<PAGE>
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 29, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number: 33-93494
CROWN PAPER CO.
(Exact name of registrant as specified in its charter)
VIRGINIA 54-1752385
-------- ----------
(State of incorporation) (I.R.S. Employer Identification No.)
300 LAKESIDE DRIVE, OAKLAND, CALIFORNIA 94612-3592
--------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (510) 874-3400
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ] Not Applicable
All of the outstanding shares of the registrant's capital stock are owned
by Crown Vantage Inc.
As of March 4, 1997, 1 (one) share of Common Stock of the registrant was
outstanding.
The registrant meets the conditions set forth in General Instruction
J(1)(a) and (b) of Form 10-K and is therefore filing this form with the reduced
disclosure format.
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
2
<PAGE>
PART 1
ITEM 1. BUSINESS
GENERAL
Crown Paper Co. and subsidiaries (the "Company" or "Crown Paper Co.") is a
wholly-owned subsidiary of Crown Vantage Inc. Crown Vantage Inc. (the "Parent"
or "Crown Vantage") became an independent company after the Board of Directors
of James River Corporation of Virginia ("James River") approved the spin-off of
assets, liabilities and operations which comprised a substantial part of James
River's Communication Papers Business and the paper-based part of its Food and
Consumer Packaging Business (collectively the "Predecessor Business"). As of
the close of business on August 25, 1995, James River distributed to its common
shareholders all of the outstanding shares of the Parent (the "Distribution").
The Distribution was made in the form of a tax-free dividend on the basis of one
share of the Parent's common stock for every ten shares of James River common
stock. A total of 8,446,362 shares of the Parent's common stock were issued and
began trading on NASDAQ on August 28, 1995.
James River transferred to the Company certain assets of the Predecessor
Business and the Company assumed certain related liabilities from James River.
In addition, the Company received $250 million in cash through a public offering
of Senior Subordinated Notes and $253 million from initial borrowings under
credit facilities with certain banks (collectively, the "Financing"). The
proceeds from the Financing after payment of expenses and retention of $1.2
million cash ($485 million) were paid to James River together with $100 million
Senior Pay-in-Kind Notes issued by the Parent, as a return of James River's
capital investment. The Distribution, transfer of assets and liabilities,
Financing, and return of capital are collectively referred to as the "Spin-Off."
Also in connection with the Spin-Off, the Company entered into a Contribution
Agreement and certain transition agreements with James River. The Company has
relied on such agreements for certain services, and the supply of a portion of
the products necessary to conduct the Company's manufacturing business,
generally over terms of one to three years from the Spin-Off, at agreed to
prices consistent with market terms.
The Company is a major producer of value-added paper products for a diverse
array of end-uses. The Company's two business sectors and corresponding
principal product categories are (i) printing and publishing papers, for
applications such as special interest magazines, books, custom business forms
and corporate communications and promotions (E.G. annual reports and
stationery); and (ii) specialty papers, principally for food and retail
packaging applications and conversion into such items as coffee filters, cups
and plates. In total, the Company operates 11 facilities using 33 diverse paper
machines.
The Company believes that its broad manufacturing capabilities allow it to
offer a wider range of products and basis weights than most of its North
American competitors. The Company focuses its operations on the higher value-
added market niches of the sectors in which it competes. Papers produced for
such niches generally command higher prices and tend to be less cyclical than
commodity grades because they are used for more specialized applications and
because there are fewer substitutes for these products.
The Company has implemented a business strategy that builds on Crown Paper Co.'s
unique strengths and technical expertise and that further differentiates it from
other paper producers. The Company's objectives are to enhance its position as
a leading supplier of value-added paper products to target markets, and to
continue to pursue cost reductions and manufacturing efficiencies to maximize
profitability. The elements of the Company's business strategy to accomplish
such objectives are to: i) accelerate the introduction of additional value-added
papers into the Company's mix; ii) obtain market share with innovative new
products; iii) add value through high levels of customer service and product
quality; and iv) reduce costs and improve productivity.
3
<PAGE>
BUSINESS SECTORS AND END USE MARKETS
PRINTING AND PUBLISHING PAPERS
The Company's coated groundwood papers are produced at its fully integrated
(i.e. pulp is manufactured on site) facility in St. Francisville, Louisiana.
These papers are produced and sold for end-use products such as specialty
magazines, catalogs, direct mail, and advertising supplements. The strength of
the coated groundwood market is largely driven by the health of the retail
market and is correlated with advertising expenditures. During 1996, the
Company completed its rebuild of the number 1 coated paper machine at the St.
Francisville, Louisiana Mill. The rebuild is expected to increase capacity for
publication papers by approximately 27,000 tons annually.
Uncoated printing and publishing papers are manufactured at the Company's fully
integrated facilities in Berlin and Gorham, New Hampshire. Customer end-use
products within the uncoated printing and publishing paper category include
stationery, custom business forms, books and manuals, annual reports and other
forms of corporate communications. Crown Paper Co. also produces uncoated
printing and publishing papers at its non-integrated facilities in Adams,
Massachusetts; Newark, Delaware; Ypsilanti, Michigan; and Dalmore and
Guardbridge, Scotland. Demand for uncoated printing and publishing papers is
correlated with economic cycles, since these papers are predominantly used in
business related activities and commercial printing. However, the Company's
specialty niches within the uncoated printing and publishing paper category
make Crown Paper Co. less susceptible to economic cycles.
SPECIALTY PAPERS
Crown Paper Co. manufactures and sells specialty papers for use in food and
retail packaging. The Company's products, which are concentrated in niche
markets for coated and uncoated papers within the specialty packaging industry,
are used by its customers to produce items such as multi-wall bags for pet
foods, food service papers, labels and cereal liners. The Company's specialty
packaging business is principally driven by consumer spending trends and has
historically exhibited less cyclicality to general economic trends as compared
to producers of papers for other end-use products. The Company's specialty
papers are produced at non-integrated facilities in Port Huron and Parchment,
Michigan and Milford, New Jersey.
Crown Paper Co. manufactures specialty converting papers at its fully integrated
facility in St. Francisville, Louisiana. In order to meet customer-specific
requirements, the Company imparts technical qualities to these value-added
papers for conversion by its customers into end-uses such as paper cups and
plates, coffee filters, disposable medical gowns, and bacon board. Converting
papers also includes the Company's cast-coating operations in Richmond,
Virginia, which provide cast-coating capabilities for a premium grade of coated
paperboard for packaging and printing applications. The unique or unusual
characteristics of the Company's specialty converting papers make substitution
by customers difficult or otherwise undesirable, mitigating cyclicality.
MARKET PULP SALES AND PURCHASES
In 1996, the Berlin-Gorham, New Hampshire facility sold approximately 43,000
tons of pulp. The Company also purchases pulp to supply non-integrated mills,
to obtain species not produced by the Company, and to minimize transportation
costs. The Company purchased approximately 261,000 tons of pulp in 1996.
4
<PAGE>
ITEM 2. PROPERTIES
The Company owns and operates three pulp mills, eight paper mills and one cast-
coating facility in the United States and two paper mills in Scotland. The
following table summarizes the location, 1996 volumes and pertinent production
characteristics of each facility. The Company's bank credit facility is
collateralized by substantially all of the Company's assets, including the
facilities listed below.
<TABLE>
<CAPTION>
COATED AND UNCOATED
COATED UNCOATED FREESHEET PAPERS
GROUNDWOOD FREESHEET ----------------------------------------
PRINTING AND PRINTING AND SPECIALTY SPECIALTY
PUBLISHING PUBLISHING PACKAGING CONVERTING
---------- ---------- --------- ----------
<S> <C> <C> <C> <C>
FACILITIES: St. Francisville, LA Berlin and Gorham, NH Port Huron, MI St. Francisville, LA
Guardbridge, Scotland Parchment, MI Richmond, VA (b)
Dalmore, Scotland Milford, NJ Berlin and
Adams, MA Gorham, NH (c)
Newark, DE
Ypsilanti, MI
1996 SALES
VOLUMES: 258,000 tons 240,000 tons (a) 239,000 tons 168,000 tons (c)
PRIMARY
PRODUCTION: No. 4, No. 5 medium Custom forms papers, Grease resistant Coffee filters,
to heavy weight text, cover and paper, labels, cup and plate
grades for magazines writing grades, multi-wall bags stock and cast-
and catalogs security papers and other coated board
and specialty packaging and
applications specialty applications
SPECIAL Coating, calendering Calendering, Coating, waxing, Calendering, cast-
PRODUCTION watermarks, calendering, coating, sheeting
CAPABILITIES: sheeting, embossing chemical treatment
PAPER MACHINES 2 Paper machines with 14 paper machines, 14 paper machines, 3 paper machines, 4
AND RELATED on-machine coating, 4 assorted sheeters, 3 with on-machine cast-coating machines,
EQUIPMENT: off-machine super rewinders and coating and hot/soft 4 sheeters
calenders embossers calendering, 3 with
on-machine waxers,
3 off-machine coaters,
6 off-machine waxers
</TABLE>
(a) Does not include 43,000 tons of market pulp sold by the
Company's Berlin-Gorham facility.
(b) The Richmond facility does not produce paper but provides cast-
coating capabilities for the production of coated paperboard.
(c) Includes 29,000 tons of toweling manufactured and sold by the
Company's Berlin-Gorham facility.
5
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
In 1994, the Company filed a suit against the City of Berlin, New Hampshire
relating to an approximately $107 million increase from 1992 to 1994 of the
City's assessed value of the Berlin portion of the Berlin-Gorham facility. The
increased assessed value resulted in an annual increase in property taxes of
approximately $2.5 million. The Company is seeking abatement of the tax
increase on the grounds that the City's valuations are excessive, and that New
Hampshire law exempts certain income producing equipment, such as the chemical
recovery unit, from property taxation. In April 1996, the trial court affirmed
most of the City's positions. The Company has appealed the trial court decision
to the New Hampshire Supreme Court, which has agreed to hear the matter.
The Company has been identified as a potentially responsible party ("PRP") under
the Comprehensive Environmental Response, Compensation and Liability Act or
similar federal and state laws with respect to alleged past disposal of wastes
at approximately 18 sites in the United States. The Company has settled or
resolved past actions related to certain of these sites at minimal cost, has
concluded that it has no liability with regards to other sites, and is
participating in investigations and cleanups at other sites for which it has
received notification. In most cases, the Company is one of many PRPs and the
alleged contribution to these sites has been minor. In certain cases, the
Company cannot predict with reasonable certainty the total response and remedial
costs, the Company's share of the total costs, the amounts of contributions from
other PRPs, the time necessary to complete the cleanups, or the availability of
reimbursement from insurance coverage. For those sites where a range of
potential liability has been determined, the Company has established reserves it
believes appropriate. Based on its investigation and cleanup experience and
the number of other solvent PRPs, the Company does not currently believe that
its share of the costs of investigation and remediation of currently known sites
will have a material effect on its financial condition. However, because of
uncertainties associated with remediation activities, regulations, technologies,
and the allocation of costs among various other parties, actual costs to be
incurred at identified sites may vary from estimates. Therefore management is
unable to determine if the ultimate disposition of all known environmental
liabilities will have a material adverse effect on the results of operations in
a given fiscal quarter or year. In addition, as is the case with most
manufacturing companies and many other companies, there can be no assurance that
the Company will not be named as a potentially responsible party at additional
sites in the future or that the costs associated with such additional sites
would not be material.
The Michigan Department of Natural Resources has notified the Company that it
intends to take enforcement action under the Michigan Water Resources Act
arising out of a number of exceedances of the effluent limitation for Biological
Oxygen Demand at Parchment. The Company has completed construction to upgrade
the wastewater treatment plant in order to eliminate future exceedances. It is
possible that the state will seek penalties from the Company.
In addition to the matters described above, the Company is a party to routine
litigation, arbitrations and proceedings incidental to its business, the
disposition of which is not expected to have a material adverse effect on the
Company's business or financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
6
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Inapplicable
ITEM 6. SELECTED FINANCIAL DATA
Omitted in accordance with General Instruction J.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Omitted in accordance with General Instruction J. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations" preceding the
Consolidated Financial Statements (Item 8).
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this item is submitted as a separate section of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
Information concerning the Company's change in accountants is included in the
Company's current reports on Forms 8-K and 8-K/A dated June 25, 1996 and June
28, 1996, respectively, which are incorporated herein by reference.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Omitted in accordance with General Instruction J.
ITEM 11. EXECUTIVE COMPENSATION
Omitted in accordance with General Instruction J.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Omitted in accordance with General Instruction J.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Omitted in accordance with General Instruction J.
7
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) FINANCIAL STATEMENTS. The report of independent auditors as of
December 29, 1996 and for the year then ended and the following consolidated
financial statements of the Company are included in this Form 10-K at the page
numbers indicated below. The report of independent accountants as of December
31, 1995 and for the two years then ended is included herein as Exhibit 23.
Page in
Financial
Statements
----------
Report of Independent
Auditors.......................................................... 5
Consolidated Statements of Operations - Years Ended December 29,
1996, December 31, 1995 and December 25, 1994................ 6
Consolidated Balance Sheets- December 29, 1996 and
December 31, 1995............................................ 7
Consolidated Statements of Cash Flows - Years Ended December 29,
1996, December 31, 1995 and December 25, 1994............... 8
Consolidated Statement of Changes in Equity - Years Ended
December 29, 1996, December 31, 1995 and December 25, 1994... 9
Notes to Consolidated Financial
Statements........................................................ 10
(a)(2) FINANCIAL STATEMENT SCHEDULES.
All schedules are omitted because of the absence of the conditions under which
they are required or because the required information is set forth in the
consolidated financial statements and notes thereto.
(a)(3) EXHIBITS
All exhibits, including those incorporated by reference:
Exhibit
No. Description
- ----- -----------
2.1(1) Form of Contribution Agreement among Crown Paper Co. ("Crown Paper"),
Crown Vantage, Inc. ("Crown Vantage"), James River Corporation of
Virginia ("JRC") and James River Paper Company, Inc. ("James River
Paper")
3.1(1) Articles of Incorporation of Crown Vantage
3.2(4) Articles of Amendment to the Articles of Incorporation dated May 13,
1996 and July 31, 1996
3.3(5) Restated Bylaws of Crown Vantage
3.4(1) Articles of Designation for Preferred Shares, Series A
4.1(1) Form of Rights Agreement between Crown Vantage and Norwest Bank
Minnesota, N.A., as Rights Agent
10.1(1) Form of Tax Sharing Agreement among JRC, James River Paper, Crown
Vantage and Crown Paper
10.2(1) Form of Berlin Product Supply Agreement between James River Paper and
Crown Paper
10.3(1) Form of Pulp Purchase Agreement between James River Paper and Crown
Paper
8
<PAGE>
10.4(1) Form of Pulp Sales Transition Agreement between James River Paper and
Crown Paper
10.5(1) Form of Transition Services Agreement between James River Paper and
Crown Paper
10.6(1) Form of Technical Services Agreement between James River Paper and
Crown Paper
10.7(1) Form of Information Technology Services Agreement between James River
Paper and Crown Paper
10.8(1) Form of Environmental Services Agreement between James River Paper
and Crown Paper
10.9(1) Form of Offices Sharing Agreement between James River Paper and Crown
Paper
10.10(1) Form of Pulp Technology Services Agreement between James River Paper
and Crown Paper
10.11(1) Form of Cottonwood Pedigreed Plant Material Agreement between James
River Paper and Crown Paper
10.12(1) Form of St. Francisville Product Supply Agreement (Consumer Products
Business) between James River Paper and Crown Paper
10.13(1) Form of St. Francisville Product Supply Agreement (Packaging Business)
between James River Paper and Crown Paper
10.14(1) Form of Landfill Agreement between James River Paper and Crown Paper
10.15(1) Form of Allocation Agreement among JRC, James River Paper and Crown
Paper
10.16(1) Form of Packaging Papers Product Supply Agreement between James River
Paper and Crown Paper
10.17(1) Form of Naheola Product Supply Agreement between James River Paper and
Crown Paper
10.18(1) Form of Confidentiality Agreement between JRC and Crown Paper
10.19(1) Form of St. Francisville Wood Chip Supply Agreement between James
River Paper and Crown Paper
10.20(1) Form of St. Francisville Roundwood Supply and Cutting Rights Agreement
between James River Paper and Crown Paper
10.21(1) Form of Northeast Roundwood Supply Agreement between James River Paper
and Crown Paper
10.22(1) Form of Pension Funding Agreement among Crown Paper, Crown Vantage
and James River
10.23(1) Form of Guaranty Support Agreement among Crown Paper, Crown Vantage
and James River
10.24(1) Forms of KVP Parchment Lease and KVP Parchment Services Agreement,
between Crown Paper and James River
10.25(1) Form of Eureka Trademark Agreement
10.26(1) Form of Crown Vantage Stock Option Plan for Outside Directors **
10.27* Crown Vantage Stock Award Plan for Outside Directors (as amended) **
10.28* Second Amendment to the Crown Vantage Inc. Stock Award Plan for
Outside Directors **
10.29(5) Form of Crown Vantage 1995 Incentive Stock Plan **
10.30(1) Form of Crown Vantage Inc. Stock Plus Employee Stock Ownership Plan
**
10.31(3) Form of Employment Agreement for Ernest S. Leopold dated December 5,
1995 **
10.32(2) Form of Nonstatutory Stock Option with Reload Feature Agreement under
the Registrant's 1995 Omnibus Incentive Stock Plan **
10.33(2) Form of Restricted Stock Award Agreement under the Registrant's 1995
Omnibus Incentive Stock
Plan **
10.34(2) Form of Nonstatutory Stock Option Agreement under the Registrant's
1995 Stock Option Plan for Outside Directors **
10.35(2) Form of Restricted Stock Award Agreement under the Registrant's 1995
Stock Award Plan for Outside Directors **
10.36(3) Form of Agreement (Severance) dated December 5, 1995 **
10.37(4) Form of Amendment No. 1 to the Crown Vantage Inc. Stock Plus Employee
Stock Ownership Plan.
10.38(1) Indenture between the Bank of New York, as trustee, and the Company,
relating to the Notes
10.39* First Supplemental Indenture between the Bank of New York, as trustee,
and the Company, relating to the Notes
9
<PAGE>
10.40(1) Bank Credit Agreement among Morgan Guaranty Trust Company of New York,
as Agent, the Banks named therein, Crown Paper and Crown Vantage
10.41* Amendment No. 1 to Credit Agreement
10.42* Amendment No. 2 to Credit Agreement
10.43* Receivables Purchase Agreement
10.44* Purchase and Sale Agreement (relating to Receivables Purchase
Agreement)
10.45* Loan Agreement between Business Finance Authority of the State of New
Hampshire and Crown Paper Co.
10.46* Refunding Loan Agreement between Business Finance Authority of the
State of New Hampshire and Crown Paper Co.
16(6) Letter regarding change in certifying accountants and related
information
23* Report of Coopers & Lybrand L.L.P. on the consolidated financial
statements of the Company as of December 31, 1995 and for the two
years then ended
27* Financial Data Schedule
- ----------
(1) Previously filed as exhibits to the Crown Paper Co. Registration Statement
No. 33-93494 on Form S-1 filed with the Securities and Exchange Commission
("SEC") on June 15, 1995, and all amendments thereto, concerning the
offering of the $250,000,000 aggregate principal amount of Senior
Subordinated Notes due 2005 issued by Crown Paper Co.
(2) Previously filed as Exhibits to Crown Vantage Inc. Form 10-Q for the
quarterly period ended September 24, 1995.
(3) Previously filed as Exhibits to the Crown Paper Co. Annual Report on Form
10-K for the year ended December 31, 1995.
(4) Previously filed as Exhibits to Crown Vantage Inc. Registration Statement
No. 333-09361 on Form S-8 and to Crown Vantage Inc.'s report on Form 10-Q
for the quarter ended June 30, 1996, respectively.
(5) Previously filed as Exhibits to Crown Vantage Inc.'s report on Form 10-Q
for the quarter ended September 29, 1996.
(6) Previously filed in Form 8-K/A dated June 28, 1996.
* Included as an exhibit herein.
** Indicates management contract or compensatory plan or arrangement.
(b) REPORTS ON FORM 8-K. None.
(c) EXHIBITS. The response to this portion of Item 14 is submitted as a separate
section of this report.
(d) FINANCIAL STATEMENT SCHEDULES. The response to this portion of Item 14 is
submitted as a separate section of this report.
10
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
March 17, 1997 CROWN PAPER CO.
(Registrant)
By: R. Neil Stuart
------------------------------
(R. Neil Stuart,
Senior Vice President,
Chief Financial Officer)
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Christopher M. McLain, R. Neil Stuart,
and Michael J. Hunter, and each of them, his or her true and lawful agent, proxy
and attorney-in-fact, with full power of substitution and resubstitution, for
him or her and in his or her name, place and stead, in any and all capacities,
to (i) act on, sign and file with the Securities and Exchange Commission any and
all amendments to this report on Form 10-K together with all schedules and
exhibits thereto, (ii) act on, sign and file such certificates, instruments,
agreements and other documents as may be necessary or appropriate in connection
therewith, and (iii) take any and all actions which may be necessary or
appropriate to be done, as fully for all intents and purposes as he or she might
or could do in person, hereby approving, ratifying and confirming all that such
agent, proxy and attorney-in-fact or any of his or her substitutes may lawfully
do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities indicated on March 17, 1997.
Signature Title
--------- -----
William V. Daniel Director
- -----------------------------
William V. Daniel
George B. James Director
- -----------------------------
George B. James
Ernest S. Leopold Chairman, President, Chief Executive Officer and -
- ---------------------------- Director
Ernest S. Leopold
Joseph T. Piemont Director
- -----------------------------
Joseph T. Piemont
E. Lee Showalter Director
- -----------------------------
E. Lee Showalter
11
<PAGE>
SIGNATURES (CONTINUED)
William D. Walsh Director
- -----------------------------
William D. Walsh
James S. Watkinson Director
- -----------------------------
James S. Watkinson
Donna L. Weaver Director
- -----------------------------
Donna L. Weaver
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities indicated on March 17, 1997.
Signature Title
--------- -----
R. Neil Stuart Chief Financial Officer
- -----------------------------
R. Neil Stuart
Michael J. Hunter Chief Accounting Officer
- -----------------------------
Michael J. Hunter
12
<PAGE>
CROWN PAPER CO.
ANNUAL REPORT ON FORM 10-K
ITEM 8 and ITEM 14(a)(1)
CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 29, 1996
<PAGE>
ITEMS 8 AND 14(a)(1) FINANCIAL STATEMENTS. The following consolidated financial
statements of Crown Paper Co. and subsidiaries, together with the report of
independent auditors, are included in Items 8 and 14(a)(1).
Page
----
Management's Discussion and Analysis of Financial Condition and
Results of Operations.................................................... 1
Report of Independent Auditors........................................... 5
Consolidated Statements of Operations - Years Ended December 29, 1996,
December 31, 1995 and December 25, 1994.............................. 6
Consolidated Balance Sheets- December 29, 1996 and December 31, 1995..... 7
Consolidated Statements of Cash Flows - Years Ended December 29, 1996,
December 31, 1995 and December 25, 1994.............................. 8
Consolidated Statement of Changes in Equity - Years Ended December 29,
1996, December 31, 1995 and December 25, 1994........................ 9
Notes to Consolidated Financial Statements............................... 10
<PAGE>
Crown Paper Co. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Consolidated Results of Operations--
1996 Compared to 1995
Net Sales: The Company's net sales decreased by 14.0% to $925.4 million for
the 52 week year ended December 29, 1996 as compared to $1.1 billion for the
53 week year ended December 31, 1995. The decrease in sales is largely due to
a 10.6% decrease in average selling prices per ton in 1996 compared to 1995.
The decrease in sales prices began in early 1996, primarily as a result of
excessive inventories at the producer and customer levels, which depressed
paper prices. In addition, market pulp prices began to decline during the
early months of 1996 which further contributed toward decreasing paper prices
throughout 1996. Also con-tributing to the sales decrease, net tons sold in
1996 were 947,600, a 3.8% decrease from the 985,100 tons sold in 1995.
Operating Income: Operating income of $22.7 million in 1996 decreased $77.6
million from $100.3 million in 1995. The significant decrease in operating
income is primarily attributable to the decreased pricing dis-cussed above,
partially offset by the Company's cost reduction program. Gross margin
decreased from 14.5% of net sales in 1995 to 8.1% of net sales in 1996. The
decrease in net sales price per ton dis-cussed above, partially offset by a
3.9% decrease in average cost per ton sold in 1996 as compared to 1995,
caused the reduction in gross margin. Selling and administrative expenses
decreased $3.3 million to $52.2 million in 1996 as compared to $55.5 million
in 1995. Selling and administrative expenses in 1996 include $1.6 million
attributable to the Company's sales of undivided interests in certain
accounts receivable (see Liquidity and Capital Resources). Selling and
administrative expenses in 1995 include $3.7 million of incentive
compensation that was not incurred in 1996 due to operating losses.
Interest Expense: Interest expense increased from $21.1 million in 1995 to
$49.9 million in 1996. The significant increase is a result of the
financings incurred in connection with the Spin-Off.
Tax Provision: The income tax benefit in 1996 totaled $10.1 million as
compared to income tax expense of $31.7 million in 1995. The effective income
tax rates were 37.9% and 39.8% in 1996 and 1995, respectively.
<PAGE>
Crown Paper Co.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
OPERATING RESULTS BY SECTOR
- --------------------------------------------------------------------------------------------------
NET SALES AND TONNAGE BY SECTOR
- --------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED 1996 1995 1994
- --------------------------------------------------------------------------------------------------
(sales in millions, tons in thousands) Tons Sales Tons Sales Tons Sales
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Printing and Publishing Papers:
Coated groundwood 258 $214 284 $263 282 $187
Uncoated 240 239 243 274 230 212
Specialty Papers:
Food and retail packaging 239 305 249 346 258 331
Converting 168 152 165 157 163 119
Pulp and miscellaneous(a) 43 15 44 37 57 26
- --------------------------------------------------------------------------------------------------
Total Company 948 $925 985 $1,077 990 $875
- --------------------------------------------------------------------------------------------------
(a) Represents market sales of pulp to third parties. Excludes approximately 44,000 tons in 1996,
38,000 tons in 1995, and 28,000 tons in 1994 transferred to other Company facilities.
- --------------------------------------------------------------------------------------------------
OPERATING INCOME (LOSS) BY SECTOR (IN MILLIONS)
- --------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED 1996 1995 1994
- --------------------------------------------------------------------------------------------------
Printing and Publishing Papers $13 $79 $(17)
Specialty Papers:
Food and retail packaging 3 (16) 10
Converting 14 23 1
Pulp and miscellaneous (7) 14 (2)
Severance and other items (6)
- --------------------------------------------------------------------------------------------------
Total operating income (loss) $23 $100 $(14)
- --------------------------------------------------------------------------------------------------
</TABLE>
RESULTS OF OPERATIONS BY BUSINESS SECTOR
PRINTING AND PUBLISHING PAPERS
Within this business sector, the Company produces coated groundwood and
uncoated papers.
The Company's coated groundwood papers are pro-duced and sold for end-use
products such as specialty magazines, catalogs, direct mail, and advertising
sup-plements. The strength of the coated groundwood market is largely driven
by the strength of the retail market and is correlated with advertising
expenditures. As the U.S. economy strengthened in 1995, demand for coated
groundwood printing and publishing papers increased significantly, which
allowed the Company to raise coated paper prices. However, an increasing
demand in 1995 resulted in excess inventories at the customer level which
began to depress prices during the early months of 1996. Demand for coated
ground-wood papers began to decrease in early to mid-1996 as customers drew
down their inventories. A temporary oversupply of inventories at the producer
level during the latter part of 1996 continued to depress pricing throughout
the remainder of the year. Net sales of coat-ed groundwood printing and
publishing papers totaled $213.6 million in 1996 as compared to $263.2
million in 1995, an 18.9% decrease. The decrease in net sales is due to a
10.5% decrease in coated groundwood prices on average in 1996 compared to
1995. Also con-tributing to the decrease in net sales was a 26,500 ton
decrease in tons sold in 1996 as compared to 1995.
Customer end-use products within the uncoated printing and publishing papers
category include stationery, custom business forms, books and manuals, annual
reports and other forms of corporate communications. Demand for the
Company's uncoated printing and publishing uncoated products is correlated
with economic cycles, since these papers are predominantly used in
business-related activities and commercial printing. However, the Company's
specialty niches within the uncoated printing and publishing paper category
make the Company less susceptible, though not immune, to economic cycles.
Improvements in the U.S. economic cycle in late 1994 and 1995 stimulated
demand for printing and publishing papers resulting in unprecedented high
prices in 1995. As customer inventories began to build in late 1995 demand
slowed and pricing started to decline through the remainder of 1995 and into
1996. Customer drawdowns of inventory through mid-1996 continued to depress
prices. Net sales of uncoated printing and publishing papers in 1996 were
$239.1 million as compared to $273.7 million in 1995,
<PAGE>
Crown Paper Co.
a 12.6% decrease. The decrease in net sales is primarily a result of a 11.7%
decrease in the average selling price per ton in 1996 as compared to 1995.
Tons sold in 1996 were 239,900, a 1.1% decrease from 1995.
Operating income from the sale of printing and publishing papers was $12.5
million in 1996, a $66.0 million decrease from operating income of $78.5
million in 1995. The significant decline in operating income is attributable
to the decrease in pricing in both the coated and uncoated printing and
writing papers sectors as well as the 29,100 ton decrease in printing and
writing papers sold in 1996 compared to 1995.
SPECIALTY PAPERS
Within this sector, the Company produces specialty papers for use in food and
retail packaging and con-verting end uses.
FOOD AND RETAIL PACKAGING PAPERS
Crown Paper Co. manufactures and sells specialty papers for use in food and
retail packaging. The Company's products, which are concentrated in niche
markets for coated and uncoated papers within the specialty packaging
industry, are used by its customers to produce items such as multi-wall bags
for pet foods, food service papers, labels and cereal liners. The Company's
specialty packaging business is principally driven by consumer spending
trends and has historical-ly exhibited less cyclicality due to general
economic trends as compared to producers of papers for other end-use
products. The Company's specialty packaging paper operations purchase all of
their pulp and are therefore more susceptible to pulp price
fluctuations--operating results benefit during periods of decreasing pulp
prices and suffer during periods of increasing pulp prices.
During 1996, Crown Paper Co's food and retail packaging papers business
generated net sales of $304.9 mil-lion as compared to net sales in 1995 of
$345.7 million. The 11.8% decrease in net sales is the combined result of an
8.2% decrease in average selling price per ton in 1996 compared to 1995 and a
9,700 ton (3.9%) decrease in tons sold in 1996 versus 1995. Price move-ments
within the Company's food and retail packaging papers business are closely
aligned with pulp price changes. Industry pulp prices declined sharply during
the first quarter of 1996 and remained at low levels (as compared to 1995)
throughout the remainder of the year. The decline in pulp prices negatively
affected prices for the Company's packaging papers, resulting in the 8.2%
decrease in average selling price per ton discussed above.
However, the Company's packaging papers business is non-integrated and
operating results benefit from pulp price decreases. During 1996, the
Company's food and retail packaging papers generated operating profits of
$2.8 million as compared to operating losses of $15.6 million in 1995. The
improvement in operating results is primarily attributable to reduced pulp
costs. Improvements in operating results were, however, off-set by price
decreases as discussed above.
CONVERTING PAPERS
Crown Paper Co. manufactures specialty converting papers at its fully
integrated facility in St. Francisville, Louisiana. In order to meet
customer-specific require-ments, the Company imparts technical qualities to
these value-added papers for conversion by its customers into end-uses such
as paper cups and plates, coffee filters, disposable medical gowns, and bacon
board. Converting papers also includes the Company's cast-coating operations
in Richmond, Virginia, which provide cast-coating capabilities for a premium
grade of coated paperboard for packaging and printing applications. The
unique or unusual characteristics of the Company's specialty converting
papers make substitution by customers difficult or otherwise undesirable,
mitigating cyclicality.
Net sales of the Company's specialty converting papers totaled $152.5 million
in 1996, a $4.7 million decrease from net sales of $157.2 million in 1995.
The 3.0% decrease is due to a $48 decrease in average sales price per ton in
1996 as compared to 1995. Demand for the Company's specialty converting
papers was strong in 1996, with total tons sold increasing by 3,500 over
1995. Operating profits were $14.5 million in 1996, a 36.6% decrease compared
to 1995. The decrease is reflective of the 5.1% decrease in average net
selling prices.
PULP AND MISCELLANEOUS
Net sales of pulp and miscellaneous products declined from $36.7 million in
1995 to $15.2 million in 1996. As discussed above, industry average selling
prices of pulp decreased significantly during the early months of 1996 and
remained at low levels throughout the year. The Company's average net selling
price per ton decreased by 43.5% during 1996 as compared to 1995. The Company
recognized operating losses of $7.1 million in 1996 versus operating income
of $14.5 million in 1995. The significant decline in operating results is due
primarily to the decrease in average net selling price per ton.
<PAGE>
Crown Paper Co.
STRATEGIC CAPITAL EXPENDITURES PLAN
Management has implemented a strategic capital spending plan that supports
the Company's focused business strategy of i) increasing the mix of value
added products, ii) developing new products and markets, iii) building on
customer service and relationships, and iv) continuing to improve efficiency
and productivity. A significant portion of the Company's strategic capital
expenditures plan is discretionary as to timing and, to a lesser extent,
amount of expenditures. The Company's capital expenditure plan includes
expenditures of $61 million in 1997. In aggregate, the Company's strategic
capital plan calls for capital expenditures of approximately $445 million
over the next five years, of which $93 million is profit adding, $284 million
is for capital maintenance, and $68 million is environmental related.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1996, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 125 ("Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities"). Statement
of Financial Accounting Standards No. 125 ("SFAS No. 125"), which applies to
the Company's sales of undivided interests in certain accounts receivables,
provides accounting and reporting standards for transfers and servicing of
financial assets and extinguishments of liabilities. SFAS No. 125 is
effective for transactions occurring after December 31, 1996. The Company
does not believe that adoption of SFAS No. 125 will have a material adverse
effect on its financial position or results of operations.
In October 1996, the American Institute of Certified Public Accountants
issued Statement of Position 96-1, Environmental Remediation Liabilities
("SOP 96-1"). SOP 96-1 provides guidance on the recognition, mea-surement,
display, and disclosure of environmental remediation liabilities and is
effective for fiscal years beginning after December 15, 1996. The Company has
elected early adoption of the provisions of SOP 96-1 and has applied its
provisions effective with its fiscal year ended December 29, 1996. Adoption
of SOP 96-1 did not have a material effect on the Company's financial
position or results of operations.
<PAGE>
Crown Paper Co. REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholder of Crown Paper Co.:
We have audited the consolidated balance sheet of Crown Paper Co. and
subsidiaries as of December 29, 1996, and the related consolidated statements
of operations, cash flows, and changes in equity for the year then ended.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit. The consolidated balance sheet of Crown Paper
Co. and subsidiaries, as described in Note 2, as of December 31, 1995, and
the related consolidated statements of operations, cash flows, and changes in
equity for the two years ended December 31, 1995 and December 25, 1994, were
audited by other auditors whose report dated February 23, 1996, expressed an
unqualified opinion on those statements.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the 1996 financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Crown Paper Co. and subsidiaries, at December 29, 1996 and the consolidated
results of their operations and their cash flows for the year then ended in
conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
San Francisco, California
February 10, 1997
<PAGE>
Crown Paper Co. CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
52 Weeks 53 Weeks 52 Weeks
Ended Ended Ended
December 29, December 31, December 25,
(amounts in thousands, except per share amounts) 1996 1995 1994
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $925,376 $1,076,506 $875,334
Cost of goods sold 850,419 920,664 832,482
- ---------------------------------------------------------------------------------------------
Gross margin 74,957 155,842 42,852
Selling and administrative expenses 52,215 55,516 57,186
- ---------------------------------------------------------------------------------------------
Operating income (loss) 22,742 100,326 (14,334)
Interest expense 49,920 21,138 1,961
Other income, net 555 565 687
- ---------------------------------------------------------------------------------------------
Income (loss) before income taxes (26,623) 79,753 (15,608)
Income tax expense (benefit) (10,087) 31,702 (5,638)
- ---------------------------------------------------------------------------------------------
Net income (loss) $(16,536) $48,051 $(9,970)
- ---------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
<PAGE>
Crown Paper Co. CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
(amounts in thousands) December 29, 1996 December 31, 1995
- -----------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $1,175 $5,335
Accounts receivable 56,004 106,674
Inventories 97,975 100,422
Prepaid expenses and other current assets 15,217 8,832
Deferred income taxes 14,191 14,899
- -----------------------------------------------------------------------------------
Total current assets 184,562 236,162
Property, plant and equipment, net 678,154 668,340
Other assets 36,759 32,852
Unamortized debt issue costs 16,023 16,448
Intangibles, net 30,101 31,226
- -----------------------------------------------------------------------------------
Total Assets $945,599 $985,028
- -----------------------------------------------------------------------------------
LIABILITIES AND EQUITY
- -----------------------------------------------------------------------------------
Current Liabilities:
Accounts payable $60,612 $57,569
Accrued liabilities 80,920 77,450
Current portion of long-term debt 6,761 11,883
- -----------------------------------------------------------------------------------
Total current liabilities 148,293 146,902
- -----------------------------------------------------------------------------------
Long-term debt 447,229 469,901
Accrued postretirement benefits other than pensions 101,273 100,358
Other long-term liabilities 15,373 29,742
Deferred income taxes 102,468 103,579
- -----------------------------------------------------------------------------------
Total Liabilities 814,636 850,482
- -----------------------------------------------------------------------------------
Shareholder's Equity:
Common Stock, no par value;
Authorized - 5,000 shares;
Issued and outstanding - 1 share
December 29, 1996 and
December 31, 1995 129,058 125,537
Minimum pension liability (892) (5,611)
Cumulative foreign currency translation adjustment 3,365 (1,348)
Retained earnings (deficit) (568) 15,968
- -----------------------------------------------------------------------------------
Total Equity 130,963 134,546
- -----------------------------------------------------------------------------------
Total Liabilities and Equity $945,599 $985,028
- -----------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
<PAGE>
Crown Paper Co. CONSOLIDATED STATEMENTS OF CASH FLOWS
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
52 Weeks 53 Weeks 52 Weeks
Ended Ended Ended
December 29, December 31, December 25,
(amounts in thousands) 1996 1995 1994
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES:
Net income (loss) $(16,536) $ 48,051 $ (9,970)
Items not affecting cash:
Depreciation and cost of timber harvested 79,252 77,821 75,416
Amortization of goodwill and other intangibles 1,125 1,125 1,141
Deferred income tax provision (benefit) (3,405) 2,009 3,623
Other, net 4,461 8 5,960
Change in current assets and liabilities:
Accounts receivable (includes $43,000 sold in 1996) 49,676 (16,523) (16,032)
Inventories 3,344 (5,481) 2,030
Other current assets (9,948) (6,805) 203
Accounts payable (4,958) 10,744 (10,342)
Other current liabilities 523 9,017 1,639
Other, net 1,403 6,473 300
- ---------------------------------------------------------------------------------------------------
Cash provided by operating activities 104,937 126,439 53,968
- ---------------------------------------------------------------------------------------------------
CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES:
Expenditures for property, plant and equipment (80,914) (46,930) (53,476)
Other, net (161) 1,366 1,268
- ---------------------------------------------------------------------------------------------------
Cash used for investing activities (81,075) (45,564) (52,208)
- ---------------------------------------------------------------------------------------------------
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES:
Issuance of Subordinated Notes 242,500
Borrowings from Term Loans 190,592
Repayments of Term Loans (52,538) (2,750)
Proceeds from draw down of Revolving Credit 191,000 89,000
Repayments of Revolving Credit (176,000) (79,000)
Proceeds from issuance of Industrial Revenue Bonds,
less underwriting costs 12,100
Payments of other long-term debt (2,584) (1,026) (854)
James River's capital infusion (withdrawal), net (527,291) 2,861
- ---------------------------------------------------------------------------------------------------
Cash (used for) provided by financing activities (28,022) (87,975) 2,007
- ---------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents (4,160) (7,100) 3,767
Cash and cash equivalents, beginning of year 5,335 12,435 8,668
- ---------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year $ 1,175 $ 5,335 $ 12,435
- ---------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
<PAGE>
Crown Paper Co. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Foreign
Common Stock Minimum Currency Retained James
------------------ Pension Translation Earnings River's
(amounts in thousands) Shares Amounts Liability Adjustment (Deficit) Investment
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 26, 1993 $586,475
Net loss (9,970)
Change in equity component
of minimum pension liability 5,314
Foreign currency translation
adjustment 610
Capital infusion by
James River, net 2,861
- -----------------------------------------------------------------------------------------------------------------
Balance at December 25, 1994 585,290
Changes in equity for the period
ended August 25, 1995:
Net income 32,083
Change in equity component
of minimum pension liability 2,023
Foreign currency translation
adjustment 693
Effect of Spin-Off:
Adjustments to pension liabilities,
accrued postretirement benefits
other than pensions and deferred
income taxes 26,989
Capital withdrawal by
James River, net (42,350)
Minimum pension liability $(5,611) 5,611
Reclassification of foreign
currency translation adjustment $701 (701)
Net Proceeds paid to James River (484,941)
Transfer from James River
investment 1 $124,697 (124,697)
Changes in equity for the period
August 25, 1995 through
December 31, 1995:
Net income $15,968
Foreign currency translation adjustment (2,049)
ESOP shares and other 840
- -----------------------------------------------------------------------------------------------------------------
Balance at December 31, 1995 1 125,537 (5,611) (1,348) 15,968
Net Loss (16,536)
Foreign Currency translation adjustment 4,713
ESOP shares and other 3,521
Minimum pension liability 4,719
- -----------------------------------------------------------------------------------------------------------------
Balance at December 29, 1996 1 $129,058 $(892) $3,365 $(568)
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
<PAGE>
Crown Paper Co. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1
ORGANIZATION AND OPERATIONS
Crown Paper Co. and subsidiaries (the "Company" or "Crown Paper Co.") is a
wholly-owned subsidiary of Crown Vantage Inc. (the "Parent" or Crown
Vantage). Crown Vantage became an independent company after the Board of
Directors of James River Corporation of Virginia ("James River") completed
the spin-off of assets, liabilities and operations which comprised a
substantial part of James River's Communication Papers Business and the
paper-based part of its Food and Consumer Packaging Business (collectively
the "Predecessor Business"). At the close of business on August 25, 1995,
James River distributed to its common shareholders all of the outstanding
shares of the Parent (the "Distribution"). The Distribution was made in the
form of a tax-free dividend on the basis of one share of the Parent's common
stock for every ten shares of James River common stock. A total of 8,446,362
shares of the Parent's common stock was issued and began trading on NASDAQ on
August 28, 1995.
James River transferred to the Company certain assets of the Predecessor
Business and the Company assumed certain related liabilities from James
River. In addition, the Company received $250 million in cash through a
public offering of Senior Subordinated Notes and $253 million from initial
borrowings under credit facilities with a group of banks (collectively, the
"Financing"). The proceeds from the Financing after payment of expenses and
retention of $1.2 million cash ($485 million) were paid to James River
together with $100 million Senior Pay-in-Kind Notes issued by the Parent, as
a return of James River's capital investment. The Distribution, transfer of
assets and liabilities, Financing, and return of capital are collectively
referred to as the "Spin-Off."
The Company is a major producer of value-added paper products for a diverse
array of end-uses. The Company's two business sectors and corresponding
principal product categories are (i) printing and pub-lishing papers, for
applications such as special interest magazines, books, custom business forms
and corporate communications and promotions (e.g. annual reports and
stationery); and (ii) specialty papers, princi-pally for food and retail
packaging applications and conversion into such items as coffee filters, cups
and plates. The Company operates 11 facilities using 33 diverse paper
machines.
At December 29, 1996, the Company employed approximately 4,000 individuals of
which approximately 1/4 were salaried and 3/4 were hourly. All of the
Company's domestic hourly employees are represented under vari-ous
collectively bargained union contracts. Hourly personnel at the Company's two
mills in Scotland are covered by an ongoing national agreement that addresses
working conditions, safety, and annual wage increases. Collective bargaining
agreements at the Company's Berlin-Gorham, Newark, and Port Huron facilities,
which cover approximately one-third of the Company's hourly employees, expire
before January 1, 1998. The Company plans to renegotiate the above contracts
before they expire.
The Company believes that its broad manufacturing capabilities allow it to
offer a wider range of products and basis weights than most of its North
American competitors. The Company focuses its operations on the higher
value-added market niches of the sectors in which it competes. Papers
produced for such niches generally command higher prices and tend to be less
cyclical than commodity grades because they are used for more specialized
applications and because there are fewer substitutes for these products. Like
its competitors, the Company is subject to a number of risks, including the
cyclical nature of the industry and the high degree of competition in the
industry. In addition, the Company is highly leveraged as a result of debt
incurred in connection with the Spin-Off.
NOTE 2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of the Company include the accounts of
Crown Paper Co., and Crown Paper Co.'s consolidated subsidiaries. Significant
intercompany balances and transactions have been eliminated.
The accompanying financial statements include the con-solidated results of
operations, assets and liabilities of the Company for the 52 weeks ended
December 29, 1996. The accompanying financial statements also include the
consolidated results of operations, assets and liabilities of the Company for
the 18 weeks ended December 31, 1995 subsequent to the Spin-Off and the
combined historical results of operations, assets and liabilities of the
Predecessor Business while a part of James River for the 35 weeks ended
August 27, 1995, and for the 52 weeks ended December 25, 1994.
<PAGE>
Crown Paper Co. NOTE 2 (continued)
The consolidated financial statements for all periods prior to the Spin-Off
have been prepared as if the Company had operated as an independent
stand-alone entity for all periods presented, except the Company generally
did not have significant borrowings prior to the Spin-Off, and there was no
allocation of James River's consolidated borrowings, and related interest
expense, except for interest capitalized as a component of properties. Prior
to the Spin-Off, the Company engaged in various transactions with James River
and its affiliates that are characteristic of a group of compa-nies under
common control. Throughout the period prior to the Spin-Off, the Company
participated in James River's centralized cash management system and, as
such, its cash funding requirements were met by James River. The Company was
charged by James River for direct costs and expenses associated with its
operations which have been included in cost of goods sold or selling and
administrative expenses, as appro-priate. James River's administrative costs
have been allocated to the Company for the period prior to the Spin-Off based
on net sales and are included in selling and administrative expense. Selling
and administrative expenses allocated to the Company were $5.5 million and
$7.3 million in 1995 and 1994, respectively.
The Company's fiscal year includes the 52 or 53 weeks ending on the last
Sunday in December. The years ended December 29, 1996, December 31, 1995, and
December 25, 1994 included 52, 53, and 52 weeks, respectively.
CASH AND CASH EQUIVALENTS
The Company invests excess cash in marketable securities with original
maturities of three months or less. These investments are classified as cash
equivalents in the accompanying consolidated financial statements.
INVENTORIES
Inventories are stated at the lower of cost or market and include the cost of
materials, labor and manufac-turing overhead. The last-in, first-out cost flow
assumption is used for valuing substantially all domestic inventories other
than stores and supplies. Other inventories, including all inventories held by
foreign operations, are valued using first-in, first-out or average cost
assumptions.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost, less accumulated
depreciation, including related delivery and installation costs and interest
incurred on significant capital projects during their construction periods.
Expenditures for improvements that increase asset values or extend useful
lives are capitalized. Maintenance and repair costs are expensed as incurred.
For financial reporting purposes, depreciation is computed using the
straight-line method over the estimated useful lives of the respective
assets, which range from 20 to 45 years for buildings and 5 to 20 years for
machinery and equipment. For income tax purposes, depreciation is calculated
using accelerated methods.
The Company capitalizes interest on projects when the construction period is
considerable and requires significant expenditures. Capitalized interest is
amortized over the life of the related assets. Interest capitalized in 1996
was $1.1 million. Capitalized interest in 1995 and 1994 was not significant.
The Company adopted Statement of Financial Accounting Standards No. 121
("Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of") in the first quarter of 1996. Adoption of
Statement of Financial Accounting Standards No. 121 did not have a material
effect on the Company's financial position or results of operations.
TIMBER AND TIMBERLANDS
Timber and timberlands are stated at cost less the accumulated total cost of
timber previously harvested. Cost of timber harvested is determined on the
basis of the annual amount of timber cut in relation to the total amount of
recoverable timber.
UNAMORTIZED DEBT ISSUE COSTS
Debt issue costs are deferred and are being charged to interest expense over
the life of the underlying indebtedness.
GOODWILL
The excess of the purchase price over the fair value of identifiable net
assets of acquired companies is allocated to goodwill and amortized over 40
years. Goodwill (which is included in intangibles) totaled $40.1 million at
December 29, 1996 and December 31, 1995 and is presented net of accumulated
amortization of $11.3 million at December 29, 1996 and $10.3 million at
December 31, 1995. The recoverability of goodwill has been evaluated to
determine whether current events or circumstances warrant adjustments to the
carrying value. As of December 29, 1996 and December 31, 1995 management
believes that no significant impair-ment of goodwill was indicated.
LANDFILL CLOSURE AND POST-CLOSURE COSTS
The Company accrues for landfill closure costs over the periods that benefit
from the use of the landfills. Management regularly reviews the adequacy of
cost estimates and adjusts the accrued amounts as necessary.
ENVIRONMENTAL REMEDIATION COSTS
In October 1996, the American Institute of Certified Public Accountants
issued Statement of Position 96-1, Environmental Remediation Liabilities
("SOP 96-1").
<PAGE>
Crown Paper Co. NOTE 2 (continued)
SOP 96-1 provides guidance for the recognition, measurement, display and
disclosure of environmental remediation liabilities and is effective for
fiscal years beginning after December 15, 1996. The Company has elected early
adoption of the provisions of SOP 96-1 and has applied its provisions
effective with its fiscal year ended December 29, 1996. Adoption of SOP 96-1
did not have a material effect on the Company's financial position or results
of operations.
Accruals for estimated losses from environmental remediation obligations are
recognized when such losses are probable and reasonably estimable, generally
no later than completion of the remedial investigation and feasibility study.
Costs associated with conducting such studies as well as other costs
incidental to evaluation of the site and potential liability (if any) are
accrued when such costs become probable and reasonably estimable. All
accruals are adjusted as subsequent information develops or circumstances
change. Costs of future expenditures for environmental remediation
obligations are not discounted to their present value. The accruals do not
include possible future insurance recoveries.
INCOME TAXES
Crown Vantage has filed its first consolidated federal income tax return and
state income tax returns for the four months ended December 31, 1995, which
included the Company's operations. Income tax expense for the four months
ended December 31, 1995 and income tax benefits for the year ended December
29, 1996 reflected in the accompanying consolidated financial statements are
intended to approximate the income tax expense or benefit which would have
been recognized had the Company filed separate income tax returns. The
Predecessor Business's taxable income for the eight months ended August 27,
1995 and the year ended December 25, 1994 was subject to inclusion in the
con-solidated federal income tax returns and state income tax returns of
James River. Income tax expense for the eight months ended August 27, 1995
and income tax benefits for the year ended December 25, 1994 reflected in the
accompanying consolidated financial statements represent the Company's share
of James River's income tax provisions that are intended to approximate the
income tax expense or benefits which would have been recognized had the
Company filed separate income tax returns. Because the Company was
historically included in the James River consolidated income tax return, the
1996 net operating loss cannot be carried back to the period prior to the
Spin-Off. In addition, investment and other tax credit carryforwards included
in the calculation of the Company's income tax provision and income tax
benefit for 1995 and 1994, respectively, as well as the net operating loss
carryforward for 1994 cannot be utilized on a separate company basis. No
provision is made for U.S. federal income taxes on $3.2 million of
undistributed earnings of the Company's foreign subsidiaries as such earnings
are considered indefinitely reinvested.
FOREIGN CURRENCY TRANSLATION
The accounts of foreign subsidiaries of the Company are measured using local
currency as the functional currency. Assets and liabilities are translated
into U.S. dollars at period-end exchange rates, and revenue and expense
accounts are translated at average monthly exchange rates. Net exchange gains
or losses resulting from such translation are excluded from net earnings and
accumulated as a separate component of Shareholder's Equity. Gains and losses
from foreign currency transactions are included in cost of sales.
JAMES RIVER'S INVESTMENT
James River's investment, as shown in the accompany-ing consolidated statement
of changes in equity, reflects the historical activity between the Company and
James River and the Company's cumulative results of operations. Transactions
with James River are reflected as though they were settled immediately as an
addition to or reduction of James River's investment.
SELECTED SALES INFORMATION
During each of the three years in the period ended December 29, 1996, export
sales to foreign markets from the Company's domestic operations represented
less than 10% of the Company's net sales. Net sales from the Company's two
Scottish facilities were 7.4%, 6.6%, and 6.6% of net sales for the three
years in the period ended December 29, 1996. No single customer accounted for
more than 10% of net sales in any year. Net sales to James River were
approximately 7.0%, 8.6% and 8.6% of total net sales in 1996, 1995 and 1994,
respectively.
INTEREST EXPENSE
Interest expense included in the accompanying consoli-dated statements of
operations for the period prior to the Spin-Off does not reflect any interest
expense on additional debt that was incurred by the Company upon completion
of the Spin-Off.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make assumptions that affect the
amounts reported in the financial statements and accompanying notes. Actual
results could differ from those estimates.
<PAGE>
Crown Paper Co. NOTE 2 (continued)
NEW ACCOUNTING PRONOUNCEMENT
In June 1996, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 125 ("Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities"). Statement
of Financial Accounting Standards No. 125 ("SFAS No. 125") provides
accounting and reporting standards for transfers and servicing of financial
assets and extinguishments of liabilities. SFAS No. 125 is effective for
transactions occurring after December 31, 1996. The Company does not believe
that adoption of SFAS No. 125 will have a material adverse effect on its
financial position or results of operations.
RECLASSIFICATIONS
Certain 1995 and 1994 amounts have been reclassified to conform with the 1996
presentation.
NOTE 3
SALE OF ACCOUNTS RECEIVABLE
During 1996, the Company entered into a five year agreement with certain
banks which provides for the sale of undivided interests (up to $60 million)
in a revolving pool of trade accounts receivable. During 1996, the Company
sold a total of $43 million of undi-vided interests. As collections reduce
accounts receivable included in the pool, the Company sells undivided
interests in new receivables in order to bring the amount sold up to $43
million.
Proceeds from the sales, which are reported as operat-ing cash flows in the
consolidated statement of cash flows, were used to prepay $43 million of
long-term debt. The proceeds from sales are less than the face amount of the
undivided interests in accounts receiv-able sold and such discount ($1.6
million in 1996) is included in selling and administrative expenses in the
consolidated statement of operations.
NOTE 4
CONCENTRATIONS OF CREDIT RISK
Credit risk represents the accounting loss that would be recognized at the
reporting date if customers failed completely to perform as contracted.
Concentrations of credit risk that arise from financial instruments exist for
groups of customers when they have similar economic characteristics that
would cause their ability to meet contractual obligations to be similarly
affected by changes in economic or other con-ditions. The Company does not
have a significant exposure to any individual customer.
Accounts receivable at the Company's facilities in Scotland totaled $19.9
million and $20.9 million at December 29, 1996 and December 31, 1995,
respec-tively. There were no other significant concentrations of foreign
credit risk at December 29, 1996 or December 31, 1995.
<PAGE>
Crown Paper Co. NOTE 5
SUPPLEMENTAL BALANCE SHEET INFORMATION
- ----------------------------------------------------------------------
INVENTORIES
(amounts in thousands) 1996 1995
- ----------------------------------------------------------------------
Raw materials $26,283 $37,238
Work-in-process 7,490 5,856
Finished goods 42,168 40,745
Stores and supplies 34,640 35,141
- ----------------------------------------------------------------------
110,581 118,980
Last-in, first-out reserve (12,606) (18,558)
- ----------------------------------------------------------------------
Total inventories $97,975 $100,422
- ----------------------------------------------------------------------
Valued at lower of cost or market:
Last-in, first-out $52,625 $59,354
First-in, first-out or average 45,350 41,068
- ----------------------------------------------------------------------
Total inventories $97,975 $100,422
- ----------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT
(amounts in thousands) 1996 1995
- ----------------------------------------------------------------------
Land and improvements $39,496 $38,587
Buildings 141,363 139,117
Machinery and equipment 1,012,690 934,807
Construction in progress 18,380 18,446
- ----------------------------------------------------------------------
1,211,929 1,130,957
Accumulated depreciation (561,965) (490,685)
- ----------------------------------------------------------------------
649,964 640,272
Timber and timberlands, net 28,190 28,068
- ----------------------------------------------------------------------
Net property, plant and equipment $678,154 $668,340
- ----------------------------------------------------------------------
ACCRUED LIABILITIES
(amounts in thousands) 1996 1995
- ----------------------------------------------------------------------
Compensated absences $11,652 $11,459
Employee insurance benefits 16,363 16,434
Accrued post retirement benefits
other than pensions, current portion 5,518 4,900
Accrued pension 3,924 14,235
Accrued interest 12,258 8,203
Taxes payable, other than income taxes 7,190 5,281
Other accrued liabilities 24,015 16,938
- ----------------------------------------------------------------------
Total accrued liabilities $80,920 $77,450
- ----------------------------------------------------------------------
<PAGE>
Crown Paper Co. NOTE 6
FOREIGN CURRENCY TRANSLATION ADJUSTMENT
The change in the cumulative foreign currency adjust-ment resulting from the
translation of assets and liabili-ties of foreign entities of the Company was
as follows:
- ------------------------------------------------------------------
(amounts in thousands) 1996 1995
- ------------------------------------------------------------------
Balance, beginning of year $ (1,348) $ 8
Translation adjustments 4,713 (1,360)
Related income tax effect, net 4
- ------------------------------------------------------------------
Balance, end of year $ 3,365 $(1,348)
- ------------------------------------------------------------------
Subsequent to the Spin-Off, the Company no longer provides for income taxes
on its foreign currency translation adjustment as the undistributed earnings
of its foreign entities are considered indefinitely reinvested.
NOTE 7
LONG-TERM DEBT
Consolidated long-term debt consists of the following:
(amounts in thousands) 1996 1995
- -------------------------------------------------------------------------------
Bank Credit Facility:
Revolving credit, average interest rate 9.49% in 1996
and 9.29% in 1995, due 2002 $25,000 $ 10,000
Term Loan A, average interest rate 8.42% in 1996
and 8.73% in 1995, due 2002 45,712 97,500
Term Loan B, average interest rate 8.94% in 1996
and 9.22% in 1995, due 2003 99,000 99,750
- -------------------------------------------------------------------------------
169,712 207,250
11% Senior Subordinated Notes, due 2005 250,000 250,000
Industrial Revenue Bonds, average interest rate 7.65% in
1996 and 6.90% in 1995, payable to 2022 34,278 24,182
10% Note, payable in 1996 352
- -------------------------------------------------------------------------------
453,990 481,784
Less current portion 6,761 11,883
- -------------------------------------------------------------------------------
$447,229 $469,901
- -------------------------------------------------------------------------------
<PAGE>
Crown Paper Co. NOTE 7 (continued)
Maturities of long-term debt for the next five years are: 1997 - $6.8
million; 1998 AND 1999 - $8.6 million; 2000 - $11.1 million, and 2001 - $7.5
million. Cash paid for interest in 1996, 1995 and 1994 totaled $45.8 million,
$7.9 million, and $2.0 million, respectively.
Under the Bank Credit Facility (the "Facility") the revolv-ing credit
available is in the aggregate amount of $150 million with a $75 million
sublimit for letters of credit (of which $42.4 million has been issued at
December 29,1996) and can be used for general corporate purposes, working
capital needs, and permitted investments. Borrowings under the Bank Credit
Facility are subject to varying rates of interest that are indexed (at the
Company's option) to a base rate (the higher of the Prime Rate or Federal
Funds Rate), or the London Interbank Offered Rate.
Principal and interest amounts on Term Loan A and Term Loan B are due in
quarterly installments. In addi-tion to those scheduled repayments, Crown
Paper Co. is obligated to make prepayments equal to 75% of Excess Cash Flow
(as defined in the underlying agreement). The Company did not generate
Excess Cash Flow in 1996. The Company is also required to make prepayments
(in varying percentages of net proceeds) upon the occurrence of certain
events which include, but are not limited to, proceeds received from any new
debt or equity issuances, asset sales, and sales of accounts receivable.
During 1996, the Company prepaid $43 million on Term Loan A using proceeds
obtained through the sale of certain accounts receivable. The Company also
prepaid $3.4 million on Term Loan A during 1996 in connection with the sale
of certain Project Bonds.
In connection with the Facility, as amended, Crown Paper Co. is required to
maintain minimum quarterly cash flow to total debt ratios as follows: first,
second, third, and fourth quarters of 1997 - .13 to 1, .12 to 1, .13 to 1,
and .16 to 1, respectively; and .20 to 1 there-after. Crown Paper Co. must
maintain minimum interest coverage ratios as follows: first, second, third,
and fourth quarters of 1997 - 1.55 to 1, 1.35 to 1, 1.50 to 1, and 2.00 to 1,
respectively; and 2.50 to 1 thereafter. Crown Paper Co. is also subject to
minimum tangible net worth requirements. In addition, both the Parent and
Crown Paper Co. are subject to certain limitations on indebtedness, liens,
mergers and acquisitions, asset sales, investments, joint ventures, capital
expenditures and prepayments or acquisitions of certain indebted-ness. The
Facility also restricts the Company from paying cash dividends to the Parent.
Generally, dividends are limited to (a) amounts necessary to pay certain
personnel and administrative expenses (not to exceed $800,000 per year), (b)
current taxes payable attributable to the Company, and (c) the Company's
share of Equity Proceeds (as defined in the underlying agreement). The
Facility contains customary events of default, including certain changes of
control. The obligations under the Facility are collateralized by
substantially all of the assets of Crown Paper Co.
The Senior Subordinated Notes (the "Notes") are unsecured and interest is
payable semi-annually in March and September. The Notes are redeemable at the
option of the Company on or after September 1, 2000 at a redemption price of
105.5% which declines to par after September 1, 2003 and thereafter. In
addition, the Company may redeem up to $85 million of aggregate principal of
the Notes prior to September 1998 at a cash redemption price of 110% from the
proceeds of one or more public offerings. In the event of a Change of Control
(as defined in the underlying agreement) the holders of the Notes have the
right to require the Company to purchase the Notes in cash at 101%. The Notes
contain covenants, limitations and restrictions which in general are not more
restrictive than those contained in the Facility.
In 1996, the Company completed an $18 million refi-nancing of certain
industrial revenue bonds issued by the Business Finance Authority of the
State of New Hampshire (the "Refunding Bonds"). The Refunding Bonds were
issued to refinance certain of the Company's pollution control and solid
waste disposal facilities located in the State of New Hampshire. The bonds
are due January 1, 2022 and bear interest at 7.75%.
Also in 1996, the Company finalized an agreement with the Business Finance
Authority of the State of New Hampshire whereby a total of $12.3 million of
bonds were sold (the "Project Bonds") to finance certain sewage and solid
waste disposal facilities to be used by the Company. The proceeds from the
sale of Project Bonds are to be used to finance eligible project costs. An
amount equivalent to 50% of proceeds are to be prepaid on Term Loan A. During
1996, $3.4 million was prepaid on Term Loan A. An additional $6.2 million was
deposited in an interest bearing account with a trustee to be drawn as needed
to finance additional project costs, of which $3.2 million is included in cash
and cash equivalents at December 29, 1996. The Project Bonds bear interest at
7.875% and are due July 1, 2026.
At December 29, 1996 and December 31, 1995, estimated fair values of the
Company's long-term debt instruments were $439.0 million and $450.5 million,
respectively. The fair values of the Company's long-term debt instruments are
based on quoted market prices, estimated based on quoted market prices for
similar issues or estimated by discounting expected cash flows at the rates
currently offered to the Company for debt having similar characteristics.
<PAGE>
Crown Paper Co. NOTE 8
INCOME TAXES
<TABLE>
<CAPTION>
THE COMPONENTS OF INCOME (LOSS) BEFORE INCOME TAXES WERE AS FOLLOWS:
- --------------------------------------------------------------------------------------------------
(amounts in thousands) 1996 1995 1994
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic $ (32,457) $73,773 $(23,688)
Foreign 5,834 5,980 8,080
- --------------------------------------------------------------------------------------------------
Income (loss) before income taxes $ (26,623) $79,753 $(15,608)
INCOME TAX EXPENSE (BENEFIT) CONSISTED OF THE FOLLOWING:
- --------------------------------------------------------------------------------------------------
(amounts in thousands) 1996 1995 1994
- --------------------------------------------------------------------------------------------------
Current:
Federal $ (8,032) $24,581 $(10,019)
State (644) 4,483 (1,850)
Foreign 1,994 629 2,608
- --------------------------------------------------------------------------------------------------
Total current income tax expense (benefit) (6,682) 29,693 (9,261)
- --------------------------------------------------------------------------------------------------
Deferred:
Federal (3,353) (120) 3,024
State (374) (22) 469
Foreign 322 2,151 130
- --------------------------------------------------------------------------------------------------
Total deferred income tax provision (benefit) (3,405) 2,009 3,623
- --------------------------------------------------------------------------------------------------
Income tax expense (benefit) $ (10,087) $31,702 $ (5,638)
- --------------------------------------------------------------------------------------------------
Principal reasons for the difference between the federal
statutory income tax rate on the income (loss) before
income taxes, and the Company's effective income tax
rate were as follows:
- --------------------------------------------------------------------------------------------------
Percent of Pretax Income (Loss)
- --------------------------------------------------------------------------------------------------
1996 1995 1994
- --------------------------------------------------------------------------------------------------
Federal statutory income tax rate (35.0)% 35.0% (35.0)%
State income taxes, net of federal income tax effect (3.8) 4.0 (5.7)
Amortization of goodwill 1.3 0.5 2.2
Other items, net (0.4) 0.3 2.4
- --------------------------------------------------------------------------------------------------
Effective income tax rate (37.9)% 39.8% (36.1)%
- --------------------------------------------------------------------------------------------------
The income tax effects of temporary differences that
gave rise to the net deferred tax liabilities as of
December 29, 1996 and December 31, 1995, were as
follows:
- --------------------------------------------------------------------------------------------------
(amounts in thousands) 1996 1995
- --------------------------------------------------------------------------------------------------
Excess of book over tax basis of property, plant and equipment $132,452 $134,892
Pension benefits, net 12,767 8,274
Other items 4,069 4,160
- --------------------------------------------------------------------------------------------------
Total deferred tax liabilities 149,288 147,326
- --------------------------------------------------------------------------------------------------
Postretirement benefits other than pensions (41,519) (40,945)
Accrued liabilities (16,092) (16,675)
Net operating loss carryforward (1,818)
Other items (1,582) (1,026)
- --------------------------------------------------------------------------------------------------
Total deferred tax assets (61,011) (58,646)
- --------------------------------------------------------------------------------------------------
Net deferred tax liability $88,277 $88,680
- --------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Crown Paper Co. NOTE 8 (continued)
The Company has recorded tax benefits totaling $6.4 million arising from the
1996 net operating loss. Tax losses totaling $17.7 million can be carried
back to the 1995 tax year in order to recover $4.6 million of taxes
previously paid. The Company has recorded a $1.8 million deferred tax benefit
to reflect the remaining net operating loss carryforward, which expires in
2011. The Company made estimated tax payments in 1996 of $1.6 million which
are also recoverable as a result of the current year net operating loss.
Cash payments for income taxes paid by the Company subsequent to the Spin-Off
through December 31, 1995 totaled $11.2 million. Because the Company was
included in the consolidated federal income tax returns of James River for
the year ended December 25, 1994, cash payments on a separate entity basis
are not determinable.
In connection with the Spin-Off, James River, the Parent, and the Company
entered into a tax sharing agreement, pursuant to which James River generally
is responsible for all federal and state income and fran-chise taxes for
taxable periods ending on or prior to August 27, 1995.
The Parent is responsible for all federal and state income and franchise
taxes of the Crown Vantage group for taxable periods beginning after August
27, 1995. The Parent generally is responsible for all unpaid taxes on its
foreign subsidiaries, state and local taxes, other than income and franchise
taxes, such as property, sales, use and payroll taxes related to the Crown
Vantage group for all periods, including periods prior to August 27, 1995.
James River will pay taxes related solely to the Spin-Off and the
transactions contemplated thereby, provided that the Spin-Off and the
transactions contemplated thereby are treated in accor-dance with the
Internal Revenue Service Ruling ("IRS Ruling") relating to the tax-free
treatment of the Spin-Off. Any taxes imposed by virtue of the Spin-Off and
the transactions resulting thereby not being treated in accordance with the
IRS Ruling shall be borne by the party solely causing the Spin-Off or the
transactions resulting thereby not to be so treated. If neither party is
solely at fault, any such taxes and liabilities would be shared, with the
Company to be responsible for 20% and James River to be responsible for 80%
of any such amounts.
NOTE 9
PENSION PLANS
James River sponsored various contributory and non-contributory pension plans
which covered substantially all employees and also participated in several
multiemployer retirement plans which provided defined benefits to employees
covered under certain collective bargaining agreements. In connection with
the Spin-Off, the Company and James River entered into an agreement with the
Pension Benefit Guaranty Corporation (the "PBGC") whereby the Company's U.S.
pension plans transferred to the Company and corresponding accumulated
participant benefits were frozen (the "Frozen Plans"). New pension plans (the
"New Plans") were then established by the Company that have terms
substantially similar to the Frozen Plans. James River has also entered into
an agreement with the PBGC which provides that, if the PBGC institutes
proceedings to terminate a Frozen Plan, James River may either assume
sponsorship of the plan or will be responsible for all liability arising from
the termination of the plan as if it were the plan sponsor. James River's
contingent obligation with respect to the Frozen Plans will generally end
when there are no unfunded benefit obligations for the Frozen Plans. James
River and the Company have entered into an agreement (the "Pension Funding
Agreement") that establishes minimum funding requirements by the Company for
the Frozen Plans that are at least equal to minimum funding requirements
pursuant to Section 412 of the Internal Revenue Code.
Benefits under the majority of plans for hourly employees are primarily based
on stated benefits per year of credited service. Benefits for salaried
employees are primarily related to compensation and years of credited
service. Contributions to the New Plans are made in amounts sufficient to
meet the minimum funding requirements of applicable laws and regulations plus
additional amounts, if any, as management, in consultation with its
actuaries, deems to be appropriate. Contributions to multiemployer plans are
generally based on negotiated labor contracts. Plan assets consist
principally of equity securities and corporate and government obligations.
The present value of benefit obligations, related com-ponents of pension
costs and plan assets were derived from actuarial calculations. Components of
pension cost for 1995 and 1994 were derived from actuarial calculations of
these components within the James River plans.
The components of the Company's net pension cost, which includes the
Company's pension plan in Scotland, were as follows:
<PAGE>
Crown Paper Co. NOTE 9 (continued)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
(amounts in thousands) 1996 1995 1994
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 5,344 $ 4,405 $ 3,844
Interest accrued on projected benefit obligation 19,055 20,665 15,985
Net investment income on plan assets (27,088) (46,374) (1,996)
Net amortization and deferral 6,196 26,081 (10,947)
Contributions to multiemployer pension plans 52 61 69
- ----------------------------------------------------------------------------------------------
Net pension cost $ 3,559 $ 4,838 $ 6,955
- ----------------------------------------------------------------------------------------------
Net amortization included amortization of the The actuarial assumptions used in determining
net transition assets, net experience gains net pension costs and related pension
and losses, and prior service costs over obligations were as follows:
15 to 20 years.
- ----------------------------------------------------------------------------------------------
1996 1995 1994
- ----------------------------------------------------------------------------------------------
Discount Rate 8.0% 7.5% 8.6%
Assumed rate of increase in compensation levels 4.0% 5.0% 5.0%
Expected long-term rate of return on plan assets 10.0% 10.0% 10.0%
- ----------------------------------------------------------------------------------------------
The following table sets forth the funded status of
the Company's U.S. and Scottish pension plans at
December 29, 1996 and December 31, 1995:
- ----------------------------------------------------------------------------------------------
(amounts in thousands) 1996 1995
- ----------------------------------------------------------------------------------------------
Assets Accumulated Assets Accumulated
Exceed Benefits Exceed Benefits
Accumulated Exceed Accumulated Exceed
Benefits Assets Benefits Assets
- ----------------------------------------------------------------------------------------------
Actuarial present value of:
Vested benefits $214,534 $15,136 $187,814 $40,185
Nonvested benefits 13,801 1,060 12,518 6,776
- ----------------------------------------------------------------------------------------------
Accumulated benefit obligation 228,335 16,196 200,332 46,961
Effect of projected future salary increases 4,810 3 6,026
- ----------------------------------------------------------------------------------------------
Projected benefit obligation 233,145 16,199 206,358 46,961
Plan assets at fair value 268,258 13,855 216,155 37,067
- ----------------------------------------------------------------------------------------------
Plan assets in excess of (less than)
projected benefit obligation 35,113 (2,344) 9,797 (9,894)
Unrecognized net (gain) loss (11,344) 1,470 4,987 9,272
Unrecognized prior service cost 8,568 2,353 7,043 5,048
Unrecognized net transition (asset) liability (359) 101 (185) (85)
Minimum Pension liability (3,924) (14,235)
- ----------------------------------------------------------------------------------------------
Net pension asset (liability) $ 31,978 $ (2,344) $ 21,642 $ (9,894)
- ----------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Crown Paper Co. NOTE 9 (continued)
Other assets include net noncurrent pension assets of $33.6 million and $26.0
million as of December 29, 1996 and December 31, 1995, respectively,
exclusive of the additional minimum pension liabilities. As of December 29,
1996 and December 31, 1995, the additional minimum pension liabilities of
$3.9 million and $14.2 million, respectively, were offset by intangible
assets of $2.4 million and $5.0 million, respectively. The additional
minimum pension liabilities at December 29, 1996 and December 31, 1995 were
offset by charges to shareholder's equity of $892,000, net of deferred taxes
of $590,000, and $5.6 million, net of deferred taxes of $3.6 million,
respectively.
The 1995 intangible asset, charge to equity and related deferred taxes
discussed above have been revised from the amounts disclosed in the prior
year. The 1995 intan-gible asset, charge to equity and related deferred tax
effect disclosed in the current year presentation were determined by
separately aggregating data for under-funded and overfunded pension plans,
consistent with the presentation of the 1996 amounts. The effect of the above
was to decrease other assets by $7.1 million and increase the charge to
equity and related deferred taxes by $4.3 million and $2.8 million,
respectively, as compared to amounts disclosed in the prior year.
NOTE 10
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
Salaried employees hired before January 1, 1993, generally become eligible
for retiree medical benefits after reaching age 55 with 15 years of service
or after reaching age 65. Under the salaried plan, post-age 65 eligible
retirees are reimbursed for a portion of the cost of premiums of Medicare
supplement insurance policies, based upon vested years of service. Post-age
65 salaried retirees are also reimbursed for certain prescription drug costs,
less deductibles. Pre-age 65 eligible retirees are paid a stated percentage
of covered medical expenses, less deductibles. Salaried employees hired after
January 1, 1993 are not eligible for retiree medical benefits. Benefits,
eligibility and cost-sharing provisions for hourly employees vary by location
and collective bargaining unit. All of the Company's retiree medical plans
are unfunded.
For the period subsequent to the Spin-Off, the consolidated financial
statements include net periodic postretirement benefit costs that were
actuarily determined by the Company. The consolidated financial statements
include net periodic postretirement benefit costs allocated from the James
River plans for the period up to and including the date of the Spin-Off. The
components of the Company's net periodic postretirement benefit costs were as
follows:
- -------------------------------------------------------------------------------
(amounts in thousands) 1996 1995 1994
- -------------------------------------------------------------------------------
Service cost $1,582 $ 1,511 $ 1,948
Interest cost on accumulated postretirement
benefit obligation 5,919 7,094 7,408
Net amortization (1,965) (1,949) (1,352)
- -------------------------------------------------------------------------------
Net periodic postretirement benefit cost $5,536 $ 6,656 $ 8,004
- -------------------------------------------------------------------------------
Net amortization includes amortization of prior service costs and gains and
net experience gains and losses over 15 years.
The discount rate used in determining the accumulated postretirement benefit
obligation ("APBO") was 8.0% and 7.5% as of December 29, 1996 and December
31, 1995, respectively. At December 29, 1996 and December 31, 1995,
unrecognized net gain, APBO and postretirement benefit costs for active
employees assigned to, and the retirees associated with, the Company were
actuarily determined by the Company.
<PAGE>
Crown Paper Co. NOTE 10 (continued)
Summary information on the Company's plans is as follows:
- -------------------------------------------------------------------------------
(amounts in thousands) 1996 1995
- -------------------------------------------------------------------------------
Accumulated postretirement benefit obligation:
Retirees $43,392 $43,327
Fully eligible active participants 11,000 11,338
Other active participants 24,931 26,262
- -------------------------------------------------------------------------------
Total accumulated postretirement benefit obligation 79,323 80,927
Unrecognized net gain 13,418 8,332
Unrecognized prior service gain 14,050 15,999
- -------------------------------------------------------------------------------
Accrued postretirement benefit obligation $106,791 $105,258
- -------------------------------------------------------------------------------
As of December 29, 1996 and December 31, 1995, the Company has included $5.5
million and $4.9 million, respectively, of accrued postretirement benefit
costs in accrued liabilities, representing the estimated current portion of
this liability.
The assumed health care cost trend rate used in mea-suring the accumulated
postretirement benefit obliga-tion was 8.5% in 1996, declining by 0.5% per
year through 2003 to an ultimate rate of 5.0%. If the health care cost trend
rate assumptions were increased by 1%, the accumulated postretirement benefit
obligation as of December 29, 1996 would have increased by $14.5 million. The
effect of this change on the sum of the service cost and interest cost
components of net periodic postretirement benefit cost for 1996 would have
been an increase of $1.4 million.
NOTE 11
COMMITMENTS AND CONTINGENT LIABILITIES
LEASES
As of December 29, 1996, future minimum rental payments under noncancelable
operating leases were as follows:
- -------------------------------------------------------
Minimum
(amounts in thousands) Rentals
- -------------------------------------------------------
1997 5,495
1998 4,709
1999 3,387
2000 3,250
2001 3,133
Later years 15,176
- -------------------------------------------------------
Total future minimum rentals 35,150
- -------------------------------------------------------
Rent expense totaled $6.7 million in 1996, $8.8 million in 1995 and $13.9
million in 1994.
LITIGATION AND ENVIRONMENTAL MATTERS
The Company is a party to various legal proceedings generally incidental to
its business and is subject to a variety of environmental protection statutes
and regulations. As is the case with other companies in similar industries,
the Company faces exposure from actual or potential claims and legal
proceedings involving environmental matters. Although the ultimate
disposition of legal proceedings cannot be predicted with certainty, it is
the present opinion of the Company's management that the outcome of any claim
which is pending or threatened, either individually or on a combined basis,
will not have a materially adverse effect on the consolidated financial
condition of the Company but could materially affect consolidated results of
operations in a given year.
The Company has accrued estimated landfill site restoration, post-closure and
monitoring costs totalling $11.1 million and $10.4 million at December 29,
1996 and December 31, 1995, respectively.
<PAGE>
Crown Paper Co. NOTE 11 (continued)
In addition, the Company has been identified as a potentially responsible
party ("PRP"), along with others, under the Comprehensive Environmental
Response, Compensation and Liability Act or similar federal and state laws
regarding the past disposal of wastes at approximately 18 sites in the United
States. The Company has previously settled its remediation obligations at
many of these sites and is awaiting final delist-ing as a PRP. At other
sites, the Company is one of many potentially responsible parties and its
alleged contribution to the site and remediation obligation is not considered
significant. At certain other sites, remedial investigation is underway.
While it is reasonably possible that a loss may be incurred at these sites,
an estimate of potential loss is not yet possible. Based upon its previous
experience with respect to the cleanup of hazardous substances as well as the
regular detailed review of its known hazardous waste sites and estimated
costs to remediate certain sites, the Company has accrued $697,000 at
December 29, 1996 and $691,000 at December 31, 1995, respectively. The
liabilities can change substantially due to such factors as the solvency of
other potentially responsible parties, the Company's share of responsibility,
additional information on the nature or extent of contamination, methods of
remediation required, and other actions by governmental agencies or private
parties. While it is not feasible to predict the outcome of all environmental
liabilities, based on its most recent review, management is of the opinion
that its share of the costs of investigation and remediation of the sites of
which it is currently aware will not have a material adverse effect upon the
consolidated financial condition of the Company.
However, because of uncertainties associated with remediation activities,
regulations, technologies, and the allocation of costs among various other
parties, actual costs to be incurred at identified sites may vary from
estimates. Therefore, management is unable to determine if the ultimate
disposition of all known environmental liabilities will have a material
adverse effect on the Company's consolidated results of operations in a given
year. In addition, as is the case with most manufacturing and many other
entities, there can be no assurance that the Company will not be named as a
potentially responsible party at additional sites in the future or that the
costs associated with such additional sites would not be material.
In December 1993, the EPA published draft rules which contain proposed
regulations affecting pulp and paper industry discharges of wastewater and
gaseous emissions ("Cluster Rules"). The final Cluster Rules were scheduled
to be issued in late 1995; however, issuance has been repeatedly delayed.
Current indications are that the rules will be issued in mid-1997 with a
compli-ance date of 2000. These Cluster Rules may require significant changes
in the pulping, bleaching and/or wastewater treatment processes presently
used in some U.S. pulp and paper mills, including some of the Company's
mills. Based on the Company's understanding of the proposed rules, the
Company estimates that approximately $68 million of capital expenditures may
be required to comply with the rules.
<PAGE>
Crown Paper Co. NOTE 12
EMPLOYEE STOCK OWNERSHIP PLAN
The Parent sponsors an Employee Stock Ownership Plan (ESOP) which is
available to substantially all employees of the Company. Participants may
elect to contribute up to 10% of their compensation as pre-tax contributions
under Internal Revenue Code Section 401(k). The Company will make matching
contributions (up to a maximum of 6%) which vary based upon each
participant's contribution as a percent of their compensation.
The ESOP was initially funded by a $10 million loan from Crown Paper Co. The
proceeds were then used to purchase 444,445 shares of the Parent's Common
Stock. The price per share of $22.50 was based upon the average of the
high/low bid price on September 27, 1995. The loan bears interest at 11% with
level monthly payments of principal and interest and is due September 28,
2002. The Company's annual contributions to the ESOP in the form of matching
contributions will be at least equal to the amount needed by the ESOP to make
the principal and interest payments on the loan, less dividends received by
the ESOP on unre-leased shares.
The ESOP shares are pledged as collateral for its debt. As the debt is
repaid, shares are released from collateral and allocated to employees who
make 401(k) contributions that year, based on the proportion of debt service
paid in the year.
Compensation expense for the 401(k) match and the ESOP was $2.5 million in
1996 and $751,000 in 1995. The ESOP shares as of December 29, 1996 and
December 31, 1995 were as follows:
- ----------------------------------------------------------------------
Number of Shares
1996 1995
- ----------------------------------------------------------------------
Allocated shares 188,910 5,373
Shares released for
allocation 81,888 28,006
Unearned shares 173,647 411,066
- ----------------------------------------------------------------------
Total ESOP shares 444,445 444,445
- ----------------------------------------------------------------------
Fair value of unearned shares
at end of year $1,367,500 $5,858,000
- ----------------------------------------------------------------------
NOTE 13
QUARTERLY FINANCIAL SUMMARY (UNAUDITED)
- -------------------------------------------------------------------------------
First Second Third Fourth
(amounts in thousands) Quarter Quarter Quarter Quarter Year
- -------------------------------------------------------------------------------
1996
Net sales $252,853 $230,564 $221,064 $220,895 $925,376
Gross margin 32,894 23,049 11,332 7,682 74,957
Net income (loss) 5,007 (1,015) (7,529) (12,999) (16,536)
- -------------------------------------------------------------------------------
1995
Net sales $261,677 $272,253 $264,779 $277,797 $1,076,506
Gross margin 33,022 32,717 43,763 46,340 155,842
Net income 11,746 10,398 13,846 12,061 48,051
- -------------------------------------------------------------------------------
<PAGE>
Crown Paper Co. NOTE 14
SUPPLEMENTAL PRO FORMA STATEMENT OF OPERATIONS (UNAUDITED)
The following supplemental unaudited pro forma con-densed statement of
operations is presented for infor-mational purposes to present the results of
operations assuming that the Spin-Off of the Predecessor Business had
occurred at the beginning of the year ended December 31, 1995. This
information may not necessarily be indicative of the future results of
operations of the Company or what the results of operations would have been
had the Company operated as a separate independent Company during the entire
period presented.
- -------------------------------------------------------------------------------
Year Ended December 31, 1995
- -------------------------------------------------------------------------------
Pro forma
(amounts in thousands) Historical Adjustments Pro forma
- -------------------------------------------------------------------------------
Net sales $1,076,506 $(750)(a) $1,075,756
Cost of goods sold 920,664 1,393(b) 922,057
- -------------------------------------------------------------------------------
Gross margin 155,842 (2,143) 153,699
Selling and administrative expenses 55,516 55,516
- -------------------------------------------------------------------------------
Operating income 100,326 (2,143) 98,183
Interest expense 21,138 32,351(c) 53,489
Other income, net 565 565
- -------------------------------------------------------------------------------
Income before income taxes 79,753 (34,494) 45,259
Provision for income taxes 31,702 (13,418)(d) 18,284
- -------------------------------------------------------------------------------
Net Income $48,051 $(21,076) $26,975
- -------------------------------------------------------------------------------
(a) Historically, the Company has produced approximately 38,000 tons of
creped paper for converting to toweling for sale to James River's Consumer
Products Business at the Company's cost to produce. In connection with the
Spin-Off, the Company has entered into a product supply agreement whereby
the Company will supply to James River creped paper for converting to
toweling amounting to up to 20,000 tons annually at an agreed upon price.
The Company will utilize the remaining 18,000 tons of capacity as it deems
appropriate. No adjustment has been made in the pro forma statements with
respect to the Company's utilization of this remaining capacity.
(b) Historically, when the Company has purchased pulp from facilities within
James River, the purchase price of the pulp was reflected at existing
published prices less a discount ranging from 0% to 9% based upon a
combination of prevailing market prices and volumes purchased. Beginning
August 28, 1995, based upon a three year Pulp Purchase Agreement entered
into by the Company and James River, the price of such pulp purchases will
be at existing published prices less a discount ranging from 0% to 6% based
upon a combination of prevailing market prices and volumes purchased.
(c) Reflects pro forma increases in the Company's interest expense assuming that
amounts outstanding in 1996 with respect to the Senior Subordinated Notes,
and borrowing under the Bank Credit Facility were outstanding during the
entire period in 1995. Pro forma interest expense also includes line of
credit fees, guaranty fees for IRB's and commitment fees on the unused
portion of the Revolver for the periods presented. Included in pro forma
interest expense is the amortization of the pro rata portion of debt issue
costs related to the Financings which is amortized over the lives of the
related indebtedness. Variable rate debt of the Company is subject to
ongoing interest rate fluctuations. The effect of a 1% increase in the
interest rate on these borrowings would have the impact of increasing
interest expense by approximately $1.8 million.
(d) Reflects the effect of the pro forma adjustments on income tax expense
using an estimated marginal tax rate of 38.9%.
<PAGE>
CROWN VANTAGE INC.
STOCK AWARD PLAN FOR OUTSIDE DIRECTORS
(as amended December 5, 1996)
CROWN VANTAGE INC. (the "Company"), hereby adopts the Crown Vantage Inc.
Stock Award Plan for Outside Directors.
1. PURPOSE. This Stock Award Plan for Outside Directors (the "Plan") is
intended to advance the interests of the Company by providing directors of the
Company who are not full-time employees of the Company or a parent or subsidiary
("Outside Directors") with shares of stock of the Company and an additional
incentive to promote its success. The Plan has been adopted by the Board of
Directors of the Company (the "Board of Directors") and approved by James River
Corporation of Virginia ("James River"), the Company's sole shareholder. The
Plan is intended to conform to the provisions of Rule 16b-3 of the Securities
Exchange Act of 1934, as amended, or any replacement rule in effect from time to
time ("Rule 16b-3").
The Plan shall become effective as of the record date of the distribution
of shares of stock of the Company by James River to its shareholders. The
record date of the distribution is referred to as the "Record Date."
2. ELIGIBILITY AND AWARD OF STOCK.
(a) On the first business day of each fiscal year of the Company,
beginning with the 1997 fiscal year, the Company shall award to each
Outside Director as of that date the number of whole shares of common
stock of the Company ("Company Stock") that, when multiplied by the Fair
Market Value (as described below) of the Company Stock, shall as nearly
as possible equal, but not exceed, $12,500, provided that a minimum of
250 shares of Company Stock shall be awarded to each Outside Director.
<PAGE>
(b) The Company, beginning with the 1997 fiscal year, shall set an amount
of cash compensation to be paid during such year to each Outside Director
(the "Cash Award"). Before the beginning of any fiscal year of the
Company, beginning with the 1997 fiscal year, an Outside Director may
elect to receive the Cash Award in whole shares of Company Stock. If
the Outside Director so elects to receive Company Stock, the Director
shall be awarded the number of whole shares of Company Stock that, when
multiplied by the Fair Market Value (as described below) of the Company
Stock, shall as nearly as possible equal, but not exceed 1.2 times the
Cash Award. Once awarded, such shares of Company Stock shall be subject
to vesting restrictions, deferral election and provisions as otherwise
provided in this Award Plan.
(c) For purposes of the Plan, the Fair Market Value of Company Stock shall
be the mean of the average of the high and low trading prices of the
Company Stock, as reported in the WALL STREET JOURNAL, for each of the
ten trading days immediately preceding the award date.
(d) Company Stock shall automatically be awarded under the Plan as
describe above. If at any time there are not sufficient shares available
under the Plan to permit an automatic award as described above, the award
shall be reduced pro rata (to zero, if necessary) so as not to exceed
the number of shares then available under the Plan.
(e) The Company Stock awarded under the Plan shall be restricted as
in Section 4 below. Each Outside Director may elect to defer payment of
the Company Stock as described in Section 5 below.
(f) As of the fifth (5th) business day following the earliest of the date
on which an Outside Director is first elected or appointed to the Board
of Directors as an Outside Director, the Company shall award to the
Outside Director that number of whole shares of Company Stock that, when
multiplied by the Fair
2
<PAGE>
Market Value (as described above) of the Company Stock, shall as nearly as
possible equal, but not exceed the amount obtained by multiplying $12,500
by a fraction, the numerator of which is the number of days in the fiscal
year following the date on which the Outside Director is elected or
appointed to the Board of Directors (as applicable) and the denominator of
which is 365. In addition, the Company shall provide such Outside
Director the opportunity to elect to receive whole shares of Company Stock
in lieu of cash compensation as provided in subparagraph (b) above.
3. STOCK. The Company has reserved an aggregate of 75,000 shares of Company
Stock for issuance pursuant to the Plan. The aggregate number is subject to
adjustment as provided in Section 7. In the event of a change in the capital
structure of the Company (as provided in Section 7), the shares resulting
from such change shall be deemed to be Company Stock within the meaning of
the Plan. The aggregate number of shares of Company Stock reserved shall be
reduced by the issuance of shares under the Plan, but, to the extent
permitted by Rule 16b-3, shall not be reduced if an Outside Director forfeits
the right to receive Company Stock under the Plan.
4. RESTRICTIONS ON COMPANY STOCK.
(a) Except as provided in Section 5 below, all Company Stock granted under
the Plan shall be restricted as described in this Section. Each Outside
Director shall become vested in Company Stock awarded pursuant to Section 2
on the date that is one year after the Company Stock is awarded, if the
Outside Director continues to be a member of the Board of Directors during
the entire one-year period following the date of the award. In addition,
an Outside Director shall become vested in such Company Stock (i) upon
retirement from the Board of Directors at or after age 65, (ii) if the
Outside Director dies while serving as a member of the Board of Directors
or (iii) if the Outside Director ceases to be a member of the Board of
Directors as a result of a Change of Control (as defined in Section 8). If
the Outside Director ceases to be a member of the Board of
3
<PAGE>
Directors for any reason other than one described in the preceding
sentence during the one-year period following the award of Company Stock,
the Outside Director's right to the Company Stock shall be forfeited.
(b) Shares of Company Stock that are restricted as described in this
Section 4 may not be sold, assigned, transferred, disposed of, pledged,
hypothecated or otherwise encumbered until the Stock becomes vested.
(c) When restricted Company Stock is issued, a certificate representing
the shares shall be issued in the name of the Outside Director, subject to
the restrictions imposed by the Plan. The Secretary of the Company
shall hold the certificates for the benefit of the Outside Director. In
other respects, the Outside Director shall have all the rights of a
shareholder with respect to the shares of Company Stock, including, but
not limited to, the right to vote such shares and the right to receive
all cash dividends. Certificates representing restricted Company Stock
shall bear a legend referring to the restrictions set forth in the Plan.
If stock dividends or other non-cash distributions are declared on
restricted Company Stock, such stock dividends or other distributions
shall be subject to the same restrictions as the underlying shares of
Company Stock.
5. DEFERRAL OF PAYMENT.
(a) Before the date on which an award of Company Stock is to be made
to Section 2, an Outside Director may elect to defer payment of part or
all of his award. If an Outside Director wishes to defer part of an
award, the deferral must relate to at least 40% of the award. An
Outside Director shall designate, at the time of the deferral, that
payment shall be made either (i) as of the first day of any calendar
year that is at least two years after the date of the deferral or (ii)
when the Outside Director ceases to be a member of the Board of
Directors. An Outside Director's deferral election shall be
irrevocable. A deferral election shall be made by filing a written
election with the Company and
4
<PAGE>
shall be made in a time and manner consistent with Rule 16b-3. Except as
provided in Section 2(f) (concerning awards made when Outside Directors
are first elected or appointed to the Board of Directors), a deferral
election shall be made before the services to which the award relates have
been rendered.
(b) If an Outside Director elects to defer payment of an award, the Company
shall establish a book account on its records for the Outside Director
and shall credit to the Outside Director's book account (the "Director's
Deferred Stock Account") a number of hypothetical shares of Company
Stock ("Director Deferred Stock") equal to the number of shares of
Company Stock that otherwise would have been granted pursuant to the
award. No actual shares of Company Stock or other certificates shall be
issued. An Outside Director's interest in such Director Deferred Stock
may not be sold, assigned, transferred, pledged, hypothecated or
otherwise encumbered.
(c) Each Director's Deferred Stock Account shall be adjusted to take into
account cash dividends that are declared on Company Stock. The Company
shall determine the amount of such dividends that are declared as of
each record date with respect to shares of Company Stock equal to the
number of hypothetical shares of Company Stock that are credited to the
Director's Deferred Stock Account as of such record date. The total
cash dividends shall then be converted into hypothetical shares of
Company Stock by dividing the amount of the dividends by the Fair Market
Value of the Company Stock as of the record date (as determined pursuant
to Section 2 but based on the ten trading days immediately following the
record date), and the nearest whole number of hypothetical shares of
Company Stock so determined shall be credited to the Director's Deferred
Stock Account. Each Director's Deferred Stock Account shall be adjusted
to take into account any stock dividends or other non-cash distributions
pursuant to Section 7 below.
5
<PAGE>
(d) If an Outside Director who has elected to defer Company Stock pursuant
to this Section 5 continues to be a member of the Board of Directors during
the entire one-year period following the date of the award, the Outside
Director shall receive payment of the Director's Deferred Stock Account
on the first to occur of: the first day of the calendar year
designated by the Outside Director at the time of the deferral, or (ii)
the date on which the Outside Director ceases to be a member of the
Board of Directors. In addition, the Outside Director shall become
entitled to receive payment of the Director's Deferred Stock Account (i)
if the Outside Director retires from the Board of Directors at or after
attaining age 65, if the Outside Director dies while serving as a
member of the Board of Directors or if the Outside Director ceases to
be a member of the Board of Directors as a result of a Change of
Control. If the Outside Director ceases to be a member of the Board of
Directors for any reason other than one described in the preceding
sentence during the one-year period following the award, the portion of
the Director's Deferred Stock Account that is attributable to cash
dividends declared on Company Stock during the one-year period shall be
paid to the Outside Director pursuant to subsection (e) below, and the
balance of the Director's Deferred Stock Account shall be forfeited.
(e) If an Outside Director has the right to receive payment of the
Director's Deferred Stock Account pursuant to subsection (d) above, the
Company shall distribute to the Outside Director that number of whole
shares of Company Stock that is equal to the number of hypothetical
whole shares of Company Stock that are then credited to the Director's
Deferred Stock Account. If an Outside Director is entitled to receive
payment of only the portion of the Director's Deferred Stock Account
that is attributable to dividends pursuant to subsection (d) above, the
Company shall distribute to the Outside Director that number of whole
shares of Company Stock that as nearly as possible equals, but does not
exceed, the portion of the Director's Deferred Stock Account that is
attributable
6
<PAGE>
to such dividends. The shares of Company Stock so distributed shall not
be subject to the restrictions described in Section 4.
6. ISSUANCE OF COMPANY STOCK. The Company shall not be required to issue or
deliver any certificate for shares of Company Stock before (i) the admission
of such shares to listing on any stock exchange on which the Company Stock
may then be listed, or listing of such shares for trading on the NASDAQ
National Market System, (ii) receipt of any required registration or other
qualification of such shares under any state or federal law or regulation
that the Company's counsel shall determine is necessary or advisable, and
(iii) the Company shall have been advised by counsel that all applicable
legal requirements have been complied with. The Company may place on a
certificate representing Company Stock any legend required pursuant to
Section 4, and any legend deemed necessary by the Company's counsel to comply
with federal or state securities laws. No shares of Company Stock shall be
issued under the Plan unless the Outside Director pays to the Company, or
makes arrangements satisfactory to the Company regarding the payment of, any
applicable withholding or other taxes. Until the Outside Director has been
issued a certificate for the shares of Company Stock acquired, the Outside
Director shall possess no shareholder rights with respect to the shares.
7. EFFECT OF STOCK DIVIDENDS AND OTHER CHANGES. Appropriate adjustments
shall be made automatically to the number and kind of shares to be issued
under the Plan, outstanding awards (including Directors' Deferred Stock
Accounts) and any other relevant provisions if there are any changes in the
Company Stock by reason of a stock dividend, stock split, combination of
shares, spin-off, reclassification, recapitalization, merger, consolidation
or other change in the Company's capital stock (including, but not limited
to, the creation or issuance to shareholders generally of rights, options or
warrants for the purchase of common stock or preferred stock of the Company).
If the adjustment would produce fractional shares, the fractional shares
shall be eliminated by rounding to the nearest whole share. The adjustments
shall be made in a manner consistent with Rule 16b-3.
7
<PAGE>
8. CHANGE OF CONTROL.
(a) For purposes of this Plan, a Change of Control means:
(i) The acquisition by any unrelated person of beneficial ownership
(as that term is used for purposes of the Securities Exchange Act of
1934, as amended) of 20% or more of the then outstanding shares of
common stock of the Company or the combined voting power of the then
outstanding voting securities of the Company entitled to vote
generally in the election of directors. The term "unrelated
person" means any person other than (x) the Company and its
subsidiaries, (y) an employee benefit plan or trust of the Company
or its subsidiaries, and (z) a person who acquires stock of the
Company pursuant to an agreement with the Company that is approved
by the Board of Directors in advance of the acquisition, unless the
acquisition results in the persons who were directors of the
Company before the acquisition ceasing to constitute a majority of
the Board of Directors. For purposes of this subsection, a
"person" means an individual, entity or group, as that term is used
for purposes of the Act.
(ii) Approval by the shareholders of the Company of a reorganization,
merger, consolidation or other transaction (collectively a
"transaction") with respect to which the persons who were the
beneficial owners of the common stock and voting securities of the
Company immediately prior to the transaction do not, following the
transaction, beneficially own, directly or indirectly, more than 50%
of the then outstanding shares of common stock of the Company (or the
successor corporation) or the combined voting power of the then
outstanding voting securities of the Company (or the successor
corporation) entitled to vote generally in the election of directors.
8
<PAGE>
(iii) A liquidation or dissolution of the Company, or a sale or other
disposition of all or substantially all of the assets of the Company.
(iv) A contested election in which an Outside Director who is
nominated by the Board of Directors is not elected to the Board of
Directors; provided that the contested election shall only be deemed a
Change of Control with respect to the Outside Director who ceases to
be a member of the Board of Directors as a result of the contested
election.
(b) An Outside Director will be considered to have ceased to be a member of
the Board of Directors as a result of a Change of Control if the Outside
Director ceases to be a member of the Board of Directors during the one-
year period commencing on the date of the applicable event described in
subsection (a).
9. ADMINISTRATION OF THE PLAN. The Board of Directors shall be responsible
for the proper implementation of the Plan. The Board of Directors shall not
exercise any discretion with respect to the administration of the Plan,
except as may be permitted by Rule 16b-3. The Board of Directors shall have
all powers vested in it by the terms of the Plan. Any decision of the Board
of Directors with respect to the Plan shall be final and conclusive. The
Board of Directors may act only by a majority of its members in office,
except that the members may authorize any one or more of their number or any
officer of the Company to execute and deliver documents on behalf of the
Board of Directors. The Board of Directors may consult with counsel, who may
be counsel to the Company, and shall not incur any liability for action taken
in good faith in reliance upon the advice of counsel.
10. EXPIRATION AND TERMINATION OF THE PLAN. Company Stock shall be awarded
under the Plan until the Plan is terminated by the Board of Directors or
until such earlier date when termination of the Plan shall be required by
law. If not sooner terminated, the Plan shall terminate automatically on
August 1, 2005.
9
<PAGE>
11. AMENDMENTS. The Board of Directors may from time to time make such
changes in and additions to the Plan as it may deem appropriate; provided
that, if and to the extent required by Rule 16b-3, no change shall be made
that increases the total number of shares reserved for issuance under the
Plan (except pursuant to Section 7), changes the class of persons eligible to
receive Company Stock, or materially increases the benefits accruing to
Outside Directors under the Plan, unless such change is authorized by the
shareholders of the Company. If required by Rule 16b-3, the Plan may not be
amended periodically, and in no event more often than every six months,
except for amendments required to comply with changes in the Internal Revenue
Code of 1986, as amended (the "Internal Revenue Code") or the rules
thereunder. The Board may unilaterally amend the Plan as it deems
appropriate to ensure compliance with Rule 16b-3 and to cause awards of
Company Stock pursuant to the Plan to meet the applicable requirements of the
Internal Revenue Code. Except as provided in the preceding sentence, the
termination of the Plan or any change or addition to the Plan shall not,
without the consent of any Outside Director who is adversely affected
thereby, alter any Company Stock awards previously made to the Outside
Director pursuant to the Plan.
12. RIGHTS UNDER THE PLAN. Title to and beneficial ownership of all
benefits described in the Plan shall at all times remain with the Company.
Participation in the Plan and the right to receive payments under the Plan
shall not give an Outside Director any proprietary interest in the Company or
any subsidiary or any of their assets. No trust fund shall be created in
connection with the Plan (other than a trust fund that does not change the
characterization of the Plan as an "unfunded" plan under the Internal Revenue
Code), and there shall be no required funding of amounts that may become
payable under the Plan. An Outside Director shall, for all purposes, be a
general creditor of the Company. The interests of an Outside Director under
the Plan cannot be assigned, anticipated, sold, encumbered or pledged and
shall not be subject to the claims of his creditors.
10
<PAGE>
13. BENEFICIARY. An Outside Director may designate, in a writing delivered
to the Company, one or more beneficiaries (which may include a trust) to
receive any payments that may become due under the Plan after the death of
the Outside Director. If an Outside Director fails to designate a
beneficiary, or no designated beneficiary survives the Outside Director, any
payments to be made with respect to the Outside Director after his death
shall be made to the personal representative of the Outside Director's
estate.
14. Notice. All notices and other communications required or permitted
to be given under the Plan shall be in writing and shall be deemed to have
been duly given if delivered personally or mailed first class, postage
prepaid, as follows: if to the Company, at its principal business address,
to the attention of the Secretary; if to any Outside Director, at the last
address of the Outside Director known to the sender at the time the notice or
other communication is sent.
15. INTERPRETATION. The terms of this Plan are subject to all present and
future rulings of the Securities Exchange Commission with respect to Rule
16b-3. If any provision of the Plan would cause the Plan to fail to meet the
requirements of Rule 16b-3, then that provision of the Plan shall be void and
of no effect.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed this 5th
day of December, 1996.
CROWN VANTAGE INC.
By /s/ Ernest S. Leopold
---------------------------
Ernest S. Leopold
Chairman, President and
Chief Executive Officer
11
<PAGE>
SECOND AMENDMENT
TO THE
CROWN VANTAGE INC.
STOCK AWARD PLAN FOR OUTSIDE DIRECTORS
THIS SECOND AMENDMENT to the Crown Vantage Inc. Stock Award Plan for
Outside Directors (the "Plan") is made pursuant to the authority under
Section 11 of the Plan for the Board of Directors to amend the Plan. The
Plan is hereby amended as follows:
I. Section 2(b) of the Plan is amended by substituting the following new
subparagraph (b) for existing subparagraph (b):
(b) The Company, beginning with the 1997 fiscal year, shall
set an amount of cash compensation to be paid during such year to
each Outside Director (the "Cash Award"). Before the beginning of
any fiscal year of the Company, beginning with the 1997 fiscal
year, an Outside Director may elect to receive the Cash Award in
whole shares of Company Stock. If the Outside Director so elects
to receive Company Stock, the Director shall be awarded the number
of whole shares of Company Stock that, when multiplied by the Fair
Market Value (as described below) of the Company Stock, shall as
nearly as possible equal, but not exceed 1.2 times the Cash Award.
Once awarded, such shares of Company Stock shall be subject to
vesting restrictions, deferral election and provisions as
otherwise provided in this Award Plan.
II. Section 2(a) of the Plan is amended by substituting "1997" for
"1996" in the second line, and substituting "$12,500" and "250" for "$25,000"
and "500", respectively, in the next to last line thereof.
III. Section 2(f) of the Plan is amended by substituting the following
new subparagraph (f) for existing subparagraph (f):
(f) As of the fifth (5th) business day following the earliest
of the date on which an Outside Director is first elected or
appointed to the Board of Directors as an Outside Director, the
Company shall award to the Outside Director that number of whole
shares of Company Stock that, when multiplied by the Fair Market
Value (as described above) of the Company
<PAGE>
Stock, shall as nearly as possible equal, but not exceed the amount
obtained by multiplying $12,500 by a fraction, the numerator of which is
the number of days in the fiscal year following the date on which the
Outside Director is elected or appointed to the Board of Directors
(as applicable) and the denominator of which is 365. In addition,
the Company shall provide such Outside Director the opportunity to
elect to receive whole shares of Company Stock in lieu of cash
compensation as provided in subparagraph (b) above.
IV. The foregoing amendments shall be effective as of December 5, 1996.
IN WITNESS WHEREOF, Crown Vantage Inc. has caused this amendment to the
plan to be executed this 5th day of December, 1996.
CROWN VANTAGE INC.
By: /s/ Christopher M. McLain
-------------------------
Christopher M. McLain
Senior Vice President and
General Counsel, Corporate Secretary
<PAGE>
CROWN PAPER CO., as Issuer
and
THE BANK OF NEW YORK, as Trustee
______________________________________________________________________________
FIRST SUPPLEMENTAL INDENTURE
Dated as of October 18, 1996
to
Indenture
Dated as of August 23, 1995
______________________________________________________________________________
11% Senior
Subordinated Notes
due 2005
<PAGE>
FIRST SUPPLEMENTAL INDENTURE (hereafter, the "First Supplemental
Indenture") dated as of October 18, 1996 between CROWN PAPER CO.
(hereinafter, the "Company"), a corporation duly organized and existing under
the laws of the Commonwealth of Virginia, and THE BANK OF NEW YORK
(hereinafter, the "Trustee"), a banking corporation organized and existing
under the laws of the State of New York.
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to the
Trustee an Indenture dated as of August 23, 1995 (hereinafter, the
"Indenture") providing for the issuance of the Company's 11% Senior
Subordinated Notes due 2005 (hereinafter, the "Securities") and
WHEREAS, certain provisions of the Indenture relating to the
definitions of "Asset Sale" and "Permitted Investment" and the covenant
regarding the Limitation On Sale of Assets are ambiguous or defective or
inconsistent with other provisions of the Indenture; and
WHEREAS, Article 9 and Section 901(c) of the Indenture permit the
Company and the Trustee to enter into a supplemental indenture without the
consent of the holders of the Securities to cure any ambiguity or to correct
or supplement any provision of the Indenture that is defective or
inconsistent with any other provision of the Indenture;
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the
Company covenants and agrees with the Indenture Trustee, for the equal and
proportionate benefit of all present and future holders of Securities, as
follows:
<PAGE>
Section 1. The definition of "Permitted Investment" in Section 101
of the Indenture shall read in its entirety as follows:
'"Permitted Investment" means (i) Investments in any Wholly Owned
Subsidiary or any Person which, as a result of such Investment, (a)
becomes a Wholly Owned Subsidiary or (b) is merged or consolidated with
or into, or transfers or conveys substantially all of its assets to, or
is liquidated into, the Company or any Wholly Owned Subsidiary; (ii)
Indebtedness of the Company or a Subsidiary described under clauses
(iv), (v) and (vi) of the definition of "Permitted Indebtedness"; (iii)
Temporary Cash Investments; (iv) Investments acquired by the Company or
any Subsidiary in connection with an Asset Sale permitted under Section
1012 to the extent such Investments are non-cash proceeds as permitted
under such covenant; (v) Investments acquired by the Company or any
Subsidiary in connection with any sale, conveyance, transfer, lease or
other disposition (collectively, a "transfer") of any properties or
assets to another Person, which transfer does not constitute an Asset
Sale; (vi) a loan of up to $10.1 million to the ESOP by the Company as
contemplated by the Contribution Agreement; and (vii) Investments in
existence on the date of this Indenture.'
Section 2. Paragraph (a) of Section 1012, LIMITATION ON SALE OF
ASSETS, shall read in its entirety as follows:
'Section 1012. Limitation of Sale of Assets.
(a) The Company will not, and will not permit any of its Subsidiaries
to, directly or indirectly, consummate an Asset Sale unless (i) at least
85% of the proceeds from such Asset Sale are received in cash; PROVIDED
that the amount of any Senior Indebtedness (as shown on the Company's
most recent balance sheet or in the notes thereto) of the Company that
is assumed by the transferee of any asset in connection with any Asset
Sale, shall be deemed to be cash for purposes of this provision and (ii)
the Company or such Subsidiary receives consideration at the time of
such Asset Sale at least equal to the Fair Market Value of the shares or
assets subject to such Asset Sale (as determined by the Board of
Directors of the Company and evidenced in a Board resolution).
Notwithstanding the foregoing, clause (i) of the preceding sentence
shall not apply to any Timber Asset Swap.'
Section 3. For all purposes of this First Supplemental Indenture,
except as otherwise herein expressly provided or unless the context otherwise
requires: (i) the terms and expressions used herein shall have the same
meanings as corresponding terms and expressions
-2-
<PAGE>
used in the Indenture; and (ii) the words "herein", "hereof" and "hereby" and
other words of similar import used in this First Supplemental Indenture refer
to this First Supplemental Indenture as a whole and not to any particular
Section hereof.
Section 4. The Trustee accepts this First Supplemental Indenture
and the amendment of the Indenture effected thereby and agrees to execute the
trust created by the Indenture as hereby amended, but only upon the terms and
conditions set forth in the Indenture, including the terms and provisions
defining and limiting the liabilities and responsibilities of the Indenture
Trustee, which terms and provisions shall in like manner define and limit its
liabilities in the performance of the trust created by the Indenture as
hereby amended.
Section 5. Except as hereby expressly amended, the Indenture and
the Securities issued thereunder are in all respects ratified and confirmed
and all the terms, conditions and provisions thereof shall remain in full
force and effect.
Section 6. This First Supplemental Indenture shall form a part of
the Indenture for all purposes, and every holder of Securities heretofore or
hereafter authenticated and delivered shall be bound hereby.
Section 7. This First Supplemental Indenture may be executed in
any number of counterparts, each of which when so executed shall be deemed to
be an original, and all of such counterparts shall together constitute one
and the same instrument.
-3-
<PAGE>
Section 8. This First Supplemental Indenture shall be construed in
accordance with and governed by the laws of the State of New York (without
giving effect to the conflict of laws principles thereof).
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed, all as of the day and year first
above written.
CROWN PAPER CO.
By: /s/ R. Neil Stuart
------------------------------
Name: R. Neil Stuart
Title: Senior Vice President,
Chief Financial Officer
Attest: /s/ Christopher M. McLain
----------------------------------
Name: Christopher M. McLain
Title: Senior Vice President and
General Counsel, Secretary
THE BANK OF NEW YORK, as Trustee
By: /s/ Byron Merino
-------------------------
Name: BYRON MERINO
Attest: /s/ Remo J. Reale Title: Assistant Treasurer
-------------------------------
Name: REMO J. REALE
Title: ASSISTANT VICE PRESIDENT
-4-
<PAGE>
State of California )
)
County of Alameda )
Subscribed and sworn to before me on October 8, 1996.
/s/ Donna Owen [Notary Public Stamp]
--------------
Notary Public
-5-
<PAGE>
AMENDMENT NO. 1 TO CREDIT AGREEMENT
AMENDMENT dated as of March 18, 1996 among CROWN PAPER CO., CROWN
VANTAGE INC., the BANKS listed on the signature pages hereof (the "BANKS")
and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent.
W I T N E S S E T H :
WHEREAS, the parties hereto have heretofore entered into a Credit
Agreement dated as of August 15, 1995 (the "Agreement"); and
WHEREAS, the parties hereto desire to amend the Agreement as more
fully set forth below;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. DEFINITIONS; REFERENCES. Unless otherwise specifically
defined herein, each term used herein which is defined in the Agreement shall
have the meaning assigned to such term in the Agreement. Each reference to
"hereof", "hereunder", "herein" and "hereby" and each other similar reference
and each reference to "this Agreement" and each other similar reference
contained in the Agreement shall from and after the date hereof refer to the
Agreement as amended hereby.
SECTION 2. AMENDMENTS OF THE AGREEMENT.
(a) Section 1.1 is amended by the addition of the following defined
term in its appropriate alphabetical position:
"Permitted IRB Debt" means the industrial revenue bond financings
set forth in Exhibit J, including all obligations of the Borrower in
respect thereof, and, subject to the PROVISO in Section 5.10 (j), any
refinancing, replacement or refunding thereof.
<PAGE>
(b) The definitions of "Available Cash Flow", "Excess Cash Flow"
and "Reduction Percentage" in Section 1.1 are amended to read in their
entirety as follows:
"Available Cash Flow" means, for any fiscal period, cash provided by
operating activities for such period, determined in accordance with
generally accepted accounting principles, as the same is reported (or
would be reported) in the "consolidated statement of cash flows" of the
Borrower and its Consolidated Subsidiaries for such period.
"Excess Cash Flow" means, for any period the excess (if any) of:
(A) Available Cash Flow for such period OVER
(B) the sum of (i) Consolidated Capital Expenditures
permitted to be made during such period under Section 5.18 (a) (i)
(whether or not made during such period or any subsequent period),
(ii) Consolidated Capital Expenditures actually made during such
period under Section 5.18 (a) (iii), (iii) cash dividends paid to
Holdings during such period in accordance with clause (c) of the
proviso to Section 5.15, (iv) scheduled amortization of long-term
Debt of the Borrower and its Consolidated Subsidiaries during such
period, (v) optional prepayments of the Term Loans during such
period and (vi) the aggregate Net Cash Proceeds of Permitted
Receivables Dispositions received during such period.
"Reduction Percentage" means, (i) in respect of an Asset Sale, a
Permitted Receivables Disposition, an incurrence of Debt other than Debt
permitted under clauses (a) through (k) of Section 5.10 or receipt of
Major Casualty Proceeds, 100%, (ii) in respect of an incurrence of Debt
described in clause (ii) (A) of the Definition of "Reduction Event",
50%, (iii) in respect of Excess Cash Flow, 75%, and (iv) in respect of
any Equity Issuance, 66.7% until the aggregate Net Cash Proceeds from
all Equity Issuances equals $50,000,000 and 50% thereafter.
(c) Clause (ii) of the definition of "Reduction Event" in Section
1.1 is amended to read in its entirety as follows:
2
<PAGE>
(ii) (A) the incurrence of Permitted IRB Debt set forth in Part B of
Exhibit J (regardless of whether, for purposes of Section 5.10, any such
Permitted IRB Debt is permitted by clause (g) or clause (k) of such
Section) and (B) the incurrence of any Debt by Holdings or any of its
Subsidiaries, other than Debt permitted under clauses (a) through (k) of
Section 5.10.
(d) Clause (k) of Section 5.1 of the Agreement is amended by
substituting the number "45" for the number "30" in the first line
thereof.
(e) Clause (j) of Section 5.10 is amended to read in its entirety as
follows:
(j) Debt of the Borrower or its Subsidiaries representing a
refinancing, replacement or refunding of (i) Debt permitted by clause (b)
or (c) above or clause (k) below or (ii) Permitted IRB Debt permitted by
clause (g) above; PROVIDED that the aggregate principal amount of such
Debt outstanding or available and the interest rate PER ANNUM payable by
the Borrower and its Subsidiaries with respect to such Debt will not be
increased, and the weighted average remaining life to maturity of such
Debt will not be decreased by reason of such refinancing, replacement or
refunding (for purposes of determining whether the interest rate PER
ANNUM will be increased in connection with any such refinancing,
replacement or refunding, any letter of credit fees, guarantee fees or
other credit support fees applicable to the outstanding Debt or to the
refinancing, replacement or refunding thereof shall be taken into
account).
(f) Section 5.10 is amended by the addition of the following new
clause (k):
(k) Permitted IRB Debt not otehrwise permitted by this Section;
PROVIDED that 50% of the principal or face amount of any Permitted
IRB Debt set forth in Part B of Exhibit J shall be permitted only by
clause (g) above and not this clause (k) and PROVIDED FURTHER that
Permitted IRB Debt (including without limitation any Permitted IRB
Debt set forth in Part A of Exhibit J and any refinancing, refunding
or replacement of any Permitted IRB Debt set forth in Part B of
Exhibit J) constituting a refinancing, replacement or refunding of
other Debt shall be permitted only by clause (j) above and not this
clause (k).
3
<PAGE>
(g) Exhibit J hereto is added to the Agreement as Exhibit J thereto.
(h) Section 5.23(a)(ii) is amended by:
(i) adding the parenthetical "(but excluding in any event the
Permitted Other Debt Payment (if any) with respect to the outstanding
principal amount (and any related premium) of the Industrial Development
Authority of the City of Richmond, Virginia Industrial Development Revenue
Bonds (James River Paper), Series of 1973 (the "Richmond IRB's")
made in reliance on the second proviso of this subsection (a)(ii)
" immediately after the phrase "subsection (a)(ii)" in the eighth line
thereof, and
(ii) adding the following proviso at the end of the first sentence
thereof: "and PROVIDED FURTHER that the Borrower may prepay in whole, on
or prior to December 31, 1996, the Richmond IRB's.
SECTION 3. AMENDMENTS OF THE MORTGAGES. The Banks hereby consent to
the execution and delivery by the Collateral Agent of amendments to any
Mortgage, in form satisfactory to the Collateral Agent, to provide that the
Permitted IRB Debt may be secured thereunder equally and ratably with the
obligations of the Borrower under the Loan Documents, PROVIDED that (i) no
consent of the holders of Permitted IRB Debt shall be required in connection
with any further amendment of any Mortgage (except as set forth in clause
(ii) of this proviso), any release of all or any portion of the Collateral
thereunder or any exercise of remedies thereunder and (ii) the consent of the
trustee for each separate indenture or similar instrument pursuant to which
any bonds constituting Permitted IRB Debt have been issued (such consent to
be obtained in accordance with the provisions of each such indenture or
similar instrument) shall be required with respect to any amendment to any
Mortgage the effect of which amendment is to eliminate the equal and ratable
sharing of the Collateral between the Banks and the holders of Permitted IRB
Debt, it being understood that the release of assets from the Lien created by
any Mortgage does not constitute such an amendment even if such release is
made in connection with a sale of such assets and the proceeds of such sale
are applied in whole to repay the Loans.
SECTION 4. GOVERNING LAW. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York.
4
<PAGE>
SECTION 5. COUNTERPARTS; EFFECTIVENESS. This Amendment may be signed
in any number of counterparts, each of which shall be an original, with the
same effect as if the signatures thereto and hereto were upon the same
instrument. This Amendment shall become effective as of the date hereof when
the Administrative Agent shall have received (x) duly executed counterparts
hereof signed by the Borrower and the Required Banks (or, in the case of any
party as to which an executed counterpart shall not have been received, the
Administrative Agent shall have received telegraphic, telex or other written
confirmation from such party of execution of a counterpart hereof by such
party) and (y) an endorsement to each of the title policies delivered to the
Administrative Agent pursuant to Section 3.1(f) of the Agreement to the
effect that the priority of the Mortgage insured thereby with respect to any
Secured Obligations (as defined in such Mortgage), other than any Secured
Obligations consisting of Secured IRB Debt (as defined in such Mortgage) or
any renewals or extensions thereof, is unaffected by the execution and
delivery of this Amendment and any amendment to such Mortgage pursuant to
Section 3 hereof.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date first above written.
CROWN PAPER CO.
By /s/ Charles Shreve
-----------------------------
Title: Senior Vice President
& Chief Financial
Officer
CROWN VANTAGE INC.
By /s/ Charles Shreve
-----------------------------
Title: Senior Vice President
& Chief Financial
Officer
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By /s/ Jeffrey Hwang
-----------------------------
Title: Vice President
THE BANK OF NEW YORK
By /s/ Lisa Y. Brown
-----------------------------
Title: Vice President
6
<PAGE>
THE LONG-TERM CREDIT BANK
OF JAPAN, LTD.
By /s/ T. Morgan Edwards II
-----------------------------
Title: Vice President &
Manager
By /s/ Y. Kamisawa
-----------------------------
Title: Deputy General
Manager
NATIONSBANK, N.A. (CAROLINAS)
By /s/ Michael Tousignant
-----------------------------
Title: Vice President
TORONTO DOMINION
(TEXAS), INC.
By /s/ Diane Bailey
-----------------------------
Title: Vice President
THE CHASE MANHATTAN BANK, N.A.
By /s/ Nancy A. Bridgman
-----------------------------
Title: Vice President
MIDLAND BANK PLC
By /s/ Martin Brown
-----------------------------
Title: Director, New York
Branch
7
<PAGE>
CHRISTIANIA BANK
OG KREDITKASSE
By /s/ Carl-Petter Svendsen
-----------------------------
Title: First Vice President
By /s/ Peter M. Dodge
-----------------------------
Title: Vice President
CREDITANSTALT CORPORATE
FINANCE, INC.
By /s/ Dennis C. O'Dowd
-----------------------------
Title: Chief Executive
Officer
By /s/ Jim McCann
-----------------------------
Title: Vice President
DRESDNER BANK AG
By /s/ Sidney S. Jordan
-----------------------------
Title: Vice President
By /s/ Jon M. Bland
-----------------------------
Title: Senior Vice President
PNC BANK, NATIONAL
ASSOCIATION
By /s/ Anthony L. Trunzo
-----------------------------
Title: Vice President &
Manager
WELLS FARGO BANK, N.A.
By /s/ Ralph Turner
-----------------------------
Title: Vice President
8
<PAGE>
BANQUE FRANCAISE DU COMMERCE
EXTERIEUR
By /s/ Timothy Daileader
-----------------------------
Title: Assistant Vice
President
CERES FINANCE LTD.
By /s/ Darren P. Riley
-----------------------------
Title: Director
STRATA FUNDING LTD.
By /s/ Darren P. Riley
-----------------------------
Title: Director
RESTRUCTURED OBLIGATIONS
BACKED BY SENIOR ASSETS,
B.V.
By: Cancellor Senior
Secured Management,
Inc. as Portfolio
Agent
By /s/ Chris Bondy
-----------------------------
Title: Director
KEYPORT LIFE INSURANCE COMPANY
By /s/ Chris Bondy
-----------------------------
Title: Director
9
<PAGE>
MERRILL LYNCH SENIOR FLOATING
RATE FUND, INC.
By /s/ John W. Fraser
-----------------------------
Title: Authorized Signatory
EATON VANCE
By
-----------------------------
Title:
FIRST SOURCE FINANCIAL, INC.
By /s/ James J. Russell
-----------------------------
Title: Vice President
THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY
By /s/ A. Kipp Koester
-----------------------------
Title: Vice President
PILGRIM PRIME RATE TRUST
By /s/ Howard Tiffen
-----------------------------
Title: Senior Vice President
PROTECTIVE LIFE INSURANCE
COMPANY
By /s/ Mark K. Okada
-----------------------------
Title: Principal of
Protective Asset
Management Co.
10
<PAGE>
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as
Administrative Agent
By /s/ Jeffrey Hwang
-----------------------------
Title: Vice President
11
<PAGE>
AMENDMENT NO. 2 TO CREDIT AGREEMENT
AMENDMENT dated as of December 18, 1996 among CROWN PAPER CO., CROWN
VANTAGE INC., the BANKS listed on the signature pages hereof (the "Banks" and
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent.
W I T N E S S E T H :
WHEREAS, the parties hereto have heretofore entered into a Credit
Agreement dated as of August 15, 1995 as amended (the "Agreement"); and
WHEREAS, the parties hereto desire to amend the Agreement as more
fully set forth below;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. DEFINITIONS: REFERENCES. Unless otherwise specifically
defined herein, each term used herein which is defined in the Agreement shall
have the meaning assigned to such term in the Agreement. Each reference to
"hereof", "hereunder", "herein" and "hereby" and each other similar reference
and each reference to "this Agreement" and each other similar reference
contained in the Agreement shall from and after the date hereof refer to the
Agreement as amended hereby.
SECTION 2. AMENDMENT TO THE DEFINITIONS OF CONSOLIDATED EBITDA AND
DEBT. (a) The definition of "Consolidated EBITDA" set forth in Section 1.1 of
the Agreement is amended to read in its entirety as follows:
"Consolidated EBITDA" means, for any fiscal period, Consolidated EBIT
for such period plus, to the extent deducted in determining Consolidated Net
Income for such period, (i) the aggregate amount of depreciation,
amortization, non-cash incentive compensation expense and other similar
non-cash charges and (ii) solely for any period ended on or prior to December
31, 1997 and solely to the extent not included in clause (i), the lesser of
(x) the aggregate amount of write-downs, write-offs or reserves with respect
to the rebuild of the Number One Paper Machine at St. Francisville and (y)
$2,500,000.
<PAGE>
(b) Clause (v) of the definition of "Debt" set forth in Section 1.1 of
the Agreement is amended to read in its entirety as follows: "(v) all
contingent and noncontingent obligations of such Person to reimburse any bank
or other Person in respect of amounts payable or paid under a letter of
credit or similar instrument".
SECTION 3. DECREASE IN THE CASH FLOW RATIO. Section 5.12 of the
Agreement is amended to read in its entirety as follows:
SECTION 5.12 CASH FLOW RATIO. As of the last day of each fiscal quarter
of the Borrower set forth below, the Cash Flow Ratio at such day will not be
less than the ratio set forth below opposite such fiscal quarter:
Fiscal Quarter Ratio
-------------- -----
Fourth quarter of
1996 fiscal year 0.18:1
First quarter of
1997 fiscal year 0.13:1
Second quarter of
1997 fiscal year 0.12:1
Third quarter of
1997 fiscal year 0.13:1
Fourth quarter of
1997 fiscal year 0.16:1
Thereafter 0.20:1
SECTION 4. DECREASE IN THE INTEREST COVERAGE RATIO. Section 5.13 of
the Agreement is amended to read in its entirety as follows:
SECTION 5.13. INTEREST COVERAGE RATIO. As of the last day of each
fiscal quarter of the Borrower set forth below, the Interest Coverage Ratio
at such day will not be less than the ratio set forth below opposite such
fiscal quarter:
Fiscal Quarter Ratio
-------------- -----
Fourth quarter of
1996 fiscal year 2.00:1
First quarter of
1997 fiscal year 1.55:1
<PAGE>
Second quarter of
1997 fiscal year 1.35:1
Third quarter of
1997 fiscal year 1.50:1
Fourth quarter of
1997 fiscal year 2.00:1
Thereafter 2.50:1
SECTION 5. DECREASE IN THE MINIMUM CONSOLIDATED TANGIBLE NET WORTH.
The table set forth in Section 5.14 of the Agreement is amended to read in
its entirety as follows:
Period Minimum Amount
------ --------------
From and including
December 18, 1996
to but
excluding last day of
first quarter of 1997
fiscal year $80,000,000
From and including
last day of first quarter
of 1997 fiscal year to but
excluding last day of
1998 fiscal year $75,000,000
From and including
last day of 1998 fiscal
year to but
excluding last day of
1999 fiscal year $100,000,000
Thereafter $125,000,000
SECTION 6. GOVERNING LAW. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 7. COUNTERPARTS: EFFECTIVENESS. This Amendment may be signed
in any number of counterparts, each of which shall be an original, with the
same effect as if the signatures thereto and hereto were upon the same
instrument. This
3
<PAGE>
Amendment shall become effective as of the date hereof when the
Administrative Agent shall have received (x) duly executed counterparts
hereof signed by the Borrower and the Required Banks (or, in the case of any
party as to which an executed counterpart shall not have been received, the
Administrative Agent shall have received telegraphic, telex or other written
confirmation from such party of execution of a counterpart hereof by such
party) and (y) for the account of each Bank, an amendment fee in such amount
as shall have been previously agreed upon between the Borrower and the Banks.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed as of the date first above written.
CROWN PAPER CO.
By /s/ R. Neil Stuart
----------------------
Title: Senior Vice President
Chief Financial Officer
CROWN VANTAGE INC.
By /s/ R. Neil Stuart
-----------------------
Title: Senior Vice President
Chief Financial Officer
<PAGE>
BANKS:
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By /s/ Charles H. King
---------------------------------
Title: Charles H. King
Vice President
THE BANK OF NEW YORK
By /s/ Jonathan Rollins
---------------------------------
Title: Jonathan Rollins
Assistant Vice President
BANQUE FRANCAISE DU COMMERCE
EXTERIEUR
By /s/ Frederick K. Kammer
---------------------------------
Title: Frederick K. Kammer
Vice President
By /s/ G. K. Day
---------------------------------
Title: G. K. Day
Assistant Vice President
CERES FINANCE LTD.
By /s/ Darren P. Riley
---------------------------------
Title: Darren P. Riley
Director
<PAGE>
RESTRUCTURED OBLIGATIONS BACKED
BY SENIOR ASSETS B.V.
BY: Chancellor LGT Senior Secured
Management, Inc. as Portfolio
Advisor
BY: /s/ Christopher A. Bondy
--------------------------------
Christopher A. Bondy
Vice President
STRATA FUNDING LTD.
By /s/ Darren P. Riley
---------------------------------
Title: Darren P. Riley
Director
THE CHASE MANHATTAN BANK, as
successor by merger to THE CHASE
MANHATTAN BANK, N.A.
By /s/ Nancy A. Bridgeman
---------------------------------
Title: Nancy A. Bridgeman
Vice President
CHRISTIANIA BANK OG
KREDITKASSE
By /s/ Carl-Petter Svendsen
---------------------------------
Title: Carl-Petter Svendsen
First Vice President
By /s/ Peter M. Dodge
---------------------------------
Title: Peter M. Dodge
First Vice President
<PAGE>
CREDITANSTALT CORPORATE
FINANCE, INC.
By /s/ Jack Bertges
---------------------------------
Title: Senior Vice President
By /s/ Jim McCann
-------------------------------
Title: Jim McCann
Vice President
DRESDNER AG, NEW YORK BRANCH
AND GRAND CAYMAN
BEACH
By /s/ Thomas J. Nadramia
--------------------------------
Title: Vice President
By
------------------------------
Title: Vice President
FIRST SOURCE FINANCIAL LLP, by
FIRST SOURCE FINANCIAL, INC.
its Agent/Manager
By /s/ Gary L. Francis
------------------------------
Title: Senior Vice President
MARINE MIDLAND BANK
By J.B. Lyons
--------------------------------
Title: Senior Vice President
<PAGE>
THE LONG-TERM CREDIT BANK OF
JAPAN, LTD.
By /s/ T. Morgan Edwards II
----------------------------------
Title: T. Morgan Edwards II
Deputy General Manager
MERRILL LYNCH PRIME RATE
PORTFOLIO
By: Merrill Lynch Asset Management,
LP, AS INVESTMENT ADVISOR
By: Gil Marchand
------------------------------
Title: Authorized Signatory
MERRILL LYNCH SENIOR FLOATING
RATE FUND, INC.
By: Gil Marchand
------------------------------
Title: Authorized Signatory
NATIONSBANK, N.A.
By /s/ Michael Tousignant
--------------------------------
Title: Michael Tousignant
Vice President
THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY
By /s/ Richard A. Strait
--------------------------------
Title: Richard A. Strait
Vice President
<PAGE>
PNC BANK NATIONAL ASSOCIATION
By
--------------------------------
Title:
PROTECTIVE LIFE INSURANCE COMPANY
By /s/ Mark K. Okada
--------------------------------
Title: Mark K. Okada
Executive Vice President
SENIOR DEBT PORTFOLIO
By: Boston Management and Research
as Investment Advisor
By
--------------------------------
Title:
SOUTHERN PACIFIC THRIFT AND
LOAN
By Charles Martorano
--------------------------------
Title: Senior Vice President
TORONTO DOMINION (TEXAS), INC.
By /s/ Neva Nesbitt
--------------------------------
Title: Neva Nesbitt
Vice President
<PAGE>
VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST
By /s/ Jeffrey W. Maillet
--------------------------------
Title: Jeffrey W. Maillet
Senior Vice President
and Director
<PAGE>
MORGAN GUARANTY TRUST
COMPANY, as Administrative
Agent
By /s/ Charles H. King
--------------------------------
Title: Charles H. King
Vice President
<PAGE>
EXHIBIT J
PERMITTED IRB DEBT
PART A
Berlin 6 5/8% bonds $ 18,070,000
due 2/1/22
Parchment 8.0% bonds 2,600,000
due 10/1/06
St. Francisville 5.95% bonds 600,000
due 1/1/08
St. Francisville 8.0% bonds 150,000
due 5/1/97
St. Francisville 5.95% bonds 590,000
due 5/1/97
St. Francisville 5.95% bonds 1,000,000
due 1/1/08
-----------
$ 23,010,000
PART B
Berlin $ 12,450,000
Parchment 4,750,000
----------
$ 17,200,000
<PAGE>
[CONFORMED COPY]
RECEIVABLES PURCHASE AGREEMENT
dated as of
June 12, 1996
among
CROWN PAPER FUNDING CORPORATION,
CROWN PAPER CO., as Servicer,
THE FINANCIAL INSTITUTIONS LISTED HEREIN,
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as Administrative Agent
and
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as Structuring and Collateral Agent
___________________________________________
Arranged by
J.P. MORGAN SECURITIES INC.<PAGE>
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TABLE OF CONTENTS
Page
ARTICLE 1
DEFINITIONS
1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. UCC Terms . . . . . . . . . . . . . . . . . . . . . . . . . . 34
1.3. Accounting Terms and Determinations . . . . . . . . . . . . . 34
ARTICLE 2
PURCHASES
2.1. Sale and Assignment . . . . . . . . . . . . . . . . . . . . . 34
2.2. Incremental Purchases . . . . . . . . . . . . . . . . . . . . 34
2.3. Tranches; Yield Accrual Periods; Yield Rates. . . . . . . . . 35
2.4. Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
2.5. Optional Termination or Reduction of Commitments. . . . . . . 37
2.6. Payments under Certain Circumstances. . . . . . . . . . . . . 37
2.7. General Provisions as to Payments . . . . . . . . . . . . . . 38
2.8. Funding Losses. . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE 3
ASSIGNMENT;
COLLECTION AND ADMINISTRATION OF RECEIVABLES
3.1. Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . 39
3.2. Accounts and Collections. . . . . . . . . . . . . . . . . . . 42
3.3. Administration of Receivables . . . . . . . . . . . . . . . . 43
3.4. Servicer's Compensation . . . . . . . . . . . . . . . . . . . 45
3.5. Servicing Transfer. . . . . . . . . . . . . . . . . . . . . . 45
3.6. Protection of Purchased Interest. . . . . . . . . . . . . . . 46
3.7. Pre-Termination Procedures; Reinvestment. . . . . . . . . . . 47
3.8. Post-Termination Procedures . . . . . . . . . . . . . . . . . 51
3.9. Payments under Certain Circumstances. . . . . . . . . . . . . 53
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ARTICLE 4
CONDITIONS
4.1. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
4.2. Conditions to Each Incremental Purchase . . . . . . . . . . . 58
4.3. Conditions to Each Purchase . . . . . . . . . . . . . . . . . 59
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
5.1. Representations and Warranties of the Servicer. . . . . . . . 60
5.2. Representations and Warranties of CPFC. . . . . . . . . . . . 60
ARTICLE 6
COVENANTS
6.1. General Information . . . . . . . . . . . . . . . . . . . . . 63
6.2. Information Regarding the Receivables . . . . . . . . . . . . 66
6.3. Preservation of Corporate Existence . . . . . . . . . . . . . 68
6.4. Compliance with Laws. . . . . . . . . . . . . . . . . . . . . 68
6.5. No Transfers; No Liens. . . . . . . . . . . . . . . . . . . . 69
6.6. No Merger . . . . . . . . . . . . . . . . . . . . . . . . . . 69
6.7. Limitations on Activities of CPFC . . . . . . . . . . . . . . 69
6.8. Agreements Relating to Program Documents. . . . . . . . . . . 70
6.9. Waivers and Amendments of Documents . . . . . . . . . . . . . 70
6.10. Payment of Taxes. . . . . . . . . . . . . . . . . . . . . . . 70
6.11. Accounting Treatment. . . . . . . . . . . . . . . . . . . . . 71
ARTICLE 7
TERMINATION EVENTS
7.1. Termination Events. . . . . . . . . . . . . . . . . . . . . . 71
7.2. Consequences of a Termination Event . . . . . . . . . . . . . 74
ARTICLE 8
THE AGENTS
8.1. Appointment and Authorization . . . . . . . . . . . . . . . . 75
8.2. Agents and Affiliates . . . . . . . . . . . . . . . . . . . . 75
8.3. Action by Agents. . . . . . . . . . . . . . . . . . . . . . . 76
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8.4. Consultation with Experts . . . . . . . . . . . . . . . . . . 76
8.5. Liability of Agents . . . . . . . . . . . . . . . . . . . . . 76
8.6. Indemnification . . . . . . . . . . . . . . . . . . . . . . . 77
8.7. Purchase Decision . . . . . . . . . . . . . . . . . . . . . . 77
8.8. Successor Agent . . . . . . . . . . . . . . . . . . . . . . . 77
8.9. Direction by Required Buyers. . . . . . . . . . . . . . . . . 78
ARTICLE 9
CHANGE IN CIRCUMSTANCES
9.1. Change in Circumstances . . . . . . . . . . . . . . . . . . . 78
9.2. Illegality. . . . . . . . . . . . . . . . . . . . . . . . . . 79
9.3. Indemnity for Changes in Law. . . . . . . . . . . . . . . . . 79
9.4. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
9.5. Substitution of Buyer . . . . . . . . . . . . . . . . . . . . 84
ARTICLE 10
MISCELLANEOUS
10.1. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
10.2. No Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . 86
10.3. Expenses; Indemnification . . . . . . . . . . . . . . . . . . 86
10.4. Sharing of Set-Offs . . . . . . . . . . . . . . . . . . . . . 89
10.5. Amendments and Waivers. . . . . . . . . . . . . . . . . . . . 89
10.6. Successors and Assigns. . . . . . . . . . . . . . . . . . . . 90
10.7. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . 92
10.8. Financial Accommodation . . . . . . . . . . . . . . . . . . . 93
10.9. No Bankruptcy Petition Against CPFC . . . . . . . . . . . . . 93
10.10. Limitation of Liability . . . . . . . . . . . . . . . . . . . 93
10.11. Notices to S&P. . . . . . . . . . . . . . . . . . . . . . . . 93
10.12. Governing Law; Submission to Jurisdiction . . . . . . . . . . 94
10.13. Counterparts; Integration; Effectiveness. . . . . . . . . . . 94
10.14. WAIVER OF JURY TRIAL. . . . . . . . . . . . . . . . . . . . . 94
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Schedules and Exhibits
Schedule 1 Qualified Banks; Collection Account and
Lockbox Information
Schedule 2 Special Obligors
Schedule 3 Eligible Subsidiaries
Exhibit A Form of Buyer's Certificate
Exhibit B Form of Purchase Notice
Exhibit C Form of Yield Accrual Period Selection
Notice
Exhibit D Form of Daily Report
Exhibit E Form of Settlement Statement
Exhibits F-1 Form of Lockbox Agreement
and F-2 Form of Collection Account Agreement
Exhibits G-1, Form of Opinions of Counsel to
G-2 and G-3 CPFC and CPC
Exhibit H Credit and Collection Policy
Exhibit I Form of Purchase and Sale Agreement
Exhibit J Form of Certificate of Incorporation of
CPFC
Exhibit K Form of Resolutions, including Form of
Bylaws, of CPFC
Exhibit L Form of Resolution of CPC
Exhibits M-1 Form of Perfection Certificates
and M-2
Exhibit N Form of Assignment and Assumption
Agreement
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RECEIVABLES PURCHASE AGREEMENT dated as of June 12, 1996 among CROWN
PAPER FUNDING CORPORATION, CROWN PAPER CO., as Servicer, the FINANCIAL
INSTITUTIONS listed on the signature pages hereof, as Buyers, MORGAN GUARANTY
TRUST COMPANY OF NEW YORK, as Administrative Agent and MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as Structuring and Collateral Agent.
RECITALS
WHEREAS, subject to the terms and conditions of this Agreement, CPFC
desires to transfer and assign to the Buyers and the Buyers desire to acquire
from CPFC undivided interests in the Receivables;
WHEREAS, CPC has agreed to act as Servicer hereunder in respect of the
Receivables;
WHEREAS, Morgan Guaranty has been requested and is willing to act as the
Administrative Agent and as the Collateral Agent;
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE 1
DEFINITIONS
SECTION A.. DEFINITIONS. The following terms, as used herein, have
the following meanings:
"Adjusted Aggregate Net Investment" means, at any time, the Aggregate
Net Investment at such time less the Allocated ANI at such time.
"Adjusted Buyers' Interest" means, at any time, a percentage equal to
the following:
(AANI + YR) x (1 + ARP)
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NPB
where:
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AANI = Adjusted Aggregate Net Investment,
YR = Yield Reserve,
ARP = Adjusted Reserve Percentage, and
NPB = Net Pool Balance.
"Adjusted CD Rate" applicable to any Yield Accrual Period means a rate
per annum determined pursuant to the following formula (the amount in brackets
being rounded upwards, if necessary, to the next higher 1/100 of 1%):
ACDR = ( CDR ) + AR
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(1.00 - DRP)
where:
ACDR = Adjusted CD Rate,
CDR = the CD Rate applicable to such Yield Accrual Period,
DRP = the Domestic Reserve Percentage in effect on the first day of such
Yield Accrual Period, and
AR = the Assessment Rate in effect on the first day of such
Yield Accrual Period.
"Adjusted London Interbank Offered Rate" applicable to any Yield Accrual
Period means a rate per annum equal to the quotient obtained (rounded upward, if
necessary, to the next higher 1/100 of 1%) by dividing (i) the applicable London
Interbank Offered Rate by (ii) 1.00 minus the Euro-Dollar Reserve Percentage in
effect on the first day of such Yield Accrual Period.
"Adjusted Reserve Percentage" means, at any time, a percentage equal to
(i) the Reserve Percentage at such time divided by (ii) 1.00 minus the Reserve
Percentage at such time.
"Administrative Agent" means Morgan Guaranty in its capacity as
administrative agent for the Buyers, and its successors in such capacity.
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"Administrative Questionnaire" means, with respect to each Buyer, an
administrative questionnaire in the form prepared by the Administrative Agent
and submitted to the Administrative Agent (with a copy to CPFC) duly completed
by such Buyer.
"Adverse Interest" means, as to any assets owned by any Person, any Lien
on, or any other claim or interest of any other Person in, such asset, other
than any Liens, claims or interests created by the Program Documents or any
Liens that secure the payment of taxes, assessments or governmental charges or
levies (i) that are not delinquent or (ii) that are being contested in good
faith by appropriate proceedings and, in the case of this clause (ii), are not
material in amount.
"Affiliate" means, with respect to a Person, any other Person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with, such Person. As used herein, the
term "control" means possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a Person, whether
through the ownership of voting securities, by contract or otherwise.
"Agent" means the Administrative Agent or the Collateral Agent, and
"Agents" means the Administrative Agent and the Collateral Agent.
"Aggregate Net Investment" means, at any time, (i) the sum of the
Purchase Price theretofore paid to CPFC by the Buyers less (ii) the aggregate
amount received (and not rescinded or otherwise returned or restored) by the
Buyers to reduce such Aggregate Net Investment pursuant to Sections 3.7(c)(ii)
and 3.8.
"Aggregate Unpaids" means, at any time, an amount equal to the sum of
(i) the aggregate accrued and unpaid Yield at such time, (ii) the Aggregate Net
Investment at such time, (iii) all Commitment Fees accrued and unpaid at such
time and (iv) all Other Expenses owed (whether then due or only accrued)
hereunder at such time.
"Agreement" means this Receivables Purchase Agreement, as amended from
time to time.
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"Allocated ANI" means, at any time, the amount on deposit in the Cash
Collateral Account pursuant to Section 3.7(c)(i) in respect of the Aggregate Net
Investment at such time.
"Assessment Rate" means for any day the annual assessment rate in
effect (expressed as a percentage and rounded upwards, if necessary, to the
next higher 1/100 of 1%) on such day which is payable by a member of the Bank
Insurance Fund classified as adequately capitalized and within supervisory
subgroup "A" (or a comparable successor assessment risk classification)
within the meaning of 12 C.F.R. SECTION 327.4(a) (or any successor provision)
to the Federal Deposit Insurance Corporation (or any successor) for such
Corporation's (or such successor's) insuring time deposits at offices of such
institution in the United States.
"Assignee" has the meaning set forth in Section 10.6(c).
"Available Collections" means, on any Business Day, (i) the amount of
the Remainder calculated on such Business Day plus (ii) Allocated ANI at the
opening of business on such Business Day.
"Available Commitment" means, at any time, the total Commitments of the
Buyers at such time minus the Aggregate Net Investment at such time.
"Base Rate" means (subject to the definition of "Yield Rate"), for any
day, the sum of (i) the higher of (x) the Prime Rate for such day and (y) the
rate per annum (rounded upward, if necessary, to the nearest 1/100 of 1%) equal
to the weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds brokers on
such day, as published by the Federal Reserve Bank of New York on the New York
Business Day next succeeding such day, (or if such day is not a New York
Business Day, the rate on such transactions on the next preceding New York
Business Day as so published on the next succeeding New York Business Day or, if
no such rate is published on such next succeeding New York Business Day, the
average rate quoted to Morgan Guaranty on such day for such transactions as
determined by the Administrative Agent) plus one-half of one percent (1/2%) and
(ii) for any day from and including the Closing
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Date to but not including the date on which the Administrative Agent delivers
a notice of termination of the Commitments pursuant to Section 7.2 or an
Event of Bankruptcy occurs with respect to CPFC or CPC, 0% per annum and,
thereafter, 2.0% per annum; "New York Business Day" means any day other than
a Saturday, Sunday or any other day on which banking institutions are
authorized or required to close in New York City.
"Benefit Arrangement" means at any time an "employee benefit plan"
within the meaning of Section 3(3) of ERISA which is not a Plan or a
Multiemployer Plan and which is maintained or otherwise contributed to by any
member of the ERISA Group.
"Business Day" means any day other than a Saturday, Sunday, or any other
day on which banking institutions are authorized or required to close in New
York City, Philadelphia, Pennsylvania, or Richmond, Virginia.
"Buyer" means each buyer listed on the signature pages hereof, each
Assignee which becomes a buyer pursuant to Section 10.6(c), and their respective
successors.
"Buyer Default" means (i) the failure (which has not been cured) of any
Buyer to make available its portion of the Incremental Purchase which it is
obligated to make available under the terms and conditions of this Agreement or
(ii) the giving of notice by any Buyer to the Administrative Agent and CPFC that
such Buyer does not intend to comply with its obligations under Article 2
following the appointment of a receiver or conservator with respect to such
Buyer at the direction or request of any regulatory agency or authority.
"Buyers' Certificates" means certificates issued to the Buyers
substantially in the form of Exhibit A hereto, and "Buyer's Certificate" means
any one of such certificates.
"Buyers' Interest" means, at any time, a percentage equal to the lesser
of: (i)
(ANI + YR) x (1 + ARP)
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NPB
where:
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ANI = Aggregate Net Investment at such time,
YR = Yield Reserve at such time,
ARP = Adjusted Reserve Percentage at such time,
NPB = Net Pool Balance at such time,
and (ii) 100%; PROVIDED that at any time on and after the Termination Date until
(and including) the Final Payment Date, the Buyers' Interest shall be equal to,
at any time of determination, the greater of (i) the Buyers' Interest calculated
as provided above at the close of business on the Business Day preceding the
Termination Date, and (ii) the Buyers' Interest calculated as provided above.
"Cash Collateral Account" has the meaning set forth in Section 3.2(b).
"Cash Collateral Account Investments" means certificates of deposit or
time deposits, in each case in the name of the Collateral Agent as Collateral
Agent hereunder, of any bank or trust company organized under the laws of the
United States or any state thereof or any branch or trust company organized
under the laws of a foreign jurisdiction that is subject to the supervision and
examination by United States Federal or state banking authorities, the
certificates of deposit of which bank are rated A-1+ by S&P, such certificates
of deposit or time deposits to mature such that funds will be available to make
payments out of the Cash Collateral Account as contemplated hereby without
having to liquidate any such certificates of deposit or time deposits.
"Category A-Rated Obligor" means, during any Report Month, an Obligor
(other than a Special Obligor):
(i) whose Ratable Short-Term Debt is rated A-1 or higher by S&P as of
the end of the immediately preceding Report Month; or
(ii) who did not have Ratable Short-Term Debt rated by S&P as of the end
of the immediately preceding Report Month, but had Ratable Long-Term Debt
rated A+ or higher, by S&P as of the end of the immediately preceding Report
Month.
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"Category B-Rated Obligor" means, during any Report Month, an Obligor
(other than a Category A-Rated Obligor or a Special Obligor):
(i) whose Ratable Short-Term Debt is rated A-2 or higher by S&P as of
the end of the immediately preceding Report Month; or
(ii) who did not have Ratable Short-Term Debt rated by S&P as of the end
of the immediately preceding Report Month, but had Ratable Long-Term Debt
rated BBB+ or higher by S&P as of the end of the immediately preceding Report
Month.
"Category C-Rated Obligor" means, during any Report Month, an Obligor
(other than a Category A-Rated Obligor, a Category B-Rated Obligor or a Special
Obligor):
(i) whose Ratable Short-Term Debt is rated A-3 or higher by S&P as of
the end of the immediately preceding Report Month; or
(ii) who did not have Ratable Short-Term Debt rated by S&P as of the end
of the immediately preceding Report Month, but had Ratable Long-Term Debt
rated BBB- or higher by S&P as of the end of the immediately preceding Report
Month.
"Category D-Rated Obligor" means, during any Report Month, an Obligor
other than a Category A-Rated Obligor, a Category B-Rated Obligor, a Category C-
Rated Obligor or a Special Obligor.
"CD Rate" applicable to any Yield Accrual Period means the rate of
interest determined by the Administrative Agent to be the average (rounded
upward, if necessary, to the next higher 1/100 of 1%) of the prevailing rates
per annum bid at 10:00 A.M. (New York City time) (or as soon thereafter as
practicable) on the first day of such Yield Accrual Period by two or more New
York certificate of deposit dealers of recognized standing for the purchase at
face value from each CD Reference Bank of its certificates of deposit in an
amount approximately equal to such CD Reference Bank's pro rata share of the
Tranche to which such Yield Accrual Period is to apply and for a period of time
comparable to such Yield Accrual Period.
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"CD Reference Banks" means The Long-Term Credit Bank of Japan, Ltd.,
NationsBank, N.A. and Morgan Guaranty and each such other bank as may be
appointed pursuant to Section 10.6(d).
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, and regulations promulgated thereunder.
"Closing Date" means the date on or after the Effective Date on which
all of the conditions set forth in Section 4.1 shall have been satisfied.
"Collateral Agent" means Morgan Guaranty, as Structuring and Collateral
Agent for the Buyers, and its successors in such capacity.
"Collection Account" has the meaning set forth in Section 3.2(a).
"Collection Account Agreement" has the meaning set forth in Section
3.2(a).
"Collection Account Bank" means at any time the bank at which the
Collection Account is then maintained.
"Collections" means, for any Receivable, (i) all amounts, whether in the
form of cash, checks, drafts, other instruments or electronic funds transfer,
received in a Lockbox or, in the case of electronic funds transfers, in the
Lockbox Account or the Collection Account in payment of such Receivable,
including, without limitation, all amounts received on account of finance
charges and fees with respect to such Receivable, (ii) all other amounts paid by
or for the account of the Obligor on such Receivable, including without
limitation any cash proceeds of the Related Security with respect to such
Receivable, (iii) without duplication, all amounts paid to the Collection
Account with respect to such Receivable as a Collection pursuant to Section 3.9
hereof and (iv) all amounts paid or credited by Seller to CPFC in respect of
Receivables pursuant to Section 2.2 of the Purchase and Sale Agreement.
"Commitment" means (i) with respect to each Buyer, the amount set forth
opposite the name of such Buyer on the signature pages hereof, or (ii) with
respect to any Assignee, the amount of the transferor Buyer's Commitment
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assigned to such Assignee pursuant to Section 10.6(c), in each case as such
amount may be increased from time to time pursuant to an amendment to this
Agreement, reduced from time to time pursuant to Section 2.5 or changed as a
result of an assignment pursuant to Section 10.6(c).
"Commitment Fee" means a fee of .25% per annum (calculated on the basis
of a year of 360 days and actual days elapsed) on the daily Available
Commitment.
"Computation Date" means, for any day, the Business Day immediately
preceding such day.
"Concentration Limit" means, (i) for each Category A-Rated Obligor
individually, and for each such Category A-Rated Obligor and such Obligor's
Affiliates considered as a whole, 13%, (ii) for each Category B-Rated Obligor
individually, and for each Category B-Rated Obligor and such Obligor's
Affiliates considered as a whole, 6.5%, (iii) for each Category C-Rated
Obligor individually, and for each Category C-Rated Obligor and such
Obligor's Affiliates considered as a whole, 3.66%, (iv) for each Category
D-Rated Obligor individually, and for each Category D-Rated Obligor and such
Obligor's Affiliates considered as a whole, 2.45%, and (v) for each Special
Obligor individually, and for each such Obligor and its Affiliates considered
as a whole, the Concentration Limit set forth on Schedule 2.
"Consent and Agreement" means the consent and agreement dated as of June
12, 1996 among CPC, Holdings, the financial institutions listed on the signature
pages thereof, and Morgan Guaranty, as administrative agent and as collateral
agent.
"Contract" as it relates to any Receivable means the agreement between
the Seller and the Obligor giving rise thereto (including as evidenced by an
invoice on an open account).
"Contribution Agreement" means the Contribution Agreement dated as of
August 15, 1995 by and among James River, James River Paper, Holdings and CPC as
in effect on the date hereof and as amended from time to time in accordance with
the terms thereof and Section 5.21 of the Existing Credit Agreement.
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"CPC" means Crown Paper Co., a Virginia corporation, and its successors.
"CPFC" means Crown Paper Funding Corporation, a Virginia corporation.
"Credit and Collection Policy" means the credit, collection, enforcement
and other policies and practices relating to Receivables set forth in Exhibit H
hereto, as such policies and practices may be amended in accordance with Section
3.3(c).
"Daily Report" has the meaning set forth in Section 6.2(a).
"Days' Sales Outstanding" means that period (expressed in days)
calculated on any Settlement Date by dividing (i) the sum of (x) the Outstanding
Balance of Receivables on the first Business Day of the Report Month ending on
the Month-end Date for such Settlement Date plus (y) the Outstanding Balance of
Receivables on the last Business Day of such Report Month divided by (z) two, by
(ii) the aggregate amount of Receivables that were generated during such Report
Month divided by the number of days in such Report Month.
"Debt" of any Person means, at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable arising in the ordinary course of
business, (iv) all obligations of such Person as lessee which are capitalized in
accordance with GAAP, (v) all obligations (whether or not contingent) of such
Person to reimburse or repay any lender or other Person in respect of amounts
paid under a letter of credit, banker's acceptance or similar instrument, (vi)
all Debt secured by a Lien on any asset of such Person, whether or not such Debt
is otherwise an obligation of such Person and (vii) all Debt of others
Guaranteed by such Person.
"Defaulting Buyer" means at any time any Buyer with respect to which a
Buyer Default is in effect at such time.
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"Default Ratio" means the ratio (expressed as a percentage) calculated
on any Settlement Date by dividing (i) the sum of (x) the aggregate balance of
all Receivables that were not Defaulted Receivables at the beginning of the
Report Month ending on the Month-end Date for such Settlement Date but that
became Defaulted Receivables during such Report Month, plus (y) to the extent
not reflected in clause (x), the aggregate balance of all Receivables that were
less than 60 days past due that were written off during such Report Month by
(ii) the aggregate amount of Receivables that were generated during the third
Report Month preceding such Report Month.
"Defaulted Receivable" means a Receivable (i) in respect of which
collection in full has become doubtful, a reserve has been allocated, or an
estimated or actual loss has been recognized as determined in accordance with
the Credit and Collection Policy, (ii) which has become uncollectible by reason
of such Obligor's inability to pay, as determined in accordance with the Credit
and Collection Policy, (iii) in respect of which an Event of Bankruptcy has
occurred with respect to the related Obligor or a Material Subsidiary thereof;
PROVIDED that with respect to a Material Subsidiary of an Obligor, a Receivable
shall not become a Defaulted Receivable until such time as the Servicer has
actual knowledge of such Event of Bankruptcy having occurred, or (iv) in respect
of which payment is more than 60 days past due.
"Derivatives Obligations" of any Person means all obligations of such
Person in respect of any rate swap transaction, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction,
currency swap transaction, cross-currency rate swap transaction, currency option
or any other similar transaction (including any option with respect to any of
the foregoing transactions) or any combination of the foregoing transactions.
"Dilution Factor" means all credits, allowances, deductions,
cancellations, rebates, discounts, adjustments (for warranty claims, disputes,
defenses, counterclaims, setoffs, returned or repossessed goods or otherwise) or
any other reduction in the Outstanding Balance of a Receivable (other than by
payment thereof by or on behalf of the
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Obligor) after booking such Receivable (including any payments made by CPC or
an Eligible Subsidiary, in the form of checks or otherwise, in lieu of a
credit, allowance, deduction, rebate, discount or adjustment with respect to
the Outstanding Balance of such Receivable) but not in any case because of
default or other credit-related matters with respect to the related Obligor.
"Dilution Horizon" means on any Settlement Date the Report Month ending
on the Month-end Date for such Settlement Date.
"Dilution Horizon Ratio" means the ratio (expressed as a percentage)
calculated on any Settlement Date by dividing (i) the aggregate amount of
Receivables generated over the Dilution Horizon for such Settlement Date by (ii)
the Net Pool Balance on the most recent Month-end Date.
"Dilution Ratio" means the ratio (expressed as a percentage) calculated
on any Settlement Date by dividing (i) the aggregate amount by which the
original Outstanding Balance of all Receivables have been reduced by any
Dilution Factor during the Report Month ending on the Month-end Date for such
Settlement Date by (ii) the aggregate original Outstanding Balance of
Receivables that were generated during the Report Month ending on the Month-end
Date for the preceding most recent Settlement Date.
"Dilution Reserve Percentage" means, at any time, a percentage
determined pursuant to the following formula:
((2.5 x ED) + ((DS - ED) x DS/ED)) x DHR
where:
ED = Expected Dilution at such time,
DS = Dilution Spike at such time, and
DHR = Dilution Horizon Ratio at such time.
"Dilution Spike" means, at any time, the highest of the Dilution Ratios
as calculated as of the Month-end Dates for the twelve most recent Settlement
Dates.
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"Dollar" and "$" means lawful currency of the United States.
"Domestic Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including without limitation any
basic, supplemental or emergency reserves) for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of new non-personal time deposits in Dollars in New York City having a
maturity comparable to the related Yield Accrual Period and in an amount of
$100,000 or more.
"Effective Date" means the date on which this Agreement becomes
effective in accordance with Section 10.13.
"Eligible Obligor" means an Obligor that is (i) domiciled in the United
States which is not the United States, or any State or any agency or
instrumentality or subdivision thereof or (ii) domiciled in the province of
Alberta, British Columbia, Manitoba, New Brunswick, Ontario, or Saskatchewan, or
in the territory of the Yukon; PROVIDED that such province or territory
continues to give effect to the security interests that have been perfected in
the United States in respect of the Receivables, the Related Security, the
Collections, and all proceeds thereof, without the necessity of further action.
"Eligible Receivable" means, at any time, any Receivable:
(a) which, at such time, meets the following requirements:
(i) such Receivable has an original maturity of not greater than 90
days and has been properly entered into and originated in accordance with the
Credit and Collection Policy;
(ii) such Receivable constitutes an "account" under Article 9 of the UCC
as then in effect in the relevant jurisdiction and is an "account receivable"
constituting part or all of the purchase price of merchandise, insurance or
services within the meaning
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of Section 3(c)(5)(A) of the Investment Company Act of 1940, as amended;
(iii) such Receivable was originated in the name of the Seller or
acquired by the Seller from an Eligible Subsidiary and is a Dollar-
denominated obligation payable in the United States of an Eligible Obligor;
(iv) such Receivable was created in compliance in all material respects
with and, immediately prior to its sale to CPFC pursuant to the Purchase and
Sale Agreement, complies in all material respects with all requirements of
law applicable to Seller, whether Federal, state or local, including without
limitation, to the extent applicable, usury laws, the Federal Consumer Credit
Protection Act, the Fair Credit Billing Act, the Federal Truth in Lending Act
and Regulation Z of the Board of Governors of the Federal Reserve System;
(v) such Receivable is owed by an Eligible Obligor as to which not more
than 25% of the aggregate amount of the Receivables due from such Eligible
Obligor is more than 60 days past due (determined in each case with respect
to the due date for payment specified at the time of the original issuance of
the invoice for such Receivable);
(vi) payments with respect to such Receivable have been directed to a
Lockbox Account for mailed payments and to a Lockbox Account or the
Collection Account for electronic payments, and such Receivable is not a
"bill and hold" Receivable;
(vii) such Receivable is the legal, valid and binding payment obligation
of the Obligor, legally enforceable against such Obligor in accordance with
its terms, subject to bankruptcy, insolvency and other similar laws affecting
the rights of creditors generally and general equitable principles and is not
subject to statutory or regulatory restrictions or transfer;
(viii) all material consents, licenses, approvals, or authorizations of,
or registrations with, any governmental authority required to be obtained or
given by the Seller in connection with the creation of such
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Receivable or the execution, delivery, creation and performance by the Seller
of the related Contract, or in connection with the sale of such Receivable to
CPFC, have been duly obtained or given and are in full force and effect and
the sale of such Receivable to CPFC complies in all material respects with all
applicable requirements of law;
(ix) such Receivable has not been classified as counterfeit, fraudulent
or charged-off;
(x) such Receivable is not a Receivable of an Eligible Obligor a
Receivable of which has been classified as counterfeit, fraudulent or
charged-off within the one year prior to the Month-end Date for the most
recent Settlement Date;
(xi) such Receivable is not a Defaulted Receivable;
(xii) the records of such Receivable are located at an address provided
by the Seller to CPFC and the Collateral Agent in the Program Documents;
(xiii) the transfer of such Receivable under the Purchase and Sale
Agreement constitutes a valid sale, transfer and assignment to CPFC of all
right, title and interest of the Seller in the Receivable, any Related
Security, any Collections and any proceeds of the foregoing, enforceable
against all creditors of and purchasers from the Seller;
(xiv) immediately prior to the sale of such Receivable to CPFC, the
Seller is the sole owner of all right, title and interest in and to such
Receivable, any Related Security, any Collections and any proceeds of the
foregoing and has good and marketable title thereto free and clear of all
Adverse Interests;
(xv) immediately following the sale of such Receivable to CPFC, CPFC
will be the sole owner of all right, title and interest in and to the
Receivable and have a first priority perfected security interest in the
Receivable, any Related Security, any Collections and any proceeds thereof,
free and clear of all Adverse Interests; PROVIDED that the interest of CPFC
need only be perfected to the extent that such interest may be
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<PAGE>
perfected through the filing of UCC financing statements; and
(xvi) the portion of the Outstanding Balance of such Receivable included
in Eligible Receivables is not subject to dispute, defense, counterclaim,
setoff or right to offsetting payment and has not been modified, extended or
reserved against except in conformity with the Credit and Collection Policy;
and
(b) (i) which CPFC has not sold, assigned, or otherwise encumbered
except pursuant to this Agreement; (ii) as to which all material consents,
licenses, approvals or authorizations required to be obtained in connection
with the sale of the Purchased Interest to the Buyers have been duly obtained
and as to which the sale of such Purchased Interest complies in all material
respects with all applicable requirements of law; (iii) as to which,
immediately prior to the sale of the Purchased Interest to the Buyers, CPFC
was the sole owner of all right, title and interest in and to such
Receivable, any Related Security, any Collections and any proceeds of the
foregoing, and had good and marketable title thereto free and clear of all
Adverse Interests; (iv) as to which the transfer of the Purchased Interest
under this Agreement constitutes a valid sale or the granting of a valid
security interest to the Buyers of all right, title and interest of CPFC in
and to the Purchased Interest, enforceable against all creditors of and
purchasers from CPFC; and (v) as to which the Collateral Agent has, for the
benefit of the Buyers and the Collateral Agent, a first priority perfected
security interest in the Purchased Interest or as to which the Buyers own the
Purchased Interest free and clear of all Adverse Interests; provided that the
interest of the Buyers and the Collateral Agent need only be perfected to the
extent that such interest may be perfected through the filing of UCC
financing statements.
"Eligible Subsidiary" means a Subsidiary of Holdings set forth on
Schedule 3 (as such Schedule may be amended or supplemented by CPFC with notice
to the Collateral Agent) which has transferred Receivables to the Seller;
PROVIDED that (i) prior to the first transfer of any Receivables to the Seller
by such Subsidiary (x) all steps necessary to establish the Seller's ownership
of, and perfect the Seller's security interest in, such Receivables shall have
been taken, (y) the Collateral Agent shall have
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received, in form and substance satisfactory to it, UCC lien search reports
(if applicable), UCC financing statements (if applicable), a legal opinion
and any further documentation as may be reasonably required by the Collateral
Agent with respect to such Receivables, and (z) the rating assigned to the
Buyers' Certificates by S&P on the Closing Date is reaffirmed, and (ii) the
transfer of such Receivables to the Seller constitutes a valid sale, transfer
and assignment to the Seller of all right, title and interest of the Eligible
Subsidiary in such Receivables, any Related Security, any Collections and any
proceeds of the foregoing, enforceable against all creditors of and
purchasers from the Eligible Subsidiary.
"Eligible Transferee" means a commercial bank, financial institution or
other "qualified institutional buyer" (as defined in Rule 144A under the
Securities Act of 1933, as amended) that is either a bank organized or licensed
under the laws of the United States or any State thereof or that has agreed to
provide the information listed in Section 9.4(d) to the extent it may lawfully
do so.
"Environmental Laws" means any and all federal, state and local
statutes, laws, judicial decisions, regulations, ordinances, rules, judgments,
orders, decrees, plans, injunctions, permits, concessions, grants, franchises,
licenses, agreements and other governmental restrictions, relating to the
environment, emissions, discharges or releases of pollutants, contaminants,
chemicals or industrial, toxic or other hazardous substances or wastes into the
environment including, without limitation, ambient air, surface water, ground
water, or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, chemicals or industrial, toxic or other hazardous
substances or wastes or the clean-up or other remediation thereof.
"Environmental Liabilities" means all liabilities (including anticipated
compliance costs) in connection with or relating to the business, assets
presently or previously owned, leased or operated property, activities
(including, without limitation, off-site disposal) or operations of Holdings and
each Subsidiary, whether vested or unvested, contingent or fixed, actual or
potential, known or unknown, which arise under or relate to matters covered by
Environmental Laws.
17
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"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"ERISA Group" means Holdings, any Subsidiary (including CPC and CPFC)
and all members of a controlled group of corporations and all trades or
businesses (whether or not incorporated) under common control which, together
with Holdings or any Subsidiary are treated as a single employer under Section
414 of the Internal Revenue Code.
"Euro-Dollar Business Day" means any Business Day on which commercial
banks are open for international business (including dealings in Dollar
deposits) in London.
"Euro-Dollar Rate" means (subject to the definition of "Yield Rate"),
for any Yield Accrual Period, the sum of (i) the Adjusted London Interbank
Offered Rate applicable to such Yield Accrual Period and (ii) for any day from
and including the Closing Date to but not including the date on which the
Administrative Agent delivers a notice of termination of the Commitments
pursuant to Section 7.2 hereof or an Event of Bankruptcy occurs with respect to
CPFC, CPC or Holdings, .6250% per annum and, thereafter, 2.6250% per annum.
"Euro-Dollar Reference Banks" means the principal London offices of The
Long-Term Credit Bank of Japan, Ltd., NationsBank, N.A. and Morgan Guaranty and
each such other bank as may be appointed pursuant to Section 10.6(d).
"Euro-Dollar Reserve Percentage" means, for any day, that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of "Eurocurrency liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest rate on
euro-dollar loans is determined or any category of extensions of credit or other
assets which includes loans by a non-United States office of any Buyer to United
States residents).
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"Event of Bankruptcy" means, with respect to any Person:
(i) the commencement of an involuntary case or other proceeding against
such Person seeking liquidation, reorganization or other relief with respect
to it or its debts under any bankruptcy, insolvency or other similar law now
or hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of such Person or any
substantial part of its property (unless, in the case of Holdings, CPC, any
Material Subsidiary of CPC (which is not CPFC) or the Servicer, such
proceeding is controverted within 20 days of commencement and is dismissed
within 60 days of commencement); or the entry of an order for relief against
such Person under the Federal bankruptcy laws as now or hereafter in effect;
or
(ii) the commencement by such Person of a voluntary case or other
proceeding seeking liquidation, reorganization or other relief with respect
to itself or its debts under any bankruptcy, insolvency or other similar law
now or hereafter in effect, or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of such Person or
any substantial part of its property, or such Person's consent to any such
relief or to the appointment of or taking possession by any such official in
an involuntary case or other proceeding commenced against it, or the making
by such Person of a general assignment for the benefit of creditors, or the
taking by such Person of any corporate action to authorize any of the
foregoing.
"Excess Servicer's Compensation" means, at any time, with respect to a
Servicer other than CPC, that portion, if any, of the amount by which such
Servicer's Compensation exceeds the amount of Servicer's Compensation payable to
CPC pursuant to Section 3.4 and with respect to such amount the Buyers' Interest
has not been increased to reflect such additional Servicer's Compensation.
"Existing Credit Agreement" means the Credit Agreement dated as of
August 15, 1995 among CPC, Holdings, the lenders party thereto, the co-agents
listed on the
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signature pages thereof and Morgan Guaranty, as administrative agent, as
amended to the date hereof.
"Existing Security Agreement" means the Security Agreement dated as of
August 23, 1995 among CPC and J.P. Morgan Delaware, as collateral agent, as
amended to the date hereof.
"Expected Dilution" means, at any time, the average of the Dilution
Ratios as calculated as of the Month-end Dates for the twelve most recent
Settlement Dates.
"Expiry Date" means the date five years after the Closing Date or, if
such date is not a Business Day, the next succeeding Business Day.
"Final Payment Date" means the date following the Termination Date when
the Aggregate Unpaids have been paid in full and the Servicer (if not CPC or any
of its Affiliates) has received all accrued Servicer's Compensation.
"Fixed CD Rate" means (subject to the definition of "Yield Rate"), for
any Yield Accrual Period, the sum of (i) the Adjusted CD Rate applicable to such
Yield Accrual Period and (ii) for any date from and including the Closing Date
to but not including the date on which the Administrative Agent delivers a
notice of termination of the Commitments pursuant to Section 7.2 hereof or an
Event of Bankruptcy occurs with respect to CPFC, CPC or Holdings, .75% per annum
and, thereafter, 2.75% per annum.
"GAAP" means generally accepted accounting principles in the United
States as in effect from time to time.
"Guarantee" by any Person means any obligation, contingent or otherwise,
of such Person directly or indirectly guaranteeing any Debt or other obligation
of any other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Debt or other obligation (whether arising by virtue of partnership arrangements,
by agreement to keep-well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions or otherwise) or
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(ii) entered into for the purpose of assuring in any other manner the holder
of such Debt or other obligation of the payment thereof or to protect such
holder against loss in respect thereof (in whole or in part); PROVIDED that
the term Guarantee shall not include endorsements for collection or deposit
in the ordinary course of business. The term "Guarantee" used as a verb has
a corresponding meaning.
"Hazardous Substances" means any toxic, radioactive, caustic or
otherwise hazardous substance, including petroleum, its derivatives, by-products
and other hydrocarbons, or any substance having any constituent elements
displaying any of the foregoing characteristics.
"Holdings" means Crown Vantage Inc., a Virginia Corporation, and its
successors.
"Incremental Purchase" has the meaning set forth in Section 2.2.
"Initial Commitment" means, with respect to any Buyer, such Buyer's
initial commitment under this Agreement, as reflected in such Buyer's commitment
letter delivered to CPFC, with a copy to the Administrative Agent.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended, or any successor statute.
"Lien" means, with respect to any asset, any mortgage, pledge, lien,
security interest, charge or other encumbrance or security arrangement of any
nature whatsoever, including, without limitation, any conditional sale, capital
lease or title retention arrangement in respect of such asset.
"Liquidation Yield" means on any date an amount equal to the following:
ANI x BR x DSO x 2
-------
360
where:
ANI = Aggregate Net Investment on such date,
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BR = the rate determined for such date under clause (i) of the
definition of "Base Rate" plus 2%, and
DSO = Days' Sales Outstanding calculated on the most recent Settlement
Date.
"Lockbox" means a lockbox for deposit of collec-tions of Receivables
maintained pursuant to a Lockbox Agreement.
"Lockbox Account" means the bank account associ-ated with a Lockbox and
subject to a Lockbox Agreement.
"Lockbox Agreement" means the letter and instruc-tions relating to a
Lockbox and the related Lockbox Account substantially in the form of Exhibit F-1
hereto.
"Lockbox Bank" means, at any time, a bank administering a Lockbox and
the related Lockbox Account.
"London Interbank Offered Rate" means, with respect to any Yield Accrual
Period, the average (rounded upward, if necessary, to the next higher 1/16 of
1%) of the respective rates per annum at which deposits in Dollars are offered
to each of the Euro-Dollar Reference Banks in the London interbank market at
approximately 11:00 A.M. (London time) two Euro-Dollar Business Days prior to
the first day of such Yield Accrual Period in an amount approximately equal to
such Euro-Dollar Reference Bank's pro rata share of the Tranche to which such
Yield Accrual Period is to apply and for a period of time comparable to such
Yield Accrual Period.
"Loss Horizon Ratio" means, at any time, a ratio (expressed as a
percentage) calculated by dividing (i) the product of (x) the aggregate amount
of Receivables that were generated during the three consecutive Report Months
ending on the Month-end Date for the most recent Settlement Date, times (y) the
weighted average original days to maturity of all Receivables calculated as of
the Month-end Date for the most recent Settlement Date plus 60, divided by 90,
by (ii) the Net Pool Balance on such Month-end Date.
"Loss Reserve Percentage" means, at any time, a percentage determined
pursuant to the following calculation: the product of (i) 2.5 times (ii) the
highest average of the
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Default Ratios as calculated as of the Month-end Dates for any three
consecutive of the most recent twelve Settlement Dates times (iii) the Loss
Horizon Ratio.
"Loss to Liquidation Ratio" means the ratio (expressed as a percentage)
calculated on any Settlement Date by dividing (i) the aggregate balance of all
Receivables written off during the three Report Months ending on the Month-end
Date for such Settlement Date by (ii) the aggregate amount of Collections in
respect of all Receivables during such three Report Months; provided that for
purposes of calculating the amount set forth in clause (ii) of this definition,
"Collections" shall not include any amounts paid to the Collection Account with
respect to any Receivables included in clause (i) of this definition as a
Collection pursuant to Section 3.9 hereof or Section 2.2 of the Purchase and
Sale Agreement.
"Material Debt" means Debt of Holdings and/or one or more of its
Subsidiaries, arising in one or more related or unrelated transactions, in an
aggregate principal or face amount exceeding $10,000,000.
"Material Financial Obligations" means a principal or face amount of
Debt and/or payment or collateralization obligations in respect of Derivatives
Obligations of Holdings and/or one or more of its Subsidiaries, arising in one
or more related or unrelated transactions, exceeding in the aggregate
$10,000,000.
"Material Plan" means at any time a Plan or Plans having aggregate
Unfunded Liabilities in excess of $10,000,000.
"Material Subsidiary" means, at any date, any Subsidiary the book value
of the assets of which, as of the end of the most recent fiscal year for which
financial statements are available, accounted for 10% or more of the book value
of the consolidated assets of Holdings and its consolidated Subsidiaries.
"Month-end Date" means, for any Settlement Date, the last Business Day
of the calendar month preceding the calendar month in which such Settlement Date
occurs.
"Morgan Guaranty" means Morgan Guaranty Trust Company of New York, a New
York State banking corporation.
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"Multiemployer Plan" means at any time an employee pension benefit plan
within the meaning of Section 4001(a)(3) of ERISA to which any member of the
ERISA Group is then making or accruing an obligation to make contributions or
has within the preceding five plan years made contributions, including for these
purposes any Person which ceased to be a member of the ERISA Group during such
five year period.
"Net Pool Balance" means, at any time, the aggregate Outstanding Balance
of all Eligible Receivables at such time less the aggregate amount by which the
aggregate Outstanding Balance of all Eligible Receivables of each Obligor, or
each Obligor and its Affiliates taken as a whole, as applicable, at such time
exceeds (x) the aggregate Outstanding Balance of all Eligible Receivables at
such time times (y) the Concentration Limit for such Obligor, or such Obligor
and its Affiliates taken as a whole, as applicable.
"New Collections" has the meaning set forth in Section 3.7(a).
"Obligor" means, for any Receivable, each Person who is obligated to
make payments in respect of such Receivable.
"Other Expenses" means all amounts payable hereunder to the Buyers or
either Agent not constituting payments in respect of Aggregate Net Investment,
Yield or Commitment Fees, including, without limitation, amounts payable under
Sections 2.8, 9.3, 9.4 and 10.3.
"Outstanding Balance" of any Receivable means, at any time, the then
outstanding amount thereof, including any accrued and outstanding finance
charges related thereto.
"Parent" means, with respect to any Buyer, any Person controlling such
Buyer.
"Participant" has the meaning set forth in Section 10.6(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
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<PAGE>
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
"Plan" means at any time an employee pension benefit plan (other than a
Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Internal Revenue Code and
either (i) is maintained, or contributed to, by any member of the ERISA Group
for employees of any member of the ERISA Group or (ii) has at any time within
the preceding five years been maintained, or contributed to, by any Person which
was at such time a member of the ERISA Group for employees of any Person which
was at such time a member of the ERISA Group.
"Potential Termination Event" means any condition or event which with
the giving of notice or passage of time or both would, unless cured or waived,
become a Termination Event.
"Prime Rate" means the rate of interest publicly announced by Morgan
Guaranty in New York City from time to time as its prime rate.
"Program Documents" means this Agreement, the Buyers' Certificates, the
Purchase and Sale Agreement, the Lockbox Agreements, the Transfer Letters, the
Servicing Agreement (if any), CPFC's articles of incorporation and by-laws, and
such other agreements, documents and instruments as may be entered into and
delivered by CPFC, the Seller or the Servicer in connection with the
transactions contemplated by this Agreement and the Purchase and Sale Agreement.
"Purchase" means an Incremental Purchase or a Reinvestment.
"Purchase and Sale Agreement" means the Purchase and Sale Agreement
dated as of June 12, 1996 between CPC, as seller, and CPFC, as purchaser,
substantially in the form of Exhibit I hereto, as amended from time to time.
"Purchase Notice" has the meaning set forth in Section 2.2.
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"Purchase Price" has the meaning set forth in Section 2.2.
"Purchased Interest" means at any time an undivided percentage ownership
interest equal to the Buyers' Interest at such time in (i) all right, title and
interest of CPFC in, to and under each and every Receivable then outstanding,
(ii) all Related Security with respect to each such Receivable, (iii) all
Collections with respect thereto, (iv) all books and records relating thereto,
and (v) all proceeds of the foregoing.
"Qualified Bank" means (i) any bank or trust company organized under the
laws of the United States or any state thereof or any branch or agency located
in the United States of any bank or trust company organized under the laws of a
foreign jurisdiction that is subject to supervision and examination by United
States Federal or state banking authorities, that (x) has capital, surplus and
undivided profits of at least $500,000,000 and (y) has Ratable Long-Term Debt
rated A or higher by S&P, and (ii) any other bank (x) listed as a Qualified Bank
on Schedule 1 hereto or (y) approved as a Qualified Bank by the Required Buyers;
PROVIDED that as to any bank not meeting the standards set forth in clause (i),
(A) the Required Buyers may, upon not less than 30 days' notice to CPFC, specify
that such bank shall no longer be a Qualified Bank hereunder and (B) prior to
such bank acting as a Qualified Bank hereunder, the rating assigned to the
Buyers' Certificates by S&P on the Closing Date shall be reaffirmed.
"Quarterly Date" means each March 31, June 30, September 30 and December
31 (or, if such date is not a Business Day, the next succeeding Business Day).
"Ratable Long-Term Debt" means, with respect to any Person, senior
unsecured long-term debt of such Person without third party credit support.
"Ratable Short-Term Debt" means, with respect to any Person, senior
unsecured short-term debt of such Person without third party credit support.
"Receivable" means at any time a trade receivable originated in
connection with the sale of goods or the provision of services by Seller or an
Eligible Subsidiary in its normal course of business, other than a receivable
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(i) owing by any Obligor not domiciled in the United States or Canada, or (ii)
owing by any Obligor that is an Affiliate of the Seller, unless, in each case,
(x) such Obligor has been approved in writing by the Required Buyers and (y)
prior to any receivable of such Obligor being included within the definition of
"Receivable" hereunder, the rating assigned to the Buyers' Certificates by S&P
on the Closing Date shall be reaffirmed.
"Receivables Information Memorandum" means the Crown Paper Funding
Corporation Rated Receivables Purchase Facility Overview of Structure and
Collateral dated as of April, 1996.
"Reference Banks" means the CD Reference Banks or the Euro-Dollar
Reference Banks, as the context may require, and "Reference Bank" means any one
of such Reference Banks.
"Reinvestment" has the meaning set forth in Section 3.7(c).
"Related Security" means with respect to any Receivable: (a) all of the
interest, if any, of Seller or an Eligible Subsidiary, as applicable, in the
goods (including returned goods) the sale of which gave rise to such Receivable;
(b) all other security interests or liens and property subject thereto from time
to time, if any, securing payment of such Receivable; and (c) all guarantees,
letters of credit, insurance or other agreements or arrangements of any kind
from time to time supporting or securing payment of such Receivable.
"Release" means any discharge, emission or release, including a Release
as defined in CERCLA at 42 U.S.C. Section 9601(22). The term "Released" has a
corresponding meaning.
"Remainder" has the meaning set forth in Section 3.7(a).
"Report Month" means each period beginning on the day after a Month-end
Date and ending on the next succeeding Month-end Date.
"Required Buyers" means, at any time prior to the Termination Date,
Buyers having at least 51% of the total Commitments or, on or after the
Termination Date, Buyers
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having at least 51% of the Adjusted Aggregate Net Investment; PROVIDED that
for purposes of Section 3.5 only, "Required Buyers" means, at any time when
no Termination Event exists, Buyers having at least 51% of the total
Commitments or, on or after the Termination Date if no Termination Event
exists, Buyers having at least 51% of the Adjusted Aggregate Net Investment
plus, in each case covered by this PROVISO, the Collateral Agent.
"Reserve Percentage" means, at any time, a percentage equal to the
greater of 17%, and (ii) the sum of (x) the Loss Reserve Percentage at such time
plus (y) the Dilution Reserve Percentage at such time.
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc.
"Seller" means CPC and its successors in its capacity as Seller under
the Purchase and Sale Agreement.
"Servicer" means CPC, or, after a Servicing Transfer, such other Person
which is the successor Servicer of the Receivables pursuant to a Servicing
Agreement.
"Servicer Termination Event" means any of the following:
(i) failure on the part of the Servicer to transfer or deposit funds
(A) in respect of reductions in the Aggregate Net Investment on the date the
Servicer is required to do so hereunder or (B) in respect of any other amount
which the Servicer is required under the Program Documents to transfer or
deposit and the continuation of such failure for a period of three Business
Days; or failure on the part of the Servicer to remit any Settlement
Statement or Daily Report when due and the continuation of such failure for a
period of three Business Days; or
(ii) failure on the part of the Servicer duly to observe or to perform
in any material respect any other covenants or agreements of the Servicer set
forth herein, in the Purchase and Sale Agreement, if applicable, or in the
Servicing Agreement, which failure shall continue unremedied for a period of
10 Business Days after the date on which written notice of
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such failure, requiring the same to be remedied, shall have been given to
the Servicer by either Agent; or
(iii) any representation, warranty or certification made by the Servicer
herein or in the Servicing Agreement proves to have been incorrect in any
material respect when made or deemed made; PROVIDED that it shall not
constitute a Servicer Termination Event if such incorrect representation,
warranty or certification arises from an error in a Daily Report that has
been promptly remedied and has not resulted in the Adjusted Buyer's Interest
exceeding 100%; or
(iv) an Event of Bankruptcy with respect to the Servicer.
Notwithstanding the foregoing, a delay in or failure of performance
referred to in clause (i) above for a period not to exceed two Business Days
shall not constitute a Servicer Termination Event if such delay or failure could
not have been prevented by the exercise of reasonable diligence by the Servicer
or such delay or failure was caused by an Act of God or the public enemy, acts
of declared or undeclared war, public disorder, rebellion or sabotage,
epidemics, landslides, lightning, fire, hurricanes, earthquakes, floods or
similar causes. The preceding sentence shall not relieve the Servicer from
using its best efforts to perform its obligations in a timely manner in
accordance with the terms of this Agreement, and the Servicer shall provide the
Agents and each Buyer prompt notice of any such failure or delay, together with
a description of its efforts so to perform its obligations.
"Servicer's Compensation" means the compensation payable to the Servicer
pursuant hereto or pursuant to the Servicing Agreement (if any).
"Servicer's Compensation Reserve" means, on any date of determination,
an amount equal to (i) the aggregate Outstanding Balance of Receivables times
(ii) 1.5% times (iii) two times Days' Sales Outstanding divided by 360; PROVIDED
that, if the servicing of the Receivables is transferred to a successor Servicer
as the result of a Servicing Transfer, the percentage set forth in clause (ii)
above shall be increased to reflect any additional compensation payable to the
successor Servicer.
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"Servicing Agreement" means any agreement between the Collateral Agent
and any Person acting as Servicer, other than CPC, which agreement shall contain
provisions concerning the servicing of Receivables substantially similar to the
provisions contained herein and in the Purchase and Sale Agreement concerning
the servicing of Receivables.
"Servicing Transfer" has the meaning set forth in Section 3.5.
"Settlement Date" means the fifteenth day of each month or, if such day
is not a Business Day, the next succeeding Business Day.
"Settlement Statement" has the meaning set forth in Section 6.2(b).
"Special Obligor" means each Obligor listed on Schedule 2 hereto.
"Subsidiary" means, as to any Person, any corporation or other entity of
which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by such Person. If not
otherwise specified, Subsidiary shall mean a Subsidiary of Holdings.
"Systems Letter" has the meaning set forth in Section 4.1(bb).
"Temporary Cash Investments" means book-entry securities, negotiable
instruments or securities represented by instruments in bearer or registered
form which evidence (a) direct obligations of the United States or obligations
guaranteed by the United States; (b) time deposits with, including certificates
of deposit issued by, a bank whose Ratable Short-Term Debt is rated at least A-
1+ by S&P; (c) commercial paper rated at least A-1+ by S&P; and (d) repurchase
agreements with a Qualified Bank collateralized by obligations described in
clause (a) above; in the case of each of (a) through (d) maturing within 30 days
from the date of acquisition thereof.
"Termination Date" means the earliest of (i) the Business Day which CPFC
designates as such by written notice
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to the Agents at least 30 days prior to such Business Day, (ii) the "Final
Purchase Date" as defined in the Purchase and Sale Agreement and (iii) the
Expiry Date.
"Termination Event" has the meaning set forth in Section 7.1.
"Tranche" has the meaning set forth in Section 2.3.
"Transfer Letter" means a letter substantially in the form of Appendix A
to Exhibits F-1 and F-2.
"Transferor's Interest" means, at any time, the amount expressed as a
percentage equal to 100% minus the Buyers' Interest at such time.
"UCC" means the Uniform Commercial Code as in effect from time to time
in the State of New York; PROVIDED that if, by reason of mandatory provisions of
law, the perfection or the effect of perfection or non-perfection as to any
interest in Receivables, any Related Security, any Collections thereon, any
books and records relating thereto or proceeds of the foregoing is governed by
the Uniform Commercial Code as in effect in a jurisdiction other than New York,
"UCC" means the Uniform Commercial Code as in effect in such other jurisdiction
for purposes of the provisions hereof relating to such perfection or effect of
perfection or non-perfection.
"Unfunded Liabilities" means, with respect to any Plan at any time, the
amount (if any) by which (i) the present value of all benefit liabilities under
such Plan, determined on a plan termination basis using the assumptions
prescribed by the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the
fair market value of all Plan assets allocable to such liabilities under Title
IV of ERISA (excluding any accrued but unpaid contributions), all determined as
of the then most recent valuation date for such Plan, but only to the extent
that such excess represents a potential liability of a member of the ERISA Group
to the PBGC or any other Person under Title IV of ERISA.
"United States" means the United States of America, including the States
and the District of Columbia, but excluding its territories and possessions.
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"Yield" means, with respect to any Yield Accrual Period for any Tranche
on any date of determination thereof, an amount equal to the following:
YR x T x AD
-----
Basis
where:
YR = the Yield Rate applicable to such Yield Accrual Period for such
Tranche;
T = the amount of the Tranche to which such Yield Accrual Period
applies;
AD = the actual number of days (including the first but excluding the
last day) in such Yield Accrual Period; and
Basis= 365 for any Yield Rate based on the Prime Rate and 360 for all
other Yield Rates;
PROVIDED that no provision of this Agreement shall require the payment or permit
the collection of Yield in excess of the maximum permitted by applicable law.
"Yield Accrual Period" means:
(a) with respect to any Tranche the Yield Rate of which is the Euro-
Dollar Rate, each period commencing on the date a portion of the Aggregate Net
Investment is allocated to such Tranche pursuant to Section 2.3 and ending on
the numerically corresponding day in the first, second, third or sixth (as
selected by CPFC) calendar month thereafter, except that (i) if such day is not
a Euro-Dollar Business Day, such Yield Accrual Period shall end on the next
succeeding Euro-Dollar Business Day (provided that if such Euro-Dollar Business
Day is in a subsequent calendar month, such Yield Accrual Period shall end on
the next preceding Euro-Dollar Business Day) and (ii) each Yield Accrual Period
that commences on the last Euro-Dollar Business Day of a calendar month (or on
any day for which there is no numerically corresponding day in the appropriate
subsequent calendar month) shall end on the last Euro-Dollar Business Day of the
appropriate subsequent calendar month;
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(b) with respect to any Tranche the Yield Rate of which is the Fixed CD
Rate, each period commencing on the date a portion of the Aggregate Net
Investment is allocated to such Tranche pursuant to Section 2.3 and ending on
the day which falls 30, 60 or 90 (as selected by CPFC) days thereafter (or, if
such day is not a Euro-Dollar Business Day, the next succeeding Euro-Dollar
Business Day); and
(c) with respect to any Tranche the Yield Rate of which is the Base
Rate, each period commencing on the date a portion of the Aggregate Net
Investment is allocated to such Tranche pursuant to Section 2.3 and ending on
the earlier of (i) with respect to any amount of prepayment of any portion of
the Aggregate Net Investment related to such Tranche, the date of such
prepayment and (ii) the next succeeding Quarterly Date;
PROVIDED that (i) any Yield Accrual Period which commences prior to the Expiry
Date and would otherwise end after the Expiry Date shall end on the Expiry Date,
(ii) any Yield Accrual Period commencing on or after the Termination Date shall
be a period of one day, and (iii) for purposes of Section 3.8 only, any Yield
Accrual Period which commences prior to the Termination Date and would otherwise
end after the Termination Date shall, if such Termination Date occurred due to
an Event of Bankruptcy with respect to CPFC, CPC or Holdings, end on the
Termination Date.
"Yield Accrual Period Selection Notice" has the meaning set forth in
Section 2.3.
"Yield Rate" means, (a) the Euro-Dollar Rate, (b) the Fixed CD Rate or
(c) the Base Rate; PROVIDED that the Yield Rate shall not, commencing on the
Termination Date (or, if a Termination Date has occurred due to the occurrence
of a Termination Event described in Section 7.1(q), commencing on the day in
respect of such Termination Event on which the Adjusted Buyers' Interest first
exceeded 100%), exceed a per annum rate equal to the sum of the rate specified
in clause (i) of the definition of "Base Rate", as in effect for the Business
Day preceding the Termination Date (or such day on which the Adjusted Buyers'
Interest first exceeded 100%), plus 2%.
"Yield Reserve" means, for any date of determination, the sum of (i) the
accrued and unpaid Yield on such date, (ii) the Liquidation Yield on such date,
(iii)
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the accrued and unpaid Commitment Fees on such date, (iv) the accrued and
unpaid Servicer's Compensation on such date and (v) the Servicer's
Compensation Reserve on such date.
"Yield Reserve Requirement" means an amount equal at any time to the
product of (x) Aggregate Net Investment at such time times (y) the rate
determined under clause (i) of the definition of "Base Rate" at such time, plus
2% times (z) 5 divided by 360.
SECTION 1.2. UCC TERMS. With respect to the Purchased Interest, terms
not otherwise defined herein which are defined in the UCC shall, unless the
context otherwise requires, have the meanings set forth therein.
SECTION 1.3. ACCOUNTING TERMS AND DETERMINATIONS. Unless otherwise
specified herein, 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.
ARTICLE 2
PURCHASES
SECTION 2.1. SALE AND ASSIGNMENT. At the time of each Purchase, CPFC
hereby sells and assigns to the Buyers, and the Buyers hereby purchase from
CPFC, the Purchased Interest. Each such sale, subject only to the provisions of
Section 3.9 hereof, shall be without recourse.
SECTION 2.2. INCREMENTAL PURCHASES. (a) Subject to the terms and
conditions hereof, CPFC may from time to time on and after the Closing Date to
but excluding the Termination Date at its option sell to the Buyers, and the
Buyers agree to purchase (an "Incremental Purchase") from CPFC for the purchase
price (the "Purchase Price") set forth in the Purchase Notice for such
Incremental Purchase, undivided percentage ownership interests in each and every
Receivable, together with the Related Security, Collections, books and records
related thereto and other proceeds with respect thereto; PROVIDED that the
Buyers shall have no obligation to make an Incremental Purchase if (i) the
Purchase Price is in excess of the Available Commitment or
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(ii) after giving effect to such Incremental Purchase, the Adjusted Buyers'
Interest would exceed 100%. The Purchase Price for an Incremental Purchase
shall be paid in the form of Dollars. Each Incremental Purchase shall be in
an amount of $1,000,000 or any integral multiple of $100,000 in excess
thereof; PROVIDED that if at the time of any Incremental Purchase the then
Available Commitment is less than the minimum amount required, CPFC may
request an Incremental Purchase for a Purchase Price equal to the Available
Commitment. Each Buyer's obligation to make purchases hereunder is ratable
in the proportion its Commitment bears to the total Commitments and is
several and not joint, and the failure of any Buyer to perform any of its
obligations hereunder shall not require the performance of such obligations
by either Agent or any other Buyer.
(b) CPFC shall provide the Administrative Agent with a notice
substantially in the form of Exhibit B hereto (a "Purchase Notice") prior to
each Incremental Purchase at the time specified in Section 2.3 for delivery of
the appropriate Yield Accrual Period Selection Notice. Upon receipt of such
Purchase Notice, the Administrative Agent shall promptly provide each Buyer with
a copy of such Purchase Notice, and advise it of its ratable share of the
Purchase Price for such Incremental Purchase. Not later than 12:00 Noon (New
York City time) on the day of any Incremental Purchase, each Buyer shall make
available in Federal or other funds immediately available in New York City its
pro rata share of the Dollar portion of the Purchase Price for such Incremental
Purchase to the Administrative Agent. The amount so received by the
Administrative Agent shall be deposited in CPFC's account as notified by CPFC in
like funds. Each Purchase Notice shall be irrevocable and binding on CPFC when
delivered to the Buyers.
SECTION 2.3. TRANCHES; YIELD ACCRUAL PERIODS; YIELD RATES. (a) CPFC
shall for each Incremental Purchase and thereafter prior to the expiry of each
Yield Accrual Period allocate portions of the Aggregate Net Investment (any such
portion so allocated being herein referred to as a "Tranche") to carry a Yield
at a Yield Rate to be selected by CPFC for a Yield Accrual Period to be selected
by CPFC, to commence on the date of such Incremental Purchase or on the last day
of the Yield Accrual Period then expiring; PROVIDED that the Aggregate Net
Investment may be so allocated to no more than five Tranches at any one time.
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The amount of each Tranche selected by CPFC shall be in an amount of $1,000,000
or any integral multiple of $100,000 in excess thereof. Notwithstanding the
foregoing, no minimums shall apply to Tranches with Yield Accrual Periods
commencing on or after the Termination Date.
(b) CPFC shall give the Administrative Agent (who shall give such
notice to the Buyers) notice of the amount, Yield Rate and Yield Accrual Period
(a "Yield Accrual Period Selection Notice") for each Tranche, such notice to be
substantially in the form of Exhibit C hereto and to be received by the
Administrative Agent not later than 10:00 A.M. (New York City time) on the
number of days prior to (or on) the first date of the requested Yield Accrual
Period set forth below:
Notice Number of Days Prior
------ --------------------
Yield Accrual Period with a 3 Euro-Dollar
Euro-Dollar Rate Yield Rate Business Days
Yield Accrual Period with
a Fixed CD Rate Yield Rate 3 Business Days
Yield Accrual Period with a First day of
Base Rate Yield Rate requested Yield
Accrual Period
Each Yield Accrual Period Selection Notice shall be irrevocable once given to
the Buyers. If (x) CPFC fails to provide a Yield Accrual Period Selection
Notice on a timely basis prior to the expiry of a Yield Accrual Period, or (y)
the Administrative Agent determines that the Yield Rate and Yield Accrual Period
requested by CPFC is unavailable pursuant to Section 9.1 or 9.2 hereof, or (z)
such Yield Accrual Period commences on or after the Termination Date, the Yield
Rate shall be the Base Rate and the related Yield Accrual Period shall be as
provided therefor in the definition of "Yield Accrual Period".
SECTION 2.4. FEES. CPC shall pay the following fees:
(i) on the Closing Date to the Administrative Agent for the account of
each Buyer, a fee equal to 1/10 of 1% of such Buyer's Commitment;
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(ii) on the Closing Date to S&P, all fees and expenses of S&P in
connection with the rating of the Buyers' Certificates;
(iii) on the Closing Date to Davis Polk & Wardwell, special counsel to
the Agents, all reasonable fees and expenses of Davis Polk & Wardwell,
invoiced not less than seven days prior to the Closing Date in connection
with the preparation of the Program Documents; and
(iv) on the Closing Date, to the Collateral Agent, for its own account
such fees and compensation in such amounts as are set forth in the letter
dated March 27, 1996.
SECTION 2.5. OPTIONAL TERMINATION OR REDUCTION OF COMMITMENTS. CPFC
may, upon at least three Business Days' notice to the Administrative Agent,
reduce in whole or from time to time in part the total Commitments (but not
below the Aggregate Net Investment) by an aggregate amount of $1,000,000 or any
multiple of $100,000 in excess thereof. Any reduction in the total Commitments
shall cause a pro rata reduction in the Commitment of each Buyer.
SECTION 2.6. PAYMENTS UNDER CERTAIN CIRCUMSTANCES. CPFC may at any
time at its option reduce the Aggregate Net Investment by directly paying monies
to the Administrative Agent for distribution to the Buyers for application to
such Tranche or Tranches as CPFC shall direct; PROVIDED that:
(i) no such reduction may be made in respect of any Tranche accruing
Yield at the Euro-Dollar Rate or the Fixed CD Rate unless (A) it is in an
amount equal to the lesser of (x) $1,000,000 (or a multiple of $100,000 in
excess thereof) and (y) the amount of such Tranche and, if it is a partial
reduction of such Tranche, the amount of the remaining portion of such
Tranche shall not be less than $1,000,000, and (B) it is at the end of the
Yield Accrual Period therefor;
(ii) no such reduction may be made in respect of any Tranche accruing
Yield at the Base Rate unless it is in an amount equal to the lesser of (x)
$1,000,000 (or a multiple of $100,000 in excess thereof) and (y) the amount
of such Tranche and, if it is a partial reduction of such Tranche, the amount
of the remaining
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portion of such Tranche shall not be less than $1,000,000;
(iii) no such reduction shall be made unless CPFC shall have determined,
based on consultation with its chief accounting officer, that the amount of
such reduction will have no effect on the treatment of sales of interests in
the Receivables to the Buyers hereunder as sales in accordance with GAAP;
(iv) notice shall be given to the Administrative Agent (x) at least two
Business Days prior to the reduction of any Tranche accruing Yield at the
Fixed CD Rate, (y) at least three Euro-Dollar Business Days prior to the
reduction of any Tranche accruing Yield at the Euro-Dollar Rate, and (z) on
or prior to the date of a reduction of any Tranche accruing Yield at the Base
Rate; and
(v) subject to Section 2.8, CPFC may revoke a notice given under clause
(iv).
SECTION 2.7. GENERAL PROVISIONS AS TO PAYMENTS. (a) All amounts
to be paid to the Agents or the Buyers hereunder shall be paid in accordance
with the terms hereof not later than 12:00 Noon (New York City time) on the
date when due, in Federal or other funds immediately available in New York
City, to the Administrative Agent at its address referred to in Section 10.1.
No such amount shall, except as provided in the FURTHER PROVISO in Section
3.9, be deemed paid by virtue of its deposit in the Collection Account or the
Cash Collateral Account. Except as provided in the FURTHER PROVISO in
Section 3.9 and in Section 2.6, payment in respect of Aggregate Net
Investment, Yield and Servicer's Compensation shall be paid (and shall be due
and payable) only out of Collections pursuant to Sections 3.7 and 3.8;
Commitment Fees and Other Expenses shall be paid pursuant to Sections 3.7 and
3.8, or if not so paid, shall in any event be payable by CPFC in arrears on
each Quarterly Date (in the case of Commitment Fees) or when due (in the case
of Other Expenses). Amounts payable to the Agents or the Buyers under any
provision of Section 3.7 or 3.8 should be paid ratably to the extent of funds
available. CPFC shall, to the extent permitted by law, pay to the Agents or
the Buyers upon demand, interest on all amounts not paid when due and payable
hereunder at a rate equal to the rate determined under clause (i) of the
definition of "Base Rate"
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(calculated on the basis of a year of 365 days and actual days elapsed) plus
2% per annum. All computations by the Agents of amounts payable hereunder
shall be binding and conclusive absent manifest error.
(b) The Buyers' Interest shall be calculated by the Servicer for
purposes of each Purchase Notice and each Daily Report. If the Servicer shall
fail to promptly calculate the Buyers' Interest as required herein, the
Collateral Agent may calculate the Buyers' Interest. All calculations of the
Buyers' Interest shall be rounded to the nearest 1/100 of 1% (with any
calculation that yields 5/1000 of 1% as a last digit being rounded upward).
SECTION 2.8. FUNDING LOSSES. If for any reason in respect of any
Tranche the Yield Rate of which is determined by reference to the Euro-Dollar
Rate or Fixed CD Rate, a reduction is effected on any day other than the last
day of the Yield Accrual Period selected or applicable thereto or the relevant
Tranche is otherwise not outstanding for the duration of such Yield Accrual
Period or if CPFC fails to complete an Incremental Purchase or a reduction of
the Aggregate Net Investment after notice has been given to the Buyers in
accordance with Section 2.2 or 2.6, CPFC shall reimburse each Buyer within 15
days after demand for any resulting loss or expense incurred by it (or by an
existing or prospective Participant in the related Tranche), including (without
limitation) any loss incurred in obtaining, liquidating or employing deposits
from third parties, but excluding loss of margin. Any such Buyer making such
demand for reimbursement shall deliver to CPFC a certificate, supported where
applicable by documentary evidence, explaining the amount of such loss or
expense, which certificate shall be conclusive in the absence of manifest error.
ARTICLE 3
ASSIGNMENT;
COLLECTION AND ADMINISTRATION OF RECEIVABLES
SECTION 3.1. ASSIGNMENT. (a) CPFC and the Buyers intend the sale
of the Purchased Interest hereunder to be a true sale of all of CPFC's right,
title and interest in, to and under the Receivables, the Related Security,
all
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Collections, all books and records related thereto and all proceeds of the
foregoing to the extent of the Buyers' Interest, providing the Buyers with
the full benefits of ownership of the same, and CPFC and the Buyers do not
intend this transaction to be, or for any purpose to be characterized as, a
loan secured by such Receivables, Related Security, Collections, books and
records and proceeds. Notwithstanding whether a court would characterize the
sale of the Purchased Interest hereunder as a loan rather than a true sale,
in order to secure its obligations under this Agreement and to further assure
the transfer of the Purchased Interest, CPFC hereby grants, pledges and
assigns as security to the Collateral Agent for the benefit of the Buyers and
the Agents:
(i) the Cash Collateral Account and all funds held therein, all income
from the investment of funds in the Cash Collateral Account and all
certificates and instruments, if any, from time to time representing or
evidencing the Cash Collateral Account or such investments;
(ii) all right, title and interest of CPFC in, to and under the
Receivables, together with all Related Security and Collections related
thereto;
(iii) all right, title and interest of CPFC in, to and under the Purchase
and Sale Agreement, including all monies due and to become due to CPFC from
the Seller under or in connection therewith, whether as Receivables or fees,
expenses, costs, indemnities, insurance recoveries, damages for breach or
otherwise, and all rights, remedies, powers, privileges and claims of CPFC
against the Seller under or with respect to the Purchase and Sale Agreement
(whether arising pursuant to the terms of the Purchase and Sale Agreement or
otherwise available at law or in equity);
(iv) all right, title and interest of CPFC in, to and under each of the
other Program Documents (excluding this Agreement) (whether as an original
party thereto, as assignee or otherwise), including all monies due and to
become due to CPFC under or in connection with such other Program Documents,
and all rights, remedies, powers, privileges, benefits and claims of CPFC
under or with respect to such other Program Documents (whether arising
pursuant to the
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terms of such Program Documents or otherwise available at law or in equity);
(v) the Collection Account and all funds held therein, all income from
the investment of funds in the Collection Account and all certificates and
instruments, if any, from time to time representing or evidencing the
Collection Account or such investments;
(vi) all Lockboxes, Lockbox Accounts and all funds held therein, all
income from the investment of funds in the Lockbox Accounts and all
certificates and instruments, if any, from time to time in such Lockboxes or
representing or evidencing the Lockbox Accounts or such investments;
(vii) all interest, dividends, cash, instruments and other property from
time to time received, receivable or otherwise distributed in respect of or
in exchange for any and all of the foregoing;
(viii) all books and records (including, without limitation, customer
lists, credit files, computer programs, printouts and other computer materials
and records) relating to any of the above; and
(ix) all substitutions for and proceeds of any of the foregoing and, to
the extent not otherwise included, all payments under insurance (whether or
not the Collateral Agent is the loss payee thereof) or any indemnity,
warranty or guaranty, payable by reason of loss or damage to or otherwise
with respect to any of the foregoing.
Notwithstanding the foregoing, no obligation or liability of CPFC, the
Seller or the Servicer under any Receivables or any related Contracts, or CPFC
under the Purchase and Sale Agreement, shall be assumed by the Agents or the
Buyers, and any such assumption is hereby expressly disclaimed.
(b) CPFC shall monitor and require compliance by the Seller with its
obligations under the Purchase and Sale Agreement, shall exercise its rights and
remedies thereunder so as to be afforded the benefits intended to accrue to it
thereunder and shall, in the event of any default by the Seller in performance
of its obligations thereunder,
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exercise any and all of its rights and remedies under the Purchase and Sale
Agreement to the extent and in the manner directed by the Collateral Agent.
SECTION 3.2. ACCOUNTS AND COLLECTIONS. (a) All Obligors shall be
instructed to cause all Collections of the Receivables to be either (i) mailed
directly to a Lockbox with a Qualified Bank which has entered into a Lockbox
Agreement governing such Lockbox and the related Lockbox Account (which shall be
a separate and segregated account) or (ii) electronically transferred to a
Lockbox Account or the Collection Account. If CPFC or the Servicer receives any
Collections on the Receivables, it shall hold such Collections in trust for the
Buyers in respect of the Purchased Interest. All Lockbox Accounts shall be
swept daily into (and as soon as possible, but in any event not later than two
Business Days after receipt of any Collections on the Receivables by CPFC or the
Servicer other than through a Lockbox Account, such Collections shall be
deposited in) a single collection account (the "Collection Account") to be at
all times maintained with a Qualified Bank which has entered into a Collection
Account Agreement (the "Collection Account Agreement") (which shall be
substantially in the form of Exhibit F-2 hereto which has been executed and
delivered to the Collateral Agent; PROVIDED that if such Qualified Bank's
certificates of deposit are not at the time rated A-1+ by S&P the Collection
Account shall be a corporate trust account at such Qualified Bank. Each Lockbox
Account and the Collection Account shall be in the names of CPFC and the
Collateral Agent, and the funds deposited in each such Account shall consist
solely of Collections on the Receivables and shall not be commingled with any
other funds of CPFC or the Servicer or any other Person. Any funds in a Lockbox
Account or the Collection Account which are not held as a deposit in such
account but are invested shall be invested in Cash Collateral Account
Investments. The location of each Lockbox and the number and location of each
Lockbox Account and the Collection Account on the Closing Date is set forth on
Schedule 1 hereto and such locations and account numbers shall not be changed,
and no new Lockbox or Lockbox Account shall be added, without 30 days' prior
written notice to the Collateral Agent.
(b) At all times during the term of this Agreement the Collateral Agent
shall maintain an account in its name, on behalf of the Buyers, and under its
control
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(the "Cash Collateral Account") for the deposit of all amounts to be
deposited in such account hereunder; PROVIDED that if the Collateral Agent's
certificates of deposit are not at the time rated A-1+ by S&P the Cash
Collateral Account shall be a corporate trust account at the Collateral
Agent. Upon allocation by the Servicer of the Buyer's share of New
Collections in accordance with Section 3.7 or 3.8, the Collateral Agent shall
allocate amounts in the Cash Collateral Account to the Yield Reserve
Requirement, Yield, Commitment Fees and Aggregate Net Investment in
accordance with Sections 3.7 and 3.8.
(c) Amounts on deposit in the Cash Collateral Account shall be invested
from time to time in Cash Collateral Account Investments selected by the
Collateral Agent. Interest or other earnings on Cash Collateral Account
Investments in the Cash Collateral Account shall be credited to such account
and, on each Quarterly Date prior to the Termination Date shall (provided no
Termination Event and no Potential Termination Event has occurred and is then
continuing) be paid to CPFC and shall, commencing on the Termination Date, be
applied in accordance with Section 3.8. The Collateral Agent shall have no
liability in respect of the Cash Collateral Account Investments or any returns
or losses thereon.
SECTION 3.3. ADMINISTRATION OF RECEIVABLES.
(a) CPFC shall, or shall cause the Servicer to (in which event the
Servicer shall), maintain all books and records relating to the Receivables as
may be necessary or advisable for the administration, servicing and collection
of the Receivables (including, without limitation, duplicate records and/or
system redundancy so as to enable the reconstruction of essential records in the
event of any reasonably foreseeable casualty) and all other information
necessary to establish or evidence the Buyers' right, title and interest in and
to the Purchased Interest, such records and information to be prepared and
maintained in a manner and utilizing procedures no less adequate than the manner
and procedures in effect on the date hereof. The Servicer shall not encumber,
or permit any party other than the Buyers to encumber, any right, title or
interest in such books and records. All Receivables will be identified under
one or more computer codes not used for any other accounts receivable or any
other accounting items of CPFC or any other Person and will be readily
identifiable and otherwise
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segregated from all other accounts receivable and other accounting items of
CPFC, the Seller, the Servicer and any other Person. Any printout listing the
Receivables will indicate that CPFC owns the Receivables and that the Buyers
own the Purchased Interest in the Receivables.
(b) The administration, servicing and collection of the Receivables
shall be the responsibility of the Servicer. Until a Servicing Transfer shall
have occurred, CPC will act as Servicer. The Servicer shall, to the fullest
extent permitted by law, have the power and authority, on behalf of CPFC, to
take such actions in respect of any such Receivable as the Servicer may deem
advisable and are consistent with the terms of this Agreement. The Servicer
agrees to exercise the same degree of skill and care and apply the same
standards, policies, procedures and diligence that it would apply to the
performance of the same functions with respect to its own accounts receivable.
The Servicer shall comply in all material respects with all applicable legal
requirements in the performance of its administrative, servicing and collection
functions hereunder.
(c) CPFC will at all times observe and perform, or cause to be observed
and performed, all obligations and undertakings to the Obligors arising in
connection with each Receivable and the related Contract. The Servicer shall
endeavor to collect or cause to be collected from the Obligor under each
Receivable, as and when due, all amounts payable thereunder in accordance with
the Credit and Collection Policy. Neither CPFC nor the Servicer shall do
anything to modify the terms of any Receivable, except in accordance with the
Credit and Collection Policy, if such modification would materially adversely
affect CPFC or cause a Termination Event, or would materially impair the rights
of the Buyers in and to the Purchased Interest; PROVIDED that (i) CPFC or the
Servicer may grant, or permit to be granted, to the Obligor under any
Receivable, any Dilution Factor which the Servicer in good faith believes is
justified, subject to the provisions of Section 3.9(c), and (ii) the Servicer
may take or permit to be taken such action to collect Receivables as it may deem
advisable, including resale of any repossessed, returned or rejected goods and
rescheduling through extension or otherwise of payments due under any Receivable
so long as such action is consistent with the Servicer's historical collection
practices as modified from time to time in accordance with this Section.
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Neither CPFC nor the Servicer shall change the fundamental nature of its
business or the Credit and Collection Policy in a manner that would materially
adversely affect CPFC or materially impair the collectibility of the Receivables
(it being understood that the Servicer may amend the Credit and Collection
Policy as long as such amendment does not materially adversely affect CPFC or
materially impair the collectibility of the Receivables). In the event of a
default under any Receivable, the Servicer shall be entitled to sue thereon in
the name of CPFC and CPC and, if and only if the Collateral Agent, acting upon
the instructions of the Required Buyers, consents in writing, as agent of the
Buyers.
SECTION 3.4. SERVICER'S COMPENSATION. The Servicer's Compensation
shall be paid to the Servicer in accordance with Sections 3.7 and 3.8 hereof.
Servicer's Compensation payable to CPC as Servicer shall accrue on each day
until the earlier of the Final Payment Date and the date of a Servicing
Transfer, in an amount equal to the product of (i) 1.5% per annum (calculated on
the basis of a year of 360 days) times (ii) the aggregate Outstanding Balance of
Receivables on such day.
SECTION 3.5. SERVICING TRANSFER. The Required Buyers may, upon the
occurrence and during the continuation of a Termination Event, by directing the
Administrative Agent to deliver notice to such effect to CPFC and the Servicer,
terminate the services of the then Servicer under the Program Documents and
transfer (a "Servicing Transfer") the servicing of the Receivables to the
Collateral Agent or affiliated or unaffiliated contractors engaged by the
Collateral Agent to act as Servicer. The Collateral Agent agrees that if no
other Servicer is engaged it will act as Servicer hereunder. Such Servicing
Transfer shall be effective immediately if a Servicer Termination Event is then
in existence but shall otherwise be effective 30 days after delivery of the
notice thereof. Notwithstanding the Servicing Transfer, pending the
commencement of the servicing of the Receivables by the successor Servicer, the
terminated Servicer shall continue to be obligated to service the Receivables
pursuant hereto. The terminated Servicer, after receiving a notice of a
Servicing Transfer shall, at its expense, deliver to the Collateral Agent or the
successor Servicer, as and when directed by the Collateral Agent, (i) a schedule
of the Receivables indicating, as to each Receivable, applicable information as
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to the related Obligor and the Outstanding Balance and (ii) copies of all of the
Servicer's records relating to such Receivables. To the extent that compliance
with this Section 3.5 shall require the Servicer to disclose to the successor
Servicer information of any kind which the Servicer reasonably deems to be
confidential, the successor Servicer shall be required to enter into such
customary licensing and confidentiality agreements as the Servicer shall deem
necessary to protect its interest. Neither CPFC nor the Servicer shall be
liable for any acts or omissions of the successor Servicer.
SECTION 3.6. PROTECTION OF PURCHASED INTEREST. (a) CPFC and the
Servicer shall, from time to time, do and perform any and all acts and execute
any and all documents (including, without limitation any amendment, supplement
or continuation of any financing statements under the UCC, the execution of any
instrument of transfer, the giving of notice of the Purchased Interest to any
Obligor and the making of notations in the records) as may be necessary, or as
may be requested by the Collateral Agent, in order to effect the purposes of
this Agreement and to protect the Purchased Interest against all Persons
whomsoever. To the fullest extent permitted by applicable law, the Collateral
Agent shall be permitted to sign and file financing and continuation statements
with respect to any of the items set forth in clauses (i) through (viii) of
Section 3.1. In furtherance of the foregoing, CPFC hereby constitutes and
appoints the Collateral Agent its true and lawful attorney, with full power of
substitution, in the name of CPFC, to execute and file financing statements and
continuation statements.
(b) CPFC shall not change its name, identity or corporate structure
(within the meaning of Section 9-402(7) of the UCC) or relocate its chief
executive office or any office where records are kept to a different city or
county unless it shall have (i) given the Collateral Agent at least 30 days'
prior written notice thereof and (ii) delivered to the Agent and each Buyer an
opinion of counsel (which counsel and which opinion shall be satisfactory to the
Collateral Agent) to the effect that all financing statements and amendments or
supplements thereto, continuation statements and other documents required to be
recorded or filed in order to perfect and protect the Purchased Interest, for
the period specified in such opinion, against all creditors of and purchasers
from CPFC
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have been filed in each filing office necessary for such purpose and that all
filing fees and taxes, if any, payable in connection with such filings have
been paid in full. CPFC shall at all times maintain its chief executive
office within a jurisdiction of the United States in which Article 9 of the
Uniform Commercial Code (1972 or later revision) is in effect.
(c) CPFC shall, promptly upon the request of the Collateral Agent (but
no more, as to each of (x) and (y), than once in any calendar year unless a
Termination Event or Potential Termination Event has occurred and is then
continuing), provide to the Collateral Agent either or both of (x) an opinion of
counsel to the effect set forth in clause (ii) of subsection (b) above and (y) a
report of counsel (which counsel may be in-house counsel and which report shall
be satisfactory to the Collateral Agent) summarizing the results of such
counsel's investigation as to CPFC's compliance with the provisions of its
articles of incorporation and by-laws relating to corporate separateness and
CPFC's special purpose (contained in Articles II, VI or VII of its articles of
incorporation and Sections 2.3 or 5.3 of its by-laws) and as to CPC's compliance
with Section 6.8 of the Purchase and Sale Agreement.
(d) CPFC and the Servicer agree that, subject to applicable laws, the
Collateral Agent shall have the right, prior to the occurrence of a Termination
Event if CPFC or the Servicer fails to do so, or at any time after the
occurrence of a Termination Event, to do all such acts and things as are
reasonably necessary to protect the interests of the Buyers, including, without
limitation, confirmation and verification of the existence, amount and status of
the Receivables and collection and enforcement of the Receivables, and that CPFC
and the Servicer shall cooperate fully to give effect to the foregoing.
SECTION 3.7. PRE-TERMINATION PROCEDURES; REINVESTMENT. (a) On each
Business Day after the Closing Date but prior to the Termination Date, the
Servicer shall allocate to the Buyers an amount equal to the product of (x) the
Buyers' Interest (as set forth on the Daily Report prepared for such Business
Day) multiplied by (y) the sum of (i) Collections theretofore received in
Lockbox Accounts (or otherwise) and to be deposited in the Collection Account on
such Business Day and (ii) amounts already on deposit in the Collection Account
and not previously applied and accounted
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for pursuant to this Section 3.7 (the amount described in this clause (y)
referred to as "New Collections"). Such Buyers' share of New Collections
shall be held or applied on such Business Day in the following order of
priority:
(i) first, if the amount then on deposit in the Cash Collateral Account
with respect to the Yield Reserve Requirement does not equal the then Yield
Reserve Requirement to be deposited in the Cash Collateral Account and held
in respect thereof, an amount equal to the excess of (x) the then Yield
Reserve Requirement over (y) the amount then on deposit with respect to the
Yield Reserve Requirement;
(ii) second, to be deposited in the Cash Collateral Account and there
held until application pursuant to (1) below, with respect to each Tranche,
an amount equal to the excess of (x) all Yield accrued and unpaid for such
Tranche to such day over (y) the amount theretofore held, and then on
deposit, with respect to Yield on such Tranche pursuant to this clause
(ii);
(iii) third, to be deposited in the Cash Collateral Account and there
held until application pursuant to (2) below, an amount equal to the excess
of (x) all accrued and unpaid Commitment Fees to such day over (y) the amount
theretofore held, and then on deposit, with respect to such Commitment Fees
pursuant to this clause (iii) or clause (b)(ii) below;
(iv) fourth, to be paid to the Agents and the Buyers on such day, any
Other Expenses due to the Agents and the Buyers not paid pursuant to clause
(b)(i) below;
(v) fifth, to be paid to the Servicer on such day, an amount which will
equal, for each day (to and including such Business Day) as to which there is
accrued and unpaid Servicer's Compensation (an "accrual day") an amount equal
to (x) the Buyers' Interest as of the close of business on the Computation
Date for such accrual day times (y) the Servicer's Compensation accrued on
such accrual day; and
(vi) sixth, the remainder of such Buyers' share of New Collections
(the "Remainder") shall
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be applied in accordance with Section 3.7(c) hereof.
Payments of amounts so allocated and held in the Cash Collateral Account
shall be made as follows:
(1) On the last day of each Yield Accrual Period for a Tranche (or to
the extent funds are insufficient therefor, as funds become available on each
of the succeeding five Business Days), the Collateral Agent shall withdraw
from the Cash Collateral Account and distribute to the Buyers the Yield
accrued with respect to such Yield Accrual Period which was retained in the
Cash Collateral Account with respect thereto pursuant to clause (ii) above
and, if necessary to pay all Yield accrued, shall apply moneys to pay such
Yield from amounts in the Cash Collateral Account in respect of the Yield
Reserve Requirement.
(2) On each Quarterly Date, the Collateral Agent shall withdraw from
the Cash Collateral Account and pay to the Administrative Agent for
distribution to the Buyers the Commitment Fees accrued since the last
Quarterly Date and retained in the Cash Collateral Account with respect
thereto pursuant to clause (iii) above or clause (b)(ii) below.
(3) On any Business Day, the Collateral Agent shall withdraw from the
Cash Collateral Account and pay to CPFC an amount, if any, equal to the
excess of (A) the amount on deposit in the Cash Collateral Account with
respect to the Yield Reserve Requirement over (B) the then Yield Reserve
Requirement.
(b) On each Business Day after the Closing Date but prior to the
Termination Date, the Servicer shall allocate to CPFC, as its share of New
Collections, an amount equal to the product of (x) the Transferor's Interest (as
set forth on the Daily Report prepared for such Business Day) multiplied by (y)
New Collections. CPFC's share of New Collections shall be held or applied on
such Business Day in the following order of priority:
(i) first, to be paid to the Agents and the Buyers on such day, an
amount equal to all Other Expenses due to the Agents and the Buyers under
the Program Documents;
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(ii) second, to be deposited in the Cash Collateral Account and there
held until application pursuant to (a)(2) above, an amount equal to the
excess of (x) all accrued and unpaid Commitment Fees to such day over (y) the
sum of (A) the amount theretofore held, and then on deposit, pursuant to this
clause (ii) and (B) the amount theretofore held, and then on deposit, or
allocated on such Business Day, pursuant to clause (a)(iii) above;
(iii) third, to be paid to the Servicer on such day, an amount which will
equal, for each accrual day, (x) the Transferor's Interest as of the close of
business on the Computation Date for such accrual day times (y) the
Servicer's Compensation accrued on such accrual day; and
(iv) fourth, any remaining amount of CPFC's share of New Collections
shall be paid to CPFC.
(c) On each Business Day after the Closing Date but prior to the
Termination Date, (A) Available Collections, up to the amount of the Aggregate
Net Investment, shall be allocated to one or more of the following applications,
as CPFC shall specify in a notice to the Servicer and the Collateral Agent:
(i) all or any portion of the Remainder may be deposited in the Cash
Collateral Account to be held in respect of Aggregate Net Investment, to
reduce Adjusted Aggregate Net Investment; or
(ii) all or any portion of the Available Collections may be paid to the
Administrative Agent for distribution to the Buyers to reduce Aggregate Net
Investment (and, in such event, CPFC shall give notice to the Administrative
Agent as to which Tranches shall be reduced); or
(iii) all or any portion of the Available Collections may be
automatically reinvested (each such reinvestment, a "Reinvestment") by the
Collateral Agent on behalf of the Buyers, and thus paid to CPFC, subject to
the provisions of Section 4.3;
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PROVIDED that any payment of a Tranche bearing interest at the Euro-Dollar Rate
or Fixed CD Rate shall be subject to clauses (i), (iv) and (v) of Section 2.6
and (B) Available Collections in excess of the Aggregate Net Investment shall be
paid to CPFC.
SECTION 3.8. POST-TERMINATION PROCEDURES. (a) On the Termination
Date and on each Business Day thereafter to and including the Final Payment
Date, the Servicer shall allocate to the Buyers an amount equal to the
product of (x) the Buyers' Interest (as set forth on the Daily Report
prepared for such Business Day) multiplied by (y) New Collections. Such
Buyers' share of New Collections shall be immediately paid over to the Cash
Collateral Account and, together with all other monies then on deposit in the
Cash Collateral Account, held or distributed on such Business Day in the
following order of priority:
(i) first, to pay to the Administrative Agent for distribution to the
Buyers an amount equal to accrued and unpaid Yield with respect to each
Tranche having a Yield Accrual Period ending on or before such Business Day;
(ii) second, if there is any Yield Accrual Period for a Tranche which
is not ending on such Business Day, then, to be held in the Cash Collateral
Account until application pursuant to clause (i), with respect to each such
Tranche bearing interest at an amount equal to the Yield accrued and unpaid
for such Tranche to such day;
(iii) third, to pay to the Administrative Agent for distribution to the
Buyers accrued and unpaid Commitment Fees;
(iv) fourth, to pay to the Servicer, for each accrual day for which the
Servicer is not an Affiliate of CPFC, an amount equal to (x) the Buyers'
Interest as of the close of business on the Computation Date for such accrual
day times (y) the Servicer's Compensation (other than any Excess Servicer's
Compensation) accrued on such accrual day;
(v) fifth, to be held in the Cash Collateral Account until the Final
Payment Date, an amount equal to 1% of Aggregate Net Investment;
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(vi) sixth, to pay to the Administrative Agent for distribution to the
Buyers an amount in reduction of the Aggregate Net Investment, applying such
amount only to Tranches whose Yield Accrual Period ends on such Business Day
and Tranches whose Yield Rate is the Base Rate;
(vii) seventh, to be held in the Cash Collateral Account until applied
pursuant to clause (vi), an amount equal to the sum of the Tranches whose
Yield Accrual Periods do not end on such Business Day and whose Yield Rate is
not the Base Rate;
(viii) eighth, to pay to the Agents and the Buyers any Other Expenses,
incurred or accrued, owing to the Agents and the Buyers not paid pursuant to
clause (b)(iii) below;
(ix) ninth, to pay to the Servicer, for each accrual day for which the
Servicer is not an Affiliate of CPFC, an amount equal to (x) the Buyers'
Interest as of the close of business on the Computation Date for such accrual
day times (y) the Excess Servicer's Compensation accrued on such accrual day;
(x) tenth, to pay to the Servicer, for each accrual day for which the
Servicer is an Affiliate of CPFC, an amount equal to (x) the Buyers' Interest
as of the close of business on the Computation Date for such accrual day
times (y) the Servicer's Compensation accrued on such accrual day; and
(xi) eleventh, the balance shall be held in the Cash Collateral Account
for future application as aforesaid.
(b) On the Termination Date and on each Business Day thereafter to and
including the Final Payment Date, the Servicer shall allocate to CPFC, as its
share of New Collections, an amount equal to the product of (x) the Transferor's
Interest (as set forth on the Daily Report prepared for such Business Day)
multiplied by (y) New Collections. CPFC's share of New Collections shall be
applied on such Business Day in the following order of priority:
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(i) first, to pay to the Servicer, for each accrual day for which the
Servicer is not an Affiliate of CPFC, an amount equal to (x) the Transferor's
Interest as at the close of business on the Computation Date for such accrual
day times (y) the Servicer's Compensation accrued on such accrual day;
(ii) second, for deposit into the Cash Collateral Account, accrued and
unpaid Commitment Fees, in each case owing to the Buyers and not paid or
provided for pursuant to subsection (a) above;
(iii) third, to be paid to the Agents and the Buyers on such day, all
Other Expenses owing to the Agents and the Buyers;
(iv) fourth, to pay the Servicer, for each accrual day for which the
Servicer is an Affiliate of CPFC, an amount equal to (x) the Transferor's
Interest as at the close of business on the Computation Date for such accrual
day times (y) the Servicer's Compensation accrued on such accrual day; and
(v) fifth, the balance shall be paid to CPFC.
(c) On the Business Day after the Final Payment Date, (i) the Servicer
shall recompute the Buyers' Interest as 0%, (ii) the Buyers shall be deemed to
have reconveyed to CPFC, without representation or warranty, the Purchased
Interest, (iii) the Collateral Agent shall pay to CPFC any amounts held in the
Collection Account and the Cash Collateral Account and (iv) the Agents and the
Buyers shall execute and deliver to CPFC, at CPFC's expense, such documents or
instruments as are reasonably necessary to terminate their interest in the
Receivables, all Related Security, all Collections, any books and records
related thereto and all proceeds of the foregoing.
SECTION 3.9. PAYMENTS UNDER CERTAIN CIRCUMSTANCES. (a) If, as to any
Receivable, a representation or warranty deemed made pursuant to Section 4.3 on
the date of any Purchase of a Purchased Interest therein was not true in all
material respects when deemed made, CPFC shall, within two Business Days of
discovery by or notice to CPFC of such fact, deposit in the Collection Account,
as a Collection with respect thereto, the Outstanding Balance of such
Receivable;
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(b) if at any time the Buyers shall cease to have a perfected undivided
ownership interest, or a first priority perfected security interest, in a
Receivable free and clear of all Adverse Interests, CPFC shall, within two
Business Days of discovery by or notice to CPFC of such fact, deposit in the
Collection Account, as a Collection with respect thereto, the Outstanding
Balance of such Receivable; and
(c) if on any day the Outstanding Balance of a Receivable (or the amount
thereof treated as an Eligible Receivable) is reduced or canceled as a result of
any Dilution Factor with respect to such Receivable, CPFC shall deposit in the
Collection Account on such day (or, if such day is not a Business Day, the next
succeeding Business Day), as a Collection with respect thereto, the amount of
such reduction or cancellation;
PROVIDED that, so long as no Termination Event or Potential Termination Event
shall have occurred and be continuing, no such deposit shall be required except
to the extent that if such deposit were not made, the Adjusted Buyers' Interest
would exceed 100% (calculated, prior to the Termination Date, after applying
Available Collections in accordance with Section 3.7 hereof); PROVIDED FURTHER
that if the circumstances described in clause (b) apply to all Receivables, CPFC
shall instead repurchase the Purchased Interest at a price equal to the
Aggregate Unpaids by paying such amount to the Administrative Agent for the
account of the Buyers.
ARTICLE 4
CONDITIONS
SECTION 4.1. CLOSING. The closing hereunder shall occur upon receipt
by the Agents of the following, all of which shall be in form and substance
acceptable to the Agents:
(a) a Buyer's Certificate for each of the Buyers duly executed by CPFC;
(b) the articles of incorporation of CPFC, substantially in the form of
Exhibit J hereto, certified as
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of a date reasonably near the Closing Date by the State Corporation
Commission of the Commonwealth of Virginia;
(c) a good standing certificate for CPFC issued by the State
Corporation Commission of the Commonwealth of Virginia dated a date reasonably
near the Closing Date;
(d) a certificate of the secretary or an assistant secretary of CPFC
certifying as of the Closing Date (i) as to no amendments to the articles of
incorporation of CPFC; (ii) as to no liquidation or dissolution proceeding;
(iii) a copy of the By-laws of CPFC, substantially in the form attached to
Exhibit K hereto; (iv) resolutions of the board of directors of CPFC,
substantially in the form of Exhibit K hereto, authorizing the execution,
delivery and performance by CPFC of the Program Documents and approving the
transactions contemplated thereby; (v) the name and specimen signature of each
officer of CPFC authorized on its behalf to execute the Program Documents and
any other documents to be delivered by CPFC thereunder; and (vi) the names of
CPFC's outside directors;
(e) a certificate of the secretary or an assistant secretary of CPC
certifying as of the Closing Date (i) as to no amendments to the articles of
incorporation of CPC; (ii) as to no liquidation or dissolution proceeding; (iii)
a copy of the By-laws of CPC; (iv) resolutions of the board of directors of CPC
substantially in the form of Exhibit L hereto; and (v) the name and specimen
signature of each officer of CPC authorized on its behalf to execute the Program
Documents and any other documents to be delivered by CPC thereunder;
(f) the articles of incorporation of CPC certified as of a date
reasonably near the Closing Date by the State Corporation Commission of the
Commonwealth of Virginia;
(g) a good standing certificate for CPC issued by the State Corporation
Commission of the Commonwealth of Virginia, dated a date reasonably near the
Closing Date;
(h) acknowledgement copies of proper financing statements (Form UCC-1)
dated a date reasonably near the Closing Date naming CPFC as the seller of the
Purchased Interest and the Collateral Agent, on behalf of the Buyers, as
purchasers thereof, or other similar instruments or
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documents as may be necessary or, in the opinion of the Collateral Agent or
its counsel, desirable under the UCC of all appropriate jurisdictions to
evidence and perfect the Buyers' interest in the Purchased Interest;
(i) acknowledgment copies of proper financing statements (Form UCC-1)
dated a date reasonably near the Closing Date naming CPC as the seller of
Receivables, CPFC as purchaser thereof and the Collateral Agent as assignee of
CPFC, or other similar instruments or documents as may be necessary or, in the
opinion of the Collateral Agent or its counsel, desirable under the UCC of all
appropriate jurisdictions to evidence and perfect CPFC's ownership interest in
all Receivables;
(j) executed financing statements (Form UCC-3) necessary to release all
security interests and other rights of any Person previously granted by CPC or
CPFC in the Receivables, the Related Security, all Collections, all books and
records related thereto and all proceeds of the foregoing;
(k) (i) requests for information or copies (Form UCC-11) (or a similar
search report certified by parties acceptable to Collateral Agent or its
counsel) dated a date reasonably near the Closing Date listing all effective
financing statements which name either CPC or CPFC (under its present name and
any previous name) as debtor and which are filed in jurisdictions in which the
filings were made pursuant to clauses (h) or (i) above, together with copies of
such financing statements (none of which, unless subject to a release referred
to in clause (j) above, shall cover any Receivables, Related Security,
Collections, books and records related thereto and proceeds of the foregoing and
(ii) requests for information dated a date reasonably near the Closing Date
regarding tax liens against CPC or CPFC in the relevant offices in the States of
California, Virginia, and Pennsylvania;
(l) duly executed counterparts of the Lockbox Agreement with the
Lockbox Bank and duly executed counterparts of the Collection Account Agreement
with the Collection Account Bank;
(m) opinions dated the Closing Date of McGuire, Woods, Battle & Boothe,
L.L.P., counsel for CPFC and CPC in substantially the forms of Exhibits G-1, G-2
and G-3, each
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covering such other matters as the Administrative Agent may reasonably
request;
(n) a certificate dated the Closing Date executed by the chief
financial officer or chief accounting officer of CPFC and CPC to the effect set
forth in Sections 4.2(a) and (b);
(o) the fees described in Section 2.4;
(p) evidence satisfactory to the Collateral Agent of the establishment
of the Cash Collateral Account;
(q) based on a trial balance of Receivables as of the close of business
on the Business Day two days prior to the Closing Date, a calculation of the
purchase price paid for Receivables by CPFC to CPC pursuant to the Purchase and
Sale Agreement on the Closing Date and a Purchase Notice;
(r) a letter from CPC's independent auditor confirming the
characterization of the transfer of the Receivables from CPC to CPFC as a
sale under GAAP; and a letter from CPFC's independent auditor confirming the
characterization of each transfer of an interest in the Receivables from CPFC
to the Buyers as a sale under GAAP;
(s) evidence satisfactory to the Collateral Agent that the Buyers'
Certificates have been rated AAA by S&P;
(t) executed and completed perfection certificates substantially in the
form of Exhibits M-1 and M-2 hereto;
(u) duly executed counterparts of the Purchase and Sale Agreement;
(v) duly executed counterparts of the Consent and Agreement;
(w) evidence satisfactory to the Collateral Agent of the initial
capitalization of CPFC showing the amount of Receivables conveyed to CPFC as a
contribution to the capital of CPFC;
(x) a Daily Report prepared for the Closing Date and a Settlement
Statement for the Report Month ending on the Month-end Date for the most recent
Settlement Date;
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(y) evidence satisfactory to the Collateral Agent as to the validity of
all perfected security interests in respect of Obligors domiciled in certain
provinces in Canada;
(z) duly executed counterparts of the Side Letter Agreement dated June
10, 1996 among James River Corporation of Virginia, James River Paper Company,
Inc., CPC and Crown Vantage Inc.;
(aa) a copy of the duly executed letter from CPC to S&P dated June 5,
1996 regarding CPC's planned computer system upgrades (the "Systems Letter");
and
(bb) all documents the Agents may reasonably request relating to the
existence of CPC or CPFC, the corporate authority for and the validity of the
Program Documents, and any other matters relevant hereto, all in form and
substance satisfactory to the Agents.
The Administrative Agent shall promptly notify CPFC and the Buyers of the date
on which the foregoing conditions have been satisfied, and such notice shall be
conclusive and binding on all parties hereto.
SECTION 4.2. CONDITIONS TO EACH INCREMENTAL PURCHASE. The following
shall be conditions precedent to each Incremental Purchase:
(a) the fact that the representations and warranties in Article 5
hereof and Article IV of the Purchase and Sale Agreement are true and correct as
of the date of such Incremental Purchase as though made on and as of such date;
(b) the fact that no Termination Event or Potential Termination Event
shall have occurred and be continuing or occur as a result of such Incremental
Purchase;
(c) the fact that no downgrading in, or withdrawal of, the rating
assigned to the Buyers' Certificates by S&P shall have occurred; and
(d) receipt by the Collateral Agent of the Daily Report for the
immediately preceding Business Day.
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At the time of each Incremental Purchase, CPFC shall be deemed to have
represented and warranted the facts set forth in clauses (a), (b) and (c) above.
SECTION 4.3. CONDITIONS TO EACH PURCHASE. The following shall be
conditions precedent to each Purchase:
(a) the fact that after giving effect to such Purchase, the Adjusted
Buyers' Interest shall not exceed 100%;
(b) without limiting the generality of the foregoing, the fact that
each Receivable included in the calculation of Net Pool Balance as an Eligible
Receivable as of the date of such Purchase is an Eligible Receivable and
otherwise properly included in such a calculation as of such date (including a
reduction for any amount exceeding the Concentration Limit applicable to the
Obligor of such Receivable); and
(c) the fact that the Final Purchase Date has not occurred under the
Purchase and Sale Agreement and that, if on the date of such Purchase, there are
new Receivables to be purchased under the Purchase and Sale Agreement, such
Receivables are in fact purchased on such day pursuant to the Purchase and Sale
Agreement.
At the time of each Purchase, CPFC shall be deemed to have represented and
warranted the facts set forth in clauses (a) through (c) above, and shall be
deemed further to have specifically represented and warranted that, as to each
such Receivable included in the calculation of Net Pool Balance, the standards
set forth in the definition of "Eligible Receivable" (other than clauses (v),
(ix), (x), (xi) and (xvi) thereof) will continue to be met.
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES
SECTION 5.1. REPRESENTATIONS AND WARRANTIES OF THE SERVICER.
The Servicer hereby makes the representations and warranties set forth
in Sections 4.2(a), (b), (c), (e) and (i) of the Purchase and Sale Agreement (it
being understood that the references to the "Seller" in such Sections shall be
read as being to the "Servicer").
SECTION 5.2. REPRESENTATIONS AND WARRANTIES OF CPFC. CPFC hereby
represents and warrants that:
(a) CORPORATE AND EXISTENCE AND POWER. CPFC is a corporation duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, and has all corporate powers and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted except for such licenses, authorizations,
consents or approvals the absence of which, in the aggregate, could not
reasonably be expected to have a material adverse effect on the business,
financial position or results of operations of CPFC, or which in any manner
draws into specific question the validity or enforceability of the Program
Documents.
(b) CORPORATE AND GOVERNMENTAL AUTHORIZATION; NO CONTRAVENTION. The
execution, delivery and performance by CPFC of the Program Documents are within
the corporate powers of CPFC, have been duly authorized by all necessary
corporate action, require no action by or in respect of, or filing with, any
governmental body, agency or official (except as contemplated by the Program
Documents) and do not contravene, or constitute a default under, any provision
of applicable law or regulation or of the articles of incorporation or by-laws
of CPFC or of any agreement or instrument evidencing Debt or any other material
agreement, judgment, injunction, order, decree or other instrument binding upon
CPFC (except for any such contravention or default as shall have been
effectively waived) or result in the creation or imposition of any Lien on any
asset of CPFC (except as contemplated by the Program Documents).
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(c) BINDING EFFECT. Each of the Program Documents constitutes a valid
and binding agreement of CPFC and each Buyer's Certificate, when executed and
delivered in accordance with this Agreement, will constitute a valid and binding
obligation of CPFC, in each case enforceable in accordance with its terms,
except as the enforceability thereof may be limited by bankruptcy, insolvency,
reorganization or moratorium or other similar laws relating to the enforcement
of creditors' rights generally and by general equitable principles (regardless
of whether such enforceability is considered in a proceeding in equity or at
law).
(d) MATERIAL ADVERSE CHANGE. Since the date of incorporation of CPFC,
there has been no material adverse change in the business, financial position or
results of operations of CPFC or in its ability to perform its obligations under
the Program Documents.
(e) LITIGATION. There is no action, suit or proceeding pending
against, or to the knowledge of CPFC threatened against or affecting, CPFC
before any court or arbitrator or any governmental body, agency or official
which has, or, if adversely determined, could reasonably be expected to have, a
material adverse effect on the business, financial position or results of
operations of CPFC, or which in any manner draws into specific question the
validity or enforceability of the Program Documents.
(f) COMPLIANCE WITH ERISA. Each member of the ERISA Group has
fulfilled its obligations under the minimum funding standards of ERISA and the
Internal Revenue Code with respect to each Plan and is in compliance in all
material respects with the presently applicable provisions of ERISA and the
Internal Revenue Code with respect to each Plan. No member of the ERISA Group
has (i) sought a waiver of the minimum funding standard under Section 412 of the
Internal Revenue Code in respect of any Plan, (ii) failed to make any
contribution or payment to any Plan or Multiemployer Plan or in respect of any
Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement,
which has resulted or could reasonably be expected to result in the imposition
of a Lien or the posting of a bond or other security under ERISA or the Internal
Revenue Code or (iii) incurred any material liability under Title IV of ERISA
other than a liability to the PBGC for premiums under Section 4007 of ERISA.
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(g) ENVIRONMENTAL MATTERS. Environmental Laws, to the extent
applicable to CPFC, will not have a material adverse effect on the business,
financial condition or results of operations of CPFC or the ability of CPFC to
perform its obligations under the Program Documents.
(h) TAXES. CPFC and the members of its "affiliated group" (as defined
in Section 1504(a) of the Internal Revenue Code) have filed all United States
Federal income tax returns and all other material tax returns which are required
to be filed by them and have paid all taxes stated to be due in such returns or
pursuant to any assessment received by them, except for taxes the amount,
applicability or validity of which is being contested in good faith by
appropriate proceedings. The charges, accruals and reserves on the books of
CPFC in respect of taxes or other governmental charges, additions to taxes and
any penalties and interest thereon are, in the opinion of CPFC, adequately
reserved for in accordance with GAAP.
(i) REGULATORY RESTRICTION. CPFC is not an "investment company" or a
company controlled by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(j) FULL DISCLOSURE. All information, including the Receivables
Information Memorandum, furnished by CPFC, the Seller or the Servicer to the
Agents or any Buyer in writing for purposes of or in connection with this
Agreement or any transaction contemplated hereby is, taken as a whole and in
light of the circumstances under which such information is furnished, true and
accurate in all material respects on the date as of which such information is
stated or certified. It is understood that the foregoing representations and
warranties in this Section are limited to the extent that any projections or
forecasts are represented to be based upon reasonable estimates believed by
CPFC, the Seller or the Servicer, as the case may be, to be accurate in all
material respects, but are not warranted to be obtainable. CPFC has disclosed
to the Buyers in writing any and all facts which materially and adversely affect
or may so affect (to the extent that CPFC can now reasonably foresee), the
business, operations or financial condition of CPFC, or the ability of CPFC to
perform its obligations under any of the Program Documents (except for economic
trends generally known to the public affecting
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generally the industry in which the Seller conducts its business).
(k) LOCATION. The principal place of business and chief executive
office of CPFC are located at its address set forth in the Perfection
Certificate attached hereto as Exhibit M-2 or at such other address as changed
in accordance with Section 3.6(b).
ARTICLE 6
COVENANTS
CPFC agrees, and CPC as, and (except for the obligations set forth in
Section 6.1(b) below) only for so long as it is, Servicer hereunder, agrees to
perform the obligations set forth below to be performed by the Servicer, in each
case, as follows:
SECTION 6.1. GENERAL INFORMATION. (a) Promptly upon becoming
aware thereof, CPFC shall give the Agents, the Buyers and S&P notice of any
event or condition which could reasonably be expected to have a material
adverse effect on the collectibility of the Receivables or the ability of the
Servicer to service such Receivables or the ability of CPFC or CPC to perform
its obligations under the Program Documents. In order to verify compliance
with this Section and otherwise verify compliance with this Agreement, CPFC
shall furnish the following to the Agents, the Buyers and S&P (except that
CPFC shall not be required to furnish to S&P the information required
pursuant to clauses (i) and (vi) below):
(i) as soon as practicable and in any event within 60 days following
the close of each fiscal quarter, excluding the last fiscal quarter, of each
fiscal year, its unaudited balance sheet as at the end of such quarter and
its unaudited statement of income for such quarter and for the fiscal year
through such quarter, in accordance with GAAP (except for the notes to such
quarterly statements which may be abbreviated and subject to normal year-end
adjustments), all in reasonable detail and certified by the chief financial
officer or chief accounting officer of CPFC;
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(ii) as soon as practicable and in any event within 120 days after the
close of each fiscal year, its audited balance sheet as at the close of such
fiscal year and its audited statement of income for such fiscal year, in
accordance with GAAP, all reported on by Coopers & Lybrand L.L.P. or other
independent public accountants of nationally recognized standing;
(iii) together with the financial statements required in clauses (i) and
(ii) above, a certificate of its chief financial officer or chief accounting
officer stating that, as of the date of the relevant financial statements, no
Termination Event or Potential Termination Event exists, or if any
Termination Event or Potential Termination Event exists, stating the nature
and status thereof;
(iv) as soon as possible, and in any event within five Business Days of
knowledge thereof, notice of any litigation or proceeding against it which
could have a material adverse effect on the collectibility of the Receivables
or its ability to perform its obligations under the Program Documents;
(v) promptly upon any officer of CPFC becoming aware of any occurrence
which such officer knows to constitute a Termination Event or Potential
Termination Event, a certificate of the chief financial officer or chief
accounting officer setting forth the details thereof and the action which
CPFC is taking or proposes to take with respect thereto;
(vi) not later than three Business Days after receiving notice thereof,
notice of any reduction, suspension or withdrawal of the rating assigned by
S&P to the Buyers' Certificates;
(vii) as soon as it receives any notice or information pursuant to
Sections 3.2(b) or 6.1 of the Purchase and Sale Agreement, such notice or
information;
(viii) if and when any member of the ERISA Group (A) gives or is required
to give notice to the PBGC of any "reportable event" (as defined in Section
4043 of ERISA) with respect to any Plan which might constitute grounds for a
termination of such Plan under Title IV
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of ERISA, or knows that the plan administrator of any Plan has given or is
required to give notice of any such reportable event, a copy of the notice of
such reportable event given or required to be given to the PBGC; PROVIDED
that CPFC shall not be required to deliver to the Agents, the Buyers or S&P
a copy of any notice pursuant to this clause (A) with respect to any
"reportable event" arising solely as a result of the transactions contemplated
by the Contribution Agreement; (B) receives notice of complete or partial
withdrawal liability under Title IV of ERISA or notice that any Multiemployer
Plan is in reorganization, is insolvent or has been terminated, a copy of such
notice; (C) receives notice from the PBGC under Title IV of ERISA of an intent
to terminate, impose liability (other than for premiums under Section 4007 of
ERISA) in respect of, or appoint a trustee to administer any Plan, a copy of
such notice; (D) applies for a waiver of the minimum funding standard under
Section 412 of the Internal Revenue Code, a copy of such application;
(E) gives notice of intent to terminate any Plan under Section 4041(c) of
ERISA, a copy of such notice and other information filed with the PBGC;
(F) gives notice of withdrawal from any Plan pursuant to Section 4063 of
ERISA, a copy of such notice; or (G) fails to make any payment or contribution
to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement or
makes any amendment to any Plan or Benefit Arrangement which has resulted or
could reasonably be expected to result in the imposition of a Lien or the
posting of a bond or other security, a certificate of the chief financial
officer or the chief accounting officer of CPFC setting forth details as to
such occurrence and action, if any, which CPFC or applicable member of the
ERISA Group is required or proposes to take;
(ix) promptly upon giving or receiving such notice, notice of a Final
Purchase Date under the Purchase and Sale Agreement; and
(x) immediately upon its receipt of a Default Notice (as defined in the
Consent and Agreement) pursuant to Section 5 of the Consent and Agreement,
notice thereof.
(b) Promptly upon becoming aware thereof, CPC shall give the Agents,
the Buyers and S&P notice of any
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event or condition which could reasonably be expected to have a material
adverse effect on the collectibility of the Receivables or its ability to
service the Receivables or its ability or the ability of CPFC to perform its
obligations under the Program Documents. In order to verify compliance with
this Section and otherwise verify compliance with this Agreement and the
Purchase and Sale Agreement, CPC agrees to furnish the information and
notices required pursuant to Section 6.1 of the Purchase and Sale Agreement
to the Agents, the Buyers and S&P (except that the Servicer shall not be
required to furnish to S&P the information required pursuant to clauses (b)
and (f) thereof).
SECTION 6.2. INFORMATION REGARDING THE RECEIVABLES. (a) CPFC shall
cause the Servicer to, and the Servicer shall, prepare on each Business Day a
report substantially in the form of Exhibit D hereto (the "Daily Report");
PROVIDED that, on and after the Termination Date, the Daily Report shall be
appropriately modified to reflect the allocations and distributions set forth in
Section 3.8. In addition, CPFC shall cause the Servicer to, and the Servicer
shall, deliver to the Collateral Agent on each Business Day a Daily Report;
PROVIDED that delivery of a Daily Report may be delayed for up to two Business
Days if such delay is attributable to a systems failure or other circumstance
outside the control of CPFC and the Servicer. Delivery of each Daily Report to
the Collateral Agent shall be deemed a representation by CPFC and the Servicer
that such Daily Report is accurate in all material respects.
(b) On or prior to the Settlement Date in each month, CPFC shall cause
the Servicer to, and the Servicer shall, prepare and forward to the Collateral
Agent, the Buyers and CPFC (i) a monthly report, substantially in the form of
Exhibit E hereto (the "Settlement Statement"), as of the close of business on
the preceding Month-end Date and certified by the Servicer's chief financial
officer or chief accounting officer and (ii) if requested by the Collateral
Agent, a listing (which may be in writing or in personal computer readable form)
by Obligor of all Receivables; PROVIDED that on and after the Termination Date,
the Settlement Statement shall be appropriately modified to reflect the
allocations and distributions set forth in Section 3.8; PROVIDED FURTHER that
delivery of the Settlement Statement may be delayed for no more than two
Business Days in connection with a systems failure or other event or situation
or condition affecting CPC or CPFC which
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delays the monthly closing of the books. If there has been any delay of at
least three Business Days in delivery of a Daily Report during the Report
Month then ended, the Settlement Statement shall contain an explanation of
the reasons for such delay. Delivery of each Settlement Statement shall be
deemed a representation by CPFC and the Servicer that such Settlement
Statement is accurate in all material respects.
(c) On or before April 30 of each calendar year, beginning with April
30, 1997, CPFC will, or will cause the Servicer to (in which event the Servicer
shall), cause a firm of nationally recognized independent public accountants
(who may also render other services to CPC, the Servicer or CPFC) to furnish a
report to the Collateral Agent, the Buyers and CPFC to the effect that:
(i) such firm has audited CPFC and CPC,
(ii) in conjunction with planning and performing those audits, the
internal control structure of CPC and the Servicer and their internal
accounting controls over the processing of Receivables was considered, and
(iii) based on procedures whereby the Servicer's internal accounting
records are compared on a random sampling basis to the information contained
in the Daily Reports and Settlement Statements prepared during the period
covered by such report, (y) the information contained in the Daily Reports and
Settlement Statements reviewed reconciles with the information contained in
the Servicer's records relating to the Receivables, and (z) the information
contained in the Daily Reports and Settlement Statements was prepared in
accordance with the provisions of this Agreement.
(d) At the Collateral Agent's request and expense, except as otherwise
provided in subsection 10.3(a)(iii), each of CPFC and the Servicer shall permit
the Collateral Agent (or a third party acting as its agent) upon reasonable
notice and during normal business hours (i) to conduct audits and/or due
diligence of the Receivables and compliance with the provisions of Section 3.2,
3.7 and 3.8, (ii) to visit and inspect any of its properties relating to the
Receivables, (iii) to examine its records (and take copies and extracts
therefrom), internal controls and procedures relating to the Receivables and the
Obligors,
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subject to confidentiality limitations, and its ability to perform its
obligations under any of the Program Documents (including those records,
whether or not located on its property, which are under the control of or in
the possession of any independent contractor providing data processing
services with respect to the Receivables) and (iv) to discuss such matters
with its officers, employees, independent accountants and independent
contractors providing data processing services with respect to the
Receivables; PROVIDED that CPFC and the Servicer may, at their option, have
one or more employees or representatives present at any such audit,
inspection, examination or discussion. Each of CPFC and the Servicer hereby
authorizes its officers, employees, independent accountants and independent
contractors to discuss such matters with the Collateral Agent (or such agent).
(e) CPFC will cause CPC, acting as Servicer, to (in which case the
Servicer shall) promptly advise the Collateral Agent and S&P that the system
enhancements described in the Systems Letter have been completed and the date of
such completion. If such completion is delayed by more than 30 days from the
date set forth in the Systems Letter, CPC will advise the Collateral Agent and
S&P of such delay.
(f) CPFC will, or will cause the Servicer to (in which event the
Servicer shall), furnish to the Collateral Agent and the Buyers such additional
information with respect to the Receivables as the Collateral Agent may from
time to time reasonably request.
SECTION 6.3. PRESERVATION OF CORPORATE EXISTENCE. CPFC shall preserve
and maintain its corporate existence and good standing in the jurisdiction of
its incorporation, and be qualified in good standing as a foreign corporation in
each jurisdiction in which the ownership of its assets or the nature of its
activities requires it to be so qualified.
SECTION 6.4. COMPLIANCE WITH LAWS. CPFC will comply in all material
respects with all applicable laws, ordinances, rules, regulations, and
requirements of governmental authorities (including, without limitation,
Environmental Laws and ERISA and the rules and regulations thereunder) except
where the necessity of compliance therewith is contested in good faith by
appropriate proceedings.
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SECTION 6.5. NO TRANSFERS; NO LIENS. Neither CPFC nor the Servicer
will cause or permit any of the Receivables, or any Related Security, any
Collections thereon, any books and records related thereto or any proceeds of
the foregoing or any Lockbox or Lockbox Account or the Collection Account or the
Cash Collateral Account to be sold, pledged, assigned or transferred. CPFC will
not create, incur, assume or suffer to exist any Lien upon any of its other
property or assets (other than Liens on office premises or furniture or
equipment granted to an Affiliate of CPFC or the provider of such office
premises or furniture or equipment).
SECTION 6.6. NO MERGER. CPFC will not enter into a joint venture
with, or consolidate or merge with or into, any other Person.
SECTION 6.7. LIMITATIONS ON ACTIVITIES OF CPFC. CPFC will not:
(a) create, incur, assume or suffer to exist any Debt or any other
liability (contingent or otherwise) except (i) liabilities under the Program
Documents, (ii) liabilities for taxes incidental to the operation of its
business, and (iii) liabilities for services or materials supplied or furnished
to CPFC;
(b) make any loan or advance or credit to, or Guarantee the obligations
of, or own, purchase, repurchase or acquire (or agree contingently to do so) any
stock, obligations or securities of, or any other interest or investment in, or
make any capital contribution to, any Person other than CPC or a Subsidiary,
except for the purchase of Receivables pursuant to the Program Documents and the
investment of funds in Temporary Cash Investments or (in the Lockbox Accounts or
the Collection Account) in Cash Collateral Account Investments;
(c) purchase or otherwise make any expenditure (by capital or operating
lease or otherwise) for any assets other than (x) pursuant to the Program
Documents or (y) incidental to the activities specifically contemplated by the
Program Documents;
(d) engage in any business or enterprise or activities other than the
activities specifically
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contemplated by the Program Documents and activities incidental thereto;
(e) declare or pay any dividend or other amounts payable in respect of
its capital stock (including by way of redemption or acquisition of its capital
stock or rights to acquire such capital stock) except to the extent of funds
available therefor distributed to CPFC pursuant to Sections 3.7 and 3.8 not
required for the purchase of Receivables under the Purchase and Sale Agreement;
or
(f) amend in any material respect its articles of incorporation or by-
laws, or amend or fail to comply in any respect with, the provisions thereof
relating to corporate separateness or CPFC's special purpose (contained in
Articles II, VI or VII of its articles of incorporation and Sections 2.3 or 5.3
of its by-laws).
SECTION 6.8. AGREEMENTS RELATING TO PROGRAM DOCUMENTS. CPFC shall
only enter into or be a party to the Program Documents or documents and
agreements incidental to the activities specifically contemplated by the Program
Documents.
SECTION 6.9. WAIVERS AND AMENDMENTS OF DOCUMENTS. CPFC will not,
without the prior written consent of the Required Buyers and reaffirmation by
S&P of the rating assigned to the Buyers' Certificates on the Closing Date,
modify, amend, or waive any provision or condition contained in, the Buyers'
Certificates, the Purchase and Sale Agreement, the Lockbox Agreements, the
Transfer Letters and the Servicing Agreement (if any) from the forms of each of
the foregoing heretofore delivered to the Buyers, the Agents and S&P.
SECTION 6.10. PAYMENT OF TAXES. CPFC will promptly pay and discharge
all Federal and state taxes, assessments and governmental charges or levies
imposed upon it or upon its income or profit or upon any property belonging to
it, unless (i) such tax, assessment, charge or levy shall not at the time be due
and payable or can be paid thereafter without penalty or (ii) the amount,
applicability or validity thereof shall be currently contested in good faith by
appropriate proceedings and adequate reserves with respect to such tax,
assessment, charge or levy shall have been established in accordance with GAAP.
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SECTION 6.11. ACCOUNTING TREATMENT. For accounting purposes, CPFC
shall treat each purchase made hereunder as a sale (unless otherwise required by
a change in GAAP) of the Receivables subject thereto.
ARTICLE 7
TERMINATION EVENTS
SECTION 7.1. TERMINATION EVENTS. A "Termination Event" shall mean
each of the following events or conditions:
(a) (i) CPFC shall fail to transfer or deposit, or fail to cause to be
transferred or deposited, to the Collateral Agent any amounts in respect of
reductions in the Aggregate Net Investment when required pursuant hereto, or
(ii) Yield accrued during any Yield Accrual Period is not paid to the Buyers
within three Business Days of the last day of such Yield Accrual Period; or
(b) CPFC shall fail to pay, transfer or deposit, or fail to cause to be
paid, transferred or deposited, any other amount, including but not limited to
Commitment Fees, when required pursuant hereto and such failure shall remain
unremedied for five Business Days; or
(c) any representation, warranty, certification or statement made or
deemed made by CPFC, the Servicer or CPC under any of the Program Documents or
in any certificate or document furnished pursuant thereto shall prove to have
been false or misleading in any material respect when made or deemed made, other
than a false representation or warranty made pursuant to Section 4.3 hereof or
Section 5.1(a) of the Purchase and Sale Agreement relating to any Receivable as
to which (in the case of a misrepresentation pursuant to Section 4.3 hereof)
payment has been made (or by virtue of the PROVISO contained in Section 3.9 is
not required to be made) pursuant to Section 3.9 or as to which (in the case of
a misrepresentation pursuant to Section 5.1(a) of the Purchase and Sale
Agreement) payment or credit in an amount equal to the Outstanding Balance of
such Receivable has been made pursuant to Section 2.2 of the Purchase and Sale
Agreement; PROVIDED that an error in a Daily Report which is promptly remedied
and does not result
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in the Adjusted Buyers' Interest exceeding 100% shall not constitute a false
or misleading representation, warranty, certification or statement; or
(d) there shall be a default or failure in the performance or
observance of any covenant, agreement or provision set forth in Sections 3.2,
3.7, 3.8, 3.9, 6.3, 6.5, 6.6, 6.7, 6.8 and 6.11 hereof (other than those covered
by clause (a) or (b) above) or Section 2.2 of the Purchase and Sale Agreement;
or
(e) CPFC or CPC shall default or fail in the performance or observance
of any other covenant, agreement, provision or duty applicable to it contained
in any of the Program Documents (other than those covered by clause (a), (b),
(c) or (d) above) and such default or failure shall continue unremedied for 10
Business Days after written notice thereof is given to such Person by either
Agent; or
(f) an Event of Bankruptcy shall occur with respect to Holdings, CPC,
CPFC or any Material Subsidiary; or
(g) Holdings or any Subsidiary shall fail to make any payment or
payments (or to post collateral or obtain letters of credit) in an aggregate
amount exceeding $5,000,000 in respect of any Material Financial Obligations
when due or within any applicable grace period; or
(h) any event or condition shall occur which results in the acceleration
of the maturity of any Material Debt; or
(i) a federal tax lien arising under Section 6321 of the Internal
Revenue Code or a Lien arising under Title I or Title IV of ERISA or Section 412
of the Internal Revenue Code shall have been filed against any member of the
ERISA Group (a "Federal Lien") and such Federal Lien results in an Adverse
Interest with respect to any Receivables, any Related Security, any Collections,
any books and records related thereto or any proceeds of any of the foregoing;
or
(j) (x) the collateral agent under the Existing Credit Agreement shall
have received a Default Notice (as defined in the Consent and Agreement) or
(y)(A) the provisions relating to the release of the claims of the collateral
agent under the Existing Security Agreement and
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the related Consent and Agreement shall cease to be effective with respect to
any Receivables; or (B) an Event of Default specified in clause (g) or (h) of
Section 6.1 of the Existing Credit Agreement shall occur; or (C) Section 14
of the Existing Security Agreement shall be amended, modified or waived in
any respect in connection with the Released Collateral (as defined in the
Consent and Agreement) without the prior written consent of all the Buyers
and the Agents; or
(k) there shall have occurred a Servicer Termination Event; or
(l) there shall be pending any litigation or proceeding against CPFC,
the Servicer or CPC, which in the reasonable opinion of the Required Buyers is
likely to materially adversely affect the collectibility of the Receivables or
the ability of CPFC, the Servicer or CPC to perform its respective obligations
under the Program Documents; or
(m) there shall have occurred any event which materially adversely
affects the collectibility of the Receivables; or
(n) CPFC shall be required to register as an "investment company" under
the Investment Company Act of 1940, as amended; or
(o) Collections on the Receivables during any five Business Day period
shall be insufficient for the allocation of the accrued and unpaid Yield for
such period pursuant to Section 3.7; or
(p) CPC shall cease to own directly or indirectly 100% of the capital
stock of CPFC; or
(q) the Adjusted Buyers' Interest shall exceed 100% for more than three
consecutive Business Days; or
(r) the average of the Loss to Liquidation Ratios for any three
consecutive Settlement Dates shall exceed 1.5%; or
(s) the Default Ratio shall exceed 2.5% on any Settlement Date or the
average of the Default Ratios for any three consecutive Settlement Dates shall
exceed 2.0%; or
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(t) the Dilution Ratio shall exceed 10.0% on any Settlement Date or the
average of the Dilution Ratios for any three consecutive Settlement Dates shall
exceed 8.75%; or
(u) CPFC shall make any loan or advance or credit to, or Guarantee the
obligations of, or own, purchase, repurchase or acquire (or agree contingently
to do so) any stock, obligations or securities of, or any other interest or
investment in, or make any capital contribution to, CPC or a Subsidiary of CPC,
except for the purchase of Receivables pursuant to the Program Documents.
Notwithstanding the foregoing, a delay in or failure of performance
referred to in subsection (a) or (b) above for a period not to exceed two
Business Days shall not constitute a Termination Event if such delay or failure
could not have been prevented by the exercise of reasonable diligence by CPFC or
such delay or failure was caused by an Act of God or the public enemy, acts of
declared or undeclared war, public disorder, rebellion or sabotage, epidemics,
landslides, lightning, fire, hurricanes, earthquakes, floods or similar causes.
The preceding sentence shall not relieve CPFC from using its best efforts to
perform its obligations in a timely manner in accordance with the terms of this
Agreement, and CPFC shall provide the Agents and each Buyer prompt notice of any
such failure or delay, together with a description of its efforts so to perform
its obligations.
SECTION 7.2. CONSEQUENCES OF A TERMINATION EVENT. (a) If a
Termination Event shall occur and be continuing, Buyers having more than 50% of
the Commitments may, by directing the Administrative Agent to deliver notice to
such effect to CPFC and CPC, terminate the Commitments; provided that (i) in the
case of an Event of Bankruptcy with respect to Holdings, CPFC or CPC or in the
case of a Termination Event under Section 7.1(j)(y), Section 7.1(i) or Section
7.1(n), or (ii) on the second Business Day after a Termination Event under
Section 7.1(j)(x), or (iii) if a Termination Event occurs under Section 7.1(q)
and such Termination Event under Section 7.1(q) is not both cured, such that
Adjusted Buyers' Interest no longer exceeds 100%, and expressly waived in
writing by Buyers having at least 66% of the total Commitments within 15 days of
(and including) the Business Day on which Adjusted Buyers' Interest first
exceeded 100%, the Commitments hereunder
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shall be automatically terminated without any action on the part of the
Agents or the Buyers.
(b) If a Termination Event shall have occurred and be continuing, (i)
the Collateral Agent shall be entitled to notify the Obligors of Receivables to
make payments directly to the Collateral Agent of amounts due thereunder;
PROVIDED that if Collections are being delivered to the Lockbox or
electronically transferred to the Lockbox Account or the Collection Account in
accordance with Section 3.2, then the Collateral Agent shall not notify any
Obligors until such Termination Event shall be continuing for a period of two
Business Days, (ii) the Collateral Agent (or its designee) shall be permitted to
open and inspect mail received by CPFC or the Servicer which the Collateral
Agent reasonably believes may relate to the Receivables, and to remove therefrom
any and all Collections and correspondence from Obligors in respect of
Receivables, and (iii) the Collateral Agent may deliver the Transfer Letters to
any of the Lockbox Banks or the Collection Account Bank and CPFC shall fully
cooperate with the Collateral Agent so as to give effect to such Transfer
Letters; PROVIDED that, notwithstanding the foregoing, Collections shall in any
event be allocated in accordance with Sections 3.7 and 3.8.
ARTICLE 8
THE AGENTS
SECTION 8.1. APPOINTMENT AND AUTHORIZATION. Each Buyer irrevocably
appoints and authorizes each Agent to take such action as agent on its behalf
and to exercise such powers under this Agreement as are delegated to such Agent
by the terms hereof, together with all such powers as are reasonably incidental
thereto. Each Buyer hereby irrevocably grants each Agent or its designated
agent, if any, an irrevocable power of attorney, with full power of
substitution, coupled with an interest, at any time and from time to time, to
take in the name of such Buyer all actions with respect to any Receivable which
such Agent may deem necessary or advisable to realize upon the Purchased
Interest in any Receivable.
SECTION 8.2. AGENTS AND AFFILIATES. Morgan Guaranty shall have the
same rights and powers under this
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Agreement as any other Buyer and may exercise or refrain from exercising the
same as though it were not the Agent, and Morgan Guaranty and its affiliates
may accept deposits from, lend money to, and generally engage in any kind of
business with CPFC or any Affiliate of CPFC as if they were not Agents
hereunder.
SECTION 8.3. ACTION BY AGENTS. The obligations of the Agents
hereunder are only those expressly set forth herein. Without limiting the
generality of the foregoing, the Agents shall not be required to take any
action with respect to any Termination Event, except as expressly provided in
Article 7.
SECTION 8.4. CONSULTATION WITH EXPERTS. The Agents may consult with
legal counsel (who may be counsel for CPFC or CPC), independent public
accountants and other experts selected by them, and they shall not be liable for
any action taken or omitted to be taken by them in good faith in accordance with
the advice of such counsel, accountants or experts.
SECTION 8.5. LIABILITY OF AGENTS. No Agent and none of their
affiliates or their respective directors, officers, agents or employees shall be
liable for any action taken or not taken by it in connection herewith (i) with
the consent or at the request of the Required Buyers (or, where required by the
terms hereof, the Buyers) or (ii) in the absence of its own gross negligence or
willful misconduct. No Agent and none of their respective affiliates,
directors, officers, agents, affiliates or employees shall be responsible for or
have any duty to ascertain, inquire into or verify (i) any statement, warranty
or representation made in connection with the Program Documents or any Purchase
hereunder; (ii) the performance or observance of any of the covenants or
agreements of CPFC, the Servicer or CPC herein or in any of the other Program
Documents; (iii) the satisfaction of any condition specified in Article 4 herein
or in any of the other Program Documents, except receipt of items required to be
delivered to such Agent; (iv) the validity, effectiveness or genuineness of any
of the Program Documents or any other instrument or writing furnished in
connection herewith; or (v) the existence, genuineness, or value of any of the
Receivables, Related Security, Collections, any books and records related
thereto or proceeds of any of the foregoing or the validity, perfection,
priority or enforceability of the ownership or
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security interests with respect to any of the foregoing. No Agent shall
incur any liability by acting in reliance upon any notice, consent,
certificate, statement, or other writing (which may be a bank wire, telex,
telecopy or similar writing) believed by it to be genuine or to be signed by
the proper party or parties.
SECTION 8.6. INDEMNIFICATION. Each Buyer shall, ratably in accordance
with its Commitment, indemnify each of the Agents, their respective affiliates,
directors, officers, agents and employees (to the extent not reimbursed by CPFC)
against any cost, expense (including counsel fees and disbursements), claim,
demand, action, loss or liability (except such as result from such indemnitees'
gross negligence or willful misconduct) that such indemnitees may suffer or
incur in connection with the Program Documents or any action taken or omitted by
such indemnitee hereunder.
SECTION 8.7. PURCHASE DECISION. Each Buyer acknowledges that it has,
independently and without reliance upon the Agents or any other Buyer, and based
on such documents and information as it has deemed appropriate, made its own
analysis and decision to enter into this Agreement. Each Buyer also
acknowledges that it will, independently and without reliance upon either Agent
or any Buyer, 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 any action under any of the Program Documents.
SECTION 8.8. SUCCESSOR AGENT. Either Agent may resign at any time by
giving written notice thereof to the Buyers, CPFC and the Servicer; provided
that such resignation shall not be effective until a successor Agent shall have
accepted its appointment as the Agent hereunder. Upon any such resignation, the
Required Buyers shall have the right, after consultation with CPFC, to appoint a
successor Agent. If no successor Agent shall have been so appointed by the
Required Buyers, and shall have accepted such appointment, within 30 days after
the retiring Agent gives notice of resignation, then the retiring Agent may, on
behalf of the Buyers, appoint a successor Agent, which shall be a commercial
bank organized or licensed under the laws of the United States or of any State
thereof and having a combined capital and surplus of at least $100,000,000.
Upon the acceptance of its appointment as the Agent hereunder by a successor
Agent (and not before), such successor Agent
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shall thereupon succeed to and become vested with all the rights and duties
of such retiring Agent and the retiring Agent shall be discharged from its
duties and obligations hereunder. After the retiring Agent's resignation
hereunder, the provisions of this Article shall inure to the retiring Agent's
benefit as to any actions taken or omitted to be taken by it while it was an
Agent.
SECTION 8.9. DIRECTION BY REQUIRED BUYERS. As to remedies hereunder
with respect to the Receivables or the Purchase and Sale Agreement or other
specific rights hereunder that the Collateral Agent has with respect to the
Receivables or the Purchase and Sale Agreement, the Collateral Agent shall
exercise such remedies and rights if and as requested by the Required Buyers;
PROVIDED that it shall not be so required to act (x) if upon advice of counsel
it concludes that any such action creates potential liability on its part or
constitutes a violation of law or (y) if it shall not be indemnified to its
satisfaction in advance in respect of its costs and expenses in connection
therewith.
ARTICLE 9
CHANGE IN CIRCUMSTANCES
SECTION 9.1. CHANGE IN CIRCUMSTANCES. If on or prior to the
commencement of any Yield Accrual Period:
(a) the Administrative Agent is advised by the Reference Banks that
deposits in Dollars (in the applicable amounts) are not being offered to the
Reference Banks in the relevant market for such Yield Accrual Period; or
(b) Buyers having 50% or more of the aggregate amount of the
Commitments advise the Administrative Agent that the Adjusted CD Rate or the
Adjusted London Interbank Offered Rate, as the case may be, as determined by the
Administrative Agent will not adequately and fairly reflect the cost to such
Buyers of funding Tranches the Yield Rate of which is based on the Fixed CD Rate
or the Euro-Dollar Rate, as the case may be, for such Yield Accrual Period;
then the Administrative Agent shall forthwith give notice thereof to CPFC and
the Buyers, whereupon until the Administrative Agent notifies CPFC that the
circumstances
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giving rise to such suspension no longer exist, the obligations of the Buyers
to allocate any portion of the Aggregate Net Investment to any Tranche the
Yield Rate of which is based on the Fixed CD Rate or the Euro-Dollar Rate, as
the case may be, shall be suspended.
SECTION 9.2. ILLEGALITY. If, on or after the date of this Agreement,
the adoption of any applicable law, rule or regulation, or any change in any
applicable law, rule or regulation, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Buyer (or its booking office for this facility) with any request or
directive (whether or not having the force of law) of any such authority,
central bank or comparable agency shall make it unlawful or impossible for any
Buyer (or its booking office for this facility) to allocate its pro rata share
of the Aggregate Net Investment to any Tranche the Yield Rate of which is based
on the Euro-Dollar Rate and such Buyer shall so notify the Administrative Agent,
the Administrative Agent shall forthwith give notice thereof to the other Buyers
and CPFC, whereupon until such Buyer notifies CPFC and the Administrative Agent
that the circumstances giving rise to such suspension no longer exist, the
obligation of such Buyer to allocate its pro rata share of the Aggregate Net
Investment to any Tranche the Yield Rate of which is based on the Euro-Dollar
Rate shall be suspended at the end of such Yield Accrual Period. Before giving
any notice to the Administrative Agent pursuant to this Section, such Buyer
shall designate a different booking office for this facility if such designation
will avoid the need for giving such notice and will not, in the judgment of such
Buyer, be otherwise disadvantageous to such Buyer. If such Buyer shall
determine that it may not lawfully continue to allocate its pro rata share of
the Aggregate Net Investment to any outstanding Tranche the Yield Rate of which
is based on the Euro-Dollar Rate, then such Buyer's pro rata share of such
Tranche shall be deemed to be a separate Tranche with a Yield based on the Base
Rate but with the Yield Accrual Period otherwise applicable to such Tranche.
SECTION 9.3. INDEMNITY FOR CHANGES IN LAW. (a) If on or after the
date hereof, the adoption of any applicable law, rule or regulation, or any
change in any applicable law, rule or regulation, or any change in the
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interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any Buyer with any request or directive (whether or
not having the force of law) of any such authority, central bank or comparable
agency shall impose, modify or deem applicable any reserve (including, without
limitation, any such requirement imposed by the Board of Governors of the
Federal Reserve System, but excluding (i) with respect to any Fixed CD Rate
Yield Accrual Period any such requirement included in the applicable Domestic
Reserve Percentage and (ii) with respect to any Euro-Dollar Rate Yield Accrual
Period any such requirement included in the applicable Euro-Dollar Reserve
Percentage), special deposit, insurance assessment (excluding with respect to
any Fixed CD Rate Yield Accrual Period any such requirement reflected in the
applicable Assessment Rate) or similar requirement against assets of, deposits
with or for the account of, or credit extended by, any Buyer (or its booking
office for this facility) or shall impose on any Buyer (or its booking office
for this facility) or on the United States market for certificates of deposit or
the London interbank market any other condition affecting the Program Documents,
or payments of amounts thereunder or its obligation to advance funds under the
Program Documents or its funding of any Purchases, and the result of any of the
foregoing is to increase the cost to such Buyer (or its booking office for this
facility) with respect to the Program Documents or payments of amounts
thereunder or its obligation to advance funds thereunder or the funding of any
Purchases thereunder, by an amount deemed by such Buyer to be material, then,
within 15 days after demand by such Buyer (with a copy to the Administrative
Agent), CPFC shall pay to such Buyer such additional amount or amounts as will
compensate such Buyer for such increased cost or reduction.
(b) If any Buyer shall have determined that, after the date hereof, the
adoption of any applicable law, rule or regulation regarding capital adequacy,
or any change in any such law, rule or regulation, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any Buyer (or its booking office for this facility)
with any request or directive regarding capital adequacy (whether or not having
the force of law) of any such authority, central bank or comparable agency, has
or would have the
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effect of reducing the rate of return on capital of such Buyer (or its
Parent) as a consequence of such Buyer's obligations hereunder to a level
below that which such Buyer or (or its Parent) could have achieved but for
such adoption, change, request or directive (taking into consideration its
policies with respect to capital adequacy) by an amount deemed by such Buyer
to be material, then from time to time, within 15 days after demand by such
Buyer (with a copy to the Administrative Agent), CPFC shall pay to such Buyer
such additional amount or amounts as will compensate such Buyer (or its
Parent) for such reduction.
(c) Each Buyer will promptly notify CPFC and the Administrative Agent
of any event of which it has knowledge, occurring after the date hereof, which
will entitle such Buyer to compensation pursuant to this Section and will
designate a different booking office if such designation will avoid the need
for, or reduce the amount of such compensation and will not, in the judgment of
such Buyer, be otherwise disadvantageous to such Buyer. A certificate of a
Buyer prepared in good faith claiming compensation under this Section and
setting forth the additional amount or amounts to be paid to it hereunder shall
be conclusive in the absence of manifest error. In determining such amount,
such Buyer may use any reasonable averaging and attribution methods.
SECTION 9.4. TAXES. (a) For the purposes of this Section 9.4(a), the
following terms have the following meanings:
"Taxes" means any and all present or future taxes, duties, levies,
imposts, deductions, charges or withholdings with respect to any payment by CPFC
pursuant to this Agreement or under any Buyer's Certificate, and all liabilities
with respect thereto, EXCLUDING (i) in the case of each Buyer and the Agents,
taxes imposed on its income, and franchise or similar taxes imposed on it, by a
jurisdiction under the laws of which such Buyer or such Agent (as the case may
be) is organized or in which its principal executive office is located or, in
the case of each Buyer, in which its booking office for this facility is located
and (ii) in the case of each Buyer, any United States withholding tax imposed on
such payments but only to the extent that such Buyer is subject to United States
withholding tax at the time such Buyer first becomes a party to this Agreement.
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"Other Taxes" means any present or future stamp or documentary taxes and
any other excise or property taxes, or similar charges or levies, which arise
from any payment made pursuant to this Agreement or under any Buyer's
Certificate or from the execution or delivery of, or otherwise with respect to,
any Program Document.
(b) Any and all payments by CPFC to or for the account of any Buyer or
the Agents hereunder or under any Buyer's Certificate shall be made without
deduction for any Taxes or Other Taxes; PROVIDED that, if CPFC shall be required
by law to deduct any Taxes or Other Taxes from any such payments, (i) the sum
payable shall be increased as necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section) such Buyer or such Agent (as the case may be) receives an amount
equal to the sum it would have received had no such deductions been made, (ii)
CPFC shall make such deductions, (iii) CPFC shall pay the full amount deducted
to the relevant taxation authority or other authority in accordance with
applicable law and (iv) CPFC shall furnish to the Administrative Agent, at its
address referred to in Section 10.1, the original or a certified copy of a
receipt evidencing payment thereof.
(c) CPFC agrees to indemnify each Buyer and each Agent for the full
amount of Taxes or Other Taxes (including, without limitation, any Taxes or
Other Taxes imposed or asserted by any jurisdiction on amounts payable under
this Section) paid by such Buyer or such Agent (as the case may be) and any
liability (including penalties, interest and expenses) arising therefrom or with
respect thereto. This indemnification shall be paid within 15 days after such
Buyer or such Agent (as the case may be) makes demand therefor (which demand
shall include a certificate, supported where applicable by documentary evidence,
explaining the amount of such claim). If a Buyer or the Administrative Agent
(as the case may be) shall become aware that it is entitled to claim a refund
(or refund in the form of a credit) (each a "Refund") from a taxing authority
(as a result of any error in the amount of Taxes or Other Taxes paid to such
taxing authority) of such Taxes or Other Taxes for which it has been indemnified
by CPFC, or with respect to which CPFC has paid additional amounts, pursuant to
this Section, it shall promptly notify CPFC of the availability of such Refund
and shall, within 30 days after receipt of a written request by CPFC, make a
claim to such taxing
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authority for such Refund at CPFC's expense if, in the judgment of such Buyer
or such Agent (as the case may be), the making of such claim will not be
otherwise disadvantageous to it; PROVIDED that nothing in this subsection
shall be construed to require any Buyer or either Agent to institute any
administrative proceeding (other than the filing of a claim for any such
Refund) or judicial proceeding to obtain any such Refund. If a Buyer or an
Agent (as the case may be) receives a Refund from a taxing authority (as a
result of any error in the amount of Taxes or Other Taxes paid to such taxing
authority) of any such Taxes or Other Taxes for which it has been indemnified
by CPFC, or with respect to which CPFC has paid additional amounts, pursuant
to this Section, it shall promptly pay to CPFC the amount so received (but
only to the extent of indemnity payments made, or additional amounts paid, by
CPFC under this Section with respect to the Taxes or Other Taxes giving rise
to such Refund), net of all reasonable out-of-pocket expenses (including the
net amount of taxes, if any, imposed on such Buyer or such Agent with respect
to such Refund) of such Buyer or such Agent, and without interest (other than
interest paid by the relevant taxing authority with respect to such Refund);
PROVIDED, HOWEVER, that CPFC upon the request of such Buyer or such Agent,
agrees to repay the amount paid over to CPFC (plus penalties, interest or
other charges) to such Buyer or such Agent in the event such Buyer or such
Agent is required to repay such Refund to such taxing authority. Nothing
contained in this Section shall require any Buyer or either Agent to make
available any of its tax returns (or any other information that it deems to
be confidential or proprietary).
(d) Each Buyer organized under the laws of a jurisdiction outside the
United States, on or prior to the date of its execution and delivery of this
Agreement in the case of each Buyer listed on the signature pages hereof and on
or prior to the date on which it becomes a Buyer in the case of each other
Buyer, and thereafter on or prior to the date on which it changes the country
where its booking office for this facility is located and from time to time
thereafter if requested in writing by CPFC (but, in each case, only so long as
such Buyer remains lawfully able to do so), shall provide CPFC and the
Administrative Agent with (i) Internal Revenue Service form 1001 or 4224, as
appropriate, or any successor form prescribed by the Internal Revenue Service,
certifying that such Buyer is entitled to benefits under an income tax treaty to
which the
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United States is a party which exempts the Buyer from United States
withholding tax or reduces the rate of withholding tax on payments of
interest for the account of such Buyer or certifying that the income
receivable pursuant to this Agreement is effectively connected with the
conduct of a trade or business in the United States or (ii) solely if such
Buyer is claiming exemption from United States withholding tax under Section
871(h) or 881(c) of the Internal Revenue Code with respect to payments of
"portfolio interest", a Form W-8, or any successor form prescribed by the
Internal Revenue Service, and a certificate representing that such Buyer is
not a bank for purposes of Section 881(c) of the Internal Revenue Code, is
not a 10-percent shareholder (within the meaning of Section 871(h)(3)(B) of
the Internal Revenue Code) of CPFC and is not a controlled foreign
corporation related to CPFC (within the meaning of Section 864(d)(4) of the
Internal Revenue Code).
(e) For any period with respect to which a Buyer has failed to provide
CPFC or the Administrative Agent with the appropriate form pursuant to Section
9.4(d) (unless such failure is due to a change in treaty, law or regulation
occurring subsequent to the date on which such form originally was required to
be provided), such Buyer shall not be entitled to indemnification under Section
9.4(b) or (c) with respect to Taxes imposed by the United States; PROVIDED that
if a Buyer, which is otherwise exempt from or subject to a reduced rate of
withholding tax, becomes subject to Taxes because of its failure to deliver a
form required hereunder, CPFC shall take such steps as such Buyer shall
reasonably request to assist such Buyer to recover such Taxes.
(f) If CPFC is required to pay additional amounts to or for the account
of any Buyer pursuant to this Section, then such Buyer will change the
jurisdiction of its booking office for this facility if, in the judgment of such
Buyer, such change (i) will eliminate or, if it is not possible to eliminate,
will reduce to the greatest extent possible any such additional payment which
may thereafter accrue and (ii) is not otherwise disadvantageous to such Buyer.
SECTION 9.5. SUBSTITUTION OF BUYER. If (i) the obligation of any
Buyer to allocate its pro rata share of the Aggregate Net Investment to any
Tranche the Yield Rate of which is based on the Euro-Dollar Rate has been
suspended pursuant to Section 9.1, (ii) any Buyer has demanded
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compensation under Section 9.3 or 9.4, (iii) any Buyer shall be a Defaulting
Buyer or (iv) any Buyer shall fail to consent to amendment or waiver which
pursuant to the terms of Section 10.5 or any other provision if any Program
Document requires the consent of all Buyers and with respect to which the
Required Buyers shall have granted their consent, CPFC shall have the right,
if no Termination Event or Potential Termination Event then exists, to
replace such Buyer (the "Replaced Buyer") with one or more other Eligible
Transferee(s), none of whom shall constitute a Defaulting Buyer at the time
of such replacement (collectively, the "Replacement Buyer") acceptable to the
Agents; PROVIDED that (i) at the time of any replacement pursuant to this
Section, the Replacement Buyer shall enter into one or more Assignment and
Assumption Agreements, substantially in the form of Exhibit N hereto,
pursuant to which the Replacement Buyer shall acquire the Commitments and the
Buyer's Certificate of the Replaced Buyer and, in connection therewith, shall
pay to the Replaced Buyer in respect thereof an amount equal to the sum of
(A) its pro rata share of the Aggregate Net Investment, (B) an amount equal
to all accrued, but theretofore unpaid, Commitment Fees owing to the Replaced
Buyer and (C) an amount equal to the amount which would be payable by CPFC to
the Replaced Buyer pursuant to Section 2.8 if CPFC prepaid at the time all of
the Tranches of such Replaced Buyer the Yield Rate of which is determined by
referring to the Euro-Dollar Rate or the Fixed CD Rate outstanding at such
time and (ii) all obligations of CPFC owing to the Replaced Buyer (other than
those specifically described in clause (i) above in respect of which the
assignment purchase price has been, or is concurrently being, paid) shall be
paid in full to such Replaced Buyer concurrently with such replacement. Upon
the execution of the respective Assignment and Assumption Agreements, the
payment of amounts referred to in clauses (i) and (ii) above and, if so
requested by the Replacement Buyer, delivery to the Replacement Buyer of the
appropriate Buyer's Certificate executed by CPFC, the Replacement Buyer shall
become a Buyer hereunder and the Replaced Buyer shall cease to constitute a
Buyer hereunder. The provisions of this Agreement (including without
limitation Sections 2.8, 9.3, 9.4 and 10.3) shall continue to govern the
rights and obligations of a Replaced Buyer with respect to its pro rata share
of the Aggregate Net Investment or any other actions taken by such Buyer
while it was a Buyer.
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ARTICLE 10
MISCELLANEOUS
SECTION 10.1. NOTICES. All notices, requests and other communications
to any party hereunder shall be in writing (including bank wire, facsimile
transmission or similar writing) and shall be given to such party: i) in the
case of CPFC or either Agent, at its address or facsimile number set forth on
the signature pages hereof, ii) in the case of any Buyer, at its address or
facsimile number set forth in its Administrative Questionnaire, iii) in the case
of any other party, such other address or facsimile number as such party may
hereafter specify for the purpose by notice to the Administrative Agent and
CPFC, and (d) in the case of S&P, at 26 Broadway, New York, New York 10004,
Attn: Standard & Poor's Ratings Services, Asset-Backed Surveillance (facsimile
number: 212-208-0053). Each such notice, request or other communication shall
be effective (i) if given by facsimile transmission, when transmitted to the
facsimile number specified in this Section and confirmation of receipt is
received, (ii) if given by mail, 72 hours after such communication is deposited
in the mails with first class postage prepaid, addressed as aforesaid or (iii)
if given by any other means, when delivered at the address specified in this
Section; PROVIDED that notices to the Administrative Agent under Article 2 or
Article 9 shall not be effective until received.
SECTION 10.2. NO WAIVERS. No failure or delay by either Agent or any
Buyer in exercising any right, power or privilege hereunder or under any other
Program Document shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies of the
Agents and the Buyers under the Program Documents are cumulative and not
exclusive of any rights or remedies which the Agents or the Buyers would
otherwise have.
SECTION 10.3. EXPENSES; INDEMNIFICATION. (a) CPFC shall pay (i)
all out-of-pocket expenses of the Agents, including fees and disbursements of
special counsel or other experts for the Agents, in connection with the
preparation and administration of the Program Documents, any waiver or
consent thereunder or any amendment thereof or any
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Termination Event or Potential Termination Event thereunder, (ii) all fees
and expenses of S&P in connection with the rating of the Buyers'
Certificates, including any annual fees and expenses with respect thereto,
and any waiver or consent under the Program Documents or any amendment
thereof, and (iii) if a Termination Event occurs, all out-of-pocket expenses
incurred by the Agents and each Buyer, including (without duplication) the
fees and disbursements of outside counsel, in connection with such
Termination Event and collection, bankruptcy, insolvency and other
enforcement proceedings resulting therefrom.
(b) CPFC agrees to indemnify, and hold harmless the Agents and each
Buyer and each of their respective directors, officers, affiliates,
shareholders, employees, agents and each legal entity, if any, who controls any
such Person (each, an "Indemnitee") forthwith on demand, from and against any
and all losses, claims, damages, liabilities, costs and expenses (including,
without limitation, all reasonable fees and disbursements of counsel, expenses
incurred by their respective credit recovery groups, expenses of settlement or
litigation or preparation therefor and the reasonable fees and expenses of
investigation by engineers, environmental consultants and similar technical
personnel) which any Indemnitee may incur or which may be asserted against any
Indemnitee by any Person (including, without limitation, any Obligor) arising
from or incurred in connection with:
(i) any breach of a representation, warranty or covenant by CPFC or the
Servicer made or deemed made in the Program Documents or in connection
herewith (including any failure of information contained in a Daily Report or
Settlement Statement to be true and correct in all material respects),
(ii) any action taken or, if CPFC or the Servicer is otherwise obligated
to take action, failed to be taken, by CPFC or the Servicer, as the case may
be, with respect to the Purchased Interest or any of their respective
obligations under the Program Documents, including, without limitation,
CPFC's or the Servicer's failure to comply with any applicable law or
regulation,
(iii) any failure not attributable to the Buyers or the Agent to vest and
maintain vested in the Buyers the
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ownership interest in the Purchased Interest, free and clear of any Adverse
Interest,
(iv) any products liability claim arising out of or relating to the
Receivables or the related Contracts,
(v) any failure to pay when due any taxes required to be paid by CPFC,
including without limitation any sales tax, excise tax or other similar tax
or charge payable in connection with the Receivables and their creation or
satisfaction, or
(vi) any dispute, suit, action, claim, proceeding or governmental
investigation, pending or threatened, whether based on statute, regulation or
order (including any such suit, action, claim or proceeding alleging a
violation of any Federal or state securities laws, on tort, on contract or
otherwise), before any court, arbitral panel, or other tribunal which arises
out of or relates to the Program Documents or the use of the proceeds of the
sale of the Purchased Interest pursuant hereto, or
(vii) any Environmental Liabilities;
PROVIDED that no Indemnitee shall have the right to be indemnified hereunder for
(x) its own gross negligence or willful misconduct as determined by a court of
competent jurisdiction, (y) any breach of its obligations hereunder or (z) any
liabilities or expenses for which CPFC is obligated to make any payment to such
Indemnitee under any other provision of this Agreement or any of the other
Program Documents; and PROVIDED FURTHER that CPFC shall not be liable for any
settlements entered into by any Indemnitee without its consent and PROVIDED
FURTHER that it is understood that CPFC shall not, in respect of the legal
expenses of the Buyers in connection with any proceeding or related proceedings
in the same jurisdiction, be liable for the fees and expenses of more than one
separate firm (in addition to any local counsel) for all Buyers designated by
the Administrative Agent and that all such fees and expenses shall be reimbursed
as they are incurred. It is expressly agreed and understood by the parties
hereto that such indemnification is not intended to constitute a guarantee of
the collectibility or payment of the Receivables purchased hereunder. Without
limiting the generality of the
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foregoing, CPFC hereby waives all rights for contribution or any other rights
of recovery with respect to liabilities, losses, damages, costs and expenses
arising under or related to Environmental Laws that it might have by statute
or otherwise against any Buyer.
SECTION 10.4. SHARING OF SET-OFFS. Each Buyer agrees that if it
shall, by exercising any right of set-off or counterclaim or otherwise, receive
payment of a portion of the Aggregate Net Investment, Yield or Commitment Fees
which is greater than the proportion received by any other Buyer in respect of
the Aggregate Net Investment, Yield or Commitment Fees, the Buyer receiving such
proportionately greater payment shall purchase such participations in the
Purchased Interest held by, and Commitment Fees owing to, the other Buyers, and
such other adjustments shall be made, as may be required so that all such
payments shall be shared by all of the Buyers pro rata; PROVIDED that nothing in
this Section shall impair the right of any Buyer to exercise any right of
set-off or counterclaim it may have and to apply the amount subject to such
exercise to the payment of other liabilities of CPFC to it. CPFC agrees, to the
fullest extent it may effectively do so under applicable law, that any holder of
a participation in the Purchased Interest, whether or not acquired pursuant to
the foregoing arrangements, may exercise rights of set-off or counterclaim and
other rights with respect to such participation as fully as if such holder of a
participation were a Buyer hereunder.
SECTION 10.5. AMENDMENTS AND WAIVERS. Any provision of this
Agreement may be amended or waived if, but only if, (i) such amendment or
waiver is in writing and is signed by CPFC and the Required Buyers (and, if
the rights or duties of either Agent or the Servicer are affected thereby, by
such Person), (ii) the rating assigned to the Buyers' Certificates by S&P on
the Closing Date is reaffirmed and (iii) such amendment or waiver is approved
in writing by the Required Banks (as defined in the Existing Credit
Agreement); PROVIDED that no such amendment or waiver shall, unless signed by
all the Buyers, (i) increase or decrease the Commitment of any Buyer (except
for a ratable decrease in the Commitments of all Buyers) or subject such
Buyer to any additional obligation, (ii) reduce the Aggregate Net Investment
or the Yield Rate applicable to any Tranche or change the amount to be paid
in respect of any Commitment Fees, or change, directly or indirectly, the
definition of Buyers' Interest or Transferor's Interest
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(other than a change which results from any amendment to the definition of
"Default Ratio", "Eligible Receivable", "Dilution Horizon Ratio", "Dilution
Ratio", "Loss to Liquidation Ratio" and "Concentration Limit") or the
allocation between the Buyers' Interest and the Transferor's Interest set
forth in Sections 3.7 and 3.8 or otherwise change the allocations and
priorities set forth in Sections 3.7 and 3.8, (iii) extend the Expiry Date or
(iv) change the percentage of the Commitments which shall be required for the
Buyers to take any action under this Section or any other provision of this
Agreement.
SECTION 10.6. SUCCESSORS AND ASSIGNS. (a) The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, except that CPFC may not assign or
otherwise transfer any of its rights under this Agreement without the prior
written consent of all Buyers.
(b) Any Buyer may at any time grant to one or more banks or other
institutions (each a "Participant") participating interests in any portion of
its rights and obligations hereunder. In the event of any such grant by a Buyer
of a participating interest to a Participant, whether or not upon notice to CPFC
and the Administrative Agent, such Buyer shall remain responsible for the
performance of its obligations hereunder, and CPFC and the Administrative Agent
shall continue to deal solely and directly with such Buyer in connection with
such Buyer's rights and obligations under this Agreement. Any agreement
pursuant to which any Buyer may grant such a participating interest shall
provide that (i) such Buyer shall retain the sole right and responsibility to
enforce the obligations of CPFC hereunder including, without limitation, the
right to approve any amendment, modification or waiver of any provision of this
Agreement; PROVIDED that such participation agreement may provide that such
Buyer will not agree to any modification, amendment or waiver which, as to the
interest of such Participant, would (x) reduce the Aggregate Net Investment or
Yield Rate applicable to a Tranche or any Commitment Fees in which such
Participant has an interest or change, directly or indirectly, the definition of
Buyers' Interest and Transferor's Interest or the allocation between the Buyers'
Interest and the Transferor's Interest set forth in Sections 3.7 and 3.8 or
otherwise change the allocations and priorities set forth in Sections 3.7 and
3.8, or (y) extend the Expiry Date and (ii) upon purchase of a participating
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interest such Participant shall be deemed to have agreed to the provisions set
forth in Section 10.9. CPFC agrees that each Participant shall, to the extent
provided in its participation agreement and subject to subsection (f) below, be
entitled to the benefits of Article 9 with respect to its participating
interest. An assignment or other transfer which is not permitted by subsection
(c) or (e) below shall be given effect for purposes of this Agreement only to
the extent of a participating interest granted in accordance with this
subsection (b). In the event of any such grant by a Buyer of a participating
interest to a Participant, the Buyer shall give notice of such participation to
CPFC and the Administrative Agent.
(c) Any Buyer may at any time assign to one or more lenders,
institutions or Persons (each an "Assignee") all, or a proportionate part of all
(equivalent to an initial Commitment of not less than $5,000,000) of its rights
and obligations under this Agreement and such Assignee shall assume such rights
and obligations, pursuant to an Assignment and Assumption Agreement in
substantially the form of Exhibit N hereto executed by such Assignee and such
transferor Buyer, with (and subject to) the subscribed consent of CPFC, which
shall not be unreasonably withheld, and the Administrative Agent; provided that
if an Assignee was a Buyer immediately prior to such assignment or is an
Affiliate of such transferor Buyer, no such consent of CPFC shall be required.
Upon execution and delivery of such instrument and payment by such Assignee to
such transferor Buyer of an amount equal to the purchase price agreed between
such transferor Buyer and such Assignee, such Assignee shall be a Buyer party to
this Agreement and shall have all the rights and obligations of a Buyer with a
Commitment as set forth in such instrument of assumption, and the transferor
Buyer shall be released from its obligations hereunder to a corresponding
extent, and no further consent or action by any party shall be required. Upon
the consummation of any assignment pursuant to this subsection, the transferor
Buyer, the Administrative Agent and CPFC shall make appropriate arrangements so
that, if required, a new Buyer's Certificate is issued to the Assignee. In
connection with any such assignment, the transferor Buyer shall pay to the
Administrative Agent an administrative fee for processing such assignment in the
amount of $3,500. If the Assignee is not incorporated under the laws of the
United States or a state thereof, it shall deliver to CPFC and the
Administrative Agent certification
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as to exemption from deduction or withholding of any United States Federal
income taxes in accordance with Section 9.4. Each Buyer may furnish any
confidential information concerning CPFC or its Affiliates in the possession
of such Buyer from time to time to Assignees and Participants (including
prospective Assignees and Participants) which have agreed in a writing
delivered to CPFC to be bound by the provisions of Section 10.7 hereof.
(d) If any Reference Bank assigns its Buyer's Certificate to an
unaffiliated institution, the Administrative Agent shall in consultation with
CPFC and with the consent of the Required Buyers, appoint another bank to act as
a Reference Bank hereunder.
(e) Any Buyer may at any time assign all or any portion of its rights
under this Agreement to a Federal Reserve Bank. No such assignment shall
release the transferor Buyer from its obligations hereunder.
(f) No Assignee, Participant or other transferee of any Buyer's rights
shall be entitled to receive any greater payment under Section 9.3 or 9.4 than
such Buyer would have been entitled to receive with respect to the rights
transferred, unless such transfer is made with CPFC's prior written consent, or
at a time when the circumstances giving rise to such greater payment did not
exist.
SECTION 10.7. CONFIDENTIALITY. Each Buyer agrees to hold all non-
public information obtained pursuant to the requirements of this Agreement in
accordance with its customary procedure for handling confidential information of
this nature and in accordance with safe and sound banking practices, PROVIDED
that nothing herein shall prevent any Buyer from disclosing such information (i)
to any other Buyer, either Agent or any of its Affiliates, (ii) to any other
Person if reasonably incidental to the administration of the facility, (iii)
upon the order of any court or administrative agency, (iv) upon the request or
demand of any regulatory agency or authority, (v) which had been publicly
disclosed other than as a result of a disclosure by either Agent or any Buyer
prohibited by this Agreement, (vi) in connection with any litigation to which
either Agent, any Buyer or its subsidiaries or Parent may be a party, (vii) to
the extent necessary in connection with the exercise of any remedy hereunder,
(viii) to such Buyer's or such Agent's legal counsel and independent auditors
and (ix) subject to
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provisions substantially similar to those contained in this Section, to any
actual or proposed Participant or Assignee.
SECTION 10.8. FINANCIAL ACCOMMODATION. The parties hereto
acknowledge that this Agreement is, and is intended to be, a contract to
extend financial accommodations to CPFC within the meaning of Section
365(e)(2)(B) of the Federal Bankruptcy Code (11 U.S.C. Section 365(e)(2)(B))
(or any amended or successor provision thereof or any amended or successor
code).
SECTION 10.9. NO BANKRUPTCY PETITION AGAINST CPFC. Each Agent, each
Buyer and the Servicer hereby covenants and agrees with each other (and not
for the benefit of CPFC) that, prior to the date which is one year and one
day after the Final Payment Date, it will not institute against, or join any
other Person in instituting against CPFC, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceeding or other similar proceeding
under the laws of the United States or any State of the United States.
SECTION 10.10. LIMITATION OF LIABILITY. CPFC's obligation with
respect to all amounts payable hereunder which are not payable pursuant to
the Buyers' Certificates including, without limitation, all amounts payable
under Sections 2.8, 3.9, 9.3, 9.4 and 10.3, shall be nonrecourse except as to
(i) amounts payable with respect thereto as expressly provided in Sections
3.7 and 3.8 and (ii) amounts payable to CPFC under Sections 3.7(b) and (c)(B)
and 3.8(b) and shall not constitute a claim against CPFC to the extent that
amounts payable with respect thereto as expressly provided in Sections 3.7
and 3.8 and amounts payable to CPFC under such Sections are insufficient; it
being understood that amounts payable by CPFC pursuant to Section 3.9
constitute Collections subject to Sections 3.7 and 3.8.
SECTION 10.11. NOTICES TO S&P. CPFC shall provide to S&P notice of
(i) all amendments to the Program Documents, (ii) an optional termination or
reduction in Commitments pursuant to Section 2.5, (iii) a Servicing Transfer
pursuant to Section 3.5, (iv) any modification, amendment or waiver with
respect to the Consent and Agreement or Section 14 of the Existing Security
Agreement, and (v) any merger or consolidation of the Seller pursuant to
Section 6.11 of the Purchase and Sale Agreement. CPFC shall provide to S&P
(with a copy to each Agent) 30 days'
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prior written notice of any change in its capital structure involving
subordinated debt owing by CPFC to CPC.
SECTION 10.12. GOVERNING LAW; SUBMISSION TO JURISDICTION. This
Agreement shall be governed by and construed in accordance with the laws of
the State of New York. Each of CPFC and CPC submits to the nonexclusive
jurisdiction of the United States District Court for the Southern District of
New York and of any New York State court sitting in New York City for
purposes of all legal proceedings arising out of or relating to this
Agreement or the transactions contemplated hereby. Each of CPFC and CPC
irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of any such
proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum.
SECTION 10.13. COUNTERPARTS; INTEGRATION; EFFECTIVENESS. This
Agreement may be signed in any number of counterparts, each of which shall be
an original, with the same effect as if the signatures thereto and hereto
were upon the same instrument. This Agreement constitutes the entire
agreement and understanding among the parties hereto and supersedes any and
all prior agreements and understandings, oral or written, relating to the
subject matter hereof. This Agreement shall become effective upon receipt by
the Administrative Agent of counterparts hereof signed by each of the parties
hereto (or, in the case of any party as to which an executed counterpart
shall not have been received, receipt by the Administrative Agent in form
satisfactory to it of telegraphic, telex, facsimile or other written
confirmation from such party of execution of a counterpart hereof by such
party).
SECTION 10.14. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and
year first above written.
CROWN PAPER FUNDING
CORPORATION
By: /s/ Christopher M. McLain
--------------------------
Name: Christopher M. McLain
Title: Vice President and Secretary
Address: 4700 Deepwater Terminal
Richmond, VA 23219
Telephone: (804) 271-3706
Telex:
Facsimile:
Attention:
CROWN PAPER CO.,
as Servicer
By: /s/ Christopher M. McLain
--------------------------
Name: Christopher M. McLain
Title: Senior Vice President and
General Counsel, Secretary
Address: 300 Lakeside Drive
Oakland, CA 94612
Telephone: (501) 874-3869
Facsimile: (501) 874-3939
Attention:
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$10,000,000 THE BANK OF NEW YORK
By: /s/ Jonathan Rollins
--------------------------
Name: Jonathan Rollins
Title: Assistant Vice President
$10,000,000 THE CHASE MANHATTAN BANK, N.A.
By: /s/ Nancy A. Bridgman
--------------------------
Name: Nancy A. Bridgman
Title: Vice President
$10,000,000 THE LONG-TERM CREDIT BANK
OF JAPAN, LTD.
By: /s/ T. Morgan Edwards II
--------------------------
Name: T. Morgan Edwards II
Title: Deputy General Manager
$10,000,000 MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By: /s/ Robert J. Henchey
--------------------------
Name: Robert J. Henchey
Title: Vice President
$10,000,000 NATIONSBANK, N.A.
By: /s/ Michael Tousignant
--------------------------
Name: Michael Tousignant
Title: Vice President
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$10,000,000 TORONTO DOMINION (TEXAS), INC.
By: /s/ Neva Nesbitt
--------------------------
Name: Neva Nesbitt
Title: Vice President
TOTAL COMMITMENTS:
$60,000,000
- -----------
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK,
as Administrative Agent
By: /s/ Robert J. Henchey
--------------------------
Name: Robert J. Henchey
Title: Vice President
60 Wall Street
New York, NY 10260
Telephone: 212-648-6503
Facsimile: 212-648-5336
Attention: Jeffrey Hwang
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK,
as Structuring and
Collateral Agent
By: /s/ Robert J. Henchey
--------------------------
Name: Robert J. Henchey
Title: Vice President
500 Stanton Christiana Road
Newark, DE 19713-2107
Telephone: 302-634-5488
Facsimile: 302-634-5490
Attention: Robert J. Henchey
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APPENDIX II
DAILY RECONCILIATION OF
INTERCOMPANY TRANSACTIONS
A. Net Purchase Price of New Receivables 0.00
B. Collections available for reinvestment 0.00
C. Proceeds of new dollar funding 0.00
D. Lesser of A and (B + C) paid to CPC 0.00
E. If A less than (B + C), the
difference to be:
- held at CPFC 0.00
- paid as a dividend 0.00
F. If (B + C) less than A, the
difference to be contributed as a capital
contribution to CPFC 0.00
<PAGE>
PURCHASE AND SALE AGREEMENT
dated as of June 12, 1996
between
CROWN PAPER CO.,
as Seller
and
CROWN PAPER FUNDING CORPORATION,
as Purchaser
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
CERTAIN DEFINITIONS
1.1 Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
PURCHASE AND SALE OF RECEIVABLES
2.1 Purchase and Sale . . . . . . . . . . . . . . . . . . . . . . . . 3
2.2 Purchase Price Adjustment; Repurchase . . . . . . . . . . . . . . 4
ARTICLE III
ADMINISTRATION OF RECEIVABLES
3.1 Administration of Receivables . . . . . . . . . . . . . . . . . . 5
3.2 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of
CPFC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.2 Representations and Warranties of
the Seller . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE V
CONDITIONS TO PURCHASE
5.1 Conditions to CPFC's Obligation
to Purchase. . . . . . . . . . . . . . . . . . . . . . . . . . 12
i
<PAGE>
Page
----
ARTICLE VI
COVENANTS OF THE SELLER
6.1 General Information . . . . . . . . . . . . . . . . . . . . . . . 12
6.2 Information Regarding the Receivables . . . . . . . . . . . . . . 15
6.3 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . 15
6.4 Accounting Treatment. . . . . . . . . . . . . . . . . . . . . . . 16
6.5 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.6 Compliance with Laws. . . . . . . . . . . . . . . . . . . . . . . 16
6.7 No Adverse Interests. . . . . . . . . . . . . . . . . . . . . . . 16
6.8 No Modification of Receivables. . . . . . . . . . . . . . . . . . 16
6.9 No Change in Business or Policy . . . . . . . . . . . . . . . . . 17
6.10 Preservation of Corporate Existence . . . . . . . . . . . . . . . 17
6.11 No Mergers. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.12 Lockbox Accounts. . . . . . . . . . . . . . . . . . . . . . . . . 17
6.13 Payment of Taxes. . . . . . . . . . . . . . . . . . . . . . . . . 18
6.14 Covenants of CPFC . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE VII
MISCELLANEOUS
7.1 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.2 Amendment and Waiver. . . . . . . . . . . . . . . . . . . . . . . 19
7.3 No Implied Waivers; Cumulative Remedies . . . . . . . . . . . . . 20
7.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.5 Costs and Expenses. . . . . . . . . . . . . . . . . . . . . . . . 20
7.6 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.7 Waiver of Jury Trial. . . . . . . . . . . . . . . . . . . . . . . 20
7.8 No Bankruptcy Petition. . . . . . . . . . . . . . . . . . . . . . 20
7.9 Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.10 Governing Law; Submission to Jurisdiction . . . . . . . . . . . . 21
7.11 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Appendix I Net Purchase Price of Receivables
Appendix II Daily Reconciliation of Intercompany Transactions
Schedule 4.2(a)
Schedule 4.2(e)
ii
<PAGE>
PURCHASE AND SALE AGREEMENT
PURCHASE AND SALE AGREEMENT, dated as of June 12, 1996, between CROWN
PAPER CO., a Virginia corporation, as Seller (the "Seller"), and CROWN PAPER
FUNDING CORPORATION, a Virginia corporation, as Purchaser ("CPFC").
RECITALS
WHEREAS, in the ordinary course of its business the Seller generates
trade receivables from the sale of goods and services; and
WHEREAS, the Seller and CPFC wish to set forth the terms pursuant to
which receivables are to be sold by the Seller to CPFC;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.1 CERTAIN DEFINITIONS. Terms not defined in this Agreement shall
have the meanings set forth in the Receivables Purchase Agreement (as defined
below). As used in this Agreement, the following terms shall, unless the
context otherwise requires, have the following meanings:
"Agreement" means this Purchase and Sale Agreement, as amended from time
to time.
"Bankruptcy Suspension Period" means, with respect to CPC, the period
beginning on the day on which an involuntary case or other proceeding
against CPC seeking liquidation, reorganization or other relief with
respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of CPC
or any substantial part of its property is commenced and ending on the day
such proceeding is dismissed; PROVIDED that if such proceeding is not
controverted within 20 days of commencement and dismissed within 60 days of
commencement then such commencement shall become an Event of Bankruptcy
(and
<PAGE>
the provisions of Section 7.2 of the Receivables Purchase Agreement shall
apply) on the earlier of 21 days from the day of commencement (in the case
of controversion) or 61 days from the day of commencement (in the case of
dismissal).
"Consolidated Subsidiary" means, at any date, any Subsidiary or other
entity the accounts of which would be consolidated with those of the Seller
in its consolidated financial statements if its consolidated financial
statements were prepared as of such date.
"Eligibility Criteria" means the requirements of paragraph (a) of the
definition of "Eligible Receivable" in the Receivables Purchase Agreement.
"Final Purchase Date" means the earliest of (i) the date specified by
either party hereto, upon written notice to the other party hereto, as the
last day on which Receivables are to be purchased hereunder, (ii) the
Business Day on which Commitments terminate pursuant to Section 7.2 of the
Receivables Purchase Agreement, and (iii) the Business Day preceding the
day on which any Event of Bankruptcy occurs with respect to Holdings, the
Seller or CPFC.
"Material Adverse Effect" means (i) any material adverse effect upon the
condition (financial or otherwise), results of operations, properties,
assets, business, or prospects of CPC and its Subsidiaries, taken as a
whole; (ii) a material adverse effect on the ability of the CPC or any
other Person to consummate the transactions contemplated hereby to occur on
the Closing Date; (iii) a material adverse effect on the ability of CPC to
perform its obligations under this Agreement or any other Program Document
or (iv) a material adverse effect on the rights and remedies of the Agents
and the Buyers under this Agreement or any other Program Document.
"Purchase Price" means, with respect to a Receivable or Receivables, the
price paid by CPFC to the Seller in consideration of the sale of such
Receivable or Receivables pursuant to Section 2.1(c) of this Agreement.
"Receivables Purchase Agreement" means the Receivables Purchase
Agreement, dated as of June 12, 1996, among CPFC, CPC, as Servicer, the
financial institutions party thereto, as Buyers, Morgan Guaranty, as
Administrative Agent, and Morgan Guaranty Trust
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Company of New York, as Structuring and Collateral Agent, as amended from
time to time.
ARTICLE II
PURCHASE AND SALE OF RECEIVABLES
2.1 PURCHASE AND SALE.
(a) GENERAL. Pursuant and subject to the terms and conditions
hereof, the Seller hereby agrees to sell to CPFC, and CPFC hereby agrees to
purchase from the Seller, all of the Seller's right, title and interest in, to
and under (i) each and every Receivable outstanding as of the Closing Date and
thereafter arising through the close of business on the Final Purchase Date,
(ii) all Related Security with respect to each such Receivable, (iii) all
Collections with respect thereto, (iv) all books and records (including, without
limitation, customer lists, credit files, computer programs, printouts and other
computer materials and records) relating thereto and (v) all proceeds of the
foregoing; PROVIDED that during a Bankruptcy Suspension Period, the Seller shall
not sell to CPFC, and CPFC shall not purchase from the Seller, any Receivables,
or any Related Security, Collections, books and records or proceeds with respect
thereto.
(b) SALE WITHOUT RECOURSE. Subject only to the provisions of Section
2.2, the sale of Receivables by the Seller hereunder shall be without recourse.
(c) PURCHASE PRICE. In consideration of the sale of Receivables by
the Seller to CPFC pursuant to this Agreement, CPFC shall pay to Seller, on the
Closing Date and each Business Day thereafter, a Purchase Price for all
Receivables first booked on such Business Day (or, in the case of the purchase
on the Closing Date, all outstanding Receivables) in an amount equal to the
outstanding face amount of all such Receivables which the Seller has certified
meet the Eligibility Criteria, less adjustments for (i) an interest component,
taking into account the maturity of such Receivables, (ii) an amount
representing the historical losses on similar Receivables and (iii) an amount
representing a servicing fee, such Purchase Price to be calculated in accordance
with Appendix I hereto. The parties hereto represent that the Purchase Price so
calculated constitutes and represents an arm's-length fair market value price
for the Receivables sold. Receivables transferred from the Seller to CPFC which
do not meet the Eligibility Criteria on the date of transfer shall be deemed
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contributed to the capital of CPFC. At the request of the Seller, CPFC agrees
to cause the Buyers to make Incremental Purchases pursuant to the Receivables
Purchase Agreement which purchase price for such Incremental Purchase shall be
payable in Dollars. The Purchase Price for each Receivable shall be payable (x)
to the extent of cash available to CPFC, in Dollars, or (y) to the extent cash
is not so available, by crediting CPC with a capital contribution (which capital
contribution may be in the form of Receivables).
(d) TRUE SALE. The Seller and CPFC intend the sales of the
Receivables hereunder to be true sales of all of the Seller's right, title and
interest in, to and under such Receivables, providing CPFC with the full
benefits of ownership of the same, and the Seller and CPFC do not intend this
transaction to be, or for any purpose to be characterized as, a loan secured by
such Receivables. If despite such intention, a court characterizes the sale of
Receivables hereunder as a loan rather than a true sale, then the Seller hereby
grants to CPFC a first priority perfected security interest in, to and under all
of the Seller's right, title and interest in, to and under each and every
Receivable outstanding on the Closing Date or arising on and after the Closing
Date through the close of business on the Final Purchase Date, together with all
Related Security with respect thereto, all Collections with respect thereto, all
books and records with respect thereto and all proceeds of the foregoing, for
the purpose of securing the rights of CPFC under this Agreement.
2.2 PURCHASE PRICE ADJUSTMENT; REPURCHASE.
(a) The Seller hereby agrees that if (x) the Seller's representation
and warranty made pursuant to Section 5.1 is incorrect when made at the time of
the purchase of a Receivable, (and the provisions of subsection (c) below do not
apply) or (y) a Receivable certified as meeting the Eligibility Criteria on the
date of purchase thereafter becomes evidenced in a form (such as a promissory
note) as to which filing is not the appropriate method of perfection under the
UCC, the Seller shall, within two Business Days of discovery by or notice to the
Seller of such fact, make payment to CPFC, or credit the Purchase Price
otherwise payable by CPFC hereunder on such day, in an amount equal to the then
Outstanding Balance of such Receivable. Such Receivable shall not be reconveyed
to the Seller but an amount equal to Collections subsequently received in
respect thereof shall be paid over promptly to the Seller after receipt.
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(b) If on any day the Outstanding Balance of a Receivable certified
as meeting the Eligibility Criteria on the date of purchase (and not
subsequently the subject of an adjustment under subsection (a) above) is reduced
or canceled as a result of any Dilution Factor, the Seller shall, on such day
(or, if such day is not a Business Day, the next succeeding Business Day), make
payment to CPFC, or credit the Purchase Price otherwise payable by CPFC
hereunder on such day, in the amount of such reduction or cancellation.
(c) If at any time, CPFC does not (except due to circumstances
described in clause (y) of subsection (a) above) have a perfected ownership
interest in any Receivable certified as meeting the Eligibility Criteria on the
date of purchase, free and clear of any Adverse Interest, then the Seller shall
purchase such Receivable from CPFC for an amount equal to the aggregate then
Outstanding Balance thereof within two Business Days of discovery by or notice
to the Seller of such fact. With respect to all Receivables repurchased by the
Seller, CPFC shall, against receipt of the purchase price therefor, assign,
without recourse, representation or warranty, to the Seller all of CPFC's right,
title and interest in and to such Receivables. CPFC shall execute such
documents and instruments of transfer and assignment prepared by the Seller and
take such other actions as shall be reasonably requested by the Seller to effect
the reconveyance of such Receivables. The Seller shall thereafter assure that
Collections with respect to such Receivables shall not be commingled with the
Collections on the Receivables continued to be owned by it.
ARTICLE III
ADMINISTRATION OF RECEIVABLES
3.1 ADMINISTRATION OF RECEIVABLES.
(a) Consistent with CPFC's ownership of the Receivables, CPFC shall
be responsible for servicing, administering and collecting the Receivables, and
the Seller, as seller, shall have no obligation whatsoever in this regard;
PROVIDED that nothing shall prevent CPFC from engaging the services of any
Person, including CPC, to service, administer and collect the Receivables as
Servicer. The Seller hereby grants to CPFC an irrevocable power of attorney,
with full power of substitution, coupled with an interest, to take in the name
of the Seller all steps necessary or desirable, as determined by CPFC, to
collect all amounts due under any Receivable, including, without
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limitation, endorsing the name of the Seller on checks and other instruments
representing Collections, enforcing such Receivables and the related Contracts,
and adjusting, settling or compromising the amount or payment thereof, in the
same manner and to the same extent as the Seller would have been entitled.
(b) Upon CPFC's request, the Seller shall promptly deliver or make
available to CPFC all records relating to the Receivables, and, in either case,
shall hold all such records in trust for CPFC. The Seller will clearly indicate
in its corporate records that Receivables are owned by CPFC or otherwise mark
its records relating to Receivables with a legend evidencing that CPFC has
purchased and owns such Receivables.
(c) The Seller shall hold in trust for the benefit of the Buyers any
Collections received directly by the Seller with respect to any Receivables and
shall deposit such Collections in the Collection Account within two Business
Days of the receipt thereof.
3.2 FURTHER ASSURANCES.
(a) The Seller shall, from time to time at its own expense, do and
perform any and all acts and execute and deliver any and all instruments and
documents (including, without limitation any amendment, supplement or
continuation of any financing statements and continuation statements under the
UCC, the execution of any instrument of transfer, the giving of notice of the
sale of Receivables hereunder to any Obligor and the making of notations in the
records) as may be necessary, or as may be reasonably requested by CPFC, in
order to perfect, protect or more fully evidence the purchase of Receivables by
CPFC pursuant to this Agreement and to protect the interests of CPFC in the
Receivables against all Persons whomsoever. To the fullest extent permitted by
applicable law, CPFC shall be permitted to sign and file financing and
continuation statements with respect to the Receivables and amendments thereto
without the Seller's execution thereof. In furtherance of the foregoing, the
Seller hereby constitutes and appoints CPFC its true and lawful attorney, with
full power of substitution, in the name of the Seller, to execute and file
financing and continuation statements.
(b) The Seller shall not change its name, identity, corporate
structure (within the meaning of Section 9-402(7) of the UCC) or relocate its
chief executive office or any office where records are kept to a different city
or county unless it shall have (i) given CPFC at least 30 days'
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prior written notice thereof and (ii) delivered an opinion of counsel (which
counsel and which opinion shall be satisfactory to CPFC) to the effect that all
financing statements and amendments or supplements thereto, continuation
statements and other documents required to be recorded or filed in order to
perfect and protect the interest of CPFC in the Receivables, for the period
specified in such opinion, against all creditors of and purchasers from the
Seller have been filed in each filing office necessary for such purpose and that
all filing fees and taxes, if any, payable in connection with such filings have
been paid in full. The Seller shall at all times maintain its chief executive
office within a jurisdiction of the United States in which Article 9 of the
Uniform Commercial Code (1972 or later revision) is in effect.
(c) The Seller agrees that, subject to applicable laws, CPFC shall
have the right, if the Seller fails to do so, to do all such acts and things as
it may deem necessary to protect the interests of CPFC, including, without
limitation, confirmation and verification of the existence, amount and status of
the Receivables and collection and enforcement of the Receivables, and that the
Seller shall cooperate fully to give effect to the foregoing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS AND WARRANTIES OF CPFC.
CPFC hereby makes the representations and warranties set forth in
Section 5.2 of the Receivables Purchase Agreement.
4.2 REPRESENTATIONS AND WARRANTIES OF THE SELLER.
The Seller hereby represents and warrants that:
(a) CORPORATE EXISTENCE AND POWER. The Seller is a corporation duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, and has all corporate powers and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted, except for such licenses, authorizations,
consents and approvals listed on Schedule 4.2(a) hereto or the absence of which,
in the aggregate, does not have and could not reasonably be expected to have a
Material Adverse Effect.
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(b) CORPORATE AND GOVERNMENTAL AUTHORIZATION; NO CONTRAVENTION. The
execution, delivery and performance by the Seller of the Program Documents to
which it is a party are within the corporate powers of the Seller, have been
duly authorized by all necessary corporate action, require no action by or in
respect of, or filing with, any governmental body, agency or official (except as
contemplated by the Program Documents) and do not contravene, or constitute a
default under, any provision of applicable law or regulation or of the articles
of incorporation or by-laws of the Seller or of any agreement or instrument
evidencing Debt or any other material agreement, judgment, injunction, order,
decree or other instrument binding upon the Seller (except for any such
contravention or default as shall have been effectively waived) or result in the
creation or imposition of any Lien on any asset of the Seller (except as
contemplated by the Program Documents).
(c) BINDING EFFECT. Each of the Program Documents to which the
Seller is a party constitutes a valid and binding agreement of the Seller
enforceable in accordance with its terms, except as the enforceability thereof
may be limited by bankruptcy, insolvency, reorganization or moratorium or other
similar laws relating to the enforcement of creditors' rights generally and by
general equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(d) FINANCIAL INFORMATION. (i) The consolidated balance sheet of
the Seller and its Consolidated Subsidiaries as of December 31, 1995 and the
related consolidated statements of operations, cash flows and changes in equity
for the fiscal year then ended, reported on by Coopers & Lybrand L.L.P., copies
of which have been delivered to each of the Buyers, fairly present, in
conformity with generally accepted accounting principles, the consolidated
financial position of the Seller and its Consolidated Subsidiaries as of such
date and their consolidated results of operations and cash flows for such fiscal
year.
(ii) The unaudited consolidated balance sheet of the Seller and its
Consolidated Subsidiaries as of March 31, 1996 and the related unaudited
consolidated statements of operations, cash flows and changes in equity for the
three months then ended, copies of which have been delivered to each of the
Buyers, fairly present, in conformity with generally accepted accounting
principles applied on a basis consistent with the financial statements referred
to in
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paragraph (i) of this subsection (d), the consolidated financial position of the
Seller and its Consolidated Subsidiaries as of such date and their consolidated
results of operations and cash flows for such three month period (subject to
normal year-end adjustments).
(iii) Since March 31, 1996, there has been no material adverse change
in the business or financial position of the Seller and its Consolidated
Subsidiaries, considered as a whole, or in its ability to perform its
obligations under the Program Documents.
(e) LITIGATION. There is no action, suit or proceeding pending
against, or to the knowledge of the Seller threatened against or affecting, the
Seller or any of its Subsidiaries before any court or arbitrator or any
governmental body, agency or official which has, or, if adversely determined,
could reasonably be expected to have, (i) except as set forth on Schedule 4.2(e)
hereto, a material adverse effect on the business, consolidated financial
position or consolidated results of operations of the Seller and its
Consolidated Subsidiaries, considered as a whole, or (ii) an effect described in
clauses (ii) through (iv) of the definition of "Material Adverse Effect" or
which in any manner draws into specific question the validity or enforceability
of the Program Documents.
(f) ENVIRONMENTAL COMPLIANCE. (i) Except as set forth on Schedule
4.2(f) hereto, or to the extent that the liabilities of the Seller and its
Subsidiaries, taken as a whole, that relate to or could result from the matters
referred to in clauses (1) through (3), inclusive, would not reasonably be
expected to result in a Material Adverse Effect:
(1) no notice, notification, demand, request for information,
citation, summons, complaint or order has been issued, no complaint has
been filed, no penalty has been assessed nor, to the Seller's knowledge, is
any investigation or review pending or threatened by any governmental or
other entity with respect to any (A) alleged violation by the Seller or any
Subsidiary of any Environmental Law, (B) alleged failure by the Seller or
any Subsidiary to have any environmental permit, certificate, license,
approval, registration or authorization required in connection with the
conduct of its business or (C) generation, storage, treatment, disposal,
transportation or Release of Hazardous Substances;
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(2) no Hazardous Substance has been Released (and no written
notification of such Release has been filed) or is present (whether or not
in a reportable or threshold planning quantity) at, on or under any
property now or previously owned, leased or operated by the Seller or any
Subsidiary; and
(3) no property now or previously owned, leased or operated by the
Seller or any Subsidiary or any property to which the Seller or any
Subsidiary has, directly or indirectly, transported or arranged for the
transportation of any Hazardous Substances, is listed or, to the Seller's
knowledge, proposed for listing, on the National Priorities List
promulgated pursuant to CERCLA, on CERCLIS (as defined in CERCLA) or on any
similar federal, state or foreign list of sites requiring investigation or
clean-up.
(ii) Except as set forth on Schedule 4.2(f) hereto, there are no
Environmental Liabilities that have resulted or could reasonably be
expected to result in a Material Adverse Effect.
(iii) For purposes of this Section, the terms "Seller" and "Subsidiary"
shall include any business or business entity (including a corporation)
which is a predecessor, in whole or in part, of the Seller or any
Subsidiary of the Seller.
(g) COMPLIANCE WITH ERISA. Each member of the ERISA Group has
fulfilled its obligations under the minimum funding standards of ERISA and the
Internal Revenue Code with respect to each Plan and is in compliance in all
material respects with the presently applicable provisions of ERISA and the
Internal Revenue Code with respect to each Plan. No member of the ERISA Group
has (i) sought a waiver of the minimum funding standard under Section 412 of the
Internal Revenue Code in respect of any Plan, (ii) failed to make any
contribution or payment to any Plan or Multiemployer Plan or in respect of any
Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement,
which has resulted or could reasonably be expected to result in the imposition
of a Lien or the posting of a bond or other security under ERISA or the Internal
Revenue Code or (iii) incurred any material liability under Title IV of ERISA
other than a liability to the PBGC for premiums under Section 4007 of ERISA.
(h) TAXES. The Seller and its Subsidiaries have filed all United
States Federal income tax returns and all other material tax returns which are
required to be filed by
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them and have paid all taxes due pursuant to such returns or pursuant to any
assessment received by the Seller or any Subsidiary, except for taxes which are
being contested in good faith and with respect to which appropriate reserves are
being maintained. The charges, accruals and reserves on the books of the Seller
and its Subsidiaries in respect of taxes or other governmental charges are, in
the opinion of the Seller, adequate.
(i) REGULATORY RESTRICTIONS. The Seller is not an "investment
company" or a company controlled by an "investment company" within the meaning
of the Investment Company Act of 1940, as amended, nor is it a "holding company"
within the meaning of the Public Utility Holding Company Act of 1935, as
amended.
(j) PERFECTION INFORMATION. As of the Closing Date: (i) the
information set forth regarding the Seller in the Perfection Certificate
attached as Exhibit M-1 to the Receivables Purchase Agreement is true and
correct, and (ii) no Receivables arise from the sale of goods by any Subsidiary
or other Affiliate of the Seller or any other Person other than the Seller or an
Eligible Subsidiary.
(k) RECEIVABLES INFORMATION. All information, including the
Receivables Information Memorandum, furnished by the Seller or the Servicer (to
the extent that the Servicer, if not the Seller, is an Affiliate of the Seller)
to the Agents or any Buyer in writing for purposes of or in connection with this
Agreement or any of the other Program Documents or any transaction contemplated
hereby is, taken as whole and in light of the circumstances under which such
information is furnished, true and accurate in all material respects on the date
as of which such information is stated or certified. It is understood that the
foregoing representation and warranty is limited to the extent that any
projections or forecasts are represented to be based upon reasonable estimates
believed by the Seller to be accurate in all material respects, but are not
warranted to be obtainable.
(l) MARGIN REGULATIONS. None of the funds provided by CPFC hereunder
will be used, directly or indirectly, for the purpose, whether immediate,
incidental or ultimate, of buying or carrying any "margin stock" within the
meaning of Regulation U of the Board of Governors of the Federal Reserve System.
(m) SOLVENCY. The Seller is not insolvent and will not be insolvent
following the consummation of the transactions contemplated by this Agreement.
CPFC will have
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given reasonable equivalent and fair value to the Seller in consideration for
the transfer to CPFC of each Receivable, and such transfer will not have been
made for or on account of an antecedent debt owed by the Seller to CPFC.
(n) LABOR MATTERS. There are no strikes or other labor disputes
pending or, to the knowledge of the Seller, threatened, against the Seller or
any of its Subsidiaries which have, or could reasonably be expected to have, a
Material Adverse Effect. The Seller and its Subsidiaries are not in violation
of the Fair Labor Standards Act or any other applicable law dealing with such
matters, except for violations which in the aggregate could not reasonably be
expected to have a Material Adverse Effect.
(o) LOCATION. The principal place of business and chief executive
office of the Seller are located at its address set forth in the Perfection
Certificate attached as Exhibit M-1 to the Receivables Purchase Agreement or at
such other address as changed in accordance with Section 3.2(b).
ARTICLE V
CONDITIONS TO PURCHASE
5.1 CONDITIONS TO CPFC'S OBLIGATION TO PURCHASE.
The obligation of CPFC to purchase Receivables on any date pursuant to
Section 2.1 is subject to the condition that the Seller shall have certified to
CPFC the Outstanding Balance of all Receivables to be purchased on such date
which meet the Eligibility Criteria on and as of such date (such certificate to
constitute a representation and warranty by the Seller to such effect).
ARTICLE VI
COVENANTS OF THE SELLER
The Seller covenants that:
6.1 GENERAL INFORMATION.
Promptly upon becoming aware thereof, the Seller shall give CPFC
notice of any event or condition which could reasonably be expected to have a
material adverse effect on the collectibility of a material amount of the
Receivables or the ability of the Servicer to service such Receivables or the
ability of the Seller to perform its obligations
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under the Program Documents. In order to verify compliance with this Section
and otherwise verify compliance with this Agreement, the Seller shall furnish
the following to CPFC:
(a) as soon as available and in any event within 120 days after the
end of each fiscal year of the Seller, the consolidated balance sheet of
the Seller and its Consolidated Subsidiaries as of the end of such fiscal
year and the related consolidated statements of operations, cash flows and
changes in stockholders' equity for such fiscal year, setting forth in each
case in comparative form the figures for the previous fiscal year, all
reported on in a manner acceptable to the Securities and Exchange
Commission by Coopers & Lybrand L.L.P. or other independent public
accountants of nationally recognized standing;
(b) as soon as available and in any event within 60 days after the
end of each of the first three quarters of each fiscal year of the Seller,
a consolidated balance sheet of the Seller and its Consolidated
Subsidiaries as of the end of such quarter and the related consolidated
statements of operations, cash flows and changes in stockholders' equity
for such quarter and for the portion of the Seller's fiscal year ended at
the end of such quarter, setting forth in each case in comparative form the
figures for the previous fiscal year, all certified (subject to normal
year-end adjustments) as to fairness of presentation, generally accepted
accounting principles and consistency by the chief financial officer or the
chief accounting officer of the Seller;
(c) together with the financial statements required in clauses (a)
and (b) above, a certificate of its chief financial officer or chief
accounting officer stating that, as of the date of the relevant financial
statements, no Termination Event or Potential Termination Event exists, or
if any Termination Event or Potential Termination Event exists, stating the
nature and status thereof;
(d) as soon as reasonably practicable after any senior financial
officer of the Seller obtains knowledge of the commencement of, or of a
threat of the commencement of, an action, suit or proceeding against the
Seller or any of its Subsidiaries before any court or arbitrator or any
governmental body, agency or official which, in its reasonable judgment,
could have a material adverse effect on the collectibility of the
Receivables or its ability to perform its obligations
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under Program Documents, a certificate of a senior financial officer of the
Seller setting forth the nature of such pending or threatened action, suit
or proceeding and such additional information with respect thereto as may
be reasonably requested by CPFC or any Buyer;
(e) promptly upon any officer of the Seller becoming aware of any
occurrence which such officer knows to constitute a Termination Event or
Potential Termination Event, a certificate of the chief financial officer
or chief accounting officer setting forth the details thereof and the
action which the Seller is taking or proposes to take with respect thereto;
(f) not later than one Business Day after receiving notice thereof,
notice of any reduction, suspension or withdrawal of the rating assigned by
S&P to the Buyers' Certificates;
(g) if and when any member of the ERISA Group (i) gives or is
required to give notice to the PBGC of any "reportable event" (as defined
in Section 4043 of ERISA) with respect to any Plan which might constitute
grounds for a termination of such Plan under Title IV of ERISA, or knows
that the plan administrator of any Plan has given or is required to give
notice of any such reportable event, a copy of the notice of such
reportable event given or required to be given to the PBGC; PROVIDED that
the Seller shall not be required to deliver to CPFC a copy of any notice
pursuant to this clause (i) with respect to any "reportable event" arising
solely as a result of the transactions contemplated by the Contribution
Agreement; (ii) receives notice of complete or partial withdrawal liability
under Title IV of ERISA or notice that any Multiemployer Plan is in
reorganization, is insolvent or has been terminated, a copy of such notice;
(iii) receives notice from the PBGC under Title IV of ERISA of an intent to
terminate, impose liability (other than for premiums under Section 4007 of
ERISA) in respect of, or appoint a trustee to administer any Plan, a copy
of such notice; (iv) applies for a waiver of the minimum funding standard
under Section 412 of the Internal Revenue Code, a copy of such application;
(v) gives notice of intent to terminate any Plan under Section 4041(c) of
ERISA, a copy of such notice and other information filed with the PBGC;
(vi) gives notice of withdrawal from any Plan pursuant to Section 4063 of
ERISA, a copy of such notice; or (vii) fails to make any payment or
contribution to any Plan or
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Multiemployer Plan or in respect of any Benefit Arrangement or makes any
amendment to any Plan or Benefit Arrangement which has resulted or could
reasonably be expected to result in the imposition of a Lien or the posting
of a bond or other security, a certificate of the chief financial officer
or the chief accounting officer of the Seller setting forth details as to
such occurrence and action, if any, which the Seller or applicable member
of the ERISA Group is required or proposes to take;
(h) promptly upon the mailing thereof to the security holders of
Holdings or the Seller generally, copies of all financial statements,
reports and proxy statements so mailed;
(i) promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration statements
on Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or
their equivalents) which Holdings or the Seller shall have filed with the
Securities and Exchange Commission; and
(j) promptly, upon receipt of any complaint, order, citation, notice
or other written communication from any Person with respect to, or upon the
Seller's obtaining knowledge of, (i) the existence or alleged existence of
a violation of any applicable Environmental Law or any Environmental
Liability in connection with any property now or previously owned, leased
or operated by the Seller or any of its Subsidiaries, (ii) any Release on
such property or any part thereof in a quantity that is reportable under
any applicable Environmental Law, and (iii) any pending or threatened
proceeding for the termination, suspension or non-renewal of any permit
required under any applicable Environmental Law, in each case in which
there is a reasonable likelihood of an adverse decision or determination
which could result in a Material Adverse Effect.
6.2 INFORMATION REGARDING THE RECEIVABLES.
The Seller shall furnish to CPFC such information with respect to the
Receivables as CPFC may request.
6.3 BOOKS AND RECORDS.
The Seller will keep proper books of record and account in which full,
true and correct entries shall be
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made of all material dealings and transactions in relation to its business and
activities.
6.4 ACCOUNTING TREATMENT.
For accounting purposes, the Seller shall treat each purchase made
hereunder as a sale of the Receivables subject thereto.
6.5 DISCLOSURE.
The Seller agrees that it shall make clear disclosure in its financial
statements (or in the footnotes thereto) that it has sold the Receivables to
CPFC.
6.6 COMPLIANCE WITH LAWS.
The Seller shall comply in all material respects with all laws
applicable to it except (A) where the failure so to comply would not reasonably
be expected to have a material adverse effect on (i) the interests of CPFC
hereunder or the Buyers under the Receivables Purchase Agreement or (ii) its
ability to perform its obligations under the Program Documents or (B) where the
necessity of compliance therewith is being contested in good faith by
appropriate proceedings.
6.7 NO ADVERSE INTERESTS.
The Seller will not cause or permit any of the Receivables, or any
Related Security, any Collections, any books and records in relation thereto or
any proceeds of the foregoing or any Lockbox or Lockbox Account or the
Collection Account to be sold, pledged, assigned or transferred or to be subject
to an Adverse Interest.
6.8 NO MODIFICATION OF RECEIVABLES.
The Seller shall not do anything to modify the terms of any
Receivable, except in accordance with the Credit and Collection Policy, if such
modification would materially adversely affect CPFC or cause a Termination
Event, or otherwise materially impair the rights of CPFC hereunder or the Buyers
under the Receivables Purchase Agreement; PROVIDED that (i) the Seller may
grant, or permit to be granted, to the Obligor under any Receivable, any
Dilution Factor which the Seller in good faith believes is justified, subject to
the provisions of Section 3.9(c) of the Receivables Purchase Agreement and
Section 2.2 hereunder, and (ii) the Seller may take or permit to be taken such
action to collect Receivables as it may deem
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advisable, including resale of any repossessed, returned or rejected goods and
rescheduling through extension or otherwise of payments due under any Receivable
so long as such action is consistent with the Seller's historical collection
practices as modified from time to time in accordance with Section 6.9.
6.9 NO CHANGE IN BUSINESS OR POLICY.
The Seller shall not change the fundamental nature of its business or
the Credit and Collection Policy in a manner that would materially adversely
affect CPFC or materially impair the collectibility of the Receivables (it being
understood that the Seller may amend the Credit and Collection Policy as long as
such amendment does not materially adversely affect CPFC or materially impair
the collectibility of the Receivables.
6.10 PRESERVATION OF CORPORATE EXISTENCE.
Except as permitted pursuant to Section 6.11 hereof, the Seller shall
preserve and maintain its corporate existence and good standing in the
jurisdiction of its incorporation, and qualify and remain qualified in good
standing as a foreign corporation in each jurisdiction where the failure to
preserve and maintain such existence, rights, franchises, privileges and
qualification would materially adversely affect (i) the interests of CPFC
hereunder or (ii) its ability to perform its obligations under the Program
Documents.
6.11 NO MERGERS.
The Seller will not consolidate or merge with or into any other
corporation or sell, lease or otherwise transfer, directly or indirectly, all or
substantially all of its assets; PROVIDED that the Seller may merge with another
corporation if (x) such corporation is not CPFC and none of the capital stock of
such corporation is owned by CPFC, (y) the Seller is the surviving corporation
in such merger and (z) after giving effect to such merger, no Termination Event
or Potential Termination Event shall have occurred and be continuing.
6.12 LOCKBOX ACCOUNTS.
The Seller agrees that it shall direct Obligors with respect to the
Receivables to cause all Collections to be either (i) mailed directly to a
Lockbox with a Qualified Bank which has entered into a Lockbox Agreement
governing such Lockbox and the related Lockbox Account (which shall be
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a separate and segregated account) pursuant to the Receivables Purchase
Agreement or (ii) electronically transferred to a Lockbox Account or the
Collection Account.
6.13 PAYMENT OF TAXES.
The Seller will promptly pay and discharge all Federal and state
taxes, assessments and governmental charges or levies imposed upon it or upon
its income or profit or upon any property belonging to it, unless (i) such tax,
assessment, charge or levy shall not at the time be due and payable or can be
paid thereafter without penalty, or (ii) the amount, applicability or validity
thereof shall be currently contested in good faith by appropriate proceedings
and adequate reserves with respect to such tax, assessment, charge or levy shall
have been established in accordance with GAAP.
6.14 COVENANTS OF CPFC.
The Seller agrees, as relevant, that it shall comply with, and to
cause CPFC to comply with, Section 3.3 of the Receivables Purchase Agreement.
ARTICLE VII
MISCELLANEOUS
7.1 INDEMNITY.
The Seller agrees to indemnify, defend and hold harmless CPFC and its
directors, officers, employees and agents (each an "indemnitee"), other than for
the indemnitee's own gross negligence or willful misconduct, forthwith on
demand, from and against any and all losses, claims, damages, liabilities, costs
and expenses (including, without limitation, all reasonable attorneys' fees and
expenses and expenses of settlement, litigation or preparation therefor) which
such indemnitee may incur or which may be asserted against such indemnitee by
any Person (including, without limitation, any Obligor) arising from or incurred
in connection with:
(i) any breach of a representation, warranty or covenant by the
Seller made or deemed made hereunder or in connection herewith or the
transactions contemplated hereby,
(ii) any action taken or, if the Seller is otherwise obligated to take
action, failed to be taken,
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by the Seller with respect to the Receivables or any of its obligations
hereunder, including, without limitation, the Seller's failure to comply
with an applicable law or regulation,
(iii) any failure attributable to the Seller to vest and maintain
vested in CPFC an ownership interest in the Receivables, free and clear of
all Adverse Interests,
(iv) any products liability claim arising out of or relating to the
Receivables or the related Contracts,
(v) any failure to pay when due any taxes required to be paid by the
Seller, including without limitation any sales tax, excise tax or other
similar tax or charge payable in connection with the Receivables and their
creation or satisfaction,
(vi) any dispute, suit, action, claim, proceeding or governmental
investigation, pending or threatened, whether based on statute, regulation
or order (including any such suit, action, claim or proceeding alleging a
violation of any Federal or state securities laws, on tort, on contract or
otherwise) before any court, arbitral panel, or other tribunal which arises
out of or relates to the Receivables or related Contracts, or the use of
the proceeds of the sale of the Receivables pursuant hereto,
(vii) any Environmental Liabilities, or
(viii) any amount required to be paid by CPFC pursuant to Section 2.4 of
the Receivables Purchase Agreement or any indemnity required to be paid by
CPFC pursuant to Section 9.3, 9.4 and 10.3 of the Receivables Purchase
Agreement.
It is expressly agreed and understood by the parties hereto that such
indemnification is not intended to constitute a guarantee of the collectibility
or payment of the Receivables purchased hereunder.
7.2 AMENDMENT AND WAIVER.
Subject to Section 7.9, this Agreement may be amended, or the
provisions hereof waived, from time to time by a written amendment or waiver
duly executed and delivered by the Seller and CPFC.
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7.3 NO IMPLIED WAIVERS; CUMULATIVE REMEDIES.
No course of dealing and no delay or failure of CPFC in exercising any
right, power or privilege under the Program Documents shall affect any other or
future exercise thereof or the exercise of any other right, power or privilege;
nor shall any single or partial exercise of any such right, power or privilege
or any abandonment or discontinuance of steps to enforce such a right, power or
privilege preclude any further exercise thereof or of any other right, power or
privilege. The rights and remedies of CPFC under the Program Documents are
cumulative and not exclusive of any rights or remedies which CPFC would
otherwise have.
7.4 NOTICES.
All communications and notices pursuant hereto to either party shall
be given in accordance with Section 10.1 of the Receivables Purchase Agreement.
7.5 COSTS AND EXPENSES.
The Seller will pay all expenses incident to the performance of its
obligations under this Agreement and the Seller agrees to pay all reasonable
out-of-pocket costs and expenses of CPFC in connection with the perfection as
against third parties of CPFC's right, title and interest in and to the
Receivables and the enforcement of any obligation of the Seller hereunder.
7.6 SURVIVAL.
This Agreement shall continue in full force and effect so long as any
Receivables remain outstanding; PROVIDED that Section 7.1 shall survive
termination of this Agreement.
7.7 WAIVER OF JURY TRIAL.
EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ANY AND ALL RIGHT TO
TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
7.8 NO BANKRUPTCY PETITION.
The Seller hereby covenants and agrees that, prior to the date which
is one year and one day after the Final Payment Date, it will not institute
against, or join any other Person in instituting against, CPFC any bankruptcy,
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reorganization, arrangement, insolvency or liquidation proceeding or other
similar proceeding under the laws of the United States or any State of the
United States.
7.9 ASSIGNMENT.
(a) The Seller acknowledges that CPFC will, pursuant to the
Receivables Purchase Agreement, convey an ownership interest in the Receivables
to the Buyers and assign all of its rights and remedies under this Agreement to
the Collateral Agent as security for its obligations under the Receivables
Purchase Agreement, and that, without limiting the generality of the foregoing,
the representations and warranties contained in this Agreement and the rights of
CPFC under Section 2.2 hereof and the indemnification provisions of Section 7.1
hereof are intended to benefit the Agents and the Buyers as third party
beneficiaries. The Seller hereby consents to such conveyances and such
assignment and to the terms of the Receivables Purchase Agreement and further
acknowledges that pursuant to the Receivables Purchase Agreement the consent of
the Required Buyers and reaffirmation by S&P of the rating assigned to the
Buyers' Certificates on the Closing Date is required in respect of amendments
hereof and waivers by CPFC of its rights hereunder.
(b) The Seller shall not assign any of its rights or obligations
hereunder.
7.10 GOVERNING LAW; SUBMISSION TO JURISDICTION.
(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK.
(b) The Seller and CPFC each hereby submits to the non-exclusive
jurisdiction of the United States District Court for the Southern District of
New York and of any New York State court sitting in New York City for purposes
of all legal proceedings arising out of or relating to this Agreement or the
transactions contemplated hereby. The Seller and CPFC each waives, to the
fullest extent permitted by law, any objection which it may now or hereafter
have to the laying of the venue of any such proceeding brought in such a court
and any claim that any such proceeding brought in such a court has been brought
in an inconvenient forum.
7.11 COUNTERPARTS.
This Agreement may be executed in any number of counterparts and by
the different parties hereto on separate
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counterparts each of which, when so executed, shall be deemed an original, but
all such counterparts shall constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereby have caused this Agreement to
be executed by their respective officers thereunto duly authorized as of the
date and year first above written.
CROWN PAPER CO.
By /s/ Christopher M. McLain
-------------------------------------
Name: Christopher M. McLain
Title: Senior Vice President
and General Counsel,
Secretary
CROWN PAPER FUNDING
CORPORATION
By /s/ Christopher M. McLain
-------------------------------------
Name: Christopher M. McLain
Title: Vice President and
Secretary
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- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LOAN AGREEMENT
between
BUSINESS FINANCE AUTHORITY OF THE STATE OF NEW HAMPSHIRE
and
CROWN PAPER CO.
-----------------------------
$12,300,000
Sewage and Solid Waste Disposal
Revenue Bonds
(Crown Paper Co. Project)
Series 1996
-----------------------------
Dated
as of
July 1, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1. Use of Defined Terms . . . . . . . . . . . . . . . . . . 1
Section 1.2. Definitions. . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.3. Interpretation . . . . . . . . . . . . . . . . . . . . . 5
Section 1.4. Captions and Headings. . . . . . . . . . . . . . . . . . 6
ARTICLE II REPRESENTATIONS. . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2.1. Representations and Covenants of the Company . . . . . . 7
ARTICLE III ISSUANCE OF THE SERIES 1996 BONDS; COMPLETION OF THE PROJECT. . 10
Section 3.1. Issuance of the Series 1996 Bonds; Application of
Proceeds. . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.2. Disbursements from the Project Fund; Company Required
to Pay Costs in Event Project Fund Insufficient . . . . 10
Section 3.3. Acquisition, Construction and Installation . . . . . . . 12
Section 3.4. Investment of Fund Moneys. . . . . . . . . . . . . . . . 12
Section 3.5. Rebate Fund. . . . . . . . . . . . . . . . . . . . . . . 12
Section 3.6. Completion of the Project. . . . . . . . . . . . . . . . 13
ARTICLE IV LOAN BY ISSUER; REPAYMENT OF THE LOAN;
LOAN PAYMENTS AND ADDITIONAL PAYMENTS . . . . . . . . . . . . . . . . . 14
Section 4.1. Loan Repayment; Delivery of Notes. . . . . . . . . . . . 14
Section 4.2. Additional Payments. . . . . . . . . . . . . . . . . . . 15
Section 4.3. Place of Payments. . . . . . . . . . . . . . . . . . . . 16
Section 4.4. Obligations Unconditional. . . . . . . . . . . . . . . . 16
Section 4.5. Assignment of Agreement and Revenues; Binding Effect
of Indenture on Company; Financing Statements . . . . . 16
Section 4.6. Deposit of Moneys in Bond Fund; Moneys for Redemption. . 17
Section 4.7. Assignment by Company. . . . . . . . . . . . . . . . . . 17
ARTICLE V ADDITIONAL AGREEMENTS AND COVENANTS . . . . . . . . . . . . . . . 19
Section 5.1. Right of Inspection. . . . . . . . . . . . . . . . . . . 19
Section 5.2. Sale, Lease or Grant of Use by Company . . . . . . . . . 19
Section 5.3. Indemnification. . . . . . . . . . . . . . . . . . . . . 19
Section 5.4. Company Not to Adversely Affect Tax Exempt Status of
Bonds' Interest . . . . . . . . . . . . . . . . . . . . 20
Section 5.5. Company to Maintain its Existence; Sales of Assets
or Mergers. . . . . . . . . . . . . . . . . . . . . . . 20
Section 5.6. Books and Records; Financial Statements. . . . . . . . . 21
Section 5.7. Maintenance of Project by Company. . . . . . . . . . . . 21
Section 5.8. Insurance Required . . . . . . . . . . . . . . . . . . . 22
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Section 5.9. Land Use . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 5.10. Current Expenses . . . . . . . . . . . . . . . . . . . . 22
Section 5.11. Covenant with respect to Mortgage. . . . . . . . . . . . 22
ARTICLE VI REDEMPTION OF SERIES 1996 BONDS. . . . . . . . . . . . . . . . . 24
Section 6.1. Optional Redemption. . . . . . . . . . . . . . . . . . . 24
Section 6.2. Extraordinary Optional Redemption. . . . . . . . . . . . 24
Section 6.3. Mandatory Redemption in Event of a Determination of
Taxability. . . . . . . . . . . . . . . . . . . . . . . 25
Section 6.4. Actions by Issuer. . . . . . . . . . . . . . . . . . . . 26
ARTICLE VII EVENTS OF DEFAULT AND REMEDIES. . . . . . . . . . . . . . . . . 27
Section 7.1. Events of Default. . . . . . . . . . . . . . . . . . . . 27
Section 7.2. Remedies on Default. . . . . . . . . . . . . . . . . . . 28
Section 7.3. No Remedy Exclusive. . . . . . . . . . . . . . . . . . . 29
Section 7.4. Agreement to Pay Attorneys' Fees and Expenses. . . . . . 30
Section 7.5. No Waiver. . . . . . . . . . . . . . . . . . . . . . . . 30
Section 7.6. Notice of Default. . . . . . . . . . . . . . . . . . . . 30
ARTICLE VIII MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 8.1. Term of Agreement. . . . . . . . . . . . . . . . . . . . 31
Section 8.2. Amounts Remaining in Funds . . . . . . . . . . . . . . . 31
Section 8.3. Notices. . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 8.4. Extent of Covenants of the Issuer; No Personal
Liability . . . . . . . . . . . . . . . . . . . . . . . 31
Section 8.5. Binding Effect . . . . . . . . . . . . . . . . . . . . . 32
Section 8.6. Amendments and Supplements . . . . . . . . . . . . . . . 32
Section 8.7. Execution Counterparts . . . . . . . . . . . . . . . . . 32
Section 8.8. Severability . . . . . . . . . . . . . . . . . . . . . . 32
Section 8.9. Governing Law. . . . . . . . . . . . . . . . . . . . . . 32
Section 8.10. Further Assurances and Corrective Instruments. . . . . . 32
Section 8.11. Issuer and Company Representative. . . . . . . . . . . . 32
Section 8.12. Matters to be Considered by the Issuer . . . . . . . . . 33
EXHIBIT A FORM OF NOTE. . . . . . . . . . . . . . . . . . . . . . . . . . .A-1
EXHIBIT B PROJECT FACILITIES. . . . . . . . . . . . . . . . . . . . . . . .B-1
EXHIBIT C FORM OF REQUISITION . . . . . . . . . . . . . . . . . . . . . . .C-1
ii
<PAGE>
LOAN AGREEMENT
THIS LOAN AGREEMENT (the "Agreement") is made and entered into as of July
1, 1996 between the BUSINESS FINANCE AUTHORITY OF THE STATE OF NEW HAMPSHIRE, a
body corporate and politic as an agency of the State of New Hampshire (the
"Issuer"), and CROWN PAPER CO. (the "Company"), a corporation for profit duly
organized and validly existing under the laws of the Commonwealth of Virginia,
under the following circumstances summarized in the following recitals (the
capitalized terms not defined in the recitals being used therein as defined in
Article I hereof):
A. The Company has requested, and the Issuer has agreed, to issue revenue
bonds for the purpose of providing funds for the construction and acquisition of
the Project.
B. Pursuant to such request, the Issuer has determined to issue and sell
the Series 1996 Bonds to assist in the financing of the Project undertaken by
the Company.
NOW THEREFORE, in consideration of the premises and the mutual
representations and agreements hereinafter contained, the Issuer and the Company
agree as follows (provided that any obligation of the Issuer created by or
arising out of this Agreement shall never constitute an indebtedness of the
Issuer or give rise to any pecuniary liability of the Issuer but shall be
payable solely out of Revenues):
ARTICLE I
DEFINITIONS
Section 1.1. USE OF DEFINED TERMS. In addition to the words and terms
defined elsewhere in this Agreement or by reference to the Indenture or to
another document, the words and terms set forth in Section 1.2 hereof shall have
the meanings set forth therein unless the context or use clearly indicates
another meaning or intent. Such definitions shall be equally applicable to both
the singular and plural forms of any of the words and terms defined therein.
Unless otherwise defined herein, any terms defined in the Indenture shall have
the same meaning herein.
Section 1.2. DEFINITIONS. As used herein:
"Act" means Chapter 162-I of the New Hampshire Revised Statutes Annotated,
as amended and supplemented.
"Additional Bonds" means the Additional Bonds as defined in the Indenture.
<PAGE>
"Additional Notes" means any nonnegotiable promissory note or notes, in
addition to the Series 1996 Note, delivered by the Company to the Trustee in
connection with the issuance of Additional Bonds, as provided herein.
"Additional Payments" means the amounts required to be paid by the Company
pursuant to the provisions of Section 4.2 hereof.
"Agreement" means this Loan Agreement as amended or supplemented from time
to time.
"Authorized Company Representative" means the person at the time designated
to act on behalf of the Company by written certificate furnished to the Issuer
and the Trustee, containing the specimen signature of that person and signed on
behalf of the Company by any of its officers. Such certificate may designate an
alternate or alternates.
"Bond Fund" means the Bond Fund created in the Indenture.
"Bond Resolution" means (a) when used with reference to the Series 1996
Bonds, the resolution providing for their issuance and approving this Agreement,
the Indenture and related matters; (b) when used with reference to an issue of
Additional Bonds, the resolution providing for the issuance of the Series 1996
Bonds, to the extent applicable, and the resolution of the Issuer providing for
the issuance of the Additional Bonds and approving any amendment or supplement
to this Agreement, any Supplemental Indenture and related matters; and (c) when
used with reference to Bonds when Additional Bonds are outstanding, the
resolution providing for the issuance of the Series 1996 Bonds and the
resolution of the Issuer providing for the issuance of the then outstanding and
the then to be issued Additional Bonds; in each case as amended or supplemented
from time to time.
"Bond Service Charges" means, for any period or time, the principal of and
interest and premium, if any, due on the Bonds for that period or payable at
that time whether due at maturity, upon acceleration, redemption or otherwise.
"Bonds" means the Series 1996 Bonds and any Additional Bonds.
"Bond Year" means any annual period commencing on the anniversary date of
the original issuance and delivery of the Bonds, with the earliest Bond Year
commencing with that original date and the last Bond Year commencing on the
anniversary date of such original date preceding or falling on the final payment
in full of all outstanding Bonds of each series.
"Change in Control" means, at any time after the date of original issuance
of the Bonds, the relinquishment by Holdings of its ownership of outstanding
shares of stock of the Company or, alternatively, the acquisition by any person
or group of persons (within the meaning of Section 13 or 14 of the Securities
Exchange Act of 1934, as amended) of beneficial ownership (within the meaning of
Rule 13d-3 promulgated by the Securities and Exchange Commission
2
<PAGE>
under said Act) of 40% or more of the outstanding shares of common stock of
Holdings; or, during any period of 12 consecutive calendar months, individuals
who were either (i) directors of Holdings on the first day of such period or
(ii) whose nomination or election was approved by a vote of at least a majority
of the directors then still in office who were directors of Holdings on the
first day of such period or who were theretofore elected or nominated in
accordance with this clause (ii), shall cease to constitute a majority of the
board of directors of Holdings.
"Code" means the Internal Revenue Code of 1986, as amended, including, when
appropriate, the statutory predecessor of the Code, and all applicable
regulations (whether proposed, temporary or final) under that Code and the
statutory predecessor of the Code, and any official rulings and judicial
determinations under the foregoing applicable to the Bonds.
"Company" means Crown Paper Co., a corporation duly organized and validly
existing under the laws of the Commonwealth of Virginia and duly authorized to
conduct business in the State of New Hampshire and having its principal office
in Oakland, California, and its lawful successors and assigns to the extent
permitted by this Agreement.
"Completion Date" means the date on which the Project is substantially
complete as evidenced by a certificate of the Authorized Company Representative
pursuant to Section 3.6 hereof.
"Computation Date" means the last day of each Bond Year and the date on
which the final payment in full of all outstanding Bonds of each series is made.
"Determination of Taxability" means, with respect to the Series 1996 Bonds,
receipt by the Company of written notice from Owner or former Owner or the
Trustee of a final determination by the Internal Revenue Service or a court of
competent jurisdiction that, as a result of a failure by the Company to perform
any of its agreements in this Agreement or the Refunding Loan Agreement or the
inaccuracy of any of its representations in this Agreement or the Refunding Loan
Agreement, the interest paid or to be paid on any Bond (except to a "substantial
user" of the Projects or a "related person" within the meaning of Section 147(a)
of the Code) is or was includable in the gross income of the Bond's owner for
federal income tax purposes. No such determination will be considered final
unless the Owner or former Owner involved in the determination gives the Company
and the Trustee prompt written notice of the commencement of the proceedings
resulting in the determination and offers the Company, subject to the Company's
agreeing to pay all expenses of the proceedings and to indemnify the Owner or
former Owner against all liabilities that might result from it, the opportunity
to control the defense of the proceedings and either the Company does not agree
within thirty days to pay the expenses, indemnify the Owner or former Owner and
control the defense or the Company exhausts or chooses not to exhaust available
procedures to contest or obtain review of the result of the proceedings. As to
any series of Additional Bonds, any Determination of Taxability shall be as
defined in the applicable Supplemental Indenture.
"Eligible Investments" means Eligible Investments as defined in the
Indenture.
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"Event of Default" means any of the events described as an Event of Default
in Section 7.1. hereof.
"Excess Earnings" means Excess Earnings as defined in the Indenture.
"Federal Tax Statement" means the Statement as to Tax Exempt Status of the
Bonds executed by the Company in connection with the issuance of the Series 1996
Bonds.
"Force Majeure" means any of the causes, circumstances or events described
as constituting Force Majeure in Section 7.1. hereof.
"Holdings" means Crown Vantage Inc., a corporation duly organized and
validly existing under the laws of the Commonwealth of Virginia and having its
principal office in Oakland, California, and its lawful successors and assigns
to the extent permitted by this Agreement.
"Indenture" means the Trust Indenture, dated as of even date herewith,
between the Issuer and the Trustee, as amended or supplemented from time to time
which provides for the issuance of the Series 1996 Bonds.
"Issuer" means the Business Finance Authority of the State of New
Hampshire, a body corporate and politic as an agency of the State of New
Hampshire, and its predecessors, successors and assigns.
"Loan" means the loan by the Issuer to the Company of the proceeds received
from the sale of the Bonds.
"Loan Payments" means the amounts required to be paid by the Company in
respect of the Bond Service Charges pursuant to Section 4.1 hereof.
"Notes" means the Series 1996 Note and any Additional Notes.
"Notice Address" means:
(a) As to the Issuer: 14 Dixon Avenue, Suite 101
Concord, NH 03301
Attention: Executive Director
(b) As to the Company: 300 Lakeside Drive, 14th Floor
Oakland, CA 94612
Attention: General Counsel
4
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(c) As to the Trustee: The Bank of New York
101 Barclay Street, 21st Floor West
New York, New York 10286
Attention: Corporate Trust Trustee Administration
or such additional or different address, notice of which is given under Section
8.3 hereof.
"Person" or words importing persons mean firms, associations, partnerships
(including without limitation, general and limited partnerships), joint
ventures, societies, estates, trusts, corporations, public or governmental
bodies, other legal entities and natural persons.
"Project" means the construction and acquisition of a "project" (within the
meaning of the Act) used as sewage and solid waste disposal facilities,
including the Project Facilities generally described on Exhibit B hereto.
"Project Facilities" means the Company's facilities described in Exhibit B
hereto, together with any additions, modifications and substitutions to those
facilities.
"Refunding Loan Agreement" means the Refunding Loan Agreement dated as of
July 1, 1996 between the Issuer and the Company, as the same may be amended or
supplemented from time to time.
"Revenues" means (a) the amounts to be paid by the Company as Loan
Payments, (b) all other moneys received or to be received by the Issuer or the
Trustee in respect of Loan Payments, including, without limitation, all moneys
and investments in the Bond Fund, (c) any moneys and investments in the Project
Fund, and (d) all income and profit from the investment of the foregoing moneys.
The term "Revenues" does not include any moneys or investments in the Rebate
Fund, or amounts received by the Issuer as fees, reimbursement of costs and
expenses, or indemnity.
"Senior Debt" means the obligations of the Company under the Senior Loan
Document.
"Senior Loan Document" means the $350,000,000 Credit Agreement, dated as of
August 15, 1995, among the Company, Holdings, the banks listed therein, the
letter of credit issuing banks named therein and Morgan Guaranty Trust Company
of New York, as Administrative Agent, J.P. Morgan Securities Inc., Arranger and
The Bank of New York, The Long-Term Credit Bank of Japan, Ltd., NationsBank,
N.A. (Carolinas), The Toronto-Dominion Bank (Texas, Inc.), Co-Agents.
"Series 1996 Bonds" means the $12,300,000 Sewage and Solid Waste Disposal
Revenue Bonds (Crown Paper Co. Project), Series 1996 of the Issuer authorized in
the Bond Resolution and in Section 2.02 of the Indenture.
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"Series 1996 Note" means the nonnegotiable promissory note of the Company,
dated as of the date of issuance of the Series 1996 Bonds, initially issued in
the form attached hereto as Exhibit A and in the principal amount of
$12,300,000, evidencing the obligation of the Company to make Loan Payments with
respect to the Series 1996 Bonds.
"Unassigned Issuer's Rights" means all of the rights of the Issuer to
receive Additional Payments under Section 4.2 hereof, to inspect the Project
under Section 5.1 hereof, to be held harmless and indemnified under Section 5.3
hereof, to be reimbursed for attorney's fees and expenses under Section 7.4
hereof, to receive notices under Section 8.3 hereof, to give or withhold consent
under Sections 4.7, 5.2 and 8.6 hereof and to exercise remedies expressly
reserved to the Issuer pursuant to Section 7.2 hereof.
Section 1.3. INTERPRETATION. Any reference herein to the Issuer, or to
any member or officer of the Issuer, includes entities or officials succeeding
to their respective functions, duties or responsibilities pursuant to or by
operation of law or lawfully performing their functions.
Any reference to a section or provision of the Constitution of the State or
the Act, or to a section, provision or chapter of the laws of the State or to
any statute of the United States of America, includes that section, provision or
chapter or statute as amended, modified, revised, supplemented or superseded
from time to time; provided, that no amendment, modification, revision,
supplement or superseding section, provision or chapter of statute shall be
applicable solely by reason of this provision, if it constitutes in any way an
impairment of the rights or obligations of the Issuer, the Owners, the Trustee
or the Company under this Agreement.
Unless the context indicates otherwise, words importing the singular number
include the plural number, and vice versa; the terms "hereof", "hereby",
"herein", "hereto", "hereunder", "hereinafter", and similar terms refer to this
Agreement; and the term "hereafter" means after, and the term "heretofore" means
before, the date of delivery of the Series 1996 Bonds. Words of any gender
include the correlative words of the other genders, unless the sense indicates
otherwise.
Section 1.4. CAPTIONS AND HEADINGS. The captions and headings in this
Agreement are solely for convenience of reference and in no way define, limit or
describe the scope or intent of any Articles, Sections, subsections, paragraphs,
subparagraphs or clauses hereof.
(End of Article I)
6
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ARTICLE II
REPRESENTATIONS
Section 2.1. REPRESENTATIONS AND COVENANTS OF THE COMPANY. The Company
represents and covenants that:
(a) It is a corporation duly incorporated under the laws of the
Commonwealth of Virginia, and is duly qualified and authorized to transact
business in the State.
(b) It has full power and authority to execute, deliver and perform this
Agreement and the Series 1996 Note and to enter into and carry out the
transactions contemplated by those documents. That execution, delivery and
performance do not, and will not, cause or result in a material violation
in any provision of law applicable to the Company or the Company's Articles
of Incorporation or its Bylaws and do not, and will not, conflict with or
result in a default under any agreement or instrument to which the Company
is a party or by which it is bound. This Agreement and the Series 1996
Note have, by proper action, been duly authorized, executed and delivered
by the Company and all steps necessary have been taken to constitute this
Agreement and the Series 1996 Note valid and binding obligations of the
Company.
(c) Not more than $100,000 of the proceeds of the Series 1996 Bonds will
be used to finance the acquisition and construction of any costs of the
Project funded by such Bonds that were paid or incurred (i) prior to
July 18, 1993 with respect to costs of the Project described in the
resolution of the Issuer adopted March 11, 1992 or (ii) more than 60 days
prior to the adoption of the resolution of the Issuer on October 16, 1995
with respect to costs of the Project described in such resolution (and not
described in the March 11, 1992 resolution).
(d) The provision of financial assistance made available to it hereunder
and the commitments therefor made by the Issuer induced the Company to
maintain within the jurisdiction of the Issuer that business of the Company
to be conducted by use of the Project and such business will create or
preserve jobs and employment opportunities within the jurisdiction of the
Issuer.
(e) The Company has no present intention to sell or otherwise dispose of
or cease operating the Project.
(f) The requisitions of the Company from the Project Fund will be such
that at least 95% of the proceeds of the Bonds (including investment
earnings thereon) will be used for the acquisition, construction,
reconstruction or improvement of land or property of a character subject to
the allowance for depreciation under Section 167 of the Code and
constituting "sewage facilities" or "solid waste disposal facilities"
within the meaning of
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Sections 142(a)(5) and (6) of the Code and at least 72.1% of such proceeds
will be used for the acquisition, construction, reconstruction or
improvement of such solid waste disposal facilities. No more than two
percent (2%) of the proceeds of the Series 1996 Bonds shall be used to pay
the costs of issuance of the Series 1996 Bonds. None of the proceeds of
the Series 1996 Bonds will be used to provide working capital.
(g) The average maturity of the Series 1996 Bonds does not exceed 120% of
the average reasonably expected economic life of the facilities to be
financed by the Series 1996 Bonds, determined pursuant to Section 147(b) of
the Code as of the later of the date the Series 1996 Bonds are issued or
the date the Project Facilities are expected to be placed in service.
(h) None of the proceeds of the Series 1996 Bonds will be used to provide
any airplane, skybox or other private luxury box or health club facility;
any facility primarily used for gambling; or any store the principal
business of which is the sale of alcoholic beverages for consumption off
premises.
(i) Less than 25% of the proceeds of the Series 1996 Bonds will be used to
acquire land or any interest therein, and none of the proceeds of the
Series 1996 Bonds will be used to provide land which is to be used for
farming purposes.
(j) No portion of the proceeds of the Series 1996 Bonds will be used to
acquire existing property or any interest therein unless such acquisition
met the rehabilitation requirements of Section 147(d) of the Code.
(k) The information furnished by the Company and used by the Issuer in
preparing the certification pursuant to Section 148 of the Code and the
information statement pursuant to Section 149(e) of the Code with respect
to the Series 1996 Bonds is accurate and complete as of the date of the
issuance of the Series 1996 Bonds.
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(l) After the expiration of any applicable temporary period under Section
148(d)(3) of the Code, at no time during any Bond Year will the aggregate
amount of gross proceeds of the Series 1996 Bonds invested in higher
yielding investments (within the meaning of Section 148(b) of the Code)
exceed 150% of the debt service on the Series 1996 Bonds for such Bond Year
and the aggregate amount of gross proceeds of the Series 1996 Bonds
invested in higher yielding investments, if any, will be promptly and
appropriately reduced as the amount of outstanding Series 1996 Bonds is
reduced, provided however that the foregoing shall not require the sale or
disposition of any investments in higher yielding investments if such sale
or disposition would result in a loss which exceeds the amount which would
be paid to the United States pursuant to Section 5.08 of the Indenture (but
for such sale or disposition) at the time of such sale or disposition if a
payment under Section 5.08 of the Indenture were due at such time.
(m) The Series 1996 Bonds are not and will not be "federally guaranteed"
within the meaning of Section 149(b) of the Code.
(n) The Company will not take any action or omit to take any action if
such action or omission would cause the Series 1996 Bonds to be included in
gross income for federal income tax purposes.
(o) The Project constitutes an "industrial facility" within the meaning of
the Act.
(End of Article II)
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ARTICLE III
ISSUANCE OF THE SERIES 1996 BONDS; COMPLETION OF THE PROJECT
Section 3.1. ISSUANCE OF THE SERIES 1996 BONDS; APPLICATION OF PROCEEDS.
To provide funds for the purpose of financing the facilities of the Project, the
Issuer will issue, sell and deliver the Series 1996 Bonds to the Original
Purchaser. The Series 1996 Bonds will be issued pursuant to the Indenture in
the aggregate principal amount, will bear interest, will mature and will be
subject to redemption as set forth therein. The Company hereby approves the
terms and conditions of the Indenture, the Purchase Agreement and the Series
1996 Bonds, and of the terms and conditions under which the Series 1996 Bonds
will be issued, sold and delivered. The Company shall carry out any duties or
obligations imposed upon it by the Indenture.
The proceeds from the sale of the Series 1996 Bonds shall be paid over to
the Trustee for the benefit of the Company and the Owners of the Series 1996
Bonds and deposited as follows: (a) a sum equal to any accrued interest paid by
the Original Purchaser on the Series 1996 Bonds shall be deposited in the Series
1996 Bond Fund and (b) the balance of the proceeds of the Series 1996 Bonds
shall be deposited in the Project Fund. Pending disbursement pursuant to
Section 3.2 hereof the proceeds so deposited in the Project Fund, together with
any investment earnings thereon, shall constitute a part of the Revenues in
which a security interest is granted by the Issuer to secure the payment of Bond
Service Charges with respect to the Series 1996 Bonds as provided in the
Indenture.
At the request of the Company, and for the purposes and upon fulfillment of
the conditions specified in the Indenture, the Issuer may provide for the
issuance, sale and delivery of Additional Bonds and provide the proceeds from
the sale thereof to the Company.
Section 3.2. DISBURSEMENTS FROM THE PROJECT FUND; COMPANY REQUIRED TO PAY
COSTS IN EVENT PROJECT FUND INSUFFICIENT. In the Indenture, the Issuer has
authorized and directed the Trustee to make disbursements from the Project Fund
to reimburse or pay the Company or any person designated by the Company for the
following:
(a) Costs incurred directly or indirectly for or in connection with
the acquisition, construction, improvement or installation of the Project,
including, but not limited to, those costs incurred for preliminary
planning and studies, architectural, legal, engineering, accounting,
consulting and supervisory and other services, labor, services, materials,
acquisition, construction and installation, recording of documents and
title work relating to the Project.
(b) Premiums attributable to all insurance required to be taken and
maintained during the construction of the Project and the premium on each
surety bond, if any, required with respect to work on the Project.
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(c) Taxes, assessments and other charges in respect of the Project
that may become due and payable during the construction of the Project.
(d) Costs incurred directly or indirectly in seeking to enforce any
remedy against any contractor or subcontractor in respect of any actual or
claimed default under any contract relating to the Project Facilities.
(e) Financial, legal, accounting, printing and engraving fees,
charges and expenses, and all other such fees, charges and expenses
incurred in connection with the authorization, sale, issuance and delivery
of the Series 1996 Bonds and the preparation and delivery of this
Agreement, the Indenture and other related documents, but not in an amount
in excess of 2% of the sale proceeds of the Series 1996 Bonds.
(f) Fees and expenses that may become due during the construction of
the Project of the Trustee and of any paying agent properly incurred under
the Indenture.
(g) Any other incidental and necessary costs including without
limitation any expenses, fees and charges relating to the acquisition,
construction, improvement or installation of the Project (excluding,
however, the acquisition of motor vehicles, raw materials, supplies
inventory or accounts receivable, or for provision of working capital).
(h) Payment of any amounts necessary to pay interest on the Series
1996 Bonds during the construction of the Project.
(i) Payments made to the Rebate Fund.
Any disbursements from the Project Fund shall be made by the Trustee only
upon the written requisition signed by the Authorized Company Representative.
Each such written order shall be in substantially the form of requisition
request attached hereto as Exhibit D and shall be consecutively numbered and
accompanied by copies of the payments or reimbursements requested. In the case
of any contract providing for the retention of a portion of the contract price
there shall be paid from the Project Fund only the net amount remaining after
deduction of any such portion, and when the amount of any such retention is due
and payable, then such retention may be paid from the Project Fund.
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All moneys in the Project Fund remaining after the Completion Date and
payment, or provision for payment, in full of the costs provided for in
subsections (a) through (h) of this Section, then due and payable, shall be
transferred to the Bond Fund, except for amounts retained by the Trustee for any
cost of the Project, or for amounts retained because the Company shall have
directed the Trustee to use such moneys to purchase Bonds for the purpose of
cancellation.
In the event the moneys in the Project Fund (including moneys from the
proceeds of any Additional Bonds sold to finance completion of the Project)
should not be sufficient to pay in full the costs to be paid therefrom, the
Company agrees, for the benefit of the Issuer and in order to fulfill the
purposes of the Act, to complete the construction and equipping to be
accomplished pursuant hereto and to pay that portion of the costs therefor as
may be in excess of the moneys available therefor in the Project Fund. The
Issuer does not make any warranty, either express or implied, that the moneys,
which will be paid into the Project Fund and which under the provisions of this
Agreement will be available for payment of the costs of the acquisition,
construction and equipping to be accomplished pursuant hereto, will be
sufficient to pay all the costs which will be incurred in that connection. The
Company agrees that if after exhaustion of the moneys in the Project Fund the
Company should pay pursuant hereto any portion of the said costs of the
construction and equipping, it shall not be entitled to any reimbursement
therefor from the Issuer, the Trustee or the holders of any of the Bonds, nor
shall it be entitled to any diminution in or abatement or postponement of this
Agreement.
Section 3.3. ACQUISITION, CONSTRUCTION AND INSTALLATION. The Company
agrees that it will acquire, construct, install and equip the Project or cause
the Project to be acquired, constructed, installed and equipped in accordance
with plans and specifications on file at the Project and otherwise in accordance
with this Agreement.
The Company may, after the execution and delivery of this Agreement, cause
such changes to be made to the plans and specifications for the Project as it
may desire and as will not result in any material change in the basic design of
the Project or result in a material addition to or deletion from the Project or
in changing its character as an "industrial facility" within the meaning of the
Act or a sewage or solid waste disposal facility within the meaning of Section
142(a)(5) and (6) of the Code.
The Company shall have the sole responsibility for the acquisition,
construction, installation and equipping of the Project and shall perform the
same itself or through agents, contractors and others selected by it, and may
make or issue such contracts, orders, receipts and instructions, and in general
do or cause to be done all such other things, as it may in it sole discretion
consider requisite or advisable for the acquisition, construction, installation
and equipping of the Project consistent with this Agreement and the Indenture.
The Company shall have full authority and the sole right under this Agreement to
supervise and control directly or indirectly all aspects of the acquisition,
construction, installation and equipping of the Project consistent with this
Agreement and the Indenture. All contracts for carrying out the Project shall
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be in the Company's own name. The Issuer shall not be liable to the Company or
any other person for any latent or patent defect in the Project.
The Company will proceed with the Project with due diligence and will use
all reasonable efforts to cause the Project to be completed on or before three
years from the date of issuance of the Bonds.
Section 3.4. INVESTMENT OF FUND MONEYS. At the written request or at the
oral request, confirmed in writing within two Business Days, of the Authorized
Company Representative, any moneys held as part of the Bond Fund, the Project
Fund or the Rebate Fund shall be invested or reinvested by the Trustee in
specified Eligible Investments. The Company hereby covenants that it will
restrict any investment and reinvestment and the use of the proceeds of the
Series 1996 Bonds in such manner and to such extent, if any, as may be necessary
so that the Series 1996 Bonds will not constitute arbitrage bonds under Section
148 of the Code.
Section 3.5. REBATE FUND. Within five days after the end of each Bond
Year and within five days after payment in full of all outstanding Bonds of each
series, the Company shall calculate the amount of Excess Earnings as of the end
of that Bond Year or the date of such payment in full and shall notify the
Trustee of that amount. If the amount then on deposit in the applicable account
in Rebate Fund created under the Indenture is less than the amount of Excess
Earnings for that series of Bonds (computed by taking into account the amount or
amounts, if any, previously paid to the United States pursuant to Section 5.08
of the Indenture and this Section), the Company shall, within five days after
the date of the aforesaid calculation, pay to the Trustee for deposit in the
Rebate Fund an amount sufficient to cause the Rebate Fund to contain an amount
equal to the Excess Earnings for that series of Bonds. The Company agrees to
direct the Trustee to make rebate payments to the United States as are required
pursuant to Section 5.08 of the Indenture. The obligation of the Company to
make such payments and provide direction to the Trustee hereunder shall remain
in effect and be binding upon the Company notwithstanding the release and
discharge of the Indenture or termination of this Agreement.
Section 3.6. COMPLETION OF THE PROJECT. The Company agrees that it will
cause the completion of the Project with all reasonable dispatch and will pay
when due all fees, costs and expenses incurred in such acquisition and
construction from funds available therefor in accordance with this Agreement or
otherwise. The Company further agrees that it will ask, demand, sue for, levy,
recover and receive all such sums of money, debts and other demands whatsoever
which may be due, owing and payable under the terms of any contract, order,
receipt, writing and instruction in connection with the acquisition and
construction of the Project, and to enforce the provisions of any contract,
agreement, obligation, bond or other performance security with respect thereto.
The Completion Date of the Project shall be evidenced to the Issuer and the
Trustee by a certificate signed by the Authorized Company Representative stating
(i) the date on which the acquisition and improvement of the Project were
substantially completed, (ii) that all other
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facilities necessary in connection with the Project have been acquired and
improved, (iii) that the acquisition and improvement of the Project and such
other facilities have been accomplished in such a manner as to conform with all
applicable zoning, planning, building, environmental and other similar
governmental regulations, (iv) that all costs of such acquisition and
improvement then due and payable have been paid and (v) the amounts which the
Trustee shall retain in the Project Fund for the payment of costs not yet due or
the liability for which the Company is contesting or which otherwise should be
retained and the reasons such amounts should be retained. Such certificate may
state that it is given without prejudice to any rights against third parties
which then exist or may subsequently come into being.
(End of Article III)
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ARTICLE IV
LOAN BY ISSUER; REPAYMENT OF THE LOAN;
LOAN PAYMENTS AND ADDITIONAL PAYMENTS
Section 4.1. LOAN REPAYMENT; DELIVERY OF NOTES. In consideration of
issuance of the Series 1996 Bonds, the Company shall make, as loan payments, in
lawful money of the United States of America, on or before each date that any
payment of principal, premium or interest on any Bond is due (at a maturity,
upon redemption, by acceleration or otherwise), Loan Payments which correspond,
as to amount, to the Bond Service Charges then payable on the Series 1996 Bonds
so that the Trustee shall have immediately available funds in its possession on
each such date that a payment is due on the Bonds in the full amount of such
payment. All such Loan Payments shall be paid to the Trustee in accordance with
the terms of the Series 1996 Note for the account of the Issuer and shall be
held and disbursed in accordance with the provisions of the Indenture and this
Agreement for application to the payment of Bond Service Charges.
To further evidence the Company's performance of its obligations under this
Agreement, the Company shall execute and deliver to the Trustee, concurrently
with the issuance and delivery of the Series 1996 Bonds, the Series 1996 Note.
The Series 1996 Note shall be dated as of the date of this Agreement and shall
mature and bear interest, shall contain substantially the other terms and
provisions and shall be subject to prepayment, as set forth, in Exhibit A
hereto.
So long as there exists no Event of Default hereunder, the Company shall be
entitled to a credit against the Loan Payments required to be made on any date
to the extent that the balance in the Bond Fund (which is available therefor) is
then in excess of amounts required (a) for the payment of Bonds theretofore
called for redemption, (b) for the payment of interest due on a prior date for
which checks or drafts have been drawn and mailed by the Trustee and (c) to be
deposited in the Bond Fund by the Indenture for use other than for the payment
of Bond Service Charges on such date. In any event, however, if on any date
that any payment of principal, premium or interest on any Bond is due (at
maturity, upon redemption, by acceleration or otherwise), the balance in the
Bond Fund (which is available therefor) is for any reason insufficient to make
required payments of Bond Service Charges, as and when due, the Company
forthwith will pay to the Trustee in immediately available funds, for the
account of the Issuer and for deposit into the Bond Fund, any deficiency.
In connection with the issuance of any Additional Bonds, the Company shall
execute and deliver to the Trustee one or more Additional Notes in a form
substantially similar to the form of the Series 1996 Note. All such Additional
Notes shall:
(a) provide for payments of interest equal to the payments of interest on
the corresponding Additional Bonds;
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(b) require payments of principal and redemption payments and any premium
equal to the payments of principal, prepayments and sinking fund payments
and any premium on the corresponding Additional Bonds;
(c) require all payments on any such Additional Notes to be made no later
than the due dates for the corresponding payments to be made on the
corresponding Additional Bonds; and
(d) contain by reference or otherwise optional and mandatory redemption
provisions and provisions in respect of the optional and mandatory
acceleration or prepayment of principal and any premium corresponding with
the redemption and acceleration provisions of the corresponding Additional
Bonds.
All payments on the Notes shall be applied solely to the payment of Bond
Service Charges on all outstanding Bonds, except that, so long as no Event of
Default has occurred and is subsisting hereunder, payments by the Company on any
of the Notes shall be used by the Trustee to make a like payment of Bond Service
Charges on the corresponding Bonds in connection with which those Notes were
delivered and shall constitute Loan Payments made in respect of those
corresponding Bonds.
Upon payment in full, in accordance with the Indenture, of the Bond Service
Charges on any or all Bonds, whether at maturity, upon acceleration or by
redemption or otherwise, or upon provision for the payment thereof having been
made in accordance with the provisions of the Indenture, and upon payment of all
amounts owed to the Trustee, (i) the Notes issued concurrently with those
corresponding Bonds, of the same maturity, bearing the same interest rate and in
an amount equal to the aggregate principal amount of the Bonds so surrendered
and cancelled or for the payment of which provision has been made, shall be
deemed fully paid, the obligations of the Company thereunder shall be
terminated, and any of those Notes shall be surrendered by the Trustee to the
Company, and shall be cancelled by the Company, or (ii) in the event there is
only one of those Notes, an appropriate notation shall be endorsed thereon
evidencing the date and amount of the principal payment or prepayment equal to
the Bonds so paid, or with respect to which provision for payment has been made,
and that Note shall be surrendered by the Trustee to the Company for
cancellation if all Bonds shall have been paid (or provision made therefor) and
cancelled as aforesaid. Unless the Company is entitled to a credit under
express terms of this Agreement or the Notes, all payments on each of the Notes
shall be in the full amount required thereunder.
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Except for such interest of the Company as may hereinafter arise pursuant
to Section 8.2 hereof or Section 5.06 of the Indenture, the Company and the
Issuer each acknowledge that neither the Company nor the Issuer has any interest
in the Bond Fund and any moneys deposited therein shall be in the custody of and
held by the Trustee in trust for the benefit of the Owners.
Section 4.2. ADDITIONAL PAYMENTS.
(a) The Company shall pay to the Issuer, as Additional Payments hereunder,
any and all reasonable costs and expenses incurred or to be paid by the Issuer
in connection with the issuance, delivery and carrying of the Series 1996 Bonds
and Additional Bonds, including without limitation, (i) any necessary expenses
incurred by the members of the Issuer while engaged in the performance of their
duties as such members or officers of the Issuer, (ii) the reasonable fees and
expenses of counsel to the Issuer and of bond counsel, (iii) all publication,
filing and recording fees, and (iv) expenses incurred or advances made in the
exercise of the Issuer's rights or the performance of its obligations hereunder,
under the Indenture, or under the Purchase Agreement.
(b) The Company also agrees to pay to the Trustee, when due, until the
principal of, premium, if any and interest on the Bonds shall have been paid in
full: (i) an amount equal to the annual fee of the Trustee for its Ordinary
Services rendered as Trustee and the Ordinary Expenses (including reasonable
attorneys' fees and expenses) of the Trustee incurred as Trustee under the
Indenture (including reasonable attorneys' fees and expenses), (ii) the
reasonable fees and charges of the Trustee as Registrar, authenticating agent
and paying agent under the Indenture, (iii) the reasonable fees and charges of
the Trustee for Extraordinary Services rendered by it and Extraordinary Expenses
(including reasonable attorneys' fees and expenses) incurred by it under the
Indenture and (iv) all other amounts which the Trustee is entitled to receive
hereunder or under the Indenture as reimbursement or indemnity; provided,
however, that the Company may, without creating a default hereunder, withhold
such payment to contest in good faith the necessity or reasonableness for any
such Extraordinary Services or Extraordinary Expenses and the reasonableness of
any such fees, charges or expenses that the Trustee has incurred without the
consent of the Company in excess of $2,000.
(c) Upon the issuance of the Bonds, the Company shall pay the Issuer an
administrative fee of $92,250.
Section 4.3. PLACE OF PAYMENTS. The Company shall make all Loan Payments
directly to the Trustee at its principal corporate trust office. Additional
Payments shall be made directly to the person or entity to whom or to which they
are due.
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Section 4.4. OBLIGATIONS UNCONDITIONAL. The obligations of the Company to
make Loan Payments, Additional Payments and any payments required of the Company
under Section 3.2 hereof or Section 5.07 of the Indenture shall be absolute and
unconditional under any and all circumstances whatsoever, and the Company shall
make such payments without abatement, diminution or deduction regardless of any
cause or circumstances whatsoever including, without limitation, any defense,
set-off, recoupment or counterclaim which the Company may have or assert against
the Issuer, the Trustee or any other Person.
Section 4.5. ASSIGNMENT OF AGREEMENT AND REVENUES; BINDING EFFECT OF
INDENTURE ON COMPANY; FINANCING STATEMENTS. To secure the payment of Bond
Service Charges, the Issuer shall assign to the Trustee, by the Indenture, its
rights under and interest in this Agreement (except for the Unassigned Issuer's
Rights) and shall assign and grant a security interest in the Revenues to the
Trustee.
The Company hereby agrees and consents to those assignments and grants.
The Company hereby agrees to be bound by and to comply with the provisions of
the Indenture applicable to, affecting or purporting to bind the Company. The
Trustee shall be a third party beneficiary of this Agreement and shall be
entitled to all rights provided to it hereunder and to enforce all provisions
hereof.
The Company will, at its own expense, cause all necessary financing
statements, amendments thereto, continuation statements and instruments of
similar character relating to the assignment and grants made to secure the
Bonds, to be recorded and filed in such manner and in such places as may be
required by law in order to fully preserve and protect the security of the
Owners of the Bonds and the rights of the Trustee under this Agreement and the
Indenture.
Section 4.6. DEPOSIT OF MONEYS IN BOND FUND; MONEYS FOR REDEMPTION. The
Company may at any time deposit moneys in the Bond Fund, without premium or
penalty, to be held by the Trustee for application to Loan Payments not yet due
and payable. Such deposits shall be credited against the Loan Payments, or any
portion thereof, in the order of their due dates. In addition, the Company may
deliver moneys to the Trustee for optional redemption of Series 1996 Bonds
pursuant to Section 6.1 or 6.2 hereof and shall deliver moneys to the Trustee
for mandatory redemption of Series 1996 Bonds pursuant to Section 6.3 hereof.
Section 4.7. ASSIGNMENT BY COMPANY. This Agreement may be assigned in
whole or in part by the Company without the necessity of obtaining the consent
of the Issuer, the Trustee or the Owners, subject, however, to each of the
following conditions:
(a) Unless waived by the Issuer, the Company shall notify the Issuer
in writing of the identity of any assignee at least 15 Business Days prior
to the effective date of such assignment;
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(b) No assignment (other than pursuant to Section 5.5 hereof) shall
relieve the Company from primary liability for any of its obligations
hereunder, and in the event of any such assignment the Company shall
continue to remain primarily liable for the payment of the Loan Payments
and Additional Payments and for performance and observance of the
agreements on its part herein provided to be performed and observed by it;
(c) Any assignment from the Company must retain for the Company such
rights and interests as will permit it to perform its obligations under
this Agreement, and any assignee from the Company shall assume in writing
the obligations of the Company hereunder to the extent of the interest
assigned;
(d) The Company shall, within thirty (30) days after execution
thereof, furnish or cause to be furnished to the Issuer and the Trustee a
true and complete copy of each such assignment together with any instrument
of assumption;
(e) Any assignment from the Company shall not materially impair
fulfillment of the purposes to be accomplished by operation of the Project
as a project, the refinancing and financing, respectively, of which is
permitted under the Act; and
(f) No assignment from the Company shall occur unless and until the
Company obtains an opinion of Bond Counsel to the effect that such
assignment will not, in and of itself, have an adverse effect on the
exclusion of interest on the Series 1996 Bonds from gross income for
federal income tax purposes;
provided, however, that the foregoing conditions shall not apply if all of the
Owners and the Issuer consent in writing to the assignment of this Agreement.
(End of Article IV)
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ARTICLE V
ADDITIONAL AGREEMENTS AND COVENANTS
Section 5.1. RIGHT OF INSPECTION. Subject to reasonable security and
safety regulations and upon two days' written notice, the Issuer and the
Trustee, and their respective agents, shall have the right during normal
business hours to inspect the Project.
Section 5.2. SALE, LEASE OR GRANT OF USE BY COMPANY. The Company may
sell, lease or otherwise grant the right to occupy and use the Project, in whole
or in part, to others, provided that:
(a) No such grant, sale or lease shall relieve the Company from its
obligations under this Agreement or the Notes;
(b) In connection with any such grant, sale or lease the Company shall
retain such rights and interests as will permit it to comply with its
obligations under this Agreement and the Notes;
(c) No such grant, sale or lease shall impair materially the purposes of
the Act to be accomplished by operation of the Project as a project as
provided herein and in the Act;
(d) The Issuer consents to such sale, lease or other such grant in
writing;
(e) The Company obtains the opinion of Bond Counsel to the effect that
such lease, sale or grant shall not have an adverse effect on the exclusion
of interest on the Bonds from gross income for federal income tax purposes.
Notwithstanding the foregoing, the Company may remove, sell or otherwise dispose
of property that has become worn out, obsolete or unnecessary for its business
purposes without satisfying the requirements of Clauses (d) and (e).
Section 5.3. INDEMNIFICATION. The Company regardless of any agreement to
maintain insurance, will indemnify the Issuer against (a) any and all
liabilities, claims, damages, costs and expenses by any person related to the
participation of the Issuer in the transactions contemplated by the Indenture,
the Purchase Agreement, or this Agreement, including without limitation claims
arising out of any condition of the Project or the construction, use, occupancy
or management thereof; any accident, injury or damage to any person occurring in
or about the Project site; any breach by the Company of its obligations under
the Purchase Agreement or this Agreement; any act or omission of the Company or
any of its agents, contractors, servants, employees or licensees; or the
offering, issuance, sale or any resale of the Bonds to the extent permitted by
law, and (b) all costs, counsel fees and expenses, expenses or liabilities
reasonably incurred in connection with any such claim or any action or
proceeding brought thereon. In case
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any action or proceeding is brought against the Issuer by reason of any such
claim, the Company will defend the same at its expense upon notice from the
Issuer, and Issuer will cooperate with the Company, at the expense of the
Company, in connection therewith.
The Company agrees to indemnify the Trustee for and to hold it harmless
against any and all liabilities, claims, damages, costs and expenses incurred by
or asserted against the Trustee without negligence or bad faith on the part of
the Trustee, on account of any action taken or omitted to be taken by the
Trustee in accordance with the terms of this Agreement, the Bonds, the Notes or
the Indenture or in connection with the Project or the sale of the Bonds, or any
action taken at the request of or with the consent of the Company, including the
costs and expenses of the Trustee in defending itself against any such claim,
action or proceeding brought in connection with the exercise or performance of
any of its powers or duties under this Agreement, the Bonds, the Indenture or
the Notes.
In case any action or proceeding is brought against the Issuer or the
Trustee in respect of which indemnity may be sought hereunder, the party seeking
indemnity promptly shall give notice of that action or proceeding to the
Company, and the Company upon receipt of that notice shall have the obligation
and the right to assume the defense of the action or proceeding; provided, that
failure of a party to give that notice shall not relieve the Company from any of
its obligations under this Section unless that failure prejudices the defense of
the action or proceeding by the Company. An indemnified party may employ
separate counsel and participate in the defense, which shall be at the expense
of the indemnified party unless such counsel is approved by the Company which
such approval shall not be unreasonably withheld. The Company shall not be
liable for any settlement made without its consent.
The indemnification set forth above is intended to and shall include the
indemnification of all affected officials, directors, officers and employees of
the Issuer and the Trustee, respectively. That indemnification is intended to
and shall be enforceable by the Issuer and the Trustee, respectively, to the
full extent permitted by law.
This section shall survive the termination of this Agreement and the
Indenture.
Section 5.4. COMPANY NOT TO ADVERSELY AFFECT TAX EXEMPT STATUS OF BONDS'
INTEREST. The Company hereby represents that it has taken and caused to be
taken, and covenants that it will take and cause to be taken, all actions that
may be required of it, alone or in conjunction with the Issuer, for the interest
on the Series 1996 Bonds to be and remain excluded from gross income for federal
income tax purposes, and represents that it has not taken or permitted to be
taken on its behalf, and covenants that it will not take or permit to be taken
on its behalf, any action that would adversely affect such exclusion under the
provisions of the Code.
Section 5.5. COMPANY TO MAINTAIN ITS EXISTENCE; SALES OF ASSETS OR
MERGERS. The Company shall do all things necessary to preserve and keep in full
force and effect its existence, rights and franchises, except as otherwise
permitted by this Section 5.5. In particular, the Company shall not (a) sell,
transfer or otherwise dispose of all, or substantially all, of its assets;
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(b) consolidate with or merge into any other entity; or (c) permit one or more
other entities to consolidate with or merge into it. The preceding restrictions
shall not apply, however, to a transaction if all of the following conditions
are met:
(i) the transferee or the surviving or resulting entity is duly formed
and existing under the laws of one of the states of the United States of
America or the District of Columbia and is duly qualified to do business in
the State;
(ii) the transferee or the surviving or resulting entity, if other than
the Company, by proper written instrument satisfactory to the Issuer and
the Trustee, irrevocably and unconditionally assumes the obligation to
perform and observe the agreements and obligations of the Company under
this Agreement, the Indenture and the Notes;
(iii) no Event of Default, or condition which with the passage of time or
notice would become an Event of Default, will exist hereunder or under the
Indenture immediately after the transfer, consolidation or merger; and
(iv) the Company obtains the opinion of Bond Counsel regarding the
exclusion of interest on the Series 1996 Bonds from gross income for
federal income tax purposes.
Section 5.6. BOOKS AND RECORDS; FINANCIAL STATEMENTS. The Company shall
within 120 days after the close of each fiscal year furnish to the Trustee, the
Issuer and the Owner of any Bond who shall request the same in writing a copy of
each of the consolidated financial statements for the Company, certified by its
independent certified public accountants, that it customarily furnishes to its
shareholders; provided that so long as the Company is subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended, a copy of the
Company's annual report on Form 10-K shall satisfy this requirement. The
Company also agrees to furnish to the Trustee, the Issuer and the Owner of any
Bond who shall request the same in writing a copy of each of the other financial
statements and reports which it customarily furnishes to its shareholders at the
same times as they are furnished to its shareholders. The Company agrees to
permit the Issuer and the Trustee to examine the books and records of the
Company with respect to the Project at reasonable times and upon reasonable
notice.
Delivery of such reports, information and documents to the Trustee is for
informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder.
Section 5.7. MAINTENANCE OF PROJECT BY COMPANY. The Company agrees that
at all times during the term of this Agreement it will, at its own expense,
maintain, preserve and keep the Project or cause the Project to be maintained,
preserved and kept with the appurtenances and every part and parcel thereof, in
good repair, working order and condition and it will from time to time make or
cause to be made all necessary and proper repairs, replacements and renewals;
provided, however, that the Company shall not be under any obligation to renew,
repair or
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replace any inadequate, obsolete, worn-out, unsuitable, undesirable or
unnecessary portion of the Project. In any instance where the Company
determines that all or any portion of the Project has become inadequate,
obsolete, worn-out, unsuitable, undesirable or unnecessary, the Company may
remove all or such portion of the Project and sell, trade-in, exchange or
otherwise dispose of the Project or such removed portion, provided that such
removal shall not impair (i) the character of the Project as an "industrial
facility" as such term is defined in the Act, or (ii) the exclusion of interest
on the Bonds from gross income for federal income tax purposes.
The removal from the Project of any portion thereof pursuant to the
provisions of this Section shall not entitle the Company to any abatement or
diminution of the payments and other sums payable hereunder.
Section 5.8. INSURANCE REQUIRED. The Company agrees that at all times
during the term of this Agreement it will, at its own expense, insure the
Project in such amounts and in such manner (including self insurance) as its
similar properties are usually insured by it, and will carry liability insurance
with respect to the Project in such amounts and in such manner (including self
insurance) as are carried by it with respect to similar properties. The
proceeds of any fire or casualty insurance carried on the Project shall belong
solely to the Company and the Company shall have no obligation to pay any part
thereof to the Issuer or the Trustee. In addition, the Company shall have no
obligation to apply the proceeds of any insurance to the repair or
reconstruction of the Project.
Section 5.9. LAND USE. In the acquisition, construction, maintenance,
improvement and operation of the Project, the Company will comply in all
material respects with all applicable building, zoning, subdivision,
environmental protection, sanitary and safety and other land use laws, rules and
regulations and will not permit any nuisance thereat. It shall not be a breach
of this Section if the Company fails to comply with such laws, rules and
regulations during any period in which the Company shall in good faith be
diligently contesting the validity thereof.
Section 5.10. CURRENT EXPENSES. The Company will pay all costs and
expenses of operation, maintenance and upkeep of the Project including without
limitation all taxes, excises and other governmental charges lawfully levied
thereon or with respect to the Company's interest therein or use thereof. It
shall not be a breach of this Section if the Company fails to pay any such taxes
or charges during any period in which the Company shall in good faith be
diligently contesting the validity or amount thereof.
Section 5.11. COVENANT WITH RESPECT TO MORTGAGE. (a) The Company agrees
that it will not take (or permit to be taken) any action with respect to the
amendment or termination of the Mortgage or the rights of the owners thereunder,
the release of all or any part of the property subject to the lien of the
Mortgage, or the waiver or release of any right of the Company under the
Mortgage unless and until there has been delivered to the Trustee the following:
(1) written evidence from each Rating Agency to the effect that such action,
release or waiver will not result in the withdrawal or reduction of such Rating
Agency's then current rating of the Bonds; (2) an Opinion of Counsel stating
that such action by the Trustee is permitted by the Indenture and this
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Agreement; and (3) an Opinion of Tax Counsel stating that such action by the
Trustee will not adversely affect the exclusion of interest on the Bonds from
gross income for federal income tax purposes. At such time as the Company's
obligations under the Senior Loan Document (or any refinancing thereof) have
been fully discharged, it is the Company's intention that the Bondholders
(together with the holders of any other debt then secured under the Mortgage)
shall succeed to all the rights and remedies under the Mortgage of the lenders
under the Senior Loan Document, with full right to control any proceedings
thereunder.
(b) By its execution and delivery of this Agreement, the Company
authorizes the Trustee to execute and deliver the Mortgage Acknowledgement
attached to the Indenture. In connection with such execution and delivery by
the Trustee, the Company represents to the Trustee for the benefit of Owners of
the Bonds that the Bonds constitute "Permitted IRB Debt" as defined in the
Mortgage.
(End of Article V)
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ARTICLE VI
REDEMPTION OF SERIES 1996 BONDS
Section 6.1. OPTIONAL REDEMPTION. Provided no Event of Default shall have
occurred and be subsisting, at any time and from time to time, the Company may
deliver moneys to the Trustee in addition to Loan Payments or Additional
Payments required to be made for the purpose of prepaying amounts due under this
Agreement and the Series 1996 Note and direct the Trustee to use the moneys so
delivered for the purpose of purchasing or redeeming Bonds pursuant to
Subsection 4.01(c) of the Indenture of the Series 1996 Bonds. Pending
application for those purposes, any moneys so delivered shall be held by the
Trustee in a special account in the Bond Fund and delivery of those moneys shall
not operate to abate or postpone Loan Payments or Additional Payments otherwise
becoming due or to alter or suspend any other obligations of the Company under
this Agreement or the Series 1996 Note.
Section 6.2. EXTRAORDINARY OPTIONAL REDEMPTION. The Company may deliver,
subject to the conditions hereinafter imposed, to the Trustee the moneys needed
to redeem the entire unpaid principal balance of the Series 1996 Bonds in
accordance with Subsection 4.01(a) of the Indenture upon the occurrence of any
of the following events:
(a) The Project shall have been damaged or destroyed to such an extent
that the Company has determined and notified the Issuer and the Trustee
that (1) the Project cannot reasonably be expected to be restored, within a
period of six consecutive months, to the condition thereof immediately
preceding such damage or destruction or (2) the normal use and operation of
the Project is reasonably expected to be prevented for a period of six
consecutive months;
(b) Title to, or the temporary use of, all or a significant part of the
Project shall have been taken under the exercise of the power of eminent
domain to such extent that (1) the Project cannot reasonably be expected to
be restored within a period of six consecutive months to a condition of
usefulness comparable to that existing prior to the taking or (2) as a
result of the taking, normal use and operation of the Project is reasonably
expected to be prevented for a period of six consecutive months;
(c) As a result of any changes in the Constitution of the State, the
Constitution of the United States of America, or state or federal laws as a
result of legislative or administrative action or by final decree, judgment
or order of any court or administrative body (whether state or federal)
entered after the contest thereof by the Issuer or the Company in good
faith, the obligations of the Company under this Agreement or the Series
1996 Note shall have become void or unenforceable or impossible of
performance in any material respect in accordance with the intent and
purpose of the parties as expressed in this Agreement and the Series 1996
Note, or if unreasonable burdens or excessive liabilities shall have been
imposed with respect to the Project or the operation
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thereof, including, without limitation, federal, state or other ad valorem
property, income or other taxes not being imposed on the date of this
Agreement other than ad valorem taxes presently levied upon privately owned
property used for the same general purpose as the Project; or
(d) Changes in economic availability of raw materials, operating supplies
or facilities necessary to operate the Project or technological or other
changes make continued operation of the Project uneconomical in the opinion
of the Company.
Moneys delivered by the Company to the Trustee pursuant to this Section shall
upon the redemption of the Series 1996 Bonds constitute a prepayment of amounts
otherwise due under the Section 4.1 of this Agreement and of the Series 1996
Note. The Company shall, if it is to exercise its right to prepayment specified
in this Section, within six months following the occurrence of an event
described above, give notice to the Issuer and to the Trustee of such occurrence
and, if the Company shall so elect, upon the occurrence of an event specified in
clauses (a) or (b) above, that the Company does not intend to restore the
affected Project. Such notice also shall specify the date on which the Company
will deliver the funds required to redeem the Series 1996 Bonds, which date
shall be not more than ninety days from the date that notice is mailed. The
Company shall make arrangements satisfactory to the Trustee for the giving of
the required notice of redemption.
The amount payable by the Company in the event of redemption of Series 1996
Bonds pursuant to this Section and Subsection 4.01(a) of the Indenture shall be
the sum of the following:
(i) An amount of money which, when added to the moneys and investments
held to the credit of the Bond Fund, will be sufficient pursuant to the
provisions of the Indenture to pay, at par, plus any accrued interest
thereon, and discharge all then outstanding Series 1996 Bonds of the
applicable series on the earliest applicable redemption date, that amount
to be paid to the Trustee, plus
(ii) An amount of money equal to the Additional Payments relating to the
applicable Series 1996 Bonds accrued and to accrue until actual final
payment and redemption of such Series 1996 Bonds, that amount or applicable
portions thereof to be paid to the Trustee or to the Persons to whom those
Additional Payments are or will be due, plus
(iii) An amount sufficient to pay all amounts due or that will become due
with respect to the Series 1996 Bonds pursuant to Section 3.5 hereof,
Section 5.08 of the Indenture and Section 148(f) of the Code.
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The requirement of (ii) above with respect to Additional Payments to accrue may
be met if provisions satisfactory to the Trustee and the Issuer are made for
paying those amounts as they accrue.
Section 6.3. MANDATORY REDEMPTION IN EVENT OF A DETERMINATION OF
TAXABILITY. Upon receipt by the Company from any Owner or the Trustee of notice
of Determination of Taxability with respect to the Series 1996 Bonds, the
Company shall, in the manner and upon the earliest practicable date selected by
the Trustee (after consultation with the Company as provided in the Indenture),
and in no event later than 180 days following that notice, deliver to the
Trustee the moneys needed to redeem the applicable principal amount of
outstanding Series 1996 Bonds in accordance with the loss of tax exemption
redemption provisions set forth in Subsection 4.01(b) of the Indenture. The
amount payable by the Company in such event shall be an amount which, together
with any moneys available in the Bond Fund for such purposes, shall equal 100%
of the outstanding principal amount of the series of Series 1996 Bonds to be
redeemed, together with accrued interest to the redemption date. In the event
that all Series 1996 Bonds are redeemed in accordance with this Section, the
amount payable by the Company shall include an amount of money equal to the
Additional Payments relating to the Series 1996 Bonds accrued and to accrue
until actual final payment and redemption of the Series 1996 Bonds. Moneys
delivered by the Company to the Trustee pursuant to this Section shall upon the
redemption of the Series 1996 Bonds constitute a prepayment of amounts otherwise
due under Section 4.1 hereof and the Series 1996 Note.
Section 6.4. ACTIONS BY ISSUER. At the request of the Company or the
Trustee, the Issuer shall take all steps, if any, required of it under the
applicable provisions of the Indenture or the Series 1996 Bonds to effect the
redemption of all or a portion of the Series 1996 Bonds pursuant to this
Article VI.
(End of Article VI)
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ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
Section 7.1. EVENTS OF DEFAULT. Each of the following shall be an Event
of Default:
(a) The Company shall fail to pay any Loan Payment when and as that Loan
Payment is due and payable;
(b) The Company shall fail to deliver to the Trustee, or cause to be
delivered on its behalf, the moneys needed to redeem any outstanding Series
1996 Bonds in the manner and upon the date requested in writing by the
Trustee as provided in Article VI of this Agreement;
(c) The Company shall fail to observe and perform any other agreement,
term or condition contained in this Agreement (other than with respect to
Section 5.4 hereof), and the continuation of such failure for a period of
ninety days after notice thereof shall have been given to the Company by
the Trustee, or for such longer period as the Trustee may agree to in
writing; provided, that if the failure is other than the payment of money
and is of such nature that it can be corrected, but not within the
applicable period, that failure shall not constitute an Event of Default so
long as the Company institutes curative action within the applicable period
and diligently pursues such action to completion;
(d) The Company shall: (i) fail to pay, or admit in writing its inability
to pay, its debts generally as they become due; (ii) have an order for
relief entered in any case commenced by or against it under the federal
bankruptcy laws, as now or hereafter in effect; (iii) commence a proceeding
under any other federal or state bankruptcy, insolvency, reorganization or
similar law, or have such a proceeding commenced against it and either have
an order of insolvency or reorganization entered against it or have such a
proceeding remain undismissed and unstayed for ninety days; (iv) make an
assignment for the benefit of creditors; or (v) have a receiver or trustee
appointed for it or for the whole or any substantial part of its property;
(e) The occurrence and continuance of a Change of Control;
(f) The occurrence and continuance of any event of default under the
Senior Loan Document resulting in the acceleration of the Senior Debt; and
(g) The occurrence and continuance of any event of default under the
Refunding Loan Agreement or the Refunding Trust Indenture dated as of
July 1, 1996 between the Issuer and The Bank of New York, as Trustee.
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Notwithstanding the foregoing, if, by reason of Force Majeure, the Company
is unable to perform or observe any agreement, term or condition hereof (other
than any under Sections 7.1(a), (b) or (d) or otherwise with respect to the
payment of money, as to which Force Majeure shall not be applicable) which would
give rise to an Event of Default under subsection (c) hereof, the Company shall
not be deemed in default during the continuance of such inability. However, the
Company shall promptly give notice to the Trustee and the Issuer of the
existence of an event of Force Majeure and shall use its best efforts to remove
the effects thereof; provided that the settlement of strikes or other industrial
disturbances shall be entirely within its discretion.
The term Force Majeure shall mean, without limitation, the following:
(i) acts of God; strikes, lockouts or other industrial disturbances;
acts of public enemies; orders or restraints of any kind of the
government of the United States of America or of the State or any of
their departments, agencies, political subdivisions or officials, or
any civil or military authority; insurrections; civil disturbances;
riots; epidemics; landslides; lightning; earthquakes; fires;
hurricanes; tornadoes; storms; droughts; floods; arrests; restraint of
government and people; explosions; breakage, malfunction or accident
to facilities, machinery, transmission pipes or canals; partial or
entire failure of utilities; shortages of labor, materials, supplies
or transportation; or
(ii) any cause, circumstance or event not reasonably within the
control of the Company.
The declaration of an Event of Default under subsection (d) above, and the
exercise of remedies upon any such declaration, shall be subject to any
applicable limitations of federal bankruptcy law affecting or precluding that
declaration or exercise during the pendency of or immediately following any
bankruptcy, liquidation or reorganization proceedings.
Section 7.2. REMEDIES ON DEFAULT. Whenever an Event of Default shall have
happened and be subsisting, any one or more of the following remedial steps may
be taken:
(a) If acceleration of the principal amount of the Series 1996 Bonds has
been declared pursuant to Section 7.03 of the Indenture, the Trustee shall
declare all Loan Payments to be immediately due and payable, whereupon the
same shall become immediately due and payable;
(b) The Issuer or the Trustee may have access to, inspect, examine and
make copies of the books, records, accounts and financial data of the
Company pertaining to the Project; or
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(c) The Issuer or the Trustee may pursue all remedies now or hereafter
existing at law or in equity to collect all amounts then due and thereafter
to become due under this Agreement or the Series 1996 Note or to enforce
the performance and observance of any other obligation or agreement of the
Company under those instruments.
Notwithstanding the foregoing, the Issuer shall not be obligated to take any
step which in its opinion will or might cause it to expend time or money or
otherwise incur liability unless and until a satisfactory indemnity bond has
been furnished to the Issuer at no cost or expense to the Issuer. Any amounts
collected as Loan Payments or applicable to Loan Payments and any other amounts
which would be applicable to payment of Bond Service Charges collected pursuant
to action taken under this Section shall be paid into the Bond Fund and applied
in accordance with the provisions of the Indenture or, if the outstanding Bonds
have been paid and discharged in accordance with the provisions of the
Indenture, shall be paid as provided in Section 5.06 of the Indenture for
transfers of remaining amounts in the Bond Fund.
If an Event of Default under Section 7.1(d) hereof shall occur and be
continuing, the Trustee shall be entitled and empowered, by intervention in such
proceedings or otherwise, to file and prove a claim or claims for the whole
amount owing and unpaid pursuant to this Agreement, irrespective of whether the
principal of the Bonds or any amount hereunder shall then be due and payable as
therein or herein expressed or by declaration or otherwise, and irrespective of
whether the Trustee shall have made any demand pursuant to the provisions of
this Section 7.2 or of Section 6.02 of the Indenture, and, in case of any
judicial proceedings, to file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the Trustee
allowed in such judicial proceedings relative to the Company, its creditors, or
its property, and to collect and receive any moneys or other property payable or
deliverable on any such claims, and to distribute the same after the deduction
of its charges and expenses; and any receiver, assignee or trustee in bankruptcy
or reorganization is hereby authorized to make such payments to the Trustee, and
to pay to the Trustee any amount due it for compensation and expenses, including
reasonable counsel fees and disbursements incurred by it up to the date of such
distribution.
The provisions of this Section are subject to the further limitation that
the rescission by the Trustee of its declaration that all of the Series 1996
Bonds are immediately due and payable also shall constitute an annulment of any
corresponding declaration made pursuant to paragraph (a) of this Section and a
waiver and rescission of the consequences of that declaration and of the Event
of Default with respect to which that declaration has been made, provided that
no such waiver or rescission shall extend to or affect any subsequent or other
default or impair any right consequent thereon.
Section 7.3. NO REMEDY EXCLUSIVE. No remedy conferred upon or reserved to
the Issuer or the Trustee by this Agreement is intended to be exclusive of any
other available remedy or remedies, but each and every such remedy shall be
cumulative and shall be in addition to every other remedy given under this
Agreement or the Series 1996 Note, or now or hereafter existing at law, in
equity or by statute. No delay or omission to exercise any right or power
accruing
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upon any default shall impair that right or power or shall be construed to be a
waiver thereof, but any such right and power may be exercised from time to time
and as often as may be deemed expedient. In order to entitle the Issuer or the
Trustee to exercise any remedy reserved to it in this Article, it shall not be
necessary to give any notice, other than any notice required by law or for which
express provision is made herein.
Section 7.4. AGREEMENT TO PAY ATTORNEYS' FEES AND EXPENSES. If an Event
of Default should occur and the Issuer or the Trustee should incur expenses,
including, without limitation, attorneys' fees and expenses, in connection with
the enforcement of this Agreement, the Series 1996 Note or the Indenture or the
collection of sums due thereunder, the Company shall reimburse the Issuer and
the Trustee, as applicable, for such expenses so incurred upon demand, together
with interest thereon from the date of demand for payment at the Interest Rate
for Advances, to the date of payment thereof.
Section 7.5. NO WAIVER. No failure by the Issuer or the Trustee to insist
upon the strict performance by the Company of any provision hereof shall
constitute a waiver of their right to strict performance and no express waiver
shall be deemed to apply to any other existing or subsequent right to remedy the
failure by the Company to observe or comply with any provision hereof.
Section 7.6. NOTICE OF DEFAULT. The Company shall notify the Trustee in
writing immediately if it becomes aware of the occurrence of any Event of
Default hereunder of any fact, condition or event which, with the giving of
notice or passage of time or both, would become an Event of Default.
(End of Article VII)
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ARTICLE VIII
MISCELLANEOUS
Section 8.1. TERM OF AGREEMENT. This Agreement shall be and remain in
full force and effect from the date of delivery of the Series 1996 Bonds to the
Original Purchaser until such time as all of the Bonds shall have been fully
paid (or provision made for such payment) pursuant to Article IX of the
Indenture and all other sums payable by the Company under this Agreement and the
Series 1996 Note shall have been paid, except for obligations of the Company
under Sections 3.5, 4.2 and 5.3 hereof, which shall survive any termination of
this Agreement.
Section 8.2. AMOUNTS REMAINING IN FUNDS. Any amounts in the Bond Fund
remaining unclaimed by the Owners of Bonds for two years after the due date
thereof (whether at stated maturity, by redemption or pursuant to any mandatory
sinking fund requirements or otherwise), at the option of the Company, shall be
deemed to belong to and shall be paid, at the written request of the Company, to
the Company by the Trustee as overpayment of Loan Payments. With respect to
that principal of and interest and any premium on the Bonds to be paid from
moneys paid to the Company pursuant to the preceding sentence, the Owners of the
Bonds entitled to those moneys shall look solely to the Company for the payment
of those moneys (which shall remain unconditionally obligated to make such
payments). Further, any amounts remaining in the Bond Fund, the Rebate Fund and
any other special funds or accounts created under this Agreement or the
Indenture after all of the outstanding Bonds shall be deemed to have been paid
and discharged under the provisions of the Indenture and all other amounts
required to be paid under this Agreement, the Notes and the Indenture have been
paid, shall be paid to the Company to the extent that those moneys are in excess
of the amounts necessary to effect the payment and discharge of the outstanding
Bonds, provided that, with respect to any moneys remaining in any of the
accounts in the Rebate Fund, such moneys shall not be paid to the Company until
after the Trustee has made the final payment from that account to the United
States in accordance with Section 5.08 of the Indenture and Section 148 of the
Code.
Section 8.3. NOTICES. All notices, certificates, requests or other
communications hereunder shall be in writing and shall be deemed to be
sufficiently given when mailed by first class mail, postage prepaid, and
addressed to the appropriate Notice Address. A duplicate copy of each notice,
certificate, request or other communication given hereunder to the Issuer, the
Company and the Trustee shall also be given to the others. The Company, the
Issuer and the Trustee, by notice given hereunder, may designate any further or
different addresses to which subsequent notices, certificates, requests or other
communications shall be sent.
Section 8.4. EXTENT OF COVENANTS OF THE ISSUER; NO PERSONAL LIABILITY.
All covenants, obligations and agreements of the Issuer contained in this
Agreement or the Indenture shall be effective to the extent authorized and
permitted by applicable law. No such covenant, obligation or agreement shall be
deemed to be a covenant, obligation or agreement of any present or future
member, trustee, officer, agent or employee of the Issuer in other than his
official capacity, and
32
<PAGE>
neither the members of the Issuer nor any official executing the Bonds shall be
liable personally on the Bonds or be subject to any personal liability or
accountability by reason of the issuance thereof or by reason of the covenants,
obligations or agreements of the Issuer contained in this Agreement or in the
Indenture.
Section 8.5. BINDING EFFECT. This Agreement shall inure to the benefit of
and shall be binding in accordance with its terms upon the Issuer, the Company
and their respective permitted successors and assigns provided that this
Agreement may not be assigned by the Company (except pursuant to Sections 4.7,
5.2 and 5.5 hereof) and may not be assigned by the Issuer except to the Trustee
pursuant to the Indenture or as otherwise may be necessary to enforce or secure
payment of Bond Service Charges. This Agreement may be enforced only by the
parties, their assignees and others who may, by law, stand in their respective
places.
Section 8.6. AMENDMENTS AND SUPPLEMENTS. Except as otherwise expressly
provided in this Agreement or the Indenture, subsequent to the issuance of the
Series 1996 Bonds and prior to all conditions provided for in the Indenture for
release of the Indenture having been met, this Agreement may not be effectively
amended, changed, modified, altered or terminated except in accordance with the
provisions of Article XI of the Indenture, as applicable.
Section 8.7. EXECUTION COUNTERPARTS. This Agreement may be executed in
any number of counterparts, each of which shall be regarded as an original and
all of which shall constitute but one and the same instrument.
Section 8.8. SEVERABILITY. If any provision of this Agreement, or any
covenant, obligation or agreement contained herein is determined by a court to
be invalid or unenforceable, that determination shall not affect any other
provision, covenant, obligation or agreement, each of which shall be construed
and enforced as if the invalid or unenforceable portion were not contained
herein. That invalidity or unenforceability shall not affect any valid and
enforceable application thereof, and each such provision, covenant, obligation
or agreement shall be deemed to be effective, operative, made, entered into or
taken in the manner and to the full extent permitted by law.
Section 8.9. GOVERNING LAW. This Agreement shall be deemed to be a
contract made under the laws of the State and for all purposes shall be governed
by and construed in accordance with the laws of the State.
Section 8.10. FURTHER ASSURANCES AND CORRECTIVE INSTRUMENTS. The Issuer
and the Company agree that they will, from time to time, execute, acknowledge
and deliver, or cause to be executed, acknowledged and delivered, such
supplements hereto and such further instruments as may reasonably be required
for carrying out the expressed intention of this Agreement.
Section 8.11. ISSUER AND COMPANY REPRESENTATIVE. Whenever under the
provisions of this Agreement the approval of the Issuer or the Company is
required or the Issuer or the Company is required to take some action at the
request of the other, such approval or such
33
<PAGE>
request shall be given for the Issuer by an Authorized Issuer Representative, as
defined in a Resolution of the Issuer relating to the Series 1996 Bonds, and for
the Company by an Authorized Company Representative. The Trustee shall be
authorized to act on any such approval or request.
Section 8.12. MATTERS TO BE CONSIDERED BY THE ISSUER. In approving,
concurring in or consenting to action or in exercising any discretion or in
making any determination under this Agreement or the Indenture, the Issuer may
consider the interests of the public, which shall include the anticipated effect
as well as the interests of the Company and the Issuer; provided, however,
nothing shall be construed as conferring on any person other than the Trustee
and the Owners any right to notice, hearing or participation in the Issuer's
consideration, and nothing in this Section shall be construed as conferring on
any of them any right additional to those conferred elsewhere. Subject to the
foregoing, the Issuer will not unreasonably withhold any approval or consent to
be given by it hereunder.
(End of Article VIII)
34
<PAGE>
IN WITNESS WHEREOF, the Issuer and the Company have caused this Agreement
to be duly executed in their respective names, all as of the date hereinbefore
written.
BUSINESS FINANCE AUTHORITY OF THE STATE OF
NEW HAMPSHIRE
By: /s/ Jack Donovan
-------------------------------------
Executive Director
CROWN PAPER CO.
By: /s/ Christopher M. McLain
-------------------------------------
Name: Christopher M. McLain
Title: Senior Vice President
35
<PAGE>
EXHIBIT A
FORM OF NOTE
This Promissory Note has not been registered under the Securities Act of
1933. Its transferability is restricted by the Trust Indenture and the Loan
Agreement referred to herein.
CROWN PAPER CO.
SERIES 1996 NOTE
Crown Paper Co. (the "Company"), a Virginia corporation, for value
received, promises to pay to The Bank of New York, as Trustee (the "Trustee")
under the Indenture hereinafter referred to, the principal sum of
TWELVE MILLION THREE HUNDRED THOUSAND DOLLARS ($12,300,000)
and to pay interest on the unpaid balance of such principal sum from and
after July 18, 1996 at the Applicable Rate until the payment of such
principal sum has been made or provided for. As used herein, "Applicable
Rate" means seven and seven-eights percent (7.875%) per annum. Interest
shall be calculated on the basis of a 360-day year, consisting of twelve
30-day months.
This Series 1996 Note has been executed and delivered by the Company to the
Trustee pursuant to a certain Loan Agreement (the "Agreement") of even date
herewith, between the Business Finance Authority of the State of New Hampshire
(the "Issuer") and the Company. Under the Agreement, the Issuer has applied the
proceeds received from the sale of the Issuer's $12,300,000 aggregate principal
amount of Sewage and Solid Waste Disposal Revenue Bonds (Crown Paper Co.
Project), Series 1996, and the Company has agreed to make Loan Payments at the
times and in the amounts set forth in the Agreement and in this Series 1996 Note
for application to the payment of the principal of and interest on the Series
1996 Bonds as and when due. The Series 1996 Bonds have been issued,
concurrently with the execution and delivery of this Series 1996 Note, pursuant
to, and are secured by, the Trust Indenture (the "Indenture"), dated as of July
1, 1996, between the Issuer and the Trustee.
The Series 1996 Bonds bear interest from their date at the Applicable Rate
payable on January 1 and July 1 of each year, commencing on July 1, 1997 (each,
an "Interest Payment Date"), and the Series 1996 Bonds mature on July 1, 2026.
To provide funds to pay the principal of and interest on the Series 1996
Bonds as and when due as above-specified, the Company hereby agrees to and shall
make as Loan Payments in immediately available funds on or before each date that
any principal or interest on any Series
A-1
<PAGE>
1996 Bond is due (at maturity, upon redemption, by acceleration or otherwise) an
amount equal to the amount payable as principal and interest, on the Series 1996
Bonds on such date.
If payment or provision for payment in accordance with the Indenture is
made in respect of the principal of and interest on all or any portion of the
Bonds from moneys other than payments on the Series 1996 Note from the Company,
this Series 1996 Note shall be deemed paid to the extent such payments or
provision for payment of Series 1996 Bonds has been made. If the Series 1996
Bonds are thereby deemed paid in full, this Series 1996 Note shall be cancelled
and returned to the Company. The Company shall receive a credit against its
obligation to make payments hereunder to the extent of moneys available in the
Bond Fund, created by the Indenture, for payment of principal and interest on
the Series 1996 Bonds, as provided in the Agreement. In any event, however, if
on any date that any payment of principal or interest on any Series 1996 Bond is
due (at maturity, upon redemption, by acceleration or otherwise), the balance in
the Bond Fund (which is available therefor) is for any reason insufficient to
make required payments of Bond Service Charges, as and when due, the Company
forthwith shall pay to the Trustee, in immediately available funds, for the
account of the Issuer and for deposit into the Bond Fund, any deficiency. If
the Series 1996 Bonds are thereby deemed paid in full, this Series 1996 Note
shall be cancelled and returned to the Company. Subject to the foregoing, all
payments on the Series 1996 Note from the Company shall be in the full amount
required hereunder.
All Loan Payments shall be payable in lawful money of the United States of
America and shall be made to the Trustee at its principal corporate trust office
in New York, New York, for the account of the Issuer and deposited in the Bond
Fund created by the Indenture. Except as otherwise provided in the Indenture,
such Loan Payments shall be used by the Trustee to pay the principal of and
interest on the Series 1996 Bonds as and when due.
The obligation of the Company to make the payments required hereunder shall
be absolute and unconditional under any and all circumstances whatsoever and the
Company shall make such payments without abatement, diminution or deduction
regardless of any cause or circumstances whatsoever including, without
limitation, any defense, set-off, recoupment or counterclaim which the Company
may have or assert against the Issuer, the Trustee or any other person.
This Note is subject to optional and mandatory prepayment prior to stated
maturity pursuant to the obligation of the Company to give the Issuer and the
Trustee sufficient notice of such prepayment as shall enable the Issuer and the
Trustee to take all action necessary under the Indenture to redeem on the date
specified for prepayment a like principal amount of Series 1996 Bonds at the
same redemption price.
Whenever an Event of Default under Section 7.01 of the Indenture (other
than an Event of Default as defined in Section 7.01(c) thereof) shall have
occurred and, as a result thereof, the principal of all Series 1996 Bonds then
outstanding, and interest accrued thereon, shall have been declared to be
immediately due and payable pursuant to Section 7.02 of the Indenture, the
unpaid
A-2
<PAGE>
principal amount of and accrued interest on this Series 1996 Note shall also be
due and payable on the date on which the principal of and interest on the Series
1996 Bonds shall have been declared due and payable; provided that the annulment
of a declaration of acceleration with respect to the Series 1996 Bonds shall
also constitute an annulment of any corresponding acceleration with respect to
this Series 1996 Note.
If an Event of Default should occur and the Issuer or the Trustee should
incur expenses, including attorneys' fees and expenses, in connection with the
enforcement of this Series 1996 Note, the Agreement or the Indenture or the
collection of sums due thereunder, the Company shall reimburse the Issuer or the
Trustee, as applicable, for reasonable expenses so incurred upon demand,
together with interest thereon from the date of demand for payment at the
Interest Rate for Advances, to the date of payment thereof.
IN WITNESS WHEREOF, the Company has caused this Series 1996 Note to be
executed in its name by a duly authorized officer as of July 18, 1996.
CROWN PAPER CO.
By: /s/ Christopher M. McLain
-------------------------------------
Title: Senior Vice President
A-3
<PAGE>
EXHIBIT B
PROJECT FACILITIES
The Project Facilities to be financed with the proceeds of the Series 1996
Bonds consists of sewage facilities and solid waste disposal facilities to be
installed at Crown Paper Company's Berlin-Gorham, New Hampshire Mill, including
the following:
A. SOLID WASTE DISPOSAL FACILITIES:
1. Closure of Mt. Carbury Landfill cells;
2. Closure of Dummer Yard Landfill;
3. Installation of Soap Skimmer/Soap Removal System;
4. Construction of new cells at Mt. Carbury Landfill;
5. Improvements to Lime Mud/Caustic Area processing;
B. SEWAGE FACILITIES
6. NCG Collection System;
7. Improvements to Burgess Waste Water Treatment Plant System, including
replacements of effluent pipes, pumps, aerators, clarifiers and
control systems;
8. Miscellaneous small projects for replacements within, or improvements
to, the Burgess Waste Water Treatment Plant.
C. Together with facilities incidental to the foregoing, including any
necessary grading, site preparation and excavation, electrical and overhead, and
any other machinery and equipment necessary and desirable in connection with the
operation of the Project, together with any replacement thereof and
substitutions therefor.
B-1
<PAGE>
EXHIBIT C
FORM OF REQUISITION
Requisition No. _________
REQUISITION FOR PAYMENT FROM THE PROJECT FUND
To: The Bank of New York, as Trustee under the Trust Indenture dated as of
July 1, 1996 (the "Indenture") between the Business Finance Authority of
the State of New Hampshire, (the "Issuer") and the Trustee.
Pursuant to Section 5.02 of the Indenture and Section 3.2 of the Loan
Agreement dated as of July 1, 1996 (the "Agreement") between the Issuer and the
undersigned, Crown Paper Co. (the "Company"), you are hereby authorized and
directed to make payments or reimbursements from the Project Fund in the
amount(s) and to the payee(s) set forth on Schedule A hereto. Terms defined in
the Agreement and Indenture have the same meanings when used herein.
C-1
<PAGE>
In connection with this Requisition, the undersigned hereby certifies that
(i) after giving effect to the payment of this Requisition, the use of all
moneys disbursed from the Project Fund complies, to the best knowledge of the
Authorized Company Representative, with the limitations contained in the
Borrowers' Federal Tax Statement; (ii) the foregoing payments or reimbursements
are of Project costs described in Section 3.2 of the Agreement and the
obligations have not been the basis for a prior requisition which has been paid;
(iii) except for deposits or progress payments on account of equipment or other
property on order and designated as such in this Requisition, all machinery,
equipment and personal property included in this Requisition have been delivered
to the Project site and accepted by the Company and upon payment of this
Requisition, the Company will have good title thereto; (iv) to the best
knowledge of the Authorized Company Representative, no Event of Default and no
event or condition which, after notice or lapse of time or both, would become an
Event of Default under the Agreement or the Indenture exists and the
representations and warranties of the Company contained in the Agreement are
true and correct as of the date hereof (except to the extent such
representations and warranties relate solely to an earlier date); (v) the
payment or reimbursement requested by this Requisition is due for work actually
performed or materials or property actually supplied prior to the date of the
requisition; (vi) to the best knowledge of the Authorized Company
Representative, all amounts previously requisitioned and disbursed from the
Project Fund for payment of subcontractors and suppliers of materials and labor
have been so applied; (vii) the payment or reimbursement requested by this
Requisition does not include any portion of a contract price entitled to be
retained by the Company; and (viii) all work and all materials, equipment or
other property included in this Requisition have been performed or supplied in
accordance with the Project specifications described in Section 3.3 of the
Agreement.
Dated: CROWN PAPER CO.
By
--------------------------------------
Authorized Company Representative
C-2
<PAGE>
SCHEDULE A TO REQUISITION NO.
Name and Address
of Person to Whom Nature of Goods
Amount of Payment Payment or or Other Property
or Reimbursement Due Reimbursement is Due or Services Received
-------------------- -------------------- --------------------
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REFUNDING LOAN AGREEMENT
between
BUSINESS FINANCE AUTHORITY OF THE STATE OF NEW HAMPSHIRE
and
CROWN PAPER CO.
-----------------------------
$17,955,000
Pollution Control and Solid Waste Disposal
Refunding Revenue Bonds
(Crown Paper Co. Project)
Series 1996
-----------------------------
Dated
as of
July 1, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1. Use of Defined Terms . . . . . . . . . . . . . . . . . . 1
Section 1.2. Definitions. . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.3. Interpretation . . . . . . . . . . . . . . . . . . . . . 6
Section 1.4. Captions and Headings. . . . . . . . . . . . . . . . . . 6
ARTICLE II REPRESENTATIONS. . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2.1. Representations and Covenants of the Company . . . . . . 7
ARTICLE III ISSUANCE OF THE SERIES 1996 REFUNDING BONDS . . . . . . . . . . 9
Section 3.1. Issuance of the Series 1996 Refunding Bonds;
Application of Proceeds . . . . . . . . . . . . . . . . 9
Section 3.2. Application of Series 1996 Refunding Bond Proceeds;
Company Required to Pay Costs in Event Refunding
Project Fund Insufficient . . . . . . . . . . . . . . . 9
Section 3.3. [Reserved] . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.4. Investment of Fund Moneys. . . . . . . . . . . . . . . . 9
Section 3.5. Rebate Fund. . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE IV LOAN BY ISSUER; REPAYMENT OF THE LOAN;
LOAN PAYMENTS AND ADDITIONAL PAYMENTS . . . . . . . . . . . . . . . . . 11
Section 4.1. Loan Repayment; Delivery of Notes. . . . . . . . . . . . 11
Section 4.2. Additional Payments. . . . . . . . . . . . . . . . . . . 12
Section 4.3. Place of Payments. . . . . . . . . . . . . . . . . . . . 13
Section 4.4. Obligations Unconditional. . . . . . . . . . . . . . . . 13
Section 4.5. Assignment of Agreement and Revenues; Binding Effect
of Indenture on Company; Financing Statements . . . . . 13
Section 4.6. Deposit of Moneys in Bond Fund; Moneys for Redemption. . 14
Section 4.7. Assignment by Company. . . . . . . . . . . . . . . . . . 14
ARTICLE V ADDITIONAL AGREEMENTS AND COVENANTS . . . . . . . . . . . . . . . 16
Section 5.1. Right of Inspection. . . . . . . . . . . . . . . . . . . 16
Section 5.2. Sale, Lease or Grant of Use by Company . . . . . . . . . 16
Section 5.3. Indemnification. . . . . . . . . . . . . . . . . . . . . 16
Section 5.4. Company Not to Adversely Affect Tax Exempt Status of
Bonds' Interest . . . . . . . . . . . . . . . . . . . . 17
Section 5.5. Company to Maintain its Existence; Sales of Assets or
Mergers . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 5.6. Books and Records; Financial Statements. . . . . . . . . 18
Section 5.7. Maintenance of Project by Company. . . . . . . . . . . . 18
Section 5.8. Insurance Required . . . . . . . . . . . . . . . . . . . 19
Section 5.9. Land Use . . . . . . . . . . . . . . . . . . . . . . . . 19
i
<PAGE>
Section 5.10. Current Expenses . . . . . . . . . . . . . . . . . . . . 19
Section 5.11. Covenant with respect to Mortgage. . . . . . . . . . . . 19
ARTICLE VI REDEMPTION OF SERIES 1996 REFUNDING BONDS. . . . . . . . . . . . 21
Section 6.1. Optional Redemption. . . . . . . . . . . . . . . . . . . 21
Section 6.2. Extraordinary Optional Redemption. . . . . . . . . . . . 21
Section 6.3. Mandatory Redemption in Event of a Determination of
Taxability. . . . . . . . . . . . . . . . . . . . . . . 23
Section 6.4. Actions by Issuer. . . . . . . . . . . . . . . . . . . . 23
ARTICLE VII EVENTS OF DEFAULT AND REMEDIES. . . . . . . . . . . . . . . . . 24
Section 7.1. Events of Default. . . . . . . . . . . . . . . . . . . . 24
Section 7.2. Remedies on Default. . . . . . . . . . . . . . . . . . . 25
Section 7.3. No Remedy Exclusive. . . . . . . . . . . . . . . . . . . 26
Section 7.4. Agreement to Pay Attorneys' Fees and Expenses. . . . . . 27
Section 7.5. No Waiver. . . . . . . . . . . . . . . . . . . . . . . . 27
Section 7.6. Notice of Default. . . . . . . . . . . . . . . . . . . . 27
ARTICLE VIII MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 8.1. Term of Agreement. . . . . . . . . . . . . . . . . . . . 28
Section 8.2. Amounts Remaining in Funds . . . . . . . . . . . . . . . 28
Section 8.3. Notices. . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 8.4. Extent of Covenants of the Issuer; No Personal
Liability . . . . . . . . . . . . . . . . . . . . . . . 28
Section 8.5. Binding Effect . . . . . . . . . . . . . . . . . . . . . 29
Section 8.6. Amendments and Supplements . . . . . . . . . . . . . . . 29
Section 8.7. Execution Counterparts . . . . . . . . . . . . . . . . . 29
Section 8.8. Severability . . . . . . . . . . . . . . . . . . . . . . 29
Section 8.9. Governing Law. . . . . . . . . . . . . . . . . . . . . . 29
Section 8.10. Further Assurances and Corrective Instruments. . . . . . 29
Section 8.11. Issuer and Company Representative. . . . . . . . . . . . 29
Section 8.12. Matters to be Considered by the Issuer . . . . . . . . . 30
EXHIBIT A FORM OF NOTE. . . . . . . . . . . . . . . . . . . . . . . . . . .A-1
EXHIBIT B PROJECT FACILITIES. . . . . . . . . . . . . . . . . . . . . . . .B-1
ii
<PAGE>
REFUNDING LOAN AGREEMENT
THIS REFUNDING LOAN AGREEMENT (the "Agreement") is made and entered into as
of July 1, 1996 between the BUSINESS FINANCE AUTHORITY OF THE STATE OF NEW
HAMPSHIRE, a body corporate and politic as an agency of the State of New
Hampshire (the "Issuer"), and CROWN PAPER CO. (the "Company"), a corporation for
profit duly organized and validly existing under the laws of the Commonwealth of
Virginia, under the following circumstances summarized in the following recitals
(the capitalized terms not defined in the recitals being used therein as defined
in Article I hereof):
A. The Company has requested, and the Issuer has agreed, to issue revenue
bonds for the purpose of providing funds for the refinancing of the construction
and acquisition of the Project.
B. Pursuant to such request, the Issuer has determined to issue and sell
the Series 1996 Refunding Bonds to assist in the refinancing of the Project
undertaken by the Company.
NOW THEREFORE, in consideration of the premises and the mutual
representations and agreements hereinafter contained, the Issuer and the Company
agree as follows (provided that any obligation of the Issuer created by or
arising out of this Agreement shall never constitute an indebtedness of the
Issuer or give rise to any pecuniary liability of the Issuer but shall be
payable solely out of Revenues):
ARTICLE I
DEFINITIONS
Section 1.1. USE OF DEFINED TERMS. In addition to the words and terms
defined elsewhere in this Agreement or by reference to the Indenture or to
another document, the words and terms set forth in Section 1.2 hereof shall have
the meanings set forth therein unless the context or use clearly indicates
another meaning or intent. Such definitions shall be equally applicable to both
the singular and plural forms of any of the words and terms defined therein.
Unless otherwise defined herein, any terms defined in the Indenture shall have
the same meaning herein.
Section 1.2. DEFINITIONS. As used herein:
"Act" means Chapter 162-I of the New Hampshire Revised Statutes Annotated,
as amended and supplemented.
"Additional Bonds" means the Additional Bonds as defined in the Indenture.
<PAGE>
"Additional Notes" means any nonnegotiable promissory note or notes, in
addition to the Series 1996 Refunding Note, delivered by the Company to the
Trustee in connection with the issuance of Additional Bonds, as provided herein.
"Additional Payments" means the amounts required to be paid by the Company
pursuant to the provisions of Section 4.2 hereof.
"Agreement" means this Refunding Loan Agreement as amended or supplemented
from time to time.
"Authorized Company Representative" means the person at the time designated
to act on behalf of the Company by written certificate furnished to the Issuer
and the Trustee, containing the specimen signature of that person and signed on
behalf of the Company by any of its officers. Such certificate may designate an
alternate or alternates.
"Bond Fund" means the Bond Fund created in the Indenture.
"Bond Resolution" means (a) when used with reference to the Series 1996
Refunding Bonds, the resolution providing for their issuance and approving this
Agreement, the Indenture and related matters; (b) when used with reference to an
issue of Additional Bonds, the resolution providing for the issuance of the
Series 1996 Refunding Bonds, to the extent applicable, and the resolution of the
Issuer providing for the issuance of the Additional Bonds and approving any
amendment or supplement to this Agreement, any Supplemental Indenture and
related matters; and (c) when used with reference to Bonds when Additional Bonds
are outstanding, the resolution providing for the issuance of the Series 1996
Refunding Bonds and the resolution of the Issuer providing for the issuance of
the then outstanding and the then to be issued Additional Bonds; in each case as
amended or supplemented from time to time.
"Bond Service Charges" means, for any period or time, the principal of and
interest and premium, if any, due on the Bonds for that period or payable at
that time whether due at maturity, upon acceleration, redemption or otherwise.
"Bonds" means the Series 1996 Refunding Bonds and any Additional Bonds.
"Bond Year" means any annual period commencing on the anniversary date of
the original issuance and delivery of the Bonds, with the earliest Bond Year
commencing with that original date and the last Bond Year commencing on the
anniversary date of such original date preceding or falling on the final payment
in full of all outstanding Bonds of each series.
"Change in Control" means, at any time after the date of original issuance
of the Bonds, the relinquishment by Holdings of its ownership of outstanding
shares of stock of the Company or, alternatively, the acquisition by any person
or group of persons (within the meaning of Section 13 or 14 of the Securities
Exchange Act of 1934, as amended) of beneficial ownership (within the meaning of
Rule 13d-3 promulgated by the Securities and Exchange Commission
2
<PAGE>
under said Act) of 40% or more of the outstanding shares of common stock of
Holdings; or, during any period of 12 consecutive calendar months, individuals
who were either (i) directors of Holdings on the first day of such period or
(ii) whose nomination or election was approved by a vote of at least a majority
of the directors then still in office who were directors of Holdings on the
first day of such period or who were theretofore elected or nominated in
accordance with this clause (ii), shall cease to constitute a majority of the
board of directors of Holdings.
"Code" means the Internal Revenue Code of 1986, as amended, including, when
appropriate, the statutory predecessor of the Code, and all applicable
regulations (whether proposed, temporary or final) under that Code and the
statutory predecessor of the Code, and any official rulings and judicial
determinations under the foregoing applicable to the Bonds.
"Company" means Crown Paper Co., a corporation duly organized and validly
existing under the laws of the Commonwealth of Virginia and duly authorized to
conduct business in the State of New Hampshire and having its principal office
in Oakland, California, and its lawful successors and assigns to the extent
permitted by this Agreement.
"Computation Date" means the last day of each Bond Year and the date on
which the final payment in full of all outstanding Bonds of each series is made.
"Determination of Taxability" means, with respect to the Series 1996
Refunding Bonds, receipt by the Company of written notice from Owner or former
Owner or the Trustee of a final determination by the Internal Revenue Service or
a court of competent jurisdiction that, as a result of a failure by the Company
to perform any of its agreements in this Agreement or the Refunding Loan
Agreement or the inaccuracy of any of its representations in this Agreement or
the Refunding Loan Agreement, the interest paid or to be paid on any Bond
(except to a "substantial user" of the Projects or a "related person" within the
meaning of Section 147(a) of the Code) is or was includable in the gross income
of the Bond's owner for federal income tax purposes. No such determination will
be considered final unless the Owner or former Owner involved in the
determination gives the Company and the Trustee prompt written notice of the
commencement of the proceedings resulting in the determination and offers the
Company, subject to the Company's agreeing to pay all expenses of the
proceedings and to indemnify the Owner or former Owner against all liabilities
that might result from it, the opportunity to control the defense of the
proceedings and either the Company does not agree within thirty days to pay the
expenses, indemnify the Owner or former Owner and control the defense or the
Company exhausts or chooses not to exhaust available procedures to contest or
obtain review of the result of the proceedings. As to any series of Additional
Bonds, any Determination of Taxability shall be as defined in the applicable
Supplemental Indenture.
"Eligible Investments" means Eligible Investments as defined in the
Indenture.
"Event of Default" means any of the events described as an Event of Default
in Section 7.1. hereof.
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"Excess Earnings" means Excess Earnings as defined in the Indenture.
"Federal Tax Statement" means the Statement as to Tax Exempt Status of the
Bonds executed by the Company in connection with the issuance of the Series 1996
Refunding Bonds.
"Force Majeure" means any of the causes, circumstances or events described
as constituting Force Majeure in Section 7.1. hereof.
"Holdings" means Crown Vantage Inc., a corporation duly organized and
validly existing under the laws of the Commonwealth of Virginia and having its
principal office in Oakland, California, and its lawful successors and assigns
to the extent permitted by this Agreement.
"Indenture" means the Trust Indenture, dated as of even date herewith,
between the Issuer and the Trustee, as amended or supplemented from time to time
which provides for the issuance of the Series 1996 Refunding Bonds.
"Issuer" means the Business Finance Authority of the State of New
Hampshire, a body corporate and politic as an agency of the State of New
Hampshire, and its predecessors, successors and assigns.
"Loan" means the loan by the Issuer to the Company of the proceeds received
from the sale of the Bonds.
"Loan Agreement" means the Loan Agreement dated as of July 1, 1996 between
the Issuer and the Company, as the same may be amended or supplemented from time
to time.
"Loan Payments" means the amounts required to be paid by the Company in
respect of the Bond Service Charges pursuant to Section 4.1 hereof.
"Notes" means the Series 1996 Refunding Note and any Additional Notes.
"Notice Address" means:
(a) As to the Issuer: 14 Dixon Avenue, Suite 101
Concord, NH 03301
Attention: Executive Director
(b) As to the Company: 300 Lakeside Drive, 14th Floor
Oakland, CA 94612
Attention: General Counsel
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(c) As to the Trustee: The Bank of New York
101 Barclay Street, 21st Floor West
New York, New York 10286
Attention: Corporate Trust Trustee Administration
or such additional or different address, notice of which is given under Section
8.3 hereof.
"Original Bonds" means the Issuer's (i) Pollution Control Revenue Bonds
(Brown Company Project), Series 1973, (ii) Pollution Control Revenue Bonds
(Brown Company Project), Series 1974 and (iii) Solid Waste Disposal Revenue
Bonds (Brown Company Project), Series 1978.
"Person" or words importing persons mean firms, associations, partnerships
(including without limitation, general and limited partnerships), joint
ventures, societies, estates, trusts, corporations, public or governmental
bodies, other legal entities and natural persons.
"Prior Bonds" means the $18,070,000 Business Finance Authority of the State
of New Hampshire Pollution Control and Solid Waste Disposal Refunding Revenue
Bonds (James River Project) Series 1993, which refunded the Original Bonds.
"Project" means the "project" (within the meaning of the Act) used as
pollution control and solid waste disposal facilities, including the Project
Facilities generally described on Exhibit B hereto.
"Project Facilities" means the Company's facilities described in Exhibit B
hereto, together with any additions, modifications and substitutions to those
facilities.
"Revenues" means (a) the amounts to be paid by the Company as Loan
Payments, (b) all other moneys received or to be received by the Issuer or the
Trustee in respect of Loan Payments, including, without limitation, all moneys
and investments in the Bond Fund, (c) any moneys and investments in the
Refunding Fund, and (d) all income and profit from the investment of the
foregoing moneys. The term "Revenues" does not include any moneys or
investments in the Rebate Fund, or amounts received by the Issuer as fees,
reimbursement of costs and expenses, or indemnity.
"Senior Debt" means the obligations of the Company under the Senior Loan
Document.
"Senior Loan Document" means the $350,000,000 Credit Agreement, dated as of
August 15, 1995, among the Company, Holdings, the banks listed therein, the
letter of credit issuing banks named therein and Morgan Guaranty Trust Company
of New York, as Administrative Agent, J.P. Morgan Securities Inc., Arranger and
The Bank of New York, The Long-Term
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Credit Bank of Japan, Ltd., NationsBank, N.A. (Carolinas), The Toronto-Dominion
Bank (Texas, Inc.), Co-Agents.
"Series 1996 Refunding Bonds" means the $17,955,000 Pollution Control and
Solid Waste Disposal Refunding Revenue Bonds (Crown Paper Co. Project), Series
1996 of the Issuer authorized in the Bond Resolution and in Section 2.02 of the
Indenture.
"Series 1996 Refunding Note" means the nonnegotiable promissory note of the
Company, dated as of the date of issuance of the Series 1996 Refunding Bonds,
initially issued in the form attached to this Loan Agreement as Exhibit A and in
the principal amount of $17,955,000, evidencing the obligation of the Company to
make Loan Payments with respect to the Series 1996 Refunding Bonds.
"Unassigned Issuer's Rights" means all of the rights of the Issuer to
receive Additional Payments under Section 4.2 hereof, to inspect the Project
under Section 5.1 hereof, to be held harmless and indemnified under Section 5.3
hereof, to be reimbursed for attorney's fees and expenses under Section 7.4
hereof, to receive notices under Section 8.3 hereof, to give or withhold consent
under Sections 4.7, 5.2 and 8.6 hereof and to exercise remedies expressly
reserved to the Issuer pursuant to Section 7.2 hereof.
Section 1.3. INTERPRETATION. Any reference herein to the Issuer, or to
any member or officer of the Issuer, includes entities or officials succeeding
to their respective functions, duties or responsibilities pursuant to or by
operation of law or lawfully performing their functions.
Any reference to a section or provision of the Constitution of the State or
the Act, or to a section, provision or chapter of the laws of the State or to
any statute of the United States of America, includes that section, provision or
chapter or statute as amended, modified, revised, supplemented or superseded
from time to time; provided, that no amendment, modification, revision,
supplement or superseding section, provision or chapter of statute shall be
applicable solely by reason of this provision, if it constitutes in any way an
impairment of the rights or obligations of the Issuer, the Owners, the Trustee
or the Company under this Agreement.
Unless the context indicates otherwise, words importing the singular number
include the plural number, and vice versa; the terms "hereof", "hereby",
"herein", "hereto", "hereunder", "hereinafter", and similar terms refer to this
Agreement; and the term "hereafter" means after, and the term "heretofore" means
before, the date of delivery of the Series 1996 Refunding Bonds. Words of any
gender include the correlative words of the other genders, unless the sense
indicates otherwise.
Section 1.4. CAPTIONS AND HEADINGS. The captions and headings in this
Agreement are solely for convenience of reference and in no way define, limit or
describe the scope or intent of any Articles, Sections, subsections, paragraphs,
subparagraphs or clauses hereof.
(End of Article I)
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ARTICLE II
REPRESENTATIONS
Section 2.1. REPRESENTATIONS AND COVENANTS OF THE COMPANY. The Company
represents and covenants that:
(a) It is a corporation duly incorporated under the laws of the
Commonwealth of Virginia, and is duly qualified and authorized to transact
business in the State.
(b) It has full power and authority to execute, deliver and perform this
Agreement and the Series 1996 Refunding Note and to enter into and carry
out the transactions contemplated by those documents. That execution,
delivery and performance do not, and will not, cause or result in a
material violation in any provision of law applicable to the Company or the
Company's Articles of Incorporation or its Bylaws and do not, and will not,
conflict with or result in a default under any agreement or instrument to
which the Company is a party or by which it is bound. This Agreement and
the Series 1996 Refunding Note have, by proper action, been duly
authorized, executed and delivered by the Company and all steps necessary
have been taken to constitute this Agreement and the Series 1996 Refunding
Note valid and binding obligations of the Company.
(c) None of the proceeds of the Original Bonds were used to finance the
acquisition and construction of any costs of the Project funded by such
Bonds that were paid or incurred prior to (i) the adoption of the
resolution of the Issuer on October 11, 1972 with respect to costs of the
Project paid from proceeds of the Original Bonds issued in 1973 and 1974 or
(ii) the adoption of the resolution of the Issuer on November 9, 1977 with
respect to costs of the Project paid from proceeds of the Original Bonds
issued in 1978.
(d) The provision of financial assistance made available to it hereunder
and the commitments therefor made by the Issuer induced the Company to
maintain within the jurisdiction of the Issuer that business of the Company
to be conducted by use of the Project and such business will create or
preserve jobs and employment opportunities within the jurisdiction of the
Issuer.
(e) The Company has no present intention to sell or otherwise dispose of
or cease operating the Project.
(f) At least 90% of the proceeds of the Original Bonds (including
investment earnings thereon) were used for the acquisition, construction,
reconstruction or improvement of land or property of a character subject to
the allowance for depreciation under Section 167 of the Code and
constituting "air or water pollution control facilities" or "sewage or
solid waste disposal facilities" within the meaning of Sections
103(b)(4)(E) and (F) of the Internal Revenue Code of 1954, as amended to
October 22, 1986. None of the proceeds
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of the Prior Bonds were used to pay the costs of issuance of the Prior
Bonds. None of the proceeds of the Series 1996 Refunding Bonds will be
used to pay cost of issuance of the Series 1996 Refunding Bonds.
(g) The average maturity of the Series 1996 Refunding Bonds does not
exceed 120% of the average reasonably expected economic life of the
facilities to be refinanced by the Series 1996 Refunding Bonds, determined
pursuant to Section 147(b) of the Code as of the date the Series 1996
Refunding Bonds are issued.
(h) None of the proceeds of the Original Bonds were used to provide any
airplane, skybox or other private luxury box or health club facility; any
facility primarily used for gambling; or any store the principal business
of which is the sale of alcoholic beverages for consumption off premises.
(i) Less than 25% of the proceeds of the Original Bonds were used to
acquire land or any interest therein, and none of the proceeds of the
Original Bonds were used to provide land which was or will be used for
farming purposes.
(j) No portion of the proceeds of the Original Bonds were used to acquire
existing property or any interest therein.
(k) The information furnished by the Company and used by the Issuer in
preparing the certification pursuant to Section 148 of the Code and the
information statement pursuant to Section 149(e) of the Code with respect
to the Series 1996 Refunding Bonds is accurate and complete as of the date
of the issuance of the Series 1996 Refunding Bonds.
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(l) After the expiration of any applicable temporary period under Section
148(d)(3) of the Code, at no time during any Bond Year will the aggregate
amount of gross proceeds of the Series 1996 Refunding Bonds invested in
higher yielding investments (within the meaning of Section 148(b) of the
Code) exceed 150% of the debt service on the Series 1996 Refunding Bonds
for such Bond Year and the aggregate amount of gross proceeds of the Series
1996 Refunding Bonds invested in higher yielding investments, if any, will
be promptly and appropriately reduced as the amount of outstanding Series
1996 Refunding Bonds is reduced, provided however that the foregoing shall
not require the sale or disposition of any investments in higher yielding
investments if such sale or disposition would result in a loss which
exceeds the amount which would be paid to the United States pursuant to
Section 5.08 of the Indenture (but for such sale or disposition) at the
time of such sale or disposition if a payment under Section 5.08 of the
Indenture were due at such time.
(m) The Series 1996 Refunding Bonds are not and will not be "federally
guaranteed" within the meaning of Section 149(b) of the Code.
(n) The Company will not take any action or omit to take any action if
such action or omission would cause the Series 1996 Refunding Bonds to be
included in gross income for federal income tax purposes.
(o) The Project constitutes an "industrial facility" within the meaning of
the Act.
(End of Article II)
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ARTICLE III
ISSUANCE OF THE SERIES 1996 REFUNDING BONDS
Section 3.1. ISSUANCE OF THE SERIES 1996 REFUNDING BONDS; APPLICATION OF
PROCEEDS. To provide funds for the purpose of financing the facilities of the
Project, the Issuer will issue, sell and deliver each series of the Series 1996
Refunding Bonds to the Original Purchaser upon the satisfaction of the
requirements specified in the Indenture and upon execution and delivery of and
satisfaction of the conditions contained in the applicable Purchase Agreement.
The Series 1996 Refunding Bonds will be issued pursuant to the Indenture in the
aggregate principal amount, will bear interest, will mature and will be subject
to redemption as set forth therein. The Company hereby approves the terms and
conditions of the Indenture, the Purchase Agreement and the Series 1996
Refunding Bonds, and of the terms and conditions under which the Series 1996
Refunding Bonds will be issued, sold and delivered. The Company shall carry out
any duties or obligations imposed upon it by the Indenture.
The proceeds from the sale of the Series 1996 Refunding Bonds shall be paid
over to the Trustee for the benefit of the Company and the Owners of the Series
1996 Refunding Bonds and deposited as follows: (a) a sum equal to any accrued
interest paid by the Original Purchaser on the Series 1996 Refunding Bonds shall
be deposited in the Series 1996 Bond Fund and (b) the balance of the proceeds of
the Series 1996 Refunding Bonds shall be deposited in the Refunding Fund.
Pending disbursement pursuant to Section 3.2 hereof the proceeds so deposited in
the Refunding Fund, together with any investment earnings thereon, shall
constitute a part of the Revenues in which a security interest is granted by the
Issuer to secure the payment of Bond Service Charges with respect to the Series
1996 Refunding Bonds as provided in the Indenture.
At the request of the Company, and for the purposes and upon fulfillment of
the conditions specified in the Indenture, the Issuer may provide for the
issuance, sale and delivery of Additional Bonds and provide the proceeds from
the sale thereof to the Company.
Section 3.2. APPLICATION OF SERIES 1996 REFUNDING BOND PROCEEDS; COMPANY
REQUIRED TO PAY COSTS IN EVENT REFUNDING PROJECT FUND INSUFFICIENT. The sale
proceeds of the Series 1996 Refunding Bonds shall be deposited in the Refunding
Fund and applied by the Trustee to pay principal of the Prior Bonds as provided
by the Indenture.
Section 3.3. [Reserved]
Section 3.4. INVESTMENT OF FUND MONEYS. At the written request or at the
oral request, confirmed in writing within two Business Days, of the Authorized
Company Representative, any moneys held as part of the Bond Fund, the Refunding
Fund or the Rebate Fund shall be invested or reinvested by the Trustee in
specified Eligible Investments. The Company hereby covenants that it will
restrict any investment and reinvestment and the use of the proceeds of the
Series 1996 Refunding Bonds in such manner and to such extent, if any, as may be
necessary so that
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the Series 1996 Refunding Bonds will not constitute arbitrage bonds under
Section 148 of the Code.
Section 3.5. REBATE FUND. Within five days after the end of each Bond
Year and within five days after payment in full of all outstanding Bonds of each
series, the Company shall calculate the amount of Excess Earnings as of the end
of that Bond Year or the date of such payment in full and shall notify the
Trustee of that amount. If the amount then on deposit in the applicable account
in Rebate Fund created under the Indenture is less than the amount of Excess
Earnings for that series of Bonds (computed by taking into account the amount or
amounts, if any, previously paid to the United States pursuant to Section 5.08
of the Indenture and this Section), the Company shall, within five days after
the date of the aforesaid calculation, pay to the Trustee for deposit in the
Rebate Fund an amount sufficient to cause the Rebate Fund to contain an amount
equal to the Excess Earnings for that series of Bonds. The Company agrees to
direct the Trustee to make rebate payments to the United States as are required
pursuant to Section 5.08 of the Indenture. The obligation of the Company to
make such payments and provide direction to the Trustee hereunder shall remain
in effect and be binding upon the Company notwithstanding the release and
discharge of the Indenture or termination of this Agreement.
(End of Article III)
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ARTICLE IV
LOAN BY ISSUER; REPAYMENT OF THE LOAN;
LOAN PAYMENTS AND ADDITIONAL PAYMENTS
Section 4.1. LOAN REPAYMENT; DELIVERY OF NOTES. In consideration of
issuance of the Series 1996 Refunding Bonds, the Company shall make, as loan
payments, in lawful money of the United States of America, on or before each
date that any payment of principal, premium or interest on any Bond is due (at a
maturity, upon redemption, by acceleration or otherwise), Loan Payments which
correspond, as to amount, to the Bond Service Charges then payable on the Series
1996 Refunding Bonds so that the Trustee shall have immediately available funds
in its possession on each such date that a payment is due on the Bonds in the
full amount of such payment. All such Loan Payments shall be paid to the
Trustee in accordance with the terms of the Series 1996 Refunding Notes for the
account of the Issuer and shall be held and disbursed in accordance with the
provisions of the Indenture and this Agreement for application to the payment of
Bond Service Charges.
To further evidence the Company's performance of its obligations under this
Agreement, the Company shall execute and deliver to the Trustee, concurrently
with the issuance and delivery of the Series 1996 Refunding Bonds, the Series
1996 Refunding Note. The Series 1996 Refunding Note shall be dated as of the
date of this Agreement and shall mature and bear interest, shall contain
substantially the other terms and provisions and shall be subject to prepayment,
as set forth, in Exhibit A hereto and as necessary to provide full and timely
payment of the Series 1996 Refunding Bonds.
So long as there exists no Event of Default hereunder, the Company shall be
entitled to a credit against the Loan Payments required to be made on any date
to the extent that the balance in the Bond Fund (which is available therefor) is
then in excess of amounts required (a) for the payment of Bonds theretofore
called for redemption, (b) for the payment of interest due on a prior date for
which checks or drafts have been drawn and mailed by the Trustee and (c) to be
deposited in the Bond Fund by the Indenture for use other than for the payment
of Bond Service Charges on such date. In any event, however, if on any date
that any payment of principal, premium or interest on any Bond is due (at
maturity, upon redemption, by acceleration or otherwise), the balance in the
Bond Fund (which is available therefor) is for any reason insufficient to make
required payments of Bond Service Charges, as and when due, the Company
forthwith will pay to the Trustee in immediately available funds, for the
account of the Issuer and for deposit into the Bond Fund, any deficiency.
In connection with the issuance of any Additional Bonds, the Company shall
execute and deliver to the Trustee one or more Additional Notes in a form
substantially similar to the form set forth in Exhibit A hereto. All Notes
shall:
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(a) provide for payments of interest equal to the payments of interest on
the corresponding Bonds;
(b) require payments of principal and redemption payments and any premium
equal to the payments of principal, prepayments and sinking fund payments
and any premium on the corresponding Bonds;
(c) require all payments on any such Notes to be made no later than the
due dates for the corresponding payments to be made on the corresponding
Bonds; and
(d) contain by reference or otherwise optional and mandatory redemption
provisions and provisions in respect of the optional and mandatory
acceleration or prepayment of principal and any premium corresponding with
the redemption and acceleration provisions of the corresponding Bonds.
All payments on the Notes shall be applied solely to the payment of Bond
Service Charges on all outstanding Bonds, except that, so long as no Event of
Default has occurred and is subsisting hereunder, payments by the Company on any
of the Notes shall be used by the Trustee to make a like payment of Bond Service
Charges on the corresponding Bonds in connection with which those Notes were
delivered and shall constitute Loan Payments made in respect of those
corresponding Bonds.
Upon payment in full, in accordance with the Indenture, of the Bond Service
Charges on any or all Bonds, whether at maturity, upon acceleration or by
redemption or otherwise, or upon provision for the payment thereof having been
made in accordance with the provisions of the Indenture, and upon payment of all
amounts owed to the Trustee, (i) the Notes issued concurrently with those
corresponding Bonds, of the same maturity, bearing the same interest rate and in
an amount equal to the aggregate principal amount of the Bonds so surrendered
and cancelled or for the payment of which provision has been made, shall be
deemed fully paid, the obligations of the Company thereunder shall be
terminated, and any of those Notes shall be surrendered by the Trustee to the
Company, and shall be cancelled by the Company, or (ii) in the event there is
only one of those Notes, an appropriate notation shall be endorsed thereon
evidencing the date and amount of the principal payment or prepayment equal to
the Bonds so paid, or with respect to which provision for payment has been made,
and that Note shall be surrendered by the Trustee to the Company for
cancellation if all Bonds shall have been paid (or provision made therefor) and
cancelled as aforesaid. Unless the Company is entitled to a credit under
express terms of this Agreement or the Notes, all payments on each of the Notes
shall be in the full amount required thereunder.
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Except for such interest of the Company as may hereinafter arise pursuant
to Section 8.2 hereof or Section 5.06 of the Indenture, the Company and the
Issuer each acknowledge that neither the Company nor the Issuer has any interest
in the Bond Fund and any moneys deposited therein shall be in the custody of and
held by the Trustee in trust for the benefit of the Owners.
Section 4.2. ADDITIONAL PAYMENTS.
(a) The Company shall pay to the Issuer, as Additional Payments hereunder,
any and all reasonable costs and expenses incurred or to be paid by the Issuer
in connection with the issuance, delivery and carrying of the Series 1996
Refunding Bonds and Additional Bonds, including without limitation, (i) any
necessary expenses incurred by the members of the Issuer while engaged in the
performance of their duties as such members or officers of the Issuer, (ii) the
reasonable fees and expenses of counsel to the Issuer and of bond counsel,
(iii) all publication, filing and recording fees, and (iv) expenses incurred or
advances made in the exercise of the Issuer's rights or the performance of its
obligations hereunder, under the Indenture, or under the Purchase Agreement.
(b) The Company also agrees to pay to the Trustee, when due, until the
principal of, premium, if any and interest on the Bonds shall have been paid in
full: (i) an amount equal to the annual fee of the Trustee for its Ordinary
Services rendered as Trustee and the Ordinary Expenses (including reasonable
attorneys' fees and expenses) of the Trustee incurred as Trustee under the
Indenture (including reasonable attorneys' fees and expenses), (ii) the
reasonable fees and charges of the Trustee as Registrar, authenticating agent
and paying agent under the Indenture, (iii) the reasonable fees and charges of
the Trustee for Extraordinary Services rendered by it and Extraordinary Expenses
(including reasonable attorneys' fees and expenses) incurred by it under the
Indenture and (iv) all other amounts which the Trustee is entitled to receive
hereunder or under the Indenture as reimbursement or indemnity; provided,
however, that the Company may, without creating a default hereunder, withhold
such payment to contest in good faith the necessity or reasonableness for any
such Extraordinary Services or Extraordinary Expenses and the reasonableness of
any such fees, charges or expenses that the Trustee has incurred without the
consent of the Company in excess of $2,000.
(c) Upon the issuance of the Bonds, the Company shall pay the Issuer an
administrative fee of $134,662.50.
Section 4.3. PLACE OF PAYMENTS. The Company shall make all Loan Payments
directly to the Trustee at its principal corporate trust office. Additional
Payments shall be made directly to the person or entity to whom or to which they
are due.
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Section 4.4. OBLIGATIONS UNCONDITIONAL. The obligations of the Company to
make Loan Payments, Additional Payments and any payments required of the Company
under Section 3.2 hereof or Section 5.07 of the Indenture shall be absolute and
unconditional under any and all circumstances whatsoever, and the Company shall
make such payments without abatement, diminution or deduction regardless of any
cause or circumstances whatsoever including, without limitation, any defense,
set-off, recoupment or counterclaim which the Company may have or assert against
the Issuer, the Trustee or any other Person.
Section 4.5. ASSIGNMENT OF AGREEMENT AND REVENUES; BINDING EFFECT OF
INDENTURE ON COMPANY; FINANCING STATEMENTS. To secure the payment of Bond
Service Charges, the Issuer shall assign to the Trustee, by the Indenture, its
rights under and interest in this Agreement (except for the Unassigned Issuer's
Rights) and shall assign and grant a security interest in the Revenues to the
Trustee.
The Company hereby agrees and consents to those assignments and grants.
The Company hereby agrees to be bound by and to comply with the provisions of
the Indenture applicable to, affecting or purporting to bind the Company. The
Trustee shall be a third party beneficiary of this Agreement and shall be
entitled to all rights provided to it hereunder and to enforce all provisions
hereof.
The Company will, at its own expense, cause all necessary financing
statements, amendments thereto, continuation statements and instruments of
similar character relating to the assignment and grants made to secure the
Bonds, to be recorded and filed in such manner and in such places as may be
required by law in order to fully preserve and protect the security of the
Owners of the Bonds and the rights of the Trustee under this Agreement and the
Indenture.
Section 4.6. DEPOSIT OF MONEYS IN BOND FUND; MONEYS FOR REDEMPTION. The
Company may at any time deposit moneys in the Bond Fund, without premium or
penalty, to be held by the Trustee for application to Loan Payments not yet due
and payable. Such deposits shall be credited against the Loan Payments, or any
portion thereof, in the order of their due dates. In addition, the Company may
deliver moneys to the Trustee for optional redemption of Series 1996 Refunding
Bonds pursuant to Section 6.1 or 6.2 hereof and shall deliver moneys to the
Trustee for mandatory redemption of Series 1996 Refunding Bonds pursuant to
Section 6.3 hereof.
Section 4.7. ASSIGNMENT BY COMPANY. This Agreement may be assigned in
whole or in part by the Company without the necessity of obtaining the consent
of the Issuer, the Trustee or the Owners, subject, however, to each of the
following conditions:
(a) Unless waived by the Issuer, the Company shall notify the Issuer
in writing of the identity of any assignee at least 15 Business Days prior
to the effective date of such assignment;
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(b) No assignment (other than pursuant to Section 5.5 hereof) shall
relieve the Company from primary liability for any of its obligations
hereunder, and in the event of any such assignment the Company shall
continue to remain primarily liable for the payment of the Loan Payments
and Additional Payments and for performance and observance of the
agreements on its part herein provided to be performed and observed by it;
(c) Any assignment from the Company must retain for the Company such
rights and interests as will permit it to perform its obligations under
this Agreement, and any assignee from the Company shall assume in writing
the obligations of the Company hereunder to the extent of the interest
assigned;
(d) The Company shall, within thirty (30) days after execution
thereof, furnish or cause to be furnished to the Issuer and the Trustee a
true and complete copy of each such assignment together with any instrument
of assumption;
(e) Any assignment from the Company shall not materially impair
fulfillment of the purposes to be accomplished by operation of the Project
as a project, the refinancing and financing, respectively, of which is
permitted under the Act; and
(f) No assignment from the Company shall occur unless and until the
Company obtains an opinion of Bond Counsel to the effect that such
assignment will not, in and of itself, have an adverse effect on the
exclusion of interest on the Series 1996 Refunding Bonds from gross income
for federal income tax purposes;
provided, however, that the foregoing conditions shall not apply if all of the
Owners and the Issuer consent in writing to the assignment of this Agreement.
(End of Article IV)
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ARTICLE V
ADDITIONAL AGREEMENTS AND COVENANTS
Section 5.1. RIGHT OF INSPECTION. Subject to reasonable security and
safety regulations and upon two days' written notice, the Issuer and the
Trustee, and their respective agents, shall have the right during normal
business hours to inspect the Project.
Section 5.2. SALE, LEASE OR GRANT OF USE BY COMPANY. The Company may
sell, lease or otherwise grant the right to occupy and use the Project, in whole
or in part, to others, provided that:
(a) No such grant, sale or lease shall relieve the Company from its
obligations under this Agreement or the Notes;
(b) In connection with any such grant, sale or lease the Company shall
retain such rights and interests as will permit it to comply with its
obligations under this Agreement and the Notes;
(c) No such grant, sale or lease shall impair materially the purposes of
the Act to be accomplished by operation of the Project as a project as
provided herein and in the Act;
(d) The Issuer consents to such sale, lease or other such grant in
writing;
(e) The Company obtains the opinion of Bond Counsel to the effect that
such lease, sale or grant shall not have an adverse effect on the exclusion
of interest on the Bonds from gross income for federal income tax purposes.
Notwithstanding the foregoing, the Company may remove, sell or otherwise dispose
of property that has become worn out, obsolete or unnecessary for its business
purposes without satisfying the requirements of Clauses (d) and (e).
Section 5.3. INDEMNIFICATION. The Company regardless of any agreement to
maintain insurance, will indemnify the Issuer against (a) any and all
liabilities, claims, damages, costs and expenses by any person related to the
participation of the Issuer in the transactions contemplated by the Indenture,
the Purchase Agreement, or this Agreement, including without limitation claims
arising out of any condition of the Project or the construction, use, occupancy
or management thereof; any accident, injury or damage to any person occurring in
or about the Project site; any breach by the Company of its obligations under
the Purchase Agreement or this Agreement; any act or omission of the Company or
any of its agents, contractors, servants, employees or licensees; or the
offering, issuance, sale or any resale of the Bonds to the extent permitted by
law, and (b) all costs, counsel fees and expenses, expenses or liabilities
reasonably incurred in connection with any such claim or any action or
proceeding brought thereon. In case
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any action or proceeding is brought against the Issuer by reason of any such
claim, the Company will defend the same at its expense upon notice from the
Issuer, and Issuer will cooperate with the Company, at the expense of the
Company, in connection therewith.
The Company agrees to indemnify the Trustee for and to hold it harmless
against any and all liabilities, claims, damages, costs and expenses incurred by
or asserted against the Trustee without negligence or bad faith on the part of
the Trustee, on account of any action taken or omitted to be taken by the
Trustee in accordance with the terms of this Agreement, the Bonds, the Notes or
the Indenture or in connection with the Project or the sale of the Bonds, or any
action taken at the request of or with the consent of the Company, including the
costs and expenses of the Trustee in defending itself against any such claim,
action or proceeding brought in connection with the exercise or performance of
any of its powers or duties under this Agreement, the Bonds, the Indenture or
the Notes.
In case any action or proceeding is brought against the Issuer or the
Trustee in respect of which indemnity may be sought hereunder, the party seeking
indemnity promptly shall give notice of that action or proceeding to the
Company, and the Company upon receipt of that notice shall have the obligation
and the right to assume the defense of the action or proceeding; provided, that
failure of a party to give that notice shall not relieve the Company from any of
its obligations under this Section unless that failure prejudices the defense of
the action or proceeding by the Company. An indemnified party may employ
separate counsel and participate in the defense, which shall be at the expense
of the indemnified party unless such counsel is approved by the Company which
such approval shall not be unreasonably withheld. The Company shall not be
liable for any settlement made without its consent.
The indemnification set forth above is intended to and shall include the
indemnification of all affected officials, directors, officers and employees of
the Issuer and the Trustee, respectively. That indemnification is intended to
and shall be enforceable by the Issuer and the Trustee, respectively, to the
full extent permitted by law.
This section shall survive the termination of this Agreement and the
Indenture.
Section 5.4. COMPANY NOT TO ADVERSELY AFFECT TAX EXEMPT STATUS OF BONDS'
INTEREST. The Company hereby represents that it has taken and caused to be
taken, and covenants that it will take and cause to be taken, all actions that
may be required of it, alone or in conjunction with the Issuer, for the interest
on the Series 1996 Refunding Bonds to be and remain excluded from gross income
for federal income tax purposes, and represents that it has not taken or
permitted to be taken on its behalf, and covenants that it will not take or
permit to be taken on its behalf, any action that would adversely affect such
exclusion under the provisions of the Code.
Section 5.5. COMPANY TO MAINTAIN ITS EXISTENCE; SALES OF ASSETS OR
MERGERS. The Company shall do all things necessary to preserve and keep in full
force and effect its existence, rights and franchises, except as otherwise
permitted by this Section 5.5. In particular, the Company shall not (a) sell,
transfer or otherwise dispose of all, or substantially all, of its assets;
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(b) consolidate with or merge into any other entity; or (c) permit one or more
other entities to consolidate with or merge into it. The preceding restrictions
shall not apply, however, to a transaction if all of the following conditions
are met:
(i) the transferee or the surviving or resulting entity is duly formed and
existing under the laws of one of the states of the United States of
America or the District of Columbia and is duly qualified to do business in
the State;
(ii) the transferee or the surviving or resulting entity, if other than the
Company, by proper written instrument satisfactory to the Issuer and the
Trustee, irrevocably and unconditionally assumes the obligation to perform
and observe the agreements and obligations of the Company under this
Agreement, the Indenture and the Notes;
(iii) no Event of Default, or condition which with the passage of time
or notice would become an Event of Default, will exist hereunder or under
the Indenture immediately after the transfer, consolidation or merger; and
(iv) the Company obtains the opinion of Bond Counsel regarding the
exclusion of interest on the Series 1996 Refunding Bonds from gross income
for federal income tax purposes.
Section 5.6. BOOKS AND RECORDS; FINANCIAL STATEMENTS. The Company shall
within 120 days after the close of each fiscal year furnish to the Trustee, the
Issuer and the Owner of any Bond who shall request the same in writing a copy of
each of the consolidated financial statements for the Company, certified by its
independent certified public accountants, that it customarily furnishes to its
shareholders; provided that so long as the Company is subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended, a copy of the
Company's annual report on Form 10-K shall satisfy this requirement. The
Company also agrees to furnish to the Trustee, the Issuer and the Owner of any
Bond who shall request the same in writing a copy of each of the other financial
statements and reports which it customarily furnishes to its shareholders at the
same times as they are furnished to its shareholders. The Company agrees to
permit the Issuer and the Trustee to examine the books and records of the
Company with respect to the Project at reasonable times and upon reasonable
notice.
Delivery of such reports, information and documents to the Trustee is for
informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder.
Section 5.7. MAINTENANCE OF PROJECT BY COMPANY. The Company agrees that
at all times during the term of this Agreement it will, at its own expense,
maintain, preserve and keep the Project or cause the Project to be maintained,
preserved and kept with the appurtenances and every part and parcel thereof, in
good repair, working order and condition and it will from time to time make or
cause to be made all necessary and proper repairs, replacements and renewals;
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provided, however, that the Company shall not be under any obligation to renew,
repair or replace any inadequate, obsolete, worn-out, unsuitable, undesirable or
unnecessary portion of the Project. In any instance where the Company
determines that all or any portion of the Project has become inadequate,
obsolete, worn-out, unsuitable, undesirable or unnecessary, the Company may
remove all or such portion of the Project and sell, trade-in, exchange or
otherwise dispose of the Project or such removed portion, provided that such
removal shall not impair (i) the character of the Project as an "industrial
facility" as such term is defined in the Act, or (ii) the exclusion of interest
on the Bonds from gross income for federal income tax purposes.
The removal from the Project of any portion thereof pursuant to the
provisions of this Section shall not entitle the Company to any abatement or
diminution of the payments and other sums payable hereunder.
Section 5.8. INSURANCE REQUIRED. The Company agrees that at all times
during the term of this Agreement it will, at its own expense, insure the
Project in such amounts and in such manner (including self insurance) as its
similar properties are usually insured by it, and will carry liability insurance
with respect to the Project in such amounts and in such manner (including self
insurance) as are carried by it with respect to similar properties. The
proceeds of any fire or casualty insurance carried on the Project shall belong
solely to the Company and the Company shall have no obligation to pay any part
thereof to the Issuer or the Trustee. In addition, the Company shall have no
obligation to apply the proceeds of any insurance to the repair or
reconstruction of the Project.
Section 5.9. LAND USE. In the acquisition, construction, maintenance,
improvement and operation of the Project, the Company will comply in all
material respects with all applicable building, zoning, subdivision,
environmental protection, sanitary and safety and other land use laws, rules and
regulations and will not permit any nuisance thereat. It shall not be a breach
of this Section if the Company fails to comply with such laws, rules and
regulations during any period in which the Company shall in good faith be
diligently contesting the validity thereof.
Section 5.10. CURRENT EXPENSES. The Company will pay all costs and
expenses of operation, maintenance and upkeep of the Project including without
limitation all taxes, excises and other governmental charges lawfully levied
thereon or with respect to the Company's interest therein or use thereof. It
shall not be a breach of this Section if the Company fails to pay any such taxes
or charges during any period in which the Company shall in good faith be
diligently contesting the validity or amount thereof.
Section 5.11. COVENANT WITH RESPECT TO MORTGAGE. (a) The Company agrees
that it will not take (or permit to be taken) any action with respect to the
amendment or termination of the Mortgage or the rights of the owners thereunder,
the release of all or any part of the property subject to the lien of the
Mortgage, or the waiver or release of any right of the Company under the
Mortgage unless and until there has been delivered to the Trustee the following:
(1) written evidence from each Rating Agency to the effect that such action,
release or waiver will not result in the withdrawal or reduction of such Rating
Agency's then current rating of the Bonds; (2) an
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Opinion of Counsel stating that such action by the Trustee is permitted by the
Indenture and this Agreement; and (3) an Opinion of Tax Counsel stating that
such action by the Trustee will not adversely affect the exclusion of interest
on the Bonds from gross income for federal income tax purposes. At such time as
the Company's obligations under the Senior Loan Document (or any refinancing
thereof) have been fully discharged, it is the Company's intention that the
Bondholders (together with the holders of any other debt then secured under the
Mortgage) shall succeed to all the rights and remedies under the Mortgage of the
lenders under the Senior Loan Document, with full right to control any
proceedings thereunder.
(b) By its execution and delivery of this Agreement, the Company
authorizes the Trustee to execute and deliver the Mortgage Acknowledgement
attached to the Indenture. In connection with such execution and delivery by
the Trustee, the Company represents to the Trustee for the benefit of Owners of
the Bonds that the Bonds constitute "Permitted IRB Debt" as defined in the
Mortgage.
(End of Article V)
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ARTICLE VI
REDEMPTION OF SERIES 1996 REFUNDING BONDS
Section 6.1. OPTIONAL REDEMPTION. Provided no Event of Default shall have
occurred and be subsisting, at any time and from time to time, the Company may
deliver moneys to the Trustee in addition to Loan Payments or Additional
Payments required to be made for the purpose of prepaying amounts due under this
Agreement and the Series 1996 Refunding Note and direct the Trustee to use the
moneys so delivered for the purpose of purchasing or redeeming Bonds pursuant to
Subsection 4.01(c) of the Indenture of the Series 1996 Refunding Bonds. Pending
application for those purposes, any moneys so delivered shall be held by the
Trustee in a special account in the Bond Fund and delivery of those moneys shall
not operate to abate or postpone Loan Payments or Additional Payments otherwise
becoming due or to alter or suspend any other obligations of the Company under
this Agreement or the Series 1996 Refunding Note.
Section 6.2. EXTRAORDINARY OPTIONAL REDEMPTION. The Company may deliver,
subject to the conditions hereinafter imposed, to the Trustee the moneys needed
to redeem the entire unpaid principal balance of the Series 1996 Refunding Bonds
in accordance with Subsection 4.01(a) of the Indenture upon the occurrence of
any of the following events:
(a) The Project shall have been damaged or destroyed to such an extent
that the Company has determined and notified the Issuer and the Trustee
that (1) the Project cannot reasonably be expected to be restored, within a
period of six consecutive months, to the condition thereof immediately
preceding such damage or destruction or (2) the normal use and operation of
the Project is reasonably expected to be prevented for a period of six
consecutive months;
(b) Title to, or the temporary use of, all or a significant part of the
Project shall have been taken under the exercise of the power of eminent
domain to such extent that (1) the Project cannot reasonably be expected to
be restored within a period of six consecutive months to a condition of
usefulness comparable to that existing prior to the taking or (2) as a
result of the taking, normal use and operation of the Project is reasonably
expected to be prevented for a period of six consecutive months;
(c) As a result of any changes in the Constitution of the State, the
Constitution of the United States of America, or state or federal laws as a
result of legislative or administrative action or by final decree, judgment
or order of any court or administrative body (whether state or federal)
entered after the contest thereof by the Issuer or the Company in good
faith, the obligations of the Company under this Agreement or the Series
1996 Refunding Note shall have become void or unenforceable or impossible
of performance in any material respect in accordance with the intent and
purpose of the parties as expressed in this Agreement and the Series 1996
Refunding Note, or if
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unreasonable burdens or excessive liabilities shall have been imposed with
respect to the Project or the operation thereof, including, without
limitation, federal, state or other ad valorem property, income or other
taxes not being imposed on the date of this Agreement other than ad valorem
taxes presently levied upon privately owned property used for the same
general purpose as the Project; or
(d) Changes in economic availability of raw materials, operating supplies
or facilities necessary to operate the Project or technological or other
changes make continued operation of the Project uneconomical in the opinion
of the Company.
Moneys delivered by the Company to the Trustee pursuant to this Section shall
upon the redemption of the Series 1996 Refunding Bonds constitute a prepayment
of amounts otherwise due under the Section 4.1 of this Agreement and of the
Series 1996 Refunding Note. The Company shall, if it is to exercise its right
to prepayment specified in this Section, within six months following the
occurrence of an event described above, give notice to the Issuer and to the
Trustee of such occurrence and, if the Company shall so elect, upon the
occurrence of an event specified in clauses (a) or (b) above, that the Company
does not intend to restore the affected Project. Such notice also shall specify
the date on which the Company will deliver the funds required to redeem the
Series 1996 Refunding Bonds, which date shall be not more than ninety days from
the date that notice is mailed. The Company shall make arrangements
satisfactory to the Trustee for the giving of the required notice of redemption.
The amount payable by the Company in the event of redemption of Series 1996
Refunding Bonds pursuant to this Section and Subsection 4.01(a) of the Indenture
shall be the sum of the following:
(i) An amount of money which, when added to the moneys and investments
held to the credit of the Bond Fund, will be sufficient pursuant to the
provisions of the Indenture to pay, at par, plus any accrued interest
thereon, and discharge all then outstanding Series 1996 Refunding Bonds of
the applicable series on the earliest applicable redemption date, that
amount to be paid to the Trustee, plus
(ii) An amount of money equal to the Additional Payments relating to the
applicable Series 1996 Refunding Bonds accrued and to accrue until actual
final payment and redemption of such Series 1996 Refunding Bonds, that
amount or applicable portions thereof to be paid to the Trustee or to the
Persons to whom those Additional Payments are or will be due, plus
(iii) An amount sufficient to pay all amounts due or that will become due
with respect to the Series 1996 Refunding Bonds pursuant to Section 3.5
hereof, Section 5.08 of the Indenture and Section 148(f) of the Code.
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The requirement of (ii) above with respect to Additional Payments to accrue may
be met if provisions satisfactory to the Trustee and the Issuer are made for
paying those amounts as they accrue.
Section 6.3. MANDATORY REDEMPTION IN EVENT OF A DETERMINATION OF
TAXABILITY. Upon receipt by the Company from any Owner or the Trustee of notice
of Determination of Taxability with respect to the Series 1996 Refunding Bonds,
the Company shall, in the manner and upon the earliest practicable date selected
by the Trustee (after consultation with the Company as provided in the
Indenture), and in no event later than 180 days following that notice, deliver
to the Trustee the moneys needed to redeem the applicable principal amount of
outstanding Series 1996 Refunding Bonds in accordance with the loss of tax
exemption redemption provisions set forth in Subsection 4.01(b) of the
Indenture. The amount payable by the Company in such event shall be an amount
which, together with any moneys available in the Bond Fund for such purposes,
shall equal 100% of the outstanding principal amount of the series of Series
1996 Refunding Bonds to be redeemed, together with accrued interest to the
redemption date. In the event that all Series 1996 Refunding Bonds are redeemed
in accordance with this Section, the amount payable by the Company shall include
an amount of money equal to the Additional Payments relating to the Series 1996
Refunding Bonds accrued and to accrue until actual final payment and redemption
of the Series 1996 Refunding Bonds. Moneys delivered by the Company to the
Trustee pursuant to this Section shall upon the redemption of the Series 1996
Refunding Bonds constitute a prepayment of amounts otherwise due under Section
4.1 hereof and the Series 1996 Refunding Note.
Section 6.4. ACTIONS BY ISSUER. At the request of the Company or the
Trustee, the Issuer shall take all steps, if any, required of it under the
applicable provisions of the Indenture or the Series 1996 Refunding Bonds to
effect the redemption of all or a portion of the Series 1996 Refunding Bonds
pursuant to this Article VI.
(End of Article VI)
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ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
Section 7.1. EVENTS OF DEFAULT. Each of the following shall be an Event
of Default:
(a) The Company shall fail to pay any Loan Payment when and as that Loan
Payment is due and payable;
(b) The Company shall fail to deliver to the Trustee, or cause to be
delivered on its behalf, the moneys needed to redeem any outstanding Series
1996 Refunding Bonds in the manner and upon the date requested in writing
by the Trustee as provided in Article VI of this Agreement;
(c) The Company shall fail to observe and perform any other agreement,
term or condition contained in this Agreement (other than with respect to
Section 5.4 hereof), and the continuation of such failure for a period of
ninety days after notice thereof shall have been given to the Company by
the Trustee, or for such longer period as the Trustee may agree to in
writing; provided, that if the failure is other than the payment of money
and is of such nature that it can be corrected, but not within the
applicable period, that failure shall not constitute an Event of Default so
long as the Company institutes curative action within the applicable period
and diligently pursues such action to completion;
(d) The Company shall: (i) fail to pay, or admit in writing its inability
to pay, its debts generally as they become due; (ii) have an order for
relief entered in any case commenced by or against it under the federal
bankruptcy laws, as now or hereafter in effect; (iii) commence a proceeding
under any other federal or state bankruptcy, insolvency, reorganization or
similar law, or have such a proceeding commenced against it and either have
an order of insolvency or reorganization entered against it or have such a
proceeding remain undismissed and unstayed for ninety days; (iv) make an
assignment for the benefit of creditors; or (v) have a receiver or trustee
appointed for it or for the whole or any substantial part of its property;
(e) The occurrence and continuance of a Change of Control;
(f) The occurrence and continuance of any event of default under the
Senior Loan Document resulting in the acceleration of the Senior Debt; and
(g) The occurrence and continuance of any event of default under the Loan
Agreement or the Trust Indenture dated as of July 1, 1996 between the
Issuer and The Bank of New York, as Trustee.
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Notwithstanding the foregoing, if, by reason of Force Majeure, the Company
is unable to perform or observe any agreement, term or condition hereof (other
than any under Sections 7.1(a), (b) or (d) or otherwise with respect to the
payment of money, as to which Force Majeure shall not be applicable) which would
give rise to an Event of Default under subsection (c) hereof, the Company shall
not be deemed in default during the continuance of such inability. However, the
Company shall promptly give notice to the Trustee and the Issuer of the
existence of an event of Force Majeure and shall use its best efforts to remove
the effects thereof; provided that the settlement of strikes or other industrial
disturbances shall be entirely within its discretion.
The term Force Majeure shall mean, without limitation, the following:
(i) acts of God; strikes, lockouts or other industrial disturbances;
acts of public enemies; orders or restraints of any kind of the
government of the United States of America or of the State or any of
their departments, agencies, political subdivisions or officials, or
any civil or military authority; insurrections; civil disturbances;
riots; epidemics; landslides; lightning; earthquakes; fires;
hurricanes; tornadoes; storms; droughts; floods; arrests; restraint of
government and people; explosions; breakage, malfunction or accident
to facilities, machinery, transmission pipes or canals; partial or
entire failure of utilities; shortages of labor, materials, supplies
or transportation; or
(ii) any cause, circumstance or event not reasonably within the
control of the Company.
The declaration of an Event of Default under subsection (d) above, and the
exercise of remedies upon any such declaration, shall be subject to any
applicable limitations of federal bankruptcy law affecting or precluding that
declaration or exercise during the pendency of or immediately following any
bankruptcy, liquidation or reorganization proceedings.
Section 7.2. REMEDIES ON DEFAULT. Whenever an Event of Default shall have
happened and be subsisting, any one or more of the following remedial steps may
be taken:
(a) If acceleration of the principal amount of the Series 1996 Refunding
Bonds has been declared pursuant to Section 7.03 of the Indenture, the
Trustee shall declare all Loan Payments to be immediately due and payable,
whereupon the same shall become immediately due and payable;
(b) The Issuer or the Trustee may have access to, inspect, examine and
make copies of the books, records, accounts and financial data of the
Company pertaining to the Project; or
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(c) The Issuer or the Trustee may pursue all remedies now or hereafter
existing at law or in equity to collect all amounts then due and thereafter
to become due under this Agreement or the Series 1996 Refunding Note or to
enforce the performance and observance of any other obligation or agreement
of the Company under those instruments.
Notwithstanding the foregoing, the Issuer shall not be obligated to take any
step which in its opinion will or might cause it to expend time or money or
otherwise incur liability unless and until a satisfactory indemnity bond has
been furnished to the Issuer at no cost or expense to the Issuer. Any amounts
collected as Loan Payments or applicable to Loan Payments and any other amounts
which would be applicable to payment of Bond Service Charges collected pursuant
to action taken under this Section shall be paid into the Bond Fund and applied
in accordance with the provisions of the Indenture or, if the outstanding Bonds
have been paid and discharged in accordance with the provisions of the
Indenture, shall be paid as provided in Section 5.06 of the Indenture for
transfers of remaining amounts in the Bond Fund.
If an Event of Default under Section 7.1(d) hereof shall occur and be
continuing, the Trustee shall be entitled and empowered, by intervention in such
proceedings or otherwise, to file and prove a claim or claims for the whole
amount owing and unpaid pursuant to this Agreement, irrespective of whether the
principal of the Bonds or any amount hereunder shall then be due and payable as
therein or herein expressed or by declaration or otherwise, and irrespective of
whether the Trustee shall have made any demand pursuant to the provisions of
this Section 7.2 or of Section 6.02 of the Indenture, and, in case of any
judicial proceedings, to file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the Trustee
allowed in such judicial proceedings relative to the Company, its creditors, or
its property, and to collect and receive any moneys or other property payable or
deliverable on any such claims, and to distribute the same after the deduction
of its charges and expenses; and any receiver, assignee or trustee in bankruptcy
or reorganization is hereby authorized to make such payments to the Trustee, and
to pay to the Trustee any amount due it for compensation and expenses, including
reasonable counsel fees and disbursements incurred by it up to the date of such
distribution.
The provisions of this Section are subject to the further limitation that
the rescission by the Trustee of its declaration that all of the Series 1996
Refunding Bonds are immediately due and payable also shall constitute an
annulment of any corresponding declaration made pursuant to paragraph (a) of
this Section and a waiver and rescission of the consequences of that declaration
and of the Event of Default with respect to which that declaration has been
made, provided that no such waiver or rescission shall extend to or affect any
subsequent or other default or impair any right consequent thereon.
Section 7.3. NO REMEDY EXCLUSIVE. No remedy conferred upon or reserved to
the Issuer or the Trustee by this Agreement is intended to be exclusive of any
other available remedy or remedies, but each and every such remedy shall be
cumulative and shall be in addition to every other remedy given under this
Agreement or the Series 1996 Refunding Note, or now or
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hereafter existing at law, in equity or by statute. No delay or omission to
exercise any right or power accruing upon any default shall impair that right or
power or shall be construed to be a waiver thereof, but any such right and power
may be exercised from time to time and as often as may be deemed expedient. In
order to entitle the Issuer or the Trustee to exercise any remedy reserved to it
in this Article, it shall not be necessary to give any notice, other than any
notice required by law or for which express provision is made herein.
Section 7.4. AGREEMENT TO PAY ATTORNEYS' FEES AND EXPENSES. If an Event
of Default should occur and the Issuer or the Trustee should incur expenses,
including, without limitation, attorneys' fees and expenses, in connection with
the enforcement of this Agreement, the Series 1996 Refunding Note or the
Indenture or the collection of sums due thereunder, the Company shall reimburse
the Issuer and the Trustee, as applicable, for such expenses so incurred upon
demand, together with interest thereon from the date of demand for payment at
the Interest Rate for Advances, to the date of payment thereof.
Section 7.5. NO WAIVER. No failure by the Issuer or the Trustee to insist
upon the strict performance by the Company of any provision hereof shall
constitute a waiver of their right to strict performance and no express waiver
shall be deemed to apply to any other existing or subsequent right to remedy the
failure by the Company to observe or comply with any provision hereof.
Section 7.6. NOTICE OF DEFAULT. The Company shall notify the Trustee in
writing immediately if it becomes aware of the occurrence of any Event of
Default hereunder of any fact, condition or event which, with the giving of
notice or passage of time or both, would become an Event of Default.
(End of Article VII)
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ARTICLE VIII
MISCELLANEOUS
Section 8.1. TERM OF AGREEMENT. This Agreement shall be and remain in
full force and effect from the date of delivery of the Series 1996 Refunding
Bonds to the Original Purchaser until such time as all of the Bonds shall have
been fully paid (or provision made for such payment) pursuant to Article IX of
the Indenture and all other sums payable by the Company under this Agreement and
the Series 1996 Refunding Note shall have been paid, except for obligations of
the Company under Sections 3.5, 4.2 and 5.3 hereof, which shall survive any
termination of this Agreement.
Section 8.2. AMOUNTS REMAINING IN FUNDS. Any amounts in the Bond Fund
remaining unclaimed by the Owners of Bonds for two years after the due date
thereof (whether at stated maturity, by redemption or pursuant to any mandatory
sinking fund requirements or otherwise), at the option of the Company, shall be
deemed to belong to and shall be paid, at the written request of the Company, to
the Company by the Trustee as overpayment of Loan Payments. With respect to
that principal of and interest and any premium on the Bonds to be paid from
moneys paid to the Company pursuant to the preceding sentence, the Owners of the
Bonds entitled to those moneys shall look solely to the Company for the payment
of those moneys (which shall remain unconditionally obligated to make such
payments). Further, any amounts remaining in the Bond Fund, the Rebate Fund and
any other special funds or accounts created under this Agreement or the
Indenture after all of the outstanding Bonds shall be deemed to have been paid
and discharged under the provisions of the Indenture and all other amounts
required to be paid under this Agreement, the Notes and the Indenture have been
paid, shall be paid to the Company to the extent that those moneys are in excess
of the amounts necessary to effect the payment and discharge of the outstanding
Bonds, provided that, with respect to any moneys remaining in any of the
accounts in the Rebate Fund, such moneys shall not be paid to the Company until
after the Trustee has made the final payment from that account to the United
States in accordance with Section 5.08 of the Indenture and Section 148 of the
Code.
Section 8.3. NOTICES. All notices, certificates, requests or other
communications hereunder shall be in writing and shall be deemed to be
sufficiently given when mailed by first class mail, postage prepaid, and
addressed to the appropriate Notice Address. A duplicate copy of each notice,
certificate, request or other communication given hereunder to the Issuer, the
Company and the Trustee shall also be given to the others. The Company, the
Issuer and the Trustee, by notice given hereunder, may designate any further or
different addresses to which subsequent notices, certificates, requests or other
communications shall be sent.
Section 8.4. EXTENT OF COVENANTS OF THE ISSUER; NO PERSONAL LIABILITY.
All covenants, obligations and agreements of the Issuer contained in this
Agreement or the Indenture shall be effective to the extent authorized and
permitted by applicable law. No such covenant, obligation or agreement shall be
deemed to be a covenant, obligation or agreement of any present or future
29
<PAGE>
member, trustee, officer, agent or employee of the Issuer in other than his
official capacity, and neither the members of the Issuer nor any official
executing the Bonds shall be liable personally on the Bonds or be subject to any
personal liability or accountability by reason of the issuance thereof or by
reason of the covenants, obligations or agreements of the Issuer contained in
this Agreement or in the Indenture.
Section 8.5. BINDING EFFECT. This Agreement shall inure to the benefit of
and shall be binding in accordance with its terms upon the Issuer, the Company
and their respective permitted successors and assigns provided that this
Agreement may not be assigned by the Company (except pursuant to Sections 4.7,
5.2 and 5.5 hereof) and may not be assigned by the Issuer except to the Trustee
pursuant to the Indenture or as otherwise may be necessary to enforce or secure
payment of Bond Service Charges. This Agreement may be enforced only by the
parties, their assignees and others who may, by law, stand in their respective
places.
Section 8.6. AMENDMENTS AND SUPPLEMENTS. Except as otherwise expressly
provided in this Agreement or the Indenture, subsequent to the issuance of the
Series 1996 Refunding Bonds and prior to all conditions provided for in the
Indenture for release of the Indenture having been met, this Agreement may not
be effectively amended, changed, modified, altered or terminated except in
accordance with the provisions of Article XI of the Indenture, as applicable and
to provide for the issuance of the Series 1996 Refunding Bonds.
Section 8.7. EXECUTION COUNTERPARTS. This Agreement may be executed in
any number of counterparts, each of which shall be regarded as an original and
all of which shall constitute but one and the same instrument.
Section 8.8. SEVERABILITY. If any provision of this Agreement, or any
covenant, obligation or agreement contained herein is determined by a court to
be invalid or unenforceable, that determination shall not affect any other
provision, covenant, obligation or agreement, each of which shall be construed
and enforced as if the invalid or unenforceable portion were not contained
herein. That invalidity or unenforceability shall not affect any valid and
enforceable application thereof, and each such provision, covenant, obligation
or agreement shall be deemed to be effective, operative, made, entered into or
taken in the manner and to the full extent permitted by law.
Section 8.9. GOVERNING LAW. This Agreement shall be deemed to be a
contract made under the laws of the State and for all purposes shall be governed
by and construed in accordance with the laws of the State.
Section 8.10. FURTHER ASSURANCES AND CORRECTIVE INSTRUMENTS. The Issuer
and the Company agree that they will, from time to time, execute, acknowledge
and deliver, or cause to be executed, acknowledged and delivered, such
supplements hereto and such further instruments as may reasonably be required
for carrying out the expressed intention of this Agreement.
30
<PAGE>
Section 8.11. ISSUER AND COMPANY REPRESENTATIVE. Whenever under the
provisions of this Agreement the approval of the Issuer or the Company is
required or the Issuer or the Company is required to take some action at the
request of the other, such approval or such request shall be given for the
Issuer by an Authorized Issuer Representative, as defined in a Resolution of the
Issuer relating to the Series 1996 Refunding Bonds, and for the Company by an
Authorized Company Representative. The Trustee shall be authorized to act on
any such approval or request.
Section 8.12. MATTERS TO BE CONSIDERED BY THE ISSUER. In approving,
concurring in or consenting to action or in exercising any discretion or in
making any determination under this Agreement or the Indenture, the Issuer may
consider the interests of the public, which shall include the anticipated effect
as well as the interests of the Company and the Issuer; provided, however,
nothing shall be construed as conferring on any person other than the Trustee
and the Owners any right to notice, hearing or participation in the Issuer's
consideration, and nothing in this Section shall be construed as conferring on
any of them any right additional to those conferred elsewhere. Subject to the
foregoing, the Issuer will not unreasonably withhold any approval or consent to
be given by it hereunder.
(End of Article VIII)
31
<PAGE>
IN WITNESS WHEREOF, the Issuer and the Company have caused this Agreement
to be duly executed in their respective names, all as of the date hereinbefore
written.
BUSINESS FINANCE AUTHORITY OF THE STATE OF
NEW HAMPSHIRE
By: /s/ Jack Donovan
-------------------------------------
Executive Director
CROWN PAPER CO.
By: /s/ Christopher M. McLain
-------------------------------------
Name: Christopher M. McLain
Title: Senior Vice President
32
<PAGE>
EXHIBIT A
FORM OF NOTE
This Promissory Note has not been registered under the Securities Act of
1933. Its transferability is restricted by the Trust Indenture and the Loan
Agreement referred to herein.
CROWN PAPER CO.
SERIES 1996 REFUNDING NOTE
Crown Paper Co. (the "Company"), a Virginia corporation, for value
received, promises to pay to The Bank of New York, as Trustee (the "Trustee")
under the Indenture hereinafter referred to, the principal sum of
SEVENTEEN MILLION NINE HUNDRED FIFTY-FIVE THOUSAND DOLLARS
($17,955,000)
and to pay interest on the unpaid balance of such principal sum from and
after July 18, 1996 at the Applicable Rate until the payment of such
principal sum has been made or provided for. As used herein, "Applicable
Rate" means seven and three-quarters percent (7.75%) per annum. Interest
shall be calculated on the basis of a 360-day year, consisting of twelve
30-day months.
This Series 1996 Refunding Note has been executed and delivered by the
Company to the Trustee pursuant to a certain Refunding Loan Agreement (the
"Agreement") of even date herewith, between the Business Finance Authority of
the State of New Hampshire (the "Issuer") and the Company. Under the Agreement,
the Issuer has applied the proceeds received from the sale of the Issuer's
$17,955,000 aggregate principal amount of Pollution Control and Solid Waste
Disposal Refunding Revenue Bonds (Crown Paper Co. Project), Series 1996, and the
Company has agreed to make Loan Payments at the times and in the amounts set
forth in the Agreement and in this Series 1996 Refunding Note for application to
the payment of the principal of and interest on the Series 1996 Refunding Bonds
as and when due. The Series 1996 Refunding Bonds have been issued, concurrently
with the execution and delivery of this Series 1996 Refunding Note, pursuant to,
and are secured by, the Trust Indenture (the "Indenture"), dated as of July 1,
1996, between the Issuer and the Trustee.
The Series 1996 Refunding Bonds bear interest from their date at the
Applicable Rate payable on January 1 and July 1 of each year, commencing on
January 1, 1997 (each, an "Interest Payment Date"), and the Series 1996
Refunding Bonds mature on January 1, 2022.
A-1
<PAGE>
To provide funds to pay the principal of and interest on the Series 1996
Refunding Bonds as and when due as above-specified, the Company hereby agrees to
and shall make as Loan Payments in immediately available funds on or before each
date that any principal or interest on any Series 1996 Refunding Bond is due (at
maturity, upon redemption, by acceleration or otherwise) an amount equal to the
amount payable as principal and interest, on the Series 1996 Refunding Bonds on
such date.
If payment or provision for payment in accordance with the Indenture is
made in respect of the principal of and interest on all or any portion of the
Bonds from moneys other than payments on the Series 1996 Refunding Note from the
Company, this Series 1996 Refunding Note shall be deemed paid to the extent such
payments or provision for payment of Series 1996 Refunding Bonds has been made.
If the Series 1996 Refunding Bonds are thereby deemed paid in full, this Series
1996 Refunding Note shall be cancelled and returned to the Company. The Company
shall receive a credit against its obligation to make payments hereunder to the
extent of moneys available in the Bond Fund, created by the Indenture, for
payment of principal and interest on the Series 1996 Refunding Bonds, as
provided in the Agreement. In any event, however, if on any date that any
payment of principal or interest on any Series 1996 Refunding Bond is due (at
maturity, upon redemption, by acceleration or otherwise), the balance in the
Bond Fund (which is available therefor) is for any reason insufficient to make
required payments of Bond Service Charges, as and when due, the Company
forthwith shall pay to the Trustee, in immediately available funds, for the
account of the Issuer and for deposit into the Bond Fund, any deficiency. If
the Series 1996 Refunding Bonds are thereby deemed paid in full, this Series
1996 Refunding Note shall be cancelled and returned to the Company. Subject to
the foregoing, all payments on the Series 1996 Refunding Note from the Company
shall be in the full amount required hereunder.
All Loan Payments shall be payable in lawful money of the United States of
America and shall be made to the Trustee at its principal corporate trust office
in New York, New York, for the account of the Issuer and deposited in the Bond
Fund created by the Indenture. Except as otherwise provided in the Indenture,
such Loan Payments shall be used by the Trustee to pay the principal of and
interest on the Series 1996 Refunding Bonds as and when due.
The obligation of the Company to make the payments required hereunder shall
be absolute and unconditional under any and all circumstances whatsoever and the
Company shall make such payments without abatement, diminution or deduction
regardless of any cause or circumstances whatsoever including, without
limitation, any defense, set-off, recoupment or counterclaim which the Company
may have or assert against the Issuer, the Trustee or any other person.
This Note is subject to optional and mandatory prepayment prior to stated
maturity pursuant to the obligation of the Company to give the Issuer and the
Trustee sufficient notice of such prepayment as shall enable the Issuer and the
Trustee to take all action necessary under the Indenture to redeem on the date
specified for prepayment a like principal amount of Series 1996 Refunding Bonds
at the same redemption price.
A-2
<PAGE>
Whenever an Event of Default under Section 7.01 of the Indenture (other
than an Event of Default as defined in Section 7.01(c) thereof) shall have
occurred and, as a result thereof, the principal of all Series 1996 Refunding
Bonds then outstanding, and interest accrued thereon, shall have been declared
to be immediately due and payable pursuant to Section 7.02 of the Indenture, the
unpaid principal amount of and accrued interest on this Series 1996 Refunding
Note shall also be due and payable on the date on which the principal of and
interest on the Series 1996 Refunding Bonds shall have been declared due and
payable; provided that the annulment of a declaration of acceleration with
respect to the Series 1996 Refunding Bonds shall also constitute an annulment of
any corresponding acceleration with respect to this Series 1996 Refunding Note.
If an Event of Default should occur and the Issuer or the Trustee should
incur expenses, including attorneys' fees and expenses, in connection with the
enforcement of this Series 1996 Refunding Note, the Agreement or the Indenture
or the collection of sums due thereunder, the Company shall reimburse the Issuer
or the Trustee, as applicable, for reasonable expenses so incurred upon demand,
together with interest thereon from the date of demand for payment at the
Interest Rate for Advances, to the date of payment thereof.
IN WITNESS WHEREOF, the Company has caused this Series 1996 Refunding Note
to be executed in its name by a duly authorized officer as of July 18, 1996.
CROWN PAPER CO.
By: /s/ Christopher M. McLain
-------------------------------------
Title: Senior Vice President
A-3
<PAGE>
EXHIBIT B
PROJECT FACILITIES
The Project Facilities consist of certain air pollution and water pollution
facilities and a solid waste disposal facility, all of which are located at the
Company's pulp and paper mills in Berlin and Gorham, New Hampshire. The air
pollution and water pollution facilities and the solid waste disposal facility
consist of 19 separate groups of facilities (and specific assets within such
facility group).
No. 8 Recovery Boiler Renovations
Black Liquor Oxidation
Oxidation Tank Recirculation System
Revise Scrubbing System for Old Lime Kiln
Kraft Mill Vent Gas Disposal System
Engineering
Start Up/Shut Down Tank CL02 System
Caustic Plant Dust Collection System
No. 11 Boiler Smelt Tank Vent Scrubber
No. 8 Boiler Smelt Tank Vent Scrubber
Smoke Density Recording Equipment - Heine
Air Pollution Monitoring - TRS Testing Equipment
Air Pollution Monitoring - Particulate Testing Equipment
Recorders for monitoring scrubbers for kiln and boilers
Ambient Air Testing Equipment
No. 14 Bark Burning Boiler
Kraft Screen Room White Water Close-Up
Screen Room Water System Close-Up
Green Liquor Clarification
Sep. Foam/Filtrate System for Brown Stock Washer
Woodroom Water System Close-Up
B-1
<PAGE>
No. 9 Paper Machine White Water Close-Up
No. 1 Paper Machine White Water Recovery & Reuse
No. 9 Paper Machine Save-All Engineering
No. 2 Paper Machine Changes to Wet End
Cascade Mill General White Water System
Cascade Mill Spill System
Riverside Mill White Water Reuse
Kraft Mill Liquor Spill Recovery System
No. 10 Paper Machine White Water System
No. 2 Pulp Dryer White Water Recovery
No. 4 Paper Machine White Water Reuse
B L Plant Water Conservation
Spill Prevention, Containment & Countermeasure Plan
CL2 Water Dilution System
No. 11 Recovery Boiler Scrubber Modifications
Burgess Mill Wastewater Treatment Plant
Burgess Mill Wastewater Treatment Plant Misc.
Cascade Mill External Treatment Plant
Engineering Fees Relating to External Treatment Plants
B-2
<PAGE>
EXHIBIT 23
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholder of Crown Paper Co.:
We have audited the consolidated balance sheet of Crown Paper Co. and
subsidiaries, as described in Note 2, as of December 31, 1995 and the
related consoldiated statements of operations, cash flows, and changes in
equity for each of the two years in the period ended December 31, 1995
listed in the index on page 8 of this form 10-K. These financial statements
are the responsibility of the management of Crown Paper Co. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Crown Paper Co.
and subsidiaries, as described in Note 2, as of December 31, 1995, and the
consolidated results of their operations and their cash flows for each of the
two years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles.
As discussed in the last paragraph to Note 9, the Company has revised certain
balance sheet amounts previously reported in the 1995 financial statements
related to accounting for pension plans.
COOPERS & LYBRAND L.L.P.
Oakland, California
February 23, 1996
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<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-START> JAN-01-1996
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