<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C, 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
--------------------------------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ................... to ..................
Commission File Number 33-93644
--------
DAY INTERNATIONAL GROUP, INC.
-----------------------------
(Exact name of registrant as specified in its charter)
Delaware 31-1436 349
- ------------------------------- ------------------------
(State or other jurisdiction of (I.R.S. Employer ID No.)
incorporation or organization)
333 West First Street, Dayton, Ohio 45402-0338
- ---------------------------------------- ------------------------
(Address of principal executive offices) (zip code)
(513) 224-4000
- ------------------------------------------
(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------ ------
The number of Common Shares of the Company, $0.01 per share par value,
outstanding as of July 29, 1996 was 51,600.
<PAGE> 2
DAY INTERNATIONAL GROUP, INC.
Index
<TABLE>
<CAPTION>
Pages
-----
<S> <C>
Part I: Financial Information
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets as of June 30, 1996
and December 31, 1995 3
Condensed Consolidated Statements of Income for the quarter ended
June 30, 1996, the period April 1, 1995 through
June 6, 1995 and the period June 7, 1995 through June 30, 1995 4
Condensed Consolidated Statements of Income for the six months
ended June 30, 1996, the period January 1, 1995 through
June 6, 1995 and the period June 7, 1995 through June 30, 1995 5
Condensed Consolidated Statements of Cash Flows for the six months
ended June 30, 1996, the period January 1, 1995 through
June 6, 1995 and the period June 7, 1995 through June 30, 1995 6
Notes to Condensed Consolidated Financial Statements 7 - 18
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 19 - 22
Part II: Other Information
Item 1 - Legal Proceedings 23
Item 6 - Exhibits and Reports on Form 8-K 23
Signature 23
</TABLE>
2
<PAGE> 3
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DAY INTERNATIONAL GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
ASSETS 1996 1995
---- ----
<S> <C> <C>
Cash and cash equivalents $ 3,291 3,769
Accounts receivable, net of allowance 17,815 15,607
Inventories 15,003 15,237
Prepaid expenses and other current assets 922 866
Deferred income taxes 2,075 1,975
----------- -----------
Total current assets 39,106 37,454
Property, plant and equipment, net 44,900 44,496
Goodwill and other intangibles 141,356 145,446
Other assets 2,934 1,427
----------- -----------
Total assets $ 228,296 $ 228,823
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 7,016 5,882
Accrued associate related costs and other expenses 11,426 11,114
Interest payable 1,340 1,212
Current maturities of long-term debt 728 --
----------- -----------
Total current liabilities 20,510 18,208
Long-term and subordinated long-term debt 147,641 151,250
Deferred tax liabilities 2,087 2,202
Other long term liabilities 7,614 7,302
----------- -----------
Total liabilities 177,852 178,962
Commitments and contingencies -- --
Stockholders' equity:
Common stock 1 1
Additional paid in capital 51,599 51,599
Retained earnings (Accumulated deficit) (435) (1,227)
Foreign currency translation adjustment (721) (512)
----------- -----------
Total stockholders' equity 50,444 49,861
----------- -----------
Total liabilities and stockholders' equity $ 228,296 $ 228,823
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 4
DAY INTERNATIONAL GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMPANY PREDECESSOR
---------------------- -----------
THREE JUNE 7, APRIL 1,
MONTHS 1995 1995
ENDED THROUGH THROUGH
JUNE 30, JUNE 30, JUNE 6,
1996 1995 1995
---------- ---------- ----------
<S> <C> <C> <C>
Net sales $33,299 $8,931 $24,220
Costs of goods sold 20,197 5,721 15,218
------- ------ -------
Gross profit 13,102 3,210 9,002
Selling, general and administrative
expenses 6,443 1,558 5,131
Amortization of intangibles 1,601 487 955
Management Fees 260 -- --
------- ------ -------
Operating income 4,798 1,165 2,916
Interest expense (including amortization of
deferred financing costs of $250 and $61) 4,113 1,155
Other (income) expense (61) 975 (350)
------- ------ -------
Income (loss) before income taxes 746 (965) 3,266
Provision for income taxes 335 -- 1,243
------- ------ -------
Net Income (loss) $ 411 ($ 965) $ 2,023
======= ====== =======
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 5
DAY INTERNATIONAL GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands)
<TABLE>
<CAPTION>
COMPANY PREDECESSOR
------------------------- -----------
SIX JUNE 7, JANUARY 1,
MONTHS 1995 1995
ENDED THROUGH THROUGH
JUNE 30, JUNE 30, JUNE 6,
1996 1995 1995
---------- ---------- ----------
<S> <C> <C> <C>
Net sales $ 67,121 $ 8,931 $ 55,454
Costs of goods sold 41,657 5,721 33,935
---------- ---------- ----------
Gross profit 25,464 3,210 21,519
Selling, general and administrative
expenses 12,195 1,558 11,257
Amortization of intangibles 3,142 487 2,258
Management Fees 460 -- --
---------- ---------- ----------
Operating income 9,667 1,165 8,004
Interest expense (including amortization of
deferred financing costs of $500 and $61) 8,242 1,155
Other (income) expense 34 975 (577)
---------- ---------- ----------
Income before income taxes 1,391 (965) 8,581
Provision for income taxes 599 -- 3,488
---------- ---------- ----------
Net Income $ 792 $ (965) $ 5,093
========== ========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE> 6
DAY INTERNATIONAL GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMPANY PREDECESSOR
---------------------- -----------
SIX JUNE 7, JANUARY 1,
MONTHS 1995 1995
ENDED THROUGH THROUGH
JUNE 30, JUNE 30, JUNE 6,
1996 1995 1995
---------- ---------- ----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 792 $ (965) $ 5,093
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 7,477 1,475 4,378
Deferred income taxes (146) (1,613)
Changes in operating assets and liabilities (1,410) (647) (7,439)
---------- ---------- ----------
Net cash provided by (used in) operating activities 6,713 (137) 419
---------- ---------- ----------
INVESTING ACTIVITIES
Capital expenditures (2,628) (115) (1,565)
Cash Paid for Day International, Inc. (199,500)
Other (1,555) -- --
---------- ---------- ----------
Net cash used in investing activities (4,183) (199,615) (1,565)
---------- ---------- ----------
FINANCING ACTIVITIES
Net payments on revolving credit facility (7,250)
Proceeds from UK credit facility 4,320
Capital contributions 50,421
Proceeds from Term Loan 30,000
Net proceeds from revolving credit facility 27,800
Issuance of subordinated debt 100,000
Payment of financing costs (9,163)
Decrease in notes receivable and advances 6,015
Net change in equity -- -- (5,483)
---------- ---------- ----------
Net cash (used in) provided by financing activities (2,930) 199,058 532
---------- ---------- ----------
Effects of exchange rates on cash (78) (61) 31
---------- ---------- ----------
CASH AND CASH EQUIVALENTS:
Net decrease in cash and cash equivalents (478) (755) (583)
Cash and cash equivalents at beginning of period 3,769 4,096 5,477
---------- ---------- ----------
Cash and cash equivalents at end of period $ 3,291 $ 3,341 $ 4,894
========== ========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
6
<PAGE> 7
DAY INTERNATIONAL GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS)
A. BASIS OF PRESENTATION- The balance sheet at December 31, 1995 is condensed
financial information derived from the audited balance sheet. The interim
financial statements are unaudited. The financial statements of Day
International Group, Inc. (the "Successor" or the "Company") and Day
International, Inc. (the "Predecessor" or "Day"), have been prepared in
accordance with generally accepted accounting principles and, in the opinion of
management, reflect all adjustments (consisting of normal recurring accruals)
necessary for a fair presentation in accordance with generally accepted
accounting principles for the periods presented. The results of operations and
cash flows for the interim periods presented are not necessarily indicative of
the results for the full year.
B. ACQUISITION OF DAY INTERNATIONAL, INC. - The Company was formed by American
Industrial Partners Capital Fund, L.P. ("AIP I") and American Industrial
Partners Capital Fund II, L.P. ("AIP II") to purchase Day (the "Acquisition").
On June 6, 1995 the Company acquired Day. The Acquisition was effected pursuant
to a Stock Purchase Agreement, dated April 11, 1995, by and among the Company,
M.A. Hanna Company and Cadillac Plastic Group, Inc. In connection with the
Acquisition, the Company purchased all of the outstanding shares of Day. Prior
to the Acquisition, the Company did not have any significant assets or
liabilities or engage in any other activities other than those indicative to
their formation, the Acquisition and financing related to the Acquisition.
The Company purchased Day for $211.8 million in cash, net of cash acquired of
$2.5 million. In order to obtain funds necessary to effect the Acquisition and
related transactions, and to pay the related fees and expenses of the
Acquisition, (i) AIP I and AIP II and its related investors contributed an
aggregate of $50.4 million to the Company in exchange for all the capital stock
of the Company, (ii) the Company consummated the offerings of 11 1/8% Senior
Subordinated Notes due 2005, in the aggregate amount of $100 million, and (iii)
the Company entered into a Credit Agreement, providing for a $30 million term
loan and a $50 million revolving credit facility, under which approximately
$59.2 million was borrowed upon the consummation of the Acquisition.
Interest on the Subordinated Notes is payable semi-annually. The terms of the
Credit Agreement and the Subordinated Notes include various financial covenants
and other covenants which place limits on, among other things, asset sales,
dividends and distributions on the Company's or any of its subsidiaries capital
stock, the purchase, redemption, acquisition of capital stock of the Company or
its affiliates or any subsidiaries, and the incurrence of certain additional
indebtedness. As of June 30, 1996, the Company was in compliance with all of the
covenants that pertain to the Credit Agreement and the Subordinated Notes.
The Acquisition of Day has been accounted for as a purchase, applying the
provisions of Accounting Principles Board Opinion No. 16. The total purchase
cost was allocated to Day's assets and liabilities as of June 6, 1995, the
closing date of the Acquisition, based on valuations and other studies. Based on
7
<PAGE> 8
these estimates, a portion of the excess purchase cost over the historical book
value of the net assets acquired is allocated to certain property, plant and
equipment, employment agreements, computer software and certain other
intangibles having lives of 1 to 40 years, and the remainder, representing
goodwill, is amortized over 40 years.
C. INVENTORIES - The components of inventories are as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
---- ----
<S> <C> <C>
Finished goods $ 7,740 $ 7,661
Work-in-process 4,737 4,732
Raw materials 2,526 2,844
------------ ------------
Total $ 15,003 $ 15,237
============ ============
</TABLE>
D. CONTINGENCIES - Claims have been made against Day for the costs of
environmental remedial measures taken or to be taken. Reserves for such
liabilities have been established and no insurance recoveries have been
anticipated in the determination of the reserves. In management's opinion, the
aforementioned claims will be resolved without material adverse effect on the
results of operations, financial position or cash flows of the Company. The
Company's previous parent and its parent, M.A. Hanna, have agreed to indemnify
the Company for certain of the costs associated with these matters. As a result,
a $1.1 Million indemnification receivable has been recorded. Management believes
that this receivable is fully realizable.
E. OTHER ASSETS - In May, 1996, the Company's wholly-owned subsidiary, Day
International, Inc. acquired the stock of San Joaquin Packaging Corporation for
$1.6 Million in cash plus the assumption of certain contingent obligations and
subsequently merged San Joaquin into Day International, Inc. The acquisition was
accounted for as a purchase with the purchase price allocated to San Joaquin's
only asset, a non-interest bearing note receivable, due in 1998, with a face
value of $2.0 Million (discounted at 11%). Collection under the note is
contingent upon the completion of certain transactions related to the sale of
the assets of San Joaquin, however, management believes that the note will be
fully realized.
F. SUPPLEMENTAL CONSOLIDATING INFORMATION - As described in Note B, in April
1995, the Company purchased Day from M.A. Hanna. The acquisition was financed
through equity, term and revolving credit facilities and senior subordinated
debt (the "Notes"). In connection with the acquisition, Day became a
wholly-owned subsidiary of the company (which has no assets or operations other
than its investment in day) and provided a full and unconditional guarantee of
the Notes. The wholly-owned foreign subsidiaries of day are not guarantors with
respect to the Notes and are not anticipated to have any credit arrangements
senior to the Notes except for the $4.3 Million borrowing by the UK subsidiary
under the Credit Agreement. All of the assets of Day and its parent, other than
the assets of the wholly-owned foreign non guarantor subsidiaries, are pledged
as collateral on the Notes. The only intercompany elimination's are the normal
intercompany eliminations with regard to intercompany sales and the Company's
investment in the wholly owned non guarantor subsidiaries. The following are the
supplemental combined condensed balance sheets as of June 30, 1996 and December
31, 1995 and the
8
<PAGE> 9
supplemental combined condensed statements of income for the quarters ended June
30, 1996 and 1995 and the supplemental combined condensed statements of income
and cash flows for the six months ended June 30, 1996 and 1995 with the
investments in the subsidiaries accounted for using the equity method. Separate
complete financial statements of the Guarantor are not presented because
management has determined that they are not material to the investors.
Day International Group, Inc.
Supplemental Combining Condensed Balance Sheet
June 30, 1996
<TABLE>
<CAPTION>
DAY DAY
International International Non Guarantor
Group, Inc. Inc.(Guarantor) Subsidiaries Eliminations Consolidated
----------- --------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
- ------
Cash & cash equivalents $ 991 $ (100) 2,400 $ 3,291
Accounts receivable - net 10,319 7,496 17,815
Inventories 9,114 5,889 15,003
Other assets 5 1,693 1,299 2,997
--------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 996 21,026 17,084 -- 39,106
Intercompany 144,000 1,796 $ (145,796) --
Property, plant and equipment - net 36,058 8,842 44,900
Investment in subsidiaries 60,269 17,477 (77,746) --
Intangibles and other assets 137,591 6,699 144,290
--------------------------------------------------------------------------------
TOTAL ASSETS $ 205,265 $ 213,948 $ 32,625 $ (223,542) $ 228,296
================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Accounts payable $ 77 $ 4,248 $ 2,410 $ 281 $ 7,016
Accrued associate related costs
and other expenses 7,455 3,971 -- 11,426
Interest payable 1,340 1,340
Current maturities of long-term debt -- -- 728 728
--------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 1,417 11,703 7,109 281 20,510
Intercompany 8,683 135,251 2,143 (146,077) --
Long-term and
Subordinated long term debt 144,000 3,641 147,641
Long-term post retirement
benefits and other 6,725 2,976 9,701
Total stockholders' equity 51,165 60,269 16,756 (77,746) 50,444
--------------------------------------------------------------------------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 205,265 $ 213,948 $ 32,625 $ (223,542) $ 228,296
================================================================================
</TABLE>
9
<PAGE> 10
Day International Group, Inc.
Supplemental Combining Condensed Balance Sheet
December 31, 1995
<TABLE>
<CAPTION>
DAY DAY
International International Non Guarantor
Group, Inc. Inc. (Guarantor) Subsidiaries Eliminations Consolidated
----------- ---------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
- ------
Cash & cash equivalents $403 $87 $3,279 $3,769
Accounts receivable - net 7,651 7,956 15,607
Inventories 9,473 5,764 15,237
Other assets 20 1,761 1,060 2,841
--------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 423 18,972 18,059 -- 37,454
Intercompany 7,697 ($7,697) --
Property, plant and equipment - net 35,510 8,986 44,496
Investment in subsidiaries 210,684 17,193 (227,877) --
Intangibles and other assets 140,143 6,730 146,873
--------------------------------------------------------------------------------
TOTAL ASSETS $211,107 $219,515 $33,775 $(235,574) $228,823
================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Accounts payable $77 $3,204 $2,702 ($101) $5,882
Accrued associate related costs
and other expenses 1,354 7,198 3,774 12,326
--------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 1,431 10,402 6,476 (101) 18,208
Intercompany 8,053 (8,064) 7,607 (7,596) --
Long-term and
subordinated long-term debt 151,250 151,250
Long-term post retirement
benefits and other 6,493 3,011 9,504
Total stockholders' equity 50,373 210,684 16,681 (227,877) 49,861
--------------------------------------------------------------------------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $211,107 $219,515 $33,775 $(235,574) $228,823
================================================================================
</TABLE>
10
<PAGE> 11
Day International Group, Inc.
Supplemental Combining Condensed Statement of Income
For the quarter ended June 30, 1996
<TABLE>
<CAPTION>
DAY DAY
International, International, Non Guarantor
Group, Inc. Inc. (Guarantor) Subsidiaries Eliminations Consolidated
----------- ---------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $ - $ 24,754 $ 8,545 $ - $ 33,299
Cost of goods sold 14,519 5,678 20,197
------------------------------------------------------------------------------
Gross profit - 10,235 2,867 - 13,102
Selling, general and administrative expenses 43 4,476 1,924 6,443
Amortization of intangibles 1,589 12 1,601
Management fees 260 260
------------------------------------------------------------------------------
Operating income (loss) (43) 3,910 931 - 4,798
Other expenses (income):
Equity in earnings of subsidiaries 1,940 (472) (1,468) -
Interest expense (3,879) 7,973 19 4,113
Other (income) expense (19) (108) 66 (61)
------------------------------------------------------------------------------
Income (loss) before income taxes 1,915 (3,483) 846 1,468 746
Provision (benefit) for income taxes 1,504 (1,543) 374 335
------------------------------------------------------------------------------
Net Income (loss) $ 411 $ (1,940) $ 472 $ 1,468 $ 411
==============================================================================
</TABLE>
11
<PAGE> 12
Day International Group, Inc.
Supplemental Combining Condensed Statement of Income
For the Six Months ended June 30, 1996
<TABLE>
<CAPTION>
DAY DAY
International, International, Non Guarantor
Group, Inc. Inc. (Guarantor) Subsidiaries Eliminations Consolidated
----------- ---------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $ - $ 49,709 $ 17,412 $ - $ 67,121
Cost of goods sold 29,984 11,673 41,657
---------------------------------------------------------------------------------
Gross profit - 19,725 5,739 - 25,464
Selling, general and administrative expenses 108 8,156 3,931 12,195
Amortization of intangibles 2,982 160 3,142
Management fees 460 460
---------------------------------------------------------------------------------
Operating income (loss) (108) 8,127 1,648 - 9,667
Other expenses (income):
Equity in earnings of subsidiaries (835) (784) 1,619 -
Interest expense - 8,223 19 8,242
Other (income) expense (38) (122) 194 34
---------------------------------------------------------------------------------
Income (loss) before income taxes 765 810 1,435 (1,619) 1,391
Provision (benefit) for income taxes (27) (25) 651 599
---------------------------------------------------------------------------------
Net Income $ 792 $ 835 $ 784 $ (1,619) $ 792
=================================================================================
</TABLE>
12
<PAGE> 13
Day International Group, Inc.
Supplemental Combining Condensed Statement of Income
For the period June 7, 1995 through June 30, 1995
<TABLE>
<CAPTION>
DAY DAY
International, International, Non Guarantor
Group, Inc. Inc. (Guarantor) Subsidiaries Eliminations Consolidated
----------- ---------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $ - $ 6,280 $ 2,651 $ - $ 8,931
Cost of goods sold 3,964 1,757 5,721
---------------------------------------------------------------------------------
Gross profit - 2,316 894 - 3,210
Selling, general and administrative expenses 62 882 614 1,558
Amortization of intangibles 487 - 487
Management fees - - -
---------------------------------------------------------------------------------
Operating income (loss) (62) 947 280 - 1,165
Other expenses (income):
Equity in earnings of subsidiaries (137) (250) 387 -
Interest expense 1,087 61 1 6 1,155
Other (income) expense (47) 999 29 (6) 975
---------------------------------------------------------------------------------
Income (loss) before income taxes (965) 137 250 (387) (965)
Provision (benefit) for income taxes - - - -
---------------------------------------------------------------------------------
Net Income $ (965) $ 137 $ 250 $ (387) $ (965)
=================================================================================
</TABLE>
13
<PAGE> 14
Day International Group, Inc.
Supplemental Combining Condensed Statement of Income
For the period April 1, 1995 through June 6, 1995
<TABLE>
<CAPTION>
DAY
International, Non Guarantor
Inc. (Guarantor) Subsidiaries Eliminations Consolidated
--------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ 17,384 $ 15,249 $ (8,413) $ 24,220
Cost of goods sold 11,252 12,379 (8,413) 15,218
----------------------------------------------------------------
Gross profit 6,132 2,870 - 9,002
Selling, general and administrative expenses 2,778 2,353 5,131
Amortization of intangibles 955 - 955
----------------------------------------------------------------
Operating income 2,399 517 - 2,916
Other expenses (income):
Equity in earnings of subsidiaries (701) 701 -
Other (income) expense 128 (478) (350)
----------------------------------------------------------------
Income before income taxes 2,972 995 (701) 3,266
Provision for income taxes 949 294 1,243
----------------------------------------------------------------
Net Income $ 2,023 $ 701 $ (701) $ 2,023
================================================================
</TABLE>
14
<PAGE> 15
Day International Group, Inc.
Supplemental Combining Condensed Statement of Income
For the period January 1, 1995 through June 6, 1995
<TABLE>
<CAPTION>
DAY
International, Non Guarantor
Inc. (Guarantor) Subsidiaries Eliminations Consolidated
--------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ 39,690 $ 24,177 $ (8,413) $ 55,454
Cost of goods sold 23,829 18,519 (8,413) 33,935
------------------------------------------------------------
Gross profit 15,861 5,658 - 21,519
Selling, general and administrative expenses 6,776 4,481 11,257
Amortization of intangibles 2,258 - 2,258
------------------------------------------------------------
Operating income 6,827 1,177 - 8,004
Other expenses (income):
Equity in earnings of subsidiaries (1,426) 1,426 -
Other (income) expense 110 (687) (577)
------------------------------------------------------------
Income before income taxes 8,143 1,864 (1,426) 8,581
Provision for income taxes 3,050 438 3,488
------------------------------------------------------------
Net Income $ 5,093 $ 1,426 $ (1,426) $ 5,093
============================================================
</TABLE>
15
<PAGE> 16
Day International Group, Inc.
Supplemental Combining Condensed Statement of Cash Flows
For the six months ended June 30, 1996
<TABLE>
<CAPTION>
DAY DAY
International International, Non Guarantor
Group, Inc. Inc. (Guarantor) Subsidiaries Eliminations Consolidated
----------- ---------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Operating Activities:
Net Income $ 792 $ 835 $ 784 $(1,619) $ 792
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 6,748 729 7,477
Equity in earning of subsidiaries (835) (784) 1,619 --
Changes in operating assets and liabilities 1 (1,983) (227) 653 (1,556)
------- ------- ------- ------- -------
Net cash provided by (used in) operating activities (42) 4,816 1,286 653 6,713
Investing Activities:
Capital expenditures (2,040) (588) (2,628)
Other (1,273) (633) 351 (1,555)
------- ------- ------- ------- -------
Net cash used in investing activities -- (3,313) (1,221) 351 (4,183)
Financing Activities:
Proceeds from UK credit facility -- 4,320 4,320
Net payments on revolving credit facility (7,250) (7,250)
------- ------- ------- ------- -------
Net cash (used in) provided by financing activities (7,250) -- 4,320 -- (2,930)
Intercompany transfers 7,880 (1,690) (5,186) (1,004) --
Effects of exchange rates on cash (78) (78)
------- ------- ------- ------- -------
Cash and Cash Equivalents:
Net increase (decrease) in cash and cash equivalents 588 (187) (879) -- (478)
Cash and cash equivalents at beginning of period 403 87 3,279 3,769
------- ------- ------- ------- -------
Cash and cash equivalents at end of period $ 991 $ (100) $ 2,400 $ -- $ 3,291
======= ======= ======= ======= =======
</TABLE>
16
<PAGE> 17
Day International Group, Inc.
Supplemental Combining Condensed Statement of Cash Flows
For the period June 7, 1995 though June 30, 1995
<TABLE>
<CAPTION>
DAY DAY
International International, Non Guarantor
Group, Inc. Inc. (Guarantor) Subsidiaries Eliminations Consolidated
----------- ---------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net Income (Loss) $ (965) $ 137 $ 250 $ (387) $ (965)
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 1,338 137 1,475
Equity in earnings (loss) of subsidiaries (137) (250) 387 --
Changes in operating assets and liabilities -- -- -- -- --
-------- ------- ------- ------- --------
Net cash provided by (used in) operating activities (1,102) 1,225 387 -- 510
INVESTING ACTIVITIES:
Cash paid for Day International, Inc. (199,500) (199,500)
Capital expenditures (115) -- (115)
-------- ------- ------- ------- --------
Net cash used in investing activities (199,500) (115) -- -- (199,615)
FINANCING ACTIVITIES:
Capital contribution 50,421 50,421
Proceeds from term loan 30,000 30,000
Net proceeds from revolving credit facility 27,800 27,800
Issuance of subordinated debt 100,000 100,000
Payment of financing costs (9,163) (9,163)
-------- ------- ------- ------- --------
Net cash provided by financing activities 199,058 -- -- -- 199,058
Intercompany transfers -- -- -- -- --
Effects of exchange rates on cash (61) (61)
-------- ------- ------- ------- --------
Cash and Cash Equivalents:
Net increase (decrease) in cash and cash equivalents (1,544) 1,110 326 -- (108)
Cash and cash equivalents at beginning of period 958 1,105 2,033 4,096
-------- ------- ------- ------- --------
Cash and cash equivalents at end of period $ (586) $ 2,215 $ 2,359 $ -- $ 3,988
======== ======= ======= ======= ========
</TABLE>
17
<PAGE> 18
Day International, Inc.
Supplemental Combining Condensed Statement of Cash Flows
For the period January 1, 1995 through June 6, 1995
<TABLE>
<CAPTION>
DAY
International, Non Guarantor
Inc.(Guarantor) Subsidiaries Eliminations Consolidated
--------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Operating Activities:
Net Income $ 5,093 $ 1,426 $ (1,426) $ 5,093
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 4,021 357 4,378
Equity in earnings of subsidiaries (1,426) -- 1,426 --
Changes in operating assets and liabilities (6,349) (2,703) -- (9,052)
------------------------------------------------------------------
Net cash provided by (used in) operating activities 1,339 (920) -- 419
Investing Activities:
Capital expenditures (1,213) (352) (1,565)
Other -- --
------------------------------------------------------------------
Net cash used in investing activities (1,213) (352) -- (1,565)
Financing Activities:
Decrease in notes receivable and advances 5,890 125 6,015
Net change in equity (5,483) (5,483)
------------------------------------------------------------------
Net cash provided by financing activities 407 125 -- 532
Effects of exchange rates on cash 31 31
------------------------------------------------------------------
Cash and Cash Equivalents:
Net increase (decrease) in cash and cash equivalents 533 (1,116) -- (583)
Cash and cash equivalents at beginning of period 572 4,905 -- 5,477
------------------------------------------------------------------
Cash and cash equivalents at end of period $ 1,105 $ 3,789 $ -- $ 4,894
==================================================================
</TABLE>
18
<PAGE> 19
DAY INTERNATIONAL GROUP, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
BASIS OF PRESENTATION
The following table sets forth, for the periods shown, net sales, cost of goods
sold, gross profit, selling, general and administrative expense ("SG&A"),
amortization of intangibles and operating income in millions of dollars and as a
percentage of net sales.
<TABLE>
<CAPTION>
Three Months Six Months
------------ ----------
Ended June 30 Ended June 30
------------- -------------
1996 1995 1996 1995
---- ---- ---- ----
$ % $ % $ % $ %
----- ----- ----- ----- ------ ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales................................ 33.3 100.0 33.1 100.0 67.1 100.0 64.4 100.0
Costs of goods sold...................... 20.2 60.7 20.9 63.2 41.7 62.1 39.7 61.6
Gross profit............................. 13.1 39.3 12.2 36.8 25.4 37.9 24.7 38.4
SG&A..................................... 6.4 19.3 6.7 20.2 12.2 18.2 12.8 19.9
Amortization of intangibles.............. 1.6 4.8 1.4 4.3 3.1 4.7 2.7 4.3
Management Fees.......................... 0.3 0.8 - - 0.5 0.7 - -
Operating income......................... 4.8 14.4 4.1 12.3 9.7 14.4 9.2 14.2
</TABLE>
COMPARISON OF RESULTS OF OPERATIONS
Three Months Ended June 30, 1996 Compared to Three Months Ended June 30, 1995
Net sales increased to $33.3 million for the three months ended June 30, 1996
from $33.1 million for the comparable period in 1995, an increase of $0.2
million or 0.4%. Sales volumes increased by $0.6 million or 1.8% offset by the
effect of translation of $0.4 million or 1.2%. Printing's sales increased to
$25.0 million for the three months ended June 30, 1996 from $24.0 million for
the comparable period in 1995, an increase of $1.0 million or 4.0%. Printing
revenues increased $1.3 million or 5.4%, as a result of modest price increases
and increased demand for the Company's existing products. Translation reduced
Printing's revenue by $0.3 million or 1.3%. Textiles' sales were $8.3 million
for the three months ended June 30, 1996 compared to $9.1 million for the
comparable period in 1995, a decrease of $0.8 million or 9.0%. Textile volumes
decreased by $0.7 million or 7.7% as a result of lower European sales, mainly to
original equipment manufacturer customers. Translation reduced Textile's
revenues by $0.1 million.
Gross profit increased $0.9 million to $13.1 million for the three months ended
June 30, 1996 from $12.2 million for the three months ended June 30, 1995. As a
percentage of net sales, gross profit increased to 39.3% for the three months
ended June 30, 1996 from 36.8% for the
19
<PAGE> 20
comparable period in 1995. Gross profit was positively impacted by productivity
enhancements and higher sales volumes. Gross profit increased by $0.1 million as
a result of higher sales volumes and favorable product mix. Lower cost of goods
sold increased gross profit by $0.9 million or 7.4%. Translation reduced gross
profit $0.2 million or 1.6%. Gross profit was also impacted by $0.5 million of
higher depreciation and amortization as a result of recognizing the market value
of the assets purchased in the Acquisition. Gross profit in the three months
ended June 30, 1995 decreased by $0.6 million as a result of selling finished
goods inventory which were purchased at market value as a result of the
acquisition.
SG&A decreased to $6.4 million for the three months ended June 30, 1996 from
$6.7 million for the comparable period in 1995, a decrease of $0.3 million or
3.8%. In the quarter ended June 30, 1996, additional stand alone costs added
$0.1 million to SG&A and translation decreased SG&A by $0.1 million. As a
percentage of net sales, SG&A decreased to 19.3% from 20.2%, as a result of
lower distribution and selling expenses mainly on reduced European sales and
cost savings associated with the reorganization of the Canadian branch office.
Amortization of intangibles increased to $1.6 million for the three months June
30, 1996 from $1.4 million for the comparable period in 1995, an increase of
$0.2 million as a result of purchase accounting from the Acquisition.
Operating income increased to $4.8 million for the three months ended June 30,
1996 from $4.1 million for the comparable period in 1995, a increase of $0.7
million or 17.6%. As a percentage of net sales, operating income increased to
14.4% for the three months ended June 30, 1996 from 12.3% for the comparable
period in 1995. The Company's operating income was $0.7 million lower due to
increased depreciation and amortization primarily as a result of the
Acquisition.
Six Months Ended June 30, 1996 Compared to Six Months Ended June 30, 1995
Net sales increased to $67.1 million for the six months ended June 30, 1996 from
$64.4 million for the comparable period in 1995, an increase of $2.7 million or
4.2%. Real revenue growth was $3.4 million, or 5.3% reduced by $0.7 million as a
result of translation. Printing's sales increased to $50.6 million for the six
months ended June 30, 1996 from $47.1 million for the comparable period in 1995,
an increase of $3.5 million or 7.5%, as a result of modest price increases,
higher sales of tubular sleeves, and increased demand for the Company's existing
products. Textiles' sales were $16.6 million for the six months ended June 30,
1996 compared to $17.3 million for the comparable period in 1995, a decrease of
$0.7 million or 4.4% as a result of lower European sales to OEM customers
coupled with adverse translation impact of $0.2 million or 1.2%. Sales of other
textile products were flat.
Gross profit increased $0.7 million to $25.4 million for the six months ended
June 30, 1996 from $24.7 million for the six months ended June 30, 1995. As a
percentage of net sales, gross profit decreased to 37.9% for the six months
ended June 30, 1996 from 38.4% for the comparable
20
<PAGE> 21
period in 1995. Gross profit was positively impacted by productivity
enhancements and higher sales volumes, particularly printing products sales.
Gross profit increased by $1.6 million as a result of higher overall sales
volumes. Gross profit decreased $0.3 million due to translation. Gross profit
was also impacted by $1.2 million of higher depreciation and amortization as a
result of recognizing the market value of the assets purchased in the
Acquisition. Gross profit in the six months ended June 30, 1995 was impacted by
$0.6 million as a result of selling finished goods inventory which were
purchased at market value as a result of the acquisition.
SG&A decreased to $12.2 million for the six months ended June 30, 1996 from
$12.8 million for the comparable period in 1995, a decrease of $0.6 million or
4.8%. In the six months ended June 30, 1996, additional stand alone costs added
$0.2 million to SG&A. As a percentage of net sales, SG&A decreased to 18.2% from
19.9%, as a result of distribution and selling expenses on lower European sales
combined with cost savings associated with the reorganization of the Canadian
branch office.
Amortization of intangibles increased to $3.1 million for the six months June
30, 1996 from $2.7 million for the comparable period in 1995, an increase of
$0.4 million as a result of purchase accounting from the Acquisition.
Operating income increased to $9.7 million for the six months ended June 30,
1996 from $9.2 million for the comparable period in 1995, an increase of $0.5
million or 5.4%. As a percentage of net sales, operating income increased to
14.4% for the six months ended June 30, 1996 from 14.2% for the comparable
period in 1995. The Company's operating income was $1.6 million lower due to
increased depreciation and amortization primarily as a result of the
Acquisition.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically generated funds from its operations and its working
capital requirements have not exhibited seasonal fluctuations. Utilizing
converters to distribute the majority of its products, the Company is able to
maintain relatively minimal levels of working capital as the converters carry
large amounts of inventory and finance receivables.
Cash Flows From Operating Activities. Cash flows from operations for the six
months ended June 30, 1996 and June 30, 1995 were $6.7 million and $0.3 million,
respectively. Cash flows from operations in 1996 were reduced by a $1.4 million
increase in working capital, primarily from increased receivable balances
offset by a small reduction in inventory balances and increased accrued
liabilities. For the six months ended June 30, 1995, cash flows from operations
were impacted by a $8.1 million increase in working capital, primarily from
payments associated with employee incentives earned in 1994 and increases in
inventory balances and receivables.
21
<PAGE> 22
Cash Flows From Investing Activities. The Company's expenditures for plant,
property and equipment have been relatively stable at $3.6, $3.5 and $3.7
million for 1995, 1994 and 1993, respectively. The Company believes that
historical capital spending levels are sufficient to maintain its leading market
position. The Company expects to fund its annual capital expenditures of $4.0
million to $6.0 million over the next several years from cash flow from
operations. Capital expenditures for the six months ended June 30, 1996 were
$2.6 million compared to $1.7 million for the six months ended June 30, 1995.
Cash Flows From Financing Activities. Concurrent with the Acquisition, the
Company entered into the Credit Agreement with certain banks. The Credit
Agreement has a maximum borrowing capacity of $77 million and is secured by the
assets of the Company and its domestic subsidiaries, as well as 65% of the stock
of each foreign subsidiary. In conjunction with the Credit Agreement, the
Company entered into an agreement with a UK bank in June 1996 to borrow $5.8
million, of which, $4.3 million was outstanding at June 30, 1996, the proceeds
of which were used to reduce the US line of credit. As of June 30, 1996, the
Company had approximately $26.9 million available under the US Credit Agreement
and $1.5 million available under the UK Credit Agreement. The Company does not
have any scheduled repayment requirements until 1999, other than $182 a quarter
due on the UK Credit Agreement. During the six months ended June 30, 1996, the
Company made $7.25 million in payments on the line of credit associated with the
US Credit Agreement. The Company believes that it will generate sufficient cash
flow from operations to meet debt service, working capital and capital
expenditure requirements, although no assurance can be given that it will be
able to do so.
22
<PAGE> 23
DAY INTERNATIONAL GROUP, INC.
Part II: Other Information
Item 1. Legal Proceedings - None
Item 6. Exhibits and Reports on Form 8-K
a. No report on Form 8-K was filed during the quarter ended June 30,
1996.
b. Exhibits:
4.1 Bank of Scotland Credit Agreement
4.2 Amendment No. 1 to Credit Agreement dated June 6, 1995
27 Financial Data Schedule
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Day International Group, Inc.
-----------------------------
(Registrant)
Date: July 29, 1996 /s/ David B. Freimuth
-------------- ---------------------
David B. Freimuth
Vice President and
Chief Financial Officer
23
<PAGE> 1
Exhibit 4.1
BANK OF SCOTLAND
Constituted by Act of Parliament 1695
Reform Street Branch
1 1/1 9 Reform Street
DUNDEE
DD1 9AU
Day International (UK) Holdings Telephone: Direct Line: 013822 9131
Sheffield Street
Stockport
Switchboard: 0131-442 7777
Fax: 01382 202109
Telex: 76225
Our Ref:
Your Ref
31st January 1996
Dear Sirs,
RE: (POUND) 2,815,000 CREDIT FACILITIES
---------------------------------------
We are pleased to offer credit facilities on the terms and conditions set out in
Parts 1 and 2 of this facility letter. Unless otherwise specifically provided,
the definitions set out in Clause 18 of Part 2 of this facility letter shall
apply. Drawdown or utilisation of all or any of the Facilities is subject to
satisfaction or waiver of the conditions precedent set out in Clause 1 of Part 2
of this facility letter.
The Facilities offered are term loan facilities of:-
(i) (pound)l,875,000 ("Term Loan 1")
(ii) (pound)940,000 ("Term Loan 2")
PART 1 - TERMS OF FACILITEES
- ----------------------------
1
<PAGE> 2
1. TERM LOANS:-
------------
(1) BORROWER:-
---------
Day International (UK) Holdings (Registered Number 2956635) having its
registered office at Sheffield Street, Stockport (the "Borrower").
(2) PURPOSE:
-------
The Term Loans may only be applied for the Specified Purpose.
(3) AMOUNT:-
-------
(i) Term Loan 1 :- (pound)l,875,000.
-----------
(ii) Term Loan 2 :- (pound)940,000
-----------
(4) DRAWDOWN:-
---------
(a) Subject to paragraph (b) below, the Borrower may draw each Term
Loan in one Tranche within one month of acceptance of the
Facilities when these Facilities shall lapse. The Borrower shall
notify the Bank no later than 11 am on the Business Day before
the proposed date of each drawdown and shall state in that notice
(i) the amount required to be drawn down, (ii) the date of
drawdown which shall be a Business Day, (iii) whether the
Borrower elects that the rate of interest applicable to that Term
Loan is to be calculated in accordance with the Base Rate Option
or the LIBOR Option as set out below and (iv) where the Term Loan
is to be subject to the LIBOR Option, the duration of the first
Interest Period. If the Borrower fails to make that election in
respect of either Term Loan that Term Loan shall be deemed to be
subject to the Base Rate Option.
(b) Drawdown shall be subject to the condition that no Event of
Default or Potential Event of Default has occurred or would
result from the Bank permitting the drawdown requested by the
Borrower.
(5) TERM:-
-----
Subject to sub-clause (6) below, Term Loan 1 shall be available until
the fifth anniversary of its date of drawdown by the Borrower, and
Term Loan 2 shall be available until the tenth anniversary of its date
of drawdown by the Borrower.
2
<PAGE> 3
(6) REPAYMENT:-
----------
Provided no Event of Default shall have earlier occurred, Term Loan 1
shall be repaid by 20 equal quarterly instalments of (pound)93,750 on
the last Business Day of each of January, April, July and October in
each year, Term Loan 2 shall be repaid by 40 equal quarterly
instalments of (pound)23,500 on the last Business Day of each of
January, April, July and October in each year, up to and including
30/4/2002.
(7) INTEREST RATE:-
--------------
(a) Base Rate Option
----------------
Under the Base Rate Option, the rate of interest applicable to
the Term Loans shall be the rate per annum which is one per cent
(1 %) over the Bank's base rate from time to time fluctuating
therewith.
Under the Base Rate Option, interest shall be payable monthly in
arrears on the Standard Application Dates.
OR
(b) LIBOR Option
------------
Under the LIBOR Option, the rate of interest applicable to a Term
Loan shall be the rate per annum which is one per cent (1 %) plus
the aggregate of. -
(i) the rate (expressed as a rate per cent per annum) at which
Sterling is offered to the Bank in the London Inter Bank
Market by prime banks selected by the Bank at or about 11 am
on the first Business Day of the applicable Interest Period
for a period equal to the duration of that Interest Period
and for a comparable amount in Sterling; and
(ii) the Mandatory Liquid Asset Costs, being the costs (expressed
as a rate per cent per annum rounded up to the nearest whole
multiple of one eighth per cent) calculated by the Bank in
accordance with its usual procedure which expresses the
prevailing costs to the Bank of complying with any reserve
asset and/or special deposit or liquidity requirements (or
other requirements having a similar purpose) of the Bank of
England or any other governmental or regulatory authority of
3
<PAGE> 4
the UK.
Under the LIBOR Option, the Borrower shall pay accrued
interest on a Term Loan on the last day of each Interest
Period. At any time after first drawdown of a Term Loan, the
Borrower may elect to change the option applying to the
calculation of the rate of interest for that Term Loan. The
Borrower must give the Bank at least two Business Days'
notice of that election but, in any event, if the applicable
option at the time the election is made is the LIBOR Option,
the election that the Base Rate Option is to apply shall
only be effective from the end of the Interest Period then
current for that Term Loan.
(8) INTEREST PERIODS:-
-----------------
(a) Under the LIBOR Option, the Interest Periods for a Term Loan
shall (subject to paragraph (b) below) be of a duration of
one or three months as selected by the Borrower or as
otherwise agreed by the Bank. In the event that the Borrower
does not select an Interest Period for each Term Loan by 11
am on the Business Day before drawdown or, as the case may
be, does not select an Interest Period before 11 am on the
Business Day before the expiry of an existing Interest
Period applicable to that Term Loan, the Borrower shall be
deemed to have selected three months as being the Interest
Period applicable to that Term Loan or, if shorter, a period
terminating on the date for final repayment of that Term
Loan.
(b) No Interest Period may be selected which (i) extends beyond
the date for final repayment of a Term Loan. If an Interest
Period is selected which contravenes the terms of the
preceding sentence then the terms of paragraph (d) below
will apply.
(c) The first Interest Period for each Term Loan shall commence
on the date of drawdown of that Term Loan and each
subsequent Interest Period relating to that Term Loan shall
commence on the expiry of the immediately preceding Interest
Period. Any Interest Period which would otherwise end on a
non-Business Day shall end on the next Business Day unless
that Business Day falls in the next calendar month in which
case it shall end on the immediately preceding Business Day.
If an Interest Period is so extended or shortened the
following Interest Period shall still end on the day on
which it would have ended if the preceding Interest Period
had not been so altered.
(d) If the Borrower repays or prepays or the Bank recovers all
or any part of the Term Loans otherwise than on the last day
of the applicable
4
<PAGE> 5
Interest Period, the Borrower shall pay to the Bank an
amount equal to the amount (if any) by which (i) the
additional interest (but excluding any part which represents
the Margin) which would have been payable on the amount so
received or recovered had it been received or recovered on
the last day of that Interest Period exceeds (ii) the amount
of interest which, in the opinion of the Bank, would have
been payable to the Bank on the last day of that Interest
Period in respect of a deposit equal to the amount so
received or recovered placed by it with a prime bank in
London for a period starting on the second Business Day
after such receipt or recovery and ending on the last day of
that Interest Period and the Borrower shall indemnify the
Bank against any other costs, liabilities or expenses
incurred by the Bank as a result of such repayment,
prepayment or recovery.
(9) PREPAYMENT:-
-----------
(a) The Borrower may, subject to paragraph (d) below, prepay all
or any part of the Term Loans without premium or penalty
provided that: -
(i) it has given the Bank not less than 30 days' notice in
writing of its intention to prepay;
(ii) where that Term Loan is drawn under the Base Rate
Option, that prepayment is made on a Business Day;
(iii) where that Term Loan is drawn under the LIBOR Option,
that prepayment is made on the last day of an Interest
Period for that Term Loan;
(iv) any prepayment is at least EIOO,000; and
(v) it has paid to the Bank the amount (if any) payable in
terms of sub-clause (8)(d) above.
(b) Amounts prepaid may not be redrawn.
(c) Any amount paid to prepay a Term Loan or any part of it
shall be accompanied by accrued interest on the amount
prepaid and will be applied in pro rata reduction of each
scheduled repayment instalment.
(d) Notwithstanding the terms of paragraph (a) above, the
Borrower shall pay to the Bank by way of compensation for
prepayment an amount equal to 1 % of the amount prepaid
should the reason for prepayment be a refinancing of all or
any part of the Facilities by any third party.
5
<PAGE> 6
2. DEFAULT INTEREST:-
-----------------
(a) In the event that the Borrower fails to pay any sum due in
respect of the Facilities (whether by way of principal, interest,
commission, fees or otherwise) on the due date the Borrower shall
(without prejudice to all other rights and remedies of the Bank)
pay interest on that overdue amount from the due date up to the
date of actual payment at the rate of two per cent (2%) per annum
over the rate which would otherwise have been payable on that
overdue amount; provided that if the Bank elects that interest at
the Default Rate is payable on the Facilities in terms of Clause
7 (3) (iii) of Part 2 of this facility letter this paragraph (a)
will cease to apply but only to the extent necessary to avoid
double counting.
(b) Any interest payable pursuant to sub clause (a) above shall be
payable monthly in arrears and if not paid shall itself bear
interest as if it were part of the overdue amount.
PART 2: CONDITIONS
------------------
1. CONDITIONS PRECEDENT:-
---------------------
The conditions precedent which require to be satisfied before first
drawdown or, if earlier, first utilisation of the Facilities are:-
1.1 SECURITY:-
---------
The Borrower shall have procured that the Bank receives or
continues to hold the following security in a form and content
which is acceptable to the Bank and, together with all other
security from time to time held by the Bank, as continuing
security for all moneys, obligations and liabilities certain or
contingent now or subsequently due, owing or incurred to the
Bank:-
(a) guarantee by Day International Inc. in favour of the Bank
and on account of the obligations of the Borrower to the
Bank subject to a maximum limit of (pound) 2,815,000 plus
all costs and interest thereon;
(b) irrevocable letters of credit from NationsBank of Texas N.A.
subject to a maximum limit of : (pound) 2,815,000 plus all
costs and interest thereon; and
(c) guarantees (incorporating offset arrangements) by the
Borrower and Day International (UK) Limited (which is
provided with facilities by the Bank pursuant to the Other
Facility Letter ) on account of each
6
<PAGE> 7
other.
1.2 FINANCIAL INFORMATION:-
----------------------
The Bank shall have received in form and content acceptable to it:-
(a) a Certified Copy of the opening Financial Statements of the
Borrower as at 6 June 1995; and
(b) whatever further information regarding the trading and financial
position of the Borrower the Bank may require.
1.3 MISCELLANEOUS:-
--------------
The Bank shall have received in form and content acceptable to it: -
(a) evidence that sufficient funds are held in the Borrower's account
with the Bank to ensure that, on drawdown by the Borrower of the
Facilities the Borrower has sufficient funds to fully repay the
Loan Notes together with all interest due thereon;
(b) evidence that all policies of insurance (including public
liability insurance) in relation to the business and assets of
the Borrower which the Bank may reasonably require are in full
force and effect and are with an insurance company acceptable to
the Bank;
(c) a certificate in the Bank's standard form from the secretary of
the Borrower confirming approval by the board of directors of the
acceptance of this Offer and approval and authorisation to
execute and deliver the Security Documents to which it is a
party;
(d) a certificate in the Bank's standard form from the secretary of
Day International (UK) Limited confirming approval by its board
of directors of the guarantee referred to in Clause 1.1(c) above
and authorisation to execute and deliver that guaranteed to the
Bank;
(e) a Certified Copy of the Certificate of Incorporation and, where
relevant, Certificate(s) of Incorporation on Change of Name of
the Borrower;
(f) a letter from the Borrower signed by its secretary listing the
directors of the Borrower and confirming that those persons are
all the existing directors of the Borrower; and
7
<PAGE> 8
(g) a letter from the Borrower signed by one of its directors
confirming that there has been no material change in its
financial condition from (i) the date of the latest Financial
Statements of the Borrower delivered to the Bank and (ii) the
earlier of the date of the first drawdown or utilisation of the
Facilities.
2. REPRESENTATIONS AND WARRANTIES: -
-------------------------------
To induce the Bank to make available and to maintain the Facilities
the Borrower represents and warrants to the Bank that as at the date
of its acceptance of this Offer: -
2.1 it is duly incorporated and validly existing under the
jurisdiction of its incorporation and it has full power to own
its assets and carry on its business wherever it owns assets or
carries on business from time to time;
2.2 each other member of the Group is duly organised and validly
existing under the laws of its jurisdiction of incorporation and
has full power to own assets and carry on its business wherever
it owns assets or carries on business from time to time;
2.3 no Event of Default nor any Potential Event of Default has
occurred and is continuing unremedied and unwaived;
2.4 it has power to enter into and perform and comply with its
obligations in terms of this facility letter and under the
Security Documents to which it is a party;
2.5 each other member of the Group has power to enter into and
perform and comply with its obligations in terms of the Security
Documents to which it is a party and the granting of those
Security Documents in support of the obligations of the Borrower
is for the commercial benefit of each other member of the Group;
2.6 all actions, conditions and things required to be taken,
fulfilled or done have been taken, fulfilled and done (including
the obtaining of any necessary consents) in order:-
(i) to enable the Borrower lawfully to enter into, exercise its
rights and perform and comply with its obligations in terms
of this facility letter and under the Security Documents to
which it is a party; and
(ii) to ensure that those obligations are legally binding and
enforceable under the laws of each relevant jurisdiction;
8
<PAGE> 9
2.7 (i) the acceptance of this Offer and compliance with its terms
and the granting and delivery of and compliance with the terms of
the Security Documents to which it is a party does not and will
not cause it to be in breach of:-
(a) any law, regulation, judicial or official order to which it
is subject;
(b) its memorandum or articles of association or other
constitutional documents; or
(c) any agreement, undertaking or restriction to which it is a
party or subject;
(ii) all governmental or other consents requisite for such
acceptance, grant, delivery and compliance are in full force and
effect;
2.8 (i) the granting and delivery of and compliance with the terms of
the Security Documents to which any other member of the Group is
a party does not and will not cause that other member of the
Group to be in breach of:-
(a) any law, regulation, judicial or official order to which it
is subject;
(b) its memorandum or articles of association or other
constitutional documents; or
(c) any agreement, undertaking or restriction to which it is a
party or subject;
(ii) all governmental or other consents requisite for such
acceptance, grant, delivery and compliance are in full force and
effect;
2.9 except as disclosed in the most recent Financial Statements of
the Borrower, received by the Bank prior to the date of this
facility letter, no Material Litigation is current, pending or
(so far as the Borrower knows) threatened against any member of
the Group or any of their respective assets;
2.10 the Financial Statements and management accounts of the
Borrower which have been or will be delivered to the Bank (i)
were, or will be, prepared in
9
<PAGE> 10
accordance with consistently applied accounting principles and
practices which are both generally accepted and adopted in the UK and
(ii) do, or will, give a true and fair view of the financial condition
of the Borrower as at the end of the period to which they relate and
of the results of its operations during that period;
2.11 the copies of all Certified Copy documents and all other documents
required to be delivered to the Bank are true, accurate and complete
in all material respects;
2.12 none of the share capital of the Borrower is under option or mortgage
or charge and, except in respect of Permitted Distributions, no
dividends or other rights or benefits have been declared, made or paid
on the share capital of the Borrower;
2.13 it has obtained and has in force all licences, permits, authorisations
and consents (including Environmental Licences) necessary for the
ownership of its property and assets and for the conduct of its
business from time to time and it has complied in all material
respects with (a) the terms and conditions of those licences,
permits, authorisations and consents and (b) Environmental Law;
2.14 it is either the legal and beneficial owner or licensee of all
Intellectual Property Rights necessary for its business from time to
time and the use of Intellectual Property Rights by members of the
Group does not infringe any third party rights.
Each of the above representations and warranties shall be deemed to be
repeated by the Borrower as at the date of each drawdown under the
Facilities and on and as of the Standard Application Dates.
3. FINANCIAL INFORMATION:-
----------------------
3.1 For the purposes of the Facilities, the Bank will rely on the
Financial Statements of the Borrower in determining the basis of its
financial condition as at the date of each applicable Financial
Statement and, in addition, the Borrower will supply to the Bank:-
(a) within 90 days after each financial year end of the Borrower, two
10
<PAGE> 11
copies of its Financial Statements together with a summary
narrative of all material aspects of those Financial Statements
in form and content acceptable to the Bank;
(b) within 28 days after each month end (commencing at the close of
the first month following the date of first drawdown or
utilisation of the Facilities, a certificate of compliance with
the financial covenants set out in Clause 4 of this Part 2 signed
by a director of the Borrower, setting out in reasonable detail
supporting computations and in form and content acceptable to the
Bank and
(c) such further financial information as the Bank may from time to
time reasonably require.
4. FINANCIAL COVENANTS:-
--------------------
4.1 Until the Borrower has repaid all moneys owing to the Bank under this
facility letter the Borrower shall ensure and shall procure that Day
International (UK) Limited shall ensure that the following covenants
are complied with:-
(A) GEARING:-
--------
The ratio of the Net Borrowings of the Group to the Net Worth of Day
International (UK) Limited shall not at any time be greater than 1:1
(100 %);
(B) CURRENT ASSET COVER:-
--------------------
The ratio of Current Assets of Day International (UK) Limited
(excluding Inter Company Receivables) to the total amount of the
Borrowings of the Group due to the Bank shall not at any time be less
than 1: 1 (100 %); and
(C) INTEREST COVER:-
---------------
The ratio of PBIT of Day International (UK) Limited to Net Interest
Charges for total amount of the Borrowings of the Group due to the
11
<PAGE> 12
Bank shall not be less than 3.7:1 (370%).
4.2 The financial covenants set out in paragraph 4.1 above shall be tested
on a monthly basis by reference to the cumulative position for the
relevant financial year, in each case tested by reference to the
latest Financial Statements of the Borrower and Day International (UK)
Limited or, if more recent, by reference to the latest management
accounts of Day International (UK) Limited, provided that, where any
financial covenant is tested by reference to management accounts it
shall be tested again by reference to the Financial Statements of Day
International (UK) Limited for the relevant period when those
Financial Statements become available.
4.3 The Bank reserves the right to review the financial covenants set out
in Clause 4.1 above on an annual basis and, in the absence of
agreement, shall be entitled to specify such reasonable alternative
financial covenants with which the Borrower shall comply.
5. POSITIVE COVENANTS:-
-------------------
5.1 The Borrower shall, unless it has a prior written waiver from the
Bank:-
(a) ensure that its obligations in respect of the Facilities and under the
Security Documents will at all times rank prior to all other present
and future Borrowings of the Borrower except for Borrowings which are
statutorily preferred;
(b) notify the Bank of any Event of Default or Potential Event of Default
straightaway upon becoming aware of its occurrence and, at the same
time, the steps (if any) being taken to nullify or mitigate its
effects;
5.2 The Borrower shall comply with the obligations set out in Clause 5.3
below and shall also procure that each other member of the Group
from time to time shall comply with those obligations so that each
reference in Clause 5.3 to the Borrower shall be construed as a
reference to each member of the Group from time to time.
5.3 The Borrower shall, unless it has a prior written waiver from the
Bank:-
(a) effect and maintain all policies of insurance in relation to its
business and assets and shall otherwise insure whatever property is
capable of insurance against loss or damage by fire for full
replacement value from time to time and shall effect and maintain
those insurances which are normally maintained by companies engaged in
the same or a similar type of business as it carries on from time to
time and
12
<PAGE> 13
will provide the Bank on demand with copies of all of its insurance
policies or certificates of insurance or such other evidence of their
existence as may be acceptable to the Bank;
(b) duly and punctually (and, in any event, prior to incurring any
penalties) pay all rents, rates, taxes, stamp duties, covenants and
all other monetary obligations to which it is subject;
(c) advise the Bank promptly of the details of any Material Litigation;
(d) take whatever steps and execute whatever documents the Bank may
reasonably require for the purpose of perfecting and giving effect to
all or any of the Security Documents;
(e) obtain, comply with, promptly renew and maintain all licences,
authorisations, permits, consents and exemptions necessary under any
applicable law or regulation from time to time;
(f) comply at all times with all Statutory Controls and give to the Bank a
copy of any notice which affects its compliance with a Statutory
Control forthwith upon receipt of such notice;
(g) at the request of the Bank, instruct its auditors to discuss the
Borrower's financial position with the Bank and authorise its auditors
to disclose any relevant financial information to the Bank; the
auditors' fees arising from that instruction shall be borne by the
Borrower but only if an Event of Default has occurred and is
continuing unremedied and unwaived or if information supplied to the
auditors reveals the occurrence of an Event of Default or Potential
Event of Default;
(h) upon reasonable notice, permit the Bank or its agents reasonable
access for the purpose of inspecting its property and assets and its
financial and business records;
(i) within one week of the Borrower drawing the Facilities, provide the
Bank with written confirmation from Day International Group Inc that
the Loan Notes together with all interest due thereon have been fully
repaid.
6. NEGATIVE COVENANTS:-
-------------------
6.1 The Borrower shall procure that each other member of the Group from
time to time shall not do any of the matters referred to in
Clause 6.2 below so that
13
<PAGE> 14
each reference in Clause 6.2 to a Borrower shall be construed as a
reference to each member of the Group from time to time.
6.2 Unless it has a prior written waiver from the Bank, the Borrower shall
not:-
(a) save in respect of Permitted Encumbrances, grant or permit to subsist
any Encumbrance-.
(b) save in respect of Permitted Disposals, sell, transfer, lease or
otherwise dispose of, lend or otherwise part with control or
possession of (whether by single transaction or a series of
transactions and whether related or not) any asset or undertaking;
(c) undertake any business other than that which at the date of acceptance
of the Facilities will be carried on by it nor make any material
change in the nature or extent of its business nor acquire any
business or undertaking;
(d) enter into any transaction, agreement or arrangement other than on an
arms' length basis and in the ordinary and usual course of business;
make any loan or grant any credit or enter into or give or permit or
suffer to subsist any indemnity or guarantee (or similar obligation)
of the due payment of money or performance of any contract, engagement
or obligation of any other person or body;
(f) enter into any partnership, joint venture or profit sharing
arrangement with any other person (save for a profit sharing
arrangement applicable to all of its employees which has been approved
in advance by the Bank) nor merge nor amalgamate with any other person
(save for any merger or amalgamation of one member of the Group with
another member of the Group as part of a solvent reconstruction
approved in advance by the Bank);
(g) incur or contract to incur or permit to subsist any Borrowings save
for:-
(i) the Facilities and amounts due in respect of the Facilities;
(ii) Borrowings in respect of trade creditors on terms which are in
accordance with reasonable commercial practice;
(iii) its outstanding commitments under hire purchase or finance
leases (calculated on a going concern basis);
14
<PAGE> 15
(h) in any of its financial years incur any liability or expenditure
(whether actual or contingent) of a capital nature (including total
payments due under hire purchase and leasing arrangements) unless that
capital liability or expenditure has been approved by the Bank;
(i) change its residence for Tax purposes;
(j) incorporate any company nor acquire any share in the share capital of
any company whether by acquisition or subscription after the date of
this facility letter nor permit any Dormant Subsidiary to cease to be
Dormant;
(k) alter the accounting principles and practices applied to its Financial
Statements (except where its auditors certify to the Bank that an
alteration is required for the purposes of complying with generally
accepted accounting principles and practices in the UK, and the Bank
may require the Borrower's auditors, at the Borrower's expense, to
provide the Bank with pro forma financial statements in a form which
enables the Bank to compare the financial position of the Borrower
before and after the alteration has been made);
(l) alter its financial year end;
(m) enter into any agreement or arrangement for the provision or receipt
of finance which will not or need not be shown in the balance sheet
contained in its Financial Statements;
(n) repay any Borrowings (other than trade debts and the Loan Notes) or
interest or other costs incurred in relation to them and which are due
by it to any other person before the stated maturity or due date for
them;
(o) provide any financial assistance (as defined in the Companies Act
1985) unless the requirements of Section 155 et seq of the Companies
Act 1985 are complied with;
(p) waive any exemption from Value Added Tax in relation to any property
or interest in property;
(q) factor or discount its debts.
7. EVENTS OF DEFAULT: -
------------------
15
<PAGE> 16
7.1 The Bank reserves the right to elect to treat any of the following, as an
event of default either upon or at any time after the occurrence of any of
them:-
(a) the Borrower fails to pay (i) any principal sum due under this
facility letter on its due date or (ii) any other sum due under this
facility letter within three Business Days after it has become due;
(b) any written information or projection given or any representation,
warranty or statement made or repeated or any certificate, notice,
opinion or other document by or on behalf or in relation to any member
of the Group or any of their respective directors in connection with
the Facilities and/or any of the Security Documents (whether before or
after the date of this facility letter) is or proves to have been
incorrect, inaccurate, incomplete or, in the Bank's opinion,
misleading in any respect which will have a Material Adverse Effect;
(c) any Borrowings of any member of the Group are not paid when due or
capable of being declared due for payment or within any originally
permitted period of grace and such non-payment will have a Material
Adverse Effect;
(d) a proposal is made or a nominee or supervisor is appointed for a
composition in satisfaction of the debts of any member of the Group or
for a scheme of arrangement of the affairs of any member of the Group
or any class of creditors or proceedings are commenced in relation to
any member of the Group or under any law, regulation or procedure
relating to the reconstruction or readjustment of debt;
(e) an application is made to the courts for an administration order under
the Insolvency Act 1986 with respect to any member of the Group;
(f) any action or any legal proceedings or any other steps are taken
either by any member of the Group without the Bank's prior written
consent or by any other party for: -
(i) the winding up or dissolution of any member of the Group; or
(ii) the appointment of a liquidator, trustee, receiver,
administrative receiver or similar officer of any member of the
Group or of the whole or any part of its undertaking, assets,
rights or revenues;
(g) any diligence, inhibition, distress, execution, sequestration or other
16
<PAGE> 17
legal process is levied or enforced upon or sued out against any
member of the Group or affecting any of its assets unless it is
defended in good faith (which shall be judged solely by the Bank,
acting reasonably) or any person takes possession of all or any part
of the property or assets of any member of the Group or steps are
taken by any person to enforce any Encumbrance against any of the
property, assets or undertaking of any member of the Group;
(h) any event occurs or proceedings are taken with respect to any member
of the Group in any jurisdiction to which it is subject which has an
effect equivalent or similar to any of the events mentioned in
paragraphs (d) to (g) above (inclusive);
(i) any of the terms of this facility letter, any Security Document or any
security granted under any Security Document ceases for whatever
reason to be, or any member of the Group alleges that any of the terms
of this facility letter, any Security Document or any such security is
not legal, valid or binding or any consent required to enable any
member of the Group to perform its obligations under this facility
letter or any Security Document ceases to be in full force and effect;
(j) notice of withdrawal or discontinuance of any guarantee or security
provided by any third party (including any member of the Group) is
served on the Bank or a guarantor or provider of such third party
security shall die, be sequestrated or become insolvent or any of the
events specified in paragraphs (d) to (h) above (inclusive) occur in
respect of a guarantor or provider of such third party security;
(k) control of any member of the Group passes to any person or persons,
not being a shareholder in it as at the date of this facility letter,
(whether acting individually or in concert),. without the prior
written consent of the Bank ("control" having the meaning given to it
in relation to a body corporate by section 840 of the Income and
Corporation Taxes Act 1988):
(l) any member of the Group purchases, cancels or redeems any share in its
share capital or reduces its share capital;
(m) save for a Permitted Distribution, any member of the Group makes,
declares or pays any distribution of capital or income or dividend to
any person (other than to a member of the Group which has granted Full
Group Security);
17
<PAGE> 18
(n) any license, authority, permit, consent, agreement or contract which
is material to the business from time to time of any member of the
Group is terminated, withheld or modified and, in the Bank's opinion,
that termination, withholding or modification will have a Material
Adverse Effect;
(o) in the Bank's opinion, at any time after the date of this facility
letter:-
(i) there is a risk that the Bank may incur liability or cost by
reason of any Environmental Law or by reason of the Bank having
taken security (whether direct or third party) in respect of the
Facilities;
(ii) the value of any of the property or assets of any member of the
Group is diminished due to the operation of any Environmental Law
and such diminution will have a Material Adverse Effect; or
(iii) any member of the Group does not comply with the terms and
conditions of any Environmental Law or Environmental License or
any other law or regulation affecting the conduct of its business
and failure to comply will have a Material Adverse Effect;
(p) the Financial Statements of any member of the Group are qualified to
the effect that they do not reflect its true financial position;
(q) by or under the authority of any government the management of any
member of the Group is wholly or partially displaced or its authority
in the conduct of its business wholly or partially curtailed which
will have a Material Adverse Effect;
(r) all or any part of the Equity Share Capital of the Borrower is
admitted to the Official List of The Stock Exchange or any other
recognized investment exchange (as defined in Section 207 of the
Financial Services Act 1986);
(s) any other circumstance or event occurs or arises which will have a
Material Adverse Effect.
7.2 None of the provisions in Clause 7.1 above affects or restricts the Bank's
right to require repayment on demand of any part of the Facilities which is
an overdraft.
18
<PAGE> 19
7.3 Upon the occurrence of any of the events referred to in Clause 7.1
above, the Bank shall be under no further obligation to make any of
the Facilities available and may by notice to the Borrower:-
(i) cancel any part of the Facilities then undrawn; and/or
(ii) require repayment (immediately or otherwise as the Bank may
require) of the Facilities together with accrued interest; and/or
(iii) elect that interest will become payable on the entire Facilities
at the Default Rate; and/or
(iv) elect, for the purposes only of calculating default interest,
that where interest on any part of the Facilities is calculated
by reference to the London Inter Bank Market rate, that part of
the Facilities be treated as an overdraft and the applicable rate
before imposing the Default Rate) shall be deemed to be the
Margin over the Bank's base rate from time to time fluctuating
therewith;
(v) charge an administration fee to compensate it for the additional
time spent in administering the Facilities.
7.4 The Borrower shall indemnify the Bank and keep the Bank indemnified on
demand against any loss or expense, including legal fees, which the
Bank may sustain or incur as a consequence of any default by the
Borrower or, as the case may be, any other member of the Group in the
Performance of any of the obligations expressed to be assumed by it
under this facility letter, under any of the Security Documents to
which it is a party or as a consequence of any Event of Default.
7.5 At any time after the occurrence of an Event of Default the Bank shall
be entitled, without prejudice to any other right or remedy, to
initiate an investigation and instruct any report on the business and
affairs of any member of the Group which it deems necessary including
accounting, legal and valuation reports, all at the cost of the
Borrower.
8. PAYMENTS AND INTEREST CALCULATIONS:-
-----------------------------------
8.1 All sums falling due by way of interest or commission shall be
calculated on the basis of a year of 365 days for the actual number of
days elapsed. Interest charged at the rates provided in this facility
letter (including the Default Rate) shall continue at those rates
after as well as before any decree or judgement for payment until
payment is made in full.
19
<PAGE> 20
8.2 Any determination by the Bank of any amount of principal, interest,
commission or charges or the applicable interest rate shall, in the
absence of manifest error, be conclusive and binding on the Borrower
for all purposes.
8.3 Where interest on any part of the Facilities is calculated by
reference to the London Inter Bank Market rate and the Bank determines
that it is unable to obtain Sterling in the London Inter Bank Market
for that amount for the relevant Interest Period, then the Bank shall
certify an alternative basis for calculating interest on that part of
the Facilities so that the Bank will not overall be in a materially
better position than it would have been in if it had not made that
determination This alternative basis of calculation will continue for
so long as the Bank determines it is unable to obtain Sterling on the
required terms.
8.4 Payments made by the Borrower to the Bank shall be made in Sterling
and in immediately cleared funds, without set-off or counterclaim
(subject to Clause 10.1 of this Part 2), at the Branch at which the
Borrower's account is located from time to time (or in whatever manner
or to whichever place the Bank may specify) by no later than 11.00 am
on the due date for each payment.
8.5 Where the due date for payment of any sums payable under this facility
letter or any Security Document falls due on a non-Business Day then,
without affecting the calculation of subsequent due payment dates,
actual payment of the amount due shall be made on the next Business
Day following the due date unless the next Business Day falls in the
next calendar month, in which case actual payment of the amount due
shall be made on the Business Day preceding the due date.
8.6 Without prejudice to any other right or remedy the Bank may have, the
Bank is authorised (but not obliged) to (i) apply any credit balance
to which the Borrower is entitled on any account of the Borrower with
the Bank and (ii) debit any account of the Borrower with the Bank in
satisfaction of any sum (including any interest, commission, costs and
charges) due by the Borrower to the Bank under the Facilities.
8.7 In the event that the Borrower requests a drawdown but fails to draw
the amount requested, the Borrower shall indemnify the Bank and keep
the Bank indemnified on demand against any loss or expense which the
Bank may incur as a result of that failure.
9. PRINCIPAL BANKER:-
-----------------
Unless otherwise agreed by the Bank, the bank accounts of the Group shall
be held within the Bank of Scotland Group and all revenues shall be paid
into them and all
20
<PAGE> 21
banking business transacted through them.
10. TAXES:-
------
10.1 All payments to be made by the Borrower in terms of this facility
letter shall be made free and clear of and without deduction in
respect of Tax unless the Borrower is required by law to make a
payment subject to the deduction or withholding of Tax, in which case
the amount of that payment payable by the Borrower shall be increased
to the extent necessary to ensure that the Bank receives and retains a
net sum equal to that which it would have received and retained had no
deduction or withholding been made or required to be made.
10.2 If the Borrower makes an increased payment under Clause 10.1 above and
the Bank determines that it has obtained a refund, reduction or
remission of Tax because of that increased payment then the Bank shall
reimburse the Borrower with an amount which the Bank (in its sole
discretion) considers will leave the Bank in no better or worse
position than it would have been in had there been no deduction or
withholding; provided that nothing in this Clause 10.2 shall require
the Bank to order its Tax affairs to achieve any refund, credit,
remission or reduction and nothing in this sub-clause shall oblige the
Bank to make available to the Borrower any information concerning the
Bank's Tax affairs or administration.
10.3 If the Bank ceases to be recognised by the Tax authorities of the UK
as a bank carrying on a bona fide banking business for the purposes of
Section 349 (3) of the Income and Corporation Taxes Act 1988 then,
unless that cessation is because of a change in any law, regulation,
practice, concession, regulatory requirement or at the request of the
Bank of England, the European Union or other appropriate authority,
the Borrower shall not be liable to pay to the Bank under Clause 10.1
above any amount in excess of the amount it would have been obliged to
pay if the Bank had not ceased to be recognised.
11. INCREASED COST:-
---------------
11.1 If the Bank incurs an Increased Cost, then on demand by the Bank the
Borrower shall promptly pay to the Bank the amount certified by the
Bank in its demand (which will show, in reasonable detail, the basis
of calculation) and will indemnify the Bank for the Increased Cost;
but the Borrower shall not be required to indemnify the Bank against
an Increased Cost that (i) is compensated for by the Mandatory Liquid
Asset Costs or (ii) arises from Tax or any increase in Tax on the
Bank's overall net income or (iii) does not apply to banks in the UK
generally.
21
<PAGE> 22
11.2 When calculating Increased Cost, the Bank may allocate or spread the
Increased Cost on whatever basis it considers reasonably appropriate
having regard to the nature of the Facilities.
12. ILLEGALITY:-
-----------
If, in the Bank's opinion, any law or regulation, change in any law or
regulation or change in its interpretation, makes it unlawful for the Bank
to make available or maintain all or part of the Facilities or to perform
any of its obligations in relation to them then the Bank will serve notice
to that effect on the Borrower and the Bank shall then be discharged from
its obligation to make available, renew or maintain the Facilities and the
Borrower shall pay to the Bank on demand or, if later, on the date
specified by the Bank as being the latest date for compliance with the
relevant law or regulation, the amount of the Facilities then outstanding
together with all other sums due and to become due under this facility
letter.
13. MITIGATION OF BORROWER'S LIABILITY :-
------------------------------------
If circumstances arise which would, or could upon the giving of notice,
result in the Bank:-
(a) not being required to make available or maintain all or part of the
Facilities or perform any of its obligations in relation to them under
Clause 12 of this Part 2; or
(b) being due any increased payment to it or for its account under Clauses
10 or 11 of this Part 2;
then without in any way limiting, reducing or otherwise qualifying the
rights of the Bank or the obligations of the Borrower under any of the
Clauses referred to in (a) or (b) above, the Bank may either (i) take
any reasonable steps open to it to mitigate the effects of those
circumstances (following consultation with the Borrower over a period
not exceeding 30 days) or (ii) permit the Borrower to prepay all sums
due and to become due under this facility letter without penalty (but
subject to the provisions of this facility letter); provided that, in
any event, the Bank shall be under no obligation to seek a mitigation
if, in the bona fide opinion of the Bank, to do so would or might have
an adverse affect upon its business, profits, operations or financial
condition.
14. FEES AND EXPENSES:-
------------------
14.1 All reasonable legal, valuation and other fees, costs and expenses or
Tax charged to or incurred by the Bank in connection with the
Facilities and the Security Documents (including the preparation,
negotiation and completion
22
<PAGE> 23
of all waiver letters, amending or supplemental documents and the
enforcement or preservation of the Bank's rights under this facility
letter or any Security Documents) will be payable by the Borrower or
will be reimbursed to the Bank (on a full indemnity basis) on demand
whether or not the Borrower draws down or utilizes all or any part of
the Facilities.
14.2 The Borrower will pay to the Bank an arrangement fee being I % of the
Term Loans payable within seven Business Days of the Borrower's
acceptance of this facility letter.
14.3 The Borrower will also pay to the Bank the costs for the instruction
or preparation of the Security Documents whether or not the Borrower
draws down or utilizes all or any part of the Facilities.
14.4 Bank charges in relation to the Facilities will also be payable in
accordance with the Bank's tariff issued to the Borrower from time to
time.
15. BENEFIT OF THIS FACILITY LETTER:-
--------------------------------
15.1 This facility letter shall bind and inure to the benefit of the
Borrower and the Bank and their respective successors and the Bank's
assignees.
15.2 The Borrower may not assign or transfer all or any part of its rights,
obligations or benefits under this facility letter.
15.3 The Bank shall be entitled (following consultation with the Borrower)
to permit any other bank or banks which the Bank may determine
(provided it is a recognised banking institution falling within
Section 349(3)(a) of the Income and Corporation Taxes Act 1988) to
participate in all or part of the Bank's rights and obligations under
this facility letter. In the event that the Bank does enter into such
an arrangement, the Borrower shall continue to deal directly with the
Bank as agent for itself and other participants.
15.4 The Bank shall be entitled (following consultation with the Borrower)
to assign, novate or transfer all or any part of its rights and
obligations under this facility letter to any other bank or banks
which the Bank may determine (provided it is a recognised banking
institution falling within Section 349(3)(a) of the Income and
Corporation Taxes Act 1988) and the Borrower now undertakes and agrees
to execute and to procure that each member of the Group shall execute
all documents the Bank may reasonably require to give effect to an
assignation, novation or transfer.
23
<PAGE> 24
15.5 Subject to obtaining a confidentiality undertaking in favour of the
Borrower, the Bank shall be entitled to disclose to any prospective or
actual assignee, transferee or participant and to any prospective or
actual participant confidential information concerning each member of
the Group and its financial condition and any other information which
may be given to the Bank pursuant to the terms of this facility
letter.
16. NOTICES, CONSULTATION ETC:-
--------------------------
16.1 Unless otherwise provided in this facility letter, all notices or
other communications to or between the parties:-
(a) shall be given or sent by first-class pre-paid post or by telex
or by telefax transmission, authenticated to the satisfaction of
the Bank;
(b) if given or made by letter, receipt shall be deemed to have
occurred forty-eight hours after posting (unless hand delivered
to the addressee in which case receipt shall be the time of
delivery) and if given or made by telex or telefax transmission
shall be deemed to have been given and received when sent;
provided that, in the case of telex, the correct answer back is
received and, in the case of telefax, a correct transmission
report is received; provided further that where delivery or
receipt would be deemed to be on a non-Business Day or after 5 pm
on a Business Day, delivery or receipt shall instead be deemed to
be at 9 am on the next Business Day;
(c) if given to the Bank, it shall be given at the address at the
head of this facility letter or at any other address the Bank may
designate from time to time by notice to the Borrower;
(d) if given to all or any of the Borrower, it shall be deemed to be
duly given if given at the address of the Borrower shown above or
at any other address the Borrower may designate from time to time
by notice to the Bank.
16.2 The Bank may, but shall not be obliged to, rely upon and act in
accordance with any communication which may be or purport to be given
by telephone or telex or telefax transmission on behalf of the
Borrower by any person notified to the Bank by the Borrower as being
authorised to give that communication, without enquiry by the Bank as
to the authority or identity of the person making or purporting to
make the communication. In consideration of the Bank acting in
accordance with this Clause 16.2 the Borrower agrees to indemnify the
Bank and agrees to keep the Bank
24
<PAGE> 25
indemnified against all losses, claims, actions, proceedings, damages,
costs and expenses incurred or sustained by the Bank as a result.
16.3 Written notice includes a notice by telex or telefax transmission in
accordance with the provisions of this Clause.
16.4 The Borrower shall not issue or permit the issue of any press release
nor shall the Borrower make or permit to be made public the terms and
conditions of this facility letter without the Bank's prior written
consent unless required by law (including disclosure requirements for
the purpose of preparing its audited annual accounts), The Stock
Exchange or the City Code on Takeovers and Mergers in which case that
Borrower shall consult with the Bank in advance as to the terms of
that release or publicity.
17. WAIVERS AND SEVERABILITY:-
-------------------------
17.1 No failure or delay by the Bank in exercising any right or remedy
under this facility letter or any Security Document shall operate as a
waiver of it nor shall any single or partial exercise of any right or
remedy prevent any further exercise or the exercise of any other right
or remedy. The rights and remedies provided in this facility letter
are cumulative and not exclusive of any other rights or remedies,
17.2 If any provision of this facility letter is or becomes invalid or
unenforceable in any respect that shall not affect the validity or
enforceability of any other provision.
18. DEFINITIONS AND INTERPRETATION: -
-------------------------------
"BANK" means the Govenor and Company of the Bank of Scotland and its successors,
assignees and transferees whomsoever.
"BANK OF SCOTLAND GROUP" means the Bank, any Subsidiary from time to time of the
Bank, any holding company from time to time of the Bank and any Subsidiary from
time to time of any such holding company.
"BORROWER" means the company named in Part 1 of this facility letter.
"BORROWINGS" means (without double counting): -
(i) money borrowed or raised and including capitalized interest;
(ii) any liability under any bond, note, debenture, loan stock, redeemable
preference share capital or other instrument or security;
25
<PAGE> 26
(iii) any liability in respect of acceptance or documentary credits or
discounted instruments;
(iv) any liability in respect of the acquisition cost of assets or services to
the extent payable on deferred payment terms where the period of deferment
is more than 60 days;
(v) any liability under debt purchase, factoring and similar agreements and
capital amounts owing under finance leases, hire purchase or conditional
sale agreements or arrangements;
(vi) any liability under any guarantee or indemnity (except product warranties).
"BUSINESS DAY" means a day on which dealings in Sterling deposits are carried
out in the London Interbank Sterling Market and being a day upon which the
Bank's Branch at which the Borrower's account is located from time to time is
open for business.
"CERTIFIED COPY" means a copy certified as true, complete and up to date by the
specified person or, if no-one is specified, by the Secretary of the Borrower.
"CURRENT ASSETS" means from time to time, the aggregate value (adjusted by the
Bank from time to time to accord with generally accepted accounting principles
and practices in the UK applied in regard to Day International (UK) Limited's
Financial Statements and to reflect any material adverse change in the financial
or trading position of Day International (UK) Limited) of all Trade Debtors
(excluding Inter Company Receivables) and Net Security Value of Stock of Day
International (UK) Limited.
"DANGEROUS SUBSTANCE" means any radioactive or other emissions and any natural
or artificial substances (whether in solid or liquid form or in the form of a
gas or vapour and whether alone or in combination with any other substance)
capable (in each case) of causing harm to man or any other living organism or
damaging the environment or public health or welfare including any controlled,
special, hazardous, toxic, radioactive or dangerous waste.
"DAY INTERNATIONAL GROUP INC" means Day International Group Inc (registered
number 2495986) and having its registered office at:
The Corporation Trust Company
Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
"DAY INTERNATIONAL INC" means Day International Inc (registered number
2241772) and having its registered office at: The Corporation Trust Company
Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
26
<PAGE> 27
"DAY INTERNATIONAL (UK) LIMITED" means Day International (UK) Limited
(registered number SC31497) and having its registered office at Dayton Works,
Balgray Street, Dundee, DD3 8HU.
"DEFAULT RATE" means a rate of interest of two per cent (2%) per annum above the
highest rate of interest payable on the Facilities.
"DORMANT" shall have the meaning given to it by Section 250 of the Companies Act
1985.
"ENCUMBRANCE" means any mortgage, charge, security, pledge, lien, right of
set-off, right to retention of title or other encumbrance, whether fixed or
floating, over any present or future property, assets or undertaking.
"ENVIRONMENTAL LAW" means all laws, regulations, codes of practice, circulars,
guidance notices and the like (whether in the UK or elsewhere) concerning the
protection of human health or welfare or the environment or the conditions of
the work place or the generation, transportation, storage, treatment or disposal
of Dangerous Substances.
"ENVIRONMENTAL LICENCE" means any licence, permit, authorisation, consent or
other approval required by any Environmental Law.
"EQUITY SHARE CAPITAL" shall have the meaning given to it by Section 744 of the
Companies Act 1985.
"EVENT OF DEFAULT" means one of the events referred to in Clause 7.1 of this
Part 2.
"FACILITIES" means the facilities made available according to the terms of this
facility letter as they may be extended, increased, restated or renewed from
time to time between the Borrower and the Bank.
"FINANCIAL STATEMENTS" means the audited annual profit and loss account and
balance sheet of the relevant company for each of its financial years
(consolidated for each financial year at the end of which that company has any
Subsidiaries) together with the related directors' and auditors' reports
thereon.
"FULL GROUP" means Day International Group Inc and its Subsidiaries from time
to time
"GROUP" means the Borrower and Day International (UK) Limited and any Subsidiary
(if any) of the Borrower and Day International (UK) Limited from time to time
(but excluding any Subsidiary which is Dormant from time to time) and "MEMBER OF
THE GROUP" shall be construed accordingly.
27
<PAGE> 28
"INCREASED COST" means: -
(i) an additional or increased cost incurred by the Bank as a result of it
having entered into, or performing, maintaining or funding its obligations
under this facility letter; or
(ii) that portion of an additional or increased cost incurred by the Bank in
making, funding or maintaining all or any advances comprised in a class of
advances formed by or including the Facilities; or
(iii) a reduction in any amount payable to the Bank or in the effective return
to the Bank under the Facilities or on its capital: or
(iv) the foregone amount of any payment made or interest or other return on or
calculated by reference to any amount received or receivable by the Bank
under the Facilities;
in each case arising as a result of any change, introduction, interpretation or
administration of any law or regulation after the date of this facility letter
or any compliance after the date of this facility letter with any law or
regulation relating to reserve assets, special deposits, cash ratios, liquidity
or capital adequacy requirements or any other form of banking or monetary
control.
"INTELLECTUAL PROPERTY RIGHTS" means patents, patent applications, trade marks,
community trade marks, service marks, trade names, brand names, registered
designs, copyright and all other industrial and intellectual property rights.
"INTER COMPANY RECEIVABLES" means trading debts due to Day International (UK)
Limited from all other members of the Full Group.
"INTEREST PERIOD" has the meaning given to it in Clause 1 (8) of Part 1 of this
facility letter.
"LIBOR" has the meaning given to it in Clause 1 (7) of Part 1 of this facility
letter.
"LOAN NOTES" means the two loan notes issued by the Borrower to Day
International Group Inc for a total sum of US $6,000,000.
"MANDATORY LIQUID ASSET COSTS" has the meaning given to it in Clause 1(7) of
Part 1 of this facility letter.
"MARGIN" means one per cent (1 %) per annum.
"MATERIAL ADVERSE EFFECT" means any effect which, in the reasonable opinion of
the Bank, might be expected to (i) affect the ability of the Borrower to comply
with its payment
28
<PAGE> 29
obligations under this facility letter or under any Security Document or (ii)
affect the ability of any member of the Group to comply with its payment
obligations under any Security Document.
"MATERIAL LITIGATION" means any litigation, arbitration or administrative
proceeding raised, pending or (to the best of the knowledge and belief of the
Borrower) threatened against the Borrower.
"NET BORROWINGS" means total Borrowings less sums standing at credit of all
accounts of the Group with the Bank from time to time in respect of which the
Bank has valid and enforceable rights of setoff.
"NET INTEREST CHARGES" means, in relation to any specified period, the aggregate
amount of interest, commission and other recurrent financial expenses
attributable to total Borrowings of the Group due to the Bank charged, accrued
or capitalised for such period.
"NET WORTH" means, from time to time, the aggregate of the amount paid up on the
issued share capital of Day International (UK) Limited and the amount standing
to the credit of its capital and revenue reserves (including any share premium
account or capital redemption reserve, but excluding any revaluation reserve)
plus or minus the amount standing to the credit or debit (as the case may be) of
the profit and loss account of the Day International (UK) Limited all as shown
in its latest available Financial Statements from time to time or, if more
recent, its latest management accounts approved by the Bank from time to time
but after: -
(i) making appropriate adjustments in respect of:-
(a) any variation in amount of such paid up share capital or any such
reserves subsequent to the date of such Financial Statements or, as
the case may be, such management accounts;
(b) any distribution in cash or specie declared or recommended subsequent
to such date out of profits earned prior thereto; and
(c) (if the Bank from time to time shall so require) further necessary
adjustments to accord with generally accepted accounting principles
and practices in the UK and to reflect any material adverse change in
assets or liabilities since the date of such Financial Statements or,
as the case may be, such management accounts; and
(ii) excluding (where included within capital and revenue reserves):-
(a) all sums set aside for Taxation, deferred charges and provisions for
depreciation or obsolescence, bad and doubtful debts and other
specific
29
<PAGE> 30
provisions, and
(b) the amount of any upward revaluation of assets which is not disclosed
in the last balance sheet and which has not been approved by the Bank;
and
(iii) deducting:-
(a) the amount (if any) by which the book value of the assets comprised in
that balance sheet exceeds a true and fair valuation of those assets;
and
(b) the book values of goodwill and all other assets which would be
treated as intangible under generally accepted accounting principles
and practices in the UK.
"OTHER FACILITY LETTER" means the facility letter between the Bank and Day
International (UK) Limited dated as at the date hereof.
"PBIT" means, in relation to any specified period, the trading profit of Day
International (UK) Limited before deduction of Net Interest Charges and Taxation
and excluding deductions in respect of goodwill written off during such period.
"PERMITTED BORROWINGS" means the Loan Notes.
"PERMITTED DISPOSALS" means:-
(a) the disposal of assets on an arm's length basis in the ordinary and usual
course of trading; or
(b) the application of cash for any purpose permitted under this facility
letter; or
(c) the disposal of obsolete equipment no longer required for the purposes of
the business carried on by any member of the Group; or
(d) disposals between the Borrower and Day International (UK) Limited; or
(e) disposals where the proceeds are applied in and towards the acquisition of
a replacement within 90 days after the date of disposal.
"PERMITTED DISTRIBUTION" means any dividend or other distribution which the
Borrower is obliged to declare, pay or make in terms of its Articles of
Association approved by the Bank and the declaration, payment or making of which
will not cause, directly or indirectly, an Event of Default or Potential Event
of Default to occur provided that no declaration, payment or distribution will
be permitted so long as an Event of Default has occurred and is
30
<PAGE> 31
continuing unwaived.
"PERMITTED ENCUMBRANCES" means:-
(a) liens securing obligations not more than 30 days overdue, arising by
operation of law in the ordinary and usual course of trading;
(b) Encumbrances arising out of title retention provisions in a supplier's
standard conditions of supply of goods acquired in the ordinary and usual
course of trading;
"POTENTIAL EVENT OF DEFAULT" means any event, act or condition which, with the
giving of notice and/or lapse of time and/or certification of materiality will
or is likely to constitute an Event of Default.
"PREFERENTIAL CREDITORS" means creditors whose debts would be treated as having
a preferential ranking in terms of Section 386 of and Schedule 6 to the
Insolvency Act 1986 (or any subsequent legislation amending the categories of
preferential debts in an insolvency) if, on the date of computation,
preferential ranking had crystallised.
"SECURITY DOCUMENTS" means the documents specified in Clause 1. 1 of this
Part 2.
"SPECIFIED PURPOSE" means the application of the proceeds of the Term Loans for
the purpose of repaying the Loan Notes.
'STANDARD APPLICATION DATES" means the last Business Day of each calendar month
or any other dates which the Bank may notify to the Borrower from time to time.
"STATUTORY CONTROL" means each of the following which affects any member of the
Group or any of its assets from time to time:-
(i) any legislation (including delegated legislation);
(ii) any consent made or given under any legislation; and
(iii) any notice, order or correspondence related to paragraphs (i) or (ii) of
this definition and having the force of law.
"STERLING" and the figure "(POUND)" shall mean lawful currency of the UK.
"SUBSIDIARY" and "HOLDING COMPANY" shall have the meanings given to them in
Section 736 of the Companies Act 1985.
"SUBSIDIARY UNDERTAKING" shall have the meaning given to it in Section 258 of
the Companies Act 1985.
31
<PAGE> 32
"THE STOCK EXCHANGE" means The International Stock Exchange of the United
Kingdom and the Republic of Ireland Limited and its successors.
"TAX" shall be construed so as to include any tax, levy, impost, duty or other
charge of a similar nature (including any interest and penalties payable in
respect thereof) and "TAXATION" shall be construed accordingly.
"TRADE DEBTORS" means debts due to Day International (UK) Limited which arise
out of and are due and owing in the ordinary course of business, which have not
been outstanding for more than 90 days from the date of the invoice (or such
other period as may be agreed with the Bank) and which are not bad or doubtful
or determined by the Bank to be bad or doubtful, but excluding (a) any debt owed
by any person who is also a creditor of that company to the extent of the amount
owed by that company to that creditor and (b) any debt which has been assigned
or charged to or is held for any third party or is held in trust for any third
party or is subject to any factoring or invoice discounting or similar agreement
with any adjustments the Bank may from time to time consider to be appropriate
in the context of the business of that company and the Facilities.
"UK" means the United Kingdom of Great Britain and Northern Ireland.
A reference to a "MONTH" is a reference to a period starting on one day in a
calendar month and ending on the day preceding the numerically corresponding day
in the next calendar month (and references to "months" shall be construed
accordingly) save that, where any such period would otherwise end on a
non-Business Day, it shall end on the next Business Day, unless that Business
Day falls in the succeeding calendar month, in which case it shall end on the
preceding Business Day; provided that if a period starts on the last Business
Day in a calendar month but there is no numerically corresponding day in the
month in which it ends, then it shall end on the last Business Day in that later
month.
References to Acts of Parliament shall be to such Acts as may be subsequently
amended, substituted, modified or re-enacted from time to time.
A reference to "THIS FACILITY LETTER" shall be construed as a reference to this
facility letter as varied, amended, novated, supplemented, replaced or restated
from time to time.
A reference to "THIS OFFER" is a reference to the offer of Facilities set out in
this facility letter.
A reference to "INCLUDING" shall be construed as being by way of illustration or
emphasis only and not as being by way of limiting the generality of the words
preceding it.
If any provision of this facility letter contradicts any provision of any
Security Document then the terms of this facility letter will prevail to the
extent of the inconsistency.
32
<PAGE> 33
18. LAW:-
----
This facility letter (and the agreement which shall be made by the
acceptance of this Offer by the Borrower) shall be governed by and
construed in accordance with the Law of Scotland and the Borrower submits
to the jurisdiction of the Scottish Courts.
This Offer may be accepted by the Borrower countersigning and returning to the
Bank the enclosed copy of this facility letter but will lapse if the Bank has
not received the duly countersigned copy within one calendar month from the date
of this facility letter.
Yours faithfully
......................................
for and on behalf of
THE GOVERNOR AND COMPANY
OF THE BANK OF SCOTLAND
This offer of Facilities set forth above is agreed and accepted on behalf of DAY
INTERNATIONAL (UK) HOLDINGS
By ....................................... Director
....................................... Director/Secretary
Date: 9th February 1996
33
<PAGE> 34
BUSINESS BANKING
CENTRE
P.O. Box
No. 9
11/19 Reform Street
DUNDEE DD1 9AU
R.E Box No. DD76
DAY INTERNATIONAL (UK) HOLDINGS, Telephone: 0138222 229131
SHEFFIELD STREET, Telex: 76225
STOCKPORT Fax 01382 205735
Our Ref:
Your ref:
5TH MARCH, 1996
DEAR SIRS,
SUPPLEMENT TO (POUND)2,815,000 TERM LOAN FACILITIES DATED 31ST JANUARY 1996 (THE
- --------------------------------------------------------------------------------
"FACILITY LETTER")
- ------------------
WORDS AND EXPRESSIONS USED IN THIS SUPPLEMENTARY LETTER SHALL UNLESS STATED
OTHERWISE BEAR THE SAME MEANING ASCRIBED TO THEM IN THE FACILITY LETTER.
PURSUANT TO A REVIEW OF THE FACILITIES IT IS PROPOSED EFFECTIVE FROM THE DATE OF
EXECUTION OF THIS SUPPLEMENTARY LETTER:-
(I) THE FIGURE "40" WHERE IT APPEARS ON LINE THREE OF SUB-CLAUSE 1(6) ON PAGE 2
OF THE FACILITY LETTER SHALL BE DELETED.
(II) THE FOLLOWING WORDS SHALL BE INSERTED AT THE END OF SUB-CLAUSE 1(6) WHERE
IT APPEARS ON PAGE 2 OF THE FACILITY LETTER:-
"UP TO AND INCLUDING 30TH APRIL 2002. IMMEDIATELY THEREAFTER THE
OUTSTANDING BALANCE OF TERM LOAN 2 SHALL BE REPAID EITHER (I) IN FULL IN
ONE AMOUNT TO THE BANK OR (II) BY SUCH OTHER ARRANGEMENT AS MAY BE
ACCEPTABLE TO THE BANK."
34
<PAGE> 35
(III) ON PAGE 2 ITEM (5) OF THE FACILITY LETTER THE AVAILABILITY OF TERM LOAN 2
SHALL BE AMENDED BY DELETION OF THE WORDING "THE TENTH ANNIVERSARY OF ITS
DATE OF DRAWDOWN BY THE BORROWER" TO BE REPLACED BY "30TH APRIL 2002."
(IV) THE FIGURE "ONE" WHERE IT APPEARS ON THE SECOND LINE OF THE CLAUSE HEADED
(4) DRAWDOWN ON PAGE 2 OF THE FACILITY LETTER SHALL BE AMENDED AND REPLACED
BY THE FIGURE "TWO".
ALL OTHER TERMS AND CONDITIONS OF THE FACILITY LETTER SHALL REMAIN IN FULL FORCE
AND EFFECT UNDER INCORPORATION OF THE SUPPLEMENTARY TERMS NARRATED ABOVE.
IN ORDER TO ACKNOWLEDGE YOUR ACCEPTANCE OF THE TERMS CONTAINED IN THIS
SUPPLEMENTARY LETTER, PLEASE EXECUTE AND RETURN THE ENCLOSED DUPLICATE WITHIN
ONE MONTH OF THE DATE OF THIS LETTER.
Yours faithfully,
FOR AND ON BEHALF OF
THE GOVERNOR AND COMPANY
OF THE BANK OF SCOTLAND
- ------------------------------
AGREED AND ACCEPTED FOR AND ON BEHALF OF
DAY INTERNATIONAL (UK) HOLDINGS
by________________________ DIRECTOR
________________________ DIRECTOR/SECRETARY
DATE:
35
<PAGE> 36
BANK OF
SCOTLAND
Constituted Act of Parliament 1695
Reform Street Branch
11 /1 9 Reform Street
DUNDEE
DD1 9AU
Day International (UK) Limited Telephone: Direct Line: 01382 2913
Dayton Works
Balgray Street
Dundee Switchboard: 0131-442 7777
DD3 8HN Fax: 01382 202109
Telex: 76225
Our Ref:
Your Ref
31st January 1996
Dear Sirs,
RE: (POUND)935,000 CREDIT FACILITIES
------------------------------------
We are pleased to offer credit facilities on the terms and conditions set out in
Parts 1 and 2 of this facility letter. Unless otherwise specifically provided,
the definitions set out in Clause 17 of Part 2 of this facility letter shall
apply. Drawdown or utilisation of all or any of the Facilities is subject to
satisfaction or waiver of the conditions precedent set out in Clause 1 of Part 2
of this facility letter.
36
<PAGE> 37
The Facilities offered are multi-option facilities of (pound)935,000
comprising: -
(i) overdraft facilities ("Overdraft");
(ii) guarantee facilities (the "Guarantee Facilities");
(iii) forward currency contract facilities (the "Forward Currency Contract
Facilities");
(iv) BACS facilities (the "BACS Facilities").
PART I - TERMS OF FACILITIES
- ----------------------------
1. Multi-Option Facilities:-
------------------------
1.1 BORROWER:-
---------
Day International (UK) Limited (Registered Number SC31497) having its
registered office at Dayton Works, Balgray Street, Dundee DD3 8HN.
1.2 AMOUNT:-
-------
(pound)935,000 (the "Limit")
1.3 The Facilities may be drawn as Overdraft, Guarantee Facilities,
Forward Currency Contract Facilities and BACS Facilities. The
aggregate amounts drawn down under those options shall not at any time
exceed the Limit.
1.4 The Bank will review the Facilities at the end of each consecutive 364
day period commencing on the date of this Facility Letter, (the last
Business Day of such period being the "Review Date"). The Facilities
will cease to be available at that date at the latest (unless before
then the Bank has specifically agreed to renew or extend the
Facilities).
If the Facilities cease to be available or repayment is demanded of
the Overdraft, then the Bank shall be entitled to request the Borrower
to lodge such funds as the Bank shall require in a written demand as
security for all other outstanding liabilities (whether actual or
contingent) under the Facilities and the Borrower shall forthwith
comply with such request.
2. OVERDRAFT AND GUARANTEE FACILITIES:-
-----------------------------------
(1) BORROWER:-
---------
Day International (UK) Limited (registered number SC31497) having its
registered office at Dayton Works, Balgray Street, Dundee, DD3 8HN
37
<PAGE> 38
(2) PURPOSE: -
--------
The Overdraft and the Guarantee Facilities may only be applied for the
working capital purposes of the Borrower.
(3) LIMIT:-
------
(a) The Bank agrees that the Borrower may operate one or more current
accounts on which the Overdraft may be drawn. The Bank shall be
entitled to refuse to pay any cheques, orders or withdrawals on
any one or more of the Borrower's current accounts where such
payments would result in the Limit being exceeded.
(b) The Borrower must at all times provide sufficient funds to ensure
that the Limit is not exceeded. If the Limit is likely to be
exceeded, the Borrower must notify the Bank and advise which
cheque(s) are to be honoured in the case of competition. If the
Borrower fails to do so, the Bank may, in its discretion, refuse
to pay a cheque (or allow any other utilisation of the Overdraft
or Guarantee Facilities) which would have the effect of exceeding
the Limit. If the Bank does pay a cheque or allows a utilisation
of the Overdraft and Guarantee Facilities so as to exceed the
Limit, that does not mean that the Limit has changed or that the
Bank will agree to pay any other cheque or meet any other payment
instruction which would have the effect of exceeding the Limit.
(4) AVAILABILITY:-
-------------
(a) Subject to the other provisions of this facility letter, the
Overdraft may be drawn down as cash withdrawals or payments.
(b) The Overdraft and the Guarantee Facilities shall cease to be
available on the Review Date unless the Bank has agreed in
writing to renew or extend them.
(c) From the date of this facility letter, the Borrower ceases to be
entitled to use any overdraft and guarantee facilities previously
made available by the Bank and any existing utilisations under
any overdraft or guarantee facilities previously made available
by the Bank shall, to the extent not repaid or discharged, be
taken into account when assessing compliance with the Limit.
(5) REPAYMENT:-
----------
Notwithstanding any other provision of this facility letter, in
accordance with normal
38
<PAGE> 39
banking practice the Overdraft shall be repayable on demand and the
Overdraft and the Guarantee Facilities will cease to be available from the
date of demand.
(6) INTEREST RATE: -
--------------
(a) The rate of interest applicable to the Overdraft shall be the rate per
annum which is one per cent (1 %) per annum over the Bank's base rate
from time to time fluctuating therewith and will be payable monthly in
arrears, on the Standard Application Dates, on the cleared daily
balance of the amount drawn down up to the date of actual payment .
(b) Unless otherwise agreed by the Bank, any drawing of the Overdraft
which results in the Limit being exceeded will attract interest at the
Bank's unauthorised rate, which will be two per cent (2%) per annum
over the Bank's base rate from time to time fluctuating therewith.
(7) GUARANTEES:-
-----------
(a) All or part of the Overdraft which has not been drawn down and which
is available for drawdown in accordance with the terms of Clause 1.3
of this Part 1 may, on receipt by the Bank of a written notice from
the Borrower requesting the same, be utilised as a guarantee facility
by way of guarantees to be issued by the Bank on behalf of the
Borrower. The guarantees shall be classified by the Bank either as
financial guarantees (where they guarantee the repayment of sums due
by the Borrower to a third party) or as performance guarantees. The
terms of each guarantee shall be subject to the prior approval of the
Bank and shall include a provision that each guarantee shall expire no
later than a date which the Bank may in its discretion agree.
(b) The Borrower shall be obliged to counter indemnify the Bank in respect
of the Bank's liability (whether present or future, actual or
contingent) under each guarantee and the counter indemnity shall
include a provision entitling the Bank to debit the account of the
Borrower with the amount of any liability due and payable by the Bank
in terms of it.
(c) In the event that the Bank demands repayment of the Overdraft or, if
earlier, becomes entitled to demand repayment of all or any part of
the Facilities, the Bank may (without prejudice to all other rights
and remedies of the Bank) by notice to the Borrower which has utilised
the Guarantee Facilities:-
(i) terminate the Guarantee Facilities; and/or
(ii) terminate any guarantees granted under this facility letter and
exercise its rights under any counter indemnity given in respect
of it
39
<PAGE> 40
or them; and/or
(iii) continue any guarantees granted under this facility letter and
require the Borrower which has utilised the Guarantee Facilities
to lodge with the Bank whatever sums the Bank may specify as
collateral in security for the Bank's liability (whether present
or future, actual or contingent) in respect of those guarantees.
(d) The Borrower shall pay to the Bank a guarantee commission calculated
as being: -
(i) in respect of H M Customs & Excise Duty Department Guarantees
three quarters of one per cent (0.75 %) per annum;
(ii) in respect of all other guarantees 2.5 per cent per annum.
In each case there shall be a minimum charge of (pound)20 per
guarantee and such commission shall be calculated on the total
liability (whether present or future, actual or contingent) to the
Bank of each guarantee issued by the Bank on the Borrower's request
and that commission shall be payable annually in advance on the date
of issue and annually thereafter. For the avoidance of doubt guarantee
commission ceases to be payable on a guarantee upon (i) termination
for whatever reason, of the guarantee; and/or (ii) the cash
collateralisation of any guarantee to the Bank's satisfaction.
3. FORWARD CURRENCY CONTRACTS:-
---------------------------
(1) BORROWER:-
---------
Day International (UK) Limited (registered number SC31497) having its
registered office at Dayton Works, Balgray Street, Dundee, DD3 8HN.
(2) PURPOSE:-
--------
The Forward Currency Contracts Facility may be utilised by the
Borrower for the purchase of any freely convertible currency.
(3) UTILISATION:-
------------
For the purposes of calculating utilisation of the Forward Currency
Contracts Facility the Bank will normally use the figure of 10 % of
the consideration payable to the Bank under each Contract for a period
of up to 12 months and 20 % for any other Contract. The Bank reserves
the right to allocate such other amount (up to 100%) to any individual
contract or to all contracts at any time and for such time as it
40
<PAGE> 41
considers necessary to do so.
(4) CHARGES:-
--------
The Bank's standard scale of charges from time to time in force
shall apply or such charges as may be agreed between the Bank and
the Borrower from time to time.
4. BACS FACILITY:-
--------------
(1) PURPOSE:-
--------
The Bank shall sponsor the Borrower to enable it to make payments
using the Bankers Automated Clearing System operated by BACS Limited
on the standard terms and conditions therefor, subject to payment of
the Bank's charges from time to time as prenotified to the Borrower.
PART 2: CONDITIONS
- ------------------
1. CONDITIONS PRECEDENT:-
---------------------
The conditions precedent which require to be satisfied before first
drawdown or, if earlier, first utilisation of the Facilities are:-
1.1 SECURITY:-
---------
The Borrower shall have procured that the Bank receives or continues
to hold the following security in a form and content which is
acceptable to the Bank and, together with all other security from time
to time held by the Bank, as continuing security for all moneys,
obligations and liabilities certain or contingent now or subsequently
due, owing or incurred to the Bank: -
(a) guarantee by Day International Inc. in favour of the Bank on
account of the obligations of the Borrower to the Bank subject
to a maximum limit of (pound)935,000 plus all costs and interest
thereon;
(b) irrevocable letters of credit from NationsBank of Texas N.A.
subject to a maximum limit of (pound)935,000 plus all costs and
interest thereon;
(c) guarantees (incorporating offset arrangements) by the Borrower
and the Parent (which is provided with facilities from the Bank
pursuant to the Other Facility Letter) on account of each other.
1.2 FINANCIAL INFORMATION:-
----------------------
41
<PAGE> 42
The Bank shall have received in form and content acceptable to it:-
(a) a Certified Copy of the Financial Statements of the Borrower as
at 6 June 1995;
(b) a Certified Copy of the management accounts of the Borrower for
the period from 31st October 1995 to 31st December 1995; and
(c) whatever further information regarding the trading and financial
position of each member of the Borrower that the Bank may
require.
1.3. SECRETARIAL: -
------------
The Bank shall have received in form and content acceptable to it: -
(a) evidence that all policies of insurance (including public liability
insurance) in relation to the business and assets of the Borrower
which the Bank may reasonably require are in full force and effect and
are with an insurance company acceptable to the Bank;
(b) a certificate in the Bank's standard form from the secretary of the
Borrower confirming approval by the board of directors of the
acceptance of this offer and approval and authorisation to execute and
deliver the Security Documents to which it is a party;
(c) a certificate in the Bank's standard form from the secretary of the
Parent confirming approval by its board of directors of the guarantee
referred to in Clause 1.1 (c) above and authorisation to execute and
deliver that guarantee.
(d) a Certified Copy of the Certificate of Incorporation and, where
relevant, Certificate(s) of Incorporation on Change of Name of the
Borrower;
(e) a letter from the Borrower signed by its secretary listing the
directors of the Borrower confirming that those persons are all the
existing directors of the Borrower; and
(f) a letter from the Borrower signed by one of its directors confirming
that there has been no material change in its financial condition from
(i) the date of the latest Financial Statements of the Borrower
delivered to the Bank, and (ii) the earlier of the date of the first
drawdown or utilisation of the Facilities.
42
<PAGE> 43
2. REPRESENTATIONS AND WARRANTIES:-
-------------------------------
To induce the Bank to make available and to maintain the Facilities the
Borrower represents and warrants to the Bank that as at the date of its
acceptance of this Offer:-
2.1 it is duly incorporated and validly existing under the jurisdiction
of its incorporation and it has full power to own its assets and
carry on its business wherever it owns assets or carries on business
from time to time;
2.2 each other member of the Group is duly organised and validly existing
under the laws of its jurisdiction of incorporation and has full
power to own assets and carry on its business wherever it owns assets
or carries on business from time to time.
2.3 it has power to enter into and perform and comply with its
obligations in terms of this facility letter and under the Security
Documents to which it is a party;
2.4 each other member of the Group has power to enter into and perform
and comply with its obligations in terms of the Security Documents to
which it is a party and the granting of those Security Documents in
support of the obligations of the Borrower is for the commercial
benefit of each other member of the Group;
2.5 all actions, conditions and things required to be taken, fulfilled or
done have been taken, fulfilled and done (including the obtaining of
any necessary consents) in order:-
(i) to enable the Borrower lawfully to enter into, exercise its
rights and perform and comply with its obligations in terms
of this facility letter and under the Security Documents to
which it is a party; and
(ii) to ensure that those obligations are legally binding and
enforceable under the laws of each relevant jurisdiction;
2.6 (i) the acceptance of this Offer and compliance with its
terms and the granting and delivery of and compliance with
the terms of the Security Documents to which it is a party
does not and will not cause it to be in breach of:-
(a) any law, regulation, judicial or official order to
which it is subject;
(b) its memorandum or articles of association or other
constitutional documents; or
(c) any agreement, undertaking or restriction to
which it is a party or subject;
43
<PAGE> 44
(ii) all governmental or other consents requisite for such acceptance,
grant, delivery and compliance are in full force and effect;
2.7
(i) the granting and delivery of and compliance with the terms of the
Security Documents to which any other member of the Group is a
party does not and will not cause that other member of the Group
to be in breach of:-
(a) any law, regulation, judicial or official order to which it
is subject;
(b) its memorandum or articles of association or other
constitutional documents; or
(c) any agreement, undertaking or restriction to which it is a
party or subject;
(ii) all governmental or other consents requisite for such acceptance,
grant, delivery and compliance are in full force and effect;
2.8 except as disclosed in the most recent Financial Statements of the
Borrower, received by the Bank prior to the date of this facility
letter, no Material Litigation is current, pending or (so far as the
Borrower knows) threatened against any member of the Group or any of
their respective assets;
2.9 the Financial Statements and management accounts of the Borrower
which have been or will be delivered to the Bank (i) were, or will
be, prepared in accordance with consistently applied accounting
principles and practices which are both generally accepted and
adopted in the UK and (ii) do, or will, give a true and fair view of
the financial condition of the Borrower as at the end of the period
to which they relate and of the results of its operations during that
period;
2.10 the copies of all Certified Copy documents and all other documents
required to be delivered to the Bank are true, accurate and complete
in all material respects;
2.11 none of the share capital of the Borrower is under option or mortgage
or charge and, except in respect of Permitted Distributions, no
dividends or other rights or benefits have been declared, made or
paid on the share capital of the Borrower;
2.12 it has obtained and has in force all licences, permits,
authorisations and consents (including Environmental Licences)
necessary for the ownership of its property and assets and for the
conduct of its business from time to time and it has compiled in all
material respects with (a) the terms and conditions of those
licences. permits, authorisations and consents and (b) Environmental
Law;
44
<PAGE> 45
2.13 it is either the legal and beneficial owner or licensee of all
Intellectual Property Rights necessary for its business from time to
time and the use of Intellectual Property Rights by members of the
Group does not infringe any third party rights.
Each of the above representations and warranties shall be deemed to be repeated
by the Borrower as at the date of each drawdown under the Facilities and on and
as of the first day of on and as of each of the Standard Application Dates.
3. FINANCIAL INFORMATION:-
----------------------
3.1 For the purposes of the Facilities, the Bank will rely on the
Financial Statements of the Borrower in determining the basis of its
financial condition as at the date of each applicable Financial
Statement and in addition the Borrower will supply to the Bank:-
(a) within 90 days after each of its financial year ends, two copies
of its Financial Statements together with a summary narrative of
all material aspects of those Financial Statements in form and
content acceptable to the Bank;
(b) within 28 days after each month end (commencing at the close of
the first month following the date of first drawdown or
utilisation of the Facilities), management accounts in form and
content acceptable to the Bank;
(c) at the same time as it delivers the management accounts referred
to in paragraph (b) above, a certificate of compliance with the
financial covenants set out in Clause 4 of this Part 2 signed by
a director of the Borrower, setting out in reasonable detail
supporting computations and in form and content acceptable to the
Bank; and
(d) such further financial information as the Bank may from time to
time reasonably require.
4. FINANCIAL COVENANTS:-
--------------------
4.1 Until the Borrower has repaid all moneys owing to the Bank under this
facility letter the Borrower shall ensure that the following covenants
are complied with:-
(a) GEARING:-
--------
The ratio of the Net Borrowings of the Group to the Net Worth of
the Borrower shall not at any time be greater than 1: 1 (100 %);
(b) CURRENT ASSET COVER:-
--------------------
45
<PAGE> 46
The ratio of Current Assets of the Borrower (excluding Inter
Company Receivables) to the total amount of the Borrowings of the
Group due to the Bank shall not at any time be less than 1: 1
(100 %); and
(c) INTEREST COVER:-
---------------
The ratio of PBIT of the Borrower to Net Interest Charges for
total amount of the Borrowings of the Group due to the Bank shall
not be less than 3.7:1 (370%).
4.2 The financial covenants set out in paragraph 4.1 above shall be tested
on a monthly basis by reference to the cumulative position for the
relevant financial year, in each case tested by reference to the
latest Financial Statements of the Parent and the Borrower or, if more
recent, by reference to the latest management accounts of the
Borrower, provided that, where any financial covenant is tested by
reference to management accounts it shall be tested again by reference
to the Financial Statements of the Borrower for the relevant period
when those Financial Statements become available.
4.3 The Bank reserves the right to review the financial covenants set out
in Clause 4.1 above on an annual basis and, in the absence of
agreement, shall be entitled to specify such reasonable alternative
financial covenants with which the Borrower shall comply.
5. POSITIVE COVENANTS:-
-------------------
5.1 The Borrower shall, unless it has a prior written waiver from the Bank
ensure that its obligations in respect of the Facilities and under the
Security Documents will at all times rank prior to all other present
and future Borrowings of the Borrower except for Borrowings which are
statutorily preferred;
5.2 The Borrower shall comply with the obligations set out in Clause 5.3
below and shall also procure that each other member of the Group from
time to time shall comply with those obligations so that each
reference in Clause 5.3 to the Borrower shall be construed as a
reference to each member of the Group from time to time.
5.3 The Borrower shall, unless it has a prior written waiver from the
Bank: -
(a) effect and maintain all policies of insurance in relation to its
business and assets and shall otherwise insure whatever property
is capable of insurance against loss or damage by fire for full
replacement value from time to time and shall effect and maintain
those insurances which are normally maintained by companies
engaged in the same or a similar type of business
46
<PAGE> 47
as it carries on from time to time and will provide the Bank on
demand with copies of all of its insurance policies or
certificates of insurance or such other evidence of their
existence as may be acceptable to the Bank;
(b) duly and punctually (and, in any event, prior to incurring any
penalties) pay all rents, rates, taxes, stamp duties, covenants
and all other monetary obligations to which it is subject;
(c) advise the Bank promptly of the details of any Material
Litigation;
(d) take whatever steps and execute whatever documents the Bank may
reasonably require for the purpose of perfecting and giving
effect to all or any of the Security Documents;
(e) obtain, comply with, promptly renew and maintain all licences,
authorisations, permits, consents and exemptions necessary under
any applicable law or regulation from time to time;
(f) comply at all times with all Statutory Controls and give to the
Bank a copy of any notice which affects its compliance with a
Statutory Control forthwith upon receipt of such notice;
(g) at the request of the Bank, instruct its auditors to discuss the
Borrower's financial position with the Bank and authorize its
auditors to disclose any relevant financial information to the
Bank; the auditors' fees arising from that instruction shall be
borne by the Borrower;
(h) upon reasonable notice, permit the Bank or its agents reasonable
Haccess for the purpose of inspecting its property and assets and
its financial and business records.
6. NEGATIVE COVENANTS:-
-------------------
6.1 The Borrower shall procure that each other member of the Group from
time to time shall not do any of the matters referred to in Clause 6.2
below so that each reference in Clause 6.2 to a Borrower shall be
construed as a reference to each member of the Group from time to
time.
6.2 Unless it has a prior written waiver from the Bank, the Borrower shall
not: -
(a) save in respect of Permitted Encumbrances, grant or permit to
subsist any Encumbrance:
(b) save in respect of Permitted Disposals, sell, transfer, lease or
otherwise
47
<PAGE> 48
dispose of, lend or otherwise part with control or possession of
(whether by a single transaction or a series of transactions and
whether related or not) any asset or undertaking;
(c) undertake any business other than that which at the date of
acceptance of the Facilities will be carried on by it nor make
any material change in the nature or extent of its business nor
acquire any business or undertaking;
(d) enter into any transaction, agreement or arrangement other than
on an arms' length basis and in the ordinary and usual course of
business;
(e) make any loan or grant any credit or enter into or give or permit
or suffer to subsist any indemnity or guarantee (or similar
obligation) of the due payment of money or performance of any
contract, engagement or obligation of any other person or body;
(f) enter into any partnership, joint venture or profit sharing
arrangement with any other person (save for a profit sharing
arrangement applicable to all of its employees which has been
approved in advance by the Bank) nor merge nor amalgamate with
any other person (save for any merger or amalgamation of one
member of the Group with another member of the Group as part of a
solvent reconstruction approved in advance by the Bank);
(g) incur or contract to incur or permit to subsist any Borrowings
save for:-
(i) the Facilities and amounts due in respect of the Facilities;
(ii) Borrowings in respect of trade creditors on terms which are
in accordance with reasonable commercial practice;
(iii) its outstanding commitments under hire purchase or finance
leases (calculated on a going concern basis).
(h) in any of its financial years incur any liability or expenditure
(whether actual or contingent) of a capital nature (including
total payments due under hire purchase and leasing arrangements)
unless that capital liability or expenditure has been approved by
the Bank;
(i) change its residence for Tax purposes;
(j) incorporate any company nor acquire any share in the share
capital of any company whether by acquisition or subscription
after the date of this facility letter nor permit any Dormant
Subsidiary to cease to be Dormant;
48
<PAGE> 49
(k) alter the accounting principles and practices applied to its
Financial Statements (except where its auditors certify to the
Bank that an alteration is required for the purposes of complying
with generally accepted accounting principles and practices in
the UK, in which case the Bank may make consequential adjustments
to the financial covenants set out in Clause 4.1 of this Part 2
which the Bank considers necessary and which shall be binding on
the Borrower and the Bank may require the Borrower's auditors, at
the Borrower's expense, to provide the Bank with pro forma
financial statements in a form which enables the Bank to compare
the financial position of the Borrower before and after the
alteration has been made);
(1) alter its financial year end;
(m) enter into any agreement or arrangement for the provision or
receipt of finance which will not or need not be shown in the
balance sheet contained in its Financial Statements;
(n) repay any Borrowings (other than trade debts) or interest or
other costs incurred in relation to them and which are due by it
to any other person before the stated maturity or due date for
them;
(o) provide any financial assistance (as defined in the Companies Act
1985) unless the requirements of Section 155 et seq of the
Companies Act 1985 are complied with;
(p) waive any exemption from Value Added Tax in relation to any
property or interest in property;
(q) factor or discount its debts.
7. PAYMENTS AND INTEREST CALCULATIONS:-
-----------------------------------
7.1 All sums falling due by way of interest or commission shall be
calculated on the basis of a year of 365 days for the actual number of
days elapsed. Interest charged at the rates provided in this facility
letter (including the Default Rate) shall continue at those rates
after as well as before any decree or judgement for payment until
payment is made in full.
7.2 Any determination by the Bank of any amount of principal, interest,
commission or charges or the applicable interest rate shall, in the
absence of manifest error, be conclusive and binding on the Borrower
for all purposes.
7.3 Payments made by the Borrower to the Bank shall be made in Sterling
and in immediately cleared funds, without set-off or counterclaim
(subject to Clause 9.1 of
49
<PAGE> 50
this Part 2), at the Branch at which the Borrower's account is located
from time to time (or in whatever manner or to whichever place the
Bank may specify) by no later than 11.00 am on the due date for each
payment.
7.4 Where the due date for payment of any sums payable under this facility
letter or any Security Document falls due on a non-Business Day then,
without affecting the calculation of subsequent due payment dates,
actual payment of the amount due shall be made on the next Business
Day following the due date unless the next Business Day falls in the
next calendar month, in which case actual payment of the amount due
shall be made on the Business Day preceding the due date.
7.5 Without prejudice to any other right or remedy the Bank may have, the
Bank is authorised (but not obliged) to (i) apply any credit balance
to which the Borrower is entitled on any account of the Borrower with
the Bank and (ii) debit any account of the Borrower with the Bank in
satisfaction of any sum (including any interest, commission, costs and
charges) due by the Borrower to the Bank under the Facilities.
7.6 In the event that the Borrower requests a drawdown but fails to draw
the amount requested, the Borrower shall indemnify the Bank and keep
the Bank indemnified on demand against any loss or expense which the
Bank may incur as a result of that failure.
8. PRINCIPAL BANKER:-
-----------------
Unless otherwise agreed by the Bank, the bank accounts of the Group shall
be held within the Bank of Scotland Group and all revenues shall be paid
into them and all banking business transacted through them.
9. TAXES:-
------
9.1 All payments to be made by the Borrower in terms of this facility
letter shall be made free and clear of and without deduction in
respect of Tax unless the Borrower is required by law to make a
payment subject to the deduction or withholding of Tax, in which case
the amount of that payment payable by the Borrower shall be increased
to the extent necessary to ensure that the Bank receives and retains a
net sum equal to that which it would have received and retained had no
deduction or withholding been made or required to be made.
9.2 If the Borrower makes an increased payment under Clause 9.1 above and
the Bank determines that it has obtained a refund, reduction or
remission of Tax because of that increased payment then the Bank shall
reimburse the Borrower with an amount which the Bank (in its sole
discretion) considers will leave the Bank in no better or worse
position than it would have been in had there been no deduction or
50
<PAGE> 51
withholding; provided that nothing in this Clause 9.2 shall require
the Bank to order its Tax affairs to achieve any refund, credit,
remission or reduction and nothing in this sub-clause shall oblige the
Bank to make available to the Borrower any information concerning the
Bank's Tax affairs or administration.
9.3 If the Bank ceases to be recognised by the Tax authorities of the UK
as a bank carrying on a bona fide banking business for the purposes of
Section 349 (3) of the Income and Corporation Taxes Act 1988 then,
unless that cessation is because of a change in any law, regulation,
practice, concession, regulatory requirement or at the request of the
Bank of England, the European Union or other appropriate authority,
the Borrower shall not be liable to pay to the Bank under Clause 9.1
above any amount in excess of the amount it would have been obliged to
pay if the Bank had not ceased to be recognised.
10. INCREASED COST:-
---------------
10.1 If the Bank incurs an Increased Cost, then on demand by the Bank the
Borrower shall promptly pay to the Bank the amount certified by the
Bank in its demand (which will show, in reasonable detail, the basis
of calculation) and will indemnify the Bank for the Increased Cost;
but the Borrower shall not be required to indemnify the Bank against
an Increased Cost that (i) arises from Tax or any increase in Tax on
the Bank's overall net income or (ii) does not apply to banks in the
UK generally.
10.2 When calculating Increased Cost, the Bank may allocate or spread the
Increased Cost on whatever basis it considers reasonably appropriate
having regard to the nature of the Facilities.
11. ILLEGALITY:-
-----------
If, in the Bank's opinion, any law or regulation, change in any law or
regulation or change in its interpretation, makes it unlawful for the Bank
to make available or maintain all or part of the Facilities or to perform
any of its obligations in relation to them then the Bank will serve notice
to that effect on the Borrower and the Bank shall then be discharged from
its obligation to make available, renew or maintain the Facilities and the
Borrower shall pay to the Bank on demand or, if later, on the date
specified by the Bank as being the latest date for compliance with the
relevant law or regulation, the amount of the Facilities then outstanding
together with all other sums due and to become due under this facility
letter.
12. MITIGATION OF BORROWER'S LIABILITY:-
-----------------------------------
If circumstances arise which would, or could upon the giving of notice,
result in the Bank:-
(a) not being required to make available or maintain all or part of the
Facilities or
51
<PAGE> 52
perform any of its obligations in relation to them under Clause 11 of
this Part 2; or
(b) being due any increased payment to it or for its account under Clauses
9 or 10 of this Part 2;
then without in any way limiting, reducing or otherwise qualifying the
rights of the Bank or the obligations of the Borrower under any of the
Clauses referred to in (a) or (b) above, the Bank may either (i) take any
reasonable steps open to it to mitigate the effects of those circumstances
(following consultation with the Borrower over a period not exceeding 30
days) or (ii) permit the Borrower to prepay all sums due and to become due
under this facility letter without penalty (but subject to the provisions
of this facility letter); provided that, in any event, the Bank shall be
under no obligation to seek a mitigation if, in the bona fide opinion of
the Bank, to do so would or might have an adverse affect upon its business,
profits, operations or financial condition.
13. FEES AND EXPENSES:-
------------------
13.1 All reasonable legal, valuation and other fees, costs and expenses or
Tax charged to or incurred by the Bank in connection with the
Facilities and the Security Documents (including the preparation,
negotiation and completion of all waiver letters, amending or
supplemental documents and the enforcement or preservation of the
Bank's rights under this facility letter or any Security Documents)
will be payable by the Borrower or will be reimbursed to the Bank (on
a full indemnity basis) on demand whether or not the Borrower draws
down or utilises all or any part of the Facilities.
13.2 The Borrower will pay to the Bank an arrangement fee 0.5 % of the
Facilities payable within seven Business Days of the Borrower's
acceptance of this facility letter.
13.3 The Borrower will also pay to the Bank the costs for the instruction
or preparation of the Security Documents whether or not the Borrower
draws down or utilises all or any part of the Facilities.
13.4 Bank charges in relation to the Facilities will also be payable in
accordance with the Bank's tariff issued to the Borrower from time to
time.
14. BENEFIT OF THIS FACILITY LETTER:-
--------------------------------
14.1 This facility letter shall bind and inure to the benefit of the
Borrower and the Bank and their respective successors and the Bank's
assignees.
14.2 The Borrower may not assign or transfer all or any part of its rights,
obligations or benefits under this facility letter.
52
<PAGE> 53
14.3 The Bank shall be entitled (following consultation with the Borrower)
to permit any other bank or banks which the Bank may determine
(provided it is a recognised banking institution falling within
Section 349(3)(a) of the Income and Corporation Taxes Act 1988) to
participate in all or part of the Bank's rights and obligations under
this facility letter. In the event that the Bank does enter into such
an arrangement, the Borrower shall continue to deal directly with the
Bank as agent for itself and other participants.
14.4 The Bank shall be entitled (following consultation with the Borrower)
to assign, novate or transfer all or any part of its rights and
obligations under this facility letter to any other bank or banks
which the Bank may determine (provided it is a recognised banking
institution falling within Section 349(3)(a) of the Income and
Corporation Taxes Act 1988) and the Borrower now undertakes and agrees
to execute and to procure that each member of the Group shall execute
all documents the Bank may reasonably require to give effect to an
assignation, novation or transfer.
14.5 Subject to obtaining a confidentiality undertaking in favour of the
Borrower, the Bank shall be entitled to disclose to any prospective or
actual assignee, transferee or participant and to any prospective or
actual participant confidential information concerning each member of
the Group and its financial condition and any other information which
may be given to the Bank pursuant to the terms of this facility
letter.
15. NOTICES, CONSULTATION ETC:-
--------------------------
15.1 Unless otherwise provided in this facility letter, all notices or
other communications to or between the parties:-
(a) shall be given or sent by first-class pre-paid post or by telex
or by telefax transmission, authenticated to the satisfaction of
the Bank;
(b) if given or made by letter, receipt shall be deemed to have
occurred forty-eight hours after posting (unless hand delivered
to the addressee in which case receipt shall be the time of
delivery) and if given or made by telex or telefax transmission
shall be deemed to have been given and received when sent;
provided that, in the case of telex, the correct answer back is
received and, in the case of telefax, a correct transmission
report is received; provided further that where delivery or
receipt would be deemed to be on a non-Business Day or after 5 pm
on a Business Day, delivery or receipt shall instead be deemed to
be at 9 am on the next Business Day;
53
<PAGE> 54
(c) if given to the Bank, it shall be given at the address at the
head of this facility letter or at any other address the Bank may
designate from time to time by notice to the Borrower;
(d) if given to the Borrower, it shall be deemed to be duly given if
given at the address of the Borrower shown above or at any other
address the Borrower may designate from time to time by notice to
the Bank.
15.2 The Bank may, but shall not be obliged to, rely upon and act in
accordance with any communication which may be or purport to be given
by telephone or telex or telefax transmission on behalf of the
Borrower by any person notified to the Bank by the Borrower as being
authorised to give that communication, without enquiry by the Bank as
to the authority or identity of the person making or purporting to
make the communication. In consideration of the Bank acting in
accordance with this Clause 15.3 the Borrower agrees to indemnify the
Bank and agrees to keep the Bank indemnified against all losses,
claims, actions, proceedings, damages, costs and expenses incurred or
sustained by the Bank as a result.
15.3 Written notice includes a notice by telex or telefax transmission in
accordance with the provisions of this Clause.
15.4 The Borrower shall not issue or permit the issue of any press release
nor shall the Borrower make or permit to be made public the terms and
conditions of this facility letter without the Bank's prior written
consent unless required by law (including disclosure requirements for
the purpose of preparing its audited annual accounts), The Stock
Exchange or the City Code on Takeovers and Mergers in which case that
Borrower shall consult with the Bank in advance as to the terms of
that release or publicity.
16. WAIVERS AND SEVERABILITY:-
-------------------------
16.1 No failure or delay by the Bank in exercising any right or remedy
under this facility letter or any Security Document shall operate as a
waiver of it nor shall any single or partial exercise of any right or
remedy prevent any further exercise or the exercise of any other right
or remedy. The rights and remedies provided in this facility letter
are cumulative and not exclusive of any other rights or remedies.
16.2 If any provision of this facility letter is or becomes invalid or
unenforceable in any respect that shall not affect the validity or
enforceability of any other provision.
17. DEFINITIONS AND INTERPRETATION:-
-------------------------------
"BANK" means the Governor and Company of the Bank of Scotland and its
successors, assignees and transferees whomsoever.
54
<PAGE> 55
"BANK OF SCOTLAND GROUP" means the Bank, any Subsidiary from time to time of the
Bank, any holding company from time to time of the Bank and any Subsidiary from
time to time of any such holding company.
"BORROWER" means the company named in Part 1 of this facility letter.
"BORROWINGS" means (without double counting):-
(i) money borrowed or raised and including capitalised interest;
(ii) any liability under any bond, note, debenture, loan stock, redeemable
preference share capital or other instrument or security;
(iii) any liability in respect of acceptance or documentary credits or
discounted instruments;
(iv) any liability in respect of the acquisition cost of assets or services to
the extent payable on deferred payment terms where the period of deferment
is more than 60 days;
(v) any liability under debt purchase, factoring and similar agreements and
capital amounts owing under finance leases, hire purchase or conditional
sale agreements or arrangements;
(vi) any liability under any guarantee or indemnity (except product
warranties).
"BUSINESS DAY" means a day upon which the Bank's Branch at which the Borrower's
account is located from time to time is open for business.
"CERTIFIED COPY" means a copy certified as true, complete and up to date by the
specified person or, if no-one is specified, by the Secretary of the Borrower.
"CURRENT ASSETS" means from time to time, the aggregate value (adjusted by the
Bank from time to time to accord with generally accepted accounting principles
and practices in the UK applied in regard to the Borrower's Financial Statements
and to reflect any material adverse change in the financial or trading position
of the Borrower) of all Trade Debtors (excluding Inter Company Receivables) and
Net Security Value of Stock of the Borrower.
"DANGEROUS SUBSTANCE" means any radioactive or other emissions and any natural
or artificial substances (whether in solid or liquid form or in the form of a
gas or vapour and whether alone or in combination with any other substance)
capable (in each case) of causing harm to man or any other living organism or
damaging the environment or public health or welfare including any controlled,
special, hazardous, toxic, radioactive or dangerous waste.
"DAY INTERNATIONAL GROUP INC" means Day International Group Inc (registered
number
55
<PAGE> 56
2495986) having its registered office at: The Corporation Trust Company
Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
"DAY INTERNATIONAL INC" means Day International Inc (registered number 2241772)
and having its registered office at: The Corporation Trust Company
Corporation Trust Company
1209 Orange Street
Wilmington, Delaware 19801
"DEFAULT RATE" means a rate of interest of two per cent (2%) per annum above the
highest rate of interest payable on the Facilities.
"DORMANT" shall have the meaning given to it by Section 250 of the Companies Act
1985.
"ENCUMBRANCE" means any mortgage, charge, security, pledge, lien, right of
set-off, right to retention of title or other encumbrance, whether fixed or
floating, over any present or future property, assets or undertaking.
"ENVIRONMENTAL LAW" means all laws, regulations, codes of practice, circulars,
guidance notices and the like (whether in the UK or elsewhere) concerning the
protection of human health or welfare or the environment or the conditions of
the work place or the generation, transportation, storage, treatment or disposal
of Dangerous Substances.
"ENVIRONMENTAL LICENCE" means any licence, permit. authorisation, consent or
other approval required by any Environmental Law.
"EQUITY SHARE CAPITAL" shall have the meaning given to it by Section 744 of the
Companies Act 1985.
"FACILITIES" means the facilities made available according to the terms of this
facility letter as they may be varied, extended, increased, restated or renewed
from time to time by agreement between the Borrower and the Bank.
"FINANCIAL STATEMENTS" means the audited annual profit and loss account and
balance sheet of the relevant company for each of its financial years
(consolidated for each financial year at the end of which that company has any
Subsidiaries) together with the related directors' and auditors' reports
thereon.
"FULL GROUP" means Day International Group Inc and its Subsidiaries from time to
time.
"GROUP" means the Borrower and the Parent and each Subsidiary (if any) of the
Parent or the Borrower from time to time (but excluding any Subsidiary which is
Dormant from time to time)
56
<PAGE> 57
and "MEMBER OF THE GROUP" shall be construed accordingly.
"INCREASED COST" means:-
(i) an additional or increased cost incurred by the Bank as a result of it
having entered into, or performing, maintaining or funding its obligations
under this facility letter; or
(ii) that portion of an additional or increased cost incurred by the Bank in
making, funding or maintaining all or any advances comprised in a class of
advances formed by or including the Facilities; or
(iii) a reduction in any amount payable to the Bank or in the effective return
to the Bank under the Facilities or on its capital; or
(iv) the foregone amount of any payment made or interest or other return on or
calculated by reference to any amount received or receivable by the Bank
under the Facilities;
IN EACH CASE arising as a result of any change, introduction, interpretation or
administration of any law or regulation after the date of this facility letter
or any compliance after the date of this facility letter with any law or
regulation relating to reserve assets, special deposits, cash ratios, liquidity
or capital adequacy requirements or any other form of banking or monetary
control.
"INTELLECTUAL PROPERTY RIGHTS" means patents, patent applications, trade marks,
community trade marks, service marks, trade names, brand names, registered
designs, copyright and all other industrial and intellectual property rights.
"INTER COMPANY RECEIVABLES" means trading debts due to the Borrower from all
other members of the Full Group.
"MATERIAL LITIGATION" means any litigation, arbitration or administrative
proceeding raised, pending or (to the best of the knowledge and belief of the
Borrower) threatened against it.
"NET BORROWINGS" means total Borrowings less sums standing at credit of all
accounts of the Group with the Bank from time to time in respect of which the
Bank has valid and enforceable rights of setoff.
"NET INTEREST CHARGES" means, in relation to any specified period, the aggregate
amount of interest, commission and other recurrent financial expenses
attributable to total Borrowings of the Group due to the Bank charged, accrued
or capitalised for such period.
"NET WORTH" means, from time to time, the aggregate of the amount paid up on the
issued share capital of the Borrower and the amount standing to the credit of
its capital and revenue reserves (including any share premium account or capital
redemption reserve, but excluding any revaluation reserve) PLUS or MINUS the
amount standing to the credit or debit (as the case may be)
57
<PAGE> 58
of the profit and loss account of the Borrower all as shown in its latest
available Financial Statements from time to time or, if more recent, its latest
management accounts approved by the Bank from time to time but after:-
(i) making appropriate adjustments in respect of: -
(a) any variation in amount of such paid up share capital or any such
reserves subsequent to the date of such Financial Statements or, as
the case may be, such management accounts;
(b) any distribution in cash or specie declared or recommended subsequent
to such date out of profits earned prior thereto; and
(c) (if the Bank from time to time shall so require) further necessary
adjustments to accord with generally accepted accounting principles
and practices in the UK and to reflect any material adverse change in
assets or liabilities since the date of such Financial Statements or,
as the case may be, such management accounts; and
(ii) excluding (where included within capital and revenue reserves):-
(a) all sums set aside for Taxation, deferred charges and provisions for
depreciation or obsolescence, bad and doubtful debts and other
specific provisions; and
(b) the amount of any upward revaluation of assets which is not disclosed
in the last balance sheet and which has not been approved by the Bank;
and
(iii) deducting:-
(a) the amount (if any) by which the book value of the assets comprised in
that balance sheet exceeds a true and fair valuation of those assets;
and
(b) the book values of goodwill and all other assets which would be
treated as intangible under generally accepted accounting principles
and practices in the UK.
"OTHER FACILITY LETTER" means the facility letter between the Bank and the
Parent dated as at the date hereof.
"PARENT" means Day International (UK) Holdings (registered number 2956635)
having its registered office at Sheffield Street, Stockport.
"PBIT" means, in relation to any specified period, the trading profit of the
Borrower before deduction of Net Interest Charges and Taxation and excluding
deductions in respect of goodwill written off during such period.
58
<PAGE> 59
"PERMITTED DISPOSALS" means:-
(a) the disposal of assets on an arm's length basis in the ordinary and usual
course of trading; or
(b) the application of cash for any purpose permitted under this facility
letter; or
(c) the disposal of obsolete equipment no longer required for the purposes of
the business carried on by any member of the Group; or
(d) disposals between the Borrower and the Parent; or
(e) disposals where the proceeds are applied in and towards the acquisition of
a replacement within 90 days after the date of disposal.
"PERMITTED DISTRIBUTION" means any dividend or other distribution which the
Borrower is obliged to declare, pay or make in terms of its Articles of
Association approved by the Bank and the declaration, payment or making of which
will not cause, directly or indirectly, an Event of Default or Potential Event
of Default to occur provided that no declaration, payment or distribution will
be permitted so long as an Event of Default has occurred and is continuing
unwaived.
"PERMITTED ENCUMBRANCES" MEANS:-
(a) liens securing obligations not more than 30 days overdue, arising by
operation of law in the ordinary and usual course of trading;
(b) Encumbrances arising out of title retention provisions in a supplier's
standard conditions of supply of goods acquired in the ordinary and usual
course of trading;
"PREFERENTIAL CREDITORS" means creditors whose debts would be treated as having
a preferential ranking in terms of Section 386 of and Schedule 6 to the
Insolvency Act 1986 (or any subsequent legislation amending the categories of
preferential debts in an insolvency) if, on the date of computation,
preferential ranking had crystallised.
"SECURITY DOCUMENTS" means the documents specified in Clause 1.1 of this Part 2.
"STANDARD APPLICATION DATES" means the last Business Day of each calendar month
or any other dates which the Bank may notify to the Borrower from time to time.
"STATUTORY CONTROL" means each of the following which affects any member of the
Group or any of its assets from time to time:-
(i) any legislation (including delegated legislation);
59
<PAGE> 60
(ii) any consent made or given under any legislation; and
(iii) any notice, order or correspondence related to paragraphs (i) or (ii) of
this definition and having the force of law.
"STERLING" and the figure "(POUND)" shall mean lawful currency of the UK.
"SUBSIDIARY" and "HOLDING COMPANY" shall have the meanings given to them in
Section 736 of the Companies Act 1985.
"SUBSIDIARY UNDERTAKING" shall have the meaning given to it in Section 258 of
the Companies Act 1985.
"THE STOCK EXCHANGE" means The International Stock Exchange of the United
Kingdom and the Republic of Ireland Limited and its successors.
"TAX" shall be construed so as to include any tax, levy, impost, duty or other
charge of a similar nature (including any interest and penalties payable in
respect thereof) and "TAXATION" shall be construed accordingly.
"TRADE DEBTORS" means debts due to the Borrower which arise out of and are due
and owing in the ordinary course of business, which have not been outstanding
for more than 90 days from the date of the invoice (or such other period as may
be agreed with the Bank) and which are not bad or doubtful or determined by the
Bank to be bad or doubtful, but excluding (a) any debt owed by any person who is
also a creditor of the Borrower to the extent of the amount owed by the Borrower
to that creditor and (b) any debt which has been assigned or charged to or is
held for any third party or is held in trust for any third party or is subject
to any factoring or invoice discounting or similar agreement with any
adjustments the Bank may from time to time consider to be appropriate in the
context of the business of the Borrower and the Facilities.
"UK" means the United Kingdom of Great Britain and Northern Ireland.
A reference to a "MONTH" is a reference to a period starting on one day in a
calendar month and ending on the day preceding the numerically corresponding day
in the next calendar month (and references to "months" shall be construed
accordingly) save that, where any such period would otherwise end on a
non-Business Day, it shall end on the next Business Day, unless that Business
Day falls in the succeeding calendar month, in which case it shall end on the
preceding Business Day; provided that if a period starts on the last Business
Day in a calendar month but there is no numerically corresponding day in the
month in which it ends, then it shall end on the last Business Day in that later
month.
References to Acts of Parliament shall be to such Acts as may be subsequently
amended, substituted, modified or re-enacted from time to time.
60
<PAGE> 61
A reference to "THIS FACILITY LETTER" shall be construed as a reference to this
facility letter as varied, amended, novated, supplemented, replaced or restated
from time to time.
A reference to "THIS OFFER" is a reference to the offer of Facilities set out in
this facility letter.
A reference to "INCLUDING" shall be construed as being by way of illustration or
emphasis only and not as being by way of limiting the generality of the words
preceding it.
If any provision of this facility letter contradicts any provision of any
Security Document then the terms of this facility letter will prevail to the
extent of the inconsistency.
18. LAW:-
----
This facility letter (and the agreement which shall be made by the acceptance of
this letter by the Borrower) shall be governed by and construed in accordance
with the Law of Scotland and the Borrower submits to the jurisdiction of the
Scottish Courts.
This facility letter may be accepted by the Borrower countersigning and
returning to the Bank the enclosed copy of this facility letter but will lapse
if the Bank has not received the duly countersigned copy within one calendar
month from the date of this facility letter unless, if the Facilities include an
overdraft facility, the Borrower has used that facility before or after the
expiry of that one month period in which case that Borrower will be deemed to
have accepted the overdraft facility and any drawing shall be deemed to be a
drawing under the overdraft facility.
Yours faithfully
61
<PAGE> 62
...................................
for and on behalf of
THE GOVERNOR AND COMPANY
OF THE BANK OF SCOTLAND
The offer of Facilities set forth above is
agreed and accepted on behalf of DAY INTERNATIONAL (UK) LIMITED
By ................................ Director
................................ Director/Secretary
Date: 9th February, 1996
62
<PAGE> 1
EXHIBIT 4.2
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (the "FIRST AMENDMENT") dated as
of July 2, 1996, is to that Credit Agreement dated as of June 6, 1995 (as
amended and modified hereby and as further amended and modified from time to
time hereafter, the "CREDIT AGREEMENT"; terms used but not otherwise defined
herein shall have the meanings assigned in the Credit Agreement), by and among
DAY INTERNATIONAL GROUP, INC., a Delaware corporation (the "BORROWER"), Those
certain Subsidiaries of the Borrower, as Guarantors, the Lenders party thereto,
and NATIONSBANK OF TEXAS, N.A., as Agent (the "AGENT").
W I T N E S S E T H
-------------------
WHEREAS, the Lenders have, pursuant to the terms of the Credit Agreement,
made available to the Borrower an $80,000,000 credit facility;
WHEREAS, the Borrower wishes to amend the Credit Agreement to modify
certain provisions contained therein.
WHEREAS, the Lenders have agreed to the requested changes on the terms and
conditions hereinafter set forth;
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
A. The Credit Agreement is amended in the following respects:
1. The definitions of "APPLICABLE MARGIN", "LEVEL I", "LEVEL II", and
"LEVEL III" in Section 1.1 of the Credit Agreement are hereby amended and
restated in their entirety to read as follows:
"Applicable Margin" means
-------------------
(a) as to Revolving Loans and Term Loans, for any
day, the rate per annum set forth below opposite the
applicable Level then in effect, it being understood that the
Applicable Margin (i) for Revolving Loans accruing interest at
the Base Rate shall be the percentage set forth under the
column "Revolving Loans Base Rate Margin", (ii) for Revolving
Loans accruing interest at the Eurodollar Rate shall be the
percentage set forth under the column "Revolving Loans
Eurodollar Margin", (iii) for that portion of the Term Loans
accruing interest at the Base Rate shall be the percentage set
forth under the column "Term Loans Base Rate Margin", (iv) for
that portion of the Term Loans accruing interest at the
Eurodollar Rate shall be the percentage set forth under the
column "Term Loans Eurodollar Margin" and (v) for the Letter
of Credit Fee shall be the
<PAGE> 2
percentage set forth under the column "Letter of Credit
Fee";
<TABLE>
<CAPTION>
Term
Revolving Revolving Loan Letter
Loan Loan Base Term Loan of
Base Rate Eurodollar Rate Eurodollar Credit
Level Margin Margin Margin Margin Fee
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Level I 1.25% 2.50% 1.50% 2.75% 2.50%
Level II 1.00% 2.25% 1.50% 2.75% 2.25%
Level III 0.75% 2.00% 1.50% 2.75% 2.00%
Level IV 0.50% 1.75% 1.50% 2.75% 1.75%
Level V 0.25% 1.50% 1.50% 2.75% 1.50%
<FN>
(b) as to Swingline Loans, one and one-fourth percent
(1 1/4%) per annum.
</TABLE>
The Applicable Margin for Revolving Loans and Term Loans
shall, in each case, be determined and adjusted quarterly on
the date 5 Business Days after the date by which the Borrower
is required to provide the officer's certificate in accordance
with the provisions of Section 7.1(d) hereof (each an
"INTEREST DETERMINATION DATE"). Such Applicable Margin shall
be effective from such Interest Determination Date until the
next such Interest Determination Date. The Applicable Margin
from the date hereof until the next Interest Determination
Date shall be based on Level III.
"LEVEL I" means any time that the conditions in Level II,
Level III, Level IV or Level V are not satisfied.
"LEVEL II" means any time that both (i) the Leverage Ratio is
less than 4.75 to 1.0 but greater than or equal to 4.25 to 1.0 and (ii)
the Interest Coverage Ratio is greater than or equal to 2.0 to 1.0.
"LEVEL III" means any time that both (i) the Leverage Ratio is
less than 4.25 to 1.0 but greater than or equal to 3.5 to 1.0 and (ii)
the Interest Coverage Ratio is greater than or equal to 2.0 to 1.0.
2. The definitions of "LEVEL IV" and "LEVEL V" are added to
Section 1.1 of the Credit Agreement to read as follows:
"LEVEL IV" means any time that both (i) the Leverage Ratio is
less than 3.5 to 1.0 but
2
<PAGE> 3
greater than or equal to 3.0 to 1.0 and (ii) the Interest Coverage Ratio
is greater than or equal to 2.5 to 1.0.
"LEVEL V" means any time that both (i) the Leverage Ratio is less than
3.0 to 1.0 and (ii) the Interest Coverage Ratio is greater than or equal to
2.5 to 1.0.
3. Section 7.12(a) of the Credit Agreement is hereby amended and restated
in its entirety to read as follows:
NET WORTH. As of September 30, 1995 and as of each Calculation Date
thereafter, the Net Worth shall be equal to or greater than the sum of (i)
$36,086,000 PLUS (ii) 50% of cumulative Net Income (without deduction for
any losses) earned for each fiscal quarter occurring after December 31,
1995.
B. The Borrower hereby represents and warrants that:
(i) any and all representations and warranties made by the Borrower
and contained in the Credit Agreement (other than those which expressly
relate to a prior period) are true and correct in all material respects as
of the date of this First Amendment; and
(ii) No Default or Event of Default currently exists and is continuing
under the Credit Agreement as of the date of this First Amendment.
C. The Borrower will execute such additional documents as are reasonably
requested by the Agent to reflect the terms and conditions of this First
Amendment.
D. LIENS. The Borrower and the Guarantors, as applicable, affirm the liens
and security interests created and granted in the Credit Agreement and the other
Credit Documents and agree that this First Amendment shall in no manner
adversely affect or impair such liens and security interests.
E. ACKNOWLEDGMENT OF GUARANTORS. The Guarantors acknowledge and consent to
all of the terms and conditions of this First Amendment and agree that this
First Amendment does not operate to reduce or discharge the Guarantors'
obligations under the Credit Agreement or the other Credit Documents. The
Guarantors acknowledge and agree that the Guarantors have no claims,
counterclaims, offsets, credits or defenses to the Credit Documents and the
performance of the Guarantors' obligations thereunder or if the Guarantors have
any such claims, counterclaims, offsets, credits or defenses to the Credit
Documents or any transaction related to the Credit Documents, the same are
hereby waived, relinquished and released in consideration of the Lenders'
execution and delivery of this First Amendment.
F. Except as modified hereby, all of the terms and provisions of the Credit
Agreement (and Exhibits) remain in full force and effect.
G. The Borrower agrees to pay all reasonable costs and expenses in
connection with the
3
<PAGE> 4
preparation, execution and delivery of this First Amendment, including without
limitation the reasonable fees and expenses of the Agent's legal counsel.
H. This First Amendment may be executed in any number of counterparts, each
of which when so executed and delivered shall be deemed an original and it shall
not be necessary in making proof of this First Amendment to produce or account
for more than one such counterpart.
I. This First Amendment and the Credit Agreement, as amended hereby, shall
be deemed to be contracts made under, and for all purposes shall be construed in
accordance with the laws of the State of New York.
(Remainder of Page Intentionally Left Blank)
4
<PAGE> 5
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart
of this First Amendment to Credit Agreement to be duly executed under seal and
delivered as of the date and year first above written.
BORROWER: DAY INTERNATIONAL GROUP, INC.
- --------
By
--------------------------------------
Title
--------------------------------------
GUARANTOR: DAY INTERNATIONAL, INC.
- ----------
By
--------------------------------------
Title
--------------------------------------
SAN JOAQUIN PACKAGING CORPORATION
By
--------------------------------------
Title
--------------------------------------
BANKS:
- ------
NATIONSBANK OF TEXAS, N.A., individually in
its capacity as a Lender and in its
capacity as Agent
By
--------------------------------------
Title
--------------------------------------
BANK OF SCOTLAND
By
--------------------------------------
Name
--------------------------------------
Title
--------------------------------------
MIDLAND BANK PLC
By
--------------------------------------
Name
--------------------------------------
Title
--------------------------------------
BANK ONE, DAYTON, NA
By
--------------------------------------
Name
--------------------------------------
Title
--------------------------------------
5
<PAGE> 6
PNC BANK, OHIO, NATIONAL ASSOCIATION
By
--------------------------------------------
Name
--------------------------------------------
Title
--------------------------------------------
THE PROVIDENT BANK
By
--------------------------------------------
Name
--------------------------------------------
Title
--------------------------------------------
U.S. NATIONAL BANK OF OREGON
By
--------------------------------------------
Name
--------------------------------------------
Title
--------------------------------------------
NATIONAL CITY BANK
By
--------------------------------------------
Name
--------------------------------------------
Title
--------------------------------------------
6
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
DAY INTERNATIONAL GROUP, INC.'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER
ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 3,291
<SECURITIES> 0
<RECEIVABLES> 18,301
<ALLOWANCES> 1,183
<INVENTORY> 15,003
<CURRENT-ASSETS> 39,106
<PP&E> 48,984
<DEPRECIATION> 4,084
<TOTAL-ASSETS> 228,296
<CURRENT-LIABILITIES> 20,510
<BONDS> 147,641
<COMMON> 1
0
0
<OTHER-SE> 50,443
<TOTAL-LIABILITY-AND-EQUITY> 228,296
<SALES> 67,121
<TOTAL-REVENUES> 67,121
<CGS> 41,657
<TOTAL-COSTS> 57,454
<OTHER-EXPENSES> 34
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,242
<INCOME-PRETAX> 1,391
<INCOME-TAX> 599
<INCOME-CONTINUING> 792
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 792
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
