<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 8-K
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Dated of earliest event report): February 20, 1998
Commission File No. 33-93644
DAY INTERNATIONAL GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 31-1436349
- ----------------------------- ---------------------------------
(State or other jurisdiction (IRS Employer Identification No.)
of Incorporation)
130 West Second Street, Suite 1700, Dayton, Ohio 45402
(Address of principal executive offices)
333 West First Street, Dayton, Ohio 45401
(Former name or former address, if changed since last report)
Registrant's telephone number, including area code: (937) 224-4000
Item 5: Other Events.
Pursuant to a Consent Solicitation Statement, dated February 20, 1998 (the
"Consent Solicitation Statement"), Day International Group, Inc., a Delaware
corporation (the "Company"), is soliciting the consents (the "Consent
Solicitation") of registered holders of its 11 1/8% Senior Subordinated Notes
due 2005 (the "Notes") to amendments to the Indenture governing the Notes,
dated as of June 6, 1995 (the "Indenture"), among the Company, Day
International, Inc., a Delaware corporation and wholly owned subsidiary of the
Company ("Day") and Firstar Bank of Minnesota, N.A. (as successor in interest
to American Bank National Association), as Trustee. The purpose of the proposed
amendments (the "Proposed Amendments") is, among other things (i) to permit
the Company to
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assume certain indebtedness which was incurred by the Company's corporate
parent, GSD Acquisition Corp., a Delaware corporation ("GSD"), in connection
with GSD's recent acquisition of the Company, (ii) to permit the Company to
thereafter immediately refinance such assumed indebtedness (the "Refinancing")
through the issuance of a combination of newly issued subordinated notes and
preferred stock, and (iii) to eliminate all of the applicable provisions of the
Indenture which subordinate the Notes in right of payment to any senior
indebtedness of the Company. The effectiveness of the Proposed Amendments is
conditioned on the completion of the Refinancing.
The Consent Solicitation will expire at 5:00 p.m., New York City time on March
9, 1998, unless extended pursuant to the terms of the Consent Solicitation
Statement.
The Consent Solicitation Statement contains Audited Financial Statements as of
December 31, 1997 and 1996 and for the years ended December 31, 1997 and 1996
and for the period June 7, 1995 through December 31, 1995 and Management's
Discussion and Analysis of this financial information. These two items are
being filed as Exhibits 99.1 and 99.2 hereto.
Item 7: Financial Statements and Exhibits.
(c) Exhibits
The following exhibits are filed herewith:
Exhibit Description
10 Senior Secured Credit Agreement, dated as of January 15, 1998, among Day
International Group, Inc., the lenders thereunder, Societe Generale
Securities Corporation, as Arranger and Societe Generale as Administrative
Agent.
99.1 Audited Financial Statements as of December 31, 1997 and 1996 and for
the years ended December 31, 1997 and 1996 and for the period June 7,
1995 through December 31, 1995.
99.2 Management's Discussion and Analysis of Audited Financial Statements as
of December 31, 1997 and 1996 and for the years ended December 31, 1997
and 1996 and for the period June 7, 1995 through December 31, 1995.
2
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DAY INTERNATIONAL GROUP, INC.
Date: February 23, 1998 By:/s/ David B. Freimuth
--------------------------------------
Name: David B. Freimuth
Title: Vice President and Chief
Financial Officer (Principal
Financial Officer and Principal
Accounting Officer)
3
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EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
PAGE
------------
<C> <S> <C>
10 Senior Secured Credit Agreement, dated as of January 15, 1998,
among Day International Group, Inc., the lenders thereunder
Societe Generale Securities Corporation, as Arranger and
Societe Generale as Administrative Agent ................................
99.1 Audited Financial Statements 1997 .......................................
99.2 Management's Discussion and Analysis of 1997 Audited Financial Statements
</TABLE>
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EXHIBIT 10
================================================================================
$60,000,000
SENIOR SECURED CREDIT AGREEMENT
among
DAY INTERNATIONAL GROUP, INC.,
as Borrower,
The Several Lenders
from Time to Time Parties Hereto,
SOCIETE GENERALE SECURITIES CORPORATION,
as Arranger
and
SOCIETE GENERALE,
as Administrative Agent
Dated as of January 15, 1998
================================================================================
<PAGE> 2
TABLE OF CONTENTS
Page
----
SECTION 1. DEFINITIONS..................................................... 1
1.1 Defined Terms................................................... 1
1.2 Other Definitional Provisions................................... 28
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS................................. 28
2.1 Term Loan Commitments........................................... 28
2.2 Procedure for Term Loan Borrowing............................... 28
2.3 Repayment of Term Loans......................................... 28
2.4 Revolving Credit Commitments.................................... 29
2.5 Procedure for Revolving Credit Borrowing........................ 29
2.6 Swing Line Commitment........................................... 30
2.7 Procedure for Swing Line Borrowing; Refunding of Swing Line
Loans .......................................................... 30
2.8 Repayment of Loans; Evidence of Debt............................ 32
2.9 Commitment Fees, etc. .......................................... 33
2.10 Termination or Reduction of Revolving Credit Commitments........ 33
2.11 Optional Prepayments............................................ 33
2.12 Mandatory Prepayments and Commitment Reductions................. 34
2.13 Conversion and Continuation Options............................. 35
2.14 Minimum Amounts and Maximum Number of Eurodollar Tranches....... 36
2.15 Interest Rates and Payment Dates................................ 36
2.16 Computation of Interest and Fees................................ 37
2.17 Inability to Determine Interest Rate............................ 37
2.18 Pro Rata Treatment and Payments................................. 38
2.19 Requirements of Law............................................. 39
2.20 Taxes........................................................... 41
2.21 Indemnity....................................................... 42
2.22 Illegality...................................................... 43
2.23 Certain Rules Relating to the Payment of Additional Amounts..... 43
SECTION 3. LETTERS OF CREDIT............................................... 45
3.1 L/C Commitment.................................................. 45
3.2 Procedure for Issuance of Letter of Credit...................... 46
3.3 Commissions, Fees and Other Charges............................. 46
3.4 L/C Participations.............................................. 46
3.5 Reimbursement Obligation of the Borrower........................ 47
3.6 Obligations Absolute............................................ 48
3.7 Letter of Credit Payments....................................... 48
3.8 Applications.................................................... 48
SECTION 4. REPRESENTATIONS AND WARRANTIES.................................. 49
4.1 Financial Condition............................................. 49
4.2 No Change....................................................... 49
4.3 Corporate Existence; Compliance with Law........................ 49
4.4 Corporate Power; Authorization; Enforceable Obligations......... 50
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Page
4.5 No Legal Bar.................................................... 50
4.6 No Material Litigation.......................................... 50
4.7 No Default...................................................... 51
4.8 Ownership of Property; Liens.................................... 51
4.9 Intellectual Property........................................... 51
4.10 Taxes........................................................... 51
4.11 Federal Regulations............................................. 51
4.12 Labor Matters................................................... 52
4.13 ERISA........................................................... 52
4.14 Investment Company Act; Other Regulations....................... 52
4.15 Subsidiaries.................................................... 52
4.16 Use of Proceeds................................................. 53
4.17 Environmental Matters........................................... 53
4.18 Accuracy of Information, etc.................................... 54
4.19 Collateral...................................................... 54
4.20 Solvency........................................................ 55
4.21 Regulation H.................................................... 55
SECTION 5. CONDITIONS PRECEDENT............................................ 56
5.1 Conditions to Initial Extension of Credit....................... 56
5.2 Conditions to Each Extension of Credit.......................... 60
SECTION 6. AFFIRMATIVE COVENANTS........................................... 60
6.1 Financial Statements............................................ 61
6.2 Certificates; Other Information................................. 61
6.3 Payment of Obligations.......................................... 63
6.4 Conduct of Business and Maintenance of Existence, etc. ......... 63
6.5 Maintenance of Property; Insurance.............................. 63
6.6 Inspection of Property; Books and Records; Discussions.......... 63
6.7 Notices......................................................... 63
6.8 Environmental Laws.............................................. 64
6.9 Additional Collateral, etc...................................... 65
6.10 Amendment to Existing Notes..................................... 66
SECTION 7. NEGATIVE COVENANTS.............................................. 66
7.1 Financial Condition Covenants................................... 67
7.2 Limitation on Indebtedness...................................... 69
7.3 Limitation on Liens............................................. 72
7.4 Limitation on Fundamental Changes............................... 74
7.5 Limitation on Sales of Assets................................... 75
7.6 Limitation on Dividends......................................... 76
7.7 Limitation on Capital Expenditures.............................. 77
7.8 Limitation on Investments, Loans and Advances................... 77
7.9 Limitation on Optional Payments and Modifications of Debt
Instruments, etc. .............................................. 79
7.10 Limitation on Transactions with Affiliates...................... 79
7.11 Limitation on Sales and Leasebacks.............................. 80
7.12 Limitation on Changes in Fiscal Periods......................... 81
7.13 Limitation on Negative Pledge Clauses........................... 81
7.14 Limitations on Currency and Commodity Hedging Transactions...... 81
7.15 Limitation on Lines of Business................................. 81
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Page
----
7.16 Limitation on Amendments to Acquisition Documents............... 81
SECTION 8. EVENTS OF DEFAULT............................................... 82
SECTION 9. THE ADMINISTRATIVE AGENT........................................ 85
9.1 Appointment..................................................... 85
9.2 Delegation of Duties............................................ 85
9.3 Exculpatory Provisions.......................................... 86
9.4 Reliance by Administrative Agent................................ 86
9.5 Notice of Default............................................... 86
9.6 Non-Reliance on the Administrative Agent and Other Lenders...... 87
9.7 Indemnification................................................. 87
9.8 Agent in Its Individual Capacity................................ 88
9.9 Successor Administrative Agent.................................. 88
9.10 Authorization to Release Liens.................................. 89
9.11 The Arranger.................................................... 89
9.12 Release of Liens on Excluded Foreign Accounts................... 89
SECTION 10. MISCELLANEOUS................................................... 89
10.1 Amendments and Waivers.......................................... 89
10.2 Notices......................................................... 90
10.3 No Waiver; Cumulative Remedies.................................. 91
10.4 Survival of Representations and Warranties...................... 91
10.5 Payment of Expenses............................................. 91
10.6 Successors and Assigns; Participations and Assignments.......... 92
10.7 Adjustments; Set-off............................................ 94
10.8 Counterparts.................................................... 95
10.9 Severability.................................................... 95
10.10 Integration..................................................... 95
10.11 GOVERNING LAW................................................... 95
10.12 Submission To Jurisdiction; Waivers............................. 96
10.13 Acknowledgements................................................ 96
10.14 WAIVERS OF JURY TRIAL........................................... 97
10.15 Confidentiality................................................. 97
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ANNEXES:
A Pricing Grid
SCHEDULES:
1.1A Commitments
1.1B Mortgaged Property
4.4 Consents, Authorizations, Filings and Notices
4.6 Material Litigation
4.9 Material Claims Regarding Intellectual Property
4.15 Subsidiaries
4.17 Environmental Matters
4.19(a) UCC Filing Jurisdictions
4.19(b) Mortgage Filing Jurisdictions
7.2(e) Existing Indebtedness
7.3(f) Existing Liens
7.8(h) Loans and Advances to Officers, Directors, or Employees of
Holdings
7.9(j) Investments
7.10 Permitted Transactions with Affiliates
EXHIBITS:
A Form of Borrower Patent and Trademark Security Agreement
B Form of Borrowing Base Certificate
C Form of Compliance Certificate
D Form of Guarantee and Collateral Agreement
E Form of Landlord Lien Waiver
F Form of Mortgage
G-1 Form of Term Note
G-2 Form of Revolving Credit Note
G-3 Form of Swing Line Note
H Form of Exemption Certificate
I Form of Closing Certificate
J Form of Legal Opinion of Debevoise & Plimpton
K Form of Assignment and Acceptance
L Form of Holdings Guarantee and Pledge Agreement
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SENIOR SECURED CREDIT AGREEMENT, dated as of January 15, 1998, among
DAY INTERNATIONAL GROUP, INC., a Delaware corporation (the "Borrower"), the
several banks and other financial institutions or entities from time to time
parties to this Agreement (the "Lenders"), SOCIETE GENERALE SECURITIES
CORPORATION, as advisor and arranger (in such capacity, the "Arranger"), SOCIETE
GENERALE, as administrative agent (in such capacity, the "Administrative
Agent").
W I T N E S S E T H:
WHEREAS, Greenwich Street Capital Partners, Inc. ("GSCP") and SG
Capital Partners, L.L.C. (collectively, the "Sponsors") are forming GSD
Acquisition Corp., a Delaware corporation (including its successors and assigns,
"Holdings"), to consummate the Acquisition referred to below, and, in connection
therewith, are investing, or causing to be invested, an aggregate of
approximately $81,900,000 in the equity of Holdings;
WHEREAS, Holdings will acquire outstanding stock of the Borrower
(the "Acquisition") for aggregate consideration of approximately $362,500,000
(the "Acquisition Consideration"), pursuant to a Purchase Agreement among
Greenwich IV LLC, Holdings, and the stockholders of the Borrower, dated as of
December 18, 1997, as amended by an Amendment thereto dated as of the date
hereof (the "Acquisition Agreement");
WHEREAS, to provide funds to (i) finance a portion of the
Acquisition Consideration, (ii) pay certain fees, transaction costs and expenses
related to the Acquisition and the financing thereof, (iii) refinance certain
existing senior indebtedness of the Borrower (as permitted by Section 4.10(v) of
the Existing Indenture) and (iv) for general corporate purposes of the Borrower,
the Borrower has requested that the Lenders make the Loans and issue any Letters
of Credit (as hereinafter defined) provided herein.
WHEREAS, the Lenders are willing to make such credit facilities
available upon and subject to the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the agreements
hereinafter set forth, the parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the terms listed in
this Section 1.1 shall have the respective meanings set forth in this Section
1.1.
"Account": as defined in the Uniform Commercial Code as in effect in
the State of New York.
"Acquisition": as defined in the Recitals to this Agreement.
"Adjustment Date": as defined in the Pricing Grid.
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2
"Affected Eurodollar Loans": as defined in Section 2.22.
"Affiliate": as to any Person, any other Person (other than a Wholly
Owned Subsidiary) which, directly or indirectly, is in control of, is
controlled by, or is under common control with, such Person. For purposes
of this definition, "control" of a Person means the power, directly or
indirectly, either to (a) vote 10% or more of the securities having
ordinary voting power for the election of directors (or persons performing
similar functions) of such Person or (b) direct or cause the direction of
the management and policies of such Person, whether by contract or
otherwise.
"Aggregate Exposure": with respect to any Lender, an amount equal to
(a) until the Closing Date, the aggregate amount of such Lender's
Commitments and (b) thereafter, the sum of (i) the aggregate unpaid
principal amount of such Lender's Term Loans and (ii) the amount of such
Lender's Revolving Credit Commitment or, if the Revolving Credit
Commitments have been terminated, the amount of such Lender's Revolving
Extensions of Credit.
"Aggregate Exposure Percentage" with respect to any Lender, the
ratio (expressed as a percentage) of such Lender's Aggregate Exposure to
the Aggregate Exposure of all Lenders.
"Agreement": this Credit Agreement, as amended, supplemented or
otherwise modified from time to time.
"Alternative Currency": any freely available currency that is freely
transferrable and freely convertible into Dollars and requested by the
Borrower and acceptable to the Issuing Lender and the Administrative
Agent.
"Alternative Currency L/C Exposure": at any time, the Assigned
Dollar Value of the aggregate undrawn amount of all outstanding Letters of
Credit denominated in an Alternative Currency at such time.
"Applicable Margin": for each Type of Loan, the rate per annum set
forth under the relevant column heading below:
<TABLE>
<CAPTION>
Base Rate Eurodollar
Loans Loans
--------- ----------
<S> <C> <C>
Revolving Credit Loans and
Swing Line Loans 1.00% 2.0%
Term Loans 1.00% 2.0%
</TABLE>
provided, that on and after the first Adjustment Date occurring after the
completion of four full fiscal quarters of the Borrower after the Closing
Date, the Applicable Margin with respect to Revolving Credit Loans, Swing
Line Loans and Term Loans will be determined pursuant to the Pricing Grid.
<PAGE> 8
3
"Application": an application, in such form as the Issuing Lender
may specify from time to time, requesting the Issuing Lender to open a
Letter of Credit.
"Asset Sale": any Disposition of Property or series of related
Dispositions of Property (excluding any such Disposition permitted by
clause (a), (b), (c), (d), (g), (h), (i) or (j) of Section 7.5) which
yields gross proceeds to the Borrower or any of its Subsidiaries (valued
at the initial principal amount thereof in the case of non-cash proceeds
consisting of notes or other debt securities and valued at fair market
value in the case of other non-cash proceeds) in excess of $250,000.
"Assigned Dollar Value": (a) in respect of the undrawn amount of any
Letter of Credit denominated in an Alternative Currency, the Dollar
Equivalent thereof determined based upon the applicable Spot Exchange Rate
as of (i) the date of issuance of such Letter of Credit, until the first
Calculation Date thereafter and (ii) thereafter, the most recent
Calculation Date and (b) in respect of a Reimbursement Obligation
denominated in an Alternative Currency, the Dollar Equivalent thereof
determined based upon the applicable Spot Exchange Rate as of the date
such Reimbursement Obligation was incurred.
"Assignee": as defined in Section 10.6(c).
"Assignor": as defined in Section 10.6(c).
"Available Revolving Credit Commitment": as to any Revolving Credit
Lender at any time, an amount equal to the excess, if any, of (a) such
Lender's Revolving Credit Commitment over (b) such Lender's Revolving
Extensions of Credit; provided, that in calculating any Lender's Revolving
Extensions of Credit for the purpose of determining such Lender's
Available Revolving Credit Commitment pursuant to Section 2.9(a), the
aggregate principal amount of Swing Line Loans then outstanding shall be
deemed to be zero.
"Base Rate": for any day, a rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to the greatest of (a) the Prime
Rate in effect on such day, and (b) the Federal Funds Effective Rate in
effect on such day plus 1/2 of 1%. For purposes hereof: "Prime Rate" shall
mean the rate of interest per annum publicly announced from time to time
by the Reference Lender as its prime or base rate in effect at its
principal office in New York City (the Prime Rate not being intended to be
the lowest rate of interest charged by the Reference Lender in connection
with extensions of credit to debtors). Any change in the Base Rate due to
a change in the Prime Rate or the Federal Funds Effective Rate shall be
effective as of the opening of business on the effective day of such
change in the Prime Rate or the Federal Funds Effective Rate,
respectively.
"Base Rate Loans": Loans the rate of interest applicable to which is
based upon the Base Rate.
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4
"Board": the Board of Governors of the Federal Reserve System of the
United States (or any successor).
"Borrowing Base": at any date of determination thereof, an amount
equal to the sum of (i) $5,000,000, (ii) 80% of the Eligible Accounts
Receivable at such date and (iii) 50% of the Eligible Inventory at such
date. The Borrowing Base shall be determined from time to time by the
Administrative Agent in its reasonable judgment by reference to the
Borrowing Base Certificate then most recently delivered to it; provided
that the information contained in such Borrowing Base Certificate shall
not be conclusive in calculating the Borrowing Base and, after
consultation with the Borrower, the Administrative Agent shall be entitled
to adjust the amounts and other information contained therein to the
extent that it believes in its reasonable credit judgment that such
adjustment is appropriate to cause the Borrowing Base (as so adjusted) to
reflect the standards set forth in the definitions of the terms "Eligible
Accounts Receivable" and "Eligible Inventory".
"Borrowing Base Certificate": a certificate executed and delivered
by the Borrower, substantially in the form of Exhibit B, delivered
pursuant to Section 6.2(f).
"Borrowing Date": the Closing Date and any Business Day specified by
the Borrower as a date on which the Borrower requests the relevant Lenders
to make Loans hereunder.
"Business": as defined in Section 4.17.
"Business Day": (i) for all purposes other than as covered by clause
(ii) below, a day other than a Saturday, Sunday or other day on which
commercial banks in New York City are authorized or required by law to
close and (ii) with respect to all notices and determinations in
connection with, and payments of principal and interest on, Eurodollar
Loans, any day which is a Business Day described in clause (i) and which
is also a day for trading by and between banks in Dollar deposits in the
interbank eurodollar market.
"Calculation Date": the last Business Day of each calendar month.
"Capital Expenditures": for any period, with respect to any Person,
the aggregate of all expenditures by such Person and its Subsidiaries for
the acquisition or leasing (pursuant to a capital lease) of fixed or
capital assets or additions to equipment (including replacements,
capitalized repairs and improvements during such period) which should be
included as capital expenditures under GAAP on a consolidated cash flow
statement of such Person and its Subsidiaries.
"Capital Lease Obligations": as to any Person, the obligations of
such Person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such
<PAGE> 10
5
Person under GAAP, and, for the purposes of this Agreement, the amount of
such obligations at any time shall be the capitalized amount thereof at
such time determined in accordance with GAAP.
"Capital Stock": any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a corporation,
any and all equivalent ownership interests in a Person (other than a
corporation) and any and all warrants, rights or options to purchase any
of the foregoing.
"Cash Equivalents": (a) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by
any agency or instrumentality thereof and backed by the full faith and
credit of the United States, in each case maturing within one year from
the date of acquisition; (b) certificates of deposit, time deposits,
eurodollar time deposits or overnight bank deposits having maturities of
six months or less from the date of acquisition issued by any Lender or by
any commercial bank organized under the laws of the United States of
America or any state thereof having combined capital and surplus of not
less than $500,000,000; (c) commercial paper of an issuer rated at least
A-2 by Standard & Poor's Ratings Services ("S&P") or P-2 by Moody's
Investors Service, Inc. ("Moody's"), or carrying an equivalent rating by a
nationally recognized rating agency, if both of the two named rating
agencies cease publishing ratings of commercial paper issuers generally,
and maturing within six months from the date of acquisition; (d)
repurchase obligations of any Lender or of any commercial bank satisfying
the requirements of clause (b) of this definition, having a term of not
more than 30 days with respect to securities issued or fully guaranteed or
insured by the United States government; (e) securities with maturities of
one year or less from the date of acquisition issued or fully guaranteed
by any state, commonwealth or territory of the United States, by any
political subdivision or taxing authority of any such state, commonwealth
or territory or by any foreign government, the securities of which state,
commonwealth, territory, political subdivision, taxing authority or
foreign government (as the case may be) are rated at least A by S&P or A
by Moody's; (f) securities with maturities of six months or less from the
date of acquisition backed by standby letters of credit issued by any
Lender or any commercial bank satisfying the requirements of clause (b) of
this definition; or (g) shares of money market mutual or similar funds
which invest exclusively in assets satisfying the requirements of clauses
(a) through (f) of this definition.
"Change of Control": the occurrence of any of the following events:
(i) the GSCP Group shall in the aggregate beneficially, directly or
indirectly, own shares of Capital Stock having less than 51% of the total
voting power of all of the outstanding Capital Stock of the Borrower, (ii)
one or more members of the GSCP Group shall not have the power (whether or
not exercised), by virtue of directly or indirectly owning shares of the
Capital Stock of Holdings or by contract or otherwise, to elect or cause
the election of a majority of the board of directors of the Borrower or
(iii) a "Change of Control" as defined in the Senior Subordinated
Indenture or the Existing Indenture
<PAGE> 11
6
(other than as a result of the Acquisition) shall have occurred at a time
when any principal amount of Indebtedness is outstanding under such
Indenture.
"Closing Date": the date on which the conditions precedent set forth
in Section 5.1 shall have been satisfied.
"Code": the Internal Revenue Code of 1986, as amended from time to
time.
"Collateral": all Property of the Loan Parties, now owned or
hereafter acquired, upon which a Lien is purported to be created by any
Security Document.
"Commitment": as to any Lender, the sum of the Term Loan Commitment
and the Revolving Credit Commitment of such Lender.
"Commitment Fee Rate": 1/2 of 1% per annum.
"Commonly Controlled Entity": an entity, whether or not
incorporated, which is under common control with the Borrower within the
meaning of Section 4001 of ERISA or is part of a group which includes the
Borrower and which is treated as a single employer under Section 414(b) or
(c) of the Code or, solely for purposes of Section 302 of ERISA and
Section 412 of the Code, is treated as a single employer under Sections
414(m) and (o) of the Code.
"Compliance Certificate": a certificate duly executed by a
Responsible Officer substantially in the form of Exhibit C.
"Consolidated Current Assets": at any date, all amounts (other than
cash and Cash Equivalents) which would, in conformity with GAAP, be set
forth opposite the caption "total current assets" (or any like caption) on
a consolidated balance sheet of the Borrower and its Subsidiaries at such
date.
"Consolidated Current Liabilities": at any date, all amounts which
would, in conformity with GAAP, be set forth opposite the caption "total
current liabilities" (or any like caption) on a consolidated balance sheet
of the Borrower and its Subsidiaries at such date, but excluding (a) the
current portion of any Funded Debt of the Borrower and its Subsidiaries
and (b) without duplication of clause (a) above, all Indebtedness
consisting of Revolving Credit Loans or Swing Line Loans to the extent
otherwise included therein.
"Consolidated EBITDA": for any period, Consolidated Net Income for
such period plus, without duplication and to the extent reflected as a
charge in the statement of such Consolidated Net Income for such period,
the sum of (a) income tax expense, (b) interest expense, amortization or
write-off of debt discount and debt issuance costs and commissions,
discounts and other fees and charges associated with Indebtedness
(including the Loans), (c) depreciation and amortization expense, (d)
amortization of intangibles (including, but not limited to, goodwill) and
organization costs, (e) any
<PAGE> 12
7
extraordinary, unusual or non-recurring expenses or losses (including,
whether or not otherwise includable as a separate item in the statement of
such Consolidated Net Income for such period, losses on sales or
write-downs of assets outside of the ordinary course of business), (f) any
other non-cash expenses and charges, (g) all cash expenses directly
related to the Acquisition, (h) non-cash provisions and reserves for
discontinued operations, (i) any loss accounted for by the equity method
of accounting and (j) cash payments made to GSCP or SG Capital Partners,
L.L.C. permitted by Section 7.10 for the rendering of management,
consulting or financial advisory services and minus, to the extent
included in the statement of such Consolidated Net Income for such period,
the sum of (a) interest income, (b) any extraordinary, unusual or
non-recurring income or gains (including, whether or not otherwise
includable as a separate item in the statement of such Consolidated Net
Income for such period, gains on the sales of assets outside of the
ordinary course of business) and (c) any other non-cash income, all as
determined on a consolidated basis and minus, to the extent not reflected
as a charge in the statement of such Consolidated Net Income for such
period, the aggregate amount of dividends paid by the Borrower to Holdings
during such period as permitted by Section 7.6(d) to enable Holdings to
pay expenses.
"Consolidated Fixed Charge Coverage Ratio": for any period, the
ratio of (a) Consolidated EBITDA for such period less the aggregate amount
actually paid by the Borrower and its Subsidiaries in cash during such
period on account of Capital Expenditures to (b) Consolidated Fixed
Charges for such period.
"Consolidated Fixed Charges": for any period, the sum (without
duplication) of (i) Consolidated Interest Expense for such period, (ii)
the aggregate amount paid, or required to be paid, by the Borrower or any
of its Subsidiaries in respect of income taxes during such period (net of
tax credits and benefits, including tax benefits from net operating
losses) on a consolidated basis in respect of such period, (iii) the
aggregate amount of dividends during such period paid pursuant to Section
7.6(c), and (iv) scheduled payments made during such period on account of
principal of Indebtedness of the Borrower or any of its Subsidiaries
(including scheduled principal payments in respect of the Term Loans).
"Consolidated Interest Coverage Ratio": for any period, the ratio of
(a) Consolidated EBITDA for such period to (b) Consolidated Interest
Expense for such period.
"Consolidated Interest Expense": for any period, the excess of (a)
total cash interest expense (including that attributable to Capital Lease
Obligations) of the Borrower and its Subsidiaries for such period with
respect to all outstanding Indebtedness of the Borrower and its
Subsidiaries (including, without limitation, all commissions, discounts
and other fees and charges owed with respect to letters of credit and
bankers' acceptance financing and net costs under Interest Rate Protection
Agreements to the extent such commissions, discounts, fees, charges and
net costs are allocable to such period in accordance with GAAP, but
excluding all amortization and
<PAGE> 13
8
write-off of financing costs) over (b) interest income of the Borrower and
its consolidated Subsidiaries for such period.
"Consolidated Leverage Ratio": as at the last day of any period of
four consecutive fiscal quarters, the ratio of (a) Consolidated Total Debt
on such day to (b) Consolidated EBITDA for such period; provided that for
purposes of calculating Consolidated EBITDA of the Borrower and its
Subsidiaries for any period, the Consolidated EBITDA of any Person
acquired by the Borrower or its Subsidiaries during such period shall be
included on a pro forma basis for such period (assuming the consummation
of such acquisition and the incurrence or assumption of any Indebtedness
in connection therewith occurred on the first day of such period) if the
consolidated balance sheet of such acquired Person and its consolidated
Subsidiaries as at the end of the period preceding the acquisition of such
Person and the related consolidated statements of income and stockholders'
equity and of cash flows for the period in respect of which Consolidated
EBITDA is to be calculated (i) have been previously provided to the
Administrative Agent and the Lenders and (ii) either (A) have been
reported on without a qualification arising out of the scope of the audit
by independent certified public accountants of nationally recognized
standing or (B) have been found reasonably acceptable by the
Administrative Agent.
"Consolidated Net Income": for any period, the consolidated net
income (or loss) of the Borrower and its Subsidiaries, determined on a
consolidated basis in accordance with GAAP; provided that there shall be
excluded (a) the income (or deficit) of any Person accrued prior to the
date it becomes a Subsidiary of the Borrower or is merged into or
consolidated with the Borrower or any of its Subsidiaries, (b) the income
(or deficit) of any Person (other than a Subsidiary of the Borrower) in
which the Borrower or any of its Subsidiaries has an ownership interest,
except to the extent that any such income is actually received by the
Borrower or such Subsidiary in the form of dividends or similar
distributions and (c) the undistributed earnings of any Subsidiary of the
Borrower to the extent that the declaration or payment of dividends or
similar distributions by such Subsidiary is not at the time permitted by
the terms of any Contractual Obligation (other than under any Loan
Document) or Requirement of Law applicable to such Subsidiary.
"Consolidated Total Debt": at any date, the aggregate principal
amount of all Indebtedness of the Borrower and its Subsidiaries at such
date, determined on a consolidated basis in accordance with GAAP,
provided, however, that until the Cash Pay Date (as defined in the
Holdings Senior Credit Agreement), any Indebtedness under the Holdings
Senior Credit Agreement that would otherwise be included in Consolidated
Total Debt shall be disregarded.
"Consolidated Working Capital": at any date, the excess of
Consolidated Current Assets on such date over Consolidated Current
Liabilities on such date.
<PAGE> 14
9
"Contractual Obligation": as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
Property is bound.
"Day International, Inc.": Day International, Inc., a Delaware
corporation.
"Default": any of the events specified in Section 8, whether or not
any requirement for the giving of notice, the lapse of time, or both, has
been satisfied.
"Defaulted Account": any Account of the Borrower or its Subsidiaries
which has been or should have been charged-off as not collectable in
conformity with the accounting policies of the Borrower and its
Subsidiaries as in effect from time to time.
"Disposition": with respect to any Property, any sale, lease, sale
and leaseback, assignment, conveyance, transfer or other disposition
thereof; and the terms "Dispose" and "Disposed of" shall have correlative
meanings.
"Dollar Equivalent": with respect to an amount of any Alternative
Currency on any date, the amount of Dollars that may are required to
purchase such amount of such Alternative Currency at the Spot Exchange
Rate with respect to such Alternative Currency on such date.
"Dollars" and "$": dollars in lawful currency of the United States
of America.
"Domestic Subsidiary": any Subsidiary of the Borrower organized
under the laws of any jurisdiction within the United States of America.
"ECF Percentage": 75%; provided, that, with respect to each fiscal
year of the Borrower ending on or after December 31, 1999, the ECF
Percentage shall be reduced to 50% if the Consolidated Leverage Ratio as
of the last day of such fiscal year is not greater than 3.0 to 1.0.
"Eligible Accounts Receivable": at any time, an amount equal to the
aggregate outstanding balance of all Accounts of the Borrower and its
Domestic Subsidiaries payable in the United States of America, as set
forth in the aging reports of billed Accounts for the Borrower and its
Domestic Subsidiaries as of such time, provided that, unless otherwise
approved in writing by the Administrative Agent, no amount owing in
respect of any Account of the Borrower or any of its Domestic Subsidiaries
shall be deemed to be included in any calculation of Eligible Accounts
Receivable if:
(a)(i) such Account is not a bona fide, valid and legally
enforceable obligation of the Obligor thereon arising from the
actual sale and delivery of goods to or rendition to and acceptance
of services by such Obligor, (ii) the goods giving rise to such
Account have not been shipped and delivered to the Obligor thereon
or the services giving rise to such Account have not been performed,
(iii) such Account arises from a progress billing or percentage of
<PAGE> 15
10
completion invoice, but only to the extent the amount billed exceeds
the value of the goods sold and delivered or the services performed
with respect thereto, or (iv) such Account otherwise does not
represent a final sale or transfer of title to such Obligor;
(b) such Account has been adjusted to reflect the return or
rejection of, or any loss of or damage to, any of the Inventory
giving rise to such Account; provided that amounts owing in respect
of such Account shall only be excluded to the extent of such
adjustment;
(c) such Account includes any material financing charges or
late or other fees; provided that amounts owing in respect of such
Account shall only be excluded to the extent of such charges or
fees;
(d) such Account remains unpaid for more than 90 days after
the date set forth for payment in the invoice originally issued
therefor;
(e) greater than 50% of the aggregate amount owing in respect
of all Accounts by the Obligor thereon to the Borrower and its
Subsidiaries remain unpaid more than 90 days after the date set
forth for payment in the respective invoices originally issued
therefor;
(f) such Account is a Defaulted Account, unless the
obligations of the Obligor under such Account are supported by a
letter of credit issued by a bank or other credit insurance
reasonably acceptable to the Administrative Agent;
(g) a proceeding under bankruptcy or similar laws has occurred
and is continuing with respect to the Obligor thereon unless the
payment of Accounts from such Obligor is secured in a manner
reasonably satisfactory to the Administrative Agent or, if the
Account arises subsequent to a decree or order for relief with
respect to such Obligor under the federal bankruptcy laws, as now or
hereinafter in effect, the timely payment and collection of such
Account will not be impaired, as determined by the Administrative
Agent in its reasonable judgment;
(h) it is an Account which pursuant to any agreement between
the Borrower or any of its Domestic Subsidiaries, on the one hand,
and the Obligor thereon, on the other hand, may be set off or
charged against (i) any adverse security deposit or other similar
deposit made by or for the benefit of such Obligor or (ii) any trade
payable, rebate obligation or other similar liability owing to such
Obligor; provided that amounts owing in respect of such Account
shall only be excluded to the extent of such set-off or charge
against such adverse security deposit, payable, rebate obligation or
other similar liability;
<PAGE> 16
11
(i) such Account is the result of a reinvoice of a disputed
Account or Defaulted Account;
(j) such Account arises from (i) the sale to the Obligor on a
bill-andhold, guaranteed sale, sale-or-return, sale on approval,
consignment, sample or trial basis, (ii) a sale subject to any
retainages or holdbacks of any type or (iii) any other sale to the
Obligor made pursuant to any other written agreement providing for
repurchase or return; provided that no amount owing in respect of
such Account shall be excluded pursuant to this clause solely as a
result of customary quality warranties or the general right to
return goods provided by the Borrower or any of its Domestic
Subsidiaries;
(k) such Account does not comply in all material respects with
all applicable legal requirements;
(l) such Account is not owned solely by the Borrower or any of
its Domestic Subsidiaries free and clear of all Liens or other
rights or claims of any other Person (except in favor of the
Administrative Agent); or
(m) the Administrative Agent does not have a valid and
perfected first priority security interest for the benefit of the
Lenders in such Account and in any letter of credit, credit
insurance or guarantee, the credit support provided by which would
permit such Account to be an Eligible Account Receivable in
accordance with the foregoing provisions of this definition (except
for liens arising by operation of law, appropriate reserves for
which have been reasonably established for borrowing base purposes
by the Borrower or a Domestic Subsidiary) or such Account does not
conform in all material respects to the representations and
warranties contained in this Agreement or any of the Security
Documents.
"Eligible Inventory": at any time, an amount equal to the aggregate
value of all Inventory of the Borrower and its Domestic Subsidiaries. In
determining the amount to be so included, such Inventory shall be valued
at the standard cost maintained on a basis consistent with the Borrower's
or such Domestic Subsidiary's current and historical accounting practice
less reserves taken and adjustments made, if any, (i) on account of
physical inventory adjustments, for standard cost variances and shrinkage
accruals, (ii) for obsolete or slow moving goods as determined by
Inventory remaining unsold or not placed into production for a period of
52 weeks, (iii) for goods returned or rejected by the Borrower's or such
Domestic Subsidiary's customers as damaged or defective, obsolete or
otherwise nonsalable, (iv) for goods in transit to third parties that are
not excluded pursuant to clause (a), (c), (c) or (d) below, (v) for Liens
referred to in clause (c)(i) below and (vi) for Liens referred to in
clause (c)(ii) below as established by the Administrative Agent in its
sole discretion. Unless otherwise approved in writing by the
Administrative Agent, no amount with respect to any Inventory shall be
deemed to be included in any calculation of Eligible Inventory if:
<PAGE> 17
12
(a) the Inventory is not owned solely by the Borrower or such
Domestic Subsidiary or is leased or on consignment or the Borrower or such
Domestic Subsidiary does not have good and valid title thereto;
(b) the Inventory is not located at property that is owned or leased
by the Borrower or such Domestic Subsidiary in the United States and that
is set forth on Schedule 4 to the Guarantee and Collateral Agreement;
(c) the Inventory is not subject to a perfected Lien in favor of the
Administrative Agent for the benefit of the Lenders prior to all other
Liens except (i) for Liens in favor of landlords with respect to which
either (x) a Landlord Lien Waiver has been obtained or (y) a Rent
Adjustment has been subtracted from the calculation of Eligible Inventory,
provided that if the Borrower or the respective Domestic Subsidiary fails
to make all rental payments with respect to the property at which such
Inventory is located for a period of three consecutive months, such
Inventory shall not be included in the calculation of Eligible Inventory
and (ii) with respect to Eligible Inventory located at or in transit to
sites described in clause (b) above, for Liens for normal and customary
warehousing and transportation charges (appropriate reserves for which
have been reasonably established for Borrowing Base purposes by the
Borrower or such Domestic Subsidiary); or
(d) the Inventory does not conform in all material respects to the
representations and warranties contained in this Agreement or any of the
Security Documents.
"Environmental Laws": any and all foreign, Federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, requirements of any Governmental Authority or other Requirements
of Law (including common law) regulating, relating to or imposing
liability or standards of conduct concerning protection of the
environment, as now or may at any time hereafter be in effect.
"ERISA": the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Eurocurrency Reserve Requirements": for any day as applied to a
Eurodollar Loan, the aggregate (without duplication) of the rates
(expressed as a decimal fraction) of reserve requirements in effect on
such day (including, without limitation, basic, supplemental, marginal and
emergency reserves under any regulations of the Board or other
Governmental Authority having jurisdiction with respect thereto) dealing
with reserve requirements prescribed for eurocurrency funding (currently
referred to as "Eurocurrency Liabilities" in Regulation D of the Board)
maintained by a member bank of the Federal Reserve System.
"Eurodollar Base Rate": with respect to each day during each
Interest Period pertaining to a Eurodollar Loan, the rate per annum
determined on the basis of the rate for deposits in Dollars for a period
equal to such Interest Period commencing on the
<PAGE> 18
13
first day of such Interest Period appearing on Page 3750 of the Dow Jones
Markets service as of 11:00 A.M., London time, two Business Days prior to
the beginning of such Interest Period. In the event that such rate does
not appear on Page 3750 of the Dow Jones Markets service (or otherwise on
such service), the "Eurodollar Base Rate" for purposes of this definition
shall be determined by reference to such other comparable publicly
available service for displaying eurodollar rates as may be reasonably
selected by the Administrative Agent or, in the absence of such
availability, by reference to the rate at which the Administrative Agent
is offered Dollar deposits at or about 11:00 A.M., New York City time, two
Business Days prior to the beginning of such Interest Period in the
interbank eurodollar market where its eurodollar and foreign currency and
exchange operations are then being conducted for delivery on the first day
of such Interest Period for the number of days comprised therein.
"Eurodollar Loans": Loans the rate of interest applicable to which
is based upon the Eurodollar Rate.
"Eurodollar Rate": with respect to each day during each Interest
Period pertaining to a Eurodollar Loan, a rate per annum determined for
such day in accordance with the following formula (rounded upward to the
nearest 1/100th of 1%):
Eurodollar Base Rate
----------------------------------------
1.00 - Eurocurrency Reserve Requirements
"Eurodollar Tranche": the collective reference to Eurodollar Loans
the then current Interest Periods with respect to all of which begin on
the same date and end on the same later date (whether or not such Loans
shall originally have been made on the same day).
"Event of Default": any of the events specified in Section 8,
provided that any requirement for the giving of notice, the lapse of time,
or both, has been satisfied.
"Excess Cash Flow": for any period, the excess, if any, of (a) the
sum, without duplication, of (i) Consolidated Net Income for such period
(excluding, for purposes of this definition, any contribution to such
Consolidated Net Income resulting from a Recovery Event), (ii) an amount
equal to the amount of all non-cash charges (including depreciation and
amortization) deducted in arriving at such Consolidated Net Income, (iii)
decreases in Consolidated Working Capital for such period, (iv) an amount
equal to the aggregate net non-cash loss on the Disposition of Property by
the Borrower and its Subsidiaries during such period (other than sales of
inventory in the ordinary course of business), to the extent deducted in
arriving at such Consolidated Net Income and (v) the net increase during
such period (if any) in deferred tax accounts of the Borrower over (b) the
sum, without duplication, of (i) an amount equal to the amount of all
non-cash credits included in arriving at such Consolidated Net Income,
(ii) the aggregate amount actually paid by the Borrower and its
Subsidiaries in cash during such period on account of Capital Expenditures
(excluding the principal amount of Indebtedness incurred in connection
with such expenditures pursuant to
<PAGE> 19
14
7.2(c) and (d) and any such expenditures financed with the proceeds of any
Recovery Event), (iii) the aggregate amount of all prepayments of
Revolving Credit Loans and Swing Line Loans during such period to the
extent accompanying permanent optional reductions of the Revolving Credit
Commitments and all optional prepayments of the Term Loans during such
period, (iv) the aggregate amount of all regularly scheduled principal
payments, optional prepayments and mandatory prepayments pursuant to
Section 2.12(c) (or any comparable provision of any other Funded Debt) of
Funded Debt (including, without limitation, the Term Loans) of the
Borrower and its Subsidiaries made during such period (other than in
respect of any revolving credit facility to the extent there is not an
equivalent permanent reduction in commitments thereunder), (v) increases
in Consolidated Working Capital for such period, (vi) an amount equal to
the aggregate net non-cash gain on the Disposition of Property by the
Borrower and its Subsidiaries during such period (other than sales of
inventory in the ordinary course of business), to the extent included in
arriving at such Consolidated Net Income, (vii) any investment made in
accordance with Sections 7.8(h), (n) and (o) hereof, and (viii) the net
decrease during such period (if any) in deferred tax accounts of the
Borrower.
"Excess Cash Flow Application Date": as defined in Section 2.12(c).
"Excluded Foreign Account": an Account owed to a Foreign Subsidiary.
"Excluded Foreign Subsidiary": any Foreign Subsidiary no share of
the Capital Stock of which is required pursuant to the terms of this
Agreement to be pledged to secure the Obligations.
"Existing Credit Facilities": collectively, (a) the Agreement dated
June 6, 1995, among the Borrower, certain subsidiaries of the Borrower as
guarantors, the several lenders from time to time party thereto, and
NationsBank of Texas N.A. and (b) the U.K. Credit Agreement.
"Existing Indenture": the Indenture, dated as of June 6, 1995, among
the Borrower, as issuer, Day International, Inc., as guarantor, and
American Bank National Association, as trustee, as the same may be amended
from time to time in accordance with Sections 6.10 and 7.9.
"Existing Notes": the Senior Subordinated Notes due 2005 of the
Borrower issued pursuant to the Existing Indenture.
"Facility": each of (a) the Term Loan Commitments and the Term Loans
made thereunder (the "Term Loan Facility") and (b) the Revolving Credit
Commitments and the extensions of credit made thereunder (the "Revolving
Credit Facility").
"Federal Funds Effective Rate"; for any day, the weighted average of
the rates on overnight federal funds transactions with members of the
Federal Reserve System arranged by federal funds brokers, as published on
the next succeeding Business Day
<PAGE> 20
15
by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day which is a Business Day, the average of the
quotations for the day of such transactions received by the Reference
Lender from three federal funds brokers of recognized standing selected by
it.
"Foreign Subsidiary": any Subsidiary of the Borrower that is not a
Domestic Subsidiary.
"Funded Debt": as to any Person, all Indebtedness of such Person
that matures more than one year from the date of its creation or matures
within one year from such date but is renewable or extendible, at the
option of such Person, to a date more than one year from such date or
arises under a revolving credit or similar agreement that obligates the
lender or lenders to extend credit during a period of more than one year
from such date, including, without limitation, all current maturities and
current sinking fund payments in respect of such Indebtedness whether or
not required to be paid within one year from the date of its creation and,
in the case of the Borrower, all Indebtedness in respect of the Loans.
"Funding Office": the office of the Administrative Agent set forth
in Section 10.2 or as specified from time to time by the Administrative
Agent as its funding office by notice to the Borrower and the Lenders.
"GAAP": generally accepted accounting principles in the United
States of America as in effect from time to time, except that for purposes
of Section 7.1, GAAP shall be determined on the basis of such principles
in effect on the date hereof and consistent with those used in the
preparation of the most recent audited financial statements delivered
pursuant to Section 4.1(b).
"Governmental Authority": any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government (including, without limitation, the National
Association of Insurance Commissioners).
"Guarantee and Collateral Agreement": the Guarantee and Collateral
Agreement to be executed and delivered by Holdings, the Borrower and each
Subsidiary Guarantor, substantially in the form of Exhibit D, as the same
may be amended, supplemented or otherwise modified from time to time.
"Guarantee Obligation": as to any Person (the "guaranteeing
person"), any obligation of (a) the guaranteeing person or (b) another
Person (including, without limitation, any bank under any letter of
credit) to induce the creation of which the guaranteeing person has issued
a reimbursement, counterindemnity or similar obligation, in either case
guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends
or other obligations (the "primary obligations") of any other third Person
(the "primary obligor") in any manner, whether directly or indirectly,
including, without limitation, any such obligation of the guaranteeing
person, whether or not
<PAGE> 21
16
contingent, (i) to purchase any such primary obligation or any Property
constituting direct or indirect security therefor, (ii) to advance or
supply funds (1) for the purchase or payment of any such primary
obligation or (2) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor, (iii) to purchase Property, securities or services
primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such
primary obligation or (iv) otherwise to assure or hold harmless the owner
of any such primary obligation against loss in respect thereof; provided,
however, that the term Guarantee Obligation shall not include endorsements
of instruments for deposit or collection in the ordinary course of
business. The amount of any Guarantee Obligation of any guaranteeing
person shall be deemed to be the lower of (a) an amount equal to the
stated or determinable amount of the primary obligation in respect of
which such Guarantee Obligation is made and (b) the maximum amount for
which such guaranteeing person may be liable pursuant to the terms of the
instrument embodying such Guarantee Obligation, unless such primary
obligation and the maximum amount for which such guaranteeing person may
be liable are not stated or determinable, in which case the amount of such
Guarantee Obligation shall be such guaranteeing person's maximum
reasonably anticipated liability in respect thereof as determined by the
Borrower in good faith.
"Guarantors": the collective reference to Holdings and the
Subsidiary Guarantors.
"GSCP Group": Greenwich Street Capital Partners, L.P., Greenwich
Street Capital Offshore Fund, Ltd., The Travelers Insurance Company, The
Travelers Life and Annuity Company, TRV Employees Fund, Inc., Smith Barney
Holdings Inc., SG Capital Partners LLC and their respective Affiliates;
any other investment fund or vehicle managed or sponsored by Greenwich
Street Capital Partners, Inc., The Travelers Insurance Company, The
Travelers Life and Annuity Company, Smith Barney Holdings Inc., SG Capital
Partners LLC or any of their respective Affiliates.
"Holdings Guarantee and Pledge Agreement": the Guarantee and Pledge
Agreement to be executed by Holdings, substantially in the form of Exhibit
L, as the same may be amended, supplemented or otherwise modified from
time to time.
"Holdings Senior Credit Agreement": the Credit Agreement, dated as
of the date hereof, among Holdings, the several banks and other financial
institutions or entities from time to time parties thereto and Societe
Generale, as administrative agent, as amended, supplemented or otherwise
modified from time to time (a) at any time prior to completion of the
Sisterco Merger, (i) to extend the maturity or reduce the amount of any
payment of principal thereof or to reduce the rate or extend the date for
payment of interest thereon or (ii) in a manner approved in writing by the
Required Lenders or (b) at any time after the completion of the Sisterco
Merger, in accordance with Section 7.9.
<PAGE> 22
17
"Holdings Senior Indebtedness": the Indebtedness of Holdings under
the Holdings Senior Credit Agreement.
"Indebtedness": of any Person at any date, without duplication, (a)
all indebtedness of such Person for borrowed money, (b) all obligations of
such Person for the deferred purchase price of Property or services (other
than trade liabilities incurred in the ordinary course of such Person's
business or any obligation of any Person under Section 3.3 of the Purchase
Agreement), (c) all obligations of such Person evidenced by notes, bonds,
debentures or other similar instruments, (d) all indebtedness created or
arising under any conditional sale or other title retention agreement with
respect to Property acquired by such Person (even though the rights and
remedies of the seller or lender under such agreement in the event of
default are limited to repossession or sale of such Property), (e) all
Capital Lease Obligations of such Person, (f) all obligations of such
Person, contingent or otherwise, as an account party under acceptance,
letter of credit or similar facilities, (g) all Guarantee Obligations of
such Person in respect of obligations of the kind referred to in clauses
(a) through (f) above; (h) all obligations of the kind referred to in
clauses (a) through (g) above secured by (or for which the holder of such
obligation has an existing right, contingent or otherwise, to be secured
by) any Lien on Property (including, without limitation, accounts and
contract rights) owned by such Person, whether or not such Person has
assumed or become liable for the payment of such obligation, (i) for the
purposes of Section 8(e) only, all obligations of such Person in respect
of Interest Rate Protection Agreements and Permitted Hedging Arrangements
and (j) for purposes of Section 7.2 only, the liquidation value of any
mandatorily redeemable preferred Capital Stock of such Person or its
Subsidiaries held by any Person other than such Person and its Wholly
Owned Subsidiaries.
"Insolvency": with respect to any Multiemployer Plan, the condition
that such Plan is insolvent within the meaning of Section 4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
"Intellectual Property": as defined in Section 4.9.
"Interest Payment Date": (a) as to any Base Rate Loan, the last day
of each March, June, September and December to occur while such Loan is
outstanding and the final maturity date of such Loan, (b) as to any
Eurodollar Loan having an Interest Period of three months or less, the
last day of such Interest Period, (c) as to any Eurodollar Loan having an
Interest Period longer than three months, each day which is three months,
or a whole multiple thereof, after the first day of such Interest Period
and the last day of such Interest Period and (d) as to any Loan (other
than any Revolving Credit Loan that is a Base Rate Loan and any Swing Line
Loan), the date of any repayment or prepayment made in respect thereof.
"Interest Period": as to any Eurodollar Loan, (a) initially, the
period commencing on the borrowing or conversion date, as the case may be,
with respect to
<PAGE> 23
18
such Eurodollar Loan and ending one, two, three or six months thereafter,
as selected by the Borrower in its notice of borrowing or notice of
conversion, as the case may be, given with respect thereto; and (b)
thereafter, each period commencing on the last day of the next preceding
Interest Period applicable to such Eurodollar Loan and ending one, two,
three or six months thereafter, as selected by the Borrower by irrevocable
notice to the Administrative Agent not less than three Business Days prior
to the last day of the then current Interest Period with respect thereto;
provided that, all of the foregoing provisions relating to Interest
Periods are subject to the following:
(i) if any Interest Period would otherwise end on a day that
is not a Business Day, such Interest Period shall be extended to the
next succeeding Business Day unless the result of such extension
would be to carry such Interest Period into another calendar month
in which event such Interest Period shall end on the immediately
preceding Business Day;
(ii) any Interest Period that would otherwise extend beyond
the Scheduled Revolving Credit Termination Date or beyond the date
final payment is due on the Term Loans, shall end on the Revolving
Credit Termination Date or such due date, as applicable;
(iii) any Interest Period that begins on the last Business Day
of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of a calendar month; and
(iv) the Borrower shall select Interest Periods so as not to
require a scheduled payment or prepayment of any Eurodollar Loan
during an Interest Period for such Loan.
"Interest Rate Protection Agreement": any interest rate protection
agreement, interest rate futures contract, interest rate option, interest
rate cap or other interest rate hedge arrangement, to or under which the
Borrower or any of its Subsidiaries is a party or a beneficiary on the
date hereof or becomes a party or a beneficiary after the date hereof.
"Inventory": as defined in the Uniform Commercial Code as in effect
in the State of New York from time to time.
"Issuing Lender": Societe Generale, in its capacity as issuer of any
Letter of Credit.
"Landlord Lien Waiver": a written agreement in substantially the
form of Exhibit E or otherwise reasonably acceptable to the Administrative
Agent.
"L/C Commitment": $10,000,000.
<PAGE> 24
19
"L/C Fee Payment Date": the last day of each March, June, September
and December and the last day of the Revolving Credit Commitment Period.
"L/C Obligations": at any time, an amount equal to the sum of (a)
the sum of (i) the aggregate then undrawn and unexpired amount of the then
outstanding Letters of Credit denominated in Dollars plus (ii) the then
Alternative Currency L/C Exposure and (b) the aggregate amount of drawings
under Letters of Credit which have not then been reimbursed pursuant to
Section 3.5.
"L/C Participants": the collective reference to all the Revolving
Credit Lenders other than the Issuing Lender.
"Letters of Credit": as defined in Section 3.1(a).
"Lien": any mortgage, pledge, hypothecation, assignment, security
deposit arrangement, encumbrance, lien (statutory or other), charge or
other security interest or any preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title
retention agreement and any Capital Lease Obligation having substantially
the same economic effect as any of the foregoing).
"Loan": any loan made by any Lender pursuant to this Agreement.
"Loan Documents": this Agreement, the Security Documents, the
Syndication Letter Agreement and the Notes.
"Loan Parties": the Borrower and each Subsidiary of the Borrower
which is a party to a Loan Document.
"Majority Facility Lenders": with respect to either Facility, the
holders of more than 50% of the aggregate unpaid principal amount of the
Term Loans or the Total Revolving Extensions of Credit, as the case may
be, outstanding under such Facility (or, in the case of the Revolving
Credit Facility, prior to any termination of the Revolving Credit
Commitments, the holders of more than 50% of the Total Revolving Credit
Commitments).
"Majority Revolving Credit Facility Lenders": the Majority Facility
Lenders in respect of the Revolving Credit Facility.
"Material Adverse Effect": a material adverse effect on (a) the
Acquisition, (b) the business, assets, property, condition (financial or
otherwise) or prospects of the Borrower and its Subsidiaries taken as a
whole or (c) the validity or enforceability of this Agreement or any of
the other Loan Documents or the rights or remedies of the Agents or the
Lenders hereunder or thereunder.
<PAGE> 25
20
"Materials of Environmental Concern": any gasoline or petroleum
(including crude oil or any fraction thereof) or petroleum products or any
hazardous or toxic substances, materials or wastes, defined or regulated
as such in or under any Environmental Law, including, without limitation,
asbestos, polychlorinated biphenyls and urea-formaldehyde insulation.
"Mortgaged Properties": the real properties listed on Schedule 1.1B,
as to which the Administrative Agent for the benefit of the Lenders shall
be granted a Lien pursuant to the Mortgages.
"Mortgages": each of the mortgages and deeds of trust made by any
Loan Party in favor of, or for the benefit of, the Administrative Agent
for the benefit of the Lenders, substantially in the form of Exhibit F
(with such changes thereto as shall be advisable under the law of the
jurisdiction in which such mortgage or deed of trust is to be recorded),
as the same may be amended, supplemented or otherwise modified from time
to time.
"Multiemployer Plan": a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"Net Cash Proceeds": (a) in connection with any Asset Sale or any
Recovery Event, the proceeds thereof in the form of cash and Cash
Equivalents (including any such proceeds received by way of deferred
payment of principal pursuant to a note or installment receivable or
purchase price adjustment receivable or otherwise, but only as and when
received) of such Asset Sale or Recovery Event, net of attorneys' fees,
accountants' fees, brokerage fees, consultants fees, investment banking
fees, amounts required to be applied to the repayment of Indebtedness
secured by a Lien expressly permitted hereunder on any asset which is the
subject of such Asset Sale or Recovery Event (other than any Lien pursuant
to a Security Document) and other customary fees and expenses actually
incurred in connection therewith and net of taxes paid or reasonably
estimated to be payable as a result thereof (after taking into account any
available tax credits or deductions and any tax sharing arrangements) and
net of appropriate amounts provided or to be provided as a reserve, in
accordance with GAAP, with respect to any liabilities associated with such
Asset Sale and retained by the Borrower or any such Subsidiary after such
Asset Sale and other appropriate amounts to be used by the Borrower or any
of its Subsidiaries to discharge or pay on a current basis any other
liabilities associated with such Asset Sale and (b) in connection with any
issuance or sale of equity securities or debt securities (other than any
issuance or borrowing permitted under Section 7.2) or instruments or the
incurrence of loans, the cash proceeds received from such issuance or
incurrence, net of attorneys' fees, investment banking fees, accountants'
fees, underwriting discounts and commissions and other customary fees and
expenses actually incurred in connection therewith.
"Non-Excluded Taxes": as defined in Section 2.20(a).
<PAGE> 26
21
"Non-U.S. Lender": as defined in Section 2.20(d).
"Notes": the collective reference to any promissory note evidencing
Loans.
"Obligations": the unpaid principal of and interest on (including,
without limitation, interest accruing after the maturity of the Loans and
Reimbursement Obligations and interest accruing after the filing of any
petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to the Borrower, whether or
not a claim for post-filing or post-petition interest is allowed in such
proceeding) the Loans and all other obligations and liabilities of the
Borrower to the Administrative Agent or to any Lender (or, in the case of
Interest Rate Protection Agreements or Permitted Hedging Arrangements, any
affiliate of any Lender), whether direct or indirect, absolute or
contingent, due or to become due, or now existing or hereafter incurred,
which may arise under, out of, or in connection with, this Agreement, any
other Loan Document, the Letters of Credit, any Interest Rate Protection
Agreement or Permitted Hedging Arrangement entered into with any Lender or
any affiliate of any Lender or any other document made, delivered or given
in connection herewith or therewith, whether on account of principal,
interest, reimbursement obligations, fees, indemnities, costs, expenses
(including, without limitation, all fees, charges and disbursements of
counsel to the Administrative Agent or to any Lender that are required to
be paid by the Borrower pursuant hereto) or otherwise.
"Obligor": with respect to an Account, the purchaser of the goods or
services giving rise to such Account or any other Person obligated to make
payment in respect of such purchase of such goods or services.
"Other Taxes": any and all present or future stamp, excise and other
similar taxes, if any, which may be payable or determined to be payable in
connection with the execution and delivery of, or consummation or
administration of any of the transactions contemplated by, or any
amendment, supplement or modification of, or any waiver or consent under
or in respect of, this Agreement or any other Loan Document.
"Participant": as defined in Section 10.6(b).
"Patent and Trademark Security Agreement": the Patent and Trademark
Security Agreement to be executed and delivered by the Borrower and its
Subsidiaries, substantially in the form of Exhibit A, as the same may be
amended, supplemented or otherwise modified from time to time.
"Payment Office": the office of the Administrative Agent set forth
in Section 10.2 or as specified from time to time by the Administrative
Agent as its payment office by notice to the Borrower and the Lenders.
<PAGE> 27
22
"PBGC": the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA (or any successor).
"Permitted Hedging Arrangement": as defined in Section 7.14.
"Person": an individual, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated
association, joint venture, Governmental Authority or other entity of
whatever nature.
"Plan": at a particular time, any employee benefit plan which is
covered by ERISA and in respect of which the Borrower or a Commonly
Controlled Entity is (or, if such plan were terminated at such time, would
under Section 4069 of ERISA be deemed to be) an "employer" as defined in
Section 3(5) of ERISA.
"Pricing Grid": the pricing grid attached hereto as Annex A.
"Pro Forma Balance Sheet": as defined in Section 4.1(a).
"Projections": as defined in Section 6.2(c).
"Properties": as defined in Section 4.17.
"Property": any right or interest in or to property of any kind
whatsoever, whether real, personal or mixed and whether tangible or
intangible, including, without limitation, Capital Stock.
"Purchase Agreement": as defined in the recitals hereto.
"Recovery Event": any settlement of or payment in respect of any
property or casualty insurance claim or any condemnation proceeding
relating to any asset of the Borrower or any of its Subsidiaries.
"Reference Lender": the Administrative Agent.
"Refunded Swing Line Loans": as defined in Section 2.7.
"Refunding Date": as defined in Section 2.7.
"Register": as defined in Section 10.6(d).
"Regulation G": Regulation G of the Board as in effect from time to
time.
"Regulation U": Regulation U of the Board as in effect from time to
time.
"Reimbursement Obligation": the obligation of the Borrower to
reimburse the Issuing Lender pursuant to Section 3.5 for amounts drawn
under Letters of Credit.
<PAGE> 28
23
"Reinvestment Amount": with respect to any Asset Sale or Recovery
Event, that portion of the Net Cash Proceeds thereof as shall, according
to a certificate of a Responsible Officer of the Borrower delivered to the
Administrative Agent within 30 days of such Asset Sale, be reinvested in
the business of the Borrower and its Subsidiaries in a manner consistent
with the requirements of Section 7.16 and the other provisions hereof
within one year of the receipt of such Net Cash Proceeds or, if such
reinvestment is in a project designated by the board of directors of the
Borrower as a project that will take longer than one year to complete,
within two years of the receipt of such Net Cash Proceeds; provided that
(i) if any such certificate of a Responsible Officer is not delivered to
the Administrative Agent on the date of such Asset Sale or Recovery Event,
any Net Cash Proceeds of such Asset Sale or Recovery Event shall be
immediately (x) deposited in a cash collateral account established at
Societe Generale to be held as collateral in favor of the Administrative
Agent for the benefit of the Lenders on terms reasonably satisfactory to
the Administrative Agent and shall remain on deposit in such cash
collateral account until such certificate of a Responsible Officer is
delivered to the Administrative Agent or (y) used to make a prepayment of
the Revolving Credit Loans in accordance with Section 2.12(b); provided
that, notwithstanding anything in this Agreement to the contrary, the
Borrower may not request any Loan or Letter of Credit under the Revolving
Credit Commitments that would reduce the aggregate amount of the Available
Revolving Credit Commitments to an amount that is less than the amount of
any such prepayment until such certificate of a Responsible Officer is
delivered to the Administrative Agent and (ii) any Net Cash Proceeds not
so reinvested within one year or such later day, as applicable, shall be
utilized at the end of such period or to prepay the Term Loans and reduce
the Revolving Credit Commitments pursuant to Section 2.12(b).
"Reinvestment Event": any Asset Sale or Recovery Event in respect of
which the Borrower has delivered a Reinvestment Notice.
"Rent Adjustment": with respect to any property leased by the
Borrower or any of its Domestic Subsidiaries where any Inventory is
located which may become subject to Liens in favor of the landlord thereof
arising by operation of law, an amount equal to six months' rent at such
premises.
"Reorganization": with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of
Section 4241 of ERISA.
"Reportable Event": any of the events set forth in Section 4043(c)
of ERISA, other than those events as to which the thirty day notice period
is waived under PBGC Reg. ss. 4043 or any successor regulation thereto.
"Required Lenders": the holders of more than 50% of (a) until the
Closing Date, the Commitments and (b) thereafter, the sum of (i) the
aggregate unpaid principal amount of the Term Loans and (ii) the Total
Revolving Credit Commitments
<PAGE> 29
24
or, if the Revolving Credit Commitments have been terminated, the Total
Revolving Extensions of Credit.
"Requirement of Law": as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing documents
of such Person, and any law, treaty, rule or regulation or determination
of an arbitrator or a court or other Governmental Authority, in each case
applicable to or binding upon such Person or any of its Property or to
which such Person or any of its Property is subject.
"Responsible Officer": the chief executive officer, president or
chief financial officer of the Borrower, but in any event, with respect to
financial matters, the chief financial officer of the Borrower.
"Restricted Payments": as defined in Section 7.6.
"Revolving Credit Commitment": as to any Lender, the obligation of
such Lender, if any, to make Revolving Credit Loans and make or
participate in Swing Line Loans and Letters of Credit, in an aggregate
principal and/or face amount not to exceed the amount set forth under the
heading "Revolving Credit Commitment" opposite such Lender's name on
Schedule 1.1A, as the same may be changed from time to time pursuant to
the terms hereof. The original amount of the Total Revolving Credit
Commitments is $20,000,000.
"Revolving Credit Commitment Period": the period from and including
the Closing Date to January 16, 2003.
"Revolving Credit Lender": each Lender which has a Revolving Credit
Commitment or which is the holder of Revolving Credit Loans.
"Revolving Credit Loans": as defined in Section 2.4.
"Revolving Credit Percentage": as to any Revolving Credit Lender at
any time, the percentage which such Lender's Revolving Credit Commitment
then constitutes of the Total Revolving Credit Commitments (or, at any
time after the Revolving Credit Commitments shall have expired or
terminated, the percentage which the aggregate principal amount of such
Lender's Revolving Credit Loans then outstanding constitutes of the
aggregate principal amount of the Revolving Credit Loans then
outstanding).
"Revolving Extensions of Credit": as to any Revolving Credit Lender
at any time, an amount equal to the sum of (a) the aggregate principal
amount of all Revolving Credit Loans made by such Lender then outstanding,
(b) such Lender's Revolving Credit Percentage of the L/C Obligations then
outstanding and (c) such Lender's Revolving Credit Percentage of the
aggregate principal amount of Swing Line Loans then outstanding.
"Scheduled Revolving Credit Termination Date": January 16, 2003.
<PAGE> 30
25
"Security Documents": the collective reference to the Guarantee and
Collateral Agreement, the Holdings Guarantee and Pledge Agreement, the
Patent and Trademark Security Agreement, the Mortgages and all other
security documents hereafter delivered to the Administrative Agent
granting a Lien on any Property of any Person to secure the obligations
and liabilities of any Loan Party under any Loan Document.
"Senior Subordinated Indebtedness": the subordinated Indebtedness of
the Borrower referred to in Section 7.2(g)(ii).
"Senior Subordinated Indenture": the Indenture to be entered into by
the Borrower in connection with the issuance of the Senior Subordinated
Indebtedness, together with all instruments and other agreements entered
into by the Borrower in connection therewith, as the same may be amended,
supplemented or otherwise modified from time to time in accordance with
Section 7.9.
"Single Employer Plan": any Plan which is covered by Title IV of
ERISA, but which is not a Multiemployer Plan.
"Sisterco": GSD Acquisition II Corp., a Delaware corporation.
"Sisterco Merger": the merger or consolidation of Sisterco with or
into the Borrower as permitted by Section 7.4(d).
"Solvent": when used with respect to any Person, means that, as of
any date of determination, (a) the amount of the "present fair saleable
value" of the assets of such Person will, as of such date, exceed the
amount of all "liabilities of such Person, contingent or otherwise", as of
such date, as such quoted terms are determined in accordance with
applicable federal and state laws governing determinations of the
insolvency of debtors, (b) the present fair saleable value of the assets
of such Person will, as of such date, be no less than the amount that will
be required to pay the probable liability of such Person on its debts as
such debts become absolute and matured, (c) such Person will not have, as
of such date, an unreasonably small amount of capital with which to
conduct its business, and (d) such Person does not intend to, and does not
believe that it will, incur debts or liabilities beyond such Person's
ability to pay as such debts and liabilities mature. For purposes of this
definition, (i) "debt" means liability on a "claim", and (ii) "claim"
means any (x) right to payment, whether or not such a right is reduced to
judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured,
disputed, undisputed, legal, equitable, secured or unsecured or (y) right
to an equitable remedy for breach of performance if such breach gives rise
to a right to payment, whether or not such right to an equitable remedy is
reduced to judgment, fixed, contingent, matured or unmatured, disputed,
undisputed, secured or unsecured.
"Sponsors": as defined in the recitals hereto.
<PAGE> 31
26
"Spot Exchange Rate": on any day, with respect to any Alternative
Currency, the spot rate at which such Alternative Currency is offered for
Dollars on such day by the Administrative Agent in London or in the
interbank market where its foreign currency exchange operations in respect
of such Alternative Currency are then being conducted at approximately
11:00 A.M. (local time). Notwithstanding the foregoing, if for any reason
at the time of any determination of the Spot Exchange Rate as described
above, no such rate is being quoted, the Administrative Agent may use any
reasonable method, applied consistently, it deems appropriate to determine
such rate, and such determination shall be conclusive absent manifest
error.
"Subsequent Holdings Equity Investment": the issuance by Holdings of
up to $20,000,000 of equity, the proceeds of which shall be applied to the
prepayment of the Holdings Senior Indebtedness.
"Subsidiary": as to any Person, a corporation, partnership, limited
liability company or other entity of which shares of stock or other
ownership interests having ordinary voting power (other than stock or such
other ownership interests having such power only by reason of the
happening of a contingency) to elect a majority of the board of directors
or other managers of such corporation, partnership or other entity are at
the time owned, or the management of which is otherwise controlled,
directly or indirectly through one or more intermediaries, or both, by
such Person. Unless otherwise qualified, all references to a "Subsidiary"
or to "Subsidiaries" in this Agreement shall refer to a Subsidiary or
Subsidiaries of the Borrower.
"Subsidiary Guarantor": each Subsidiary of the Borrower other than
any Excluded Foreign Subsidiary.
"Swing Line Commitment": the obligation of the Swing Line Lender to
make Swing Line Loans pursuant to Section 2.6 in an aggregate principal
amount at any one time outstanding not to exceed $1,000,000.
"Swing Line Lender": Societe Generale, in its capacity as the lender
of Swing Line Loans.
"Swing Line Loans": as defined in Section 2.6.
"Swing Line Participation Amount": as defined in Section 2.7.
"Syndication Date": the earlier of (x) the date on which the
Administrative Agent completes the syndication of the Facilities and the
entities selected in such syndication process become parties to this
Agreement and (y) 60 Business Days following the Closing Date.
"Syndication Letter Agreement": the letter agreement, dated as of
January 15, 1998, between the Borrower and the Administration Agent
relating to the syndication of the Facilities.
<PAGE> 32
27
"Tax Sharing Agreement": as defined in Section 6.1(e).
"Term Loan": as defined in Section 2.1.
"Term Loan Commitment": as to any Lender, the obligation of such
Lender, if any, to make a Term Loan to the Borrower hereunder in a
principal amount not to exceed the amount set forth under the heading
"Term Loan Commitment" opposite such Lender's name on Schedule 1.1A. The
original aggregate amount of the Term Loan Commitments is $40,000,000.
"Term Loan Lender": each Lender which has a Term Loan Commitment or
which is the holder of a Term Loan.
"Term Loan Percentage": as to Term Loan Lender at any time, the
percentage which such Lender's Term Loan Commitment then constitutes of
the aggregate Term Loan Commitments (or, at any time after the Closing
Date, the percentage which the aggregate principal amount of such Lender's
Term Loans then outstanding constitutes of the aggregate principal amount
of the Term Loans then outstanding).
"Total Revolving Credit Commitments": at any time, the aggregate
amount of the Revolving Credit Commitments at such time.
"Total Revolving Extensions of Credit": at any time, the aggregate
amount of the Revolving Extensions of Credit of the Revolving Credit
Lenders at such time.
"Transferee": as defined in Section 10.15.
"Type": as to any Loan, its nature as a Base Rate Loan or a
Eurodollar Loan.
"U.K. Credit Agreement": the Agreement, dated January 31, 1996,
between Day International (UK) Holdings and the Bank of Scotland, and the
Credit Facility, dated January 31, 1996, between Day International (UK)
Limited and the Bank of Scotland.
"Uniform Customs": the Uniform Customs and Practice for Documentary
Credits (1993 Revision), International Chamber of Commerce Publication
No. 500, as the same may be amended from time to time.
"Wholly Owned Subsidiary": as to any Person, any other Person all of
the Capital Stock of which (other than directors' qualifying shares or
other interests required by law) is owned by such Person directly and/or
through other Wholly Owned Subsidiaries.
"Wholly Owned Subsidiary Guarantor": any Subsidiary Guarantor that
is a Wholly Owned Subsidiary of the Borrower.
<PAGE> 33
28
1.2 Other Definitional Provisions. (a) Unless otherwise specified
therein, all terms defined in this Agreement shall have the defined meanings
when used in the other Loan Documents or any certificate or other document made
or delivered pursuant hereto or thereto.
(b) As used herein and in the other Loan Documents, and any
certificate or other document made or delivered pursuant hereto or thereto,
accounting terms relating to Holdings, the Borrower and its Subsidiaries not
defined in Section 1.1 and accounting terms partly defined in Section 1.1, to
the extent not defined, shall have the respective meanings given to them under
GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and Section,
Schedule and Exhibit references are to this Agreement unless otherwise
specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS
2.1 Term Loan Commitments. Subject to the terms and conditions
hereof, each Term Loan Lender severally agrees to make a term loan (a "Term
Loan") to the Borrower on the Closing Date in an amount not to exceed the amount
of the Tranche A Term Loan Commitment of such Lender. The Term Loans may from
time to time be Eurodollar Loans or Base Rate Loans, or a combination thereof,
as determined by the Borrower and notified to the Administrative Agent in
accordance with Sections 2.2 and 2.13.
2.2 Procedure for Term Loan Borrowing. The Borrower shall give the
Administrative Agent irrevocable notice (which notice must be received by the
Administrative Agent prior to 10:00 A.M., New York City time, one Business Day
prior to the anticipated Closing Date) requesting that the Term Loan Lenders
make the Term Loans on the Closing Date and specifying the amount to be
borrowed. Unless the Lenders otherwise agree, the Term Loans made on the Closing
Date shall initially be Base Rate Loans, and no Term Loan may be converted into
or continued as a Eurodollar Loan having an Interest Period in excess of one
month prior to the Syndication Date. Upon receipt of such notice the
Administrative Agent shall promptly notify each Term Loan Lender thereof. Not
later than 10:00 A.M., New York City time, on the Closing Date each Term Loan
Lender shall make available to the Administrative Agent at the Funding Office an
amount in immediately available funds equal to the Term Loan or Term Loans to be
made by such Lender. The Administrative Agent shall make available to the
Borrower the aggregate of the amounts made available to the Administrative Agent
by the Term Loan Lenders in immediately available funds.
2.3 Repayment of Term Loans. The Term Loan of each Lender shall
mature in 19 consecutive quarterly installments, commencing on June 30, 1998,
each of which shall be in an amount equal to such Lender's Term Loan Percentage
multiplied by the amount set forth below opposite such installment:
<PAGE> 34
29
<TABLE>
<CAPTION>
Installment Principal Amount
----------- ----------------
<S> <C>
1-2 $ 666,666
3 $ 666,668
4-7 $1,250,000
8-11 $2,000,000
12-15 $2,750,000
16-19 $3,500,000
</TABLE>
2.4 Revolving Credit Commitments. (a) Subject to the terms and
conditions hereof, each Revolving Credit Lender severally agrees to make
revolving credit loans ("Revolving Credit Loans") to the Borrower from time to
time during the Revolving Credit Commitment Period in an aggregate principal
amount at any one time outstanding which, when added to such Lender's Revolving
Credit Percentage of the sum of (i) the L/C Obligations then outstanding and
(ii) the aggregate principal amount of the Swing Line Loans then outstanding,
does not exceed the amount of such Lender's Revolving Credit Commitment. During
the Revolving Credit Commitment Period the Borrower may use the Revolving Credit
Commitments by borrowing, prepaying the Revolving Credit Loans in whole or in
part, and reborrowing, all in accordance with the terms and conditions hereof.
The Revolving Credit Loans may from time to time be Eurodollar Loans, Base Rate
Loans or a combination thereof, as determined by the Borrower and notified to
the Administrative Agent in accordance with Sections 2.5 and 2.13, provided that
no Revolving Credit Loan shall be made as a Eurodollar Loan after the day that
is one month prior to the Revolving Credit Termination Date.
(b) The Borrower shall repay all outstanding Revolving Credit Loans
on the Revolving Credit Termination Date.
2.5 Procedure for Revolving Credit Borrowing. The Borrower may
borrow under the Revolving Credit Commitments during the Revolving Credit
Commitment Period on any Business Day, provided that the Borrower shall give the
Administrative Agent irrevocable notice (which notice must be received by the
Administrative Agent prior to 1:00 P.M., New York City time, (a) three Business
Days prior to the requested Borrowing Date, in the case of Eurodollar Loans, or
(b) one Business Day prior to the requested Borrowing Date, in the case of Base
Rate Loans), specifying (i) the amount and Type of Revolving Credit Loans to be
borrowed, (ii) the requested Borrowing Date and (iii) in the case of Eurodollar
Loans, the respective amounts of each such Type of Loan and the respective
lengths of the initial Interest Period therefor. Unless the Lenders otherwise
agree, any Revolving Credit Loans made on the Closing Date shall initially be
Base Rate Loans, and no Revolving Credit Loan may be made as, converted into or
continued as a Eurodollar Loan having an Interest Period in excess of one month
prior to the Syndication Date. Each borrowing under the Revolving Credit
Commitments shall be in an amount equal to (x) in the case of Base Rate Loans,
$1,000,000 or a whole multiple thereof (or, if the then aggregate Available
Revolving Credit Commitments are less than $1,000,000, such lesser amount) and
(y) in the case of Eurodollar Loans, $2,500,000 or a whole multiple of $500,000
in excess thereof; provided, that the Swing Line Lender may request, on behalf
of the Borrower, borrowings under the Revolving
<PAGE> 35
30
Credit Commitments which are Base Rate Loans in other amounts pursuant to
Section 2.7. Upon receipt of any such notice from the Borrower, the
Administrative Agent shall promptly notify each Revolving Credit Lender thereof.
Each Revolving Credit Lender will make the amount of its pro rata share of each
borrowing available to the Administrative Agent for the account of the Borrower
at the Funding Office prior to 1:00 P.M. (or 10:00 A.M., in the case of the
initial borrowing hereunder), New York City time, on the Borrowing Date
requested by the Borrower in funds immediately available to the Administrative
Agent. Such borrowing will then be made available to the Borrower by the
Administrative Agent in like funds as received by the Administrative Agent.
Notwithstanding any of the foregoing, the initial borrowing under the Revolving
Credit Commitment shall not exceed $5,000,000.
2.6 Swing Line Commitment. (a) Subject to the terms and conditions
hereof, the Swing Line Lender agrees to make a portion of the credit otherwise
available to the Borrower under the Revolving Credit Commitments from time to
time during the Revolving Credit Commitment Period by making swing line loans
("Swing Line Loans") to the Borrower; provided that (i) the aggregate principal
amount of Swing Line Loans outstanding at any time shall not exceed the Swing
Line Commitment then in effect (notwithstanding that the Swing Line Loans
outstanding at any time, when aggregated with the Swing Line Lender's other
outstanding Revolving Credit Loans hereunder, may exceed the Swing Line
Commitment then in effect) and (ii) the Borrower shall not request, and the
Swing Line Lender shall not make, any Swing Line Loan if, after giving effect to
the making of such Swing Line Loan, the aggregate amount of the Available
Revolving Credit Commitments would be less than zero. During the Revolving
Credit Commitment Period, the Borrower may use the Swing Line Commitment by
borrowing, repaying and reborrowing, all in accordance with the terms and
conditions hereof. Swing Line Loans shall be Base Rate Loans only.
(b) The Borrower shall repay all outstanding Swing Line Loans on the
Revolving Credit Termination Date.
2.7 Procedure for Swing Line Borrowing; Refunding of Swing Line
Loans. (a) Whenever the Borrower desires that the Swing Line Lender make Swing
Line Loans it shall give the Swing Line Lender irrevocable telephonic notice
confirmed promptly in writing (which telephonic notice must be received by the
Swing Line Lender not later than 1:00 P.M., New York City time, on the proposed
Borrowing Date), specifying (i) the amount to be borrowed and (ii) the requested
Borrowing Date (which shall be a Business Day during the Revolving Credit
Commitment Period). Each borrowing under the Swing Line Commitment shall be in
an amount equal to $100,000 or a whole multiple of $25,000 in excess thereof.
Not later than 2:00 P.M., New York City time, on the Borrowing Date specified in
a notice in respect of Swing Line Loans, the Swing Line Lender shall make
available to the Administrative Agent at the Funding Office an amount in
immediately available funds equal to the amount of the Swing Line Loan to be
made by the Swing Line Lender. The Administrative Agent shall make the proceeds
of such Swing Line Loan available to the Borrower on such Borrowing Date in
immediately available funds.
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(b) The Swing Line Lender, at any time and from time to time in its
sole and absolute discretion may, on behalf of the Borrower (which hereby
irrevocably directs the Swing Line Lender to act on its behalf), on one Business
Day's notice given by the Swing Line Lender no later than 1:00 P.M., New York
City time, request each Revolving Credit Lender to make, and each Revolving
Credit Lender hereby agrees to make, a Revolving Credit Loan, in an amount equal
to such Revolving Credit Lender's Revolving Credit Percentage of the aggregate
amount of the Swing Line Loans (the "Refunded Swing Line Loans") outstanding on
the date of such notice, to repay the Swing Line Lender. Each Revolving Credit
Lender shall make the amount of such Revolving Credit Loan available to the
Administrative Agent at the Funding Office in immediately available funds, not
later than 10:00 A.M., New York City time, one Business Day after the date of
such notice. The proceeds of such Revolving Credit Loans shall be immediately
made available by the Administrative Agent to the Swing Line Lender for
application by the Swing Line Lender to the repayment of the Refunded Swing Line
Loans. The Borrower irrevocably authorizes the Swing Line Lender to charge the
Borrower's accounts with the Administrative Agent (up to the amount available in
each such account) in order to immediately pay the amount of such Refunded Swing
Line Loans to the extent amounts received from the Revolving Credit Lenders are
not sufficient to repay in full such Refunded Swing Line Loans.
(c) If prior to the time a Revolving Credit Loan would have
otherwise been made pursuant to Section 2.7(b), one of the events described in
Section 8(f) shall have occurred and be continuing with respect to the Borrower
or if for any other reason, as determined by the Swing Line Lender in its sole
discretion, Revolving Credit Loans may not be made as contemplated by Section
2.7(b), each Revolving Credit Lender shall, on the date such Revolving Credit
Loan was to have been made pursuant to the notice referred to in Section 2.7(b)
(the "Refunding Date"), purchase for cash an undivided participating interest in
the then outstanding Swing Line Loans by paying to the Swing Line Lender an
amount (the "Swing Line Participation Amount") equal to (i) such Revolving
Credit Lender's Revolving Credit Percentage times (ii) the sum of the aggregate
principal amount of Swing Line Loans then outstanding which were to have been
repaid with such Revolving Credit Loans plus all then accrued and unpaid
interest thereon.
(d) Whenever, at any time after the Swing Line Lender has received
from any Revolving Credit Lender such Lender's Swing Line Participation Amount,
the Swing Line Lender receives any payment on account of the Swing Line Loans,
the Swing Line Lender will distribute to such Lender its Swing Line
Participation Amount (appropriately adjusted to reflect such Lender's pro rata
portion of such payment if such payment is not sufficient to pay the principal
of and interest on all Swing Line Loans then due); provided, however, that in
the event that such payment received by the Swing Line Lender is required to be
returned, such Revolving Credit Lender will return to the Swing Line Lender any
portion thereof previously distributed to it by the Swing Line Lender.
(e) Each Revolving Credit Lender's obligation to make the Loans
referred to in Section 2.7(b) and to purchase participating interests pursuant
to Section 2.7(c) shall be absolute and unconditional and shall not be affected
by any circumstance, including, without limitation, (i) any set-off,
counterclaim, recoupment, defense or other right which such
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Revolving Credit Lender or the Borrower may have against the Swing Line Lender,
the Borrower or any other Person for any reason whatsoever; (ii) the occurrence
or continuance of a Default or an Event of Default or the failure to satisfy any
of the other conditions specified in Section 5; (iii) any adverse change in the
condition (financial or otherwise) of the Borrower; (iv) any breach of this
Agreement or any other Loan Document by the Borrower, any other Loan Party or
any other Revolving Credit Lender; or (v) any other circumstance, happening or
event whatsoever, whether or not similar to any of the foregoing.
2.8 Repayment of Loans; Evidence of Debt. (a) The Borrower hereby
unconditionally promises to pay to the Administrative Agent for the account of
the appropriate Revolving Credit Lender or Term Loan Lender, as the case may be,
(i) the then unpaid principal amount of each Revolving Credit Loan of such
Revolving Credit Lender on the Revolving Credit Termination Date (or such
earlier date on which the Loans become due and payable pursuant to Section 8),
(ii) the then unpaid principal amount of each Swing Line Loan of such Swing Line
Lender on the Revolving Credit Termination Date (or such earlier date on which
the Loans become due and payable pursuant to Section 8) and (iii) the principal
amount of each Term Loan of such Term Loan Lender in installments according to
the amortization schedule set forth in Section 2.3 (or on such earlier date on
which the Loans become due and payable pursuant to Section 8). The Borrower
hereby further agrees to pay interest on the unpaid principal amount of the
Loans from time to time outstanding from the date hereof until payment in full
thereof at the rates per annum, and on the dates, set forth in Section 2.15.
(b) Each Lender shall maintain in accordance with its usual practice
an account or accounts evidencing indebtedness of the Borrower to such Lender
resulting from each Loan of such Lender from time to time, including the amounts
of principal and interest payable and paid to such Lender from time to time
under this Agreement.
(c) The Administrative Agent, on behalf of the Borrower, shall
maintain the Register pursuant to Section 10.6(e), and a subaccount therein for
each Lender, in which shall be recorded (i) the amount of each Loan made
hereunder and any Note evidencing such Loan, the Type thereof and each Interest
Period applicable thereto, (ii) the amount of any principal or interest due and
payable or to become due and payable from the Borrower to each Lender hereunder
and (iii) both the amount of any sum received by the Administrative Agent
hereunder from the Borrower and each Lender's share thereof.
(d) The entries made in the Register and the accounts of each Lender
maintained pursuant to Section 2.8(b) shall, to the extent permitted by
applicable law, be prima facie evidence of the existence and amounts of the
obligations of the Borrower therein recorded; provided, however, that the
failure of any Lender or the Administrative Agent to maintain the Register or
any such account, or any error therein, shall not in any manner affect the
obligation of the Borrower to repay (with applicable interest) the Loans made to
such Borrower by such Lender in accordance with the terms of this Agreement.
(e) The Borrower agrees that, upon the request to the Administrative
Agent by any Lender, the Borrower will execute and deliver to such Lender a
promissory note of the
<PAGE> 38
33
Borrower evidencing any Term Loans, Revolving Credit Loans or Swing Line Loans,
as the case may be, of such Lender, substantially in the forms of Exhibit G-1,
G-2 or G-3, respectively, with appropriate insertions as to date and principal
amount.
2.9 Commitment Fees, etc. (a) The Borrower agrees to pay to the
Administrative Agent for the account of each Revolving Credit Lender a
commitment fee for the period from and including the Closing Date to the last
day of the Revolving Credit Commitment Period, computed at the Commitment Fee
Rate on the average daily amount of the Available Revolving Credit Commitment of
such Lender during the period for which payment is made, payable quarterly in
arrears on the last day of each March, June, September and December and on the
Revolving Credit Termination Date, commencing on the first of such dates to
occur after the date hereof.
(b) The Borrower agrees to pay to the Administrative Agent the fees
in the amounts and on the dates from time to time agreed to in writing by the
Borrower and the Administrative Agent.
2.10 Termination or Reduction of Revolving Credit Commitments. The
Borrower shall have the right, upon not less than three Business Days' notice to
the Administrative Agent, to terminate the Revolving Credit Commitments or, from
time to time, to reduce the amount of the Revolving Credit Commitments; provided
that no such termination or reduction of Revolving Credit Commitments shall be
permitted if, after giving effect thereto and to any prepayments of the
Revolving Credit Loans and Swing Line Loans made on the effective date thereof,
the Total Revolving Extensions of Credit would exceed the Total Revolving Credit
Commitments. Any such reduction shall be in an amount equal to $1,000,000, or a
whole multiple of $500,000 in excess thereof, and shall reduce permanently the
Revolving Credit Commitments then in effect.
2.11 Optional Prepayments. The Borrower may at any time and from
time to time prepay the Loans, in whole or in part, without premium or penalty,
upon irrevocable notice delivered to the Administrative Agent at least three
Business Days prior thereto in the case of Eurodollar Loans and prior to 1:00
P.M., New York City time, on the day thereof in the case of Base Rate Loans,
which notice shall specify the date and amount of prepayment and whether the
prepayment is of Eurodollar Loans or Base Rate Loans; provided, that if a
Eurodollar Loan is prepaid on any day other than the last day of the Interest
Period applicable thereto, the Borrower shall also pay any amounts owing
pursuant to Section 2.21. Upon receipt of any such notice the Administrative
Agent shall promptly notify each relevant Lender thereof. If any such notice is
given, the amount specified in such notice shall be due and payable on the date
specified therein, together with (except in the case of Revolving Credit Loans
which are Base Rate Loans and Swing Line Loans) accrued interest to such date on
the amount prepaid. Partial prepayments of Term Loans and Revolving Credit Loans
shall be in an aggregate principal amount of $500,000 or a whole multiple of
$100,000 in excess thereof. Partial prepayments of Swing Line Loans shall be in
an aggregate principal amount of $100,000 or a whole multiple thereof.
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2.12 Mandatory Prepayments and Commitment Reductions. (a) Unless the
Majority Facility Lenders with respect to each Facility shall otherwise agree,
if any Capital Stock shall be issued by Holdings or the Borrower (except for
shares of Capital Stock of (i) the Borrower issued or sold to Holdings, (ii)
Holdings or the Borrower issued or sold to directors, officers and employees of,
or consultants to, Holdings or any of its Subsidiaries, (iii) the Borrower
issued to any Person in connection with any merger or other combination of
Holdings with and into the Borrower or (iv) Greenwich IV LLC in connection with
any merger of Holdings with and into Greenwich IV LLC or Indebtedness shall be
incurred by the Borrower or any of its Subsidiaries (excluding (i) the
Subsequent Holdings Equity Investment or (ii) any Indebtedness permitted by
Section 7.2 as in effect on the date of this Agreement), an amount equal to 100%
of the Net Cash Proceeds thereof shall be applied on the date of such issuance
or incurrence (or on the first Business Day thereafter) toward the prepayment of
the Term Loans and the reduction of the Revolving Credit Commitments as set
forth in Section 2.12(d).
(b) Unless the Majority Facility Lenders with respect to each
Facility shall otherwise agree, if on any date the Borrower or any of its
Subsidiaries shall receive Net Cash Proceeds from any Asset Sale or Recovery
Event then such Net Cash Proceeds (excluding any Reinvested Amount) shall be
applied on such date toward the prepayment of the Term Loans and the reduction
of the Revolving Credit Commitments as set forth in Section 2.12(d); provided,
that, notwithstanding the foregoing, the aggregate Net Cash Proceeds of such
Asset Sales that may be excluded from the foregoing requirement as Reinvested
Amount shall not exceed $2,500,000 in any fiscal year of the Borrower.
(c) Unless the Majority Facility Lenders with respect to each
Facility shall otherwise agree, if, for the period beginning on the Closing Date
and ending December 31, 1998 or for any fiscal year of the Borrower thereafter,
there shall be Excess Cash Flow, the Borrower shall, on the relevant Excess Cash
Flow Application Date, apply the ECF Percentage of such Excess Cash Flow toward
the prepayment of the Term Loans and the reduction of the Revolving Credit
Commitments as set forth in Section 2.12(d). Each such prepayment and commitment
reduction shall be made on a date (an "Excess Cash Flow Application Date") no
later than five days after the earlier of (i) the date on which the financial
statements of the Borrower referred to in Section 6.1(a), for the fiscal year
with respect to which such prepayment is made, are required to be delivered to
the Lenders and (ii) the date such financial statements are actually delivered.
(d) Amounts to be applied in connection with prepayments and
Commitment reductions made pursuant to this Section shall be applied, first, to
the prepayment of the Term Loans and, second, to reduce permanently the
Revolving Credit Commitments. Any such reduction of the Revolving Credit
Commitments shall be accompanied by prepayment of the Revolving Credit Loans
and/or Swing Line Loans to the extent, if any, that the Total Revolving
Extensions of Credit exceed the amount of the Total Revolving Credit Commitments
as so reduced, provided that if the aggregate principal amount of Revolving
Credit Loans and Swing Line Loans then outstanding is less than the amount of
such excess (because L/C Obligations constitute a portion thereof), the Borrower
shall, to the extent of the balance of such excess, replace outstanding Letters
of Credit and/or deposit an amount in cash
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in a cash collateral account established with the Administrative Agent for the
benefit of the Lenders on terms and conditions satisfactory to the
Administrative Agent. The application of any prepayment pursuant to this Section
shall be made first to Base Rate Loans and second to Eurodollar Loans. Each
prepayment of the Loans under this Section (except in the case of Revolving
Credit Loans that are Base Rate Loans and Swing Line Loans) shall be accompanied
by accrued interest to the date of such prepayment on the amount prepaid.
(e) Notwithstanding the foregoing provisions of this Section, if at
any time any prepayment of the Loans pursuant to this Section would result,
after giving effect to the procedures set forth in this Agreement, in the
Borrower incurring breakage costs under Section 2.21 as a result of Eurodollar
Loans being prepaid other than on the last day of an Interest Period with
respect thereto, then, the Borrower may, so long as no Default or Event of
Default shall have occurred and be continuing, in its sole discretion, initially
(x) deposit a portion (up to 100%) of the amounts that otherwise would have been
paid in respect of such Eurodollar Loans with the Administrative Agent (which
deposit must be equal in amount to the amount of such Eurodollar Loans not
immediately prepaid) to be held as security for the obligations of the Borrower
to make such prepayment pursuant to a cash collateral agreement to be entered
into on terms reasonably satisfactory to the Administrative Agent, with such
cash collateral to be directly applied upon the first occurrence thereafter of
the last day of an Interest Period with respect to such Eurodollar Loans (or
such earlier date or dates as shall be requested by the Borrower) or (y) make a
prepayment of the Revolving Credit Loans in accordance with Section 2.11 with an
amount equal to a portion (up to 100%) of the amounts that otherwise would have
been paid in respect of such Eurodollar Loans (which prepayment, together with
any deposits pursuant to clause (x) above, must be equal in amount to the amount
of such Eurodollar Loans not immediately prepaid); provided that,
notwithstanding anything in this Agreement to the contrary, the Borrower may not
request any Loan under the Revolving Credit Commitments that would reduce the
aggregate amount of the Available Revolving Credit Commitments to an amount that
is less than the amount of such prepayment until the related portion of such
Eurodollar Loans have been prepaid upon the first occurrence thereafter of the
last day of an Interest Period with respect to such Eurodollar Loans; provided
that, in the case of either clause (x) or (y), such unpaid Eurodollar Loans
shall continue to bear interest in accordance with the applicable provisions
hereof until such unpaid Eurodollar Loans or the related portion of such
Eurodollar Loans, as the case may be, have or has been prepaid.
(f) If, at any time for any reason, the Revolving Extensions of
Credit exceed an amount equal to the lesser of, (i) the Borrowing Base on such
date and (ii) the Total Revolving Credit Commitments on such date, the Borrower
shall: first prepay the Revolving Credit Loans then outstanding; second pay any
Reimbursement Obligations then outstanding and, last, cash collateralize any
outstanding L/C Obligation in an amount equal to such excess.
2.13 Conversion and Continuation Options. (a) The Borrower may elect
from time to time to convert any outstanding Eurodollar Loans to Base Rate Loans
by giving the Administrative Agent at least two Business Days' prior irrevocable
notice of such election, provided that any such conversion of Eurodollar Loans
may only be made on the last day of
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an Interest Period with respect thereto. The Borrower may elect from time to
time to convert any outstanding Base Rate Loans to Eurodollar Loans by giving
the Administrative Agent at least three Business Days' prior irrevocable notice
of such election (which notice shall specify the length of the initial Interest
Period therefor), provided that no Base Rate Loan under a particular Facility
may be converted into a Eurodollar Loan (i) when any Event of Default has
occurred and is continuing and the Administrative Agent or the Majority Facility
Lenders in respect of such Facility have determined in its or their sole
discretion not to permit such conversions or (ii) after the date that is one
month prior to the final scheduled termination or maturity date of such
Facility. Upon receipt of any such notice the Administrative Agent shall
promptly notify each relevant Lender thereof.
(b) Any Eurodollar Loan may be continued as such upon the expiration
of the then current Interest Period with respect thereto by the Borrower giving
irrevocable notice to the Administrative Agent, in accordance with the
applicable provisions of the term "Interest Period" set forth in Section 1.1, of
the length of the next Interest Period to be applicable to such Loans, provided
that no Eurodollar Loan under a particular Facility may be continued as such (i)
when any Event of Default has occurred and is continuing and the Administrative
Agent has or the Majority Facility Lenders in respect of such Facility have
determined in its or their sole discretion not to permit such continuations or
(ii) after the date that is one month prior to the final scheduled termination
or maturity date of such Facility, and provided, further, that if the Borrower
shall fail to give any required notice as described above in this paragraph or
if such continuation is not permitted pursuant to the preceding proviso such
Loans shall be automatically converted to Base Rate Loans on the last day of
such then expiring Interest Period. Upon receipt of any such notice the
Administrative Agent shall promptly notify each relevant Lender thereof.
2.14 Minimum Amounts and Maximum Number of Eurodollar Tranches.
Notwithstanding anything to the contrary in this Agreement, all borrowings,
conversions, continuations and optional prepayments of Eurodollar Loans
hereunder and all selections of Interest Periods hereunder shall be in such
amounts and be made pursuant to such elections so that, (a) after giving effect
thereto, the aggregate principal amount of the Eurodollar Loans comprising each
Eurodollar Tranche shall be equal to $2,500,000 or a whole multiple of $500,000
in excess thereof and (b) no more than six Eurodollar Tranches shall be
outstanding at any one time.
2.15 Interest Rates and Payment Dates. (a) Each Eurodollar Loan
shall bear interest for each day during each Interest Period with respect
thereto at a rate per annum equal to the Eurodollar Rate determined for such day
plus the Applicable Margin in effect for such day.
(b) Each Base Rate Loan shall bear interest for each day at a rate
per annum equal to the Base Rate in effect for such day plus the Applicable
Margin in effect for such day.
(c) (i) If all or a portion of the principal amount of any Loan or
Reimbursement Obligation shall not be paid when due (whether at the stated
maturity, by
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37
acceleration or otherwise), all outstanding Loans and Reimbursement Obligations
(whether or not overdue) shall bear interest at a rate per annum which is equal
to (x) in the case of the Loans, the rate that would otherwise be applicable
thereto pursuant to the foregoing provisions of this Section plus 2% or (y) in
the case of Reimbursement Obligations, the rate applicable to Base Rate Loans
under the Revolving Credit Facility plus 2%, and (ii) if all or a portion of any
interest payable on any Loan or Reimbursement Obligation or any commitment fee
or other amount payable hereunder shall not be paid when due (whether at the
stated maturity, by acceleration or otherwise), such overdue amount shall bear
interest at a rate per annum equal to the then rate applicable to Base Rate
Loans under the relevant Facility plus 2% (or, in the case of any such other
amounts that do not relate to a particular Facility, the then rate applicable to
Base Rate Loans under the Revolving Credit Facility plus 2%), in each case, with
respect to clauses (i) and (ii) above, from the date of such non-payment until
such amount is paid in full (as well after as before judgment).
(d) Interest shall be payable in arrears on each Interest Payment
Date, provided that interest accruing pursuant to paragraph (c) of this Section
shall be payable from time to time on demand.
2.16 Computation of Interest and Fees. (a) Interest, fees and
commissions payable pursuant hereto shall be calculated on the basis of a
360-day year for the actual days elapsed, except that, with respect to Base Rate
Loans the rate of interest on which is calculated on the basis of the Prime
Rate, the interest thereon shall be calculated on the basis of a 365- (or 366-,
as the case may be) day year for the actual days elapsed. The Administrative
Agent shall as soon as practicable notify the Borrower and the relevant Lenders
of each determination of a Eurodollar Rate. Any change in the interest rate on a
Loan resulting from a change in the Base Rate or the Eurocurrency Reserve
Requirements shall become effective as of the opening of business on the day on
which such change becomes effective. The Administrative Agent shall as soon as
practicable notify the Borrower and the relevant Lenders of the effective date
and the amount of each such change in interest rate.
(b) Each determination of an interest rate by the Administrative
Agent pursuant to any provision of this Agreement shall be conclusive and
binding on the Borrower and the Lenders in the absence of manifest error. The
Administrative Agent shall, at the request of the Borrower, deliver to the
Borrower a statement showing the quotations used by the Administrative Agent in
determining any interest rate pursuant to Section 2.15(a).
2.17 Inability to Determine Interest Rate. If prior to the first day
of any Interest Period:
(a) the Administrative Agent shall have determined (which
determination shall be conclusive and binding upon the Borrower) that, by
reason of circumstances affecting the relevant market, adequate and
reasonable means do not exist for ascertaining the Eurodollar Rate for
such Interest Period, or
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(b) the Administrative Agent shall have received notice from the
Majority Facility Lenders in respect of the relevant Facility that the
Eurodollar Rate determined or to be determined for such Interest Period
will not adequately and fairly reflect the cost to such Lenders (as
conclusively certified by such Lenders) of making or maintaining their
affected Loans during such Interest Period,
the Administrative Agent shall give telecopy or telephonic notice thereof to the
Borrower and the relevant Lenders as soon as practicable thereafter. If such
notice is given (x) any Eurodollar Loans under the relevant Facility requested
to be made on the first day of such Interest Period shall be made as Base Rate
Loans, (y) any Loans under the relevant Facility that were to have been
converted on the first day of such Interest Period to Eurodollar Loans shall be
continued as Base Rate Loans and (z) any outstanding Eurodollar Loans under the
relevant Facility shall be converted, on the first day of such Interest Period,
to Base Rate Loans. Until such notice has been withdrawn by the Administrative
Agent, no further Eurodollar Loans under the relevant Facility shall be made or
continued as such, nor shall the Borrower have the right to convert Loans under
the relevant Facility to Eurodollar Loans.
2.18 Pro Rata Treatment and Payments. (a) Each borrowing by the
Borrower from the Lenders hereunder, each payment by the Borrower on account of
any commitment fee and any reduction of the Commitments of the Lenders shall be
made pro rata according to the respective Term Loan Percentages or Revolving
Credit Percentages, as the case may be, of the relevant Lenders.
(b) Each payment (including each prepayment) by the Borrower on
account of principal of and interest on the Term Loans shall be made pro rata
according to the respective outstanding principal amounts of the Term Loans then
held by the Term Loan Lenders. The amount of each principal prepayment of the
Term Loans shall be applied to reduce the then remaining installments of the
Term Loans pro rata based upon the then remaining principal amount thereof,
provided that any prepayment pursuant to Section 2.11 may be applied, at the
option of the Borrower, either (x) first to the next two then scheduled
installments of the Term Loans, and, second, pro rata to each of the remaining
installments of the Term Loans, based upon the then remaining principal amounts
thereof, or (y) pro rata to the remaining installments, based upon the then
remaining principal amounts thereof. Amounts prepaid on account of the Term
Loans may not be reborrowed.
(c) Each payment (including each prepayment) by the Borrower on
account of principal of and interest on the Revolving Credit Loans shall be made
pro rata according to the respective outstanding principal amounts of the
Revolving Credit Loans then held by the Revolving Credit Lenders.
(d) All payments (including prepayments) to be made by the Borrower
hereunder, whether on account of principal, interest, fees or otherwise, shall
be made without set-off or counterclaim and shall be made prior to 1:00 P.M.,
New York City time, on the due date thereof to the Administrative Agent, for the
account of the Lenders, at the Payment Office, in Dollars and in immediately
available funds. The Administrative Agent shall distribute such payments to the
Lenders promptly upon receipt in like funds as received. If
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any payment hereunder (other than payments on the Eurodollar Loans) becomes due
and payable on a day other than a Business Day, such payment shall be extended
to the next succeeding Business Day. If any payment on a Eurodollar Loan becomes
due and payable on a day other than a Business Day, the maturity thereof shall
be extended to the next succeeding Business Day unless the result of such
extension would be to extend such payment into another calendar month, in which
event such payment shall be made on the immediately preceding Business Day. In
the case of any extension of any payment of principal pursuant to the preceding
two sentences, interest thereon shall be payable at the then applicable rate
during such extension.
(e) Unless the Administrative Agent shall have been notified in
writing by any Lender prior to a borrowing that such Lender will not make the
amount that would constitute its share of such borrowing available to the
Administrative Agent, the Administrative Agent may assume that such Lender is
making such amount available to the Administrative Agent, and the Administrative
Agent may, in reliance upon such assumption, make available to the Borrower a
corresponding amount. If such amount is not made available to the Administrative
Agent by the required time on the Borrowing Date therefor, such Lender shall pay
to the Administrative Agent, on demand, such amount with interest thereon at a
rate equal to the daily average Federal Funds Effective Rate for the period
until such Lender makes such amount immediately available to the Administrative
Agent. A certificate of the Administrative Agent submitted to any Lender with
respect to any amounts owing under this paragraph shall be conclusive in the
absence of manifest error. If such Lender's share of such borrowing is not made
available to the Administrative Agent by such Lender within three Business Days
of such Borrowing Date, the Administrative Agent shall also be entitled to
recover such amount with interest thereon at the rate per annum applicable to
Base Rate Loans under the relevant Facility, on demand, from the Borrower.
(f) Unless the Administrative Agent shall have been notified in
writing by the Borrower prior to the date of any payment being made hereunder
that the Borrower will not make such payment to the Administrative Agent, the
Administrative Agent may assume that the Borrower is making such payment, and
the Administrative Agent may, but shall not be required to, in reliance upon
such assumption, make available to the Lenders their respective pro rata shares
of a corresponding amount. If such payment is not made to the Administrative
Agent by the Borrower within three Business Days of such required date, the
Administrative Agent shall be entitled to recover, on demand, from each Lender
to which any amount which was made available pursuant to the preceding sentence,
such amount with interest thereon at the rate per annum equal to the daily
average Federal Funds Effective Rate. Nothing herein shall be deemed to limit
the rights of the Administrative Agent or any Lender against the Borrower.
2.19 Requirements of Law. (a) If the adoption of or any change in
any Requirement of Law or in the interpretation or application thereof or
compliance by any Lender with any request or directive (whether or not having
the force of law) from any central bank or other Governmental Authority made
subsequent to the date hereof (or, if later, the date on which such Lender
becomes a Lender):
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(i) shall subject any Lender to any tax of any kind whatsoever
with respect to this Agreement, any Letter of Credit, any Application or
any Eurodollar Loan made by it, or change the basis of taxation of
payments to such Lender in respect thereof (except for Non-Excluded Taxes
covered by Section 2.20 (including Non-Excluded Taxes imposed solely by
reason of any failure of such Lender to comply with its obligations (if
any) under section 2.20(d)) and changes in the rate of tax on the overall
net income of such Lender and changes in the rate of franchise taxes or
branch profits taxes of such Lender);
(ii) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets
held by, deposits or other liabilities in or for the account of, advances,
loans or other extensions of credit by, or any other acquisition of funds
by, any office of such Lender which is not otherwise included in the
determination of the Eurodollar Rate hereunder; or
(iii) shall impose on such Lender any other condition
(excluding any tax of any kind whatsoever);
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, converting into,
continuing or maintaining Eurodollar Loans or issuing or participating in
Letters of Credit, or to reduce any amount receivable hereunder in respect
thereof, then, in any such case, the Borrower shall promptly pay such Lender,
upon its demand, any additional amounts necessary to compensate such Lender for
such increased cost or reduced amount receivable. If any Lender becomes entitled
to claim any additional amounts pursuant to this Section, it shall promptly
notify the Borrower (with a copy to the Administrative Agent) of the event by
reason of which it has become so entitled.
(b) If any Lender shall have determined that the adoption of or any
change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by such Lender or any
corporation controlling such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any Governmental
Authority made subsequent to the date hereof shall have the effect of reducing
the rate of return on such Lender's or such corporation's capital as a
consequence of its obligations hereunder or under or in respect of any Letter of
Credit to a level below that which such Lender or such corporation could have
achieved but for such adoption, change or compliance (taking into consideration
such Lender's or such corporation's policies with respect to capital adequacy)
by an amount deemed by such Lender to be material, then from time to time, after
submission by such Lender to the Borrower (with a copy to the Administrative
Agent) of a written request therefor, the Borrower shall pay to such Lender such
additional amount or amounts as will compensate such Lender for such reduction;
provided that the Borrower shall not be required to compensate a Lender pursuant
to this paragraph for any amounts incurred more than six months prior to the
date that such Lender notifies the Borrower of such Lender's intention to claim
compensation therefor; and provided further that, if the circumstances giving
rise to such claim have a retroactive effect, then such six-month period shall
be extended to include the period of such retroactive effect.
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(c) A certificate as to any additional amounts payable pursuant to
this Section 2.19 submitted by any Lender to the Borrower (with a copy to the
Administrative Agent) shall be conclusive in the absence of manifest error. The
obligations of the Borrower pursuant to this Section 2.19 shall survive the
termination of this Agreement and the payment of the Loans and all other amounts
payable hereunder.
2.20 Taxes. (a) All payments made by the Borrower under this
Agreement shall be made free and clear of, and without deduction or withholding
for or on account of, any present or future income, stamp or other taxes,
levies, imposts, duties, charges, fees, deductions or withholdings, now or
hereafter imposed, levied, collected, withheld or assessed by any Governmental
Authority, excluding net income taxes, franchise taxes and branch profits taxes
(imposed in lieu of net income taxes) imposed on any Agent or any Lender as a
result of a present or former connection between such Agent or such Lender and
the jurisdiction of the Governmental Authority imposing such tax or any
political subdivision or taxing authority thereof or therein (other than any
such connection arising solely from the Administrative Agent or such Lender
having executed, delivered or performed its obligations or received a payment
under, or enforced, this Agreement or any other Loan Document). If any such
non-excluded taxes, levies, imposts, duties, charges, fees, deductions or
withholdings ("Non-Excluded Taxes") or Other Taxes are required to be withheld
from any amounts payable to any Agent or any Lender hereunder, the amounts so
payable to the Administrative Agent or such Lender shall be increased to the
extent necessary to yield to such Agent or such Lender (after payment of all
Non-Excluded Taxes) interest or any such other amounts payable hereunder at the
rates or in the amounts specified in this Agreement, provided, however, that the
Borrower shall not be required to increase any such amounts payable to any
Lender with respect to any Non-Excluded Taxes (i) that are attributable to such
Lender's failure to comply with the requirements of paragraph (d) of this
Section or (ii) that are United States withholding taxes imposed on amounts
payable to such Lender at the time the Lender becomes a party to this Agreement,
except to the extent that such Lender's assignor (if any) was entitled, at the
time of assignment, to receive additional amounts from the Borrower with respect
to such Non-Excluded Taxes pursuant to Section 2.20(a).
(b) In addition, the Borrower shall pay any Other Taxes to the
relevant Governmental Authority in accordance with applicable law.
(c) Whenever any Non-Excluded Taxes or Other Taxes are payable by
the Borrower, as promptly as possible thereafter the Borrower shall send to the
Administrative Agent for the account of the relevant Agent or Lender, as the
case may be, a certified copy of an original official receipt received by the
Borrower showing payment thereof. If the Borrower fails to pay any Non-Excluded
Taxes or Other Taxes when due to the appropriate taxing authority or fails to
remit to the Agents the required receipts or other required documentary
evidence, the Borrower shall indemnify the Administrative Agent and the Lenders
for any incremental taxes, interest or penalties that may become payable by the
Administrative Agent or any Lender as a result of any such failure. The
agreements in this Section shall survive the termination of this Agreement and
the payment of the Loans and all other amounts payable hereunder.
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(d) Each Lender (or Transferee) that is not a citizen or resident of
the United States of America, a corporation, partnership or other entity created
or organized in or under the laws of the United States of America (or any
jurisdiction thereof), or any estate or trust that is subject to federal income
taxation regardless of the source of its income (a "Non-U.S. Lender") shall
deliver to the Borrower and the Administrative Agent (or, in the case of a
Participant, to the Lender from which the related participation shall have been
purchased) two copies of (X) U.S. Internal Revenue Service Form 1001 or Form
4224, or (Y) in the case of a Non-U.S. Lender claiming exemption from U.S.
federal withholding tax under Section 871(h) or 881(c) of the Code with respect
to payments of "portfolio interest" (i) a statement substantially in the form of
Exhibit H, (ii) a Form W-8 and (iii) to the extent legally entitled to do so,
upon reasonable request by the Borrower, such other forms as may be reasonably
required in order to establish the legal entitlement of such Lender to an
exemption from withholding with respect to payments under this Agreement and any
Notes, provided that in determining the reasonableness of a request under this
clause (iii) such Lender shall be entitled to consider the cost (to the extent
unreimbursed by the Borrower) which would be imposed on such Lender of complying
with such request, and in the case of both (x) and (y), any subsequent versions
thereof or successors thereto properly completed and duly executed by such
Non-U.S. Lender claiming complete exemption from, or a reduced rate of, U.S.
federal withholding tax on all payments by the Borrower under this Agreement and
the other Loan Documents. Such forms shall be delivered by each Non-U.S. Lender
on or before the date it becomes a party to this Agreement (or, in the case of
any Participant, on or before the date such Participant purchases the related
participation). In addition, each Non-U.S. Lender shall deliver such forms
promptly upon the obsolescence or invalidity of any form previously delivered by
such Non-U.S. Lender. Each Non-U.S. Lender shall promptly notify the Borrower at
any time it determines that it is no longer in a position to provide any
previously delivered certificate to the Borrower (or any other form of
certification adopted by the U.S. taxing authorities for such purpose).
Notwithstanding any other provision of this paragraph, a Non-U.S. Lender shall
not be required to deliver any form pursuant to this paragraph that such
Non-U.S. Lender is not legally able to deliver.
2.21 Indemnity. The Borrower agrees to indemnify each Lender and to
hold each Lender harmless from any loss or expense which such Lender may sustain
or incur as a consequence of (a) default by the Borrower in making a borrowing
of, conversion into or continuation of Eurodollar Loans after the Borrower has
given a notice requesting the same in accordance with the provisions of this
Agreement, (b) default by the Borrower in making any prepayment after the
Borrower has given a notice thereof in accordance with the provisions of this
Agreement or (c) the making of a prepayment of Eurodollar Loans on a day which
is not the last day of an Interest Period with respect thereto. Such
indemnification may include an amount equal to the excess, if any, of (i) the
amount of interest which would have accrued on the amount so prepaid, or not so
borrowed, converted or continued, for the period from the date of such
prepayment or of such failure to borrow, convert or continue to the last day of
such Interest Period (or, in the case of a failure to borrow, convert or
continue, the Interest Period that would have commenced on the date of such
failure) in each case at the applicable rate of interest for such Loans provided
for herein (excluding, however, the Applicable Margin included therein, if any)
over (ii) the amount of interest (as reasonably determined by such Lender) which
would have accrued to such Lender on such amount by placing such
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amount on deposit for a comparable period with leading banks in the interbank
eurodollar market. If any Lender becomes entitled to claim any amounts under the
indemnity contained in this Section, it shall provide prompt notice thereof to
the Borrower, through the Administrative Agent, certifying (x) that one of the
events described in clause (a), (b) or (c) of the first sentence of this Section
has occurred and describing in reasonable detail the nature of such event, (y)
as to the loss or expense sustained or incurred by such Lender as a consequence
thereof and (z) as to the amount for which such Lender seeks indemnification
hereunder and a reasonably detailed explanation of the calculation thereof. Such
a certificate as to any indemnification pursuant to this Section submitted by
such Lender, through the Administrative Agent, to the Borrower shall be
conclusive in the absence of manifest error. This covenant shall survive the
termination of this Agreement and the payment of the Loans and all other amounts
payable hereunder.
2.22 Illegality. Notwithstanding any other provision herein, if the
adoption of or any change in any Requirement of Law or in the interpretation or
application thereof occurring after the Closing Date shall make it unlawful for
any Lender to make or maintain any Eurodollar Loans as contemplated by this
Agreement ("Affected Eurodollar Loans"), (a) such Lender shall promptly give
written notice of such circumstances to the Borrower and the Administrative
Agent (which notice shall be withdrawn whenever such circumstances no longer
exist), (b) the commitment of such Lender hereunder to make Affected Eurodollar
Loans, continue Affected Eurodollar Loans as such and convert a Base Rate Loan
to an Affected Eurodollar Loan shall forthwith be cancelled, and, until such
time as it shall no longer be unlawful for such Lender to make or maintain such
Affected Eurodollar Loans, such Lender shall then have a commitment only to make
a Base Rate Loan when an Affected Eurodollar Loan is requested (to the extent
otherwise permitted by Section 2.13), (c) such Lender's Loans then outstanding
as Affected Eurodollar Loans, if any, shall be converted automatically to Base
Rate Loans on the respective last days of the then current Interest Periods with
respect to such Loans or within such earlier period as required by law (to the
extent otherwise permitted by Section 2.13) and (d) such Lender's Loans then
outstanding as Affected Eurodollar Loans, if any, not otherwise permitted to be
converted to Base Rate Loans by Section 2.13 shall, upon notice to the Borrower,
be prepaid with accrued interest thereon on the last day of the then current
Interest Period with respect thereto (or such earlier date as may be required by
any such Requirement of Law). If any such conversion or prepayment of an
Affected Eurodollar Loan occurs on a day which is not the last day of the then
current Interest Period with respect thereto, the applicable Borrower shall pay
to such Lender such amounts, if any, as may be required pursuant to Section
2.21.
2.23 Certain Rules Relating to the Payment of Additional Amounts.
(a) Upon the request, and at the expense, of the Borrower, each Lender to which
the Borrower is required to pay any additional amount pursuant to Section 2.19
or 2.20, and any participant in respect of whose participation such payment is
required, shall reasonably afford the Borrower the opportunity to contest, and
reasonably cooperate with the Borrower in contesting, the imposition of any
Non-Excluded Tax giving rise to such payment; provided that (i) such Lender
shall not be required to afford the Borrower the opportunity so to contest
unless the Borrower shall have confirmed in writing to such Lender its
obligation to pay such amounts pursuant to this Agreement and (ii) the Borrower
shall reimburse such Lender for its
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reasonable attorneys' and accountants' fees and disbursements incurred in so
cooperating with the Borrower in contesting the imposition of such Non-Excluded
Tax; provided, however, that notwithstanding the foregoing no Lender shall be
required to afford the Borrower the opportunity to contest, or cooperate with
the Borrower in contesting, the imposition of any Non-Excluded Taxes, if such
Lender in its sole discretion in good faith determines that to do so would have
an adverse effect on it.
(b) If a Lender changes its applicable lending office (other than pursuant
to paragraph (c) below) and the effect of such change, as of the date of such
change, would be to cause the Borrower to become obligated to pay any additional
amount under Section 2.19 or 2.20, the Borrower shall not be obligated to pay
such additional amount.
(c) If a condition or an event occurs which would, or would upon the
passage of time or giving of notice, result in payment of any additional amount
to any Lender by the Borrower pursuant to Section 2.19 or 2.20, such Lender
shall promptly notify the Borrower and the Administrative Agent and shall take
such steps as may reasonably be available to it to mitigate the effects of such
condition or event (which shall include efforts to rebook the Loans held by such
Lender at another lending office, or through another branch or an affiliate, of
such Lender); provided that such Lender shall not be required to take any step
that, in its reasonable judgment, would be disadvantageous to its business or
operations or would require it to incur additional costs (unless such Borrower
agrees to reimburse such Lender for the reasonable incremental out-or-pocket
costs thereof).
(d) If the Borrower shall become obligated to pay additional amounts
pursuant to Section 2.19 or 2.20 and any affected Lender shall not have promptly
taken steps necessary to avoid the need for payments under Section 2.19 or 2.20,
the Borrower shall have the right, for so long as such obligation remains, (x)
with the assistance of the Administrative Agent, to seek one or more substitute
Lenders reasonably satisfactory to the Administrative Agent and the Borrower to
purchase the affected Loan in whole or in part, at an aggregate price no less
than such Loan's principal amount plus accrued interest, and assume the affected
obligations under this Agreement, or (y) upon at least four Business Days
irrevocable notice to the Administrative Agent, to prepay the affected Loan, in
whole or in part, subject to Section 2.19 or 2.20, without premium or penalty.
In the case of the substitution of a Lender, the Borrower, the Administrative
Agent, the affected lender, and any substitute Lender shall execute and deliver
an appropriately completed Assignment and Acceptance pursuant to Section 10.6(c)
to effect the assignment of rights to, and the assumption of obligations by, the
substitute Lender; provided, that any fees required to be paid by Section
10.6(e) in connection with such assignment shall be paid by the Borrower or the
substitute Lender and provided, further, that the Borrower shall be obligated to
pay to the affected Lender an amount equal to any amount that would have been
payable to such Lender pursuant to Section 2.21 if the affected Loan had been
prepaid in full on the date of the assignment thereof pursuant to this
paragraph. In the case of a prepayment of an affected Loan, the amount specified
in the notice shall be due and payable on the date specified therein, together
with any accrued interest to such date on the amount prepaid. In the case of
each of the substitution of a Lender and of the prepayment of an affected Loan,
the Borrower shall first pay the affected Lender any additional amounts owing
under Sections 2.19 and 2.20 (as well as any
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commitment fees and other amounts then due an owing to such Lender, including,
without limitation, any amounts under Section 2.21) prior to such substitution
or prepayment.
(e) If the Administrative Agent or any Lender or any Participant receives
a refund directly attributable to taxes for which the Borrower has made
additional payments pursuant to Section 2.19(a) or 2.20(a), the Administrative
Agent or such Lender, as the case may be, shall promptly pay such refund
(together with any interest with respect thereto received from the relevant
taxing authority) to the Borrower, provided, however, that the Borrower agrees
promptly to return such refund (together with any interest with respect thereto
due to the relevant taxing authority) (free of all Non-Excluded Taxes) to the
Administrative Agent or the applicable Lender, as the case may be, upon receipt
of a notice that such refund is required to be repaid to the relevant taxing
authority.
(f) The obligations of a Lender or Participant under this Section 2.23
shall survive the termination of this Agreement and the payment of the Loans and
all amounts payable hereunder.
SECTION 3. LETTERS OF CREDIT
3.1 L/C Commitment. (a) Subject to the terms and conditions hereof,
the Issuing Lender, in reliance on the agreements of the other Revolving Credit
Lenders set forth in Section 3.4(a), agrees to issue letters of credit ("Letters
of Credit") for the account of the Borrower on any Business Day during the
Revolving Credit Commitment Period denominated in Dollars or an Alternative
Currency in such form as may be approved from time to time by the Issuing
Lender; provided that the Issuing Lender shall have no obligation to issue any
Letter of Credit if, after giving effect to such issuance, (i) the L/C
Obligations would exceed the L/C Commitment or (ii) the aggregate amount of the
Available Revolving Credit Commitments would be less than zero. Each Letter of
Credit shall (i) be denominated in Dollars and (ii) expire no later than the
earlier of (x) the first anniversary of its date of issuance and (y) the date
which is five Business Days prior to the Scheduled Revolving Credit Termination
Date, provided that any Letter of Credit with a one-year term may provide for
the renewal thereof for additional one-year periods (which shall in no event
extend beyond the date referred to in clause (y) above). Each Letter of Credit
shall be either (x) a standby letter of credit issued to support obligations of
the Borrower or any of its Subsidiaries, contingent or otherwise, which finance
the working capital and business needs of the Borrower and its Subsidiaries
incurred in the ordinary course of business, or (y) a commercial letter of
credit in respect of the purchase of goods or services by the Borrower or any of
its Subsidiaries in the ordinary course of business.
(b) Each Letter of Credit shall be subject to the Uniform Customs
and, to the extent not inconsistent therewith, the laws of the State of New
York.
(c) The Issuing Lender shall not at any time be obligated to issue
any Letter of Credit hereunder if such issuance would conflict with, or cause
the Issuing Lender or any L/C Participant to exceed any limits imposed by, any
applicable Requirement of Law.
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3.2 Procedure for Issuance of Letter of Credit. The Borrower may
from time to time request that the Issuing Lender issue a Letter of Credit by
delivering to the Issuing Lender at its address for notices specified herein an
Application therefor, completed to the satisfaction of the Issuing Lender and
specifying the currency in which the Letter of Credit is to be issued, and such
other certificates, documents and other papers and information as the Issuing
Lender may reasonably request. Upon receipt of any Application, the Issuing
Lender will process such Application and the certificates, documents and other
papers and information delivered to it in connection therewith in accordance
with its customary procedures and shall promptly issue the Letter of Credit
requested thereby (but in no event shall the Issuing Lender be required to issue
any Letter of Credit earlier than three Business Days after its receipt of the
Application therefor and all such other certificates, documents and other papers
and information relating thereto) by issuing the original of such Letter of
Credit to the beneficiary thereof or as otherwise may be agreed to by the
Issuing Lender and the Borrower. The Issuing Lender shall furnish a copy of such
Letter of Credit to the Borrower promptly following the issuance thereof. The
Issuing Lender shall promptly furnish to the Administrative Agent, which shall
in turn promptly furnish to the Lenders, notice of the issuance of each Letter
of Credit (including the amount thereof).
3.3 Commissions, Fees and Other Charges. (a) The Borrower will pay a
commission on all outstanding Letters of Credit at a per annum rate equal to the
Applicable Margin then in effect with respect to Eurodollar Loans under the
Revolving Credit Facility, shared ratably among the Revolving Credit Lenders and
payable quarterly in arrears on each L/C Fee Payment Date after the issuance
date (calculated, in the case of Letters of Credit denominated in Alternative
Currencies, based upon the respective Assigned Dollar Values for such Letters of
Credit). In addition, the Borrower shall pay to the Issuing Lender for its own
account a fronting fee of 1/4 of 1% per annum, payable quarterly in arrears on
each L/C Fee Payment Date after the Issuance Date.
(b) In addition to the foregoing fees and commissions, the Borrower
shall pay or reimburse the Issuing Lender for such normal and customary costs
and expenses as are incurred or charged by the Issuing Lender in issuing,
negotiating, effecting payment under, amending or otherwise administering any
Letter of Credit.
3.4 L/C Participations. (a) The Issuing Lender irrevocably agrees to
grant and hereby grants to each L/C Participant, and, to induce the Issuing
Lender to issue Letters of Credit hereunder, each L/C Participant irrevocably
agrees to accept and purchase and hereby accepts and purchases from the Issuing
Lender, on the terms and conditions hereinafter stated, for such L/C
Participant's own account and risk an undivided interest equal to such L/C
Participant's Revolving Credit Percentage in the Issuing Lender's obligations
and rights under each Letter of Credit issued hereunder and the amount of each
draft paid by the Issuing Lender thereunder. Each L/C Participant
unconditionally and irrevocably agrees with the Issuing Lender that, if a draft
is paid under any Letter of Credit for which the Issuing Lender is not
reimbursed in full by the Borrower in accordance with the terms of this
Agreement, such L/C Participant shall pay to the Issuing Lender upon demand at
the Issuing Lender's address for notices specified herein an amount equal to
such L/C Participant's Revolving
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Credit Percentage of the amount of such draft, or any part thereof, which is not
so reimbursed.
(b) If any amount required to be paid by any L/C Participant to the
Issuing Lender pursuant to Section 3.4(a) in respect of any unreimbursed portion
of any payment made by the Issuing Lender under any Letter of Credit is paid to
the Issuing Lender within three Business Days after the date such payment is
due, such L/C Participant shall pay to the Issuing Lender on demand an amount
equal to the product of (i) such amount, times (ii) the daily average Federal
Funds Effective Rate during the period from and including the date such payment
is required to the date on which such payment is immediately available to the
Issuing Lender, times (iii) a fraction the numerator of which is the number of
days that elapse during such period and the denominator of which is 360. If any
such amount required to be paid by any L/C Participant pursuant to Section
3.4(a) is not made available to the Issuing Lender by such L/C Participant
within three Business Days after the date such payment is due, the Issuing
Lender shall be entitled to recover from such L/C Participant, on demand, such
amount with interest thereon calculated from such due date at the rate per annum
applicable to Base Rate Loans under the Revolving Credit Facility. A certificate
of the Issuing Lender submitted to any L/C Participant with respect to any
amounts owing under this Section shall be conclusive in the absence of manifest
error.
(c) Whenever, at any time after the Issuing Lender has made payment
under any Letter of Credit and has received from any L/C Participant its pro
rata share of such payment in accordance with Section 3.4(a), the Issuing Lender
receives any payment related to such Letter of Credit (whether directly from the
Borrower or otherwise, including proceeds of collateral applied thereto by the
Issuing Lender), or any payment of interest on account thereof, the Issuing
Lender will distribute to such L/C Participant its pro rata share thereof;
provided, however, that in the event that any such payment received by the
Issuing Lender shall be required to be returned by the Issuing Lender, such L/C
Participant shall return to the Issuing Lender the portion thereof previously
distributed by the Issuing Lender to it.
3.5 Reimbursement Obligation of the Borrower. The Borrower agrees to
reimburse the Issuing Lender on each date on which the Issuing Lender notifies
the Borrower of the date and amount of a draft presented under any Letter of
Credit and paid by the Issuing Lender for the amount of (a) such draft so paid
(calculated, in the case of a Letter of Credit denominated in an Alternative
Currency, based upon the Dollar Equivalent of such draft) and (b) any taxes,
fees, charges or other costs or expenses incurred by the Issuing Lender in
connection with such payment. Each such payment shall be made to the Issuing
Lender at its address for notices specified herein in lawful money of the United
States of America and in immediately available funds on the date which the
Borrower receives such notice, if received prior to 11:00 A.M., New York City
time, on a Business Day and, otherwise, on the next succeeding Business Day.
Interest shall be payable on any and all amounts remaining unpaid by the
Borrower under this Section from the date such amounts become payable (whether
at stated maturity, by acceleration or otherwise) until payment in full at the
rate set forth in (i) until the second Business Day following the date of the
applicable drawing, Section 2.15(b) and (ii) thereafter, Section 2.15(c). Each
drawing under any Letter of Credit shall (unless an event of the type described
in clause (i) or (ii) of Section 8(f) shall have occurred and be
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continuing with respect to the Borrower, in which case the procedures specified
in Section 3.4 for funding by L/C Participants shall apply) constitute a request
by the Borrower to the Administrative Agent for a borrowing pursuant to Section
2.5 of Base Rate Loans (or, at the option of the Administrative Agent and the
Swing Line Lender in their sole discretion, a borrowing pursuant to Section 2.7
of Swing Line Loans) in the amount of such drawing. The Borrowing Date with
respect to such borrowing shall be the date of such drawing.
3.6 Obligations Absolute. The Borrower's obligations under this
Section 3 shall be absolute and unconditional under any and all circumstances
and irrespective of any set-off, counterclaim or defense to payment which the
Borrower may have or have had against the Issuing Lender, any beneficiary of a
Letter of Credit or any other Person. The Borrower also agrees with the Issuing
Lender that the Issuing Lender shall not be responsible for, and the Borrower's
Reimbursement Obligations under Section 3.5 shall not be affected by, among
other things, the validity or genuineness of documents or of any endorsements
thereon, even though such documents shall in fact prove to be invalid,
fraudulent or forged, or any dispute between or among the Borrower and any
beneficiary of any Letter of Credit or any other party to which such Letter of
Credit may be transferred or any claims whatsoever of the Borrower against any
beneficiary of such Letter of Credit or any such transferee. The Issuing Lender
shall not be liable for any error, omission, interruption or delay in
transmission, dispatch or delivery of any message or advice, however
transmitted, in connection with any Letter of Credit, except for errors or
omissions found by a final and nonappealable decision of a court of competent
jurisdiction to have resulted from the gross negligence or willful misconduct of
the Issuing Lender. The Borrower agrees that any action taken or omitted by the
Issuing Lender under or in connection with any Letter of Credit or the related
drafts or documents, if done in the absence of gross negligence or willful
misconduct and in accordance with the standards or care specified in the Uniform
Commercial Code of the State of New York, shall be binding on the Borrower and
shall not result in any liability of the Issuing Lender to the Borrower.
3.7 Letter of Credit Payments. If any draft shall be presented for
payment under any Letter of Credit, the Issuing Lender shall promptly notify the
Borrower of the date and amount thereof. The responsibility of the Issuing
Lender to the Borrower in connection with any draft presented for payment under
any Letter of Credit shall, in addition to any payment obligation expressly
provided for in such Letter of Credit, be limited to determining that the
documents (including each draft) delivered under such Letter of Credit in
connection with such presentment are in conformity with such Letter of Credit,
provided that this paragraph shall not relieve the Issuing Lender of any
liability resulting from the gross negligence or willful misconduct of the
Issuing Lender or otherwise effect any defense or other right that the Borrower
may have as a result of such gross negligence or willful misconduct.
3.8 Applications. To the extent that any provision of any
Application related to any Letter of Credit is inconsistent with the provisions
of this Section 3, the provisions of this Section 3 shall apply.
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49
SECTION 4. REPRESENTATIONS AND WARRANTIES
To induce the Agents and the Lenders to enter into this Agreement
and to make the Loans and issue or participate in the Letters of Credit, the
Borrower hereby represents and warrants to the Administrative Agent and each
Lender that:
4.1 Financial Condition. (a) The unaudited pro forma consolidated
balance sheet of the Borrower and its consolidated Subsidiaries as at September
30, 1997 (including the notes thereto) (the "Pro Forma Balance Sheet"), copies
of which have heretofore been furnished to each Lender, has been prepared giving
effect to the matters referred to therein. The Pro Forma Balance Sheet has been
prepared based on the best information available to the Borrower as of the date
of delivery thereof and presents fairly in all material respects on a pro forma
basis the estimated financial position of the Borrower and its consolidated
Subsidiaries as at September 30, 1997 assuming that the events specified in the
preceding sentence had actually occurred at such date.
(b) The audited consolidated balance sheets of Day International
Group, Inc. as at December 31, 1995 and December 31, 1996, and the related
consolidated statements of income and of cash flows for the fiscal years ended
on such dates, reported on by Deloitte & Touche, present fairly, in all material
respects, the consolidated financial condition of the Borrower and its
consolidated Subsidiaries as at such date, and the consolidated results of its
operations and its consolidated cash flows for the respective fiscal years then
ended. The unaudited consolidated balance sheet of Day International Group, Inc.
as at September 30, 1997, and the related unaudited consolidated statements of
income and cash flows for the nine-month period ended on such date, present
fairly, in all material respects, the consolidated financial condition of the
Borrower and its consolidated Subsidiaries as at such date, and the consolidated
results of its operations and its consolidated cash flows for the nine-month
period then ended (subject to normal year-end audit adjustments and any other
adjustments described therein). All such financial statements, including the
related schedules and notes thereto, have been prepared in accordance with GAAP
applied consistently throughout the periods involved (except as stated in the
financial statements, including the related notes, and except that the quarterly
financial statements do not contain all of the footnote disclosures required by
GAAP). During the period from September 30, 1997 to and including the date
hereof there has been no Disposition by the Borrower and its consolidated
Subsidiaries of any material part of its business or Property, taken as a whole.
4.2 No Change. Since September 30, 1997 (other than as may result
from the incurrence of the Indebtedness hereunder or of Indebtedness pursuant to
Section 7.2(g) or Section 7.2(a)) there has been no development or event which
has had or would reasonably be expected to have a Material Adverse Effect.
4.3 Corporate Existence; Compliance with Law. Each of Holdings, the
Borrower and its Subsidiaries (a) is duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization, (b) has
the corporate power and authority, and the legal right, to own and operate its
Property, to lease the Property it operates as lessee and to conduct the
business in which it is currently engaged, (c) is duly qualified as
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50
a foreign corporation and in good standing under the laws of each jurisdiction
other than where the absence of such qualification would have a Material Adverse
Effect and (d) is in compliance with all Requirements of Law except to the
extent that the failure to comply therewith would not, in the aggregate,
reasonably be expected to have a Material Adverse Effect.
4.4 Corporate Power; Authorization; Enforceable Obligations. Each
Loan Party has the corporate power and authority, and the legal right, to make,
deliver and perform the Loan Documents to which it is a party and, in the case
of the Borrower, to borrow hereunder. Each Loan Party has taken all necessary
corporate action to authorize the execution, delivery and performance of the
Loan Documents to which it is a party and, in the case of the Borrower, to
authorize the borrowings on the terms and conditions of this Agreement. No
consent or authorization of, filing with, notice to or other act by or in
respect of, any Governmental Authority or any other Person is required in
connection with the Acquisition and the borrowings hereunder or with the
execution, delivery, performance, validity or enforceability of this Agreement
or any of the Loan Documents, except (i) consents, authorizations, filings and
notices described in Schedule 4.4, which consents, authorizations, filings and
notices have been obtained or made and are in full force and effect, (ii) the
filings referred to in Section 4.19 and (iii) consents, authorizations, notices
and filings which the failure to obtain or make would not reasonably be expected
to have a Material Adverse Effect. This Agreement has been duly executed by the
Borrower, and each of the other Loan Documents have been, or will be, duly
executed and delivered on behalf of each Loan Party thereto. This Agreement
constitutes, and each other Loan Document upon execution will constitute, a
legal, valid and binding obligation of each Loan Party thereto, enforceable
against each such Loan Party in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
4.5 No Legal Bar. The execution, delivery and performance of this
Agreement and the other Loan Documents, the issuance of Letters of Credit, the
borrowings hereunder and the use of the proceeds thereof will not violate any
Requirement of Law or any Contractual Obligation of the Borrower or any of its
Subsidiaries in any respect that would reasonably be expected to have a Material
Adverse Effect, and will not result in, or require, the creation or imposition
of any Lien other than Liens permitted by Section 7.3 on any of their respective
properties or revenues pursuant to any Requirement of Law or any such
Contractual Obligation (other than the Liens created by the Security Documents).
No Requirement of Law or Contractual Obligation applicable to the Borrower or
any of its Subsidiaries could reasonably be expected to have a Material Adverse
Effect.
4.6 No Material Litigation. No litigation, investigation or
proceeding of or before any arbitrator or Governmental Authority is pending or,
to the knowledge of the Borrower, threatened by or against the Borrower or any
of its Subsidiaries or against any of their respective properties or revenues,
(a) except as described on Schedule 4.6 hereto, which is so pending or
threatened at any time on or prior to the date hereof and relates to any of the
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51
Loan Documents or the Acquisition or any of the transactions contemplated hereby
or thereby or (b) which would reasonably be expected to have a Material Adverse
Effect.
4.7 No Default. Neither the Borrower nor any of its Subsidiaries is
in default under or with respect to any of its Contractual Obligations in any
respect which would reasonably be expected to have a Material Adverse Effect. No
Default or Event of Default has occurred and is continuing.
4.8 Ownership of Property; Liens. Each of the Borrower and its
Subsidiaries has title in fee simple to, or a valid leasehold interest in, all
its material real property, and good title to, or a valid leasehold interest in,
all its other material Property, and none of such Property is subject to any
Lien except as permitted by Section 7.3.
4.9 Intellectual Property. The Borrower and each of its Subsidiaries
owns, or has the legal right to use, all patents, patent applications,
trademarks, trademark applications, trade names, copyrights, technology,
know-how and processes necessary for each of them to conduct its business as
currently conducted (the "Intellectual Property") except for those the failure
to own or have such legal right to use would not reasonably be expected to have
a Material Adverse Effect. Except as provided on Schedule 4.9, no material claim
has been asserted and is pending by any Person challenging or questioning the
use of any such Intellectual Property or the validity or effectiveness of any
such Intellectual Property, nor does the Borrower know of any such claim, and,
except as provided on Schedule 4.9, to the knowledge of the Borrower, the use of
such Intellectual Property by the Borrower and its Subsidiaries does not
infringe on the rights of any Person, except for such claims and infringement
which in the aggregate, would not reasonably be expected to have a Material
Adverse Effect.
4.10 Taxes. To the knowledge of the Borrower the Borrower and each
of its Subsidiaries has filed or caused to be filed all U.S. Federal, state and
other material tax returns which are required to be filed and has paid all taxes
shown to be due and payable on said returns or on any assessments of which it
has received notice made against it or any of its Property and all other taxes,
fees or other charges imposed on it or any of its Property by any Governmental
Authority and no tax Lien has been filed, and, no claim is being asserted, with
respect to any such tax, fee or other charge (other than any amount or validity
of which are currently being contested in good faith by appropriate proceedings
and with respect to which reserves in conformity with GAAP have been provided on
the books of the Borrower or its Subsidiaries, as the case may be).
4.11 Federal Regulations. No part of the proceeds of any Loans will
be used for "purchasing" or "carrying" any "margin stock" within the respective
meanings of each of the quoted terms under Regulation G or Regulation U as now
and from time to time hereafter in effect or for any purpose which violates the
provisions of such Regulations of the Board. If requested by any Lender or the
Administrative Agent, the Borrower will furnish to the Administrative Agent and
each Lender a statement to the foregoing effect in conformity with the
requirements of FR Form G-3 or FR Form U-1 referred to in Regulation G or
Regulation U, as the case may be.
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4.12 Labor Matters. There are no strikes or other labor disputes
against the Borrower or any of its Subsidiaries pending or, to the knowledge of
the Borrower, threatened that (individually or in the aggregate) would
reasonably be expected to have a Material Adverse Effect. Hours worked by and
payment made to employees of the Borrower and its Subsidiaries have not been in
violation of the Fair Labor Standards Act or any other applicable Requirement of
Law dealing with such matters except where such violations (individually or in
the aggregate) would not reasonably be expected to have a Material Adverse
Effect. The consummation of the Transactions will not give rise to a right of
termination or right of renegotiation on the part of any union under any
collective bargaining agreement to which the Borrower or any of its Subsidiaries
(or any predecessor) is a party or by which the Borrower or any of its
Subsidiaries (or any predecessor) is bound.
4.13 ERISA. Neither a Reportable Event nor an "accumulated funding
deficiency" (within the meaning of Section 412 of the Code or Section 302 of
ERISA) has occurred during the five-year period prior to the date on which this
representation is made or deemed made with respect to any Plan, which, and each
Plan has complied in all material respects with the applicable provisions of
ERISA and the Code except where such Reportable Event, "Accumulated Funding
Deficiency", or non-compliance, individually or in the aggregate, has not
resulted and is not reasonably likely to result in a Material Adverse Effect. No
termination of a Single Employer Plan has occurred (other than a standard
termination pursuant to Section 4041(b) of ERISA), and no Lien on the property
of the Borrower or its Subsidiaries in favor of the PBGC or a Plan has arisen,
during such five-year period which has resulted or is reasonably likely to
result in a Material Adverse Effect. The present value of all accrued benefits
under each Single Employer Plan (based on those assumptions used to fund such
Plans) did not, as of the last annual valuation date prior to the date on which
this representation is made or deemed made, exceed the value of the assets of
such Plan allocable to such accrued benefits by an amount which has resulted or
is reasonably likely to result in a Material Adverse Effect. Neither the
Borrower nor any Commonly Controlled Entity has had a complete or partial
withdrawal from any Multiemployer Plan which has resulted or is reasonably
likely to result in a Material Adverse Effect, and neither the Borrower nor any
Commonly Controlled Entity would become subject to any material liability under
ERISA which is reasonably likely to result in a Material Adverse Effect if the
Borrower or any such Commonly Controlled Entity were to withdraw completely from
all Multiemployer Plans as of the annual valuation date most closely preceding
the date on which this representation is made or deemed made. No Multiemployer
Plan is in Reorganization or Insolvent.
4.14 Investment Company Act; Other Regulations. No Loan Party is an
"investment company", or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended. No Loan
Party is subject to regulation under any Requirement of Law (other than
Regulation X of the Board) which limits its ability to incur Indebtedness as
contemplated hereby.
4.15 Subsidiaries. The Subsidiaries listed on Schedule 4.15
constitute all the Subsidiaries of the Borrower at the date hereof.
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4.16 Use of Proceeds. The proceeds of the Term Loans shall be used
to finance a portion of the Acquisition and to pay related fees and expenses.
The proceeds of the Revolving Credit Loans and the Swing Line Loans, and the
Letters of Credit, shall be used for general corporate purposes (including the
financing of the Acquisition and the fees and expenses relating thereto and any
such fees and expenses associated with the incurrence of any Indebtedness
permitted by Section 7.2(g) or with the amendments referred to in Section 6.10).
4.17 Environmental Matters. Other than as set forth in Schedule 4.17
hereto:
(a) The facilities and properties owned, leased or operated by
Holdings, the Borrower or any of its Subsidiaries (the "Properties") do not
contain, and have not previously contained, any Materials of Environmental
Concern in amounts or concentrations or under circumstances which (i) constitute
or constituted a violation of, or (ii) could give rise to liability under, any
Environmental Law, except in either case insofar as such violation or liability,
or any aggregation thereof, would not reasonably be expected to result in a
Material Adverse Effect.
(b) The Properties and all operations at the Properties are in
material compliance, and since June 6, 1995 have been in material compliance,
with all applicable Environmental Laws, and there is no contamination at, under
or about the Properties or violation of any Environmental Law with respect to
the Properties or the business operated by Holdings, the Borrower or any of its
Subsidiaries (the "Business") which would reasonably be expected to result in a
Material Adverse Effect or materially impair the fair saleable value thereof.
(c) Neither Holdings, the Borrower nor any of its Subsidiaries has
received or is aware of any notice of violation, alleged violation,
non-compliance, liability or potential liability regarding environmental matters
or compliance with Environmental Laws with regard to any of the Properties or
the Business, nor does Holdings or the Borrower have knowledge or reason to
believe that any such notice will be received or is being threatened, except
insofar as such notice or threatened notice, or any aggregation thereof, does
not involve a matter or matters that would reasonably be expected to result in a
Material Adverse Effect.
(d) Materials of Environmental Concern have not been transported or
disposed of from the Properties in violation of, or in a manner or to a location
which could give rise to liability under, any Environmental Law, nor have any
Materials of Environmental Concern been generated, treated, stored or disposed
of at, on or under any of the Properties in violation of, or in a manner that
could give rise to liability under, any applicable Environmental Law, except
insofar as any such violation or liability referred to in this paragraph, or any
aggregation thereof, would not reasonably be expected to result in a Material
Adverse Effect.
(e) No judicial proceeding or governmental or administrative action
is pending or, to the knowledge of Holdings and the Borrower, threatened, under
any Environmental Law to which Holdings, the Borrower or any Subsidiary is or
will be named as a party with
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54
respect to the Properties or the Business, nor are there any consent decrees or
other decrees, consent orders, administrative orders or other orders, or other
administrative or judicial requirements outstanding under any Environmental Law
with respect to the Properties or the Business, except insofar as such
proceeding, action, decree, order or other requirement, or any aggregation
thereof, would not reasonably be expected to result in a Material Adverse
Effect.
(f) There has been no release or threat of release of Materials of
Environmental Concern at or from the Properties, or arising from or related to
the operations of Holdings, the Borrower or any Subsidiary in connection with
the Properties or otherwise in connection with the Business, in violation of or
in amounts or in a manner that could give rise to liability under Environmental
Laws, except insofar as any such violation or liability referred to in this
paragraph, or any aggregation thereof, would not reasonably be expected to
result in a Material Adverse Effect.
4.18 Accuracy of Information, etc. No written statement or
information contained in this Agreement, any other Loan Document or any other
document, certificate or statement furnished to the Administrative Agent or the
Lenders or any of them, by or on behalf of any Loan Party for use in connection
with the transactions contemplated by this Agreement or the other Loan
Documents, contained as of the Closing Date, any untrue statement of a material
fact or omitted to state a material fact necessary in order to make the
statements contained herein or therein not misleading in light of the
circumstances under which such statements were made. The projections and pro
forma financial information contained in the materials referenced above are
based upon good faith estimates and assumptions believed by management of the
Borrower to be reasonable at the time made, it being recognized by the Lenders
that such financial information as it relates to future events is not to be
viewed as fact and that actual results during the period or periods covered by
such financial information may differ from the projected results set forth
therein by a material amount. As of the Closing Date, the representations and
warranties contained in the Acquisition Agreement (after giving effect to any
modifications thereto which do not violate the provisions of Section 7.17 or
result in the failure of the condition set forth in Section 5.1(c)(i) to be
satisfied) are true and correct to the extent necessary to cause the conditions
in Section 8.1(b) of the Purchase Agreement to be satisfied.
4.19 Collateral. Except with respect to (i) Liens on equipment
constituting fixtures, (ii) any reserved rights of the United States government
as required under law, (iii) Liens upon Patents, Patent Licenses, Trademarks and
Trademark Licenses (as such terms are defined in the Guarantee and Collateral
Agreement) to the extent that (a) such Liens are not otherwise perfected by the
filing of financing statements under the Uniform Commercial Code or by the
filing and acceptance thereof in the United States Patent and Trademark Office
or (b) such Patents, Patent Licenses, Trademarks and Trademark Licenses are not,
individually or in the aggregate, material to the business of the Borrower and
its Subsidiaries taken as a whole, (iv) Liens on uncertificated securities, (v)
Liens on Collateral the perfection of which requires filings in or other actions
under the laws of jurisdictions outside of the United States of America, any
State, territory or dependency thereof or the District of Columbia (except to
the extent such filings or other actions have been made or taken), (vi) Liens on
Proceeds of Accounts Receivable and Inventory, until transferred to or deposited
in the Collateral
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Proceeds Account (if any) as defined in the Guarantee and Collateral Agreement
of the Credit Agreement, and (vii) claims of creditors of Persons receiving
goods included as Collateral for "sale or return" within the meaning of Section
2-326 of the Uniform Commercial Code of the applicable jurisdiction, upon filing
of the financing statements delivered to the Administrative Agent by the
Borrower and its Subsidiaries on the Closing Date in the jurisdictions listed on
Schedule 4.19(a) (which financing statements are in proper form for filing in
such jurisdictions) and the recording of the Mortgages listed on Schedule
4.19(b) (and the recording of the Patent and Trademark Security Agreement, and
the making of filings after the Closing Date in any other jurisdiction as may be
necessary under any Requirement of Law) and the delivery to, and continuing
possession by, the Administrative Agent of all Instruments and Documents a
security interest in which is perfected by possession, the Liens created
pursuant to each Security Document, which when executed and delivered, will
constitute valid Liens on and, to the extent provided therein, perfected
security interests in the collateral referred to in such Security Document (but
as to the Copyrights and the Copyright Licenses (as defined in the Guarantee and
Collateral Agreement) and accounts arising therefrom, only to the extent the
Uniform Commercial Code of the relevant jurisdiction, from time to time in
effect, is applicable) in favor of the Administrative Agent for the benefit of
the Lenders, which Liens will be prior to all other Liens of all other Persons,
except for Liens permitted pursuant to the Loan Documents (including, without
limitation, those permitted to exist pursuant to Section 7.3), and which Liens
are enforceable as such as against all other Persons (except, with respect to
goods only, buyers in the ordinary course of business to the extent provided in
Section 9-307(l) of the Uniform Commercial Code as from time to time in effect
in the applicable jurisdiction and except to the extent that recording of an
assignment or other transfer of title to the Administrative Agent in the United
States Patent and Trademark Office or the United States Copyright Office or
other applicable office may be necessary for such enforceability), except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law). Notwithstanding any
other provision of this Agreement, capitalized terms which are used in this
Section 4.19 and not defined in this Agreement are so used as defined in the
applicable Security Document.
4.20 Solvency. Each Loan Party is, and after giving effect to the
Acquisition and the incurrence of all Indebtedness and obligations being
incurred in connection herewith and therewith will be Solvent.
4.21 Regulation H. No Mortgage encumbers improved real property
which is located in an area that has been identified by the Secretary of Housing
and Urban Development as an area having special flood hazards and in which flood
insurance has been made available under the National Flood Insurance Act of
1968.
4.22 Ownership of Stock. On the Closing Date all the issued and
outstanding Capital Stock of (a) the Borrower will be owned by Holdings and
certain of the management stockholders of the Borrower who are parties to the
Acquisition Agreement and (b) Sisterco will be owned by Holdings.
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SECTION 5. CONDITIONS PRECEDENT
5.1 Conditions to Initial Extension of Credit. The agreement of each
Lender to make the initial extension of credit requested to be made by it is
subject to the satisfaction, prior to or concurrently with the making of such
extension of credit on the Closing Date, of the following conditions precedent:
(a) Loan Documents. The Administrative Agent shall have received (i)
this Agreement, executed and delivered by a duly authorized officer of the
Borrower, (ii) the Guarantee and Collateral Agreement, executed and
delivered by a duly authorized officer of the Borrower and each Subsidiary
Guarantor, (iii) the Patent and Trademark Security Agreement, executed and
delivered by a duly authorized officer of Day International, Inc., (iv) a
Mortgage covering each of the Mortgaged Properties, executed and delivered
by a duly authorized officer of each party thereto, (v) for the account of
each relevant Lender, Notes conforming to the requirements hereof and
executed and delivered by a duly authorized officer of the Borrower and
(vi) the Holdings Guarantee and Pledge Agreement, executed and delivered
by a duly authorized officer of Holdings.
(b) Holdings Senior Credit Agreement. The Administrative Agent shall
have received true and correct copies, certified by an officer of the
Borrower, of the Holdings Senior Credit Agreement and any notes executed
and delivered by Holdings pursuant thereto.
(c) Acquisition, etc. The following transactions shall have been
consummated, in each case on terms and conditions reasonably satisfactory
to the Lenders:
(i) Holdings shall have acquired all of the Capital
Stock of the Borrower (other than those shares of Capital Stock
currently owned and to be retained by certain of the management
stockholders of the Borrower who are parties to the Acquisition
Agreement) pursuant to the terms of the Acquisition Agreement
without any waiver of any of the material conditions to the
obligations of Holdings to consummate the Acquisition (including,
without limitation, any such waiver effected by Holdings failing to
exercise its right to terminate the Acquisition Agreement pursuant
to the provisions of Section 7.9 of the Acquisition Agreement after
it shall have been informed that a representation and warranty in
the Acquisition Agreement is untrue) that has not been consented to
by the Lenders;
(ii) Holdings shall have received at least $81,000,000
from the proceeds of equity issued by the Borrower; and
(iii) The Holdings Senior Credit Agreement shall have
become effective in accordance with its terms and Holdings shall
have received proceeds of loans thereunder in an aggregate amount
equal to $140,000,000.
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(d) Approvals. All material governmental and third party approvals
(including landlords' and other consents) necessary in connection with the
Acquisition, the continuing operations of Holdings, the Borrower and its
Subsidiaries and the transactions contemplated hereby shall have been
obtained and be in full force and effect, and all applicable waiting
periods shall have expired without any action being taken or threatened by
any competent authority which would materially restrain, prevent or
otherwise impose material adverse conditions on the Acquisition or the
financing contemplated hereby.
(e) Related Agreements. The Administrative Agent shall have
received, with a copy for each Lender, true and correct copies, certified
as to authenticity by the Borrower, of (i) the employment contracts of (A)
Dennis R. Wolters, (B) David B. Freimuth and (C) Michael McLean and (ii)
the Tax Sharing Agreement, dated January 15, 1998, among Holdings and the
Borrower and any agreement or acknowledgement entered into between the
Borrower and its Subsidiaries pursuant to Section 9.1 of such Tax Sharing
Agreement (the "Tax Sharing Agreement") and (iii) the Stockholders
Agreement, dated January 15, 1998, among Holdings and the Sponsors.
(f) Termination of Existing Credit Facilities. The Administrative
Agent shall have received evidence satisfactory to the Administrative
Agent that the Existing Credit Facilities shall be simultaneously
terminated, all amounts thereunder shall be simultaneously paid in full
and arrangements satisfactory to the Administrative Agent shall have been
made for the termination of Liens and security interests granted in
connection therewith.
(g) Fees. The Lenders and the Administrative Agent shall have
received all fees required to be paid by the Borrower to the
Administrative Agent or the Lenders in connection herewith, and all
expenses for which invoices have been presented, on or before the Closing
Date.
(h) Solvency Opinion. The Lenders shall have received a reasonably
satisfactory solvency opinion issued by Appraisal Economics, Inc. which
shall document the solvency of the Borrower and its Subsidiaries
considered as a whole after giving effect to the transactions contemplated
hereby.
(i) Lien Searches. The Administrative Agent shall have received the
results of a recent lien search in each of the jurisdictions where assets
of the Loan Parties are located, and such search shall reveal no liens on
any of the assets of the Borrower or its Subsidiaries except for liens
permitted by Section 7.3.
(j) Environmental Audit. The Administrative Agent shall have
received copies of environmental audits prepared with respect to each of
the real properties of the Borrower and its Subsidiaries.
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(k) Expenses. The Administrative Agent shall have received
satisfactory evidence that the fees and expenses to be incurred in
connection with the Acquisition and the financing thereof (exclusive of
any fees associated with the amendments referred to in Section 6.10) shall
not exceed $18,000,000, no more than $10,000,000 of which shall be payable
on the Closing Date.
(l) Closing Certificate. The Administrative Agent shall have
received, with a counterpart for each Lender, a certificate of each Loan
Party, dated the Closing Date, substantially in the form of Exhibit I,
with appropriate insertions and attachments.
(m) Legal Opinions. The Administrative Agent shall have received the
legal opinion of Debevoise & Plimpton, counsel to the Borrower and its
Subsidiaries, substantially in the form of Exhibit J and such legal
opinion shall cover such other matters incident to the transactions
contemplated by this Agreement as the Administrative Agent may reasonably
require.
(n) Pledged Stock; Stock Power; Pledged Notes. The Administrative
Agent shall have received (i) the certificates representing the shares of
Capital Stock pledged pursuant to the Guarantee and Collateral Agreement
and the Holdings Guarantee and Pledge Agreement, together with an undated
stock power for each such certificate executed in blank by a duly
authorized officer of the pledgor thereof and (ii) each promissory note
pledged to the Administrative Agent pursuant to the Guarantee and
Collateral Agreement and Holdings Guarantee and Pledge Agreement endorsed
(without recourse) in blank (or accompanied by an executed transfer form
in blank satisfactory to the Syndication Agent) by the pledgor thereof.
(o) Filings, Registrations and Recordings. Each document (including,
without limitation, any Uniform Commercial Code financing statement)
required by the Security Documents or under law or reasonably requested by
the Administrative Agent to be filed, registered or recorded in order to
create in favor of the Administrative Agent, for the benefit of the
Lenders, a perfected Lien on the Collateral described therein, prior and
superior in right to any other Person (other than with respect to Liens
expressly permitted by Section 7.3), shall be in proper form for filing,
registration or recordation.
(p) Surveys; Title Insurance; Flood Insurance. (i) If requested by
the Administrative Agent, the Administrative Agent shall have received,
and the title insurance company issuing the policy referred to in clause
(ii) below (the "Title Insurance Company") shall have received, maps or
plats of an as-built survey of the sites of the Mortgaged Properties
certified to the Administrative Agent and the Title Insurance Company in a
manner satisfactory to them, dated a date reasonably satisfactory to the
Administrative Agent and the Title Insurance Company by an independent
professional licensed land surveyor satisfactory to the Administrative
Agent and the Title Insurance Company, which maps or plats and the surveys
on which they are based shall be made in accordance with the Minimum
Standard Detail Requirements for Land Title Surveys jointly established
and adopted by the American
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Land Title Association and the American Congress on Surveying and Mapping
in 1992, and, without limiting the generality of the foregoing, there
shall be surveyed and shown on such maps, plats or surveys the following:
(A) the locations on such sites of all the buildings, structures and other
improvements and the established building setback lines; (B) the lines of
streets abutting the sites and width thereof; (C) all access and other
easements appurtenant to the sites; (D) all roadways, paths, driveways,
easements, encroachments and overhanging projections and similar
encumbrances affecting the site, whether recorded, apparent from a
physical inspection of the sites or otherwise known to the surveyor; (E)
any encroachments on any adjoining property by the building structures and
improvements on the sites; (F) if the site is described as being on a
filed map, a legend relating the survey to said map; and (G) the flood
zone designations, if any, in which the Mortgaged Properties are located.
(ii) The Administrative Agent shall have received in respect of each
Mortgaged Property a mortgagee's title insurance policy (or policies) or
marked up unconditional binder for such insurance. Each such policy shall
(A) be in an amount reasonably satisfactory to the Administrative Agent;
(B) be issued at ordinary rates (other than with respect to affirmative
insurance); (C) insure that the Mortgage insured thereby creates a valid
first Lien on such Mortgaged Property free and clear of all defects and
encumbrances, except those Liens expressly permitted by Section 7.3 and
such defects and encumbrances as may be approved by the Administrative
Agent (D) name the Administrative Agent for the benefit of the Lenders as
the insured thereunder; (E) be in the form of ALTA Loan Policy - 1970
(Amended 10/17/70 and 10/17/84) (or equivalent policies); (F) contain such
endorsements and affirmative coverage as the Administrative Agent may
reasonably request, except zoning endorsements; and (G) be issued by title
companies reasonably satisfactory to the Administrative Agent (including
any such title companies acting as co-insurers or reinsurers, at the
option of the Administrative Agent). The Administrative Agent shall have
received in respect of each property either (i) a zoning endorsement, or
(ii) written confirmation from the applicable zoning commission or other
appropriate Governmental Authority stating that with respect to each
Mortgaged Property as built it complies with existing land use and zoning
ordinances, regulations and restrictions applicable to such Mortgaged
Property. The Administrative Agent shall have received evidence reasonably
satisfactory to it that all premiums in respect of each such policy, all
charges for mortgage recording tax, and all related expenses, if any, have
been paid.
(iii) If reasonably requested by the Administrative Agent, the
Administrative Agent shall have received (A) a policy of flood insurance
which (1) covers any parcel of improved real property which is encumbered
by any Mortgage, (2) is written in an amount equal to the lesser of (a)
the outstanding principal amount of the indebtedness secured by such
Mortgage which is reasonably allocable to such real property or (b) the
maximum amount of coverage made available with respect to the particular
type of property under the National Flood Insurance Act of 1968, and (3)
has a term ending not later than the maturity of the Indebtedness secured
by such Mortgage and (B) confirmation that the Borrower has received the
notice delivered to the Borrower by
<PAGE> 65
60
the Administrative Agent as required pursuant to Section 208(e)(3) of
Regulation H of the Board.
(iv) The Administrative Agent shall have received a copy of all
recorded documents referred to, or listed as exceptions to title in, the
title policy or policies referred to in clause (ii) above and a copy of
all other material documents affecting the Mortgaged Properties as shall
have been requested by the Administrative Agent.
(q) Insurance. The Administrative Agent shall have received
insurance certificates satisfying the requirements of Section 5.2.2 of the
Guarantee and Collateral Agreement.
(r) Borrowing Certificate. The Administrative Agent shall have
received, with a photocopy for each Lender, a certificate of the Borrower,
dated the Closing Date, substantially in the form of Exhibit I, executed
by a Responsible Officer and the Secretary or any Assistant Secretary of
the Borrower.
5.2 Conditions to Each Extension of Credit. The agreement of each
Lender to make any extension of credit requested to be made by it on any date
(including, without limitation, its initial extension of credit) is subject to
the satisfaction of the following conditions precedent:
(a) Representations and Warranties. Each of the representations and
warranties made by any Loan Party in or pursuant to the Loan Documents
shall, except to the extent that they speak as of a particular date (in
which case they shall be true as of such date), be true and correct in all
material respects on and as of such date as if made on and as of such
date.
(b) No Default. No Default or Event of Default shall have occurred
and be continuing on such date or after giving effect to the extensions of
credit requested to be made on such date.
(c) Available Commitments. After giving effect to such extension of
credit the Borrowing Base would be equal to or less than the aggregate
principal amount of the Revolving Credit Loans, Swing Line Loans and L/C
Obligations then outstanding.
Each borrowing by and issuance of a Letter of Credit on behalf of the Borrower
hereunder shall constitute a representation and warranty by the Borrower as of
the date of such extension of credit that the conditions contained in this
Section 5.2 have been satisfied.
SECTION 6. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that, from and after the Closing Date and
so long as the Revolving Credit Commitments remain in effect, and thereafter
until payment in full of the Loans, all Reimbursement Obligations and any other
amount then due and owing to any Lender or the Administrative Agent hereunder
and under any Note and termination or
<PAGE> 66
61
expiration of all Letters of Credit, the Borrower shall (except in the case of
delivery of financial information, reports and notices) and shall cause each of
its Subsidiaries to:
6.1 Financial Statements. Furnish to the Agent for delivery to each
Lender):
(a) as soon as available, but in any event within 90 days after the
end of each fiscal year of the Borrower, a copy of the audited
consolidated balance sheet of the Borrower and its consolidated
Subsidiaries as at the end of such year and the related audited
consolidated statements of income and of cash flows for such year, setting
forth in each case in comparative form the figures for the previous year,
reported on without a "going concern" or like qualification or exception,
or qualification arising out of the scope of the audit, by Arthur
Andersen, Deloitte & Touche or other independent certified public
accountants of nationally recognized standing;
(b) as soon as available, but in any event not later than 45 days
after the end of each of the first three quarterly periods of each fiscal
year of the Borrower, the unaudited consolidated balance sheet of the
Borrower and its consolidated Subsidiaries as at the end of such quarter
and the related unaudited consolidated statements of income and of cash
flows for such quarter and the portion of the fiscal year through the end
of such quarter, setting forth in each case in comparative form the
figures for the previous year, certified by a Responsible Officer as being
fairly stated in all material respects (subject to normal year-end audit
and other adjustments); and
(c) as soon as available, but in any event not later than 45 days
after the end of each month occurring during each fiscal year of the
Borrower (other than the third, sixth, ninth and twelfth such month), the
unaudited consolidated balance sheets of the Borrower and its Subsidiaries
as at the end of such month and the related unaudited consolidated
statements of income and of cash flows for such month and the portion of
the fiscal year through the end of such month, setting forth in each case
in comparative form the figures for the previous year, certified by a
Responsible Officer as being fairly stated in all material respects
(subject to normal year-end audit adjustments);
all such financial statements delivered pursuant to Section 6.1(a) and 6.1(b)
shall be complete and correct in all material respects and shall be prepared in
reasonable detail and in accordance with GAAP applied consistently throughout
the periods reflected therein and with prior periods that began on or after the
Closing of the Acquisition (except as approved by such accountants or officer,
as the case may be, and disclosed therein).
6.2 Certificates; Other Information. Furnish to the Agent for
delivery to each Lender, or, in the case of clause (g), to the relevant Lender:
(a) concurrently with the delivery of the financial statements
referred to in Section 6.1(a), a certificate of the independent certified
public accountants reporting on such financial statements stating that in
making the examination necessary therefor no knowledge was obtained of any
Default or Event of Default insofar as the same relates
<PAGE> 67
62
to any financial accounting matters covered by their audit, except as
specified in such certificate;
(b) concurrently with the delivery of the financial statements
pursuant to Section 6.1(a) and (b), (i) a certificate of a Responsible
Officer stating that, to the best of each such Responsible Officer's
knowledge, each Loan Party during such period has observed or performed
all of its covenants and other agreements, and satisfied every condition,
contained in this Agreement and the other Loan Documents to which it is a
party to be observed, performed or satisfied by it, and that such
Responsible Officer has obtained no knowledge of any Default or Event of
Default except as specified in such certificate, (x) a Compliance
Certificate containing all information necessary for determining
compliance by the Borrower and its Subsidiaries with the provisions of
Sections 7.1 and 7.7 (in the case where such Certificate is being
delivered together with the financial statements required pursuant to
Section 6.1(a)) and 2.12(c) of this Agreement referred to therein as of
the last day of the fiscal quarter or fiscal year of the Borrower, as the
case may be, and (y) to the extent not previously disclosed to the
Administrative Agent, a listing of any county or state within the United
States where any Loan Party keeps inventory or equipment and of any
Intellectual Property acquired by any Loan Party since the date of the
most recent list delivered pursuant to this clause (y) (or, in the case of
the first such list so delivered, since the Closing Date);
(c) as soon as available, and in any event no later than 30 days
after the end of each fiscal year of the Borrower, a consolidated budget
for the following fiscal year (including a projected consolidated balance
sheet of the Borrower and its Subsidiaries as of the end of the following
fiscal year, and the related consolidated statements of projected cash
flow, projected changes in financial position and projected income), and,
as soon as available, significant revisions, if any, of such budget and
projections with respect to such fiscal year (collectively, the
"Projections"), which Projections shall in each case be accompanied by a
certificate of a Responsible Officer to the effect that such Responsible
Officer believes such Projections to have been prepared on the basis of
reasonable assumptions;
(d) within five Business Days after the same are sent, copies of all
financial statements and reports which Holdings or the Borrower sends to
the holders of any class of its debt securities or public equity
securities and, within five Business Days after the same are filed, copies
of all financial statements and reports which Holdings or the Borrower may
make to, or file with, the Securities and Exchange Commission or any
successor or analogous Governmental Authority;
(e) on the 25th day of each calendar month (and at such other times
as the Administrative Agent reasonably may request), a Borrowing Base
Certificate, certified by a Responsible Officer of the Borrower as being
true and accurate in all material respects, setting forth the Borrower's
calculation of the Borrowing Base as of the date specified in such
certificate (which, with respect to the Borrowing Base Certificate
<PAGE> 68
63
delivered on the 25th day of a calendar month, shall be as of the last
Business Day of the prior calendar month); and
(f) promptly, such additional financial and other information as any
Lender may from time to time reasonably request.
6.3 Payment of Obligations. Pay, discharge or otherwise satisfy at
or before maturity or before they become delinquent, as the case may be, all its
material obligations of whatever nature, except where the amount or validity
thereof is currently being contested in good faith by appropriate proceedings
and reserves in conformity with GAAP with respect thereto have been provided on
the books of Holdings, the Borrower or its Subsidiaries, as the case may be.
6.4 Conduct of Business and Maintenance of Existence, etc. (a) (i)
Preserve, renew and keep in full force and effect its corporate existence and
(ii) take all reasonable action to maintain all rights, privileges and
franchises necessary or desirable in the normal conduct of its business, except,
in each case, as otherwise permitted by Section 7.4 and except, in the case of
clause (ii) and (with respect to Subsidiaries) clause (i) above, to the extent
that failure to do so would not reasonably be expected to have a Material
Adverse Effect; and (b) comply with all Contractual Obligations and Requirements
of Law except to the extent that failure to comply therewith would not, in the
aggregate, reasonably be expected to have a Material Adverse Effect.
6.5 Maintenance of Property; Insurance. (a) Keep all Property useful
and necessary in its business taken as a whole in good working order and
condition, ordinary wear and tear excepted and (b) maintain with financially
sound and reputable insurance companies insurance on all such Property in at
least such amounts and against at least such risks (but including in any event
public liability, product liability and business interruption) as are usually
insured against in the same general area by companies engaged in the same or a
similar business.
6.6 Inspection of Property; Books and Records; Discussions. (a) Keep
proper books of records and account in which full, true and correct entries in
conformity with GAAP and all material Requirements of Law shall be made of all
dealings and transactions in relation to its business and activities and (b)
permit representatives of any Lender to visit and inspect any of its properties
and examine and, to the extent reasonable, make abstracts from any of its books
and records at any reasonable time and to discuss the business, operations,
properties and financial and other condition of the Borrower and its
Subsidiaries with officers and employees of the Borrower and its Subsidiaries
and with its independent certified public accountants in each case at any
reasonable time, upon reasonable notice and as often as reasonably desired.
6.7 Notices. Give notice to the Administrative Agent and each
Lender:
(a) as soon as possible after a Responsible Officer of the Borrower
knows or reasonably should know thereof, of the occurrence of any Default
or Event of Default;
<PAGE> 69
64
(b) as soon as possible after a Responsible Officer of the Borrower
knows or reasonably should know thereof, of any (i) default or event of
default under any Contractual Obligation of Holdings, the Borrower or any
of its Subsidiaries other than as previously disclosed in writing to the
Lenders or (ii) litigation, investigation or proceeding which may exist at
any time between Holdings, the Borrower or any of its Subsidiaries and any
Governmental Authority, which in either case, if not cured or if adversely
determined, as the case may be, could reasonably be expected to have a
Material Adverse Effect;
(c) as soon as possible after a Responsible Officer of the Borrower
knows or reasonably should know thereof, of any litigation or proceeding
affecting Holdings, the Borrower or any of its Subsidiaries in which the
amount involved is $2,500,000 or more and not covered by insurance or in
which injunctive or similar relief is sought;
(d) promptly of the following events, as soon as possible and in any
event within 30 days after a Responsible Officer of the Borrower knows or
reasonably should know thereof: (i) the occurrence of any Reportable Event
with respect to any Single Employer Plan, a failure to make any required
contribution to a Single Employer Plan or Multiemployer Plan, the creation
of any Lien on the property of the Borrower and its Subsidiaries in favor
of the PBGC or a Plan or any withdrawal from, or the termination,
Reorganization or Insolvency of, any Multiemployer Plan or (ii) the
institution of proceedings or the taking of any other formal action by the
PBGC or the Borrower or any Commonly Controlled Entity or any
Multiemployer Plan which could reasonably be expected to result in the
withdrawal from, or the termination, Reorganization or Insolvency of, any
Single Employer or Multiemployer Plan; provided, however, that no such
notice will be required under clause (i) or (ii) above unless the event
giving rise to such notice, when aggregated with all other such events
under clause (i) or (ii) above, could be reasonably expected to result in
liability to the Borrower or its Subsidiaries in an amount that would
exceed $1,000,000; and
(e) as soon as possible after a Responsible Officer of the Borrower
knows or reasonably should know thereof, of any development or event which
has had or could reasonably be expected to have a Material Adverse Effect.
Each notice pursuant to this Section shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action Holdings, the Borrower or the relevant Subsidiary
proposes to take with respect thereto.
6.8 Environmental Laws. (a) Comply in all material respects with,
and ensure compliance in all material respects by all tenants and subtenants, if
any, with, all applicable Environmental Laws, and obtain and comply in all
material respects with and maintain, and ensure that all tenants and subtenants
obtain and comply in all material respects with and maintain, any and all
licenses, approvals, notifications, registrations or permits required by
applicable Environmental Laws.
<PAGE> 70
65
(b) Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply in all material respects with all lawful
orders and directives of all Governmental Authorities regarding Environmental
Laws.
6.9 Additional Collateral, etc. (a) With respect to any Property
acquired after the Closing Date by the Borrower or any of its Subsidiaries
(other than (x) any Property described in paragraph (b), (c) or (d) below and
(y) any Property subject to a Lien expressly permitted by Section 7.3(g)) as to
which the Administrative Agent, for the benefit of the Lenders, does not have a
perfected Lien, promptly (i) execute and deliver to the Administrative Agent
such amendments to the Guarantee and Collateral Agreement or such other
documents as the Administrative Agent deems necessary or advisable to grant to
the Administrative Agent, for the benefit of the Lenders, a security interest in
such Property and (ii) take all actions necessary or advisable to grant to the
Administrative Agent, for the benefit of the Lenders, a perfected security
interest in such Property, including without limitation, the filing of Uniform
Commercial Code financing statements in such jurisdictions as may be required by
the Guarantee and Collateral Agreement or by law or as may be requested by the
Administrative Agent.
(b) With respect to any fee interest in any real property having a
value (together with improvements thereof) of at least $1,000,000 (or $250,000
if an Event of Default exists) acquired after the Closing Date by the Borrower
or any of its Subsidiaries (other than any such real property subject to a Lien
expressly permitted by Section 7.3(g)), promptly (i) execute and deliver a first
priority Mortgage in favor of the Administrative Agent, for the benefit of the
Lenders, covering such real property, (ii) if reasonably requested by the
Administrative Agent, provide the Lenders with (x) title and extended coverage
insurance covering such real property in an amount at least equal to the
purchase price of such real estate (or such other amount as shall be reasonably
specified by the Administrative Agent) as well as a current ALTA survey thereof,
together with a surveyor's certificate and (y) any consents or estoppels
reasonably deemed necessary or advisable by the Administrative Agent in
connection with such Mortgage, each of the foregoing in form and substance
reasonably satisfactory to the Administrative Agent and (iii) if reasonably
requested by the Administrative Agent and the value of the real property is at
least $2,500,000 ($500,000 if an Event of Default exists), deliver to the
Administrative Agent legal opinions relating to the matters described above,
which opinions shall be in form and substance, and from counsel, reasonably
satisfactory to the Administrative Agent.
(c) With respect to any new Subsidiary (other than an Excluded
Foreign Subsidiary) created or acquired after the Closing Date (which, for the
purposes of this paragraph (c), shall include any existing Subsidiary that
ceases to be an Excluded Foreign Subsidiary), by the Borrower or any of its
Subsidiaries, promptly (i) execute and deliver to the Administrative Agent such
amendments to the Guarantee and Collateral Agreement as the Administrative Agent
deems necessary or advisable to grant to the Administrative Agent, for the
benefit of the Lenders, a perfected first priority security interest in the
Capital Stock of such new Subsidiary which is owned by the Borrower or any of
its Subsidiaries, (ii) deliver to the Administrative Agent the certificates
representing such Capital Stock, together with
<PAGE> 71
66
undated stock powers, in blank, executed and delivered by a duly authorized
officer of the Borrower or such Subsidiary, as the case may be, (iii) cause such
new Subsidiary (A) to become a party to the Guarantee and Collateral Agreement
and (B) to take such actions necessary or advisable to grant to the
Administrative Agent for the benefit of the Lenders a perfected security
interest in the Collateral described in the Guarantee and Collateral Agreement
with respect to such new Subsidiary, including, without limitation, the filing
of Uniform Commercial Code financing statements in such jurisdictions as may be
required by the Guarantee and Collateral Agreement or by law or as may be
requested by the Administrative Agent, and (iv) if requested by the
Administrative Agent, deliver to the Administrative Agent legal opinions
relating to the matters described above, which opinions shall be in form and
substance, and from counsel, reasonably satisfactory to the Administrative
Agent.
(d) With respect to any new Foreign Subsidiary created or acquired
after the Closing Date by the Borrower and/or any of its Domestic Subsidiaries,
promptly (i) execute and deliver to the Administrative Agent such amendments to
the Guarantee and Collateral Agreement as the Administrative Agent deems
necessary or advisable in order to grant to the Administrative Agent, for the
benefit of the Lenders, a perfected first priority security interest in the
Capital Stock of such new Foreign Subsidiary which is owned by the Borrower or
any of its Domestic Subsidiaries (provided that in no event shall shares of
Capital Stock of such new Foreign Subsidiary having more than 65% of the
aggregate voting power of all such total outstanding Capital Stock of any such
new Foreign Subsidiary be required to be so pledged), (ii) deliver to the
Administrative Agent the certificates representing such Capital Stock, together
with undated stock powers, in blank, executed and delivered by a duly authorized
officer of the Borrower or such Domestic Subsidiary, as the case may be, and
take such other action as may be necessary or, in the opinion of the
Administrative Agent, desirable to perfect the Lien of the Administrative Agent
thereon, and (iii) if requested by the Administrative Agent, deliver to the
Administrative Agent legal opinions relating to the matters described above,
which opinions shall be in form and substance, and from counsel, reasonably
satisfactory to the Administrative Agent.
6.10 Amendment to Existing Notes. Use the Borrower's reasonable
commercial efforts to amend the Existing Notes as soon as practicable following
the Closing Date to include the changes previously agreed to by the Borrower and
the Agent.
SECTION 7. NEGATIVE COVENANTS
The Borrower hereby agrees that, from and after the Closing Date and
so long as the Revolving Credit Commitments remain in effect, and thereafter
until payment in full of the Loans, all Reimbursement Obligations and any other
amount then due and owing to any Lender or the Administrative Agent hereunder
and under any Note and termination or expiration of all Letters of Credit, the
Borrower shall not, and shall not permit any of its Subsidiaries to, directly or
indirectly:
<PAGE> 72
67
7.1 Financial Condition Covenants.
(a) Consolidated Leverage Ratio. Permit the Consolidated Leverage
Ratio as at the last day of any period of four consecutive fiscal quarters of
the Borrower ending with any fiscal quarter set forth below to exceed the ratio
set forth below opposite such fiscal quarter:
(i) prior to the issuance of the Senior Subordinated Indebtedness:
<TABLE>
<CAPTION>
Consolidated
Fiscal Quarter Leverage Ratio
-------------- --------------
<S> <C>
1-7 3.75 to 1.0
8-11 3.50 to 1.0
12-20 3.00 to 1.0
</TABLE>
(ii) after the issuance of the Senior Subordinated Indebtedness:
<TABLE>
<CAPTION>
Consolidated
Fiscal Quarter Leverage Ratio
-------------- --------------
<S> <C>
2-4 6.50 to 1.0
5-8 6.25 to 1.0
9-12 6.00 to 1.0
13-16 5.50 to 1.0
17-20 5.25 to 1.0
</TABLE>
(b) Consolidated Interest Coverage Ratio. Permit the Consolidated
Interest Coverage Ratio for any period of four consecutive fiscal quarters of
the Borrower ending with any fiscal quarter set forth below to be less than the
ratio set forth below opposite such fiscal quarter:
(i) prior to the issuance of the Senior Subordinated Indebtedness:
<TABLE>
<CAPTION>
Consolidated Interest
Fiscal Quarter Coverage Ratio
-------------- --------------
<S> <C>
1-4 2.50 to 1
5-8 2.75 to 1
9-12 3.00 to 1
13-16 3.50 to 1
17-20 4.00 to 1
</TABLE>
(ii) after the issuance of the Senior Subordinated Indebtedness:
<PAGE> 73
68
<TABLE>
<CAPTION>
Consolidated Interest
Fiscal Quarter Coverage Ratio
-------------- --------------
<S> <C>
1-4 1.25 to 1
5-8 1.50 to 1
9-12 1.50 to 1
13-16 1.75 to 1
17-20 2.00 to 1
</TABLE>
(c) Consolidated Fixed Charge Coverage Ratio. Permit the
Consolidated Fixed Charge Coverage Ratio for any period of four consecutive
fiscal quarters of the Borrower ending with any fiscal quarter set forth below
to be less than the ratio set forth below opposite such fiscal quarter:
(i) prior to the issuance of the Senior Subordinated Indebtedness:
<PAGE> 74
69
<TABLE>
<CAPTION>
Consolidated Fixed
Fiscal Quarter Charge Coverage Ratio
-------------- ---------------------
<S> <C>
1-4 1.10 to 1
5-8 1.20 to 1
9-12 1.20 to 1
13-16 1.20 to 1
17-20 1.20 to 1
</TABLE>
(ii) after to the issuance of the Senior Subordinated Indebtedness:
<TABLE>
<CAPTION>
Consolidated Fixed
Fiscal Quarter Charge Coverage Ratio
-------------- ---------------------
<S> <C>
1-4 1.00 to 1
5-8 1.00 to 1
9-12 1.05 to 1
13-16 1.05 to 1
17-20 1.05 to 1
</TABLE>
7.2 Limitation on Indebtedness. Create, incur, assume or suffer to
exist any Indebtedness, except:
(a) Indebtedness of any Loan Party pursuant to any Loan Document;
(b)(i) Indebtedness of the Borrower to any Subsidiary and of any
Subsidiary Guarantor to the Borrower or any other Subsidiary or of any
Foreign Subsidiary to the Borrower or any Subsidiary Guarantor or of any
Excluded Foreign Subsidiary to any other Excluded Foreign Subsidiary and
(ii) Indebtedness of the Borrower or any Subsidiary Guarantor to any
Excluded Subsidiary not to exceed $3,000,000;
(c) Indebtedness incurred to finance the acquisition of fixed or
capital assets that are secured by Liens permitted by Section 7.3(g) in an
aggregate principal amount not to exceed $5,000,000 at any one time
outstanding;
(d) Capital Lease Obligations in an aggregate principal amount not
to exceed $5,000,000 at any one time outstanding;
(e) Indebtedness outstanding on the date hereof and listed on
Schedule 7.2(e) and any refinancings, refundings, renewals or extensions
thereof (without any increase in the principal amount thereof or any
shortening of the maturity of any principal amount thereof, except by an
amount equal to the premium or other amounts paid, and fees and expenses
incurred, in connection with such refinancing, refunding, renewal or
extension), provided that any refinancing of the Existing Notes must be
effected with the proceeds of Indebtedness meeting the requirements of
Section 7.2(h);
<PAGE> 75
70
(f) guarantees made in the ordinary course of business by the
Borrower or any of its Subsidiaries of obligations of any Wholly Owned
Subsidiary Guarantor;
(g) (i) upon completion of Sisterco Merger, Indebtedness under the
Holdings Senior Credit Agreement, (ii) subordinated Indebtedness of the
Borrower in an aggregate principal amount not to exceed $125,000,000
and/or preferred stock of the Borrower having an aggregate liquidation
value not to exceed $55,000,000 (provided that the aggregate principal
amount and liquidation value of all such Indebtedness and preferred stock
permitted by this clause (ii) shall not exceed $155,000,000) all the terms
and conditions of which are reasonably satisfactory to the Required
Lenders, as evidenced by their prior written approval thereof, and the Net
Cash Proceeds of which shall be used to repay the Indebtedness under the
Holdings Senior Credit Agreement and (iii) Guarantee Obligations of any
Subsidiary Guarantor in respect of such subordinated Indebtedness
described in clause (iii) above; provided that such Guarantee Obligations
are subordinated to the same extent as the obligations of the Borrower in
respect of such subordinated Indebtedness;
(h) subordinated and/or senior unsecured Indebtedness of the
Borrower in an aggregate principal amount not to exceed $100,000,000
(except by an amount equal to the premium or other amounts paid, and fees
and expenses incurred, in connection with such refinancing, refunding,
renewal or extension) all the terms and conditions of which are reasonably
satisfactory to the Required Lenders, as evidenced by their prior written
approval thereof, and the Net Cash Proceeds of which shall be used to
refinance the Existing Notes;
(i) Indebtedness of the Borrower and any of its Subsidiaries
incurred to finance or refinance the purchase price of, or Indebtedness of
the Borrower and any of its Subsidiaries assumed in connection with, any
acquisition permitted pursuant to this Agreement, provided that (i) such
Indebtedness is incurred prior to, substantially simultaneously with or
within six months after such acquisition or in connection with the
refinancing thereof, (ii) such Indebtedness shall have terms and
conditions reasonably satisfactory to the Administrative Agent and shall
not exceed 75% of the purchase price of such acquisition (including any
Indebtedness assumed in connection with such acquisition), (iii)
immediately after giving effect to such acquisition no Default or Event of
Default shall have occurred and be continuing and (iv) the aggregate
amount of all Indebtedness incurred pursuant to this paragraph shall not
exceed $7,500,000.
(j) to the extent that any Indebtedness may be incurred or arise
thereunder, Indebtedness of the Borrower and its Subsidiaries under
Permitted Hedging Arrangements;
(k) Indebtedness of Borrower or any of its Subsidiaries incurred to
finance insurance premiums in the ordinary course of business;
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71
(l) Indebtedness arising from the honoring of a check, draft or
similar instrument against insufficient funds, provided that such
Indebtedness is extinguished within two Business Days of its incurrence;
(m) Indebtedness consisting of subordinated promissory notes issued
by the Borrower to repurchase shares of the Borrower's common stock from
directors, officers or employees of Holdings and its Subsidiaries in
circumstances in which the payment of cash dividends by the Borrower for
the purposes of funding such repurchase would not be permitted under
Section 7.6(g), provided that all the terms and conditions of such
promissory notes (including, without limitation, subordination terms) are
consistent with the terms set forth in Section 4(b) of the Stockholders
Agreement and such promissory notes include provisions prohibiting the
payment thereof when any Default or Event of Default shall have occurred
and be continuing or would result therefrom and do not include any
cross-default provisions;
(n) Indebtedness consisting of borrowings by Foreign Subsidiaries,
provided that the aggregate principal amount of such Indebtedness that is
outstanding at any time, when added to the aggregate amount of
Indebtedness of Foreign Subsidiaries permitted pursuant to Section 7.2(e)
that is then outstanding and the aggregate amount of receivables sold by
the Borrower and its Subsidiaries that are described in the proviso to
Section 7.5(i) and Section 7.5(j) that are then outstanding, shall not
exceed $15,000,000;
(o) Guarantee Obligations for performance, appeal, judgment,
replevin and similar bonds and suretyship arrangements, all in the
ordinary course of business;
(p) Reimbursement Obligations in respect of the Letters of Credit;
(q) Guarantee Obligations in respect of third-party loans and
advances to officers or employees of the Borrower or any of its
Subsidiaries (i) for travel and entertainment expenses incurred in the
ordinary course of business, (ii) for relocation expenses incurred in the
ordinary course of business, or (iii) for other purposes in an aggregate
amount (as to the Borrower and all its Subsidiaries), together with the
aggregate amount of all then outstanding investments permitted under
Section 7.8(h), of up to $500,000 outstanding at any time;
(r) obligations to insurers required in connection with worker's
compensation and other insurance coverage incurred in the ordinary course
of business;
(s) guarantees made in the ordinary course of its business by the
Borrower or any of its Subsidiaries of obligations of the Borrower or any
of its Subsidiaries, which obligations are otherwise permitted under this
Agreement;
(t) Guarantee Obligations in connection with sales or other
dispositions permitted under Section 7.5, including indemnification
obligations with respect to
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leases, and guarantees of collectability in respect of accounts receivable
or notes receivable for up to face value;
(u) Guarantee Obligations in respect of Indebtedness of a Person in
connection with a joint venture or similar arrangement in respect to which
no other coinvestor or other Person has a greater legal or beneficial
ownership interest than the Borrower or any of its Subsidiaries, and as to
all of such Persons does not at any time exceed $1,000,000 in aggregate
principal amount;
(v) Guarantee Obligations incurred pursuant to the Guarantee and
Collateral Agreement or otherwise in respect of Indebtedness permitted by
Section 7.2(a);
(w) guarantees by Subsidiaries of the Borrower of the Senior
Subordinated Indebtedness, which guarantees are subordinated pursuant to
terms and conditions approved in writing by the Required Lenders;
(x) guarantees of Indebtedness of Foreign Subsidiaries permitted by
Section 7.2(n);
(y) Guarantee Obligations in respect of letters of credit issued for
the account of Foreign Subsidiaries, and guarantees thereof, provided that
the aggregate amount of such Guarantee Obligations, taken together with
the aggregate amount of other Indebtedness of Foreign Subsidiaries
outstanding pursuant to Section 7.2(n), shall not exceed the aggregate
amount of such Indebtedness permitted pursuant to such Section;
(z) Indebtedness in the principal amount of $875,000 Incurred by the
Borrower as a result of borrowing by the Borrower from Holdings in such
amount on the Closing Date; and
(aa) Indebtedness not otherwise permitted by the preceding clauses
of this Section not exceeding $2,500,000 in aggregate principal amount at
any one time outstanding.
With respect to any Indebtedness denominated in a foreign currency, for
purposes of determining compliance with any Dollar-denominated restriction
on such Indebtedness under this Section, the amount of such Indebtedness
shall be calculated monthly based on the Spot Exchange Rate in effect at
such time.
7.3 Limitation on Liens. Create, incur, assume or suffer to exist
any Lien upon any of its Property or revenues, whether now owned or hereafter
acquired, except for:
(a) Liens for taxes not yet delinquent or the nonpayment of which in
the aggregate would not reasonably be expected to have a Material Adverse
Effect or which are being contested in good faith by appropriate
proceedings, provided that adequate reserves with respect to taxes being
so contested are maintained on the books of the Borrower or its
Subsidiaries, as the case may be, in conformity with GAAP;
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(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of business
which are not overdue for a period of more than 60 days or which are being
contested in good faith by appropriate proceedings;
(c) pledges, deposits or other Liens in connection with workers'
compensation, unemployment insurance, other social security benefits or
other insurance-related obligations (including, without limitation,
pledges or deposits securing liabilities to insurance carriers under
insurance or self-insurance arrangements);
(d) Liens to secure the performance of bids, trade contracts (other
than for borrowed money), leases, utility statutory obligations, surety
and appeal bonds, performance bonds, judgment and like bonds, replevin and
similar bonds and other obligations of a like nature incurred in the
ordinary course of business;
(e) zoning restrictions, easements, rights-of-way, restrictions and
other similar encumbrances incurred in the ordinary course of business and
minor imperfections of title which do not materially interfere with the
ordinary conduct of the business of the Borrower or any of its
Subsidiaries taken as a whole;
(f) Liens on the assets or, in the case of floating Liens, types of
assets in existence on the date hereof listed on Schedule 7.3(f), securing
Indebtedness permitted by Section 7.2(e), provided that no such Lien is
spread to cover any additional Property after the Closing Date and that
the amount of Indebtedness secured thereby is not increased except as
permitted by Section 7.2(e);
(g) Liens securing Indebtedness of the Borrower or any other
Subsidiary incurred pursuant to Sections 7.2(c) and (d) or Section 7.2(i),
provided that (i) such Liens shall be created substantially simultaneously
with the acquisition financed with the Indebtedness secured thereby or, in
the case of any acquisition of fixed or capital assets, within six months
after such acquisition and (ii) such Liens do not at any time encumber any
Property other than the Property financed by such Indebtedness;
(h) Liens created pursuant to the Security Documents; and
(i) any interest or title of a lessor under any lease entered into
by the Borrower or any other Subsidiary in the ordinary course of its
business and covering only the assets so leased.
(j) Liens arising by reason of any judgment, decree or order of any
court or other Governmental Authority, if appropriate legal proceedings
which may have been duly initiated for the review of such judgment, decree
or order, are being diligently prosecuted and shall not have been finally
terminated or the period within which such proceedings may be initiated
shall not have expired;
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74
(k) Liens existing on assets or properties at the time of the
acquisition thereof by the Borrower or any of its Subsidiaries which do
not materially interfere with the use, occupancy, operation and
maintenance of structures existing on the property subject thereto or
extend to or cover any assets or properties of the Borrower or such
Subsidiary other than the assets or property being acquired;
(l) any encumbrance or restriction (including, without limitation,
put and call agreements) with respect to the Capital Stock of any joint
venture or similar arrangement pursuant to the joint venture or similar
agreement with respect to such joint venture or similar arrangement,
provided that no such encumbrance or restriction affects in any way the
ability of the Borrower or any of its Subsidiaries to comply with Section
6.9;
(m) Liens on Intellectual Property (as defined in Section 4.9) to
the extent such Liens arise from the granting of licenses to use such
Intellectual Property to any Person in the ordinary course of business of
the Borrower or any of its Subsidiaries or result from the joint ownership
of such Intellectual Property;
(n) Liens on Property of any Foreign Subsidiary securing
Indebtedness of such Subsidiary permitted by Section 7.2(n) and recourse
obligations of such Foreign Subsidiary in respect of sales of Excluded
Foreign Accounts permitted by the proviso to Section 7.5(i) and by Section
7.5(j), provided that the aggregate amount of Indebtedness and obligations
secured by Liens described in this paragraph shall at no time exceed
$12,000,000; and
(o) Liens arising from leases or subleases granted to others in the
ordinary course of business not interfering in any material respect with
the business or operations of the Borrower or any of its Subsidiaries.
7.4 Limitation on Fundamental Changes. Enter into any merger,
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or Dispose of all or substantially all
of its Property or business except:
(a) any Subsidiary of the Borrower may be merged or consolidated
with or into the Borrower (provided that the Borrower shall be the
continuing or surviving corporation) or with or into one or more
Subsidiary Guarantors (provided that a Subsidiary Guarantor shall be the
continuing or surviving corporation);
(b) any Subsidiary of the Borrower may Dispose of any or all of its
assets (upon voluntary liquidation or otherwise) to the Borrower or any
Subsidiary Guarantor;
(c) as expressly permitted by Section 7.5; and
(d) Holdings and/or Sisterco may be merged or consolidated with or
into the Borrower, provided that (i) the Borrower shall be the surviving
corporation and (ii)
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Holdings or, as the case may be, Sisterco shall, immediately prior to any
such transaction in which it is involved, have no material obligations or
liabilities other than under the Holdings Senior Credit Agreement.
7.5 Limitation on Sales of Assets. Dispose of any of its Property or
business (including, without limitation, receivables and leasehold interests),
whether now owned or hereafter acquired, or, in the case of any Subsidiary,
issue or sell any shares of such Subsidiary's Capital Stock to any Person,
except:
(a) the Disposition of obsolete or worn out or surplus property,
whether or not now owned or hereafter acquired, in the ordinary course of
business;
(b) the Disposition of any Property (including inventory) in the
ordinary course of business;
(c) Dispositions permitted by Section 7.4(b);
(d) the sale or issuance of any Subsidiary's Capital Stock to the
Borrower or any Wholly Owned Subsidiary Guarantor;
(e) the sale of other assets having a fair market value not to
exceed $2,500,000 in the aggregate for any fiscal year of the Borrower;
and
(f) any Asset Sale or Recovery Event, provided, that the
requirements of Section 2.12(b) are complied with in connection therewith.
(g) as permitted by Section 7.4(b) and pursuant to Permitted Sale
and Leaseback Transactions;
(h) the abandonment or other Disposition of patents, trademarks or
other intellectual property that are, in the reasonable judgment of the
Borrower, no longer economically practicable to maintain or useful in the
conduct of the business of the Borrower and its Subsidiaries taken as a
whole;
(i) the sale or discount without recourse of accounts receivable or
notes receivable arising in the ordinary course of business, or the
conversion or exchange of accounts receivable into or for notes
receivable, in any case described in this paragraph in connection with the
compromise or collection thereof provided that, in the case of any Foreign
Subsidiary of the Borrower, any such sale or discount may be with recourse
if such sale or discount is consistent with customer practice in such
Foreign Subsidiary's country of business and the aggregate amount of any
such recourse shall be included in the determination of such Foreign
Subsidiary's Indebtedness for purposes of Section 7.2(n); and
(j) the sale or discount by any Foreign Subsidiary with or without
recourse of accounts receivable or notes receivable arising in the
ordinary course of business,
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provided that the aggregate amount of such receivables so sold that are
outstanding at any time shall not exceed $3,000,000.
7.6 Limitation on Dividends. Declare or pay any dividend (other than
dividends payable solely in common stock of the Person making such dividend) on,
or make any payment on account of, or set apart assets for a sinking or other
analogous fund for, the purchase, redemption, defeasance, retirement or other
acquisition of, any shares of any class of Capital Stock of the Borrower or any
Subsidiary or any warrants or options to purchase any such Capital Stock,
whether now or hereafter outstanding, or make any other distribution (other than
distributions payable solely in common stock of the Borrower or options,
warranties or other rights to purchase common stock of the Borrower) in respect
thereof, either directly or indirectly, whether in cash or property or in
obligations of the Borrower or any Subsidiary (collectively, "Restricted
Payments"), except that:
(a) any Subsidiary may make Restricted Payments to the Borrower or
any Wholly Owned Subsidiary Guarantor;
(b) so long as no Default or Event of Default shall have occurred
and be continuing, the Borrower may pay dividends to Holdings with the Net
Cash Proceeds of the subordinated Indebtedness and preferred stock of the
Borrower referred to in Section 7.2(g)(ii) to permit Holdings to refinance
the Indebtedness of Holdings under the Holdings Senior Credit Agreement;
(c) the Borrower may make payments to Holdings (i) pursuant to a Tax
Sharing Agreement or (ii) to permit Holdings to pay any taxes which are
due and payable by Holdings;
(d) the Borrower may pay cash dividends in an amount sufficient to
allow Holdings to pay expenses (other than management, advisory or similar
fees) incurred in the ordinary course of business in an aggregate amount
not to exceed $750,000 in any fiscal year;
(e) the Borrower may pay cash dividends in an amount sufficient to
allow Holdings to pay all fees and expenses incurred in connection with
the Acquisition and the transactions expressly contemplated by this
Agreement and the other Loan Documents in an aggregate amount which,
together with all other such fees and expenses of the Borrower (exclusive
of any fees and expenses associated with obtaining the consents referred
to in Section 6.10 and the first parenthetical clause included in clause
(b) of Section 7.9), shall not exceed $18,000,000;
(f) the Borrower may pay cash dividends in an amount sufficient to
cover reasonable and necessary expenses (including professional fees and
expenses) incurred by Holdings in connection with indemnification and
reimbursement of directors, officers and employees in respect of
liabilities relating to their services in any such capacity; and
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(g) the Borrower may repurchase shares of its common stock or
rights, options or units in respect thereof from directors, officers or
employees of Holdings and its Subsidiaries upon their death or other
termination of employment with the Borrower (but not from Greenwich IV or
any member of the GSCP Group), provided that the aggregate amount paid in
cash in connection with such repurchases shall not exceed $2,500,000; and
(h) the Borrower may make payments pursuant to Section 3.3 of the
Acquisition Agreement.
7.7 Limitation on Capital Expenditures. Make or commit to make (by
way of the acquisition of securities of a Person or otherwise) any Capital
Expenditure, except (a) Capital Expenditures of the Borrower and its
Subsidiaries not exceeding $10,000,000 in any fiscal year; provided, that (i) up
to $5,000,000 of any such amount referred to above, if not so expended in the
fiscal year for which it is permitted, may be carried over for expenditure in
the next succeeding fiscal year and (ii) Capital Expenditures made pursuant to
this clause (a) during any fiscal year shall be deemed made, first, in respect
of amounts carried over from the prior fiscal year pursuant to subclause (i)
above and, second, in respect of amounts permitted for such fiscal year as
provided above and (b) Capital Expenditures made with the proceeds of any
Reinvestment Amount.
7.8 Limitation on Investments, Loans and Advances. Make any advance,
loan, extension of credit (by way of guaranty or otherwise) or capital
contribution to, or purchase any stock, bonds, notes, debentures or other
securities of or any assets constituting all or a material part of a business
unit of, or make any other investment in, any Person, except:
(a) extensions of trade credit in the ordinary course of business;
(b) investments in cash and Cash Equivalents;
(c) obligations permitted by Section 7.2;
(d) the Acquisition;
(e) investments made by the Borrower or any of its Subsidiaries with
the proceeds of any Reinvestment Amount;
(f) investments by the Borrower or any of its Subsidiaries in the
Borrower or any Person that, prior to such investment, is a Wholly Owned
Subsidiary Guarantor;
(g) investments in notes receivable and other instruments and
securities obtained in connection with transactions permitted by Section
7.5(g);
(h) loans and advances to officers, directors or employees of
Holdings, the Borrower or any of their respective Subsidiaries (i) in the
ordinary course of business for travel and entertainment expenses, (ii)
existing on the Closing Date and described
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in Schedule 7.8(h), (iii) made after the Closing Date for relocation
expenses in the ordinary course of business, (iv) made for other purposes
in an aggregate amount (as to Holdings and all its Subsidiaries) of up to
$500,000 outstanding at any time or (v) relating to indemnification or
reimbursement of any officers, directors or employees in respect of
liabilities relating to their serving in any such capacity or as otherwise
specified in Section 7.10;
(i) investments existing on the date hereof and described in
Schedule 7.9(j), setting forth the respective amounts of such Investments
as of a recent date;
(j) investments of the Borrower and its Subsidiaries under Permitted
Hedging Arrangements;
(k) investments in the nature of pledges or deposits with respect to
leases or utilities provided to third parties in the ordinary course of
business or otherwise described in Section 7.3(c), (d) or (i);
(l) investments representing non-cash consideration received by the
Borrower or any of its Subsidiaries in connection with any Asset Sale,
provided that in the case of any Asset Sale permitted under Section
7.5(f), such non-cash consideration constitutes not more than 25% of the
aggregate consideration received in connection with such Asset Sale and
any such non-cash consideration received by the Borrower or any of its
Domestic Subsidiaries is pledged to the Administrative Agent for the
benefit of the Lenders pursuant to the Security Documents;
(m) investments representing evidences of Indebtedness, securities
or other property received from another Person by the Borrower or any of
its Subsidiaries in connection with any bankruptcy proceeding or other
reorganization of such other Person or as a result of foreclosure,
perfection or enforcement of any Lien or exchange for evidences of
Indebtedness, securities or other property of such other Person held by
the Borrower or any of its Subsidiaries; provided that any such securities
or other property received by the Borrower or any of its Domestic
Subsidiaries is pledged to the Administrative Agent for the benefit of the
Lenders pursuant to the Security Documents;
(n) investments by the Borrower or any of its Subsidiaries in a
Person in connection with a joint venture or similar arrangement in
respect of which no other co-investor or other Person has a greater legal
or beneficial ownership interest than the Borrower or such Subsidiary in
an aggregate amount not to exceed at any time an amount equal to
$5,000,000; and
(o) so long as (x) no Default or Event of Default has occurred and
is continuing at the time of such acquisition or would occur after giving
effect to such acquisition and (y) the Borrower would be in pro forma
compliance with the financial covenants set forth in Sections 7.1(a), (b)
and (c), as of the date such acquisition is consummated after giving
effect to such acquisition, acquisitions of the business or
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assets of, or stock or other evidences of beneficial ownership of, any
Person engaged in a business of the same general type as those in which
the Borrower and its Subsidiaries are engaged on the Closing Date or which
are substantially related thereto, so long as (i) such acquisition is
expressly permitted by Section 7.4 or (ii) the aggregate consideration
paid by the Borrower and its Subsidiaries in connection with all such
acquisitions made pursuant to this clause (ii) since the Closing Date does
not exceed at any time an amount equal to $10,000,000.
7.9 Limitation on Optional Payments and Modifications of Debt
Instruments, etc. (a) Make or offer to make any payment, prepayment, repurchase
or redemption of or otherwise defease or segregate funds with respect to the
Existing Notes (except with the proceeds of subordinated Indebtedness incurred
pursuant to Section 7.2(h)), the Senior Subordinated Indebtedness (other than
scheduled interest payments required to be made in cash), the promissory notes
described in Section 7.2(m), or, at any time after completion of the Sisterco
Merger, the Holdings Senior Indebtedness (except with the proceeds of
Indebtedness incurred pursuant to Section 7.2(g)(ii)), (b) amend, modify, waive
or otherwise change, or consent or agree to any amendment, modification, waiver
or other change to, any of the terms of the Existing Notes (except as previously
agreed by the Borrower and the Administrative Agent), the Senior Subordinated
Indebtedness, the promissory notes described in Section 7.2(m) or, at any time
after completion of the Sisterco Merger, the Holdings Senior Indebtedness (other
than any such amendment, modification, waiver or other change which (i) would
extend the maturity or reduce the amount of any payment of principal thereof or
which would reduce the rate or extend the date for payment of interest thereon
and (ii) does not involve the payment of a consent fee), (c) designate any
Indebtedness as "Designated Senior Indebtedness" (or any similar term) for the
purposes of the Senior Subordinated Indenture or (d) amend its certificate of
incorporation in any manner determined by the Administrative Agent to be adverse
to the Lenders without the prior written consent of the Required Lenders.
7.10 Limitation on Transactions with Affiliates. Enter into any
transaction, including, without limitation, any purchase, sale, lease or
exchange of Property, the rendering of any service or the payment of any
management, advisory or similar fees, with any Affiliate (other than Holdings,
the Borrower or any Wholly Owned Subsidiary Guarantor) unless such transaction
is (a) otherwise permitted under this Agreement, (b) upon fair and reasonable
terms no less favorable to the Borrower or such Subsidiary, as the case may be,
than it would obtain in a comparable arm's length transaction with a Person
which is not an Affiliate; provided that nothing contained in this Section 7.10
shall be deemed to prohibit:
(a) the payment of transaction expenses in connection with this Agreement
and the Transactions, including, but not limited to, the payment by the Borrower
of a deal fee to GSCP and SG Capital Partners in an aggregate amount not to
exceed $1,850,000;
(b) the Borrower or any of its Subsidiaries from entering into or
performing an agreement with the Sponsors for the rendering of management
consulting or financial advisory services for compensation not to exceed in the
aggregate $950,000 per year plus reasonable out-of-pocket expenses, provided
that at any time when a Default or an Event of Default has occurred and is
continuing, the Borrower and its Subsidiaries may not make any
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payments to the Sponsors under any such agreement and such payments may accrue
to the Sponsors and may be paid in full after such Default or Event of Default
has been cured or waived, provided further that at any time when the Borrower
and its Subsidiaries are not permitted to make payments to the Sponsors under
any such agreements, the Sponsors may elect to receive Capital Stock of the
Borrower in lieu of such payments;
(c) the Borrower or any of its Subsidiaries from entering into, making
payments pursuant to and otherwise performing an indemnification and
contribution agreement in favor of any person who is or becomes a director,
officer, agent or employee of the Borrower or any of its Subsidiaries, in
respect of liabilities (A) arising under the Securities Act, the Exchange Act
and any other applicable securities laws or otherwise, in connection with any
offering of securities by the Borrower or any of its Subsidiaries, (B) incurred
to third parties for any action or failure to act of the Borrower or any of its
Subsidiaries, predecessors or successors, (C) arising out of the performance by
the Sponsors of management consulting or financial advisory services provided to
the Borrower or any of its Subsidiaries, (D) arising out of the fact that any
indemnitee was or is a director, officer, agent or employee of the Borrower or
any of its Subsidiaries, or is or was serving at the request of any such
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or enterprise or (E) to the fullest extent
permitted by delaware or other applicable state law, arising out of any breach
or alleged breach by such indemnitee of his or her fiduciary duty as a director
or officer of the Borrower or any of its Subsidiaries;
(d) the Borrower or any of its Subsidiaries from performing any agreements
or commitments with or to any Affiliate existing on the date hereof and
described on Schedule 7.10;
(e) any transaction permitted under Sections 7.3(l), 7.4, 7.6 or 7.8(h),
or any transaction with a Wholly Owned Subsidiary of the Borrower; or
(f) the Borrower or any of its Subsidiaries from performing its
obligations under a Tax Sharing Agreement.
For purposes of this Section 7.10, (A) any transaction with any
Affiliate shall be deemed to have satisfied the standard set forth in clause (b)
of the first sentence hereof if (i) such transaction is approved by a majority
of the Disinterested Directors of the board of directors of the Borrower or such
Subsidiary, or (ii) in the event that at the time of any such transaction, there
are no Disinterested Directors serving on the board of directors of the Borrower
or such Subsidiary, such transactions shall be approved by a nationally
recognized expert with expertise in appraising the terms and conditions of the
type of transaction for which approval is required, and (B) "Disinterested
Director" shall mean, with respect to any Person and transaction, a member of
the board of directors of such Person who does not have any material direct or
indirect financial interest in or with respect to such transaction.
7.11 Limitation on Sales and Leasebacks. Enter into any arrangement
with any Person providing for the leasing by the Borrower or any Subsidiary of
real or personal property which has been or is to be sold or transferred by the
Borrower or such Subsidiary to
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such Person or to any other Person to whom funds have been or are to be advanced
by such Person on the security of such property or rental obligations of the
Borrower or such Subsidiary unless such arrangement is entered into in
connection with the financing of the acquisition of such property through the
proceeds of a Capital Lease Obligation permitted by Section 7.2(d) and the sale
or transfer of such property occurs immediately following the acquisition
thereof by the Borrower or such Subsidiary (a "Permitted Sale and Leaseback
Transaction").
7.12 Limitation on Changes in Fiscal Periods. Permit the fiscal year
of the Borrower to end on a day other than December 31 or change the Borrower's
method of determining fiscal quarters.
7.13 Limitation on Negative Pledge Clauses. Enter into or suffer to
exist or become effective any agreement which prohibits or limits the ability of
Holdings, the Borrower or any of its Subsidiaries to create, incur, assume or
suffer to exist any Lien upon any of its Property or revenues, whether now owned
or hereafter acquired, to secure the Obligations or, in the case of any
Guarantor, its obligations under the Guarantee and Collateral Agreement, other
than (a) this Agreement and the other Loan Documents, (b) any agreements
governing any purchase money Liens or Capital Lease Obligations otherwise
permitted hereby (in which case, any prohibition or limitation shall only be
effective against the assets financed thereby) or (c) any agreement relating to
any Indebtedness of a Foreign Subsidiary permitted by Section 7.2(n) or
otherwise permitted under this Agreement (in which case, any prohibition or
limitation shall only be effective against the assets of such Foreign Subsidiary
and its Subsidiaries).
7.14 Limitations on Currency and Commodity Hedging Transactions.
Enter into, purchase or otherwise acquire agreement or arrangements relating to
currency, commodity or other hedging except, to the extent and only to the
extent that, such agreements or arrangements are entered into, purchased or
otherwise acquired in the ordinary course of business of the Borrower or any of
its Subsidiaries with reputable financial institutions and not for purposes of
speculation (any such agreement permitted by this Section, a "Permitted Hedging
Arrangement").
7.15 Limitation on Lines of Business. Enter into any business,
either directly or through any Subsidiary, except for those businesses in which
the Borrower and its Subsidiaries are engaged on the date of this Agreement or
which are reasonably related thereto.
7.16 Limitation on Amendments to Acquisition Documents. Amend,
supplement or otherwise modify (pursuant to a waiver or otherwise) in any
material respect the terms and conditions of the Acquisition Agreement or any
other document delivered by the Sellers or any of their affiliates in connection
therewith such that after giving effect thereto such terms and conditions shall
be materially less favorable to the interests of the Loan Parties or the Lenders
with respect thereto.
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SECTION 8. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) The Borrower shall fail to pay any principal of any Loan or
Reimbursement Obligation when due in accordance with the terms hereof; or
the Borrower shall fail to pay any interest on any Loan or Reimbursement
Obligation, or any other amount payable hereunder or under any other Loan
Document, within five days after any such interest or other amount becomes
due in accordance with the terms hereof; or
(b) Any representation or warranty made or deemed made by any Loan
Party herein or in any other Loan Document or which is contained in any
certificate furnished by it at any time under this Agreement or any such
other Loan Document shall prove to have been inaccurate in any material
respect on or as of the date made or deemed made; or
(c) (i) Any Loan Party shall default in the observance or
performance of any agreement contained in clause (i) or (ii) of Section
6.4(a) (with respect to Holdings and the Borrower only), Section 6.7(a),
Section 7 or Section 5.3.2 of the Guarantee and Collateral Agreement or
Section 5.3.2 of the Holdings Guarantee and Pledge Agreement and, in the
case of a default in the observance or performance of its obligations
under Section 6.7(a) hereof, such default shall have continued unremedied
for a period of two days after a Responsible Officer of the Borrower shall
have discovered or should have discovered such default or (ii) an "Event
of Default" under and as defined in any Mortgage shall have occurred and
be continuing; or
(d) Any Loan Party shall default in the observance or performance of
any other agreement contained in this Agreement or any other Loan Document
(other than as provided in paragraphs (a) through (c) of this Section),
and such default shall continue unremedied for a period ending on the
earlier of (i) the date 30 days after a Responsible Officer of the
Borrower shall have discovered or should have discovered such default (ii)
the date 15 days after written notice of such default has been given to
the Borrower by the Administrative Agent or the Required Lenders; or
(e) The Borrower or any of its Subsidiaries shall (i) default in (x)
making any payment of any principal of any Indebtedness (including,
without limitation, any Guarantee Obligation, but excluding the Loans) on
the scheduled or original due date with respect thereto or (y) making any
payment of any interest on any such Indebtedness, beyond the period of
grace (not to exceed 31 days), if any, provided in the instrument or
agreement under which such Indebtedness was created; or (ii) default in
the observance or performance of any other agreement or condition relating
to any such Indebtedness or contained in any instrument or agreement
evidencing, securing or relating thereto, or any other event shall occur
or condition exist, the effect of which default or other event or
condition is to cause, or to permit the holder or beneficiary of such
Indebtedness (or a trustee or agent on behalf of such holder or
beneficiary) to
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cause, with the giving of notice if required, such Indebtedness to become
due prior to its stated maturity or (in the case of any such Indebtedness
constituting a Guarantee Obligation) to become payable; provided, that a
default, event or condition described in clause (i) or (ii) of this
paragraph (e) shall not at any time constitute an Event of Default unless,
at such time, one or more defaults, events or conditions of the type
described in clauses (i) and (ii) of this paragraph (e) shall have
occurred and be continuing with respect to Indebtedness the outstanding
principal amount of which exceeds in the aggregate $2,500,000; or
(f) (i) Any Loan Party shall commence any case, proceeding or other
action (A) under any existing or future law of any jurisdiction, domestic
or foreign, relating to bankruptcy, insolvency, reorganization or relief
of debtors, seeking to have an order for relief entered with respect to
it, or seeking to adjudicate it a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts,
or (B) seeking appointment of a receiver, trustee, custodian, conservator
or other similar official for it or for all or any substantial part of its
assets, any Loan Party shall make a general assignment for the benefit of
its creditors; or (ii) there shall be commenced against any Loan Party any
case, proceeding or other action of a nature referred to in clause (i)
above which (A) results in the entry of an order for relief or any such
adjudication or appointment or (B) remains undismissed, undischarged or
unbonded for a period of 60 days; or (iii) there shall be commenced
against any Loan Party any case, proceeding or other action seeking
issuance of a warrant of attachment, execution, distraint or similar
process against all or any substantial part of its assets which results in
the entry of an order for any such relief which shall not have been
vacated, discharged, or stayed or bonded pending appeal within 60 days
from the entry thereof; or (iv) any Loan Party shall take any action in
furtherance of, or indicating its consent to, approval of, or acquiescence
in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v)
any Loan Party shall generally not, or shall be unable to, or shall admit
in writing its inability to, pay its debts as they become due; or
(g) (i) Any Person shall engage in any non-exempt "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the
Code) involving any Plan, (ii) any "accumulated funding deficiency" (as
defined in Section 302 of ERISA), whether or not waived, shall exist with
respect to any Plan or any Lien in favor of the PBGC or a Plan shall arise
on the assets of the Borrower or any Commonly Controlled Entity, (iii) a
Reportable Event shall occur with respect to, or proceedings shall
commence to have a trustee appointed, or a trustee shall be appointed, to
administer or to terminate, any Single Employer Plan, which Reportable
Event or commencement of proceedings or appointment of a trustee is, in
the reasonable opinion of the Required Lenders, likely to result in the
termination of such Plan for purposes of Title IV of ERISA, (iv) any
Single Employer Plan shall terminate for purposes of Title IV of ERISA,
(v) the Borrower or any Commonly Controlled Entity shall, or in the
reasonable opinion of the Required Lenders is likely to, incur any
liability in connection with a withdrawal from, or the Insolvency or
Reorganization of, a Multiemployer Plan or (vi) any other event or
condition shall occur or exist with
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84
respect to a Plan; and in each case in clauses (i) through (vi) above,
such event or condition, together with all other such events or
conditions, if any, could, in the sole judgment of the Required Lenders,
reasonably be expected to have a Material Adverse Effect; or
(h) One or more judgments or decrees shall be entered against the
Borrower or any of its Subsidiaries involving in the aggregate a liability
(not paid or fully covered by insurance as to which the relevant insurance
company has acknowledged coverage) of $2,500,000 or more, and all such
judgments or decrees shall not have been vacated, discharged, stayed or
bonded pending appeal within 60 days from the entry thereof; or
(i) Any of the Security Documents shall cease, for any reason, to be
in full force and effect (other than pursuant to the terms hereof or
thereof), or any Loan Party shall so assert in writing, or any Lien
created by any of the Security Documents shall cease to be enforceable and
of the same effect and priority purported to be created thereby with
respect to any significant portion of the Collateral (other than in
connection with any termination of such Lien in respect of any Collateral
as permitted hereby or by any Security Document), and such failure of such
Lien to be perfected and enforceable with such priority shall have
continued unremedied for a period of 20 days; or
(j) The guarantee contained in Section 2 of the Guarantee and
Collateral Agreement or the Holdings Guarantee and Pledge Agreement shall
cease, for any reason, to be in full force and effect (other than pursuant
to the terms hereof or thereof) or any Loan Party shall so assert in
writing; or
(k) A Change of Control shall have occurred; or
(l) The Senior Subordinated Indebtedness, the Existing Notes or the
guarantees thereof shall at any time after the date created cease, for any
reason, to be validly subordinated to the Obligations or the obligations
of the Subsidiary Guarantors under the Guarantee and Collateral Agreement,
as the case may be, as provided in the Senior Subordinated Indenture or
the Existing Indenture, or any Loan Party, any Affiliate of any Loan
Party, the trustee in respect of the Senior Subordinated Notes or, as the
case may be, the Existing Notes, or the holders of at least 25% in
aggregate principal amount of the Senior Subordinated Notes or, as the
case may be, the Existing Notes, shall so assert in writing;
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) above with respect to the Borrower,
automatically the Commitments shall immediately terminate and the Loans
hereunder (with accrued interest thereon) and all other amounts owing under this
Agreement and the other Loan Documents (including, without limitation, all
amounts of L/C Obligations, whether or not the beneficiaries of the then
outstanding Letters of Credit shall have presented the documents required
thereunder) and any Notes shall immediately become due and payable, and (B) if
such event is any other Event of Default, either or both of the following
actions may be taken: (i) with the consent of the
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85
Required Lenders, the Administrative Agent may, or upon the request of the
Required Lenders, the Administrative Agent shall, by notice to the Borrower
declare the Revolving Credit Commitments to be terminated forthwith, whereupon
the Revolving Credit Commitments shall immediately terminate; and (ii) with the
consent of the Required Lenders, the Administrative Agent may, or upon the
request of the Required Lenders, the Administrative Agent shall, by notice to
the Borrower, declare the Loans hereunder (with accrued interest thereon) and
all other amounts owing under this Agreement and the other Loan Documents
(including, without limitation, all amounts of L/C Obligations, whether or not
the beneficiaries of the then outstanding Letters of Credit shall have presented
the documents required thereunder) to be due and payable forthwith, whereupon
the same shall immediately become due and payable. With respect to all Letters
of Credit with respect to which presentment for honor shall not have occurred at
the time of an acceleration pursuant to this paragraph, the Borrower shall at
such time deposit in a cash collateral account opened by the Administrative
Agent an amount equal to the aggregate then undrawn and unexpired amount of such
Letters of Credit. Amounts held in such cash collateral account shall be applied
by the Administrative Agent to the payment of drafts drawn under such Letters of
Credit, and the unused portion thereof after all such Letters of Credit shall
have expired or been fully drawn upon, if any, shall be applied to repay other
obligations of the Borrower hereunder and under the other Loan Documents. After
all such Letters of Credit shall have expired or been fully drawn upon, all
Reimbursement Obligations shall have been satisfied and all other obligations of
the Borrower hereunder and under the other Loan Documents shall have been paid
in full, the balance, if any, in such cash collateral account shall be returned
to the Borrower (or such other Person as may be lawfully entitled thereto).
SECTION 9. THE ADMINISTRATIVE AGENT
9.1 Appointment. Each Lender hereby irrevocably designates and
appoints the Administrative Agent as the agent of such Lender under this
Agreement and the other Loan Documents, and each such Lender irrevocably
authorizes the Administrative Agent, in such capacity, to take such action on
its behalf under the provisions of this Agreement and the other Loan Documents
and to exercise such powers and perform such duties as are expressly delegated
to the Administrative Agent by the terms of this Agreement and the other Loan
Documents, together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in this Agreement, the
Administrative Agent shall not have any duties or responsibilities, except those
expressly set forth herein, or any fiduciary relationship with any Lender, and
no implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist against the Administrative Agent.
9.2 Delegation of Duties. The Administrative Agent may execute any
of its duties under this Agreement and the other Loan Documents by or through
agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Administrative Agent shall
not be responsible for the negligence or misconduct of any agents or attorneys
in-fact selected by it with reasonable care.
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86
9.3 Exculpatory Provisions. Neither the Administrative Agent nor any
of its respective officers, directors, employees, agents, attorneys-in-fact or
affiliates shall be (i) liable for any action lawfully taken or omitted to be
taken by it or such Person under or in connection with this Agreement or any
other Loan Document (except to the extent that any of the foregoing are found by
a final and nonappealable decision of a court of competent jurisdiction to have
resulted from its or such Person's own gross negligence or willful misconduct)
or (ii) responsible in any manner to any of the Lenders for any recitals,
statements, representations or warranties made by any Loan Party or any officer
thereof contained in this Agreement or any other Loan Document or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Administrative Agent under or in connection with, this
Agreement or any other Loan Document or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other Loan
Document or for any failure of any Loan Party a party thereto to perform its
obligations hereunder or thereunder. The Administrative Agent shall not be under
any obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or any other Loan Document, or to inspect the properties, books or
records of any Loan Party.
9.4 Reliance by Administrative Agent. The Administrative Agent shall
be entitled to rely, and shall be fully protected in relying, upon any
instrument, writing, resolution, notice, consent, certificate, affidavit,
letter, telecopy, telex or teletype message, statement, order or other document
or conversation believed by it to be genuine and correct and to have been
signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel (including, without limitation, counsel to the Loan
Parties), independent accountants and other experts selected by the
Administrative Agent. The Administrative Agent may deem and treat the payee of
any Note as the owner thereof for all purposes unless a written notice of
assignment, negotiation or transfer thereof shall have been filed with the
Administrative Agent. The Administrative Agent shall be fully justified as
between itself and the Lenders in failing or refusing to take any action under
this Agreement or any other Loan Document unless it shall first receive such
advice or concurrence of the Required Lenders (or, if so specified by this
Agreement, all Lenders) as it deems appropriate or it shall first be indemnified
to its satisfaction by the Lenders against any and all liability and expense
which may be incurred by it by reason of taking or continuing to take any such
action. The Administrative Agent shall in all cases be fully protected in
acting, or in refraining from acting, under this Agreement and the other Loan
Documents in accordance with a request of the Required Lenders (or, if so
specified by this Agreement, all Lenders), and such request and any action taken
or failure to act pursuant thereto shall be binding upon all the Lenders and all
future holders of the Loans.
9.5 Notice of Default. The Administrative Agent shall not be deemed
to have knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless it has received notice from a Lender or the Borrower referring
to this Agreement, describing such Default or Event of Default and stating that
such notice is a "notice of default". In the event that the Administrative Agent
receives such a notice, the Administrative Agent shall give notice thereof to
the Lenders. The Administrative Agent shall take such action with respect to
such Default or Event of Default as shall be reasonably directed by the Required
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Lenders (or, if so specified by this Agreement, all Lenders); provided that
unless and until the Administrative Agent shall have received such directions,
the Administrative Agent may (but shall not be obligated to) take such action,
or refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interests of the Lenders.
9.6 Non-Reliance on the Administrative Agent and Other Lenders. Each
Lender expressly acknowledges that neither the Administrative Agent nor any of
its respective officers, directors, employees, agents, attorneys-in-fact or
affiliates have made any representations or warranties to it and that no act by
the Administrative Agent hereinafter taken, including any review of the affairs
of a Loan Party or any affiliate of a Loan Party, shall be deemed to constitute
any representation or warranty by the Administrative Agent to any Lender. Each
Lender represents to the Administrative Agent that it has, independently and
without reliance upon the Administrative Agent or any other Lender, and based on
such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, operations, property,
financial and other condition and creditworthiness of the Loan Parties and their
affiliates and made its own decision to make its Loans hereunder and enter into
this Agreement. Each Lender also represents that it will, independently and
without reliance upon the Administrative Agent or any other Lender, and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or
not taking action under this Agreement and the other Loan Documents, and to make
such investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition and creditworthiness of the
Loan Parties and their affiliates. Except for notices, reports and other
documents expressly required to be furnished to the Lenders by the
Administrative Agent hereunder, the Administrative Agent shall not have any duty
or responsibility to provide any Lender with any credit or other information
concerning the business, operations, property, condition (financial or
otherwise), prospects or creditworthiness of any Loan Party or any affiliate of
a Loan Party which may come into the possession of the Administrative Agent or
any of its officers, directors, employees, agents, attorneys-in-fact or
affiliates. Each Lender represents to each other party hereto that it is a bank,
savings and loan association or other similar savings institution, insurance
company, investment fund or company or other financial institution which makes
or acquires commercial loans in the ordinary course of its business, that it is
participating hereunder as a Lender for its account and for such commercial
purposes, and that it has the knowledge and experience to be and is capable of
evaluating the merits and risks of being a Lender hereunder. Each Lender
acknowledges and agrees to comply with the provisions of Section 10.6 applicable
to the Lenders hereunder.
9.7 Indemnification. The Lenders agree to indemnify the
Administrative Agent in its capacity as such (to the extent not reimbursed by
Holdings or the Borrower and without limiting the obligation of Holdings or the
Borrower to do so), ratably according to their respective Aggregate Exposure
Percentages in effect on the date on which indemnification is sought under this
Section 9.7 (or, if indemnification is sought after the date upon which the
Commitments shall have terminated and the Loans shall have been paid in full,
ratably in accordance with such Aggregate Exposure Percentages immediately prior
to
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88
such date), from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind whatsoever which may at any time (including, without limitation, at
any time following the payment of the Loans) be imposed on, incurred by or
asserted against the Administrative Agent in any way relating to or arising out
of, the Commitments, this Agreement, any of the other Loan Documents or any
documents contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by such Agent
under or in connection with any of the foregoing; provided that no Lender shall
be liable for the payment of any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements which are found by a final and nonappealable decision of a court
of competent jurisdiction to have resulted from the Administrative Agent's gross
negligence or willful misconduct. The agreements in this Section 9.7 shall
survive the payment of the Loans and all other amounts payable hereunder.
9.8 Agent in Its Individual Capacity. The Administrative Agent and
its affiliates may make loans to, accept deposits from and generally engage in
any kind of business with any Loan Party as though the Administrative Agent was
not the Administrative Agent. With respect to its Loans made or renewed by it
and with respect to any Letter of Credit issued or participated in by it, the
Administrative Agent shall have the same rights and powers under this Agreement
and the other Loan Documents as any Lender and may exercise the same as though
it were not the Administrative Agent, and the terms "Lender" and "Lenders" shall
include the Administrative Agent in its individual capacity.
9.9 Successor Administrative Agent. The Administrative Agent may
resign as Administrative Agent upon 10 days' notice to the Lenders and the
Borrower. If the Administrative Agent shall resign as Administrative Agent under
this Agreement and the other Loan Documents, then the Required Lenders shall
appoint from among the Lenders a successor agent for the Lenders, which
successor agent (which shall be a bank) shall (unless an Event of Default under
Section 8(a) or Section 8(f) with respect to the Borrower shall have occurred
and be continuing) be subject to approval by the Borrower (which approval shall
not be unreasonably withheld or delayed), whereupon such successor agent shall
succeed to the rights, powers and duties of the Administrative Agent, and the
term "Administrative Agent" shall mean such successor agent effective upon such
appointment and approval, and the former Administrative Agent's rights, powers
and duties as Administrative Agent shall be terminated, without any other or
further act or deed on the part of such former Administrative Agent or any of
the parties to this Agreement or any holders of the Loans. If no successor agent
has accepted appointment as Administrative Agent by the date that is 10 days
following a retiring Administrative Agent's notice of resignation, the retiring
Administrative Agent's resignation shall nevertheless thereupon become
effective, and the Lenders shall assume and perform all of the duties of the
Administrative Agent hereunder until such time, if any, as the Required Lenders
appoint a successor agent as provided for above. After the Administrative
Agent's resignation as Administrative Agent, the provisions of this Section 9
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Administrative Agent under this Agreement and the other Loan
Documents.
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9.10 Authorization to Release Liens. The Administrative Agent is
hereby irrevocably authorized by each of the Lenders to release any Lien
covering any Property of the Borrower or any of its Subsidiaries that is the
subject of a Disposition which is permitted by this Agreement or which has been
consented to in accordance with Section 10.1.
9.11 The Arranger. The Arranger, in its capacity as such, shall have
no duties or responsibilities, and shall incur no liability, under this
Agreement and the other Loan Documents.
9.12 Release of Liens on Excluded Foreign Accounts. In connection
with the incurrence by the Borrower or any of its Subsidiaries of Indebtedness
permitted by Section 7.2, the Borrower may deliver to the Administrative Agent,
a written request for release identifying the relevant Excluded Foreign Accounts
and the terms of such Indebtedness in reasonable detail together with a
certification by the Borrower stating that such transaction is in compliance
with this Agreement. The Administrative Agent shall execute and deliver to the
Borrower (at the sole cost and expense of the Borrower) all releases or other
documents (including without limitation UCC termination statements) necessary or
reasonably desirable for the release or (to the extent acceptable to the holder
of such Indebtedness) subordination of the Liens created by the Guarantee and
Collateral Agreement on such Excluded Foreign Accounts as the Borrower may
reasonably request. Each of the Lenders hereby authorizes the Administrative
Agent to deliver such releases or other documents.
SECTION 10. MISCELLANEOUS
10.1 Amendments and Waivers. Neither this Agreement, any other Loan
Document, nor any terms hereof or thereof may be amended, supplemented or
modified except in accordance with the provisions of this Section 10.1. The
Required Lenders and each Loan Party party to the relevant Loan Document may, or
(with the written consent of the Required Lenders) the Administrative Agent and
each Loan Party party to the relevant Loan Document may, from time to time, (a)
enter into written amendments, supplements or modifications hereto and to the
other Loan Documents for the purpose of adding any provisions to this Agreement
or the other Loan Documents or changing in any manner the rights or obligations
of the Lenders or of the Loan Parties hereunder or thereunder or (b) waive, on
such terms and conditions as the Required Lenders, or the Administrative Agent,
as the case may be, may specify in such instrument, any of the requirements of
this Agreement or the other Loan Documents or any Default or Event of Default
and its consequences; provided, however, that no such waiver and no such
amendment, supplement or modification shall (i) forgive the principal amount or
extend the final scheduled date of maturity of any Loan, extend the scheduled
date of any amortization payment in respect of any Term Loan, reduce the stated
rate of any interest, fee or letter of credit commission payable hereunder or
extend the scheduled date of any payment thereof, change the method or procedure
for determining the Borrowing Base, or increase the amount or extend the
expiration date of any Lender's Revolving Credit Commitment, in each case
without the consent of each Lender directly affected thereby; (ii) amend, modify
or waive any provision of this Section or reduce any percentage specified in the
definition of Required Lenders, consent to the assignment or
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transfer by the Borrower of any of its rights and obligations under this
Agreement and the other Loan Documents, release all or substantially all of the
Collateral, release all or substantially all of the Subsidiary Guarantors from
their obligations under the Guarantee and Collateral Agreement, amend or modify
the definition of "Borrowing Base", in each case without the written consent of
all Lenders; (iii) amend, modify or waive any condition precedent to any
extension of credit under the Revolving Credit Facility set forth in Section 5.2
(including, without limitation, in connection with any waiver of an existing
Default or Event of Default) without the written consent of the Majority
Revolving Credit Facility Lenders; (iv) reduce the percentage specified in the
definition of Majority Facility Lenders as applicable to any Facility without
the written consent of all Lenders under such Facility; (v) amend, modify or
waive any provision of Section 9 without the written consent of the
Administrative Agent; (vi) amend, modify or waive any provision of Section 2.6
or 2.7 without the written consent of the Swing Line Lender; or (vii) amend,
modify or waive any provision of Section 3 without the written consent of the
Issuing Lender. Any such waiver and any such amendment, supplement or
modification shall apply equally to each of the Lenders and shall be binding
upon the Loan Parties, the Lenders, the Administrative Agent and all future
holders of the Loans. In the case of any waiver, the Loan Parties, the Lenders
and the Administrative Agent shall be restored to their former position and
rights hereunder and under the other Loan Documents, and any Default or Event of
Default waived shall be deemed to be cured and not continuing; but no such
waiver shall extend to any subsequent or other Default or Event of Default, or
impair any right consequent thereon.
10.2 Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
telecopy), and, unless otherwise expressly provided herein, shall be deemed to
have been duly given or made when delivered, or three Business Days after being
deposited in the mail, postage prepaid, or, in the case of telecopy notice, when
received, addressed as follows in the case of Holdings, the Borrower and the
Administrative Agent, and as set forth in an administrative questionnaire
delivered to the Administrative Agent in the case of the Lenders, or to such
other address as may be hereafter notified by the respective parties hereto:
The Borrower: Day International Group, Inc.
130 West Second Street
Dayton Ohio 45402
Attention: _____________
Telecopy: _____________
Telephone: _____________
The Administrative Agent: Societe Generale
1221 Avenue of the Americas
New York, New York 10020
Attention: Mr. Jack Stack
Telecopy: (212) 278-5460
Telephone: (212) 278-6402
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provided that any notice, request or demand to or upon the Administrative Agent
or the Lenders shall not be effective until received.
10.3 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of the Administrative Agent or any Lender, any
right, remedy, power or privilege hereunder or under the other Loan Documents
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
The rights, remedies, powers and privileges herein provided are cumulative and
not exclusive of any rights, remedies, powers and privileges provided by law.
10.4 Survival of Representations and Warranties. All representations
and warranties made hereunder, in the other Loan Documents and in any document,
certificate or statement delivered pursuant hereto or in connection herewith
shall survive the execution and delivery of this Agreement and the making of the
Loans hereunder.
10.5 Payment of Expenses. The Borrower agrees (a) to pay or
reimburse the Administrative Agent for all its reasonable out-of-pocket costs
and expenses incurred in connection with the preparation and execution of, and
any amendment, supplement or modification to, this Agreement and the other Loan
Documents and any other documents prepared in connection herewith or therewith,
and the consummation and administration of the transactions contemplated hereby
and thereby, including, without limitation, the reasonable fees and
disbursements of counsel to the Administrative Agent, (b) to pay or reimburse
each Lender and the Administrative Agent for all its costs and expenses incurred
in connection with the enforcement or preservation of any rights under this
Agreement, the other Loan Documents and any such other documents, including,
without limitation, the fees and disbursements of counsel to each Lender and of
counsel to the Administrative Agent, (c) to pay, indemnify, and hold each Lender
and the Administrative Agent harmless from, any and all recording and filing
fees or any amendment, supplement or modification of, or any waiver or consent
under or in respect of, this Agreement, the other Loan Documents and any such
other documents, and (d) to pay, indemnify, and hold each Lender and the
Administrative Agent and its respective officers, directors, employees,
affiliates, agents and controlling persons (each, an "indemnitee") harmless from
and against any and all other liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of this Agreement, the other Loan Documents and
any such other documents, including, without limitation, any of the foregoing
relating to the use of proceeds of the Loans or the violation of, noncompliance
with or liability under, any Environmental Law applicable to the operations of
Holdings, the Borrower any of its Subsidiaries or any of the Properties (all the
foregoing in this clause (d), collectively, the "indemnified liabilities"),
provided, that (except as expressly provided in Section 2.10 and Section 2.11)
the Borrower shall have no obligation to any indemnitee with respect to taxes
and provided further that the Borrower shall have no obligation hereunder to any
indemnitee with respect to indemnified liabilities to the extent such
indemnified liabilities are found by a final and nonappealable decision of a
court of competent jurisdiction to have resulted from (i) the gross negligence
or willful misconduct of such indemnitee or any of its affiliates, officers,
<PAGE> 97
92
directors, employees, advisors, agents or controlling persons, or (ii) claims
made or legal proceedings commenced against the Administrative Agent or any such
Lender by any securityholder or creditor thereof arising out of and based upon
rights afforded any such securityholder or creditor solely in its capacity as
such. Without limiting the foregoing, and to the extent permitted by applicable
law, the Borrower agrees not to assert and to cause its Subsidiaries not to
assert, and hereby waive and agree to cause its Subsidiaries to so waive, all
rights for contribution or any other rights of recovery with respect to all
claims, demands, penalties, fines, liabilities, settlements, damages, costs and
expenses of whatever kind or nature, under or related to Environmental Laws,
that any of them might have by statute or otherwise against any indemnitee. The
agreements in this Section shall survive repayment of the Loans and all other
amounts payable hereunder.
10.6 Successors and Assigns; Participations and Assignments. (a)
This Agreement shall be binding upon and inure to the benefit of the Borrower,
the Lenders, the Administrative Agent, all future holders of the Loans and their
respective successors and assigns, except that the Borrower may not assign or
transfer any of its rights or obligations under this Agreement (other than in
connection with a merger or consolidation permitted by Section 7.5) without the
prior written consent of the Administrative Agent and each Lender.
(b) Any Lender may, without the consent of the Borrower, in
accordance with applicable law, at any time sell to one or more banks, financial
institutions or other entities (each, a "Participant") participating interests
in any Loan owing to such Lender, any Commitment of such Lender or any other
interest of such Lender hereunder and under the other Loan Documents. In the
event of any such sale by a Lender of a participating interest to a Participant,
such Lender's obligations under this Agreement to the other parties to this
Agreement shall remain unchanged, such Lender shall remain solely responsible
for the performance thereof, such Lender shall remain the holder of any such
Loan for all purposes under this Agreement and the other Loan Documents, and the
Borrower and the Administrative Agent shall continue to deal solely and directly
with such Lender in connection with such Lender's rights and obligations under
this Agreement and the other Loan Documents. In no event shall any Participant
under any such participation have any right to approve any amendment or waiver
of any provision of any Loan Document, or any consent to any departure by any
Loan Party therefrom, except to the extent that such amendment, waiver or
consent would reduce the principal of, or interest on, the Loans or any fees
payable hereunder, or postpone the date of the final maturity of the Loans, in
each case to the extent subject to such participation. The Borrower agrees that
if amounts outstanding under this Agreement and the Loans are due or unpaid, or
shall have been declared or shall have become due and payable upon the
occurrence of an Event of Default, each Participant shall, to the maximum extent
permitted by applicable law, be deemed to have the right of set-off in respect
of its participating interest in amounts owing under this Agreement to the same
extent as if the amount of its participating interest were owing directly to it
as a Lender under this Agreement, provided that, in purchasing such
participating interest, such Participant shall be deemed to have agreed to share
with the Lenders the proceeds thereof as provided in Section 10.7(a) as fully as
if it were a Lender hereunder. The Borrower also agrees that each Participant
shall be entitled to the benefits of Sections 2.19, 2.20 and 2.21 with respect
to its participation in the Commitments and the Loans outstanding from time to
time as if it was a
<PAGE> 98
93
Lender; provided that, in the case of Section 2.20, such Participant shall have
complied with the requirements of said Section and provided, further, that no
Participant shall be entitled to receive any greater amount pursuant to any such
Section than the transferor Lender would have been entitled to receive in
respect of the amount of the participation transferred by such transferor Lender
to such Participant had no such transfer occurred.
(c) Any Lender (an "Assignor") may, in accordance with applicable
law, at any time and from time to time assign to any Lender or any Affiliate
thereof or, with the consent of the Borrower, and the Administrative Agent
(which, in each case, shall not be unreasonably withheld or delayed) (provided
that no such consent need be obtained by Societe Generale for a period of 180
days following the Closing Date), to an additional bank, financial institution
or other entity (an "Assignee") all or any part of its rights and obligations
under this Agreement pursuant to an Assignment and Acceptance, substantially in
the form of Exhibit K, executed by such Assignee, such Assignor and the
Administrative Agent (and, where the consent of the Borrower is required
pursuant to the foregoing provisions, by the Borrower) and delivered to the
Administrative Agent for its acceptance and recording in the Register; provided
that no such assignment to an Assignee (other than any Lender or any affiliate
thereof) shall be in an aggregate principal amount of less than $5,000,000
(other than in the case of an assignment of all of a Lender's interests under
this Agreement), unless otherwise agreed by the Borrower and the Administrative
Agent. Any such assignment need not be ratable as among the Facilities. Upon
such execution, delivery, acceptance and recording, from and after the effective
date determined pursuant to such Assignment and Acceptance, (x) the Assignee
thereunder shall be a party hereto and, to the extent provided in such
Assignment and Acceptance, have the rights and obligations of a Lender hereunder
with a Commitment and/or Loans as set forth therein, and (y) the Assignor
thereunder shall, to the extent provided in such Assignment and Acceptance, be
released from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all of an Assignor's rights and obligations
under this Agreement, such assigning Lender shall cease to be a party hereto).
Notwithstanding any provision of this Section, the consent of the Borrower shall
not be required for any assignment which occurs at any time when any Event of
Default shall have occurred and be continuing.
(d) The Administrative Agent shall maintain at its address referred
to in Section 10.2 a copy of each Assignment and Acceptance delivered to it and
a register (the "Register") for the recordation of the names and addresses of
the Lenders and the Commitment of, and principal amount of the Loans owing to,
each Lender from time to time and any Notes evidencing such Loans. The entries
in the Register shall be conclusive, in the absence of manifest error, and the
Borrower, the Administrative Agent and the Lenders shall treat each Person whose
name is recorded in the Register as the owner of the Loan and any Note
evidencing such Loan recorded therein for all purposes of this Agreement. Any
assignment of any Loan whether or not evidenced by a Note shall be effective
only upon appropriate entries with respect thereto being made in the Register
(and each Note shall expressly so provide). Any assignment or transfer of all or
part of a Loan evidenced by a Note shall be registered on the Register only upon
surrender for registration of assignment or transfer of the Note evidencing such
Loan, accompanied by a duly executed Assignment and Acceptance, and thereupon
one or more new Notes in the same aggregate principal amount
<PAGE> 99
94
shall be issued to the designated Assignee and the old Notes shall be returned
by the Administrative Agent to the Borrower marked "cancelled". The Register
shall be available for inspection by the Borrower or any Lender at any
reasonable time and from time to time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an Assignee (and, in the case of an Assignee that is not
then a Lender or an affiliate thereof or a Person under common management with
such Lender, by the Borrower, the Administrative Agent and the Issuing Lender)
together with payment to the Administrative Agent of a registration and
processing fee of $3,500 (except that no such registration and processing fee
shall be payable (y) in connection with an assignment by Societe Generale or (z)
in the case of an Assignee which is already a Lender or is an affiliate of a
Lender or a Person under common management with a Lender), the Administrative
Agent shall (i) promptly accept such Assignment and Acceptance and (ii) on the
effective date determined pursuant thereto record the information contained
therein in the Register and give notice of such acceptance and recordation to
the Lenders and the Borrower. On or prior to such effective date, the Borrower,
at its own expense, upon request, shall execute and deliver to the
Administrative Agent (in exchange for the Revolving Credit Note and/or Term
Notes, as the case may be, of the assigning Lender) a new Revolving Credit Note
and/or Term Notes, as the case may be, to the order of such Assignee in an
amount equal to the Revolving Credit Commitment and/or applicable Term Loans, as
the case may be, assumed or acquired by it pursuant to such Assignment and
Acceptance and, if the assigning Lender has retained a Revolving Credit
Commitment and/or Term Loans, as the case may be, upon request, a new Revolving
Credit Note and/or Term Notes, as the case may be, to the order of the assigning
Lender in an amount equal to the Revolving Credit Commitment and/or applicable
Term Loans, as the case may be, retained by it hereunder. Such new Notes shall
be dated the Closing Date and shall otherwise be in the form of the Note
replaced thereby.
(f) For avoidance of doubt, the parties to this Agreement
acknowledge that the provisions of this Section concerning assignments of Loans
and Notes relate only to absolute assignments and that such provisions do not
prohibit assignments creating security interests, including, without limitation,
any pledge or assignment by a Lender of any Loan or Note to any Federal Reserve
Bank in accordance with applicable law.
10.7 Adjustments; Set-off. (a) Except to the extent that this
Agreement provides for payments to be allocated to the Lenders under a
particular Facility, if any Lender (a "Benefitted Lender") shall at any time
receive any payment of all or part of its Loans or the Reimbursement Obligations
owing to it, or interest thereon, or receive any collateral in respect thereof
(whether voluntarily or involuntarily, by set-off, pursuant to events or
proceedings of the nature referred to in Section 8(f), or otherwise), in a
greater proportion than any such payment to or collateral received by any other
Lender, if any, in respect of such other Lender's Loans or the Reimbursement
Obligations owing to such other Lender, or interest thereon, such Benefitted
Lender shall purchase for cash from the other Lenders a participating interest
in such portion of each such other Lender's Loan and/or of the Reimbursement
Obligations owing to each such other Lender, or shall provide such other Lenders
with the benefits of any such collateral, or the proceeds thereof, as shall be
necessary
<PAGE> 100
95
to cause such Benefitted Lender to share the excess payment or benefits of such
collateral or proceeds ratably with each of the Lenders; provided, however, that
if all or any portion of such excess payment or benefits is thereafter recovered
from such Benefitted Lender, such purchase shall be rescinded, and the purchase
price and benefits returned, to the extent of such recovery, but without
interest.
(b) In addition to any rights and remedies of the Lenders provided
by law, each Lender shall have the right, to the extent permitted by applicable
law, without prior notice to the Borrower, any such notice being expressly
waived by the Borrower to the extent permitted by applicable law, upon any
amount becoming due and payable by the Borrower hereunder (whether at the stated
maturity, by acceleration or otherwise) to set off and appropriate and apply
against such amount any and all deposits (general or special, time or demand,
provisional or final), in any currency, and any other credits, indebtedness or
claims, in any currency, in each case whether direct or indirect, absolute or
contingent, matured or unmatured, at any time held or owing by such Lender or
any branch or agency thereof to or for the credit or the account of the
Borrower. Each Lender agrees promptly to notify the Borrower and the
Administrative Agent after any such set-off and application made by such Lender,
provided that, to the extent permitted by applicable law the failure to give
such notice shall not affect the validity of such set-off and application.
10.8 Counterparts. This Agreement may be executed by one or more of
the parties to this Agreement on any number of separate counterparts (including
by telecopy), and all of said counterparts taken together shall be deemed to
constitute one and the same instrument. A set of the copies of this Agreement
signed by all the parties shall be lodged with the Borrower and the
Administrative Agent.
10.9 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
10.10 Integration. This Agreement and the other Loan Documents
represent the agreement of Holdings, the Borrower, the Administrative Agent and
the Lenders with respect to the subject matter hereof, and there are no
promises, undertakings, representations or warranties by the Administrative
Agent or any Lender relative to subject matter hereof not expressly set forth or
referred to herein or in the other Loan Documents.
10.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF TO THE EXTENT THE SAME WOULD
REQUIRE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.
<PAGE> 101
96
10.12 Submission To Jurisdiction; Waivers. Each party hereby
irrevocably and unconditionally:
(a) submits for itself and its Property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to
which it is a party, or for recognition and enforcement of any judgment in
respect thereof, to the non-exclusive general jurisdiction of the Courts
of the State of New York, the courts of the United States of America for
the Southern District of New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient forum and agrees not
to plead or claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to the
Borrower, the Administrative Agent, or the applicable Lender, as the case
may be, at its address set forth in Section 10.2 or at such other address
of which the Administrative Agent, any such Lender and the Borrower shall
have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right
it may have to claim or recover in any legal action or proceeding referred
to in this Section 10.12 any punitive damages.
10.13 Acknowledgements. The Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Loan Documents;
(b) neither the Administrative Agent nor any Lender has any
fiduciary relationship with or duty to the Borrower arising out of or in
connection with this Agreement or any of the other Loan Documents, and the
relationship between Administrative Agent and Lenders, on one hand, and
Holdings and the Borrower, on the other hand, in connection herewith or
therewith is solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions contemplated
hereby among the Lenders or among Holdings, the Borrower and the Lenders.
<PAGE> 102
97
10.14 WAIVERS OF JURY TRIAL. THE BORROWER, THE AGENTS AND THE
LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL
ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND
FOR ANY COUNTERCLAIM THEREIN.
10.15 Confidentiality. The Administrative Agent and each Lender
agrees to keep confidential all non-public information provided to it by any
Loan Party pursuant to this Agreement that is designated by such Loan Party as
confidential; provided that nothing herein shall prevent the Administrative
Agent or any Lender from disclosing any such information (a) to the
Administrative Agent, any other Lender or any affiliate of any Lender, (b) to
any Participant or Assignee (each, a "Transferee") or prospective Transferee
which agrees to comply with the provisions of this Section, (c) to the
employees, directors, agents, attorneys, accountants and other professional
advisors of such Lender or its affiliates, (d) upon the request or demand of any
Governmental Authority having jurisdiction over the Administrative Agent or such
Lender, (e) in response to any order of any court or other Governmental
Authority or as may otherwise be required pursuant to any Requirement of Law,
(f) if requested or required to do so in connection with any litigation or
similar proceeding, (g) which has been publicly disclosed other than in breach
of this Section, (h) to the National Association of Insurance Commissioners or
any similar organization or any nationally recognized rating agency that
requires access to information about a Lender's investment portfolio in
connection with ratings issued with respect to such Lender, or (i) in connection
with the exercise of any remedy hereunder or under any other Loan Document.
<PAGE> 103
98
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
DAY INTERNATIONAL GROUP, INC.,
as Borrower
By:______________________________________
Name:
Title:
<PAGE> 104
SOCIETE GENERALE SECURITIES
CORPORATION,
as Arranger
By:______________________________________
Name:
Title:
<PAGE> 105
SOCIETE GENERALE, NEW YORK BRANCH,
as Administrative Agent and as a Lender
By:______________________________________
Name:
Title:
<PAGE> 106
Annex A
-------
PRICING GRID FOR REVOLVING CREDIT LOANS, SWING LINE LOANS AND TERM LOANS
<TABLE>
<CAPTION>
=======================================================================
Consolidated Applicable Margin Applicable Margin for Base
Leverage Ratio for Eurodollar Loans Rate Loans
- -----------------------------------------------------------------------
<S> <C> <C>
>4.00 to 1 2.00 1.00
- -----------------------------------------------------------------------
<=4.00 to 1 1.75 .75
>3.50 to 1
- -----------------------------------------------------------------------
<=3.50 to 1 1.50 .50
>3.00 to 1
- -----------------------------------------------------------------------
<=3.00 to 1 1.25 .25
>2.50 to 1
- -----------------------------------------------------------------------
<=2.50 to 1 1.00 ___
=======================================================================
</TABLE>
Changes in the Applicable Margin with respect to Term Loans resulting from
changes in the Consolidated Interest Coverage Ratio and the Consolidated
Leverage Ratio shall become effective on the date (the "Adjustment Date") on
which financial statements are delivered to the Lenders pursuant to Section 6.1
(but in any event not later than the 45th day after the end of each of the first
three quarterly periods of each fiscal year or the 90th day after the end of
each fiscal year, as the case may be) and shall remain in effect until the next
change to be effected pursuant to this paragraph. If any financial statements
referred to above are not delivered within the time periods specified above,
then, until such financial statements are delivered, the Consolidated Leverage
Ratio as at the end of the fiscal period that would have been covered thereby
shall for the purposes of this definition be deemed greater than 4.00 to 1. In
addition, at all times while an Event of Default shall have occurred and be
continuing, the Consolidated Leverage Ratio shall for the purposes of this
definition be deemed to be greater than 4.00 to 1. If on any Adjustment Date the
Consolidated Leverage Ratio would result in different Applicable Margins, the
higher Applicable Margin shall govern. Each determination of the Consolidated
Leverage Ratio pursuant to this definition shall be made with respect to the
period of four consecutive fiscal quarters of the Borrower ending at the end of
the period covered by the relevant financial statements.
<PAGE> 107
SCHEDULES 1.1A
COMMITMENTS
<TABLE>
<CAPTION>
Lender Revolving Credit Term Loan
- ------ ---------------- ---------
<S> <C> <C>
SOCIETE GENERALE $20,000,000 $40,000,000
</TABLE>
<PAGE> 1
Exhibit 99.1
1997 AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY
INDEPENDENT AUDITORS' REPORT
To the Board of directors and Stockholders
DAY INTERNATIONAL GROUP, INC.
We have audited the accompanying consolidated balance sheets of Day
International Group, Inc. and subsidiaries as of December 31, 1997 and 1996, and
the related consolidated statements of operations, stockholders' equity and cash
flows for the years ended December 31, 1997 and 1996 and the period from June 7,
1995 (date of acquisition) through December 31, 1995. Our audits also included
the financial statement schedule listed in the Index at Item 14(a)2 for the
years ended December 31, 1997 and 1996 and the period ended December 31, 1995.
These financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial statement schedule based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Day International Group, Inc.
at December 31, 1997 and 1996, and the results of their operations and their
cash flows for the years ended December 31, 1997 and 1996 and the period from
June 7, 1995 through December 31, 1995, in conformity with generally accepted
accounting principles. Also, in our opinion, such financial statement schedule,
when considered in relation to the basic consolidated financial statements taken
as a whole, presents fairly, in all material respects, the information set forth
therein.
DELOITTE & TOUCHE LLP
Dayton, Ohio
February 17, 1998
<PAGE> 2
DAY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.......................................... $ 780 $ 5,433
Accounts receivable:
Trade (less allowance for doubtful accounts of $1,055 and
$982).......................................................... 21,593 16,788
Other........................................................... 379 383
Inventories (Note C)............................................... 16,501 16,355
Prepaid expenses and other current assets.......................... 1,457 3,630
Deferred tax assets (Note E)....................................... 1,938 3,389
-------- --------
Total current assets.......................................... 42,648 45,978
PROPERTY, PLANT AND EQUIPMENT (Note A):
Land............................................................... 2,023 2,025
Buildings.......................................................... 10,648 10,183
Machinery and equipment............................................ 39,999 34,692
Construction in progress........................................... 3,716 5,098
-------- --------
56,386 51,998
Less accumulated depreciation...................................... (11,594) (6,709)
-------- --------
44,792 45,289
OTHER ASSETS:
Goodwill and other intangible assets (Note B)...................... 136,722 145,018
Note receivable (Note K)........................................... 890 1,155
Other assets....................................................... 475 446
-------- --------
138,087 146,619
-------- --------
TOTAL ASSETS......................................................... $225,527 $237,886
======== ========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 3
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable................................................... $ 7,743 $ 7,453
Accrued associate related costs.................................... 8,177 7,929
Other accrued expenses............................................. 3,694 5,430
Income taxes payable............................................... 1,618 645
Interest payable................................................... 1,013 1,068
Current maturities of long-term debt (Note D)...................... 774 803
-------- --------
Total current liabilities..................................... 23,019 23,328
LONG-TERM AND SUBORDINATED LONG-TERM DEBT (Note D)................... 130,109 152,116
DEFERRED TAX LIABILITIES (Note E).................................... 5,688 3,513
OTHER LONG-TERM LIABILITIES (Notes J and K).......................... 6,522 6,195
COMMITMENTS AND CONTINGENCIES (Note K)...............................
-------- --------
Total liabilities............................................. 165,338 185,152
STOCKHOLDERS' EQUITY (Note H):
Preferred Shares $.01 per share par value, 10,000 shares
authorized,
none outstanding
Common Shares, $.01 per share par value, 100,000 shares authorized,
51,655 shares -- 1997 and 51,555 shares -- 1996 issued and
outstanding..................................................... 1 1
Additional paid-in-capital......................................... 51,959 51,531
Retained earnings.................................................. 9,697 1,780
Foreign currency translation adjustment............................ (1,468) (578)
-------- --------
Total stockholders' equity.................................... 60,189 52,734
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........................... $225,527 $237,886
======== ========
</TABLE>
<PAGE> 4
DAY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997 AND 1996 AND PERIOD FROM
JUNE 7, 1995 THROUGH DECEMBER 31, 1995 (IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- -------
<S> <C> <C> <C>
NET SALES................................................. $166,286 $136,814 $73,103
COST OF GOODS SOLD (including inventory fair value
adjustments of $2,287 in 1995) (Note G)................. 103,035 84,602 47,503
-------- --------- --------
GROSS PROFIT.............................................. 63,251 52,212 25,600
SELLING, GENERAL AND ADMINISTRATIVE....................... 28,629 23,657 12,885
AMORTIZATION OF INTANGIBLES............................... 3,315 6,474 3,688
MANAGEMENT FEES (Note G).................................. 896 920 455
-------- --------- --------
OPERATING PROFIT.......................................... 30,411 21,161 8,572
OTHER EXPENSES (Note D):
Interest Expense (including amortization of deferred
financing costs of $966 in 1997, $1,000 in 1996 and
$567 in 1995)........................................ 15,926 16,373 9,697
Other expense (income) -- net........................... 629 (219) 952
-------- --------- --------
16,555 16,154 10,649
-------- --------- --------
INCOME (LOSS) BEFORE INCOME TAXES (BENEFIT)............... 13,856 5,007 (2,077)
INCOME TAXES (BENEFIT) (Note E)........................... 5,939 2,000 (850)
-------- --------- --------
NET INCOME (LOSS)......................................... $ 7,917 $ 3,007 $(1,227)
======== ========= ========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 5
DAY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996 AND PERIOD FROM
JUNE 7, 1995 THROUGH DECEMBER 31, 1995 (DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
RETAINED FOREIGN
COMMON SHARES ADDITIONAL EARNINGS/ CURRENCY
---------------- PAID-IN (ACCUMULATED TRANSLATION
SHARES AMOUNT CAPITAL DEFICIT) ADJUSTMENT
------ ------ ---------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Sale of common shares.................... 51,600 $1 $ 51,599 $ $
Net loss................................. (1,227)
Foreign currency translation
adjustment............................. (512)
------ --- ------- ------- --------
December 31, 1995........................ 51,600 1 51,599 (1,227) (512)
Sale of common shares.................... 73 73
Purchase of common shares................ (118) (141)
Net income............................... 3,007
Foreign currency translation
adjustment............................. (66)
------ --- ------- ------- --------
December 31, 1996........................ 51,555 1 51,531 1,780 (578)
Sale of common shares.................... 100 120
Issuance of stock options................ 308
Net income............................... 7,917
Foreign currency translation
adjustment............................. (890)
------ --- ------- ------- --------
December 31, 1997........................ 51,655 $1 $ 51,959 $ 9,697 $ (1,468)
====== === ======= ======= ========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 6
DAY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997 AND 1996 AND PERIOD FROM
JUNE 7, 1995 THROUGH DECEMBER 31, 1995 (IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss).......................................... $ 7,917 $ 3,007 $ (1,227)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation............................................. 5,238 4,384 2,415
Amortization of goodwill and intangibles................. 7,827 10,724 8,310
Deferred income taxes.................................... 3,528 146 (1,247)
Non-cash charge related to stock option awards........... 308
Change in assets and liabilities, net of effect of David M
acquisition:
Accounts receivable...................................... (5,455) (125) 280
Inventories.............................................. (532) 909 1,512
Prepaid expenses and other current assets................ (521) 236 472
Accounts payable and other accrued expenses.............. 1,361 (1,218) 4,400
-------- -------- ---------
Net cash provided by operating activities........... 19,671 18,063 14,915
-------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for Day International, Inc., net of cash
acquired................................................. (203,993)
Cash paid for net assets of David M........................ 1,513 (11,285)
Capital expenditures....................................... (5,124) (5,221) (2,082)
Other...................................................... 1,107 (1,107)
-------- -------- ---------
Net cash used in investing activities............... (2,504) (17,613) (206,075)
-------- -------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common shares...................................... 120 73 51,600
Net payments on credit facilities.......................... (21,821)
Purchase of common shares.................................. (141)
Proceeds from term loan.................................... 30,000
Net proceeds from revolving credit facility................ 1,241 21,250
Issuance of senior subordinated notes...................... 100,000
Payment of financing costs................................. (7,802)
-------- -------- ---------
Net cash (used in) provided by financing
activities....................................... (21,701) 1,173 195,048
EFFECT OF EXCHANGE RATE CHANGES ON CASH.................... (119) 41 (119)
-------- -------- ---------
CASH AND CASH EQUIVALENTS:
Net (decrease) increase in cash and cash equivalents....... (4,653) 1,664 3,769
Cash and cash equivalents at beginning of period........... 5,433 3,769
-------- -------- ---------
Cash and cash equivalents at end of period................. $ 780 $ 5,433 $ 3,769
======== ======== =========
CASH PAID FOR:
Income Taxes............................................... $ 1,390 $ 1,620 $ 892
======== ======== =========
Interest................................................... $ 15,015 $ 15,517 $ 7,963
======== ======== =========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 7
A. NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SUBSEQUENT EVENT
Day International Group, Inc. and subsidiaries ("Day" or "the Company")
designs and manufactures precision engineered rubber components for the printing
and textile industries. Day's Image Transfer business designs, manufactures and
markets high-quality printing blankets and sleaves used in the offset printing
industry. Day's Textile business manufactures and markets precision engineered
rubber cots and aprons sold to textile yarn spinners and other engineered rubber
products sold to diverse markets. Sales are made through Day's organization,
distributors and representatives.
In connection with the Stock Purchase Agreement dated April 11, 1995, as
amended, among Day International Group, Inc., M.A. Hanna Company, and Cadillac
Plastics Group, Inc., the Share Purchase Agreement dated April 11, 1995, as
amended, among Day International Group, Inc. and Cadillac Plastics Limited, and
an Asset Purchase Agreement dated April 11, 1995, as amended, among Day
International Group, Inc. and Day International (Canada) Limited, Day acquired
the stock or net assets, as appropriate, from M.A. Hanna and its subsidiaries,
related to the precision engineered rubber components business, effective June
6, 1995 for $211.8 million in cash (net of cash acquired of $2.5 million). The
acquisition has been accounted for as a purchase in accordance with Accounting
Principles Board Opinion No. 16. The purchase price has been allocated to the
net assets acquired based on their fair market values as follows:
<TABLE>
<S> <C>
Current Assets.................................................... $36,685
Property, plant and equipment..................................... 38,347
Other assets...................................................... 1,624
Goodwill and other intangible assets.............................. 158,970
Current liabilities............................................... (16,986)
Postretirement benefits and other long-term liabilities........... (6,845)
--------
Total Purchase Price......................................... $211,795
========
</TABLE>
On December 31, 1996, the Company acquired certain net assets of the David
M division of Flint Ink Corporation for $9.8 million in cash. The acquisition
was accounted for as a purchase in accordance with Accounting Principles Board
Opinion No. 16.
On January 16, 1998, affiliates of Greenwich Street Capital Partners, Inc.,
and SG Capital Partners acquired 93.9% of the common stock of Day for
approximately $206 million with Day's management retaining the other 6.1% of the
common shares. As a result of the change in control, bonuses of approximately
$0.6 million will be required to be paid to certain members of Day's management
in conjunction with the completion of their one or two year employment
agreements. The expense related to the employment agreements will be recorded in
the first quarter of 1998. The impact of the acquisition on the Company's
financial statements is expected to include the issuance of $50 million of
Preferred Stock and an additional $100 million of Senior Subordinated Notes. The
proceeds from these two transactions will be used to repay the bridge loan of
its new majority owner of $140 million plus the associated transaction related
expenses.
B. SIGNIFICANT ACCOUNTING PRINCIPLES
PRINCIPLES OF CONSOLIDATION -- The consolidated financial statements
include the accounts of the Company and its domestic and foreign subsidiaries.
All significant intercompany transactions and balances have been eliminated.
CASH AND CASH EQUIVALENTS -- Cash and cash equivalents include all highly
liquid investments with an original purchased maturity of three months or less.
INVENTORIES are stated at the lower of cost or market using the first-in,
first-out (FIFO) method.
PROPERTY, PLANT AND EQUIPMENT -- Property, plant and equipment are stated
at cost. Depreciation is computed using the straight-line method over their
estimated useful lives. Buildings are depreciated over 25 years and machinery
and equipment are depreciated between 5 and 10 years.
<PAGE> 8
GOODWILL AND OTHER INTANGIBLES -- Goodwill represents the excess of cost
over the fair value of the net assets acquired and is being amortized on the
straight line basis over 40 years. The Company assesses the recoverability of
goodwill and other intangibles by determining whether the amortization of the
respective balances over their remaining lives can be recovered through
projected undiscounted cash flows.
Deferred financing costs of $5,269 at December 31, 1997 (net of accumulated
amortization of $2,533) are being amortized using an effective interest rate
method over the lives of the related debt. Deferred financing costs of $728
related to the US Credit Agreement will be expensed in the first quarter of 1998
as the US Credit Agreement was repaid in conjunction with the January 16, 1998
change in control as described in Note A.
Goodwill and other intangibles are being amortized using the straight-line
method, as follows:
<TABLE>
<CAPTION>
LIFE
------------
<S> <C> <C>
Goodwill.......................................................... $103,619 40 years
Employment agreements............................................. 6,803 1.7 years
Deferred financing costs.......................................... 7,802 5 to 7 years
Printing technology............................................... 27,946 11.5 years
Textile compound formulas......................................... 5,247 30 years
Unpatented technology............................................. 9,529 20 years
--------
Total intangibles................................................. 160,946
Less accumulated amortization..................................... (24,224)
--------
$136,722
========
</TABLE>
REVENUE RECOGNITION -- Day recognizes revenue when the product is shipped.
Reserves for product returns, based upon historical experience, are also
recognized upon shipment.
FOREIGN CURRENCY TRANSLATION -- The functional currency is the local
currency of Day's respective international subsidiaries. Accordingly, foreign
currency assets and liabilities are translated into U.S. dollars at the period
end exchange rates. Foreign currency revenues and expenses are translated at the
average exchange rates for the period. Translation gains and losses are recorded
in the accumulated translation adjustment account in shareholders' equity.
Transaction gains and losses are recorded in the consolidated statement of
operations for the period. Effective January 1, 1997, Day's Mexico subsidiary
switched its functional currency to the US dollar in accordance with Statement
of Financial Accounting Standards (SFAS) No. 52, "Foreign Currency Translation"
because the Mexican economy was considered hyper-inflationary.
CONCENTRATION OF CREDIT RISK -- A majority of Day's textile operations U.S.
sales are concentrated in the southeastern part of the U.S. Day's Image Transfer
and Textile receivables are from a diverse group of customers in the printing
and textile industry and such receivables are generally unsecured. Day maintains
a reserve for potential losses. One customer accounted for 11% of sales for the
year ended December 31, 1997 and 9% of receivables at December 31, 1997.
Certain of Day's international subsidiaries make purchases in foreign
currencies. As a result, they are subject to transaction exposures that arise
from foreign exchange movements between the date that the foreign currency
transaction is recorded and the date it is consummated. Day has entered into
forward foreign exchange contracts to protect itself against such foreign
currency movements which generally expire in 3 to 12 months. The contract value,
which approximates market, of these foreign exchange contracts was $2,311 and
$1,762 at December 31, 1997 and 1996, respectively.
Day is exposed to credit-related losses in the event of nonperformance by
counterparties to the forward contracts. No counterparties are expected to fail
to meet their obligations given their credit ratings, therefore Day does not
obtain collateral for these instruments.
<PAGE> 9
FAIR VALUE OF FINANCIAL INSTRUMENTS -- The carrying value of the Company's
variable rate US and UK Credit Agreements approximates fair value. The 11 1/8%
Senior Subordinated Debt's fair market value was approximately 107% of its
carrying value at December 31, 1997 based on quoted market prices. The carrying
amounts of all other current assets and liabilities as reported in the
consolidated balance sheets at December 31, 1997 and 1996, which qualify as
financial instruments, approximated fair value.
MANAGEMENT ESTIMATES -- The preparation of the financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from these estimates.
C. INVENTORIES
Inventories as of December 31, 1997 and 1996 consists of:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Finished Goods......................................................... $ 8,917 $ 9,118
Work in Progress....................................................... 4,164 4,115
Raw Materials.......................................................... 3,420 3,122
------- -------
$16,501 $16,355
======= =======
</TABLE>
D. LONG-TERM AND SUBORDINATED LONG-TERM DEBT
Long-term and subordinated long-term debt as of December 31, 1997 and 1996
consists of:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
US Credit Agreement.................................................. $ 30,000 $ 48,500
UK Credit Agreement.................................................. 883 4,419
11- 1/8% Senior Subordinated Notes................................... 100,000 100,000
-------- --------
130,883 152,919
Less: Current maturities of long-term debt........................... (774) (803)
-------- --------
$130,109 $152,116
======== ========
</TABLE>
The US Credit Agreement consisted of a $40,000 revolving line of credit and
a $30,000 term loan with a group of banks. The revolving line of credit included
a $12,500 letter of credit subfacility ($1,903 of letters of credit were
outstanding at December 31, 1997) and a $2,000 swingline loan subfacility. At
December 31, 1997, interest on $5,000 of the revolving line of credit was based
on the banks' base rate plus 0.50% (9.00% at December 31, 1997). At December 31,
1997, $33,097 was available under the US Credit Agreement. The US Credit
Agreement required a commitment fee of 1/2% a year on the unused portion of the
revolving line of credit. Interest on the term loan was based on the banks' base
rate plus 1.50% (9.5% at December 31, 1997) or the LIBOR rate plus 2.75% (8.69%
at December 31, 1997). At December 31, 1997, interest on the term loan was based
on the LIBOR rate. Interest rates on LIBOR borrowings are fixed for one, two,
three or six month periods at the Company's discretion. The weighted average
interest rate on the US Credit Agreement for the years ended December 31, 1997
and 1996 and the period from June 7, 1995 through December 31, 1995 was 8.61%,
8.46% and 8.86%, respectively.
The US Credit Agreement was repaid on January 16, 1998 and replaced with a
$60,000 credit facility consisting of a five year $40,000 term loan and a
$20,000 revolving line of credit, in conjunction with the change of control as
described in Note A. Interest on the credit facility will be at the bank's base
rate plus 1% or LIBOR plus 2%. Principal payments under the term loan are as
follows: $2,000 -- 1998; $5,000 -- 1999; $8,000 -- 2000; $11,000 -- 2001 and
$14,000 -- 2002.
<PAGE> 10
The 11 1/8% Senior Subordinated Notes ("the Notes") are due June 1, 2005
with interest payable semi-annually.
The Notes contain various financial and other covenants which place limits
on, among other things, asset sales, dividends and distributions of the
Company's or 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. The
Company's wholly-owned subsidiary, Day International, Inc., has guaranteed the
new credit facility and the Notes and pledged all its assets, except its
investments in its foreign subsidiaries, as collateral on these agreements. Upon
a change in control, the Notes can be put back to the Company at 101% of their
face value. An offer to repurchase the Notes at 101% of their face value was
made on February 13, 1998.
A Consent Solicitation Statement is expected to be sent to the existing
holders of the Notes by March 1, 1998, requesting their consent to certain
amendments to the Indenture governing the Notes which, among other things, will
permit the Company to issue an additional $100 million of Senior Subordinated
Notes and eliminate all provisions of the Indenture subordinating the Notes in
right of payment to senior indebtedness of the Company. In consideration for
signing the Consent, the Company will make a Consent Payment of $40 in cash for
each $1,000 of Notes for which a signed Consent is received prior to the Consent
expiration date.
In 1996, the Company's UK subsidiary entered into credit facilities with a
UK bank ("UK Credit Agreement") that provided a $1,544 line of credit and two
five year term loans totaling $4,647. Interest on the line of credit is at the
bank's base rate plus 1% (8.25% at December 31, 1997) payable monthly. The UK
Credit Agreement was repaid on January 12, 1998. Interest on the term loans was
at either the bank's base rate plus 1% (8.25% at December 31, 1997) or the LIBOR
rate plus 1% (7.87% at December 31, 1997) payable monthly. At December 31, 1997,
$1,544 was available under the UK Credit Agreement. All borrowings were secured
by guarantees from the Company's US subsidiary and by letters of credit obtained
under the US Credit Agreement. The credit facilities also contained certain
financial covenants related to the UK subsidiary.
In conjunction with the acquisition in 1995, the Company entered into an
agreement that would provide temporary financing in the event the Notes were not
in place by the closing date. This temporary financing was ultimately not
required. As a result, fees and related costs associated with this temporary
financing of $1,019 were charged to other expense in the period June 7, 1995
through December 31, 1995.
<PAGE> 11
E. INCOME TAXES
Significant components of deferred tax assets (liabilities) as of December
31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Domestic:
Current:
Accounts receivable reserves...................................... $ 491 $ 489
Inventory reserves................................................ 574 533
Other reserves.................................................... 350 638
Net operating loss carryforward................................... 1,284
AMT credit carryforward........................................... 350 200
------- -------
1,765 3,144
------- -------
Long-term:
Depreciation...................................................... (2,721) (1,477)
Amortization...................................................... (1,830) (531)
Other postretirement benefits..................................... 463 250
------- -------
(4,088) (1,758)
------- -------
Total domestic deferred tax assets (liabilities)....................... (2,323) 1,386
------- -------
Foreign:
Current:
Inventories....................................................... (25) (177)
Other............................................................. 198 422
------- -------
173 245
------- -------
Long-term:
Plant and equipment............................................... (1,626) (1,873)
Pension........................................................... 26 118
------- -------
(1,600) (1,755)
------- -------
Total foreign deferred tax liabilities................................. (1,427) (1,510)
------- -------
Net deferred tax liabilities........................................... $(3,750) $ (124)
======= =======
</TABLE>
<PAGE> 12
Income tax expense (benefit) consists of the following for the years ended
December 31, 1997 and 1996 and the period from June 7, 1995 through December 31,
1995:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ -------
<S> <C> <C> <C>
Current:
Domestic:
Federal.................................................. $ $ $ 209
State and local.......................................... 309 583 50
Foreign..................................................... 1,396 1,251 138
------ ------ -------
1,705 1,834 397
------ ------ -------
Deferred:
Domestic:
Federal.................................................. 3,366 324 (1,359)
State and local.......................................... 495 48 (200)
Foreign..................................................... 373 (206) 312
------ ------ -------
4,234 166 (1,247)
------ ------ -------
$5,939 $2,000 $ (850)
====== ====== =======
</TABLE>
The foreign deferred tax expense primarily results from differences in
accounting for fixed assets.
The income tax expense (benefit) differs from the statutory rate for the
years ended December 31, 1997 and 1996 and period June 7, 1995 through December
31, 1995 as a result of the following:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ -----
<S> <C> <C> <C>
Provision at the federal statutory rate......................... $4,711 $1,702 $(707)
Foreign tax rate differential................................... 444 (169) (63)
State and local taxes, net of federal income tax effect......... 689 417 (99)
Non-deductible expenses......................................... 117 57 118
Other........................................................... (22) (7) (99)
------ ------ ------
$5,939 $2,000 $(850)
====== ====== ======
</TABLE>
Income (loss) before income taxes includes $5,809, $3,571 and $1,510 of
income from international operations for the years ended December 31, 1997 and
1996 and period June 7, 1995 through December 31, 1995, respectively. Day has
not provided deferred taxes on the undistributed earnings of foreign
subsidiaries because the earnings are deemed permanently reinvested.
<PAGE> 13
F. BUSINESS OPERATIONS
Net sales and income (loss) before income taxes (benefit) for the years
ended December 31, 1997 and 1996 and the period from June 7, 1995 through
December 31, 1995 and identifiable assets as of December 31, 1997 and 1996 by
geographic area are as follows:
<TABLE>
<CAPTION>
1997
--------------------------------------------
INCOME BEFORE IDENTIFIABLE
NET SALES INCOME TAXES ASSETS
--------- ------------- ------------
<S> <C> <C> <C>
Domestic............................................... $ 101,319 $ 2,677 $183,267
Europe................................................. 45,280 4,808 30,871
Other International.................................... 25,243 6,371 11,389
Interarea.............................................. (5,556)
--------- ------------- ------------
$ 166,286 $13,856 $225,527
======== ========== ========
</TABLE>
<TABLE>
<CAPTION>
1996
--------------------------------------------
INCOME (LOSS)
BEFORE IDENTIFIABLE
NET SALES INCOME TAXES ASSETS
--------- ------------- ------------
<S> <C> <C> <C>
Domestic.............................................. $ 83,819 $(3,461) $195,792
Europe................................................ 33,664 2,025 30,454
Other International................................... 24,288 6,443 11,640
Interarea............................................. (4,957)
--------- ------------- ------------
$ 136,814 $ 5,007 $237,886
======== =========== ========
</TABLE>
<TABLE>
<CAPTION>
1995
---------------------------
INCOME (LOSS)
BEFORE
NET SALES INCOME TAXES
--------- -------------
<S> <C> <C> <C>
Domestic.............................................. $ 46,537 $(5,260)
Europe................................................ 18,289 478
Other International................................... 11,231 2,705
Interarea............................................. (2,954)
--------- -------------
$ 73,103 $(2,077)
======== ===========
</TABLE>
Sales between geographic areas are generally priced to recover cost plus an
appropriate mark-up for profit.
G. RELATED PARTY TRANSACTIONS
In accordance with a management services agreement, the Company was
required to pay American Industrial Partners, an affiliate of the controlling
shareholders of Day, an annual management fee of $800 plus expenses, payable
semi-annually. The agreement terminated on January 16, 1998 with the change in
control described in Note A.
The Company also paid American Industrial Partners $450 in conjunction with
the acquisition of David M, related to their assistance in acquiring David M
which was included in the David M purchase price allocation.
In 1997, the Company purchased approximately $1.7 million of its raw
material needs from suppliers who were also owned by the controlling
shareholders of Day. The Company does not anticipate any price increases or
service interruptions as a result of the change in control described in Note A.
<PAGE> 14
H. STOCKHOLDERS' EQUITY AND STOCK BASED COMPENSATION PLAN
The Company has a stock option plan permitting the grant of up to 3,730
options to purchase common shares to officers and key employees. The options
vest nine years from the grant date; however, vesting is accelerated if the
Company achieves certain performance objectives and expire ten years from grant
date. All outstanding options vested on January 16, 1998 with the change in
control as described in Note A and 142.5 options were exercised for $143. As of
December 31, 1997, 2,605 options have been granted under the plan with an
exercise price of $1,000 a share and 310 options have been granted under the
plan with an exercise price of $1,200 a share. Also, the options expire as
follows: 2,530 expire in 2005, 75 expire in 2006 and 310 expire in 2007. The
following table summarizes activity in the Company's stock option plan:
<TABLE>
<CAPTION>
1997 1996 1995
------------------ ------------------ ------------------
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
------ -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of period........ 2,605 $ 1,000 2,730 $ 1,000
Granted................................... 310 $ 1,200 75 $ 1,000 2,730 $ 1,000
Exercised................................. (18) $ 1,000
Canceled.................................. (182) $ 1,000
------ ------ ------
Outstanding at end of period.............. 2,915 2,605 2,730
===== ===== =====
Exercisable at end of period.............. 1,520 862 283
===== ===== =====
Weighted-average fair value of options
granted during the year using the
Black-Scholes options-pricing model..... $ 1,548 $ 662 $ 462
====== ====== ======
Weighted-average assumptions used for
grants:
Expected dividend yield................. 0% 0% 0%
Expected life of options................ 9 years 9 years 9 years
Risk-free interest rate................. 7% 7% 7%
</TABLE>
The Company measures compensation cost for stock options issued to
employees using the intrinsic value based method of accounting prescribed by
Accounting Principles Board Opinion (APB) No. 25, "Accounting for Stock Issued
to Employees." In October 1995, the Financial Accounting Standards Board issued
SFAS No. 123, "Accounting for Stock-Based Compensation," which the Company was
required to adopt in 1996. Pursuant to the new standard, companies are
encouraged, but not required, to adopt the fair value method of accounting for
stock options and similar equity instruments. Had compensation costs been
determined based on the fair value method of SFAS No. 123 would have reduced the
Company's net earnings by $255 in 1997, $214 in 1996 and $107 in 1995.
I. RETIREMENT PLANS
The Company has non-contributory defined benefit plans covering certain
associates of its UK and German subsidiaries. Benefits under these plans are
based primarily on years of service and qualifying compensation during the final
years of employment. Plan assets include marketable equity securities. The
Company's funding policy complies with the requirements of local laws and
regulations.
Day also sponsors defined contribution plans for certain of its associates,
which provide for Company contributions of a specified percentage of each
associate's total compensation.
<PAGE> 15
The funded status of the Company's defined benefit plans at December 31,
1997 and 1996 is as follows:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligations including vested benefits of $10,015
and $9,347........................................................ $10,138 $ 9,493
======= =======
Projected benefit obligation........................................... $11,355 $10,636
Plan assets at fair value.............................................. 10,894 10,652
------- -------
Plan assets (in excess of) less than projected benefits................ 461 (16)
Unrecognized net actuarial gain (loss)................................. 4 438
------- -------
Accrued pension cost................................................... $ 465 $ 422
======= =======
</TABLE>
The projected benefit obligation was determined using an assumed discount
rate of 7.0% and 7.5% in 1997 and 1996, respectively and an assumed long-term
rate of increase in compensation of 5%. The assumed long-term rate of return on
plan assets was 9.0% in 1997 and 8.5% in 1996.
A summary of the components of net periodic pension cost for the defined
benefit plans and for the defined contribution plans for the years ended
December 31, 1997 and 1996 and the period from June 7, 1995 through December 31,
1995 is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------ -------- -----
<S> <C> <C> <C>
Defined benefit plans:
Service cost................................................ $ 506 $ 433 $ 256
Interest cost............................................... 728 701 381
Actual return on plan assets................................ (977) (1,006) (810)
Net amortization and deferral............................... 95 265 418
------ ------- -----
Net periodic pension cost..................................... 352 393 245
Defined contribution plans.................................... 1,458 1,247 690
------ ------- -----
Total pension expense......................................... $1,810 $ 1,640 $ 935
====== ======= =====
</TABLE>
J. OTHER POSTRETIREMENT BENEFITS
Day provides certain contributory health care and life insurance benefits
for certain U.S. associates. Those associates may become eligible for these
postretirement benefits if they retire on or after age 55 with at least ten
years of service.
The status of Day's plan at December 31, 1997 and 1996, which is unfunded,
is as follows:
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees............................................................... $1,024 $1,003
Fully eligible active plan participants................................ 265 242
Other active plan participants......................................... 3,282 2,605
------ ------
4,571 3,850
Unrecognized net loss.................................................. 161 337
------ ------
Accrued postretirement benefit obligation................................ $4,732 $4,187
====== ======
</TABLE>
Approximately $87 and $57 of accrued postretirement benefit obligation is
included in accrued associate related costs at December 31, 1997 and 1996,
respectively.
<PAGE> 16
The weighted-average assumed rate of increase in the per capita cost of
covered benefits (i.e., health care cost rate trend) is assumed to be 5% and
decreasing gradually to 4.75% in 2007 and remaining at that level thereafter. A
one percentage point increase in the assumed health care cost trend rate would
have increased the accumulated benefit obligation by $882 at December 31, 1997
and the interest and service cost would have been $152 higher for the year ended
December 31, 1997.
A discount rate of 7.0% and 7.5% was used in determining the accumulated
obligation as of December 31, 1997 and 1996, respectively.
Net periodic postretirement benefit costs include the following components
for the year ended December 31, 1997 and 1996 and the period from June 7, 1995
through December 31, 1995:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Service cost........................................................ $386 $348 $206
Interest cost....................................................... 315 263 136
---- ---- ----
Net periodic postretirement benefit costs........................... $701 $611 $342
==== ==== ====
</TABLE>
K. LEASE COMMITMENTS AND CONTINGENCIES
The Company leases certain warehouses, transportation equipment and office
equipment under operating leases with terms of 1 to 10 years. Rental expense for
the years ended December 31, 1997 and 1996 and the period from June 7, 1995
through December 31, 1995 was $780, $811 and $412, respectively. At December 31,
1997, future minimum lease commitments for noncancelable operating leases are:
<TABLE>
<S> <C>
1998....................................................... $ 339
1999....................................................... 295
2000....................................................... 234
2001....................................................... 198
2002....................................................... 130
Thereafter................................................. 71
------
Total................................................. $1,267
======
</TABLE>
There are currently no environmental claims against the Company for the
costs of environmental remediation measures taken or to be taken. The Company is
operating under a consent decree related to its Michigan manufacturing facility
for environmental matters that occurred prior to the acquisition by American
Industrial Partners in 1995. Independent environmental consultants have assessed
the environmental matters. Based on this assessment and management's best
estimates of the liability associated with these matters, reserves for such
liabilities have been established and no insurance recoveries have been
anticipated in determining the reserves. The Company's previous parent and its
parent, M.A. Hanna, have agreed to indemnify the Company for certain costs
associated with these matters. At December 31, 1997 a $935 indemnification
receivable is recorded. Management believes that this receivable is fully
realizable. In management's opinion, the aforementioned claims will be resolved
without material adverse effect on the operations, financial position or cash
flows of the Company.
L. SUPPLEMENTAL CONSOLIDATING INFORMATION
As described in Note A, 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 International, Inc. ("Day International" or "Guarantor") became
a wholly-owned subsidiary of the Company (which has no assets or operations
other than its investment in Day International) and provided a full and
unconditional guarantee of the Notes. The wholly-owned foreign subsidiaries of
Day International are not guarantors with respect to the Notes and do not have
any credit arrangements senior to the Notes except for the UK Credit Agreement
of the UK subsidiary as described in
<PAGE> 17
Note D. All of the assets of Day International 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 eliminations are the normal
intercompany eliminations with regard to intercompany sales and the Company's
investment in the wholly-owned non guarantor subsidiaries. In 1996, intercompany
notes were put in place through a dividend which effectively transfers the
interest expense from Day International Group, Inc. to Day International, Inc.
The following are the supplemental combined condensed balance sheets as of
December 31, 1997 and 1996, the supplemental combined condensed statements of
operations and cash flows for the years ended December 31, 1997 and 1996 and the
period from June 7, 1995 through December 31, 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.
<PAGE> 18
DAY INTERNATIONAL GROUP, INC.
SUPPLEMENTAL COMBINING CONDENSED BALANCE SHEET
DECEMBER 31, 1997
<TABLE>
<CAPTION>
DAY DAY NON
INTERNATIONAL INTERNATIONAL GUARANTOR
GROUP, INC. INC. (GUARANTOR) SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------- ---------------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents......... $ 596 $ (320) $ 504 $ 780
Accounts receivable -- net........ 12,215 2,767 21,972
Inventories....................... 10,637 6,864 16,501
Other assets...................... 1,936 1,459 3,395
-------- -------- -------- --------- --------
TOTAL CURRENT ASSETS......... 596 24,468 17,584 -- 42,648
Intercompany...................... 130,000 -- $ (130,000) --
Property, plant and equipment --
net............................. 35,931 8,861 44,792
Investment in subsidiaries........ 70,337 23,106 (93,443) --
Intangible and other assets....... 132,809 5,278 138,087
-------- -------- -------- --------- --------
TOTAL ASSETS...................... $ 200,933 $216,314 $ 31,723 $ (223,443) $ 225,527
======== ======== ======== ========= ========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Accounts payable.................. $ 4,736 $ 3,532 $ (525) $ 7,743
Current maturities of long-term
debt............................ 774 774
Accrued accounts, restated costs
and other expenses.............. $ 990 8,899 4,613 14,502
-------- -------- -------- --------- --------
TOTAL CURRENT LIABILITIES.... 990 13,635 8,919 (525) 23,019
Intercompany...................... 8,286 121,217 (28) (129,475) --
Long-term and subordinated
long-term debt.................. 130,000 109 130,109
Long-term post retirement benefits
and other....................... 9,527 2,683 12,210
Total stockholders' equity........ 61,657 71,935 20,040 (93,443) 60,189
-------- -------- -------- --------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY............ $ 200,933 $216,314 $ 31,723 $ (223,443) $ 225,527
======== ======== ======== ========= ========
</TABLE>
<PAGE> 19
DAY INTERNATIONAL GROUP, INC.
SUPPLEMENTAL COMBINING CONDENSED BALANCE SHEET
DECEMBER 31, 1996
<TABLE>
<CAPTION>
DAY DAY NON
INTERNATIONAL INTERNATIONAL GUARANTOR
GROUP, INC. INC. (GUARANTOR) SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------- ---------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents........... $ 2,757 $ (726) $ 3,402 $ 5,433
Accounts receivable -- net.......... 9,139 8,032 17,171
Inventories......................... 10,780 5,575 16,355
Other assets........................ 6,118 901 7,019
-------- -------- ------- -------- --------
TOTAL CURRENT ASSETS 2,757 25,311 17,910 -- 45,978
Intercompany........................ 148,500 583 (149,083) --
Property, plant and
equipment -- net.................. 36,112 9,177 45,289
Investment in subsidiaries.......... 62,410 19,218 (81,628) --
Intangible and other assets......... 141,320 5,299 146,619
-------- -------- ------- -------- --------
TOTAL ASSETS........................ $ 213,667 $222,544 $ 32,386 $ (230,711) $237,886
======== ======== ======= ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable.................... $ 4,878 $ 2,919 $ (344) $ 7,453
Current maturities of long-term
debt.............................. 803 803
Accrued associate related costs and
other expenses.................... $ 1,068 10,703 3,301 15,072
-------- -------- ------- -------- --------
TOTAL CURRENT LIABILITIES...... 1,068 15,581 7,023 (344) 23,328
Intercompany........................ 10,787 137,536 415 (148,738) --
Long-term and subordinated long-term
debt.............................. 148,500 3,616 152,116
Long-term post retirement benefits
and other......................... 6,921 2,787 9,708
Total stockholders' equity.......... 53,312 62,506 18,545 (81,629) 52,734
-------- -------- ------- -------- --------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY............................ $ 213,667 $222,544 $ 32,386 $ (230,711) $237,886
======== ======== ======= ======== ========
</TABLE>
<PAGE> 20
DAY INTERNATIONAL GROUP, INC.
SUPPLEMENTAL COMBINING CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
DAY DAY
INTERNATIONAL INTERNATIONAL NON GUARANTOR
GROUP, INC. INC. (GUARANTOR) SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------- ----------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net sales................. $ -- $ 124,422 $ 41,864 $ -- $ 166,286
Cost of goods sold........ 74,846 28,189 103,035
-------- -------- ------- --------- --------
Gross profit......... -- 49,576 13,675 -- 63,251
Selling, general and
administrative.......... 50 20,741 7,838 28,629
Amortization of
intangibles............. 3,270 45 3,315
Management fees........... 896 896
-------- -------- ------- --------- --------
Operating income..... (50) 24,669 5,792 -- 30,411
Other expenses (income):
Equity in earnings of
subsidiaries............ (7,926) (3,760) 11,686 --
Interest expense.......... -- 15,605 321 15,926
Other (income) expense.... (35) 489 175 629
-------- -------- ------- --------- --------
Income before income
taxes.............. 7,911 12,335 5,296 (11,686) 13,856
Income taxes.............. (6) 4,409 1,536 5,939
-------- -------- ------- --------- --------
Net income........... $ 7,917 $ 7,926 $ 3,760 $ (11,686) $ 7,917
======== ======== ======= ========= ========
</TABLE>
<PAGE> 21
DAY INTERNATIONAL GROUP, INC.
SUPPLEMENTAL COMBINING CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
DAY DAY
INTERNATIONAL INTERNATIONAL NON GUARANTOR
GROUP, INC. INC. (GUARANTOR) SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------- ----------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net sales................. $ -- $ 101,284 $ 35,530 $ -- $ 136,814
Cost of goods sold........ 60,838 23,764 84,602
------ -------- ------- -------- --------
Gross profit......... -- 40,446 11,766 -- 52,212
Selling, general and
administrative.......... 35 15,904 7,717 23,657
Amortization of
intangibles............. 6,291 183 6,474
Management fees........... 920 920
------ -------- ------- -------- --------
Operating income..... (36) 17,331 3,866 -- 21,161
Other expenses (income):
Equity in earnings of
subsidiaries............ (2,976) (2,526) 5,502 --
Interest expense.......... -- 16,078 295 16,373
Other (income) expense.... (87) (132) -- (219)
------ -------- ------- -------- --------
Income before income
taxes.............. 3,027 3,911 3,571 (5,502) 5,007
Income taxes.............. 20 935 1,045 2,000
------ -------- ------- -------- --------
Net income........... $ 3,007 $ 2,976 $ 2,526 $ (5,502) $ 3,007
====== ======== ======= ======== ========
</TABLE>
<PAGE> 22
DAY INTERNATIONAL GROUP, INC.
SUPPLEMENTAL COMBINING CONDENSED STATEMENT OF OPERATIONS
PERIOD FROM JUNE 7, 1995 THROUGH DECEMBER 31, 1995
<TABLE>
<CAPTION>
DAY DAY
INTERNATIONAL INTERNATIONAL NON GUARANTOR
GROUP, INC. INC. (GUARANTOR) SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------- ---------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales................... $ -- $ 51,974 $21,129 $ -- $ 73,103
Cost of goods sold.......... 33,357 14,146 47,503
------------- ---------------- ------------- ------------ ------------
Gross profit........... -- 18,617 6,983 -- 25,600
Selling, general and
administrative............ 100 7,799 4,986 12,885
Amortization of
intangibles............... 3,634 54 3,688
Management fees............. 455 455
------------- ---------------- ------------- ------------ ------------
Operating income....... (100) 6,729 1,943 -- 8,572
Other expenses (income):
Equity in earnings of
subsidiaries.............. (4,267) (1,133) 5,400 --
Interest expense............ 9,130 567 9,697
Other (income) expense...... (223) 815 360 952
------------- ---------------- ------------- ------------ ------------
Income (loss) before
income taxes
(benefit)............ (4,740) 6,480 1,583 (5,400) (2,077)
Income taxes (benefit)...... (3,513) 2,213 450 (850)
------------- ---------------- ------------- ------------ ------------
Net Income (Loss)...... $(1,227) 4,267 $ 1,133 $ (5,400) $ (1,227)
========= ============ =========== ========= =========
</TABLE>
<PAGE> 23
DAY INTERNATIONAL GROUP, INC.
SUPPLEMENTAL COMBINING CONDENSED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1997
<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....................... $ 7,917 $ 7,926 $ 3,760 $(11,686) $ 7,917
Adjustments to reconcile net
income to net cash
provided by (used in)
operating activities:
Depreciation and
amortization.............. 11,464 1,601 13,065
Non-cash charge related to
stock option awards....... 308 308
Equity in earnings of
subsidiaries.............. (7,926) (3,760) 11,686 --
Deferred income taxes and
other..................... 3,710 (182) 3,528
Changes in operating assets
and liabilities........... (78) (3,693) (1,276) (100) (5,147)
-------- -------- ------- -------- --------
Net cash provided by (used in)
operating activities........... 221 15,647 3,903 (100) 19,671
Investing activities:
Cash paid for David M............ 1,513 1,513
Capital expenditures............. (3,627) (1,497) (5,124)
Other............................ 1,107 1,107
-------- -------- ------- -------- --------
Net cash used in investing
activities..................... -- (1,007) (1,497) -- (2,504)
Financing Activities:
Sale of common shares............ 120 120
Purchase of common shares........ --
Net payments on credit
facilities..................... (18,500) (3,321) (21,821)
-------- -------- ------- -------- --------
Net cash used in financing
activities..................... (18,380) -- (3,321) -- (21,701)
Intercompany transfers and
dividends...................... 15,998 (14,234) (1,864) 100 --
Effects of exchange rates on
cash........................... (119) (119)
-------- -------- ------- -------- --------
Cash and Cash Equivalents:
Net increase (decrease) in cash
and cash equivalents........... (2,161) 406 (2,898) -- (4,653)
Cash and cash equivalents at
beginning of period............ 2,757 (726) 3,402 5,433
-------- -------- ------- -------- --------
Cash and cash equivalents at end
of period...................... $ 596 $ (320) $ 504 $ -- $ 780
======== ======== ======= ======== ========
</TABLE>
<PAGE> 24
DAY INTERNATIONAL GROUP, INC.
SUPPLEMENTAL COMBINING CONDENSED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 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.................. $ 3,007 $ 2,976 $ 2,526 $ (5,502) $ 3,007
Adjustments to reconcile
net income to net cash
provided by (used in)
operating activities:
Depreciation and
amortization......... 13,589 1,519 15,108
Equity in earnings of
subsidiaries......... (2,976) (2,526) 5,502 --
Deferred income taxes
and other............ 88 (456) 514 146
Change in operating
assets and
liabilities.......... (343) 696 (57) (494) (198)
-------- -------- -------- -------- --------
Net cash provided by (used
in) operating
activities................ (312) 14,823 3,532 20 18,063
Investing activities:
Cash paid for David M..... (11,285) (11,285)
Capital expenditures...... (3,968) (1,253) (5,221)
Other..................... (2,665) 921 637 (1,107)
-------- -------- -------- -------- --------
Net cash used in investing
activities................ -- (17,918) (332) 637 (17,613)
Financing activities:
Sale of common shares..... 73 73
Purchase of common
shares................. (141) (141)
Net proceeds from
revolving credit
facility............... (2,750) 3,991 1,241
-------- -------- -------- -------- --------
Net cash provided by (used
in) financing
activities................ (2,818) 3,991 1,173
Intercompany transfers and
dividends................. 5,484 2,282 (7,109) (657) --
Effects of exchange rates on
cash...................... 41 41
-------- -------- -------- -------- --------
Cash and Cash Equivalents:
Net increase (decrease) in
cash and cash
equivalents............ 2,354 (813) 123 -- 1,664
Cash and cash equivalents
at beginning of
period................. 403 87 3,279 3,769
-------- -------- -------- -------- --------
Cash and cash equivalents
at end of period....... $ 2,757 $ (726) $ 3,402 $ -- $ 5,433
======== ======== ======== ======== ========
</TABLE>
<PAGE> 25
DAY INTERNATIONAL GROUP, INC.
SUPPLEMENTAL COMBINING CONDENSED STATEMENT OF CASH FLOWS
PERIOD FROM JUNE 7, 1995 THROUGH DECEMBER 31, 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)................ $ (1,227) $ 4,267 $ 1,133 $ (5,400) $ (1,227)
Adjustments to reconcile net
income (loss) to net cash
provided by (used in)
operating activities:
Depreciation and
amortization.............. 9,828 897 10,725
Equity in earnings of
subsidiaries.............. (4,267) (1,133) 5,400 --
Deferred income taxes and
other..................... (3,514) 2,580 (313) (1,247)
Change in operating assets
and liabilities........... 1,411 2,804 1,346 1,103 6,664
------------- ---------------- ------------- ------------ ------------
Net cash provided by (used in)
operating activities........... (7,597) 18,346 3,063 1,103 14,915
Investing activities:
Cash paid for Day International,
Inc............................ (203,564) (429) (203,993)
Capital expenditures............. (1,018) (1,064) (2,082)
------------- ---------------- ------------- ------------ ------------
Net cash used in investing
activities..................... (203,564) (1,018) (1,493) -- (206,075)
Financing Activities:
Sale of common shares............ 51,600 51,600
Proceeds from term loan.......... 30,000 30,000
Net proceeds from evolving credit
facility....................... 21,250 21,250
Issuance of senior subordinated
notes.......................... 100,000 100,000
Payment of financing costs....... (7,802) (7,802)
------------- ---------------- ------------- ------------ ------------
Net cash provided by financing
activities..................... 195,048 -- -- -- 195,048
Intercompany transfers........... 16,516 (17,241) 1,828 (1,103) --
Effects of exchange rates on
cash........................... (119) (119)
------------- ---------------- ------------- ------------ ------------
Cash and Cash Equivalents:
Net increase in cash and cash
equivalents.................... 403 87 3,279 -- 3,769
------------- ---------------- ------------- ------------ ------------
Cash and cash equivalents at end
of period...................... $ 403 $ 87 $ 3,279 $ -- $ 3,769
========= ============ =========== ========= =========
</TABLE>
<PAGE> 1
Exhibit 99.2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following should be read in conjunction with "Selected Historical
Financial Data" and the Consolidated Financial Statements and notes thereto
included elsewhere in this Offering Memorandum.
As a result of the Acquisition, the Company entered into new financing
arrangements, including the Senior Secured Credit Facility, and expects to issue
the Senior Subordinated Notes and the Preferred Stock. Accordingly, the results
of operations for periods subsequent to the Acquisition Closing Date may not be
comparable to prior periods. Also see "Risk Factors," "The Acquisition and
Related Transactions," "Unaudited Pro Forma Consolidated Financial Information,"
"Capitalization" and "Description of Certain Senior Indebtedness."
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>
208 DAYS ENDED YEAR ENDED YEAR ENDED
157 DAYS ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31,
JUNE 6, 1995 1995 1996 1997
-------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales................. $55.4 100.0% $73.1 100.0% $136.8 100.0% $166.3 100.0%
Cost of goods sold........ 33.9 61.2 47.5 65.0 84.6 61.8 103.0 62.0
----- ----- ----- ----- ------ ----- ------ -----
Gross profit.............. 21.5 38.8 25.6 35.0 52.2 38.2 63.3 38.0
SG&A(a)................... 11.2 20.2 13.3 18.2 24.6 18.0 29.5 17.8
Amortization of
intangibles............. 2.3 4.2 3.7 5.0 6.5 4.7 3.3 2.0
----- ----- ----- ----- ------ ----- ------ -----
Operating income.......... $ 8.0 14.4% $ 8.6 11.8% $ 21.2 15.5% $ 30.4 18.3%
===== ===== ===== ===== ====== ===== ====== =====
</TABLE>
- ---------------
(a) Includes the following management fees paid to AIP: $0.455 million in the
208 days ended December 31, 1995; $0.92 million in 1996; and $0.896 million
in 1997.
COMPARISON OF RESULTS OF OPERATIONS
TWELVE MONTHS ENDED DECEMBER 31, 1997 COMPARED TO TWELVE MONTHS ENDED DECEMBER
31, 1996
Net sales increased to $166.3 million for the year ended December 31, 1997
from $136.8 million for the comparable period in 1996, an increase of $29.5
million or 21.6%. Sales in 1997 were negatively impacted by $2.5 million as a
result of foreign currency translation rate changes. Image Transfer's sales
increased to $132.0 million for the year ended December 31, 1997 from $103.6
million for the comparable period in 1996, an increase of $28.4 million or
27.4%. Image Transfer's sales were negatively impacted by $2.3 million as a
result of the impact of foreign currency translation rate changes. Image
Transfer sales generated by the David M Company, which was acquired by the
Company on December 31, 1996, amounted to $18.6 million, or 14.1% of 1997 sales
of Image Transfer. Excluding sales of the David M Company, Image Transfer's
sales increased $9.8 million or 9.5% in 1997. The increased sales volumes
resulted from increased sales of tubular sleeves and increased demand for the
Company's existing products in Europe, the United States and Mexico, offset by
lower sales to the Pacific Rim and Latin America. Textiles' sales increased to
$34.3 million for the year ended December 31, 1997 compared to $33.2 million in
1996, an increase of $1.1 million or 3.3%. Textile sales were negatively
impacted by $0.2 million as a result of the impact of foreign currency
translation changes.
Gross profit increased to $63.3 million for the year ended December 31,
1997 from $52.2 million in 1996, an increase of $11.1 million or 21.3%. The
acquisition of David M accounted for $5.5 million of the 1997 gross profits. As
a percentage of net sales, gross profit decreased slightly to 38.0% for the year
ended December 31, 1997 from 38.2% for the comparable period in 1996. This
slight decline was due to the lower gross margin of
<PAGE> 2
David M compared with that of the rest of the Company's operations; excluding
the David M Company, gross profit as a percentage of sales increased to 39.1% in
1997. This gross profit improvement was primarily the result of increased volume
and productivity enhancements gained through process improvements. Foreign
currency translation rate changes reduced gross profit by $0.4 million.
SG&A increased to $29.5 million for the year ended December 31, 1997
compared with $24.6 million for 1996, an increase of $4.9 million or 19.9%.
David M accounted for $3.2 million. As a percentage of net sales, SG&A decreased
to 17.8% from 18.0% mainly as a result of European SG&A expenses remaining
relatively constant while sales increased 17.3%. Changes in foreign currency
translation rates reduced SG&A costs by $0.6 million in 1997.
Amortization of intangibles decreased to $3.3 million for the year ended
December 31, 1997 from $6.5 million in 1996, a decrease of $3.2 million as a
result of certain employment agreements becoming fully amortized in 1997.
Operating income increased to $30.5 million for the year ended December 31,
1997 from $21.2 million for the comparable period in 1996, an increase of $9.3
million or 43.9%. David M contributed $2.3 million to the 1997 operating income,
while $3.2 million of 1997 operating income relates to the reduction in the
amortization of intangibles. The remaining $3.8 million increase results from
increased sales volumes and productivity enhancements. As a percentage of net
sales, operating income increased to 18.3% for the year ended December 31, 1997
from 15.5% for the comparable period in 1996.
TWELVE MONTHS ENDED DECEMBER 31, 1996 COMPARED TO TWELVE MONTHS ENDED DECEMBER
31, 1995
Net sales increased to $136.8 million for the year ended December 31, 1996
from $128.5 million for the comparable period in 1995, an increase of $8.3
million or 6.5%. The Company's net sales were adversely impacted by changes in
foreign currency translation rates, which amounted to $1.2 million. Image
Transfer's sales increased to $103.6 million for the year ended December 31,
1996 from $95.2 million for the comparable period in 1995, an increase of $8.4
million or 8.8%, as a result of increased sales from new products, such as the
NewsMaker(TM) series for the newspaper market, higher sales of tubular sleeves
and increased demand for the Company's existing products in the United States,
Latin America and the Pacific Rim, and a modest price increase. Foreign currency
translation rate changes adversely impacted Image Transfer sales by $1.0
million. Textiles' sales remained relatively constant at $33.2 million for the
year ended December 31, 1996 compared to $33.3 million in 1995. Changes in
foreign currency translation rates reduced Textiles' sales by $0.2 million.
Domestic sales increases offset reduced European sales with export sales to
Latin America and the Pacific Rim remaining relatively constant.
Gross profit increased to $52.2 million for the year ended December 31,
1996 from $47.1 million in 1995, an increase of $5.1 million or 10.8%. As a
percentage of net sales, gross profit increased to 38.2% for the year ended
December 31, 1996 from 36.7% for the comparable period in 1995. Gross profit in
1996 increased by $3.3 million or 6.7% as a result of increased volume and
productivity enhancements through process improvements and a modest price
increase, offset by changes in foreign currency translation rates, higher costs
of material and labor and a shift in sales to markets with typically lower
margins. Also, gross profit in 1995 was adversely impacted by $2.3 million for
sales of finished goods inventory which were purchased at market values as a
result of the AIP Acquisition. SG&A remained virtually constant at $24.6 million
for the year ended December 31, 1996 compared with $24.5 million for 1995. Stand
alone costs related to the acquisition were $0.5 million higher in 1996 and
changes in currency translation rates reduced SG&A costs by
$0.2 million in 1996. As a percentage of net sales, SG&A decreased to 18.0% from
19.1%.
Amortization of intangibles increased to $6.5 million for the year ended
December 31, 1996 from $6.0 million in 1995, an increase of $0.5 million as a
result of purchase accounting from the AIP Acquisition.
Operating income increased to $21.2 million for the year ended December 31,
1996 from $16.6 million for the comparable period in 1995, an increase of $4.6
million or 27.7%, of which $2.3 million relates to the higher costs of goods
sold in 1995 resulting from the sale of finished goods inventory that were
purchased at market values as a result of the AIP Acquisition. The remaining
$2.3 million increase in operating income
<PAGE> 3
results from increased sales volumes and productivity enhancements offset by
additional amortization and depreciation and stand alone costs primarily as a
result of the AIP Acquisition. As a percentage of net sales, operating income
increased to 15.5% for the year ended December 31, 1996 from 12.9% for the
comparable period in 1995.
Not included in the table under "-- Basis of Presentation" above, other
(income) expense in 1995 includes a $1.0 million bridge loan fee.
TWELVE MONTHS ENDED DECEMBER 31, 1995 COMPARED TO TWELVE MONTHS ENDED DECEMBER
31, 1994
Net sales increased to $128.5 million for the twelve months ended December
31, 1995 from $120.3 million for the comparable period in 1994, an increase of
$8.2 million or 6.8%. The Company's net sales were favorably impacted by changes
in foreign currency translation rates, which amounted to $1.6 million, or 19.5%,
of the increase in revenues. Image Transfer's sales increased to $95.2 million
for the twelve months ended December 31, 1995 from $88.9 million for the
comparable period in 1994, an increase of $6.3 million or 6.7%, as a result of
increased sales from new products, such as the NewsMaker(TM) series for the
newspaper market, higher sales of tubular sleeves and increased demand for the
Company's existing products in Europe. Also, foreign currency translation rate
changes contributed $0.6 million of the increase. Textiles' sales increased to
$33.3 million for the twelve months ended December 31, 1995 from $31.4 million
for comparable period in 1994, an increase of $1.9 million or 6.1%.
Approximately $1.0 million of this increase is related to foreign currency
translation rates with the remainder attributable to increased exports to Latin
America and the Pacific Rim and further market share gains in Europe.
Gross profit decreased to $47.1 million for the twelve months ended
December 31, 1995 from $49.3 million for the comparable period in 1994, a
decrease of $2.2 million or 4.5%. As a percentage of net sales, gross profit
decreased to 36.7% for the twelve months ended December 31, 1995 from 41.0% for
the comparable period in 1994. Gross profit increased by $1.6 million or 3.2% as
a result of increased volume and productivity enhancements such as the new
continuous spreading and automated cot finishing equipment, offset by changes in
foreign currency translation rates, a shift in sales mix and higher material and
labor costs. Gross profit was also adversely impacted by $2.3 million for sales
of finished goods inventory that were purchased at market values as a result of
the AIP Acquisition, and by $1.5 million as a result of higher depreciation,
primarily as a result of the AIP Acquisition.
SG&A increased to $24.5 million for the twelve months ended December 31,
1995 from $22.7 million for the comparable period in 1994, an increase of $1.8
million or 7.9%, primarily as a result of higher sales volumes and stand alone
costs of $0.6 million as a result of the AIP Acquisition. The Company's expenses
were affected by changes in currency translation rates, which amounted to $0.7
million, or 38.9%, of the increase in SG&A. As a percentage of net sales, SG&A
increased to 19.1% from 18.9%.
Amortization of intangibles increased to $6.0 million for the twelve months
ended December 31, 1995 from $5.2 million for the comparable period in 1994, an
increase of $0.8 million resulting from the purchase accounting of the AIP
Acquisition.
Operating income decreased to $16.6 million for the twelve months ended
December 31, 1995 from $21.3 million for the comparable period in 1994, a
decrease of $4.7 million or 22.1%. Operating income decreased by $5.2 million as
a result of higher cost of goods sold, additional amortization and depreciation
and stand alone costs primarily as a result of the AIP Acquisition. As a
percentage of net sales, operating income decreased to 12.9% for the twelve
months ended December 31, 1995 from 17.7% for the comparable period in 1994.
Operating income, excluding costs related to the AIP Acquisition, increased $.5
million or 2.3% to $21.8 million for the twelve months ended December 31, 1995.
RISKS ASSOCIATED WITH FOREIGN OPERATIONS
The Company conducts a significant amount of business and has operating and
sales facilities in countries outside the United States. As a result, the
Company is subject to business risks inherent in non-U.S. activities, including
political uncertainty, import and export limitations, exchange controls and
currency fluctuations.
<PAGE> 4
The Company believes risks related to its foreign operations are mitigated due
to the political and economic stability of the countries in which its largest
foreign operations are located, the stand-alone nature of the operations, the
Company's net asset exposure, forward foreign exchange contract practices and
pricing flexibility. Thus, while changes in foreign currency values do affect
earnings, the longer term economic effect of these changes should not have a
material adverse effect on the Company's financial condition, results of
operations or liquidity. Foreign currency gains and losses, included in other
income-net, were a $0.3 million loss in 1997, a $0.1 million loss in 1996 and a
$0.3 million gain in 1995.
Certain of the Company's international subsidiaries make purchases in
foreign currencies, mainly intercompany transactions. As a result, they are
subject to transaction exposures that arise from foreign exchange movements
between the date that the foreign currency transaction is recorded and the date
it is consummated. The Company has entered into forward foreign exchange
contracts to protect it against such foreign exchange movements. The contract
value of these foreign exchange contracts was approximately $2.3 million at
December 31, 1997, approximately $1.8 million at December 31, 1996 and
approximately $1.6 million at December 31, 1995. These contracts generally
expire within three to twelve months. These contracts are through
internationally recognized financial institutions with high credit ratings;
however, the Company is exposed to credit-related losses in the event of
non-performance by counterparties to the forward contracts.
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.
On the Acquisition Closing Date, the Company repaid all of the outstanding
principal and accrued interest under its Old Senior Credit Facilities ($32.1
million) and entered into the $60 million Senior Secured Credit Facility,
consisting of a $40 million Term Loan Facility (all of which was drawn on such
date) and a $20 million Revolving Credit Facility (of which $0 was drawn on such
date). The proceeds of the Term Loan Facility were applied to finance the
Acquisition and related transactions, including the repayment of the Company's
obligations under the Old Senior Credit Facilities. The availability of the
Revolving Credit Facility is subject to various conditions precedent typical for
bank loans of this type, including the maintenance by the Company of a borrowing
base. Scheduled repayments of principal under the Term Loan Facility are $2
million in 1998; $5 million in 1999; $8 million in 2000; $11 million in 2001;
and $14 million in 2002.
The Company anticipates that its operating cash flow, together with
borrowing under the Revolving Credit Facility, will be sufficient to meet its
operating expenses and capital expenditures and to service its debt requirements
as they become due. See also "Risk Factors -- Substantial Leverage."
Cash Flows From Operating Activities. Cash flows from operations for years
ended December 31, 1997, 1996 and 1995 were $19.7 million, $18.1 million and
$15.3 million, respectively. Cash flows from operations in 1997 were unfavorably
impacted by a $5.1 million increase in working capital. The increase in working
capital in 1997 is mainly a result of the increased sales volumes, especially in
Europe, as working capital as a percent of sales has remained relatively
constant. Cash flows from operations for 1996 were unfavorably impacted by a
$0.2 million working capital increase and $7.5 million of additional cash paid
for interest. For the year ended December 31, 1995, cash flows from operations
were unfavorably impacted by a $0.8 million working capital increase and $8.0
million of cash paid for interest partially offset by increased depreciation and
amortization of $5.2 million, as a result of the AIP Acquisition.
Cash Flows From Investing Activities. The Company's expenditures for plant,
property and equipment were $5.1 million in 1997, $5.2 million in 1996 and $3.6
million in 1995. 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 $6.0 million to $8.0 million over the
next several years from cash flow from operations. On December 31, 1996 the
Company acquired certain assets of the David M Company for $11.3 million in cash
which was funded out of the Company's Old Senior Credit Facilities. In 1997, the
<PAGE> 5
Company received a purchase price adjustment of $1.5 million in cash related to
certain changes in David M's working capital as of the closing date.
Cash Flows From Financing Activities. Concurrent with the AIP Acquisition
in 1995, the Company entered into a credit agreement with certain U.S. banks.
The U.S. credit agreement had a maximum borrowing capacity of $70 million as of
December 31, 1997 and was secured by the assets of the Company and its domestic
subsidiaries, as well as 65% of the stock of each foreign subsidiary. The
Company did not have any scheduled repayment requirements until 1999. Also in
connection with the AIP Acquisition, the Company issued the 2005 Notes. In 1996,
the Company entered into a credit agreement with a U.K. bank. The U.K. credit
agreement provided for two term loans totaling $4.6 million and a $1.5 million
line of credit. Scheduled repayments on the term loans were due in quarterly
payments of $194. The entire $1.5 million line of credit was available at
December 31, 1997.
YEAR 2000 COMPLIANCE
The Company has formed a task force to address all year 2000 issues and is
in the process of evaluating and correcting all year 2000 issues. The initial
assessment indicates that the Company does not have a significant year 2000
issue, and currently management believes that the cost of addressing its year
2000 issues will not be material.
ENVIRONMENTAL EXPENDITURES
The Company has made, and will continue to make, expenditures to comply
with current and future requirements of environmental laws and regulations. The
Company estimates that in 1995, 1996 and 1997 it spent approximately $0.1
million, $0.2 million and $0.6 million, respectively, in capital expenditures
for solvent recovery, wastewater treatment, air monitoring and related projects
to comply with environmental requirements.
New rules to be promulgated under the 1990 amendments to the federal Clean
Air Act governing emissions of hazardous air pollutants may require
implementation of additional air emission control measures at the Company's U.S.
facilities. Because the applicable requirements are not scheduled to be
promulgated until 2000, it is difficult to estimate the costs of any additional
controls that might be required with any certainty. The Company currently
believes that the total capital expenditures to install additional control
equipment at these facilities are not likely to exceed $2.5 million. Although
such requirements are not required to be promulgated before 2000, the Company
intends to begin installing the necessary equipment in 1998 to mitigate future
spending requirements resulting from the Clean Air Act.
Solvent air emissions from the Dundee, Scotland facility have periodically
exceeded the regulatory limit for such emissions, and in 1997 the Company began
to initiate a plan for air controls and install a solvent recovery system in
order to control the solvent emissions and comply with the regulatory limit. The
Company believes that capital expenditures for such equipment will total
approximately $1.4 million and will be incurred in 1998.
Capital expenditures in 1998 relating to environmental matters are
estimated at approximately $2.0 million, which include anticipated expenditures
related to solvent air emissions at the Dundee facility. In incurring
expenditures for compliance with environmental requirements, the Company intends
to use the best-available technology in anticipation of the requirements of the
new Clean Air Act.
Based on environmental assessments conducted by independent environmental
consultants in connection with the Acquisition, except as otherwise stated
herein, the Company believes that its operations are currently in compliance
with environmental laws and regulations, except as would not be expected to have
a material adverse effect on the Company. However, there can be no assurances
that environmental requirements will not change in the future or that the
Company will not incur significant costs in the future to comply with such
requirements. In addition, the Company's operations involve the handling of
toluene and other hazardous substances, and if a release of hazardous substances
occurs on or from the Company's facilities, the Company may be required to pay
the cost of remedying any condition caused by such release, the amount of which
could be material.
