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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT - OCTOBER 28, 1999
DATE OF EARLIEST EVENT REPORTED - OCTOBER 19, 1999
COMMISSION FILE NO. 33-93644
DAY INTERNATIONAL GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 31-143634
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(State of Incorporation) (IRS Employer Identification No.)
130 WEST SECOND STREET, SUITE 1700, DAYTON, OHIO 45402
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(Address of principal executive offices)
Registrant's telephone number, including area code: (937) 224-4000
ITEM 2: ACQUISITION OR DISPOSITION OF ASSETS
DAY International Group, Inc. (the "Company") announced on October 19, 1999 that
it completed its acquisition of the stock of privately-held Varn International
for $59.3 million in cash, plus expenses. The purchase price is subject to
certain adjustments for changes in working capital and future revenue growth.
The acquisition was financed through the private placement of $38.5 million of
18% convertible cumulative preferred stock and by amending and restating the
existing $60 million Senior Secured Credit Facility ($40 million term and $20
million revolver). The Amended and Restated Senior Secured Credit Facility
provides for a $70 million Term Loan and a $20 million Revolving Credit
Facility. The Revolving Credit Facility includes a $10 million letter of credit
subfacility ($530 of letters of credit were outstanding at October 18, 1999) and
a $1 million swingline loan subfacility. The amounts available under the
Revolving Credit Facility are subject to a borrowing base limitation (defined
generally as $5 million plus 50% of eligible domestic inventory and 80% of
eligible domestic accounts receivable). At October 18, 1999, $19.5 million was
available under the Senior Secured Credit Facility. The Senior Secured Credit
Facility requires a commitment fee of 1/2% a year on the unused portion of
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the revolving line of credit. Interest on the term loan is based on the banks'
base rate plus 1.75% or the LIBOR rate plus 2.75%. Interest rates on LIBOR
borrowings are fixed for one, two, three or six month periods at the Company's
discretion.
The term loans mature in 21 consecutive quarterly installments, commencing on
March 31, 2000. Principal payments are to be made in the following amounts:
installments 1-4, $1,875,000 per installment; installments 5-8, $2,500,000 per
installment; installments 9-20, $3,750,000 per installment; and installment 21,
$7,500,000.
Varn is a leading worldwide supplier of pressroom chemicals to the printing
industry. Varn also manufactures the Kompac brand of automatic dampening systems
for printing presses through its Graph Tech subsidiary. Headquartered in
Oakland, New Jersey, Varn has manufacturing facilities in Addison, IL; Houston,
TX; Ontario, Canada; Manchester, England; Willich, Germany; Johannesburg, South
Africa; Melbourne, Australia; Kuala Lumpur, Malaysia and a joint venture in
Foshan, China.
Day International, Inc. is one of the world's leading producers of precision
engineered rubber products, specializing in the design and customization of
components used by a broad customer base in the printing and textile industries.
Day's Image Transfer business is one of the world's largest manufacturers and
marketers of high-quality printing blankets and sleeves for use in the offset
printing industry and its Textile Products business manufacturers and marketers
precision engineered rubber cots, aprons and other fabricated rubber components
used by the world wide textile industry. Day International, Inc. is
headquartered in Dayton, Ohio and has four U.S. manufacturing facilities as well
as two international manufacturing facilities.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired
The combined financial statements of Varn International for the year ended
December 31, 1998 have not been audited. The Company intends to prepare
audited consolidated financial statements for Varn as of October 18, 1999
and for the period from January 1, 1999 through October 18, 1999 and will
file such statements as soon as they are available.
(b) Pro forma financial information
The Company will file unaudited pro forma financial statements on or before
January 4, 2000.
(c) Exhibits - See Index to Exhibits
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
Date: October 29, 1999 By: /s/ Thomas J. Koenig
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Thomas J. Koenig
Vice President and Chief
Financial Officer (Principal
Financial Officer and Principal
Accounting Officer)
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INDEX TO EXHIBITS
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Exhibit
Description
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2.1 Stock Purchase Agreement, dated as of August 13, 1999,
by and among the Company and the stockholders of each of
Varnco Holdings Inc., Varn Holdings PLC, Varn Aegis Co.
GmbH Hautschutzsysteme, Varn Products Co., Inc., JV Tex
Realty Corp. and Graph Tech, Inc.
2.2 Amendment No. 1, dated October 19, 1999, to the Stock Purchase Agreement,
dated as of August 13, 1999, by and among the Company and the stockholders
of each of Varnco Holdings Inc., Varn Holdings PLC, Varn Aegis Co. GmbH
Hautschutzsysteme, Varn Products Co., Inc., JV Tex Realty Corp. and Graph
Tech, Inc.
3.1 Certificate of Amendment to the Certificate of Incorporation of the
Company, filed with the Secretary of State of the State of Delaware on
October 15, 1999.
4.1 Certificate of Designation for the Company's 18% Convertible Cumulative
Preference Stock due 2010, filed with the Secretary of State of the State
of Delaware on October 15, 1999.
4.2 Supplemental Indenture, dated as of October 19, 1999 among The Bank of New
York and the several Guarantors party thereto.
4.3 Subsidiary Guarantee, dated as of October 19, 1999,
among Firstar Bank, N.A. and the several Guarantors
party thereto.
4.4 Preference Stock Purchase Agreement, dated as of October
19, 1999, among the Company and the several Investors
party thereto.
4.5 Amended and Restated Stockholders Agreement, dated as of October 19, 1999,
among the Company and certain of its stockholders.
10.1 Amended and Restated Credit Agreement, dated as of October 19, 1999, among
the Company, Societe Generale, as Administrative Agent, and SG Cowen
Securities Corporation, as Arranger.
99.1 Press Release
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Exhibit 2.1
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STOCK PURCHASE AGREEMENT
AMONG
DAY INTERNATIONAL GROUP, INC.
AND
THE STOCKHOLDERS IDENTIFIED ON THE SIGNATURE PAGES HERETO
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VARN-SPA
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TABLE OF CONTENTS
Section Page
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1. Definitions.....................................................................1
2. Purchase and Sale..............................................................11
2.1 Purchase and Sale. ...................................................11
2.2 Certain Closing Payments..............................................12
2.3 Earn-Out Payment. ...................................................12
2.4 Post-Closing Adjustment to Consideration..............................14
3. Closing........................................................................16
3.1 Location, Date. ......................................................16
3.2 Deliveries. ..........................................................16
4. Representations and Warranties of the Stockholders.............................17
4.1 Corporate Status......................................................17
4.2 Authorization. .......................................................17
4.3 Consents and Approvals................................................17
4.4 Capitalization and Stock Ownership....................................18
4.5 Financial Statements..................................................18
4.6 Absence of Undisclosed Liabilities....................................19
4.7 Title to Assets; Sufficiency of Assets................................19
4.8 Real Property. .......................................................20
4.9 Taxes.................................................................21
4.10 Subsidiaries..........................................................22
4.11 Legal Proceedings and Compliance with Law.............................22
4.12 Environmental Conditions..............................................23
4.13 Contracts.............................................................24
4.14 Intellectual Property Matters. .......................................25
4.15 Benefit Plans.........................................................26
4.16 Employees, Labor Matters, etc.........................................27
4.17 Corporate Records.....................................................28
4.18 Absence of Certain Changes. ..........................................28
4.19 Finder's Fees. .......................................................29
4.20 Affiliate Transactions................................................29
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5. Representations and Warranties of Buyer. .....................................30
5.1 Organizational Status. ...............................................30
5.2 Authorization. .......................................................30
5.3 Consents and Approvals................................................30
5.4 Finder's Fees. .......................................................31
5.5 Sufficient Funds. ....................................................31
5.6 Investment Purpose. ..................................................31
6. Covenants Pending Closing......................................................31
6.1 Conduct of the Business by Subject Companies. ........................31
6.2 Access to Information. ...............................................33
6.3 No Solicitation. .....................................................34
6.4 Competition and Confidentiality. ....................................34
6.5 Supplements to Disclosure Schedule. ..................................36
6.6 Guarantees. ..........................................................36
6.7 Compliance With New Jersey Industrial Site Recovery Act. .............36
6.8 Repayment of Indebtedness.............................................37
6.9 FIRPTA................................................................37
6.10 Pre-Closing Transactions..............................................37
7. Mutual Covenants...............................................................37
7.1 Fulfillment of Closing Conditions. ...................................37
7.2 Disclosure of Certain Matters. .......................................38
7.3 Compliance with HSR Act and Foreign Regulatory Requirements. .........38
7.4 Public Announcements. ................................................38
7.5 Books and Records. ...................................................39
7.6 No Other Warranties. .................................................39
7.7 Forecasts; Projections; Etc. .........................................39
7.8 Disclaimer. ..........................................................39
7.9 Employees.............................................................39
7.10 Insurance.............................................................40
7.11 Refunds...............................................................40
7.12 Cash on Closing.......................................................40
7.13 Termination of Certain Contracts......................................40
7.14 Allocation............................................................40
8. Conditions Precedent to Obligations of the Stockholders........................40
8.1 Representations and Warranties. ......................................40
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8.2 Agreements, Conditions and Covenants. ................................41
8.3 Certificates. ........................................................41
8.4 Legality. ............................................................41
8.5 Required Consents; Certain Approvals. ................................41
8.6 Ancillary Documents. .................................................41
8.7 Opinions of Counsel...................................................41
8.8 Termination of Certain Contracts.....................................41
8.9 German Debt...........................................................41
9. Conditions Precedent to Obligations of Buyer...................................42
9.1 Representations and Warranties. ......................................42
9.2 Agreements, Conditions and Covenants. ................................42
9.3 Certificates. ........................................................42
9.4 Legality. ............................................................42
9.5 Required Consents. ...................................................42
9.6 ISRA Approval.........................................................42
9.7 Ancillary Documents. .................................................43
9.8 Subsidiary Purchase Agreements........................................43
9.9 Resignation of Directors..............................................43
9.10 Financing.............................................................43
9.11 Opinions of Counsel...................................................43
10. Indemnification................................................................43
10.1 Indemnification. .....................................................43
10.2 Procedure for Claims..................................................44
10.3 Certain Limitations. .................................................46
10.4 Generally. ...........................................................47
10.5 Claims Period. ......................................................47
10.6 Exclusivity. .........................................................48
10.7 Sellers'Representatives...............................................48
11. Tax Matters....................................................................49
11.1 Payment for Certain Taxes.............................................49
11.2 Tax Returns. ........................................................50
11.3 Tax Proceedings.......................................................50
11.4 Cooperation on Tax Matters. ..........................................50
11.5 Certain Taxes. .......................................................51
</TABLE>
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12. Termination....................................................................51
12.1 Grounds for Termination. .............................................51
12.2 Effect of Termination. ...............................................52
13. General Matters................................................................53
13.1 Contents of Agreement. ...............................................53
13.2 Amendment, Parties in Interest, Assignment, Etc. .....................53
13.3 Further Assurances. .................................................53
13.4 Expenses. ............................................................53
13.5 Waiver. ..............................................................53
13.6 Notices. .............................................................54
13.7 Governing Law. .......................................................55
13.8 No Benefit to Others. ................................................56
13.9 Interpretation. ......................................................56
13.10 Disclosure Schedule and Schedules. ...................................56
13.11 Counterparts. ........................................................56
</TABLE>
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The following Disclosure Schedules, Schedules and Exhibits have been omitted.
The Company agrees to furnish supplementally copies of such Disclosure
Schedules, Schedules and Exhibits to the Securities and Exchange Commission upon
request.
Disclosure Schedule
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4.1 Corporate Status
4.3 Required Consents
4.4 Capitalization and Stock Ownership
4.5 Financial Statements
4.6 Absence of Undisclosed Liabilities
4.7 Title to Assets and Related Matters
4.8(a) Owned Real Property
4.8(b) Real Property Leases
4.9 Taxes
4.10 Subsidiaries
4.11 Legal Proceedings and Compliance with Law
4.11(b) Insurance
4.12 Environmental Conditions
4.13 Contracts
4.14 Intellectual Property
4.15 Benefit Plans
4.16 Employees, Labor Matters
4.18 Absence of Certain Changes
4.20 Affiliate Transactions
5.3 Buyer Required Consents
6.1 Conduct of the Business by Subject Companies
6.6 Guarantees
6.8 Repayment of Indebtedness
9.5 Closing Required Consents
Schedules
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Schedule 1 - Cash Schedule
Schedule 2 - Consideration; Allocation Percentage
Schedule 3 - Subsidiary Purchase Agreements
Schedule 5 - Insurance
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Schedule 6 - Termination of Certain Contracts
Schedule 7 - Protocols for Determining Adjusted Net Assets
Exhibits
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Exhibit A - Form of Escrow Agreement
Exhibit B - Form of Subsidiary Purchase Agreement
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is made as of August 13, 1999 by and
among Day International Group, Inc., a Delaware corporation ("BUYER") and the
stockholders of each of the Subject Companies (as defined below) identified on
the signature pages hereto (the "STOCKHOLDERS").
The parties to this Agreement are sometimes referred to herein as the
"PARTIES." Certain other terms are used herein as defined below in Section 1 or
elsewhere in this Agreement.
Background
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This Agreement sets forth the terms and conditions under which Buyer or
its permitted assigns will acquire all of the issued and outstanding stock of,
Varnco Holdings Inc., a New Jersey corporation ("VARNCO"), Varn Holdings PLC, a
company incorporated under the laws of England ("VARN HOLDINGS"), Varn Aegis Co.
GmbH Hautschutzsysteme, a company incorporated under the laws of Germany ("VARN
AEGIS"), Varn Products Co., Inc., a Texas corporation ("VARN PRODUCTS CO."), JV
TEX Realty Corp., a Texas corporation ("JVTEX"), Graph Tech, Inc., an Ohio
corporation ("GRAPH TECH," and collectively with Varnco, Varn Holding GmbH, Varn
Aegis, Varn Products Co. and JVTEX, the "SUBJECT COMPANIES") from the
Stockholders, and the Subject Companies will become wholly owned Subsidiaries of
Buyer.
Witnesseth
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NOW, THEREFORE, in consideration of the respective covenants contained
herein and intending to be legally bound hereby, the parties hereto agree as
follows:
1. DEFINITIONS.
For convenience, certain terms used in more than one part of this
Agreement are listed in alphabetical order and defined or referred to below (and
such terms, as well as any other terms defined elsewhere in this Agreement,
shall be equally applicable to both the singular and plural forms of the terms
defined).
"ACQUISITION PROPOSAL" is defined in Section 6.3.
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"ADJUSTED NET ASSETS" means the excess of (i) the sum of the Subject
Companies' current assets (excluding cash and cash equivalents), over (ii) the
sum of their current liabilities (excluding notes payable and current portions
of long term debt), computed on an accrual basis in accordance with GAAP,
applied on a consistent basis with the Subject Companies' prior application of
GAAP and using the same accounting methods, policies, practices, principles and
classifications as were used in the preparation of their combined schedule of
net assets as of December 31, 1998 and March 31, 1999, including, without
limitation, the protocols set forth in SCHEDULE 7. Adjusted Net Assets shall not
include any amounts payable as the refunds set forth in Section 7.11 of this
Agreement.
"ADJUSTED NET ASSETS COMPUTATION" is defined in Section 2.4(b).
"ADJUSTED NET ASSETS TARGET" is defined in Section 2.4(a).
"AFFILIATES" means, with respect to a particular Party, persons or
entities controlling, controlled by or under common control with that Party.
"ACTION" is defined in Section 10.2.
"ALLOCATION PERCENTAGE" means each Stockholder's allocable share of the
Consideration expressed as a percentage, as set forth on SCHEDULE 2.
"AGREEMENT" means this Agreement and the exhibits and Disclosure
Schedule attached hereto and made a part hereof.
"ASSETS" means, with respect to a particular Party, all of the assets,
properties, goodwill and rights of every kind and description, real and
personal, tangible and intangible, wherever situated and whether or not
reflected in such Party's most recent Financial Statements, that are owned or
possessed by such Party.
"BALANCE SHEET" is defined in Section 4.5.
"BALANCE SHEET DATE" is defined in Section 4.5.
"BENEFIT PLAN" means (i) as to employees employed in the US, any (y)
"employee benefit plan" as defined in Section 3(3) of ERISA, and (z)
supplemental retirement, bonus, deferred compensation, severance, incentive
plan, program or arrangement or other employee fringe benefit plan, program or
arrangement, whether or not governed by ERISA; and (ii) as to employees employed
outside the US, all employee benefit, health,
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welfare, supplemental unemployment benefit, bonus, pension, profit sharing,
deferred compensation, stock compensation, stock purchase, retirement,
hospitalization insurance, medical, dental, legal, disability and similar plans
or arrangements or practices.
"BOOKS AND RECORDS" is defined in Section 7.5.
"BUSINESS" means, with respect to a particular Party and its
Subsidiaries, its entire business, operations and facilities other than any
business, operations and facilities of any Unrelated Company.
"BUYER" is defined above in the preamble.
"BUYER REQUIRED CONSENTS" is defined in Section 5.3.
"CHARTER DOCUMENTS" means an entity's certificate or articles of
incorporation, certificate defining the rights and preferences of securities,
articles of organization, general or limited partnership agreement, certificate
of limited partnership, joint venture agreement or similar document governing
the entity.
"CLAIM NOTICE" is defined in Section 10.2.
"CLAIM RESPONSE" is defined in Section 10.2.
"CLOSING" is defined in Section 3.1.
"CLOSING CERTIFICATES" means the certificates to be delivered by any of
the Seller Parties under Section 9.3 and any other provisions hereof.
"CLOSING DATE" is defined in Section 3.1.
"CODE" is the Internal Revenue Code of 1986, as amended.
"COMPETITIVE BUSINESS" is defined in Section 6.4(a).
"CONFIDENTIAL INFORMATION" means any information of a Subject Company,
including a formula, pattern, list, compilation, device, method, technique or
process that derives independent economic value, actual or potential, from not
being generally known to the public or to other Persons who can obtain economic
value from its disclosure or use.
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"CONFIDENTIALITY AGREEMENT" means the Confidentiality Agreement dated
October 13, 1998 between Greenwich Street Capital Partners, Inc. (on behalf of
Buyer) and Varn International and Graph Tech, Inc.
"CONSIDERATION" is defined in Section 2.1.
"CONTRACT" means any written or oral contract, agreement, lease,
license, instrument, or other commitment that is binding on any Person or its
property under applicable law.
"COURT ORDER" means any judgment, decree, injunction, order or ruling
of any federal, state, local or foreign court or governmental or regulatory body
or authority that is binding on any Person or its property under applicable law.
"DAMAGES" is defined in Section 10.1.
"DEDUCTIBLE AMOUNT" is defined in Section 10.3(a).
"DEFAULT" means (a) a breach, default or violation, (b) the occurrence
of an event that with or without the passage of time or the giving of notice, or
both, would constitute a breach, default or violation or (c) with respect to any
Contract, the occurrence of an event that with or without the passage of time or
the giving of notice, or both, would give rise to a right of termination,
renegotiation or acceleration or a right to receive damages or a payment of
penalties.
"DISCLOSURE SCHEDULE" means the disclosure schedule that contains
information relating to the Subject Companies and the Stockholders pursuant to
Section 4 and other provisions hereof, as well as SCHEDULES 1, 2, 3, 4, 5, 6 and
7.
"EARN-OUT DISPUTE NOTICE" is defined in Section 2.3(d).
"EARN-OUT PAYEES" means Vincent Von Zwehl and Joseph Von Zwehl.
"EARN-OUT PAYMENT" is defined in Section 2.3(a).
"EARN-OUT PERIOD" means the five-year period beginning January 1, 2000
and ending December 31, 2004.
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"ENCUMBRANCES" means, any lien, mortgage, security interest, pledge,
restriction on transferability, defect of title or other claim, charge or
encumbrance of any nature whatsoever on any property or property interest.
"ENVIRONMENTAL LAW" means, with respect to a particular Party, all Laws
relating to or regulating pollution or protection of human health, natural
resources or the environment, as well as any principles of common law under
which a Party may be held liable for the release, threatened release,
generation, handling, treatment, disposal or discharge of any materials,
including Hazardous Substances, into the environment.
"ENVIRONMENTAL PERMITS" means all Governmental Permits relating to the
protection of human health or the environment.
"EQUITY FINANCING" means the equity financing obtained by Buyer
pursuant to a Commitment Letter.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ESCROW ACCOUNT" is defined in Section 2.2(a).
"ESCROW AGENT" is defined in Section 2.2(a).
"ESCROW AGREEMENT" is defined in Section 2.2(a).
"ESCROW DISTRIBUTION DATE" is defined in Section 2.2(a).
"FINANCIAL STATEMENTS" is defined in Section 4.5.
"FINANCING COMMITMENT DATE" means the date Buyer has entered into a
binding commitment letter or letters (the "COMMITMENT LETTER") with one or more
investors, a copy of which has been delivered to the Sellers' Representatives,
pursuant to which (i) equity funds to be advanced to Buyer under the Commitment
Letter, together with other funds of Buyer and the proceeds of the debt
financing, will be sufficient to pay the Consideration, (ii) Buyer has been
advised by its investor or investors that (A) no additional diligence of the
Subject Companies or any of its Subsidiaries or their Business is required in
connection with the loans contemplated by the Commitment Letter and (B) all
authorizations internal to the investor's approval process required in
connection with the issuance of such Commitment Letters have been obtained, and
(iii) Buyer has paid all
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fees, if any, contemplated by the Commitment Letter required to be paid upon
issuance of the Commitment Letter.
"GAAP" means United States generally accepted accounting principles.
"GERMAN DEBT" means the indebtedness owed from Varn Aegis (in the
amount of DM 3,558,869) and Varn Holding GmbH (in the amount of DM 8,806,492) to
the individual members of the Von Zwehl family or trusts holding such
indebtedness for their benefit.
"GOVERNMENTAL PERMITS" means all permits, licenses, registrations,
certificates of occupancy, approvals and other authorizations issued by any
federal, state, local, foreign or other governmental agency or body or of any
other type of regulatory body.
"GRAPH TECH" is defined above in the preamble.
"HAYWARD FACILITY" means the Real Property located at 1942 National
Avenue, Hayward, California.
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976 or any successor law, and rules and regulations issued pursuant to that act
or any successor law.
"HAZARDOUS SUBSTANCES" means any toxic or hazardous gaseous, liquid or
solid material or waste that may or could pose a hazard to the environment or
human health or safety including (i) any "hazardous substances" as defined by
the federal Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. ss.ss. 9601 ET SEQ., (ii) any "extremely hazardous substance,"
"hazardous chemical," or "toxic chemical" as those terms are defined by the
federal Emergency Planning and Community Right-to-Know Act, 42 U.S.C. ss.ss.
11001 ET SEQ., (iii) any "hazardous waste," as defined under the federal Solid
Waste Disposal Act, as amended by the Resource Conservation and Recovery Act, 42
U.S.C. ss.ss. 6901 ET SEQ., (iv) any "pollutant," as defined under the federal
Water Pollution Control Act, 33 U.S.C. ss.ss. 1251 ET SEQ., as any of such laws
in clauses (i) through (iv) have been amended, (v) asbestos, polychlorinated
biphenyls, petroleum products or by-products and urea-formaldehyde insulation,
and (vi) any regulated substance or waste under any Laws that have been enacted
or promulgated by any federal, state, local or foreign governmental authorities
concerning protection of human health, natural resources or the environment.
"INDEMNIFIED PARTY" is defined in Section 10.2.
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"INDEMNIFYING PARTY" is defined in Section 10.2.
"INTELLECTUAL PROPERTY" means trademarks, service marks, trade names,
trade dress, domain names, copyrights, and similar rights, including
registrations and applications to register or renew the registration of any of
the foregoing, patents and patent applications, and inventions, processes,
designs, formulae, trade secrets, know-how, confidential information, Software,
firmware, and all similar intellectual property rights, tangible embodiments of
any of the foregoing (in any medium including electronic media), and licenses of
any of the foregoing.
"IRS" means the Internal Revenue Service.
"ISRA" is defined in Section 6.7.
"ISRA CLEARANCE" is defined in Section 6.7.
"JVTEX" is defined above in the preamble.
"JVZ SHAREHOLDER GROUP" means, collectively, Jeanine Johnsen, Lisa
Klingenberg, Mark Von Zwehl, Christopher Von Zwehl, Sean Von Zwehl and Joanne
Von Zwehl-Dempsey.
"KNOWLEDGE" means the actual knowledge of each director and executive
officer of each member of the Subject Company Group and its Subsidiaries after
due inquiry.
"LAW" means any statute, law, ordinance, regulation, order, decree, or
rule of any federal, state, provincial, local, foreign or other governmental
agency or body, including those covering environmental, energy, safety,
telecommunications, consumer protection, health, transportation, bribery and
corrupt practices, recordkeeping, zoning, minority-owned businesses,
antidiscrimination, antitrust, wage and hour, and price and wage control
matters.
"LEASED REAL PROPERTY" means all interests leased pursuant to the
Leases.
"LEASES" means the real property leases, subleases, licenses or
occupancy agreements pursuant to which any member of any Subject Company Group
is the lessee, sublessee, user or occupant of real property used in or held for
use in connection with the Business of any member of such Subject Company Group.
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"LIABILITY" means any direct or indirect liability, indebtedness,
obligation, expense, claim, loss, damage, deficiency, guaranty or endorsement of
or by any Person.
"LITIGATION" means any lawsuit, action, arbitration, administrative or
other proceeding, criminal prosecution or governmental investigation or inquiry.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the
business, operations or condition (financial or otherwise) of all of the Subject
Companies, taken as a whole or any material impairment of the ability of the
Seller Parties to perform their respective obligations under the Transaction
Documents.
"MINOR CONTRACT" means any Contract that is terminable by a party on
not more than 30 days' notice without any Liability or any Contract under which
the obligation of a party (fulfilled and to be fulfilled) involves an amount of
less than U.S. $75,000 (or an equivalent amount in foreign currency for any
Contract not denominated in U.S. dollars).
"NEW ACCOUNTING FIRM" is defined in Section 2.3(d).
"NJDEP" is defined in Section 6.7.
"NEW JERSEY LEASE" means a three year lease between JVNJ Realty Corp.
and Buyer, relating to the real property located at 8 Allerman Road, Oakland,
New Jersey, which lease shall provide for payment by Buyer to JVNJ Realty Corp.
of an annual rent of $245,000 plus taxes, insurance and maintenance and
operating costs.
"1998 BALANCE SHEET" is defined in Section 4.5.
"NON-COMPETITION PERIOD" is defined in Section 6.4(a).
"OWNED REAL PROPERTY" means the real property owned by any member of
any Subject Company Group, together with all structures, facilities,
improvements, fixtures, systems, equipment and items of property presently or
hereafter located thereon or attached or appurtenant thereto or owned by any
member of any Subject Company Group and located on Leased Real Property, and all
easements, licenses, rights and appurtenances relating to the foregoing.
"PARTY" is defined above in the preamble.
<PAGE> 18
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"PERMITTED ENCUMBRANCES" means the liens for Taxes and assessments not
yet delinquent, liens for Taxes, assessments and other charges, if any, the
validity of which is being contested in good faith by appropriate action, liens
of employees and laborers for current wages not yet due, liens, pledges,
security interests and other Encumbrances and restrictions that would not have a
Material Adverse Effect.
"PERSON" means any natural person, corporation, partnership, limited
liability company, proprietorship, association, trust or other legal entity.
"PRE-CLOSING TRANSACTIONS" means (a) to the extent permitted by local
law, the transfer of beneficial and record ownership of all the equity interests
of Varn Pressroom Products Sdn Bhd held by Yap Miew Sam and Yue Sam Yin prior to
the date hereof, to Varn Holdings PLC or another Person or Persons designated by
Buyer in writing at least 30 days prior to the Closing Date, it being expressly
understood that such transfer shall not entail any governmental consent, review
or approval (b) the transfer of all of the equity interests of JVCal Realty
Corp. and JVNJ Realty Corp. to a Person which is not a Subject Company or
another Unrelated Company and (c) to the extent permitted by local law, the
transfer by Barry Neal and Bruce Hall of each of their ownership interest in
Varn Products Co., Inc. to Varn Holdings PLC, as may be required by Buyer.
"PURCHASE PRICE ADJUSTMENT" is defined in Section 2.4(d).
"PURCHASE PRICE ADJUSTMENT DEPOSIT" is defined in Section 2.2(b).
"PURCHASE PRICE ADJUSTMENT ESCROW ACCOUNT" is defined in Section
2.2(b).
"REAL PROPERTY" means the Owned Real Property and the Leased Real
Property.
"RELATED CONTRACTS" is defined in Section 4.13(b).
"RELATED PERSON" is defined in Section 4.15(a).
"RESPONSE PERIOD" is defined in Section 10.2.
"RESTRICTED PARTY" means Vincent Von Zwehl and Joseph Von Zwehl.
"REVISED EARN-OUT PAYMENT" is defined in Section 2.3(d).
<PAGE> 19
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"SELLER ADVISORS" means any investment advisors, accountants, counsel,
agents or other Persons who may act on behalf of any of the Seller Parties.
"SELLER PARTIES" means the Stockholders and the Subject Companies.
"SELLER REQUIRED CONSENTS" is defined in Section 4.3.
"SELLERS' REPRESENTATIVES" is defined in Section 10.7.
"SHARE" means, with respect to a particular Subject Company, a share of
the outstanding capital stock, other equity interest or other similar ownership
interest as provided under local law in the Subject Company.
"SOFTWARE" means all computer software, including all source code and
object code versions thereof, in any and all forms and media, whether recorded
on paper, magnetic media or other electronic or non-electronic media (including
data and related documentation, user manuals, training materials, flow charts,
diagrams, descriptive tests and programs, computer print-outs, underlying tapes,
computer databases and similar items), integrated circuits, embedded systems,
and other electro-mechanical or processor based systems.
"STOCKHOLDERS" is defined above in the preamble.
"SUBJECT COMPANIES" is defined in the Background clause.
"SUBJECT COMPANY GROUP" means the Subject Companies and their
Subsidiaries, other than the Unrelated Companies.
"SUBSIDIARY" means each corporation or other Person in which a Person
owns or controls, directly or indirectly, capital stock or other equity
interests representing more than 50% of the outstanding voting stock or other
equity interests.
"SUBSIDIARY PURCHASE AGREEMENTS" is defined in Section 3.2(a).
"TAX DISPUTE RESOLUTION PROCEDURE" means the following procedure: any
disputed item shall be submitted to an independent accounting firm of national
reputation selected by Buyer and the Sellers' Representatives in accordance with
the procedures set forth in Section 2.4(c) (the "TAX DISPUTE ACCOUNTANTS").
Buyer and the Sellers' Representatives shall present their arguments to the Tax
Dispute Accountants within 30 days after such
<PAGE> 20
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submission and the Tax Dispute Accountants shall resolve such dispute, in a fair
and equitable manner and in accordance with applicable Tax law, which
determination will be binding and conclusive on the parties. Buyer, on the one
hand, and the Stockholders, on the other hand, shall each be responsible for
one-half of the cost and fees of the Tax Dispute Accountants.
"TAX ESCROW" is defined in Section 2.2(c).
"TAX ESCROW ACCOUNT" is defined in Section 2.2(c).
"TAXES" means all taxes, duties, charges, fees, levies or other
assessments imposed by any taxing authority, wherever located, including income,
gross receipts, value-added, excise, withholding, personal property, real
estate, sale, use, ad valorem, license, lease, service, severance, stamp,
transfer, payroll, employment, unemployment, customs, duties, alternative,
add-on minimum, estimated, privilege, profits, windfall profits, social
security, disability, occupation and franchise taxes (including any interest,
penalties or additions attributable to or imposed on or with respect thereto).
"TAX RETURNS" means, with respect to a particular Subject Company, all
reports, returns, statements (including estimated reports, returns or
statements) and other similar filings required to be filed on or before the
Closing Date by the Subject Company with respect to any Taxes.
"TERMINATION DATE" is defined in Section 3.1.
"TOTAL ANNUAL NET SALES" shall mean, with respect to a given fiscal
year, the aggregate sales of the Subject Companies determined in accordance with
GAAP, after deducting any allowances repaid or credited to customers of the
Subject Companies by reason of rejected or returned orders.
"TRANSACTION DOCUMENTS" means this Agreement and any other documents
and agreements contemplated by the terms hereof, including, but not limited to,
the Escrow Agreement, the Subsidiary Purchase Agreements and the New Jersey
Lease.
"TRANSACTIONS" means the purchase and sale of all Shares of the Subject
Companies and the other transactions contemplated by the Transaction Documents.
"US" means the United States of America.
<PAGE> 21
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"UNRELATED COMPANIES" means JVCal Realty Corp and JVNJ Realty Corp.
"UNRELATED LIABILITIES" means any and all Liabilities of the Unrelated
Companies.
"US BENEFIT PLAN" means any Benefit Plan relating to employees employed
in the US.
"VARN" means the Subject Companies and the Unrelated Companies and all
affiliated corporations, partnerships or other entities, taken as a whole.
"VARN AEGIS" is defined above in the Background clause.
"VARN BUSINESS" means the specialty pressroom chemicals and the kompac
dampener Business.
"VARNCO HOLDINGS" is defined above in the Background clause.
"VARN PRODUCTS CO." is defined above in the Background clause.
"VVZ SHAREHOLDER GROUP" means, collectively, Paul Von Zwehl, Matthew
Von Zwehl, Veronica Von Zwehl, John Vincent Von Zwehl and Danny Von Zwehl.
2. PURCHASE AND SALE.
2.1 PURCHASE AND SALE. Subject to the terms and conditions contained in
this Agreement, on the Closing Date, the Stockholders shall sell, assign,
transfer and deliver to Buyer or its designated Subsidiaries, and Buyer or its
designated Subsidiaries shall purchase from the Stockholders, all of the Shares
of the Subject Companies in exchange for an aggregate purchase price of U.S.
$60,000,000, PLUS an amount equal to the cash held by the Subject Companies and
their Subsidiaries set forth on SCHEDULE 1, PLUS the Earn-Out Payments, MINUS an
amount equal to the German Debt, (such amounts, in the aggregate, the
"CONSIDERATION"). The Consideration, less A) the amounts required to be
deposited in escrow pursuant to Section 2.2, and B) the Earn-Out Payments shall
be (i) paid to the Sellers' Representatives on behalf of the
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Stockholders by wire transfer of immediately available funds to such accounts as
the Sellers' Representatives shall direct in writing at least two (2) business
days before the Closing Date and (ii) allocated among the Shares of the Subject
Companies and paid to the Stockholders by the Sellers' Representatives based on
the respective estimated percentages set forth opposite their names on SCHEDULE
2 hereto. The Sellers' Representatives shall first pay all costs and expenses
related to the transactions contemplated by this Agreement (including, without
limitation, attorneys fees and the fees of Schroder & Co., Inc. and Johnsen,
Fretty & Company, LLC), and the remaining Consideration shall be paid to the
Stockholders in accordance with the provisions of this Section 2.1.
2.2 CERTAIN CLOSING PAYMENTS.
(i) At the Closing, Buyer or its designated Subsidiaries shall
deposit or shall cause to be deposited U.S. $3,000,000 in an escrow account (the
"ESCROW ACCOUNT") with the escrow agent (the "ESCROW AGENT") designated in an
escrow agreement (the "ESCROW AGREEMENT"), in substantially the form of Exhibit
A, to be entered into at the Closing among Buyer and the Sellers'
Representatives and the Escrow Agent, which amount shall be held and disbursed
by the Escrow Agent, on the first anniversary of the Closing Date (the "ESCROW
DISTRIBUTION DATE") in accordance with the Escrow Agreement.
(ii) At the Closing, Buyer or its designated Subsidiaries
shall deposit or shall cause to be deposited U.S. $750,000 (the "PURCHASE PRICE
ADJUSTMENT DEPOSIT") in an escrow account (the "PURCHASE PRICE ADJUSTMENT ESCROW
ACCOUNT") with the Escrow Agent, which amount shall be held and disbursed by the
Escrow Agent two (2) business days following the final determination of the
Adjusted Net Assets computation in accordance with Section 2.3(d) and the Escrow
Agreement.
<PAGE> 23
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(iii) At the Closing, Buyer or its designated Subsidiaries
shall deposit or shall cause to be deposited U.S. $4,000,000 (the "TAX ESCROW")
in an escrow account (the "TAX ESCROW ACCOUNT") with the Escrow Agent, which
amount shall be held and disbursed by the Escrow Agent in accordance with the
Escrow Agreement.
2.3 EARN-OUT PAYMENT.
(i) For the purposes of this Agreement, the "EARN-OUT PAYMENT"
shall mean one and one-half percent (1 1/2%) of the Total Annual Net Sales in
excess of U.S. $64,900,000. An Earn-Out Payment shall be payable to each
Earn-Out Payee within ninety (90) days of the end of each fiscal year of the
Subject Companies during the Earn-Out Period. For example, if such Total Annual
Net Sales for a fiscal year are U.S. $65,900,000, each Earn-Out Payee shall
receive U.S. $15,000.
(ii) Total Annual Net Sales shall be calculated on the basis
of invoiced currency, which if not U.S. dollars, shall be converted to U.S.
dollars in accordance with GAAP, using the conversion rate and methodology
utilized in the preparation of Buyer's financial statements.
(iii) Buyer will determine the amount of the Earn-Out Payments
with respect to each fiscal year during the Earn-Out Period, which determination
will be reviewed by the independent accountant of the Subject Companies. No
later than ninety (90) days after the end of each fiscal year of the Subject
Companies during the Earn-Out Period, Buyer will deliver to the Earn-Out Payees
(i) a certificate (the "EARN-OUT CERTIFICATE") setting forth Buyer's calculation
of the Earn-Out Payments for such fiscal year, and (ii) the Earn-Out Payments
payable to each Earn-Out Payee as reflected on the Earn-Out Certificate. Buyer
will maintain, or cause the Subject Companies to maintain, complete and accurate
books of account and records of the
<PAGE> 24
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Subject Companies during the Earn-Out Period as is necessary to compute Total
Annual Net Sales under this Agreement. The Earn-Out Payees and their
representatives shall have the right, at reasonable times during business hours,
to inspect, audit and make extracts from all of the records, files and books of
the Subject Companies relating to the Earn-Out Payment (the "EARN-OUT RECORDS")
for the purposes of verifying the amount of the consideration payable pursuant
to this Section 2.3. All Earn-Out Records shall be subject to the
confidentiality restrictions of the Restricted Parties set forth in Section 6.4,
and each representative of the Earn-Out Payees who examines the Earn-Out Records
shall agree in advance to be bound thereby.
(iv) The Earn-Out Payees shall have thirty (30) days from the
receipt of the Earn-Out Payment to notify Buyer if they dispute the amount of
the Earn-Out Payment. If Buyer has not received notice of any such dispute
within such 30-day period, the Earn-Out Payment shall be final. If the Earn-Out
Payees wish to dispute the amount of the Earn-Out Payment, then prior to the end
of such thirty-day period, the Earn-Out Payees shall deliver to Buyer a notice
(the "EARN-OUT DISPUTE NOTICE") of any disagreement with respect to the
calculation of the Earn-Out Payment setting forth the amount or amounts in
dispute and the basis therefor. If the Earn-Out Payees have delivered notice of
such a dispute to Buyer within such 30-day period, Buyer and the Earn-Out Payees
shall negotiate in good faith for a period of thirty (30) days from the receipt
of the Earn-Out Dispute Notice. If the parties are unable to resolve the dispute
within such thirty (30) day period, Buyer and the Earn-Out Payees shall select
an independent accounting firm that has not represented any of the parties
hereto within the preceding two (2) years and is one of the five largest
accounting firms in the United States (the "NEW ACCOUNTING FIRM") to review the
amount of the disputed Earn-Out Payment to determine the amount, if any, that
the Earn-Out Payment is in error. The New Accounting Firm shall make its
<PAGE> 25
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determination of the Earn-Out Payment (the "REVISED EARN-OUT PAYMENT"), if any,
within thirty (30) days of its selection. The Revised Earn-Out Payment shall be
final and binding on the parties hereto. If the Revised Earn-Out Payment is
higher than the Actual Earn-Out Payment, Buyer shall pay to the Earn-Out Payees
interest, at the Prime Rate (defined below), on the deficiency from the date
that is ninety (90) days after the end of the Earn-Out Period. The costs of the
New Accounting Firm shall be borne one-half by Buyer and one-half by the
Earn-Out Payees. For purposes of this Section, the term "Prime Rate" shall mean
the annual rate of interest announced by Citibank, N.A. in New York, New York as
its prime rate in effect on the date of the New Accounting Firm's final
determination of the Revised Earn-Out Payment.
(v) Buyer and the Subject Companies shall not discontinue
maintenance of the Subject Companies' books and records as a separate entity for
purposes of calculating the Earn-Out Payment. Upon written request, the Earn-Out
Payees shall be entitled to receive any financial statements of the Subject
Companies prepared by Buyer during the Earn-Out Period. In the event of a
Disposition Transaction (as hereinafter defined) the target amounts of the
Earn-Out Payment shall be reduced by the Total Annual Net Sales of the Subject
Company subject to the Disposition Transaction for the fiscal year immediately
preceding the Disposition Transaction. Following any Disposition Transaction,
Buyer shall be relieved of its obligation to maintain separate books and records
for such Subject Company subject to the Disposition Transaction. For purposes of
this Section 2.3(e), a "Disposition Transaction" shall mean any transaction or
event by which: (i) Buyer sells or liquidates (other than to itself or a
wholly-owned Subsidiary, subject to all of the restrictions of this Section
2.3(e)), or otherwise disposes of its ownership interest in any Subject Company
(or sells all or substantially all of the assets of any Subject Company) during
the Earn Out Period; or (ii)
<PAGE> 26
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Buyer sells substantially all of its assets or is merged with another entity
that does not assume the obligations to pay the Earn-Out Payment to the Earn-Out
Payees as earned.
2.4 POST-CLOSING ADJUSTMENT TO CONSIDERATION.
(i) The Consideration provided for in Section 2.1 hereof has
been determined on the assumption that the amount of Adjusted Net Assets of the
Subject Companies as of the Closing Date and immediately prior to the Closing is
U.S. $12,605,000 (the "ADJUSTED NET ASSETS TARGET").
(b) As soon as reasonably practical following (but not more
than 90 days after) the Closing Date, Buyer shall compute the Adjusted Net
Assets of the Subject Companies as of the Closing Date and immediately prior to
the Closing. Such computation (the "ADJUSTED NET ASSETS COMPUTATION") shall be
set forth in a certificate of Buyer's chief financial officer delivered to the
Sellers' Representatives, which will show how the Adjusted Net Assets
Computation was made and recite that it was made in accordance with the
definition of Adjusted Net Assets. Buyer shall cause this certificate to be
submitted to Sellers' Representatives within 10 days after it has been prepared
(but not more than 90 days after the Closing Date). All expenses incurred in
connection with the preparation of the Adjusted Net Assets Computation shall be
the responsibility of Buyer. To assist the Sellers' Representatives in their
review of the Adjusted Net Assets Computation, Buyer shall make available to the
Sellers' Representatives, simultaneously with the Adjusted Net Assets
Computation, all work papers prepared in connection therewith, and shall provide
the Sellers' Representatives and their representatives reasonable access to
personnel at the Subject Companies rendering such report.
(c) The Adjusted Net Assets Computation shall become final and
binding upon the parties unless within 60 days following its submittal to the
Sellers' Representatives the Sellers' Representatives notify Buyer of their
objection thereto in reasonable detail, which objection may only be that it was
not properly calculated under Section 2.4(b) above. If the Sellers'
Representatives do so notify Buyer of their objection to the Adjusted Net Assets
Computation, Sellers' Representatives and Buyer shall negotiate in good faith to
resolve any differences. If within 30 days following the receipt of such notice
by Buyer, such differences have not been resolved, they shall be resolved by an
independent "big five" accounting firm. If Buyer and the Sellers'
Representatives cannot agree on the independent accounting firm to be retained,
Buyer, on the one hand, and the Sellers' Representatives, on the other hand,
shall each submit the name of one accounting firm that satisfies the
qualifications set forth in this Section 2.4(c), and the
<PAGE> 27
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independent accounting firm shall be selected by lot from those two firms. Such
accounting firm's opinion thereon and the resulting Adjusted Net Assets
Computation shall be final, binding and not subject to any appeal. The fees and
expenses of such accounting firm shall be paid one-half by Sellers'
Representatives and one-half by Buyer.
(d) Within 10 days following the final determination of the
Adjusted Net Assets Computation, if the Adjusted Net Assets Computation is less
than the Adjusted Net Assets Target by an amount in excess of U.S. $750,000, the
Sellers' Representatives shall pay Buyer (from funds in the Purchase Price
Adjustment Escrow Account) as a reduction in the Consideration paid at the
Closing the amount of such deficiency (the "PURCHASE PRICE ADJUSTMENT"), with
interest thereon in accordance with the Escrow Agreement. The Sellers'
Representatives shall receive (on behalf of and for distribution to the
Stockholders in accordance with their Allocation Percentages) any balance of the
Purchase Price Adjustment Deposit remaining after payment of the Purchase Price
Adjustment. If the Purchase Price Adjustment Deposit is insufficient to pay the
entire Purchase Price Adjustment, each Sellers' Representative shall promptly
pay to Buyer, in cash with interest thereon from the Closing Date until the date
of payment at the prime rate published by Chase Manhattan Bank on the Closing
Date (from funds provided by the Stockholders in accordance with their
Allocation Percentages), an amount equal to one-half of the difference between
the Purchase Price Adjustment and the Purchase Price Adjustment Deposit. The
Sellers' Representatives and the Stockholders shall have no liability under this
Section 2.4(d) unless the Purchase Price Adjustment exceeds U.S. $750,000, and
then only to the extent of any amount over U.S. $750,000.
3. CLOSING.
3.1 LOCATION, DATE. The closing for the Transactions (the "CLOSING")
shall be held at the offices of Morgan, Lewis & Bockius LLP, 101 Park Avenue,
New York, New York, at 10:00 a.m. (local time) or within three business days
after satisfaction or waiver of the conditions to the consummation of the
Transactions set forth in Sections 8 and 9 hereof, but in any event not later
than ninety (90) days from the date hereof (the "TERMINATION DATE"), unless the
Sellers' Representatives and Buyer agree in writing to another date or place.
The date on which the Closing occurs is referred to herein as the "CLOSING
DATE."
3.2 DELIVERIES. At the Closing, subject to the terms and conditions
contained herein:
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(i) the Stockholders shall deliver to Buyer certificates for
their Shares, free and clear of all Encumbrances, either duly endorsed
for transfer to Buyer or to Buyer's designated Subsidiary or
accompanied by stock powers duly executed in blank or such other
evidence of ownership or instruments of transfer as are customary in
the jurisdictions of organization of the members of the Subject Company
Group and are sufficient to convey ownership of the Shares to Buyer or
to Buyer's designated Subsidiaries, free and clear of all Encumbrances,
and in the case of Subject Companies organized outside the United
States and set forth on SCHEDULE 3, pursuant to stock purchase
agreements substantially in the form of Exhibit B to be entered into
prior to the Closing between the relevant Seller Party and Buyer or its
Subsidiaries (the "SUBSIDIARY PURCHASE AGREEMENTS");
(ii) Buyer shall pay or cause its designated Subsidiaries to
pay by wire transfer or certified or bank checks of immediately
available funds the Consideration to the Stockholders in accordance
with Section 2.1; and
(iii) the Parties shall also deliver to each other the
respective agreements and other documents and instruments specified
with respect to them in Sections 8 and 9, in addition to such other
items as may be reasonably requested.
4. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS.
Except as set forth in THE DISCLOSURE SCHEDULE dated as of the date
hereof, each Stockholder hereby represents and warrants to Buyer as follows:
4.1 CORPORATE STATUS. (i) Each member of the Subject Company Group is a
corporation duly organized, validly existing and in good standing under the Laws
of the jurisdiction of its incorporation, as specified in SECTION 4.1 OF THE
DISCLOSURE SCHEDULE. Each member of the Subject Company Group is qualified or
licensed to do business and is in good standing in every jurisdiction where the
nature of the business conducted by it or the properties owned or leased by it
requires qualification, except where the failure to be so qualified or licensed
is not, in the aggregate, reasonably likely to have a Material Adverse Effect.
The Charter Documents and bylaws of each member of the Subject Company Group
have been delivered to Buyer as of the date hereof, and all such documents are
effective under applicable Laws are current, correct and complete.
<PAGE> 29
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(ii) Each Stockholder, if not a natural person, is duly organized,
validly existing and in good standing under the Laws of the jurisdiction of its
formation. The Charter Documents and bylaws of each Stockholder, if not a
natural person, have been delivered to Buyer as of the date hereof and all such
documents are effective under applicable Laws and are current, correct and
complete.
4.2 AUTHORIZATION. Each member of the Subject Company Group has the
requisite corporate power and authority to own its Assets and to carry on its
Business as currently conducted. Each Stockholder has the requisite power and
authority to execute and deliver the Transaction Documents to which it is a
Party and to perform the Transactions performed or to be performed by it
thereunder. Such execution, delivery and performance by each Stockholder have
been duly authorized by all necessary action on the part of each Stockholder
and, if not a natural person, by all necessary corporate action on the part of
such Stockholder and no other corporate proceedings on the part of any
Stockholder are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. Each Transaction Document executed and
delivered by any Stockholder has been duly and validly executed and delivered by
such Party and constitutes a valid and binding obligation of such Party,
enforceable against such Party in accordance with its terms.
4.3 CONSENTS AND APPROVALS. Except for filings that may be required to
comply with the HSR Act, ISRA and any consents specified in SECTION 4.3 OF THE
DISCLOSURE SCHEDULE (together, the "SELLER REQUIRED CONSENTS"), (a) no
authorization, approval or consent of, notification to, exemption by or
registration or filing with, any governmental authority or agency or any third
party is required in connection with the Pre-Closing Transactions or the
execution, delivery and performance of the Transaction Documents by any
Stockholder or the taking of any other action contemplated thereby, (b) neither
the Pre-Closing Transactions nor the execution, delivery and performance of this
Agreement by any Stockholder will contravene or violate (i) any Law to which any
Stockholder or any member of the Subject Company Group is subject, (ii) any
Court Order that is applicable to any Stockholder or any member of the Subject
Company Group, or (iii) the Charter Documents of any Stockholder, and (c)
neither the Pre-Closing Transactions nor the execution, delivery and performance
of the Transaction Documents by the Stockholder will (i) conflict with or result
in a Default under any Contract required to be disclosed in SECTION 4.3 OF THE
DISCLOSURE SCHEDULE or by which any Stockholder or any member of the Subject
Company Group or any of their Assets is bound or (ii) result in the imposition
of any Encumbrance (other than Permitted Encumbrances) upon any Assets relating
to the Varn Business, except, in the case of clauses (b)(i) or (c), for any such
conflict or Default which, individually or in the aggregate, is not reasonably
<PAGE> 30
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likely to have a Material Adverse Effect.
4.4 CAPITALIZATION AND STOCK OWNERSHIP. SECTION 4.4 OF THE DISCLOSURE
SCHEDULE accurately describes the total authorized capital stock of each Subject
Company and the Shares thereof that are issued and outstanding on the date
hereof and that will be issued and outstanding immediately prior to the Closing.
SECTION 4.4 OF THE DISCLOSURE SCHEDULE lists all of the record owners of the
Shares each Subject Company and the respective Shares owned by them. Such record
owners own all of the issued and outstanding Shares of the Subject Companies.
Each Stockholder owns all of the Shares of each Subject Company listed as owned
by such Stockholder in SECTION 4.4 OF THE DISCLOSURE SCHEDULE, in each case free
and clear of any Encumbrances, and except as set forth in SECTION 4.4 OF THE
DISCLOSURE SCHEDULE, is not a party to any voting trust, proxy or other
agreement with respect to the voting of any Shares. There are no outstanding
options, subscriptions, convertible securities, warrants, calls, commitments,
registration or other rights of any character (including conversion or
preemptive rights) or other arrangements relating to the issuance, transfer or
disposition of any issued or unissued capital stock or other securities of any
Subject Company or voting trusts or other agreements or understandings to which
any Subject Company is bound with respect to the capital stock of the Subject
Company, and no authorization therefor has been given. All of the Shares of each
Subject Company are duly and validly authorized and issued, fully paid and
non-assessable.
4.5 FINANCIAL STATEMENTS. The Subject Company Group has delivered to
Buyer prior to the date hereof correct and complete copies of the audited
combined schedule of net assets as of December 31, 1998 and the unaudited
combined schedule of net assets as of March 31, 1999 (the "BALANCE SHEET," and
the date thereof, the "BALANCE SHEET DATE"), and the related audited combined
statement of earnings for the 12-month period ended December 31, 1998 and the
related unaudited combined statement of earnings for the 3-month period ended
March 31, 1999 (the Balance Sheet and such related statements, the "FINANCIAL
STATEMENTS"). Complete copies of the Financial Statements are attached to
SECTION 4.5 OF THE DISCLOSURE SCHEDULE. The Financial Statements present fairly,
in all material respects, the financial position and results of operations of
the Subject Company Group as of the date thereof, and the results of its
operations for the period then ended, in conformity with GAAP, applied on a
consistent basis with the exception of income Taxes, as discussed in note 1 of
the Financial Statements.
4.6 ABSENCE OF UNDISCLOSED LIABILITIES.
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(i) Except for liabilities and obligations reflected or
reserved against in the Financial Statements, incurred in the ordinary course of
business since the Balance Sheet Date or as disclosed in SECTION 4.6 OF THE
DISCLOSURE SCHEDULE, no member of the Subject Company Group has incurred any
liabilities or obligations (absolute, accrued, contingent or otherwise) other
than the German Debt, other than liabilities or obligations which are not,
individually or in the aggregate, reasonably likely to have a Material Adverse
Effect.
(ii) Neither Varn Aegis nor Varn Holding GmbH have any
liabilities or obligations of any kind or description whatsoever (absolute,
accrued, contingent or otherwise). Other than the capital stock of Varn Holding
GmbH and Varn Products Company (S.A.) Pty. Ltd., Varn Aegis does not own any
assets and has never engaged in any business of any kind, other than its skin
cream business which was terminated on or around February 1997. Other than the
capital stock of Varn Products Co. GmbH and Varn Kompac Company GmbH, Varn
Holding GmbH does not own any assets and has never engaged in any business of
any kind. As of the date hereof, neither Varn Aegis nor any other member of the
Subject Company Group has any remaining liability or obligation of any kind or
description whatsoever (absolute, accrued, contingent or otherwise) relating to
or arising out of Varn Aegis' skin cream business.
4.7 TITLE TO ASSETS; SUFFICIENCY OF ASSETS.
(i) Each member of the Subject Company Group has good and
valid title to, valid leasehold interests in or valid licenses to use, all of
its Assets, free from any Encumbrances except for (i) Permitted Encumbrances and
(ii) items specified in SECTION 4.7 OF THE DISCLOSURE SCHEDULE.
(ii) The Assets of the Subject Company Group, taken as a
whole, constitute all of the assets, properties and rights used or useful in or
necessary for the ownership and operation of the Varn Business.
4.8 REAL PROPERTY.
(i) OWNED REAL PROPERTY. SECTION 4.8(A) OF THE DISCLOSURE
SCHEDULE contains a complete and correct list of all Owned Real Property setting
forth the address and owner of each parcel of Owned Real Property. The
applicable member of the Subject Company Group has good, valid and marketable
fee simple title to the Owned Real Property, free and clear of any Encumbrances
other than Permitted Encumbrances.
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(ii) LEASES. SECTION 4.8(B) OF THE DISCLOSURE SCHEDULE
contains a complete and correct list of all Leases, setting forth the address
for each Lease. The Subject Company Group has made available to Buyer correct
and complete copies of the Leases. Each Lease grants the tenant under the Lease,
and the tenant enjoys undisturbed, the exclusive right to use and occupy the
premises and rights demised and intended to be demised thereunder (unless
otherwise set forth in the Disclosure Schedule).
(iii) NO PROCEEDINGS. To the Knowledge of the Subject Company
Group, there are no proceedings in eminent domain or other similar proceedings
pending or threatened affecting any portion of the Real Property.
(iv) CURRENT USE. The use and operation of the Real Property
in the conduct of the Varn Business does not violate in any material respect any
instrument of record or agreement affecting the Real Property. No damage or
destruction has occurred with respect to any of the Real Property that,
individually or in the aggregate, is reasonably likely to have a Material
Adverse Effect.
(v) REAL PROPERTY TAXES. Each parcel included in the Real
Property is assessed for real estate tax purposes as a wholly independent tax
lot, separate from any adjoining land or improvements not constituting a part of
that parcel.
(vi) COMPLIANCE WITH REAL PROPERTY LAWS. To the Knowledge of
the Subject Company Group, the Real Property is in full compliance with all
material applicable building, zoning, subdivision and other land use and similar
Laws affecting the Real Property (collectively, the "REAL PROPERTY LAWS"), and
no member of the Subject Company Group has received any notice of violation or
claimed violation of any Real Property Law. To the Knowledge of the Subject
Company Group, no current use by any member of the Subject Company Group of the
Real Property is dependent on a nonconforming use or other governmental
approach, the absence of which would have a Material Adverse Effect.
4.9 TAXES.
(i) Except as set forth in SECTION 4.9 OF THE DISCLOSURE
SCHEDULE, each Subject Company and each Subsidiary thereof has duly filed all
Tax Returns with the proper governmental authorities in all jurisdictions in
which such Tax Returns are required to be filed and has paid all Taxes shown as
being due pursuant to such Tax Returns or pursuant to any assessment received.
All Taxes shown to be due and payable on such Tax Returns have been paid. All
such Tax Returns were correct and complete in
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all material respects. Except as set forth in SECTION 4.9 OF THE DISCLOSURE
SCHEDULE, (i) no such Tax Return is currently being examined by any taxing
authority, (ii) there are no outstanding agreements or waivers extending the
statute of limitations, or powers of attorney, applicable to any Tax, which any
member of the Subject Company or any Subsidiary thereof is a party and (iii)
there has been no claim (other than a claim that has been finally settled)
concerning any liability for Taxes payable by any Subject Company or any of its
Subsidiaries asserted, raised or threatened by any taxing authority in writing.
(ii) Except as set forth in SECTION 4.9 OF THE DISCLOSURE
SCHEDULE, each Subject Company and each Subsidiary thereof has complied in all
material respects with applicable Law relating to the reporting, payment and
withholding of Taxes in connection with amounts paid to its employees,
creditors, independent contractors or other third Parties and has, within the
time and in the manner prescribed by law, withheld from such amounts and timely
paid over to the proper taxing authorities all such amounts required to be so
withheld and paid over under applicable Law.
(iii) No Subject Company and no Subsidiary of any Subject
Company has filed a consent under section 341(f) of the Code concerning
collapsible corporations and there are no outstanding adjustments for income Tax
purposes applicable to any Subject Company or any Subsidiary thereof required as
a result of changes in methods of accounting effected on or before the Closing
Date.
(iv) Except as set forth in SECTION 4.9 OF THE DISCLOSURE
SCHEDULE, no Subject Company and no Subsidiary of any Subject Company is a party
to or bound by or has any obligation under any Tax allocation, sharing,
indemnity or similar agreement or arrangement, and no Subject Company and no
Subsidiary of any Subject Company (i) is and has been a member of any group of
companies filing a consolidated, combined or unitary Income Tax Return other
than a group of which Varnco is the parent company or (ii) has any liability for
the Taxes of any person under section 1.1502-6 of the Treasury Regulations (or
any similar provision of state, local or foreign law), as a transferee,
successor, indemnitor or guarantor, by contract or otherwise.
(v) Each of Varn Products Co., Inc. (a Texas corporation) and
JV Tex Realty Corp. has made the election to be treated as an S corporation
under section 1362 of the Code and all comparable elections under applicable
state and local Law, and such elections are in effect for all periods beginning
on or after its incorporation.
4.10 SUBSIDIARIES. Except as set forth in SECTION 4.10 OF THE
DISCLOSURE SCHEDULE, no Subject Company owns, directly or indirectly, any
capital stock interest or
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investment (whether equity or debt) in any corporation, partnership, limited
liability company, trust, joint venture or other legal entity, other than
investments of excess cash of the Subject Companies or their Subsidiaries in
"AAA" rated overnight investments. The name, jurisdiction of incorporation,
capitalization and ownership of each Subsidiary of the Subject Companies is set
forth in SECTION 4.10 OF THE DISCLOSURE SCHEDULE. Except as set forth in SECTION
4.10 OF THE DISCLOSURE SCHEDULE each Subject Company owns all of the issued and
outstanding shares of capital stock of the Subsidiaries which it purports to
own, free and clear of all Encumbrances, except for Permitted Encumbrances, and
all of such shares are duly and validly authorized and issued, fully paid and
non-assessable. Except as set forth in SECTION 4.10 OF THE DISCLOSURE SCHEDULE,
there are no outstanding options, subscriptions, convertible securities,
warrants, calls, commitments or registration or other rights of any character
(including conversion or preemptive rights) or other arrangements relating to
the issuance, transfer or disposition of any issued or unissued capital stock or
other securities of any of the Subsidiaries or voting trusts or other agreements
or understandings to which any of the Subsidiaries is bound with respect to the
capital stock of the Subsidiary, and no authorization therefor has been given.
4.11 LEGAL PROCEEDINGS AND COMPLIANCE WITH LAW.
(i) Except as set forth in SECTION 4.11 OF THE DISCLOSURE
SCHEDULE, there is no material Litigation that is pending or, to the Subject
Company's Knowledge, threatened against any member of the Subject Company Group
or relating to Real Property and all material information known by the Sellers'
Representatives and Ronald Conti has been provided to Buyer prior to Closing.
Each member of the Subject Company Group has the Governmental Permits necessary
for the conduct of its Business as currently conducted and is in compliance with
the terms of the Governmental Permits (including Environmental Permits), except
for any non-compliance which is not reasonably likely to have a Material Adverse
Effect. There has been no Default under any Laws or Court Orders applicable to
the Subject Company or the Real Property, including, without limitation, Laws or
Court Orders relating to pollution or protection of human health or safety or
the environment, except for any such Defaults that, individually or in the
aggregate, are not reasonably likely to have a Material Adverse Effect.
(ii) SCHEDULE 4.11(B) sets forth a complete and correct list
and summary description of all insurance policies maintained by or on behalf of
any member of the Subject Company Group. To the Knowledge of the Subject Company
Group after due inquiry, all such policies are in full force and effect. The
litigation matters set forth on SCHEDULE 4.11(A) are covered, subject to policy
dollar limits, by the insurance policies set
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forth on SCHEDULE 4.11(B).
4.12 ENVIRONMENTAL CONDITIONS. Except as described in SECTION 4.12 OF
THE DISCLOSURE SCHEDULE:
(i) Each member of the Subject Company Group is in material
compliance and at all times has materially complied with all Environmental Laws
pertaining to any of the properties or assets of the Subject Company Group
(including the properties currently or formerly owned, leased or used) and the
use and ownership thereof, or to its Business. No material violation by any
member of the Subject Company Group is being, or within the last three (3) years
has been, alleged or threatened of any Environmental Law relating to any of
their respective properties or assets (including the properties currently or
formerly owned or leased) or the use or ownership thereof, or to its respective
Business.
(ii) Neither any member of the Subject Company Group, nor to
the Knowledge of the Subject Company Group, any other Person, has caused or
taken any action that will result in, and no member of the Subject Company Group
is subject to, any material liability or obligation relating to the
environmental conditions on, under, or about the Real Property or other
properties or assets currently or formerly owned, leased, operated or used by
any member of the Subject Company Group or any predecessor thereto, including
without limitation, the air, soil and groundwater conditions.
(iii) No member of the Subject Company Group (x) is subject to
any outstanding order from, or contractual or other obligation with, any
governmental body or Person in respect of which it may be required to incur
costs arising from the release or threatened release of Hazardous Substances or
(y) has entered into any contractual or other obligation (including
indemnification obligation) with any governmental body or Person pursuant to
which it assumed responsibility for the remediation of any condition relating to
the release or threatened release of Hazardous Substances.
(iv) Each member of the Subject Company Group has delivered to
Buyer complete copies of any written reports, studies or assessments in the
possession or control of such member of the Subject Company Group that relate to
the environmental conditions on, under or about the Real Property or other
properties or assets currently or formerly owned, leased, operated or used by
the Subject Company Group.
(v) Each member of the Subject Company Group has obtained and
is in material compliance with all Environmental Permits, (all of which, along
with any
<PAGE> 36
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pending renewal applications, are listed in SECTION 4.12 OF THE DISCLOSURE
SCHEDULE), that are required to operate and maintain its Business in compliance
with all Laws, except for those the absence of which would not cause a Material
Adverse Effect. All of such Environmental Permits are currently valid and
maintained in full force and effect and each member of the Subject Company Group
has filed such timely and complete renewal applications as may be required with
respect to such Environmental Permits. No alteration, modification, revocation,
cancellation or withdrawal thereof is pending, or to the Knowledge of any member
of the Subject Company Group, proposed, expected or threatened.
4.13 CONTRACTS.
(i) SECTION 4.13 OF THE DISCLOSURE SCHEDULE lists all
Contracts of the following types to which any member of the Subject Company
Group is a Party or by which any such member is bound:
(a) Contracts with any present or former stockholder,
director, officer, employee or partner of the Subject Company
Group, with an annual salary in excess of U.S. $75,000 (or an
equivalent amount in foreign currency for any Contract not
denominated in U.S. dollars);
(b) Contracts for the future purchase of, or payment
for, supplies or products, or for the lease of any Asset from
or the performance of services by a third party, in excess of
U.S. $150,000 (or an equivalent amount in foreign currency for
any Contract not denominated in U.S. dollars) in any
individual case;
(c) Contracts to sell or supply products or to
perform services that involve an amount in excess of U.S.
$150,000 (or an equivalent amount in foreign currency for any
Contract not denominated in U.S. dollars) in any individual
case;
(d) Contracts to lease to or to operate for any other
party any asset, including all leases that involve an amount
in excess of U.S. $150,000 (or an equivalent amount in foreign
currency for any Contract not denominated in U.S.
dollars) in any individual case;
<PAGE> 37
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(e) Any notes, debentures, bonds, conditional sale
agreements, equipment trust agreements, letter of credit
agreements, reimbursement agreements, loan agreements or other
Contracts for the borrowing or lending of money (including
loans to or from officers, directors, partners, stockholders
or Affiliates of the Subject Company Group), agreements or
arrangements for a line of credit or for a guarantee of, or
other undertaking in connection with, the indebtedness of any
other Person;
(f) Any Contracts under which any material
Encumbrances exist;
(g) Contracts providing in whole or in part for
the use of, or limiting the use of, any Intellectual Property;
(h) Any Contract that obligates any member of the
Subject Company Group not to compete with any business or
otherwise restrains or prevents any member of the Subject
Company Group from carrying on any lawful business (excluding
customary restrictive covenants contained in agreements
identified pursuant to clause (v) above);
(i) Any Contract that imposes any restriction on the
declaration or payment of dividends or similar distributions
by any member of the Subject Company Group; and
(j) Any other Contracts (other than Minor Contracts
and those described in any of (i) through (x) above) not made
in the ordinary course of business.
(ii) The Contracts listed or required to be listed in SECTION
4.13 OF THE DISCLOSURE SCHEDULE and the Minor Contracts are referred to herein
as the "RELATED CONTRACTS." No member of the Subject Company Group is in Default
under any such Related Contracts, except where such Default would not have a
Material Adverse Effect. The Subject Company Group has made available to Buyer
correct and complete copies of all of the Contracts listed in SECTION 4.13 OF
THE DISCLOSURE SCHEDULE.
4.14 INTELLECTUAL PROPERTY MATTERS. SECTION 4.14 OF THE DISCLOSURE
SCHEDULE contains a complete and correct list of all of the Intellectual
Property that is owned by any
<PAGE> 38
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member of the Subject Company Group other than Intellectual Property that is not
issued, registered or subject to application for registration, the substance of
which need not be described in SECTION 4.14 OF THE DISCLOSURE SCHEDULE. The
Subject Company Group is the owner of all right, title and interest in, or has
the valid and legal right to use, all Intellectual Property used in or necessary
for the conduct of its Business free from any Encumbrances. The Intellectual
Property owned by the Subject Company Group, together with the Intellectual
Property used pursuant to Related Contracts, constitutes all Intellectual
Property used in or necessary for the conduct of the Varn Business. None of the
Stockholders has any interest in, or claim with respect to, any of the
Intellectual Property used in the Varn Business. Immediately after the Closing,
each member of the Subject Company Group will be the exclusive owner of or have
the right to use all Intellectual Property used in its Business, free from any
Encumbrances (other than Permitted Encumbrances) and on the same terms and
conditions as in effect prior to the Closing. Except as set forth in SECTION
4.14 OF THE DISCLOSURE SCHEDULE, there is no claim or demand of any Person
pertaining to, or any proceeding which is pending or, to the Knowledge of the
Subject Company Group, threatened, that challenges, the rights of any member of
the Subject Company Group in respect of any Intellectual Property. None of the
Intellectual Property used in or necessary for the conduct of the Varn Business
is subject to any outstanding Court Order. Each member of the Subject Company
Group has taken all necessary actions to ensure protection of the Intellectual
Property used in its Business (including maintaining the secrecy of all
confidential Intellectual Property) under any applicable Law. The applications,
registrations and issued Intellectual Property owned by each member of the
Subject Company Group are valid and in full force and effect. The conduct of the
Business does not infringe upon or unlawfully or wrongfully use any Intellectual
Property owned or claimed by another Person. To the Knowledge of the Subject
Company Group, none of the Intellectual Property used in the Varn Business taken
as a whole is being infringed or used or available for use by any Person without
a license or permission from the Subject Company Group. All Software, hardware
and equipment used in the Varn Business that contains or calls on a calendar
function is and will be able to record, store, process, calculate, compare,
sequence and provide true and accurate day, date and time data from, into and
between the twentieth and twenty-first centuries, including but not limited to
with respect to the years 1999, 2000 and 2001 and leap year calculations.
4.15 BENEFIT PLANS.
(i) SECTION 4.15(A) OF THE DISCLOSURE SCHEDULE contains a
complete list of all Benefit Plans sponsored or maintained by each member of the
Subject Company Group or under which such member of the Subject Company Group is
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obligated. With respect to each Benefit Plan, each member of the Subject Company
Group has delivered to Buyer (i) accurate and complete copies of all such
Benefit Plan documents and all other material documents relating thereto,
including (if applicable) all summary plan descriptions, insurance contracts,
trust agreements and other funding arrangements, (ii) accurate, materially
complete and detailed summaries of all unwritten Benefit Plans, and (iii)
accurate and complete copies of the most recent financial statements and
actuarial reports with respect to all such Benefit Plans for which financial
statements or actuarial reports are required or have been prepared. Except as
may be required to comply with any applicable Law or changes in the Law, no
Stockholder nor any member of the Subject Company Group has communicated to any
employee any intention or commitment to modify any Benefit Plan or to establish
or implement any other employee or retiree benefit or compensation plan or
arrangement that would be effective on or after the Closing Date other than the
potential implementation of the Benefit Plans of Buyer after the Closing Date.
(ii) QUALIFICATION. Each Benefit Plan intended to be qualified
under section 401(a) of the Code, and the trust (if any) forming a part thereof,
has received a favorable determination letter from the IRS as to its
qualification under the Code and to the effect that each such trust is exempt
from taxation under section 501(a) of the Code, and, except as set forth in
SECTION 4.15(B) OF THE DISCLOSURE SCHEDULE to the Knowledge of the Stockholders
or any member of the Subject Company Group, nothing has occurred since the date
of such determination letter that could reasonably be expected to adversely
affect such qualification or tax-exempt status.
(iii) COMPLIANCE; LIABILITY.
(a) Except as set forth in SECTION 4.15(C) OF THE
DISCLOSURE SCHEDULE to the Knowledge of the Subject Company Group, all US
Benefit Plans are in substantial compliance with ERISA and the Code to the
extent applicable. All contributions and premiums required to have been paid
prior to the Closing Date by each Stockholder, each member of the Subject
Company Group and each Related Person to any employee benefit plan (within the
meaning of Section 3(3) of ERISA) (including each US Benefit Plan) under the
terms of any such plan or its related trust, insurance contract or other funding
arrangement, or pursuant to any applicable Law (including ERISA and the Code) or
collective bargaining agreement have been paid as prescribed by any such plan,
agreement or applicable Law.
(b) There are no material pending or threatened
claims by or on behalf of any of the US Benefit Plans, by any employee or
otherwise involving any such
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Benefit Plan or the assets of any US Benefit Plan
(other than routine claims for benefits, all of which have been fully reserved
for on the 1998 Balance Sheet).
(c) No employee is or will become entitled to an
increase in the amount of compensation or benefits (whether severance pay or
otherwise) or the acceleration of the vesting or timing of payment of any
compensation or benefits as a result of the transactions contemplated by this
Agreement.
4.16 EMPLOYEES, LABOR MATTERS, ETC. Except as set forth in SECTION 4.16
OF THE DISCLOSURE SCHEDULE, no member of the Subject Company Group is a party to
or bound by any collective bargaining agreement, and there are no labor unions
or other organizations representing or, to the Knowledge of the Subject
Companies, any employees employed by any member of the Subject Company Group.
Each member of the Subject Company Group has complied with all applicable Laws
pertaining to the employment or termination of employment of its respective
employees, including, without limitation, all such Laws relating to labor
relations, equal employment opportunities, fair employment practices, prohibited
discrimination or distinction and other similar employment activities, except
for any failure so to comply that, individually and in the aggregate, could not
reasonably be expected to result in any material liability or obligation on the
part of any member of the Subject Company Group or Buyer or any of its
Affiliates, or to have or result in a Material Adverse Effect.
4.17 CORPORATE RECORDS. Except as set forth in SECTION 4.17 OF THE
DISCLOSURE SCHEDULE, (i) the minute books of each member of the Subject Company
Group contain complete, correct and current copies of its Charter Documents and
bylaws and of all minutes of meetings, resolutions and other proceedings of its
Board of Directors and its stockholders, and (ii) the stock record books of each
member of the Subject Company Group are complete, correct and current except
where such would not have a Material Adverse Effect. As of the Closing Date, (i)
the minute books of each member of the Subject Company Group will contain
complete, correct and current copies of its Charter Documents and bylaws and of
all minutes of meetings, resolutions and other proceedings of its Board of
Directors, any committee of its Board of Directors and its stockholders, and
(ii) the stock record books of each member of the Subject Company Group will be
complete, correct and current, except where such would not have a Material
Adverse Effect.
4.18 ABSENCE OF CERTAIN CHANGES. Except (i) as otherwise contemplated
by this Agreement, (ii) in the ordinary course of business, or (iii) as set
forth in SECTION 4.18 OF THE DISCLOSURE SCHEDULE, since the Balance Sheet Date,
other than changes in general
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economic or financial conditions, or changes affecting generally the industry in
which the Subject Company Group operates, (a) there has been no development that
has had a Material Adverse Effect, (b) each member of the Subject Company Group
has conducted its Business in the ordinary course, in substantially the same
manner in which it has previously been conducted, and (c) no member of the
Subject Company Group has:
(a) purchased or redeemed any shares of its capital
stock or issued or agreed to issue any capital stock or other equity securities
of any member of the Subject Company Group or any securities or rights
convertible into or exchangeable for equity securities of any member of the
Subject Company Group or rights to purchase or otherwise receive any of the
foregoing, or amended any of the terms of any equity securities or any such
rights outstanding on the date hereof;
(b) incurred or guaranteed any indebtedness for
borrowed money;
(c) mortgaged, pledged or subjected to any
Encumbrances any of its material properties or assets, except for Permitted
Encumbrances;
(d) made any change in personnel policies or the
compensation (salary, bonus or otherwise) payable or to become payable to any
officer, director, employee, agent, affiliate or consultant, entered into or
amended any employment, severance, termination or other similar agreement or
made any loans to any of its officers, directors, employees, agents, Affiliates
or consultants or made any material change in its existing borrowing or lending
arrangements for or on behalf of any such persons, or otherwise entered into any
transactions with or made any payment to or for any Affiliate of the Subject
Company Group;
(e) amended its Charter Document or by-laws;
(f) changed its accounting methods, principles, or
practices;
(g) disposed or agreed to dispose of any assets
(other than cash) where the proceeds of the disposition or the net book value of
the relevant assets exceed in the aggregate U.S. $100,000 (or a comparable
amount in foreign currency);
(h) amended in any material respect or terminated any
Contract required to be disclosed in SCHEDULE 4.13 hereto and material to the
operation of the Business of any Subject Company Group; or
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(i) entered into any agreement to do any of the
things described in the preceding clauses (i) through (viii).
4.19 FINDER'S FEES. Except for amounts payable to Schroder & Co., Inc.
and Johnsen, Fretty & Company, LLC, no Person retained by any Subject Company or
the Stockholders is or will be entitled to any commission or finder's or similar
fee in connection with the Transactions.
4.20 AFFILIATE TRANSACTIONS.
(i) SECTION 4.20 OF THE DISCLOSURE SCHEDULE contains a complete
and correct list of all material Contracts or liabilities (other than those
entered into in the ordinary course of business on an arms length basis), to or
by which any member of the Subject Company Group, on the one hand, and any
Affiliate of any Subject Company, on the other hand are or have been a party or
otherwise bound or affected, and that are currently pending or in effect (other
than any of the foregoing entered into between members of the Subject Company
Group).
(ii) To the Knowledge of the Subject Company Group, except as
set forth in SECTION 4.20 OF THE DISCLOSURE SCHEDULE, no Stockholder, officer or
director of any member of the Subject Company Group, or any family member,
relative or Affiliate of any such Stockholder, officer, director or employee,
(i) owns, directly or indirectly, and whether on an individual, joint or other
basis, any interest in (x) any property or asset, real or personal, tangible or
intangible with a fair market value in excess of U.S. $25,000 (or an equivalent
amount in foreign currency for any property or asset not denominated in U.S.
dollars) used in or held for use in connection with or pertaining to the Varn
Business other than any automobiles or any home office of any employee of any
member of the Subject Company Group, or (y) any Person, that is a supplier,
customer or competitor of any member of the Subject Company Group (except for
any interest in any company whose securities are publicly traded), (ii) serves
as an officer, director or employee of any person that is a supplier, customer
or competitor of any member of the Subject Company Group or (iii) has received
any loans from or is otherwise a debtor of, or made any loans to or is otherwise
a creditor of, any member of the Subject Company Group, other than certain loans
to employees in an amount less than U.S. $75,000 (or an equivalent amount in
foreign currency for any loan not denominated in U.S. dollars) in the aggregate.
50 REPRESENTATIONS AND WARRANTIES OF BUYER.
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Buyer hereby represents and warrants to the Stockholders as follows:
5.1 ORGANIZATIONAL STATUS. Buyer is a corporation duly organized,
validly existing and in good standing under the Laws of the State of Delaware.
5.2 AUTHORIZATION. Buyer has the requisite power and authority to
execute and deliver the Transaction Documents to which it is a Party and to
perform the Transactions performed or to be performed by it thereunder. Such
execution, delivery and performance by Buyer has been duly authorized by all
necessary corporate or other action. Each Transaction Document executed and
delivered by Buyer has been duly and validly executed and delivered by Buyer,
and constitutes a valid and binding obligation of Buyer, enforceable against
Buyer in accordance with its terms.
5.3 CONSENTS AND APPROVALS. Except for filings that may be required to
comply with the HSR Act, and any consents specified in SECTION 5.3 OF THE
DISCLOSURE SCHEDULE which consents are addressed elsewhere in this Agreement
(together, the "BUYER REQUIRED CONSENTS"), (a) no authorization, approval or
consent of, notification to, exemption by or registration or filing with, any
governmental authority or agency or third party is required in connection with
the execution, delivery and performance of the Transaction Documents by Buyer or
the taking of any other action contemplated thereby, and (b) the execution,
delivery and performance of this Agreement by Buyer will contravene or violate
(i) any Law to which Buyer is subject, (ii) any Court Order that is applicable
to Buyer, or (iii) the Charter Documents of Buyer.
5.4 FINDER'S FEES. No Person retained by Buyer is or will be entitled
to any commission or finder's or similar fee in connection with the
Transactions.
5.5 SUFFICIENT FUNDS. Prior to the date hereof, Buyer has delivered to
the Sellers' Representatives on behalf of the Stockholders and each Subject
Company written commitments from one or more banks or other financial
institutions which contain the general terms and conditions upon which such
banks or financial institutions have agreed to make loans to Buyer, the proceeds
of which, together with any necessary equity contributions from Greenwich Street
Capital Partners, Inc. and SG Capital Partners, their respective affiliates or
any investors pursuant to the Equity Financing, immediately prior to the Closing
Date, will be sufficient to enable Buyer to consummate the transactions
contemplated in this Agreement.
5.6 INVESTMENT PURPOSE. Buyer is acquiring the Shares solely for the
purpose
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of investment and not with a view to any resale or other distribution thereof
prohibited by Law.
60 COVENANTS PENDING CLOSING.
6.1 CONDUCT OF THE BUSINESS BY SUBJECT COMPANIES. Except as set forth
in SECTION 6.1 OF THE DISCLOSURE SCHEDULE or contemplated by this Agreement or
otherwise consented to by Buyer in writing, the Stockholders shall cause each
Subject Company to carry on its Business in the ordinary course consistent with
past practice. In furtherance of and in addition to such restriction:
(i) none of the Subject Companies shall, or shall permit any of
its Subsidiaries to,
(a) amend its Charter Documents or bylaws;
(b) merge or consolidate with, or purchase
substantially all of the assets of, or
otherwise acquire any business of, any
corporation, partnership or other business
organization or business division thereof;
(c) split, combine or reclassify its outstanding
capital stock;
(d) enter into any Contract or otherwise incur
any Liability outside the ordinary course of
business;
(e) discharge or satisfy any Encumbrance or pay
or satisfy any material Liability (other
than indebtedness for borrowed money) except
pursuant to the terms thereof;
(f) compromise, settle or
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otherwise adjust any material claim or
litigation not covered by insurance;
(g) make any capital expenditure involving in
any individual case more than U.S. $100,000
(or an equivalent amount in foreign currency
for any expenditure not made in U.S.
dollars);
(h) declare or pay any dividend or other
distribution on its capital stock;
(i) increase the salaries or other compensation
payable to any officer or employee except in
the ordinary course of business;
(j) make any distributions or payments to any
Affiliate (other than any member of the
Subject Company Group) other than in the
ordinary course of business;
(k) incur any debt other than in the ordinary
course of business;
(l) take any action or omit to take any action,
which action or omission would result in a
breach of any of the representations and
warranties set forth in Section 4.18; or
(m) make any material Tax election, amend any
Tax
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Return, settle or compromise any material
federal, state, local or non-U.S. income
Tax liability.
(ii) each Subject Company shall, and shall cause its
Subsidiaries to,
(a) maintain and service the Assets in good
repair, working order and operating
condition consistent with past practice;
(b) use commercially reasonable efforts to
preserve intact its current business
organization;
(c) maintain its books of account and records in
the usual, regular and ordinary manner
consistent with past policies and practice;
and
(d) promptly advise Buyer in writing of any
event, occurrence, fact, condition, change,
development or effect that, to their
Knowledge, individually or in the aggregate,
could have or result in a Material Adverse
Effect or a breach of this Section 6.1.
6.2 ACCESS TO INFORMATION.
(i) Each member of the Subject Company Group shall give Buyer
and its representatives (including Buyer's lenders and investors and their
respective representatives, accountants, counsel and employees), upon reasonable
notice and during normal business hours, full access to the properties,
contracts, books, records and affairs of such Subject Company, provided that
such access shall not unreasonably interfere with the operations of the Subject
Company. Each member of the Subject Company Group shall cause its officers and
employees to furnish to Buyer all documents, records and information (and copies
thereof) as Buyer may reasonably request.
(ii) Notwithstanding the foregoing, no Subject Company shall
be required to provide to Buyer's officers, employees, counsel, accountants and
other representatives access to any Confidential Information relating to
pricing, marketing
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plans or other matters to the extent that disclosure of such information could
be inconsistent with any antitrust or competition law.
6.3 NO SOLICITATION. From and after the Financing Commitment Date,
through the Closing Date, without the prior written consent of Buyer, each
Seller Party will not, and will not authorize or permit any of the Seller
Advisors to, directly or indirectly, solicit, initiate or encourage (including
by way of furnishing, or permitting to be furnished, information) or take any
other action to facilitate knowingly any inquiries or the making of any proposal
that constitutes or may reasonably be expected to lead to, an Acquisition
Proposal from any Person, or engage in or continue any discussion or
negotiations relating thereto or accept any Acquisition Proposal. Any Seller
Party that receives any such inquiries, offers or proposals shall notify Buyer
orally and in writing of any such inquiries, offers or proposals (including the
terms and conditions of any such proposal and the identity of the person making
it), within 24 hours of the receipt thereof. As used herein, "ACQUISITION
PROPOSAL" means a proposal or offer (other than pursuant to this Agreement) for
a tender or exchange offer, merger, consolidation or other business combination
involving any or any proposal to acquire in any manner an equity interest in, or
all or substantially all of the business, operations or assets of, any Subject
Company.
6.4 COMPETITION AND CONFIDENTIALITY.
(i) During the period beginning on the Closing Date and ending
on the fifth anniversary thereof (the "NON-COMPETITION PERIOD"), no Restricted
Party shall, within any state, possession or territory in which any Subject
Company or any of its Subsidiaries or Affiliates conducts the Business as of the
Closing Date, (i) engage directly or indirectly, in any capacity, in any
business activities which are the same as, or directly competitive with, the
Business in which the Subject Company Group has been engaged, including, without
limitation, the manufacture and distribution of specialty pressroom chemicals
and dampeners internationally (other than for Buyer or a Subsidiary or Affiliate
of Buyer) ("COMPETITIVE BUSINESS") or (ii) own an interest in, manage, operate,
join or control or participate in or be connected with as a partner, member,
stockholder, co-venturer, consultant or otherwise any other Person that engages
in a Competitive Business, but only for as long as the Business of the Subject
Companies or their respective Subsidiaries is carried on by (A) Buyer or any of
its Subsidiaries or Affiliates or (B) any Person deriving title from Buyer to
the assets and goodwill of the Business being carried on by the Subject
Companies or their respective Subsidiaries on the Closing Date, PROVIDED that
the foregoing shall not restrict the Restricted Parties from maintaining a
passive investor ownership interest in publicly traded securities representing
less than 5% of the outstanding securities of any class of such securities of
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any Competitive Business. No Restricted Party shall assist any Person that shall
be engaged in any such business activities, including by making available to any
such Person any information related to the Business. Each Restricted Party
further covenants and agrees that for a period of five years from and after the
Closing Date, neither such Restricted Party nor its Affiliates will, without the
express prior written consent of Buyer, (x) recruit, hire, assist others in
recruiting or hiring or discuss employment with any person who is, or within the
twelve-month period immediately prior to the Closing Date was, an employee or
consultant of any member of the Subject Company Group, (y) solicit the trade of,
or trade with, any Person for any competing business purpose that the Restricted
Party knows or has reason to know is a customer or supplier of the Varn Business
other than for the benefit of Buyer and (z) directly interfere with Buyer's
business relationship with any Person that the Restricted Party knows or has
reason to know is a customer or supplier of the Varn Business. If a court
determines that the foregoing restrictions are too broad or otherwise
unreasonable under applicable law, including with respect to time or space, the
court is hereby requested and authorized by the parties hereto to revise the
foregoing restriction to include the maximum restrictions allowable under
applicable law. Each Restricted Party acknowledges, however, that this Section
6.4 has been negotiated by the Parties and that the geographical and time
limitations, as well as the limitation on activities, are reasonable in light of
the circumstances pertaining to the Business.
(ii) Each Restricted Party recognizes and acknowledges that by
reason of its or his involvement with or employment in the Business, it or he
has had access to Confidential Information relating to the Business. Each
Restricted Party acknowledges that such Confidential Information is a valuable
and unique asset and covenants that it or he will not disclose any such
Confidential Information any Person for any reason whatsoever, unless such
information (a) is in the public domain through no wrongful act of the
Restricted Party, (b) has been rightfully received from a third party without
restriction and without breach of this Agreement or (c) except as may be
required by Law or Court Order.
(iii) In the event of any breach or threatened breach by any
Restricted Party of any provision of Section 6.4, Buyer shall be entitled to
injunctive or other equitable relief, restraining such party from using or
disclosing any Confidential Information in whole or in part, or from engaging in
conduct that would constitute a breach of the obligations of a Restricted Party
under Section 6.4. Such relief shall be in addition to and not in lieu of any
other remedies that may be available, including an action for the recovery of
Damages.
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(iv) From and after the Closing Date, Buyer and its Affiliates and
representatives shall have no further liability or obligation under the
Confidentiality Agreement with respect to information, agreements or documents
of or relating to the Varn Business. The provisions of this Section 6.4(d) shall
supersede in all respects the provisions of the Confidentiality Agreement with
respect to confidential treatment of information. The provisions of this Section
6.4(d) shall not restrict Buyer or any Seller Party from using Confidential
Information in performing their respective obligations under, or enforcing the
terms of the Transaction Documents, or in exercising their respective rights
relating thereto or to the transactions contemplated thereby.
6.5 SUPPLEMENTS TO DISCLOSURE SCHEDULE. From time to time prior to the
Closing, any Seller Party may deliver to Buyer such supplements or amendments to
the DISCLOSURE SCHEDULE that such Seller Party may deem necessary in order to
correct or maintain the accuracy of the representations and warranties set forth
in Section 4, and any representation, warranty, covenant or agreement of the
Seller Parties affected thereby shall be deemed to have been amended
accordingly. If the Closing occurs, no supplement or amendment of any DISCLOSURE
SCHEDULE will be effective to cure or correct any breach of representation or
warranty that would have occurred had the Seller Party not made such supplement
or amendment and Buyer shall be entitled to indemnification under this Agreement
on account of such breach.
6.6 GUARANTEES. On or before the Closing, Buyer shall cause each
Stockholder to be released from each guaranty, surety and other similar
obligations relating to obligations of any Subject Company set forth in SECTION
6.6 OF THE DISCLOSURE SCHEDULE. After the Closing, Buyer shall (and shall cause
each Subject Company to) indemnify and hold harmless each Stockholder against
any Damages caused by or resulting from any such guaranty, surety and other
similar obligation.
6.7 COMPLIANCE WITH NEW JERSEY INDUSTRIAL SITE RECOVERY ACT. Prior to
Closing, JVNJ Realty Corp. shall obtain and provide to Buyer either: (a) a
letter from the New Jersey Department of Environmental Protection ("NJDEP")
stating that the New Jersey Industrial Site Recovery Act, N.J.S.A. 13:1K-6 et.
seq. and the regulations promulgated thereunder (collectively "ISRA") are not
applicable to the Pre-Closing Transactions; or (b) an approved Negative
Declaration (as defined by ISRA) or No Further Action Letter (as defined by
ISRA) (such Negative Declaration or No Further Action Letter, as the case may
be, are hereinafter
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referred to collectively as the "ISRA CLEARANCE"). If JVNJ Realty Corp. is
unable to obtain ISRA Clearance prior to the Closing, JVNJ Realty Corp. shall
apply for and enter into a Remediation Agreement (as defined by ISRA) with
NJDEP. In any such Remediation Agreement, the Sellers' Representatives shall be
identified as the sole parties responsible for: (x) compliance with the
Remediation Agreement after Closing; and (y) obtaining ISRA Clearance after the
Closing.
6.8 REPAYMENT OF INDEBTEDNESS.
(i On or prior to the Closing Date, the Stockholders or the
Subject Companies shall pay all amounts owing by the Subject Companies with
respect to the indebtedness for borrowed money other than (i) any indebtedness
for borrowed money owed to one Subject Company from any other Subject Company or
(ii) the German Debt. The Stockholders shall secure the release of all liens and
encumbrances (other than liens or encumbrances in connection with foreign
payroll funding, special foreign commercial considerations or customs letters of
credit issued on behalf of any members of the Subject Company Group) for
indebtedness for borrowed money or bank account overdraft protection privileges
to which the property or assets of any member of the Subject Company Group may
be subject, including, but not limited to those set forth on SCHEDULE 4.7 and
shall provide to Buyer evidence of release of any such liens and encumbrances at
Closing.
(ii The Stockholders shall, or shall cause any Unrelated
Company, any stockholder or other equity owner, officer, director or employee of
any Unrelated Company or any stockholder, officer, director or employee of any
member of the Subject Company Group to, repay all loans (other than certain
loans to employees in an amount less than U.S. $100,000 (or an equivalent amount
in foreign currency for any loan not denominated in U.S. dollars) in the
aggregate) by such member to such Unrelated Company, stockholder or other equity
owner, officer, director or employee, as the case may be, outstanding prior to
the Closing as set forth in SECTION 6.8 OF THE DISCLOSURE SCHEDULE.
6.9 FIRPTA. The Stockholders shall have delivered to Buyer a statement
issued by each of Varnco, Varn Products Co., JVTEX and Graph Tech pursuant to
Treasury Regulations section 1.1445-2(c)(3)(i), certifying that the interest
being acquired in the Company is not a United States real
<PAGE> 51
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property interest, within the meaning of the Code and the applicable Treasury
Regulations.
6.10 PRE-CLOSING TRANSACTIONS. Prior to the Closing, the Stockholders
will consummate or cause to be consummated the Pre-Closing Transactions.
7. MUTUAL COVENANTS.
7.1 FULFILLMENT OF CLOSING CONDITIONS. At and prior to the Closing,
each Party shall use commercially reasonable efforts to fulfill, and to cause
each other to fulfill, as soon as practicable the conditions specified in
Sections 8 and 9 to the extent that the fulfillment of such conditions is within
its or his control. In connection with the foregoing, each Party will (a)
execute and deliver the applicable agreements and other documents referred to in
Sections 8 and 9, and (b) use commercially reasonable efforts to (i) refrain
from any actions that would cause any of its representations and warranties to
be inaccurate as of the Closing, and take any reasonable actions within its
control that would be necessary to prevent its representations and warranties
from being inaccurate as of the Closing, (ii) comply with all applicable Laws in
connection with its execution, delivery and performance of this Agreement and
the Transactions, (iii) obtain in a timely manner all necessary waivers,
consents and approvals required under any Laws, Contracts or otherwise,
including any Seller Required Consents and any Buyer Required Consents, and (iv)
take, or cause to be taken, all other actions and to do, or cause to be done,
all other things reasonably necessary, proper or advisable to consummate and
make effective as promptly as practicable the Transactions.
7.2 DISCLOSURE OF CERTAIN MATTERS. Each Seller Party on the one hand,
and Buyer on the other hand, shall give Buyer and the Seller Parties,
respectively, prompt notice of any event or development that occurs that (a) had
it existed or been known on the date hereof would have been required to be
disclosed by such Party under this Agreement, (b) would cause any of the
representations and warranties of such Party contained herein to be inaccurate
or otherwise misleading, except as contemplated by the terms hereof, or (c)
gives any such Party any reason to believe that any of the conditions set forth
in Sections 8 and 9 will not be satisfied prior to the Termination Date.
7.3 COMPLIANCE WITH HSR ACT AND FOREIGN REGULATORY REQUIREMENTS. Each
Subject Company and Buyer will as promptly as practicable (but in no event later
than 30 days following the date hereof) file with the United States Federal
Trade Commission and the United States Department of Justice the notification
and report form required for the Transactions as well as any filings with, or
submissions to, any antitrust, competition or
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other similar authority in any foreign jurisdiction where such filing is
required in connection with the Transactions, and thereafter each Subject
Company and Buyer will as promptly as practicable file any supplemental
information requested in connection therewith pursuant to the HSR Act or
antitrust, competition or comparable laws of any foreign jurisdiction. Any such
notification and report form and supplemental information will be in substantial
compliance with the requirements of the HSR Act or antitrust, competition or
comparable laws of any foreign jurisdiction. Each Subject Company and Buyer will
use commercially reasonable efforts to obtain any clearance required under the
HSR Act or antitrust, competition or comparable laws of any foreign jurisdiction
for the consummation of the Transactions. Buyer shall be solely responsible for
any filing fees under the HSR Act.
7.4 PUBLIC ANNOUNCEMENTS. The Seller Parties and Buyer shall consult
with each other before issuing any press release or making any public statement
with respect to this Agreement and the Transactions and, except as may be
required by applicable Law, none of such Parties nor any other Parties shall
issue any such press release or make any such public statement without the
written consent of the other parties hereto.
7.5 BOOKS AND RECORDS. For ten years following the Closing Date, unless
acting with the prior written consent of Sellers' Representatives, Buyer shall
not (and shall not permit any Subject Company to), destroy or otherwise dispose
of any of any Subject Company's books, records, files, designs, specifications,
customer lists, supplier lists, information, reports, correspondence, magnetic
media and other data and similar materials (all such materials, the "BOOKS AND
RECORDS") without first offering to surrender the Books and Records which are
intended to be destroyed or disposed of to Sellers' Representatives. After the
Closing, Buyer (a) shall allow the counsel, accountants and other
representatives of Stockholders access to such Books and Records (with the
related right of examination and duplication) upon reasonable request and during
normal business hours and (b) shall make available the employees of the Subject
Companies to the extent such availability is reasonably required by Sellers'
Representatives in connection with the investigation, preparation, conduct or
settlement of or for any dispute, claim, suit, litigation or other proceeding by
or against any Subject Company or any Stockholder or any other matter arising
out of the Businesses of the Subject Companies prior to the Closing.
7.6 NO OTHER WARRANTIES. Except as expressly set forth in this
Agreement, no Party is relying on any express or implied representations or
warranties relating to any Party or to the Transactions.
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7.7 FORECASTS; PROJECTIONS; ETC. Buyer acknowledges that (a) Buyer has
taken full responsibility for evaluating the adequacy, completeness and accuracy
of various forecasts, projections, opinions and similar material heretofore
furnished by any Seller Party or their representatives to Buyer in connection
with Buyer's investigations of the Subject Companies, (b) Buyer is familiar with
the uncertainties that are inherent in attempting to make projections and
forecasts and render opinions, and (c) Buyer is not relying on any projections,
forecasts or opinions furnished to it by any Seller Party or any of their
representatives.
7.8 DISCLAIMER. Except as and to the extent expressly set forth in the
Transaction Documents, each Seller Party hereby disclaims all liability and
responsibility for any statement or information made or communicated (orally or
in writing) to Buyer or any Affiliate, representative or agent thereof
(including any opinion, information or advice by any officer, director,
consultant, affiliate, representative or agent of any Seller Party.
7.9 EMPLOYEES. (a) From and after the Closing Date until December 31,
1999, Buyer shall maintain the Benefit Plans listed in SECTION 4.15(A) OF THE
DISCLOSURE SCHEDULE, as in effect on the Closing Date and immediately prior to
the Closing, and (b) from and after the Closing Date, Buyer shall credit, for
purposes of all benefit policies, each employee of each member of the Subject
Company Group for pre-Closing service with the Subject Companies.
7.10 INSURANCE. On the Closing Date, Buyer shall purchase a tail
insurance policy on the terms and conditions set forth in SCHEDULE 5 hereof. The
cost of such policy shall be borne as follows: (i) the Seller's Representatives
shall reimburse Buyer at Closing for the first U.S. $100,000 of the cost of such
policy; (ii) the Buyer shall be responsible for the next $30,000 of the cost of
such policy; and (iii) the Sellers' Representatives shall be
<PAGE> 54
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responsibility for any remaining cost of such policy. From and after the Closing
Date, Buyer shall maintain insurance policies for the Subject Companies which
are sufficient to maintain the tail insurance policy set forth above in full
force and effect.
7.11 REFUNDS. Sellers' Representatives shall receive immediate payment
from Buyer or any of its Affiliates of the net amount paid to any Subject
Company of any refund, credit or rebate with respect to Taxes with respect to
any Tax Period ending on or before the Closing Date relating to Varn Holding
GmbH and/or Varn Aegis.
7.12 CASH ON CLOSING. On the Closing Date, each of the Subject
Companies and their Subsidiaries listed on SCHEDULE 1 hereto shall have at least
the amount of cash on hand set forth opposite such companies' name on SCHEDULE 1
hereto.
7.13 TERMINATION OF CERTAIN CONTRACTS. The Sellers' Representatives
shall bear the cost of any prepayment or other fees or penalties incurred in
connection with the termination of contracts listed on SCHEDULE 6.
7.14 ALLOCATION. The Sellers' Representatives shall, or shall cause its
accountants to, make available to the Buyer and its representatives upon
reasonable notice and during normal business hours the work papers used in the
preparation of the audited December 31, 1998 financial statements of the Subject
Company Group and such other information as the Buyer shall reasonably request
to enable the Buyer to determine the accuracy of the estimated amounts set forth
on SCHEDULE 2. In determining the final allocation to be used by the parties,
the Buyer shall be permitted to adjust such estimated amounts for each category
upward or downward by no more than 10 percent.
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8. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE STOCKHOLDERS.
All obligations of the Stockholders to consummate the Transactions are
subject to the satisfaction prior thereto of each of the following conditions:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Buyer contained in this Agreement shall be true and correct on the date
hereof and (except to the extent such representations and warranties speak as of
an earlier date) shall also be true and correct on and as of the Closing Date
with the same force and effect as if made on and as of the Closing Date, except
where the failure of such representations and warranties to be so true and
correct (without giving effect to any limitation as to materiality or material
adverse effect set forth therein), does not have, and is not likely to have, a
Material Adverse Effect.
8.2 AGREEMENTS, CONDITIONS AND COVENANTS. Buyer shall have performed or
complied in all material respects with all agreements, conditions and covenants
required by this Agreement to be performed or complied with by Buyer on or
before the Closing Date.
8.3 CERTIFICATES. The Stockholders shall have received a certificate of
an executive officer of Buyer to the effect set forth in Sections 8.1 and 8.2.
8.4 LEGALITY. No Law or Court Order shall have been enacted, entered,
promulgated or enforced by any court or governmental authority, whether foreign
or domestic, that has the effect of making the purchase and sale of the Shares
illegal or otherwise prohibiting the consummation of such purchase and sale.
8.5 REQUIRED CONSENTS; CERTAIN APPROVALS. Buyer shall have obtained the
Buyer Required Consents and the waiting period under the HSR Act shall have
expired or been terminated. All other Governmental Permits from foreign
governmental authorities and consents, authorizations and approvals from the
third parties required to be obtained to consummate the transactions
contemplated by the Transaction Documents shall have been obtained and all
applicable pre-consummation waiting periods shall have expired.
8.6 ANCILLARY DOCUMENTS. Buyer shall have tendered executed copies of
the respective Transaction Documents to which it is party.
8.7 OPINIONS OF COUNSEL. The Stockholders shall have received an
opinion, addressed to them and dated the Closing Date, from Debevoise &
Plimpton, in form and
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substance reasonably satisfactory to the Sellers' Representatives.
8.8 TERMINATION OF CERTAIN CONTRACTS. The Contracts listed on SCHEDULE
6 hereof shall have been terminated prior to Closing.
8.9 GERMAN DEBT. Buyer shall have purchased the German Debt by making a
cash payment to the Stockholders on the Closing Date.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER.
All obligations of Buyer to consummate the Transactions are subject to
the satisfaction prior thereto of each of the following conditions:
9.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Stockholders contained in this Agreement shall be true and correct on the
date hereof and (except to the extent such representations and warranties speak
as of an earlier date) shall also be true and correct on and as of the Closing
Date with the same force and effect as if made on and as of the Closing Date
with the same force and effect as if made on and as of the Closing Date, except
where the failure of such representations and warranties to be so true and
correct (without giving effect to any limitation as to materiality or material
adverse effect set forth therein), does not have, and is not likely to have, a
Material Adverse Effect or does not materially and adversely affect Buyer's
ownership of the Shares after the Closing.
9.2 AGREEMENTS, CONDITIONS AND COVENANTS. The Stockholders shall have
performed or complied in all material respects with all agreements, conditions
and covenants required by this Agreement to be performed or complied with by
them on or before the Closing Date.
9.3 CERTIFICATES. Buyer shall have received a certificate of the chief
executive officer of each Subject Company to the effect set forth in Sections
9.1 and 9.2.
9.4 LEGALITY. No Law or Court Order shall have been enacted, entered,
promulgated or enforced by any court or governmental authority that is in effect
and has the effect of making the purchase and sale of the Shares illegal or
otherwise prohibiting the consummation of such purchase and sale.
9.5 REQUIRED CONSENTS. The Seller Parties shall have obtained the
Seller Required Consents set forth in SECTION 9.5 OF THE DISCLOSURE SCHEDULE,
and the waiting
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period under the HSR Act shall have expired or been terminated. All other
Government Permits from foreign governmental authorities and consents,
authorizations and approvals from third parties required to be obtained to
consummate the transactions contemplated by the Transaction Documents shall have
been obtained and all applicable pre-consummation waiting periods shall have
expired.
9.6 ISRA APPROVAL. Seller shall have obtained (and provided to Buyer)
ISRA Clearance as provided in Section 6.7. If ISRA Clearance is not obtained
prior to the Closing, then Buyer may, at its own option, (a) fail to close until
ISRA Clearance is obtained, or (b) have JVNJ Realty Corp. apply for and enter
into a Remediation Agreement (as defined by ISRA) with the NJDEP. In any such
Remediation Agreement, the Stockholders shall pay all costs and expenses,
including filing fees, legal fees and consulting fees associated with (x)
complying with the Remediation Agreement after Closing, and (y) obtaining ISRA
Clearance after the Closing. The Stockholders shall provide all necessary
financial assurance required by the NJDEP under any such Remediation Agreement.
9.7 ANCILLARY DOCUMENTS. The Seller Parties shall have tendered
executed copies of the respective Transaction Documents to which they are
parties.
9.8 SUBSIDIARY PURCHASE AGREEMENTS. The closings under the Subsidiary
Purchase Agreements shall have occurred.
9.9 RESIGNATION OF DIRECTORS. All directors and officers of each of the
Subject Companies whose resignations shall have been requested in writing by
Buyer at least five (5) business days prior to the Closing Date shall have
submitted their resignations or been removed from office effective as of the
Closing Date.
9.10 FINANCING. Buyer shall have obtained financing sufficient to
enable Buyer to consummate the transactions contemplated by this Agreement on
such terms as are satisfactory to Buyer in its reasonable judgment.
9.11 OPINIONS OF COUNSEL. Buyer shall have received opinions, addressed
to it and dated the Closing Date, from Morgan, Lewis & Bockius LLP, and local
counsel reasonably acceptable to Buyer in each foreign jurisdiction in which a
member of the Subject Company Group is organized, in form and substance
reasonably satisfactory to the Buyer.
10. INDEMNIFICATION.
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10.1 INDEMNIFICATION. (i Subject to the other provisions of this
Section 10, from and after the Closing Date, each Stockholder other than Allan
Moroknek, individually (but not in his capacity as trustee) and Michael
Moroknek, individually (but not in his capacity as trustee) shall indemnify and
hold harmless Buyer, its Affiliates, each member of the Subject Company Group
and their respective officers, directors, employees, agents and representatives
(each a "BUYER INDEMNIFIED PARTY") for one hundred percent (100%) of the first
Three Million Dollars (U.S. $3,000,000) of, and ninety percent (90%) of any
additional, liabilities, claims, demands, judgments, losses, costs, damages or
expenses whatsoever (including reasonable attorneys', consultants' and other
reasonable professional fees and disbursements of every kind, nature and
description incurred in connection therewith, but excluding any consequential or
punitive damages other consequential or punitive damages in connection with the
litigation matters set forth on SCHEDULE 4.11), net of any insurance proceeds
available for the payment thereof (collectively, "DAMAGES"), directly or
proximately caused by, resulting from in connection with or pursuant to (i) any
breach of any of the respective representations and warranties of any
Stockholder contained in this Agreement or of Iona College Charitable Gift Fund
contained in the Letter Agreement dated of even date herewith between Iona
College Charitable Gift Fund and Buyer, (ii) any breach of any of the covenants
or agreements of any Stockholder contained in this Agreement, (iii) the
business, operations or properties of any Unrelated Company, (iv) any Unrelated
Liability and (v) environmental conditions existing on, under, above, about or
emanating from the Hayward Facility, including the soil, air and groundwater,
(vi) any sanctions or penalties imposed by the IRS, in connection with an IRS
Audit, and reasonable attorneys fees related thereto, on any Benefit Plan
intended to be a qualified plan as described in Section 4.15(b) arising out of
an event that occurred on or before Closing and (vii) the Denis Dunlea Deferred
Compensation Trust, dated May 4, 1998, between Varn Products Co., Inc. and
Kathleen Dunlea, except for any Damages arising from the insolvency of Varn
Products Co., Inc. Notwithstanding the foregoing, any indemnification for any
claim arising from any inaccuracy of any representation or warranty set forth in
Section 4.6(b) or related to or arising from clauses (iii), (iv), (v), (vi) or
(vii) of this Section 10.1(a) shall be for one hundred percent (100%) regardless
of whether any such claim exceeds Three Million Dollars (U.S. $3,000,000).
(ii Subject to the other provisions of this Section 10, from
and after the Closing Date, Buyer, its Affiliates, each member of the Subject
Company Group and their respective officers, directors, employees, agents and
representatives shall indemnify and hold harmless Stockholders for any Damages,
directly or proximately caused by or resulting from any breach of any of the
respective representations, warranties, covenants
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or agreements of Buyer contained in this Agreement.
(iii For purposes of this Section 10, any inaccuracy in any
representation or warranty shall be determined without regard to any materiality
qualification contained in such representation or warranty, which qualification
limits the scope of such representation or warranty and, giving effect thereto,
renders such representation or warranty accurate.
10.2 PROCEDURE FOR CLAIMS.
(i A party seeking indemnification under any part of Section
10.1 or Section 11 (the "INDEMNIFIED PARTY") shall promptly notify in writing (a
"CLAIM NOTICE") the other party (the "INDEMNIFYING PARTY") of its desire to seek
indemnification (including without limitation items that would give rise to a
right to indemnification if they were not below the Threshold Amount). Such
notice shall briefly explain the nature of the claim and the parties known to be
involved, and shall specify the amount thereof. The Indemnified Party shall not
be entitled to give any Claim Notice, or to indemnification, pursuant to Section
10.1(a)(i) for any Damage less than U.S. $10,000 in any one instance (and any
such Damage shall not be included in the Threshold Amount). The Indemnified
Party shall as soon as practicable thereafter provide to the Indemnifying Party
all information and documentation necessary to support and verify the right
asserted, and the Indemnifying Party shall be given access to all personnel,
properties, books and records that the Indemnifying Party reasonably determine
to be related thereto. The Indemnifying Party shall respond to the Indemnified
Party (a "CLAIM RESPONSE") within 45 days (the "RESPONSE PERIOD") after the date
that the Claim Notice is given. Any Claim Notice or Claim Response shall be
given in accordance with the notice requirements under this Agreement, and any
Claim Response shall specify whether the Indemnifying Party disputes the claim
in the Claim Notice. If the Indemnifying Party fails to give a Claim Response
within the Response Period, the Indemnified Party shall be deemed not to dispute
the claim described in the Claim Notice. If the Indemnifying Party elects not to
dispute a claim described in a Claim Notice, whether by failing to give a timely
Claim Response or otherwise, then the amount of such obligation shall be
conclusively deemed to be an obligation of the Indemnifying Party.
(ii If any Stockholder shall be obligated to indemnify Buyer
under Section 10.1, Buyer shall first obtain distributions from the Escrow
Account, and Buyer shall not be entitled to receive any indemnification
obligation from any Stockholder until the Escrow Account has been fully
exhausted. The Escrow Agent shall pay to Buyer the amount to which Buyer shall
be entitled in accordance with the terms of the Escrow
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Agreement. If there shall be a dispute as to the amount or manner of
indemnification under this Section 10, Buyer may pursue whatever legal remedies
may be available for recovery of the Damages claimed from any Stockholder. In
the event the amounts available in the Escrow Account are insufficient to
satisfy a Stockholder indemnification obligation under Section 10.1, Buyer shall
be entitled to receive all amounts remaining in the Escrow Account, if any, and
shall have the right to recover the remainder of the amount of such claim from
the Stockholders.
(iii If the Indemnified Party seeks indemnification under any
part of Section 10.1 with respect to any actions, suits or other administrative
or judicial proceedings (each, an "ACTION") that may be instituted by a third
party, the Indemnified Party shall give the Indemnifying Party prompt notice of
a third party's institution of such Action. After such notice, the Indemnifying
Party shall have the right at any time, at their option and expense, to
participate in or assume the defense of any such Action (including the right to
participate in negotiations and settlement discussions), PROVIDED, that counsel
for the Indemnifying Party who shall conduct the defense of such Action shall be
reasonably satisfactory to the Indemnified Party, and the Indemnified Party may
participate in such defense at its expense. Except with the prior written
consent of the Indemnified Party, no Indemnifying Party, in the defense of any
such Action, shall consent to entry of any judgment or enter into any settlement
that provides for injunctive or other nonmonetary relief affecting the
Indemnified Party or that does not include as an unconditional term thereof the
giving by each claimant or plaintiff to the Indemnified Party of a release from
all liability with respect to such Action. The Indemnified Party and the
Indemnifying Party shall cooperate fully with each other in connection with the
defense, negotiation and settlement of any such Action, and the Indemnifying
Party shall be given access to all personnel, properties, books and records that
the Indemnifying Party reasonably determine to be related thereto. No such
Action may be settled or compromised (nor shall any agreement be entered into or
commitment made with respect to any settlement or compromise) without the
written consent of the Indemnifying Party, which shall not be unreasonably
withheld.
10.3 CERTAIN LIMITATIONS. Notwithstanding anything to the contrary
contained herein, the obligations of the Indemnifying Party under Sections 10
and 11 shall be limited as follows:
(i The Indemnified Party shall be entitled to indemnification
under Sections 10.1(a)(i) (other than in connection with any claim for
indemnification arising from any inaccuracy of any representation or warranty
set forth in Sections 4.6(b), 4.9 and 4.12 as to which there shall be no
limitation) if the aggregate of all Damages as to
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which the Indemnified Party shall otherwise be entitled to indemnification
(other than in connection with any claim for indemnification arising from any
inaccuracy of any representation or warranty set forth in Sections 4.6(b), 4.9
or 4.12 as to which there shall be no limitation) exceeds U.S. $1,000,000 (the
"DEDUCTIBLE AMOUNT") and then only to the extent of any excess Damages over such
Deductible Amount;
(ii The obligations of any Indemnified Party under Sections
10.1(a)(i) (other than in connection with any claim for indemnification arising
from any inaccuracy of any representation or warranty set forth in Sections 4.2,
4.4, 4.6(b), 4.9, or 4.12 as to which there shall be no limitation) shall not
exceed, in the aggregate, the sum of the Escrow Account plus U.S. $22,500,000.
(iii Each member of the VVZ Shareholder Group shall be jointly
and severally liable for up to fifty percent (50%) of the aggregate amount of
all indemnification obligations to which any Buyer Indemnified Party is entitled
to under Sections 10 and 11, and the VVZ Shareholder Group, as a whole, shall
not be liable for more than fifty percent (50%) of the aggregate amount of all
indemnification obligations under Sections 10 and 11;
(iv Each member of the JVZ Shareholder Group shall be jointly
and severally liable for up to fifty percent (50%) of the aggregate amount of
all indemnification obligations to which any Buyer Indemnified Party is entitled
to under Sections 10 and 11, and the JVZ Shareholder Group, as a whole, shall
not be liable for more than fifty percent (50%) of the aggregate amount of all
indemnification obligations under Sections 10 and 11;
(v The obligations of any Indemnified Party under Sections 10
and 11 shall not exceed, in the aggregate, the Consideration as adjusted
pursuant to Section 2.4; and
(vi No Buyer Indemnified Party shall be entitled to
indemnification under Section 10.1(a) for any indemnification obligation
relating to the representations and warranties relating to the real property
located at 905 South Westwood Avenue, Addison, Illinois contained in Section
4.12, or any other claim relating to any environmental condition of the real
property located at 905 South Westwood Avenue, Addison, Illinois.
10.4 GENERALLY. No indemnification obligation shall be made (or Damages
counted against the Deductible Amount) for matters to the extent that they are
covered by
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insurance (after reduction for the reasonable costs and expenses of obtaining or
maintaining such or similar insurance). In determining the amount of any Damages
giving rise to an Escrow Account distribution (or to be counted against the
Deductible Amount) hereunder, the amount of the Damages shall be computed after
giving effect to any tax benefit and tax detriment (federal, state or local) to
be realized by reason of such Damages, PROVIDED that such tax benefits and such
tax detriments shall be given effect to for purposes of this Section 10.4 only
if and to the extent such tax detriments or tax benefits, respectively, are
actually realized, and based on the assumption that the items giving rise to
such tax benefits or tax detriments, respectively, are utilized after all other
relevant items have been taken into account on its Tax Return, and PROVIDED
FURTHER that in the event that any such tax benefit of such party is
subsequently disallowed, the indemnifying party shall make an additional payment
to the indemnified party equal to the amount of any tax detriment resulting from
such disallowance. In the event the parties are unable to agree on the amount of
any such tax benefit or tax detriment, such dispute shall be resolved in
accordance with the Tax Dispute Resolution Procedure.
10.5 CLAIMS PERIOD. No party shall be entitled to seek indemnification
under this Section 10 after the first anniversary of the Closing Date except as
follows:
(a) claims with respect to the representations and
warranties contained in Section 4.12 can be made
until the third anniversary of the Closing Date;
(b) claims with respect to the representations and
warranties contained in Sections 4.1, 4.2, 4.4,
4.6(b), 4.10 and 4.15(b), and Buyer's right to
indemnification under Sections 10.1(a)(iii),
10.1(a)(iv), 10.1(a)(v), 10.1(a)(vi) and 10.1(a)(vii)
can be made indefinitely; and
(c) claims with respect to the representations and
warranties contained in Sections 4.9 and 4.15(c)(i)
can be made until the expiration of any applicable
statute of limitations.
10.6 EXCLUSIVITY. The remedy provided under Sections 10 and 11 shall
constitute the exclusive remedy of Buyer and the Stockholders, from and after
the Closing, against any loss, liability or expense arising out of or related to
the Transactions, provided, that nothing herein shall limit in any way Buyer's
remedies in respect of fraud or intentional misrepresentation or omission by any
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Stockholder in connection herewith or with the Transaction Documents or the
transactions contemplated thereby.
10.7 SELLERS' REPRESENTATIVES.
(i Each Stockholder irrevocably makes, constitutes and
appoints Vincent Von Zwehl and Joseph Von Zwehl as such Stockholders' sole and
exclusive representative (collectively, the "SELLERS' REPRESENTATIVES") and
authorizes and empowers each of them to take all actions necessary or
appropriate in the judgment of the Sellers' Representatives for the
accomplishment of the terms of this Agreement. All actions by the Sellers'
Representatives shall require the approval of both the Sellers' Representatives,
and the Seller Parties shall be bound by any and all actions of the Sellers'
Representatives. If either of the Sellers' Representatives shall be unable to
perform his functions hereunder, the remaining Sellers' Representative shall
become the sole Sellers' Representative and the Seller Parties shall be bound by
any and all actions of such remaining Sellers' Representative. If both Sellers'
Representatives are unable to perform their functions hereunder, the holders of
a majority of the Shares shall elect, by written ballot, a single successor
Sellers' Representative. The decisions and actions of any successor Sellers'
Representative shall be, for all purposes, those of a Sellers' Representative as
if originally named herein.
(ii Buyer shall be entitled to rely exclusively upon any
communications or writings given or executed by the Sellers' Representatives and
shall not be liable in any manner whatsoever for any action taken or not taken
in reliance upon the actions taken or not taken or communications or writings
given or executed by the Sellers' Representatives. Except as specifically
contemplated by the Escrow Agreement, Buyer shall be entitled to disregard any
notices or communications given or made by any Seller Party unless given or made
through the Sellers' Representatives.
(iii The Sellers' Representatives shall not be liable for any
act done or omitted in such capacity while acting in good faith and in the
exercise of reasonable judgment, and any act done or omitted pursuant to the
advice of counsel shall be conclusive evidence of such good faith. The
Stockholders shall severally indemnify the Sellers' Representatives and hold
them harmless against any loss, liability or expense incurred without gross
negligence or bad faith.
11. TAX MATTERS.
11.1 PAYMENT FOR CERTAIN TAXES.
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(i Each Stockholder other than Allan Moroknek, individually
(but not in his capacity as trustee) and Michael Moroknek, individually (but not
in his capacity as trustee) shall indemnify and hold harmless Buyer and each
Subject Company from and against, such Stockholder's Allocation Percentage of
any Tax that is or may become payable by any Subject Company or any of its
Subsidiaries, or chargeable as a lien upon the Assets thereof that (1) is
attributable to any period or a portion thereof ending, or event occurring, on
or prior to the Closing Date, and has not been paid as of the Closing Date, to
the extent that the amount of such Tax exceeds the reserve with respect thereto
reflected in the Adjusted Net Assets Computation (excluding any reserve for
deferred liability for Taxes) or (2) is required to be paid by the Stockholders
pursuant to Section 11.2. For purposes of this Section 11.1(a), any liability
for any Tax that is or may be payable by any Subject Company or any of its
Subsidiaries that is attributable to a period which begins before and ends after
the Closing Date shall be apportioned between the portion of such period ending
on the Closing Date and the portion beginning on the Closing Date (x) in the
case of Taxes other than taxes based on income or receipts, by apportioning such
Taxes on a per diem basis and (y) in the case of Taxes based on income or
receipts, by calculating the amount of such Tax that would be due had the
Subject Company or Subsidiary's taxable period ended on the Closing Date.
(ii If any Stockholder shall be obligated to indemnify Buyer
under Section 11(a)(i), the Escrow Agent shall pay to Buyer from the then
balance in the Tax Escrow Account the amount to which Buyer shall be entitled in
accordance with the terms of the Escrow Agreement. In the event the amounts
available in the Tax Escrow Account are insufficient to satisfy an
indemnification claim, Buyer shall be entitled to receive all amounts remaining
in the Tax Escrow Account, if any, and shall have the right to recover the
remainder of the amount of such claim from the Stockholder based on the
Stockholder's Allocation Percentage. Any disputes as to the amount of
indemnification under Section 11.1(a) shall be resolved in accordance with the
Tax Dispute Resolution Procedure. Any remaining balance in the Tax Escrow
Account, after giving effect to any payments made pursuant to this Section 11.1,
shall be released at the times, and in the manner set forth in the Escrow
Agreement.
(iii Any indemnification obligations under this Section 11 are
governed by the applicable provisions of Section 10, except that the provisions
of Section 11.3 shall govern any audits or administrative or judicial
proceedings with respect to the Tax Liabilities of each Subject Company and each
of its Subsidiaries..
11.2 TAX RETURNS.
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(i THE STOCKHOLDERS' RESPONSIBILITY. The Stockholders shall
prepare, or cause to be prepared, and timely file, all Tax Returns that are
required to be filed by Tax law by each Subject Company and each of its
Subsidiaries on or prior to the Closing Date on a basis consistent with past
practice.
(ii BUYER'S RESPONSIBILITY. Buyer shall prepare and timely
file, or cause to be prepared and timely filed, with the relevant Governmental
Authorities all Tax Returns relating to the Business or Assets of the Subject
Companies and their Subsidiaries other than those Tax Returns described in
Section 11.1(b)(i). With respect to Tax Returns for periods beginning before and
ending after the Closing Date, such Tax Returns shall be prepared consistent
with past practice, PROVIDED that all Tax Returns required to be filed by Tax
law by each Subject Company and each of its Subsidiaries after the Closing Date
relating to periods ending on or before the Closing Date shall be prepared on a
basis consistent with past practice, to the extent permitted under applicable
law and, shall be subject to the review and approval of the Sellers'
Representative, which approval shall not be unreasonably withheld.
11.3 TAX PROCEEDINGS. Notwithstanding anything in this Agreement to the
contrary, Buyer shall control the conduct of all audits or administrative or
judicial proceedings with respect to the Tax liabilities of each Subject Company
and each of its Subsidiaries for any period or portion thereof. Subject to such
control, Buyer (i) shall give notice to the Sellers' Representatives of any Tax
adjustment proposed in writing pursuant to any government audit or other
proceeding if such adjustment could give rise to a Claim for indemnification
against the Stockholders pursuant to this Section 11, (ii) shall, if requested
by the Sellers' Representatives, consult with the Sellers' Representatives and
their counsel regarding the positions Buyer will assert in writing with respect
to any such proposed adjustment, and (iii) shall not, and shall not permit any
of its Affiliates to, accept any proposed adjustment or enter into any
settlement or agreement that would result in a Claim for indemnification against
the Stockholders pursuant to this Section 11 without the written consent of the
Sellers' Representative, which consent shall not be unreasonably withheld.
11.4 COOPERATION ON TAX MATTERS. Buyer, the Subject Companies and the
Stockholders shall cooperate fully, as and to the extent reasonably requested by
the other Party, in connection with the filing of Tax Returns pursuant to this
Section 11 and any audit, litigation or other proceeding with respect to Taxes.
Such cooperation shall include the retention and (upon the other Party's
request) the provision of records and information which are reasonably relevant
to any such audit, litigation or other
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proceeding and making employees available on a mutually convenient basis to
provide additional information and explanation of any material provided
hereunder. The Subject Companies and the Stockholders shall (i) retain all Books
and Records with respect to Tax matters pertinent to such Subject Companies
relating to any taxable period beginning before the Closing Date until the
expiration of the statute of limitations (and, to the extent notified by Buyer
or the Stockholders, any extensions thereof) of the respective taxable periods,
and to abide by all record retention agreements entered into with any taxing
authority, and (ii) to give the other Party reasonable written notice prior to
transferring, destroying or discarding any such Books and Records and, if the
other Party so requests, the Subject Companies or the Stockholders, as the case
may be, shall allow the other Party to take possession of such Books and
Records.
11.5 CERTAIN TAXES. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement and the Transactions shall
be paid, one-half by Buyer and one-half by Stockholders when due.
12. TERMINATION.
12.1 GROUNDS FOR TERMINATION. This Agreement may be terminated by
written notice of termination only as follows:
(i By the Sellers' Representatives or the Buyer if the
Financing Commitment Date has not occurred on or before 5:00 p.m. New York City
time within fourteen (14) days of the date hereof;
(ii By mutual written consent of Buyer and the Sellers'
Representatives;
(iii By written notice if the Closing shall not have been
consummated on or before 5:00 p.m. New York City time on the Termination Date
unless such date is extended by the mutual written consent of the Sellers'
Representatives and Buyer; provided, however, that the right to terminate this
Agreement under this Section 12.1(c) shall not be available to any Party whose
failure to fulfill any obligation under this Agreement has been the cause of, or
resulted in, the failure of the Closing to occur on or before the Termination
Date;
(iv By either Buyer, on the one hand, or the Seller's
Representatives on the other hand, (i) if a court of competent jurisdiction or
governmental, regulatory or
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administrative agency or commission shall have issued a Court Order (which Court
Order the Parties shall use commercially reasonable efforts to lift) that
permanently restrains, enjoins or otherwise prohibits the Transactions, and such
Court Order shall have become final and nonappealable or (ii) any other event,
factor or condition shall occur or exist that otherwise shall have made it
impossible to satisfy a condition precedent to the terminating party's
obligations to consummate the transactions contemplated by this Agreement,
unless the occurrence or existence of such event, fact or condition shall be due
to the failure of the terminating party to perform or comply with any of the
agreements, covenants or conditions hereof to be performed or complied with by
such party prior to the Closing;
(v By either Buyer, on the one hand, or the Sellers'
Representatives, on the other hand, if there has been a misrepresentation or
breach on the part of the other Party in the representations, warranties,
covenants or agreements contained herein or in other Transaction Documents (or
in any certificate delivered in connection herewith) which would cause a failure
of the conditions set forth in Section 8.1 (in the case of a termination by the
Sellers' Representatives) or Section 9.1 (in the case of a termination by Buyer)
and which is not cured within ten business days after such other Party has been
notified of the intent to terminate this Agreement pursuant to this Section
12.1(e); or
(vi By Buyer within five business days after Buyer has
received notice under Section 6.5 of a supplement or amendment to the Disclosure
Schedule that has disclosed any information that would have a Material Adverse
Effect or would materially and adversely affect Buyer's ownership of the Shares
after the Closing.
12.2 EFFECT OF TERMINATION. If this Agreement is terminated under
Section 12.1, this Agreement shall forthwith become void and have no effect
(except for Section 13.4 and the Confidentiality Agreement) and there shall be
no liability in respect of this Agreement on the part of any of Buyer or any
Seller Party or their respective officers, directors, or shareholders except as
provided below in this Section 12.2 and in Section 13.4. If such termination is
based on a breach of any material representation, warranty or covenant or
agreement herein (or if this Agreement is otherwise terminated pursuant to
Section 12.1(c)) by any Party hereto, such Party shall be fully liable to the
other Party hereto for all costs and expenses (including reasonable attorneys'
fees and expenses) actually incurred in good faith by such
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other Party in connection with this Agreement and the Transactions. If this
Agreement is terminated, each Party hereto shall return promptly to the other
Party hereto or destroy (and certify such destruction to the other Party in
writing) all documents, work papers and other material of the other Party
furnished or made available to such Party or its representatives or agents, and
all copies thereof, and agrees that no information received by it or its
representatives or agents shall be revealed by it or its representatives or
agents to any third party or used for the advantage of such party or any other
person.
13. GENERAL MATTERS.
13.1 CONTENTS OF AGREEMENT. This Agreement, together with the other
Transaction Documents and the Confidentiality Agreement, sets forth the entire
understanding of the Parties with respect to the Transactions and supersede all
prior agreements or understandings among the parties regarding those matters.
13.2 AMENDMENT, PARTIES IN INTEREST, ASSIGNMENT, ETC. This Agreement
may be amended, modified or supplemented only by a written instrument duly
executed by each of the parties hereto. If any provision of this Agreement shall
for any reason be held to be invalid, illegal, or unenforceable in any respect,
such invalidity, illegality, or unenforceability shall not affect any other
provision hereof, and this Agreement shall be construed as if such invalid,
illegal or unenforceable provision had never been contained herein. This
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the respective heirs, legal representatives, successors and permitted assigns
of the Parties. Nothing in this Agreement shall confer any rights upon any
Person other than the Parties and their respective heirs, legal representatives,
successors and permitted assigns, except as provided in Section 10. No Party
hereto shall assign this Agreement or any right, benefit or obligation
hereunder; PROVIDED, that Buyer may assign this Agreement to one or more
Subsidiaries of Buyer, or to any lender to Buyer or any Subsidiary or affiliate
thereof as security for obligations to such lender, and PROVIDED, FURTHER, that
no assignment to any such lender shall in any way affect the Parties'
obligations or liabilities under this Agreement. Any term or provision of this
Agreement may be waived at any time by the Party entitled to the benefit thereof
by a written instrument duly executed by such Party.
13.3 FURTHER ASSURANCES. At and after the Closing, the Parties shall
execute and
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deliver any and all documents and take any and all other actions that may be
deemed reasonably necessary by their respective counsel to render effective the
consummation of the Transactions or otherwise carry out the intent and purpose
of this Agreement, including but not limited to securing the third party
consents set forth on SCHEDULE 4.3.
13.4 EXPENSES. The Parties shall pay their own expenses incidental to
the preparation of this Agreement, the carrying out of the provisions of this
Agreement and Transactions. Buyer acknowledges and agrees that it alone will be
fully responsible for the filing fee owing under the HSR Act. Stockholders
acknowledge and agree that they alone will be fully responsible for amounts
payable to Schroder & Co., Inc. and Johnsen, Fretty & Company, LLC.
13.5 WAIVER. No waiver by any Party hereto, whether express or implied,
of any right under any provision of this Agreement shall constitute a waiver of
such Party's rights under any other provision of this Agreement, nor shall any
such waiver constitute a waiver of such Party's right at any other time or
unless it is made in writing and signed by the Party waiving the condition. No
failure by any Party hereto to take any action with respect to any breach of
this Agreement or default by any other Party shall constitute a waiver of such
Party's right to enforce any provision of this Agreement against such other
Party or to take action with respect to such breach or default or of any
subsequent breach or default by such other Party.
13.6 NOTICES. Any notice, request, demand, waiver, consent, approval or
other communication which is required or permitted hereunder shall be in writing
and shall be deemed to have been duly given if delivered personally, telefaxed
with receipt acknowledged (and with a confirmation copy also sent by certified
mail return receipt requested), delivered by a recognized commercial courier
service with receipt acknowledged, or mailed by registered or certified mail
return receipt requested, as follows:
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If to Buyer, to:
Day International Group, Inc.
130 West Second Street
Dayton, OH 45401
Attention: Dennis R. Wolters
Telefax No.: 937-226-0052
with a required copy to:
Greenwich Street Capital Partners, Inc.
388 Greenwich Street - 36th Floor
New York, NY 10013
Attention: Christine K. Vanden Beukel
Telefax No.: 212-816-0166
and
Debevoise & Plimpton
875 Third Avenue
New York, NY 10022
Attention: Andrew L. Sommer, Esquire
Telefax No.:212-909-6836
If to any Seller Party, to Sellers' Representatives:
Vincent Von Zwehl and Vincent Von Zwehl
P.O. Box 728 3991 Gulf Shore Blvd. N.
29 Cobblestone Tr. Naples, FL 34103
Montville, NJ 07045 Telefax No.: 941-434-2978
Telefax No.: 973-331-7973
and
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Joseph Von Zwehl and Joseph Von Zwehl
1121 Jericho 431 Lido Drive
Oyster Bay Rd. Ft. Lauderdale, FL 33301
Route 106 Telefax No.: 954-523-4225
Muttontown, NY 11732
with a required copy to:
Thomas J. Sharbaugh, Esquire
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103-2921
Telefax No.: 215-963-5299
or to such other address as the addressee may have specified in a notice duly
given to the sender as provided herein. Such notice, request, demand, waiver,
consent, approval or other communication will be deemed to have been given as of
the date so delivered or telefaxed or five business days after the date mailed.
13.7 GOVERNING LAW. This Agreement shall be governed by and interpreted
and enforced in accordance with the laws of the state of New York, including all
matters of construction, validity and performance and (b) each of the parties
hereto irrevocably and unconditionally (i) submits to the non-exclusive
jurisdiction of a court of competent civil jurisdiction sitting in the City and
County of New York, New York for the purposes of any suit, civil action or other
proceeding arising out of, in connection with or with respect to this Agreement,
the subject matter hereof, the performance or non-performance of any obligation
hereunder, or any of the Transactions (collectively, "SUIT") and (ii) waives and
agrees not to assert by way of motion, as a defense or otherwise in any such
Suit, any claim that it is not subject to the jurisdiction of the above courts,
that
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such Suit is brought in an inconvenient forum, or that the venue of such Suit is
improper.
13.8 NO BENEFIT TO OTHERS. The representations, warranties, covenants
and agreements contained in this Agreement are for the sole benefit of the
parties hereto and their permitted successors and assigns, and they shall not be
construed as conferring any rights on any other persons.
13.9 INTERPRETATION. Unless the context of this Agreement clearly
requires otherwise, (a) references to the plural include the singular, the
singular the plural, the part the whole, (b) references to any gender include
all genders, (c) "or" has the inclusive meaning frequently identified with the
phrase "and/or," (d) "including" has the inclusive meaning frequently identified
with the phrase "but not limited to," and (e) references to "hereunder" or
"herein" relate to this Agreement. The section and other headings contained in
this Agreement are for reference purposes only and shall not control or affect
the construction of this Agreement or the interpretation thereof in any respect.
Section, subsection, schedule and exhibit references are to this Agreement
unless otherwise specified. Each accounting term used herein that is not
specifically defined herein shall have the meaning given to it under GAAP. Any
reference to a Party's being satisfied with any particular item or to a Party's
determination of a particular item means that such standard will not be achieved
unless such Party shall be satisfied or shall have made such determination in
its sole or complete discretion.
13.10 DISCLOSURE SCHEDULE AND SCHEDULES. The Disclosure Schedule and
all Schedules referred to herein are intended to be and hereby are specifically
made a part of this Agreement. Matters reflected in the Disclosure Schedule are
not necessarily limited to matters required by this Agreement to be reflected
therein and the inclusion of such matters shall not be deemed an admission that
such matters were required to be reflected in the Disclosure Schedule. Such
additional matters are set forth for informational purposes only and do not
necessarily include other matters of a similar nature.
13.11 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be binding as of the date first written above,
and all of which shall constitute one and the same instrument. Each such copy
shall be deemed an original, and it shall not be necessary in making proof of
this Agreement to produce or account for more than one such counterpart.
<PAGE> 73
-64-
[SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT]
IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto as of the day and year first written above.
Buyer: DAY INTERNATIONAL GROUP, INC.
By: /s/ Dennis R. Wolters
--------------------------------
Name: Dennis R. Wolters
Title: President & CEO
Stockholders: /s/ Vincent Von Zwehl
--------------------------------
VINCENT VON ZWEHL
/s/ Joseph Von Zwehl
--------------------------------
JOSEPH VON ZWEHL
<PAGE> 74
-65-
[SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT]
/s/ Lisa Klingenberg
------------------------------------
LISA KLINGENBERG
/s/ Joanne Von Zwehl-Dempsey
------------------------------------
JOANNE VON ZWEHL-DEMPSEY
/s/ Christopher Von Zwehl
------------------------------------
CHRISTOPHER VON ZWEHL
/s/ Jeanine Johnsen
------------------------------------
JEANINE JOHNSEN
/s/ Mark Von Zwehl
------------------------------------
MARK VON ZWEHL
/s/ Sean Von Zwehl
------------------------------------
SEAN VON ZWEHL
/s/ Veronica Von Zwehl
------------------------------------
VERONICA VON ZWEHL
/s/ Paul von Zwehl
------------------------------------
PAUL VON ZWEHL
/s/ Matthew Von Zwehl
------------------------------------
MATTHEW VON ZWEHL
/s/ Daniel Von Zwehl
------------------------------------
DANIEL VON ZWEHL
<PAGE> 75
-66-
/s/ John Vincent Von Zwehl
------------------------------------
JOHN VINCENT VON ZWEHL
[SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT]
/s/ Allan Moroknek
------------------------------------
ALLAN MOROKNEK, INDIVIDUALLY
AND AS TRUSTEE
/s/ Michael Moroknek
------------------------------------
MICHAEL MOROKNEK, INDIVIDUALLY
AND AS TRUSTEE
-67-
<PAGE> 1
Exhibit 2.2
AMENDMENT NO. 1
TO
STOCK PURCHASE AGREEMENT
THIS AMENDMENT NO. 1 TO STOCK PURCHASE AGREEMENT (the "First
Amendment") is made as of the 19th day of October, 1999, among Day International
Group, Inc., a Delaware corporation ("Buyer") and the Stockholders Identified on
the Signature Pages to the Original Agreement (as hereinafter defined)
(collectively, the "Stockholders"). Terms used herein that are not defined
herein shall have the meanings ascribed thereto in the Original Agreement.
WHEREAS, the parties hereto entered into a Stock Purchase Agreement,
dated as of August 13, 1999 (the "Original Agreement");
WHEREAS, Buyer has asserted certain breaches of representations,
warranties and covenants under the Agreement resulting from (i) the alleged
failure of certain members of the Subject Company Group to reflect a certain
real property lease agreement dated November 29, 1993 (the "Lease") between
HALOS Grundstucks-Vermietungsgesellschaft GmbH & Co. Objekt Luma KG and Varn
Products Co. GmbH, as amended, on the Financial Statements as either debt or a
capital lease, and (ii) the alleged failure of the Stockholders and certain
members of the Subject Company Group to characterize the Lease as debt (and not
an operating lease) on the Disclosure Schedule (collectively, the "Alleged
Breaches");
WHEREAS, the Stockholders dispute the Alleged Breaches;
WHEREAS, the parties have agreed that, in consideration for a reduction
in the Consideration, Buyer shall waive any rights to indemnification under the
Original Agreement for any of the Alleged Breaches; and
WHEREAS, the parties acknowledge that JV TEX Realty Corp., a Texas
corporation and a Subject Company, is indebted to J V N J Realty Corp., a New
Jersey corporation that is not a Subject Company ("JVNJ"), in the aggregate
amount of $556,000 (the "JVTEX Debt"); and
WHEREAS, the parties have agreed that, in consideration for a reduction
in the Consideration, Buyer shall purchase the JVTEX Debt;
WHEREAS, the Stockholders wish to provide for payments of $150,500 and
$217,700 to be made to the individuals and in the amounts set forth on Annex 1
hereto,
<PAGE> 2
-2-
respectively, after the Closing, both such payments to be made by Varn Products
Co. (the "Bonus Payments");
WHEREAS, Buyer has agreed to cause such Bonus Payments to be made by
Varn Products Co. subsequent to the Closing and the Stockholders have agreed to
fund a portion of such Bonus Payments by leaving $293,200 in cash in Varn at
Closing in addition to any amounts set forth on Schedule 1 to the Original
Agreement, and Buyer has agreed to fund a portion of such Bonus Payments by
contributing $75,000;
WHEREAS, the parties hereto desire to amend the Original Agreement, as
described below, by entering into this First Amendment.
NOW, THEREFORE, in consideration of the promises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
1. The Background section is hereby deleted in its entirety and there
is inserted in lieu thereof the following:
This Agreement sets forth the terms and conditions under which Buyer or
its permitted assigns will acquire all of the issued and outstanding
stock of, Varnco Holdings Inc., a New Jersey corporation ("VARNCO"),
Varn Holdings PLC, a company incorporated under the laws of England
("VARN HOLDINGS"), Varn Aegis Co. GmbH Hautschutzsysteme, a company
incorporated under the laws of Germany ("VARN AEGIS"), Varn Products
Co., Inc., a Texas corporation ("VARN PRODUCTS CO."), JV TEX Realty
Corp., a Texas corporation ("JVTEX"), Graph Tech, Inc., an Ohio
corporation ("GRAPH TECH," and collectively with Varnco, Varn Holdings,
Varn Aegis, Varn Products Co. and JVTEX, the "SUBJECT COMPANIES") from
the Stockholders, and the Subject Companies will become wholly owned
Subsidiaries of Buyer.
2. The first sentence of Section 2.1 is hereby deleted and there is
inserted in lieu thereof the following:
Subject to the terms and conditions contained in this Agreement, on the
Closing Date, the Stockholders shall sell, assign, transfer and deliver
to Buyer or its designated Subsidiaries, and Buyer or its designated
Subsidiaries shall purchase from the Stockholders, all of the Shares of
the Subject Companies in exchange for an aggregate purchase price of
U.S. $59,300,000, PLUS an amount equal to the cash
<PAGE> 3
-3-
held by the Subject Companies and their Subsidiaries set forth on
SCHEDULE 1, PLUS the Earn-Out Payments, MINUS an amount equal to sum of
the German Debt and the JVTEX Debt, (such amounts, in the aggregate,
the "CONSIDERATION").
3. Section 6.8(a) is hereby deleted and there is inserted in lieu
thereof the following:
(a) On or prior to the Closing Date, the Stockholders or the Subject
Companies shall pay all amounts owing by the Subject Companies with
respect to the indebtedness for borrowed money other than (i) any
indebtedness for borrowed money owed to one Subject Company from any
other Subject Company, (ii) the German Debt, or (iii) the JVTEX Debt.
4. Section 7.12 is hereby amended by adding the following sentence at
the end thereof:
On the Closing Date, Varn Products Co. shall have at least $293,200 of
cash on hand, which shall be in addition to any amounts set forth on
Schedule 1 hereto. In addition to the $293,200 of cash on hand in Varn
Products Co., Buyer shall contribute $75,000 towards the Bonus Payments
payable on April 1, 2000 (as set forth on Annex 1 to the First
Amendment to this Agreement). Varn Products Co. shall distribute the
Bonus Payments as set forth on Annex 1 to the First Amendment to this
Agreement, provided that the individual allocations (but not the
aggegate amount of the Bonus Payments) may be reallocated among the
empoyees set forth on Annex 1 to the First Amendment to this Agreement
in a reasonable manner by Buyer following consultation with the
Sellers' Represenatives.
5. The following is hereby added at the end of Section 8:
8.10 JVTEX DEBT. Buyer shall have purchased the JVTEX Debt by
making a cash payment in the amount of $556,000 to JVNJ.
6. Section 10.1 is hereby amended by deleting Section 10.1(a) in its
entirety and adding in lieu thereof the following:
(a) Subject to the other provisions of this Section 10, from and after
the Closing Date, each Stockholder other than Allan Moroknek,
individually (but not in his capacity as trustee) and Michael Moroknek,
individually (but not in his capacity as trustee) shall indemnify and
hold harmless Buyer, its Affiliates, each member
<PAGE> 4
-4-
of the Subject Company Group and their respective officers, directors,
employees, agents and representatives (each a "BUYER INDEMNIFIED
PARTY") for one hundred percent (100%) of the first Three Million
Dollars (U.S. $3,000,000) of, and ninety percent (90%) of any
additional, liabilities, claims, demands, judgments, losses, costs,
damages or expenses whatsoever (including reasonable attorneys',
consultants' and other reasonable professional fees and disbursements
of every kind, nature and description incurred in connection therewith,
but excluding any consequential or punitive damages other than
consequential or punitive damages in connection with the litigation
matters set forth on SCHEDULE 4.11), net of any insurance proceeds
available for the payment thereof (collectively, "DAMAGES"), directly
or proximately caused by, resulting from in connection with or pursuant
to (i) any breach of any of the respective representations and
warranties of any Stockholder contained in this Agreement or of Iona
College Charitable Gift Fund contained in the Letter Agreement dated of
even date herewith between Iona College Charitable Gift Fund and Buyer,
(ii) any breach of any of the covenants or agreements of any
Stockholder contained in this Agreement, (iii) the business, operations
or properties of any Unrelated Company, (iv) any Unrelated Liability
and (v) environmental conditions existing on, under, above, about or
emanating from the Hayward Facility, including the soil, air and
groundwater, (vi) the ERISA indemnity under Section 10.8 or any
sanctions or penalties imposed by the IRS in connection with an IRS
Audit (except to the extent any such sanctions or penalties relate to
any indemnification provided under Section 10.8) and (vii) the Denis
Dunlea Deferred Compensation Trust, dated May 4, 1998, between Varn
Products Co., Inc. and Kathleen Dunlea, except for any Damages arising
from the insolvency of Varn Products Co., Inc. Notwithstanding the
foregoing, any indemnification for any claim arising from any
inaccuracy of any representation or warranty set forth in Section
4.6(b) or related to or arising from clauses (iii), (iv), (v), (vi) or
(vii) of this Section 10.1(a) shall be for one hundred percent (100%)
regardless of whether any such claim exceeds Three Million Dollars
(U.S. $3,000,000).
7. Article 10 is hereby amended by adding thereto a new Section 10.8 as
follows:
10.8 ERISA INDEMNIFICATION. From and after the Closing Date,
each Stockholder other than Allan Moroknek, individually (but
not in his capacity as trustee) and Michael Moroknek,
individually (but not in his capacity as trustee) shall
indemnify and hold harmless each Buyer Indemnified Party from
and against any Damages, including, but not
<PAGE> 5
-5-
limited to, corrective contributions and earnings thereon, any
excise taxes under the Code, IRS penalties and attorney and
consulting fees that may be incurred with respect to the
correction of any form or operational defect set forth on
Schedule 4.15(b) and (c) of the Disclosure Schedule relating
to the Varn/Graph-Tech Savings and Investment Plan (the "VARN
401(k) PLAN") if such Damages are caused by such a form or
operational defect that occurred (i) prior to the Closing Date
and (ii) in connection with a Subject Company Group member's
sponsorship and maintenance of the Varn 401(k) Plan; provided,
however, that Buyer shall commence with the IRS a voluntary
disclosure and correction of the form or operational defects
set forth on Schedule 4.15(b) and (c) of the Disclosure
Schedules, in accordance with Revenue Procedure 98-22 (or any
successor revenue procedure thereto) or otherwise commence
correction of such defects within the period ending on the
first anniversary of the Closing, and Buyer shall correct such
defects on the basis which Buyer is advised by an independent,
nationally recognized pension consulting firm selected by
Buyer is likely to be the most cost efficient correction
methodology available under Revenue Procedure 98-22 or
otherwise as such consultant advises Buyer is likely to
minimize the indemnification and hold harmless protection
provided hereunder by the Stockholders, and the Buyer shall
reasonably keep the Sellers' Representatives appraised of such
correction procedure.
8. Each Buyer Indemnified Party hereby waives any and all rights and
claims under Section 10 of the Original Agreement, or otherwise, arising out of
or relating to the Alleged Breaches.
9. This First Amendment is executed, and shall be considered, as an
amendment to the Original Agreement and shall form a part thereof, and the
provisions of the Original Agreement, as amended by this First Amendment, are
hereby ratified and confirmed in all respects.
10. This First Amendment may be executed in any number of counterparts,
each of which shall be deemed an original, and all of which taken together shall
constitute but one and the same instrument. This First Amendment shall become
binding only when each party hereto has executed and delivered to the other
parties one or more counterparts.
<PAGE> 6
-6-
[SIGNATURE PAGE TO AMENDMENT NO. 1
TO STOCK PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the parties hereto have executed this First
Amendment or have caused this First Amendment to be duly executed by their
respective authorized officers as of the day and year first above written.
Buyer: DAY INTERNATIONAL GROUP, INC.
By: /s/ Dennis R. Wolters
--------------------------------
Name: Dennis R. Wolters
Title: President & CEO
Stockholders: /s/ Vincent Von Zwehl
--------------------------------
VINCENT VON ZWEHL
/s/ Joseph Von Zwehl
--------------------------------
JOSEPH VON ZWEHL
/s/ Lisa Klingenberg
--------------------------------
LISA KLINGENBERG
<PAGE> 7
-7-
[SIGNATURE PAGE TO AMENDMENT NO. 1
TO STOCK PURCHASE AGREEMENT]
/s/ Joanne Von Zwehl-Dempsey
--------------------------------
JOANNE VON ZWEHL-DEMPSEY
/s/ Christopher Von Zwehl
--------------------------------
CHRISTOPHER VON ZWEHL
/s/ Jeanine Johnsen
--------------------------------
JEANINE JOHNSEN
/s/ Mark Von Zwehl
--------------------------------
MARK VON ZWEHL
/s/ Sean Von Zwehl
--------------------------------
SEAN VON ZWEHL
/s/ Veronica Von Zwehl
--------------------------------
VERONICA VON ZWEHL
/s/ Paul von Zwehl
--------------------------------
PAUL VON ZWEHL
/s/ Matthew Von Zwehl
--------------------------------
MATTHEW VON ZWEHL
/s/ Daniel Von Zwehl
--------------------------------
DANIEL VON ZWEHL
<PAGE> 8
-8-
/s/ John Vincent Von Zwehl
--------------------------------
JOHN VINCENT VON ZWEHL
[SIGNATURE PAGE TO AMENDMENT NO. 1
TO STOCK PURCHASE AGREEMENT]
/s/ Allan Moroknek
--------------------------------
ALLAN MOROKNEK, INDIVIDUALLY
AND AS TRUSTEE
/s/ Michael Moroknek
--------------------------------
MICHAEL MOROKNEK, INDIVIDUALLY
AND AS TRUSTEE
<PAGE> 9
ANNEX 1
BONUS PAYMENTS TO BE PAID ON OR BEFORE OCTOBER 28, 1999
Omitted. The Company agrees to furnish supplementally a copy of this Annex to
the Securities and Exchange Commission upon request.
<PAGE> 1
Exhibit 3.1
CERTIFICATE OF AMENDMENT OF
THE CERTIFICATE OF INCORPORATION
OF
DAY INTERNATIONAL GROUP, INC.
(Adopted in accordance with the provisions of Section 242
of the General Corporation Law of the State of Delaware)
Day International Group, Inc., a corporation organized and existing
under the laws of the State of Delaware (the "Corporation"), does hereby
certify:
1. That the Board of Directors of the Corporation by unanimous
written consent of its members, filed with the minutes of the Board, adopted a
resolution proposing and declaring advisable that the portion of section A of
Article Fourth of the Certificate of Incorporation prior to subsection "a.
Common Stock" thereof be amended so that as amended such portion shall read in
its entirety as follows:
"FOURTH:
A. AUTHORIZED SHARES
-----------------
The total number of shares of capital stock which the
Corporation has authority to issue is 855,000 shares consisting of:
(1) 500,000 shares of a class of Cumulative Preference Stock,
par value $.01 per share (the "Cumulative Preference Stock"); and
(2) 105,000 shares of Preferred Stock, par value $.01 per share
(the "Preferred Stock"); and
(3) 200,000 shares of Class A Voting Common Stock, par value
$.01 per share (the "Class A Common Stock"), and
(4) 50,000 shares of Class B Non-Voting Common Stock, par value
$.01 per share (the "Class B Common Stock" and, together with the
Class A Common Stock, the "Common Stock").
The number of authorized shares of the class of Cumulative
Preference Stock may be increased or decreased, but not below the
number of shares thereof outstanding, by the affirmative vote of the
holders of a majority of the stock of the Corporation entitled to
vote irrespective of subsection (b)(2) of Section 242 of the General
Corporation Law of State of Delaware.
<PAGE> 2
2. That the Board of Directors of the Corporation by unanimous
written consent of its members, filed with the minutes of the Board, adopted a
resolution proposing and declaring advisable that a new subsection "c" be added
at the end of section A of Article Fourth of the Certificate of Incorporation,
to read in its entirety as follows:
c. CUMULATIVE PREFERENCE STOCK
---------------------------
Shares of Cumulative Preference Stock may be issued from time to
time in one or more series. Unless consented to by the affirmative
vote of the holders of a majority of the Preferred Stock, Cumulative
Preference Stock shall, in respect to dividend distributions and
distributions upon the liquidation, winding-up and dissolution of the
Company, rank junior to the Preferred Stock. In all other respects,
the Board of Directors of the Corporation is hereby authorized to
determine and alter all rights, preferences and privileges and
qualifications, limitations and restrictions thereof (including,
without limitation, voting rights and the limitation and exclusion
thereof) granted to or imposed upon any wholly unissued series of
Cumulative Preference Stock and the number of shares constituting any
such series and the designation thereof, and to increase or decrease
(but not below the number of shares of such series the outstanding)
the number of shares of any series subsequent to the issue of shares
of that series the outstanding. In the event that the number of any
shares is so decreased, the shares constituting such reduction shall
resume the status which such shares had prior to the adoption of the
resolution originally fixing the number of shares of such series."
3. That the stockholders of the Corporation have adopted a resolution
authorizing the amendments to the Certificate of Incorporation herein above set
forth.
4. That the aforesaid amendment was duly adopted in accordance with
the applicable provisions of Section 242 of the General Corporation Law of the
State of Delaware.
IN WITNESS WHEREOF, DAY INTERNATIONAL GROUP, INC. has caused
this instrument to be executed for and on its behalf by its President thereunto
duly authorized, and attested by the Vice President, this 15th day of October,
1999.
DAY INTERNATIONAL GROUP, INC.
By: /s/ Dennis R. Wolters
----------------------------------------
Name: Dennis R. Wolters
Title: President and Chief Executive Officer
ATTEST:
/s/ David B. Freimuth
- -----------------------------
Name: David B. Freimuth
Title: Vice President
<PAGE> 1
Exhibit 4.1
DAY INTERNATIONAL GROUP, INC.
October 15, 1999
CERTIFICATE OF DESIGNATION OF THE POWERS, PREFERENCES AND
RELATIVE, PARTICIPATING, OPTIONAL AND OTHER SPECIAL RIGHTS OF
18% CONVERTIBLE CUMULATIVE PREFERENCE STOCK DUE 2010 AND
QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS THEREOF
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
Day International Group, Inc. (the "COMPANY"), a corporation
organized and existing under the General Corporation Law of the State of
Delaware, does hereby certify that, pursuant to authority conferred upon the
board of directors of the Company (the "BOARD OF DIRECTORS") by its Certificate
of Incorporation, as amended (hereinafter referred to as the "CERTIFICATE OF
INCORPORATION"), and pursuant to the provisions of Section 151 of the General
Corporation Law of the State of Delaware, said Board of Directors, by unanimous
written consent dated October 13, 1999, duly approved and adopted the following
resolution (the "RESOLUTION"):
RESOLVED, that, pursuant to the authority vested in the Board of
Directors by the Company's Certificate of Incorporation, the Board of
Directors does hereby create, authorize and provide for the issue of 18%
Convertible Cumulative Preference Stock, par value $0.01 per share, with a
liquidation preference of $1,000.00 per share, consisting of up to 38,500
shares, having the designations, preferences, relative, participating,
optional and other special rights and the qualifications, limitations and
restrictions thereof that are set forth in the Certificate of
Incorporation and in this Resolution as follows:
<PAGE> 2
(a) Designation. There is hereby created out of the authorized and
unissued shares of Cumulative Preference Stock of the Company a series of
Cumulative Preference Stock designated as the "18% Convertible Cumulative
Preference Stock" (the "CONVERTIBLE PREFERENCE STOCK"). The number of shares
constituting such series shall be 38,500 shares of Convertible Preference Stock.
The liquidation preference of the Convertible Preference Stock shall initially
be $1,000.00 per share (the "LIQUIDATION PREFERENCE "), and may be increased
time to time as provided in paragraph (c)(i).
(b) Rank. The Convertible Preference Stock shall, with respect to
dividend distributions and distributions upon the liquidation, winding-up and
dissolution of the Company, rank (i) junior to the Company's 12 1/4%
Exchangeable Preferred Stock (the "EXCHANGEABLE PREFERRED STOCK"), (ii) senior
to all classes of common stock of the Company (the "COMMON STOCK") and each
other class of Capital Stock or series of Preferred Stock of the Company
hereafter created by the Board of Directors the terms of which do not expressly
provide that it ranks on a parity with the Convertible Preference Stock as to
dividend distributions and distributions upon the liquidation, winding-up and
dissolution of the Company (collectively referred to with the Common Stock of
the Company as "JUNIOR SECURITIES"), and (iii) on a parity with any class of
Capital Stock or series of Preferred Stock hereafter created by the Board of
Directors, the terms of which expressly provide that such class or series shall
rank on a parity with the Convertible Preference Stock as to dividend
distributions and distributions upon the liquidation, winding-up and dissolution
of the Company (collectively referred to as "PARITY SECURITIES"); provided that
any such Parity Securities in clause (iii) above that were not approved by the
Holders in accordance with paragraph (f)(ii)(A) hereof (to the extent such
approval is required) shall be deemed to be Junior Securities and not Parity
Securities.
(c) Dividends.
(i) Beginning on the Issue Date, the Holders of the outstanding
shares of Convertible Preference Stock shall be entitled to receive, when, as
and if declared by the Board of Directors, out of funds legally available
therefor, (A) dividends on each share of Convertible Preference Stock, at a rate
per annum equal to 18% of the Liquidation Preference per share of the
Convertible Preference Stock plus (B) a fraction (the numerator of which is
equal to 7,348.7 shares of Common Stock (equaling 24% of the Company's issued
and outstanding Common Stock as of the Issue Date), as adjusted (in the same
manner as adjustments are made under Section 6.1 of the Future Warrants) for
stock splits, stock dividends, issuances of capital stock of the Company or any
securities of the Company convertible into capital stock to persons other than
the Company's directors, officers, or employees for a consideration per share
less than the then applicable Fair Market Value (as defined in the Stockholders
Agreement) and similar transactions affecting the Common Stock occurring after
<PAGE> 3
the Issue Date, and the denominator of which is equal to the total of all issued
and outstanding shares of the Company's Common Stock as of the Dividend Date) of
the aggregate value of each dividend declared and paid on the Company's Common
Stock. All dividends required pursuant to paragraph (c)(i)(A) above shall be
cumulative, whether or not earned or declared, on a daily basis from the Issue
Date, shall be payable quarterly in arrears on each Dividend Payment Date,
commencing on the first Dividend Payment Date after the Issue Date, and, if not
paid quarterly in cash as aforesaid, shall compound annually on each anniversary
of the Issue Date by being added to the Liquidation Preference of each share of
the Convertible Preference Stock (and after such compounding they shall no
longer be payable as dividends). Any dividend required pursuant to paragraph
(c)(i)(B) above shall be declared and paid at the same time as each dividend on
the Company's Common Stock is declared and paid. Each distribution in the form
of a dividend shall be payable to Holders of record as they appear on the stock
register of the Company on such record dates, not less than 10 nor more than 60
days preceding the related Dividend Payment Date, as shall be fixed by the Board
of Directors. Dividends shall cease to accumulate in respect of shares of the
Convertible Preference Stock on the date of their redemption unless the Company
shall have failed to pay the relevant redemption price on the date fixed for
redemption.
(ii) All dividends paid with respect to shares of the Convertible
Preference Stock pursuant to paragraph (c)(i) shall be paid pro rata to the
Holders entitled thereto.
(iii) Nothing herein contained shall in any way or under any
circumstances be construed or deemed to require the Board of Directors to
declare, or the Company to pay or set apart for payment, any dividends on shares
of the Convertible Preference Stock at any time except as required pursuant to
paragraph (c)(i)(B) hereof.
(iv) Dividends on account of arrears for any past Dividend Period and
dividends in connection with any optional redemption pursuant to paragraph
(e)(i) may be declared and paid at any time, without reference to any regular
Dividend Payment Date, to Holders of record on such date, not more than 45 days
prior to the payment thereof, as may be fixed by the Board of Directors.
(v) No full dividends shall be declared by the Board of Directors or
paid or funds set apart for payment of dividends by the Company on any Parity
Securities for any period unless full cumulative dividends shall have been or
contemporaneously are declared, and paid in full or declared, and (in the case
of dividends payable in cash) a sum in cash set apart sufficient for such
payment, on the Convertible Preference Stock for all Dividend Periods
terminating on or prior to the date of payment of such full dividends on such
Parity Securities. If any dividends are not paid in full, as aforesaid, upon the
shares of the Convertible Preference Stock and any other Parity Securities, all
dividends declared upon shares of the Convertible Preference Stock and any other
Parity Securities shall be declared pro rata so that the amount of dividends
declared per share on the Convertible Preference Stock and such Parity
Securities shall in all cases bear to each other the same ratio that accrued
dividends per share on the Convertible Preference Stock and such Parity
Securities bear to each other.
<PAGE> 4
(vi) (A) Holders of shares of the Convertible Preference Stock shall
be entitled to receive the dividends provided for in paragraph (c)(i) hereof in
preference to and in priority over any dividends upon any of the Junior
Securities.
(B) So long as any shares of Convertible Preference Stock are
outstanding, the Company shall not declare, pay or set apart for payment any
dividend on any of the Junior Securities or make any payment on account of, or
set apart for payment money for a sinking or other similar fund for, the
purchase, redemption or other retirement of, any of the Junior Securities or any
warrants, rights, calls or options exercisable for or convertible into any of
the Junior Securities, or make any distribution in respect thereof, either
directly or indirectly, and whether in cash, obligations or shares of the
Company or other property (other than dividends on Junior Securities paid in
additional shares of Junior Securities), and shall not permit any corporation or
other entity directly or indirectly controlled by the Company to purchase or
redeem any of the Junior Securities or any such warrants, rights, calls or
options unless full cumulative dividends determined in accordance herewith have
been paid in full on the Convertible Preference Stock.
(C) So long as any shares of Convertible Preference Stock are
outstanding, the Company shall not make any payment on account of, or set apart
for payment money for a sinking or other similar fund for, the purchase,
redemption or other retirement of, any of the Parity Securities or any warrants,
rights, calls or options exercisable for or convertible into any of the Parity
Securities, and shall not permit any corporation or other entity directly or
indirectly controlled by the Company to purchase or redeem any of the Parity
Securities or any such warrants, rights calls or options unless the dividends
determined in accordance herewith on the Convertible Preference Stock have been
paid in full.
(vii) Dividends payable on shares of the Convertible Preference Stock
pursuant to paragraph (c)(i)(A) hereof for any period less than a year shall be
computed on the basis of a 360-day year of twelve 30-day months and the actual
number of days elapsed in the period for which payable. If any Dividend Payment
Date occurs on a day that is not a Business Day, any accrued dividends otherwise
payable on such Dividend Payment Date shall be paid on the next succeeding
Business Day.
(d) Liquidation Preference.
(i) Upon any voluntary or involuntary liquidation, dissolution or
winding-up of the affairs of the Company, the Holders of shares of Convertible
Preference Stock then outstanding shall be entitled to be paid, out of the
assets of the Company available for distribution to its stockholders, FIRST,
before any payment shall be made or any assets distributed to the holders of any
of the Junior Securities, including, without limitation, Common Stock of the
Company, the sum of (I) the Liquidation Preference per share of Convertible
Preference Stock, plus an amount in cash equal to all accumulated and unpaid
dividends thereon to the date fixed for liquidation, dissolution or winding-up
(including an amount equal to a prorated dividend for the period from the last
Dividend Payment Date to the date fixed for liquidation, dissolution or
winding-up) PLUS (II) the
<PAGE> 5
Early Redemption Premium in the event that such liquidation, dissolution or
winding up of the affairs of the Company occurs prior to September 30, 2002, and
SECOND simultaneously with payments made or assets distributed to the Holders of
Common Stock, any amount by which the Base Redemption Amount, determined as of
the date of such liquidation, dissolution or winding-up, exceeds the amount
distributed in priority under clause FIRST. Except as provided in the preceding
sentence, Holders of shares of Convertible Preference Stock shall not be
entitled to any distribution in the event of liquidation, dissolution or
winding-up of the affairs of the Company. If, upon any voluntary or involuntary
liquidation, dissolution or winding-up of the Company, the assets of the Company
are not sufficient to pay in full the Liquidation Preference payable to the
Holders of outstanding shares of the Convertible Preference Stock and the
aggregate Liquidation Preference payable to the holders of the outstanding
shares of all Parity Securities, then the holders of all such shares shall share
equally and ratably in such distribution of assets of the Company in proportion
to the full liquidation preferences plus accumulated and unpaid dividends which
would be payable on such distribution if the amount to which the Holders of
outstanding shares of Convertible Preference Stock and the holders of
outstanding shares of all Parity Securities are entitled were paid such amounts
in full.
(ii) After payment of the full amount of the aggregate Liquidation
Preference and all accumulated and unpaid dividends to which they are entitled,
the Holders of shares of the Convertible Preference Stock shall not be entitled
to any further participation in any distribution of assets of the Company.
(iii) For the purposes of this paragraph (d), neither the sale,
conveyance, exchange or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all of the property or assets of the
Company nor the consolidation or merger of the Company with or into one or more
corporations shall be deemed to be a liquidation, dissolution or winding-up of
the affairs of the Company (unless such sale, conveyance, exchange or transfer
is in connection with a dissolution or winding-up of the business of the
Company).
(e) Redemption.
(i) Optional Redemption. (A) The Company may (subject to contractual
and other restrictions with respect thereto and the legal availability of funds
therefor), at the option of the Company, redeem at any time on or after
September 30, 2002, from any source of funds legally available therefor, in
whole or in part, in the manner provided in paragraph (e)(iii) hereof, any or
all of the shares of the Convertible Preference Stock, for consideration equal
to the Base Redemption Amount.
(B) In addition, at any time and from time to time prior to September
30, 2002, the Company may (subject to contractual and other restrictions with
respect thereto and the legal availability of funds therefor) redeem, in the
manner provided in paragraph (e)(iii) hereof, shares of the Convertible
Preference Stock, in whole or in part, at the option of the Company, for
consideration equal to the Base Redemption Amount plus,
<PAGE> 6
without duplication, a premium equal to the amount (if any) by which the amount
described in clause (i) of the Definition of Base Redemption Amount that would
be payable in connection with a redemption occurring on September 30, 2002
(assuming that no dividends were paid on the Convertible Preference Stock
between the Redemption Date and September 30, 2002) exceeds the Base Redemption
Amount calculated as of the Redemption Date (the "EARLY REDEMPTION PREMIUM").
(C) In the event of a redemption of only a portion of the then
outstanding shares of the Convertible Preference Stock, the Company shall effect
such redemption as it determines, pro rata according to the number of shares
held by each Holder of the Convertible Preference Stock, except that the Company
may redeem such shares held by any Holders of fewer than 100 shares (or shares
held by Holders who would hold less than 100 shares as a result of such
redemption), without regard to any pro rata redemption requirement.
(ii) Mandatory Redemption. On June 30, 2010, the Company shall redeem
(subject to the legal availability of funds therefor) from any source of funds
legally available therefor, in the manner provided in paragraph (e)(iii) hereof,
all of the shares of the Convertible Preference Stock then outstanding for
consideration equal to the Base Redemption Amount.
(iii) Procedures for Redemption. (A) At least 15 days prior to the
date fixed for any redemption of the Convertible Preference Stock, written
notice (the "REDEMPTION NOTICE") shall be given by certified first-class mail,
postage prepaid, to each Holder of record on the record date fixed for such
redemption of the Convertible Preference Stock at such Holder's address as the
same appears on the stock register of the Company, provided that no failure to
give such notice nor any deficiency therein shall affect the validity of the
procedure for the redemption of any shares of Convertible Preference Stock to be
redeemed except as to the Holder or Holders to whom the Company has failed to
give said notice or except as to the Holder or Holders whose notice was
defective. The Redemption Notice shall state:
(1) whether the redemption is pursuant to paragraph (e)(i)(A),
(e)(i)(B) or (e)(ii) hereof;
(2) the Base Redemption Amount, the Early Redemption Premium, if
applicable, and the Per-Share Redemption Amount;
(3) whether all or less than all the outstanding shares of the
Convertible Preference Stock are to be redeemed and the total
number of shares of the Convertible Preference Stock being
redeemed;
(4) the number of shares of Convertible Preference Stock held, as of
the appropriate record date, by the Holder that the Company
intends to redeem;
(5) the earliest date on which redemption may occur;
<PAGE> 7
(6) that the Holder is to surrender to the Company, at the place or
places where certificates for shares of Convertible Preference
Stock are to be surrendered for redemption, in the manner and at
the price designated, the certificate or certificates
representing the shares of Convertible Preference Stock to be
redeemed;
(7) that dividends on the shares of the Convertible Preference Stock
to be redeemed shall cease to accrue on such Redemption Date
unless the Company defaults in the payment of the Redemption
Price; and
(8) whether the Company is making a Conversion Election pursuant to
paragraph (g) hereof.
(B) Each Holder of Convertible Preference Stock shall surrender the
certificate or certificates representing such shares of Convertible Preference
Stock to the Company, duly endorsed, in the manner and at the place designated
in the Redemption Notice, and on the Redemption Date the full Redemption Price
for such shares shall be payable in cash to the Person whose name appears on
such surrendered certificate or certificates as the owner thereof, and each
surrendered certificate shall be canceled and retired. In the event that less
than all of the shares represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares and all of the
rights appertaining to such unredeemed shares.
(C) Unless the Company defaults in the payment in full of the
Redemption Price, dividends on the portion of the Convertible Preference Stock
called for redemption shall cease to accumulate on the Redemption Date, and the
Holders of such redemption shares shall cease to have any further rights with
respect thereto on the Redemption Date, other than the right to receive the
Redemption Price without interest.
(f) Voting Rights.
(i) The Holders of shares of the Convertible Preference Stock, except
as otherwise required under the laws of the State of Delaware or as set forth in
this paragraph (f), shall be entitled and permitted to vote as a single class
with the holders of the Common Stock on any matter required or permitted to be
voted upon by the stockholders of the Company as if the shares of the
Convertible Preference Stock had been converted into the Common Stock pursuant
to paragraph (g) hereof as of the date immediately prior to the record date for
any such vote.
(ii) (A) So long as any shares of the Convertible Preference Stock
are outstanding, the Company shall not authorize the issuance of any class of
Parity Securities without the affirmative vote or consent of Holders of at least
50% of the then outstanding shares of Convertible Preference Stock, voting or
consenting, as the case may be, separately as one class, given in person or by
proxy, either in writing or by resolution adopted at an annual or special
meeting, except that without the approval of Holders of
<PAGE> 8
the Convertible Preference Stock, the Company may authorize or issue shares of
Parity Securities in exchange for, or the proceeds of which are used to redeem
or repurchase, all shares of Convertible Preference Stock or any other Parity
Securities then outstanding.
(B) So long as any shares of the Convertible Preference Stock are
outstanding, the Company shall not amend this Certificate of Designation so as
to affect the specified rights, preferences, privileges or voting rights of
Holders of shares of Convertible Preference Stock or, except as provided in
paragraph (f)(ii)(A) above, to authorize the issuance of any additional shares
of Convertible Preference Stock without the affirmative vote or consent of
Holders of a least 50% of the outstanding shares of Convertible Preference
Stock, voting or consenting, as the case may be, separately as one class, given
in person or by proxy, either in writing or by resolution adopted at an annual
or special meeting.
(C) Except as set forth in paragraph (f)(ii)(A) above, (1) the
creation, authorization or issuance of any shares of any Junior Securities or
Parity Securities, (2) the decrease in the amount of authorized capital stock of
any class, including the Convertible Preference Stock, or (3) the increase in
the amount of authorized capital stock of any class of Junior Securities shall
not require the consent of Holders of Convertible Preference Stock and shall
not, unless not complying with paragraph (f)(ii)(A), be deemed to affect
adversely the rights, preferences, privileges or voting rights of Holders of
shares of Convertible Preference Stock.
(iii) So long as any shares of Convertible Preference Stock are
outstanding, the Holders of a majority of the outstanding Convertible Preference
Shares shall have the right to elect, voting separately as one class, one member
of the Company's Board of Directors at a meeting therefor called on or shortly
before the Issue Date and at every subsequent meeting at which the terms of
office of the Directors so elected by the Holders of the Convertible Preference
Stock expire. The Company shall use its best efforts to cause the election of
such Director as provided in this paragraph (f)(iii).
(iv) (A) If (1) the Company fails to redeem the Convertible
Preference Stock on the Mandatory Redemption Date, whether or not the Company is
permitted to do so by the terms of the Senior Secured Credit Facility, the 2005
Notes, the Notes, the Exchangeable Preferred Stock, the Exchange Debentures or
any other obligations of the Company (a "Redemption Default"); or (2) the
Company breaches or violates one of the provisions set forth in paragraph (l)
hereof and the breach or violation continues for a period of 60 days or more
after the Company receives notice thereof specifying the default from holders of
at least 25% of the Convertible Preferred Stock then outstanding (a "RESTRICTION
DEFAULT"); or (3) a default occurs on the obligations to pay principal of,
interest on or any other payment obligation on one or more classes of
Indebtedness of the Company or any Subsidiary of the Company within any
applicable grace period after final maturity (a "PAYMENT DEFAULT"), whether such
Indebtedness exists on the Issue Date or is incurred thereafter, or any other
Payment Default occurs on one or more such classes of Indebtedness and such
class or classes of Indebtedness are declared due and payable prior to their
respective maturities, and the amount of such Indebtedness unpaid
<PAGE> 9
at final maturity or declared due and payable exceeds, in the aggregate,
$5,000,000 or its foreign currency equivalent, then, in any such case, the
Holders of the majority of the then outstanding Convertible Preference Stock,
voting separately as one class, shall have the right to elect one additional
member of the Company's Board of Directors (the "ADDITIONAL DIRECTOR"). Each
event described in clauses (1), (2) and (3) is a "BOARD TRIGGERING EVENT."
Subject to paragraph (f)(iv)(B) below, Holders of a majority of the issued and
outstanding shares of the Convertible Preference Stock, voting separately as one
class, shall have the right to elect the Additional Director at a meeting
therefor called upon occurrence of such Board Triggering Event, as the case may
be, and at every subsequent meeting at which the terms of office of the
Additional Director so elected by the Holders of the Convertible Preference
Stock expire (other than as described in paragraph (f)(iv)(B) below). The
Company shall use its best efforts to cause the election of such Additional
Director as provided in this paragraph (f)(iv).
(B) The right of the Holders of Convertible Preference Stock voting
separately as one class to elect the Additional Director as set forth in
paragraph (f)(iv)(A) above shall continue until such time as the Company
remedies any failure, breach or default that gave rise to the Board Triggering
Event, at which time the term of the Additional Director shall terminate,
subject always to the same provisions for the renewal and divestment of such
special voting rights in the case of any future Board Triggering Event. At any
time after voting power to elect an Additional Director shall have become vested
and be continuing in the Holders of shares of the Convertible Preference Stock
pursuant to this paragraph (f)(iv), or if vacancies shall exist in the offices
of directors elected by the Holders of shares of the Convertible Preference
Stock, a proper officer of the Company may, and upon the written request of the
Holders of record of at least 10% of the shares of Convertible Preference Stock
then outstanding addressed to the Secretary of the Company shall, call a special
meeting of the Holders of Convertible Preference Stock, for the purpose of
electing the Additional Director which such Holders are entitled to elect. If
such meeting shall not be called by the proper officer of the Company within 20
days after personal service of said written request upon the Secretary of the
Company, or within 20 days after mailing the same within the United States by
certified mail, addressed to the Secretary of the Company at its principal
executive offices, then the Holders of record of at least 20% of the outstanding
shares of the Convertible Preference Stock may designate in writing one of their
number to call such meeting at the expense of the Company, and such meeting may
be called by the Person so designated upon the notice required for the annual
meeting of stockholders of the Company and shall be held at the place for
holding the annual meetings of stockholders or such other place in the United
States as shall be designated in such notice. Notwithstanding the provisions of
this paragraph (f)(iv)(B), no such special meeting shall be called if any such
request is received less than 30 days before the date fixed for the next ensuing
annual or special meeting of stockholders of the Company. Any Holder of shares
of the Convertible Preference Stock so designated shall have, and the Company
shall provide, access to the lists of Holders of shares of the Convertible
Preference Stock for purposes of calling a meeting pursuant to the provisions of
this paragraph (f)(iv)(B).
<PAGE> 10
(C) At any meeting held for the purpose of electing directors at
which the Holders of Convertible Preference Stock shall have the right, voting
separately as one class, to elect an Additional Director as aforesaid, the
presence in person or by proxy of the Holders of at least a majority of the
outstanding Convertible Preference Stock shall be required to constitute a
quorum of such Convertible Preference Stock.
(D) After the occurrence of a Board Triggering Event and until such
Board Triggering Event is cured, any vacancy occurring in the office of an
Additional Director elected by the Holders of shares of the Convertible
Preference Stock may be filled by the remaining director elected by the Holders
of shares of the Convertible Preference Stock unless and until such vacancy
shall be filled by the Holders of shares of the Convertible Preference Stock.
(v) Notwithstanding any provision in this Certificate of Designation
to the contrary, the size of the Company's Board of Directors may be increased
or decreased in accordance with the provisions of the Company's Certificate of
Incorporation and By-Laws provided that nothing in this paragraph (f)(v) shall
be construed to deny the rights of the Preference Holders to elect a director
and an Additional Director as provided in paragraphs (f)(iii) and (f)(iv).
(vi) In any case in which the Holders of shares of the Convertible
Preference Stock shall be entitled to vote pursuant to this paragraph (f) or
pursuant to the laws of the State of Delaware, each Holder of shares of the
Convertible Preference Stock shall be entitled to one vote for each share of
Convertible Preference Stock held, except that in the case of paragraph (f)(i)
hereof, each Holder of shares of the Convertible Preference Stock shall be
entitled to as many votes for each share of the Convertible Preference Stock as
such Holder would have had if its shares of the Convertible Preference Stock had
been converted into the Common Stock pursuant to paragraph (g) hereof as of the
date immediately prior to the record date for any such vote.
(vii) Except as otherwise expressly required under the General
Corporation Law of the State of Delaware or any provision of this Certificate of
Designation, all actions to be taken by the Holders of Convertible Preference
Stock voting separately as one class shall be taken by the affirmative vote or
consent of Holders of a majority of the then outstanding shares of Convertible
Preference Stock, voting or consenting, as the case may be, in person or by
proxy, either in writing or by resolution adopted at an annual or special
meeting.
(g) Conversion.
(i) Requirements. (A) If, on any Redemption Date which occurs after
an initial public offering of the Company's Common Stock, the Base Redemption
Amount is calculated by reference to clause (ii) of the definition of Base
Redemption Amount, the Company may elect (a "CONVERSION ELECTION"), by so
stating in its Redemption Notice, in lieu of paying cash on the redemption of
such Convertible Preference Stock to convert some or all of the Convertible
Preference Stock into up to 7,348.7 shares of the
<PAGE> 11
Company's Common Stock (equaling 24% of the Company's issued and outstanding
Common Stock as of the Issue Date), as adjusted (in the same manner as
adjustments are made under Section 6.1 of the Future Warrants) for stock splits,
stock dividends, issuances of capital stock of the Company or any securities of
the Company convertible into capital stock to persons other than the Company's
directors, officers, or employees for a consideration per share less than the
then applicable Fair Market Value (as defined in the Stockholders Agreement) and
similar transactions affecting the Common Stock occurring after the Issue Date,
as described more fully below, such conversion to occur as of the Redemption
Date for such Convertible Preferred Stock. The Company shall not be permitted to
make a Conversion Election if (I) the conversion of the Convertible Preference
Stock would cause any portion of the cash received by the Holders of the
Convertible Preference Stock in redemption of any Convertible Preference Stock
not converted pursuant to this paragraph (g)(i) to be treated as a dividend for
U.S. federal income tax purposes or (II) the Common Stock issued to the Holders
of Convertible Preference Stock upon conversion would not be freely tradable by
such Holders (subject to customary lock-up provisions contained in any
underwriting agreement to which the Holders or the Company may be a party and
the provisions of the Stockholders Agreement).
(B) If the Company elects to convert any of the Convertible
Preference Stock into Common Stock, the Convertible Preference Stock for which
the Company has exercised the Conversion Election (the "SUBJECT SHARES") shall
be converted as of the Redemption Date therefor into a number of shares of the
Company's issued and outstanding Common Stock equal to the number of Subject
Shares MULTIPLIED BY the Conversion Ratio and then adjusted for stock splits,
stock dividends and similar transactions affecting the Common Stock occurring
after the Issue Date. If the Company elects to convert less than all of the
shares of Convertible Preference Stock into Common Stock, the Company shall
redeem the shares of Convertible Preference Stock called for redemption other
than Subject Shares for cash in a total amount equal to the number of such
shares multiplied by the Per-Share Redemption Amount.
(ii) Procedure for Conversion. (A) On or before the applicable
Redemption Date, each Holder of Convertible Preference Stock shall surrender the
certificate or certificates representing such shares of Convertible Preference
Stock, in the manner and at the place designated in the Redemption Notice. Upon
surrender in accordance with the Redemption Notice of the certificates for any
shares of Convertible Preference Stock so converted (properly endorsed or
assigned for transfer, if the notice shall so state), such shares shall be
converted by the Company into Common Stock.
(B) If the Redemption Notice has been mailed as aforesaid, then on
the Redemption Date, dividends shall cease to accrue on the outstanding shares
of Convertible Preference Stock and all of the rights of the Holders of shares
of the Convertible Preference Stock as Holders of such shares of the Company
shall cease, and the Person or Persons entitled to receive the Common Stock
issuable upon conversion shall be treated for all purposes as the registered
holder or holders of such Common Stock as of the date of conversion.
<PAGE> 12
(C) In the event of a conversion of only a portion of the then
outstanding shares of the Convertible Preference Stock into Common Stock, the
Company shall effect such conversion, pro rata according to the number of shares
held by each Holder of the Convertible Preference Stock.
(h) Change of Control.
(i) (X) Upon the occurrence of a Change of Control and (y) subject to
the Holders of all of the Company's Senior Securities having exercised their
right to be prepaid and/or to put their securities to the Company upon such
Change of Control, each Holder of Convertible Preference Stock may require the
Company to redeem, on or after the 92nd day after the prepayment or redemption
of the Company's Senior Securities in whole, all or any part of such Holder's
Convertible Preference Stock (the "PUT") at 102% of the Redemption Price of such
securities, calculated as if the Company had exercised its option to redeem the
securities under paragraph (e) hereof on the date on which the Change of Control
occurred (the "PUT PRICE"), plus, without duplication, an amount in cash equal
to all accumulated and unpaid dividends per share (including an amount in cash
equal to a prorated dividend for the period from the Dividend Payment Date
immediately prior to the repurchase date of the Put shares (the "PUT DATE") to
the Put Date), if any, to the Put Date (subject to the right of Holders of
Convertible Preference Stock of record on the relevant record date to receive
dividends due on the relevant Dividends Payment Date); provided, however, that
notwithstanding the occurrence of a Change of Control, the Company shall not be
obligated to purchase the Convertible Preference Stock pursuant to this
paragraph (h) in the event that it has exercised its right to redeem all of the
Convertible Preference Stock under paragraph (e)(i) hereof.
(ii) Unless the Company has exercised its rights to redeem all the
Convertible Preference Stock under paragraph (e)(i) hereof within 15 days
following any Change of Control (or, at the Company's option, prior to such
Change of Control), the Company shall mail a notice to each Holder of
Convertible Preference Stock stating: (A) that (X) a Change of Control has
occurred or will occur and that such Holder of Convertible Preference Stock has
(or upon such occurrence and the redemption of all of the Company's Senior
Securities will have) the right to require the Company to purchase such Holder's
Exchangeable Preferred Stock at the Put Price; (B) the circumstances and
relevant facts and financial information regarding such Change of Control; and
(C) the instructions determined by the Company, consistent with this paragraph
(h), that a Holder of Convertible Preference Stock must follow in order to
exercise a Put (the "CHANGE OF CONTROL NOTICE").
(iii) (A) Holders of Convertible Preference Stock electing to have
shares of Convertible Preference Stock redeemed by the Company pursuant to this
paragraph (h) shall be required to mail to the Company within 15 days after
receipt of the Change of Control Notice a notice of its intent to exercise a Put
with respect to the Change of Control for which such Change of Control Notice
has been given upon the redemption of all of the Company's Senior Securities,
specifying the number of shares to be Put (the "PUT NOTICE"). Any Holder of
Convertible Preference Shares that fails to submit a Put
<PAGE> 13
Notice within 15 days of receipt of the Change of Control Notice shall forfeit
its right to put shares pursuant to this paragraph (h) with respect to the
Change in Control for which such Change in Control Notice has been given.
(B) Contemporaneously with or promptly after redemption of all of the
Company's Senior Securities, the Company shall mail a notice to each Holder of
Convertible Preference Stock that has submitted a timely Put Notice, specifying
the Put Date (which shall be at least 92 days, and no more than 100 days, after
the prepayment or redemption of the Company's Senior Securities) and instructing
such Holder to surrender its shares of Convertible Preference Stock, with an
appro-priate form duly completed, to the Company at the address specified in the
notice at least three Business Days prior to the Put Date. Holders of
Convertible Preference Stock shall be entitled to withdraw their election to
exercise a Put if the transfer agent or the Company receives not later than one
Business Day prior to the Put Date a facsimile transmission or letter setting
forth the name of the Holder of Convertible Preference Stock, the Liquidation
Preference of the Convertible Preference Stock which was delivered for purchase
by the Holder of Convertible Preference Stock and a statement that such Holder
of Convertible Preference Stock is withdrawing his election to Put such
Convertible Preference Stock.
(C) On or before the Put Date, all shares of Convertible Preference
Stock put to the Company under this paragraph (h) shall be delivered to the
Company for cancellation, and on the Put Date the Company shall pay the Put
Price plus accumulated and unpaid dividends, if any, to the Holders entitled
thereto.
(D) Unless the Company defaults in the payment for the shares of
Convertible Preference Stock tendered pursuant to any Put, dividends shall cease
to accrue with respect to the shares of Convertible Preference Stock tendered
and all rights of Holders of such tendered shares shall terminate, except for
the right to receive payment therefor, on the Put Date.
(iv) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) under the Exchange Act and any securities laws and
regulations, in connection with the Put of Convertible Preference Stock pursuant
to this paragraph (h). To the extent that the provisions of any securities laws
or regulations conflict with provisions of this paragraph (h), the Company will
comply with the applicable securities laws and regulations and it will not be
deemed to have breached its obligations under this paragraph (h) by virtue
thereof.
(i) Preemptive Rights. No shares of Convertible Preference Stock
shall have any rights of preemption whatsoever as to any securities of the
Company, or any warrants, rights or options issued or granted with respect
thereto, regardless of how such securities or such warrants, rights or options
may be designated, issued or granted.
(j) Reissuance of Convertible Preference Stock. Shares of Convertible
Preference Stock that have been issued and reacquired in any manner, including
shares purchased or redeemed or converted, shall (upon compliance with any
applicable
<PAGE> 14
provisions of the laws of Delaware) have the status of authorized but unissued
shares of Preferred Stock of the Company undesignated as to series and may be
designated or redesignated and issued or reissued, as the case may be, as part
of any series of Convertible Preference Stock of the Company, provided that (I)
such shares of the Convertible Preference Stock may be redesignated or reissued,
as the case may be, only after all outstanding shares of the Convertible
Preference Stock have been redeemed and (II) any issuance of such shares as
Convertible Preference Stock must be in compliance with the terms hereof.
(k) Business Day. If any payment, redemption or exchange shall be
required by the terms hereof to be made on a day that is not a Business Day,
such payment, redemption or exchange shall be made on the immediately succeeding
Business Day.
(l) Certain Additional Provisions.
(i) Merger or Consolidation. Without the consent of Holders of a
majority of the outstanding shares of Convertible Preference Stock, voting as a
separate class, the Company shall not consolidate or merge with or into, or
convey, transfer or lease all or substantially all of its assets to, any Person
unless (A) the resulting, transferee or surviving Person (the "SUCCESSOR
COMPANY") will be a Person organized and existing under the laws of the United
States of America, any State thereof or the District of Columbia; (B) the
Convertible Preference Stock shall be converted into or exchanged for and shall
become shares of the Successor Company having in respect of such successor,
transferee or resulting corporation substantially the same powers, preferences
and relative participating, optional or other special rights, and the
qualifications, limitations or restrictions thereon that the Convertible
Preference Stock had immediately prior to such transaction; (C) immediately
after such transaction, no Board Triggering Event, and no event that after the
giving of notice or lapse of time or both would become a Board Triggering Event,
shall have occurred and be continuing; (D) immediately after giving effect to
such transaction (and treating any Indebtedness which becomes any obligation of
the Successor Company or any Restricted Subsidiary as a result of such
transaction as having been incurred by the Successor Company or such Restricted
Subsidiary at the time of such transaction) no Default will have occurred and be
continuing; and (E) prior to the consummation of any such proposed transaction,
the Company shall have delivered to the transfer agent an Officers' Certificate
and an Opinion of Counsel, to the effect that such transaction complies with the
terms of the Certificate of Designation and that all conditions precedent to
such transaction have been satisfied; provided, that (X) in giving such opinion
such counsel may rely on such officer's certificate as to any matters of fact
(including without limitation as to compliance with the foregoing clauses (C)
and (D)), and (Y) no Opinion of Counsel will be required for a consolidation,
merger or transfer described in the last paragraph of this paragraph (l)(i). Any
Indebtedness that becomes an obligation of the Company or any Restricted
Subsidiary (or that is deemed to be Incurred by any Restricted Subsidiary that
becomes a Restricted Subsidiary) as a result of such transaction undertaken in
compliance with this covenant, and any Refinancing Indebtedness with respect
thereto, shall be deemed to have been Incurred in compliance with paragraph
(l)(iv)(B).
<PAGE> 15
Notwithstanding the preceding paragraph, (1) any Restricted
Subsidiary may consolidate with, merge into or transfer all or part of its
properties and assets to the Company and (2) the Company may merge with an
Affiliate incorporated or organized for the purpose of reincorporating or
reorganizing the Company in another jurisdiction to realize tax or other
benefits.
(ii) Junior Payments. The Company shall not, directly or indirectly,
(A) declare or pay any dividend or make any distribution on account of any
Junior Securities (other than dividends or distributions payable in Junior
Securities (other than Disqualified Stock)), (B) purchase, redeem or otherwise
acquire or retire for value any Junior Securities or (C) make any Investment
(other than Permitted Investments) in any Person (all such dividends,
distributions, purchases, redemptions, acquisitions, retirements and Investments
being collectively referred to as "JUNIOR PAYMENTS"), if, at the time of such
Junior Payment, a Board Triggering Event shall have occurred and be continuing
or would occur as a consequence thereof.
Notwithstanding the foregoing, this Certificate of Designation shall
not prohibit as Junior Payments:
(1) any purchase, redemption, repurchase, defeasance, retirement
or other acquisition of Junior Securities or Parity Securities made by
exchange (including any such exchange pursuant to the exercise of a
conversion right or privilege in connection with which cash is paid in
lieu of the issuance of fractional shares) for, or out of the proceeds of
the substantially concurrent sale of, Junior Securities or Parity
Securities of the Company (other than Disqualified Stock and other than
Capital Stock issued or sold to a Subsidiary or an employee stock
ownership plan or other trust established by the Company or any of its
Subsidiaries) or a substantially concurrent capital contribution to the
Company;
(2) any purchase, redemption, repurchase, defeasance, retirement
or other acquisition of Junior Securities or Parity Securities upon a
Change of Control to the extent required by the agreement governing such
Junior Securities or Parity Securities but only if the Company shall have
complied with paragraph (h) and purchased all Convertible Preference Stock
put to the Company, as required thereby, prior to purchasing or repaying
such Junior Securities or Parity Securities; provided, however, that the
purchase price (stated as a percentage of liquidation preference) of such
Junior Securities or Parity Securities shall not be greater than the price
for such purchase set forth in the instrument pursuant to which such
Junior Securities or Parity Securities were issued.
(3) dividends paid within 60 days after the date of declaration
thereof if at such date of declaration such dividend would have complied
with this Certificate of Designation, including without limitation this
paragraph (l)(ii).
<PAGE> 16
(4) a Junior Payment to pay for the repurchase or other
acquisition or retirement of Junior Securities or Parity Securities or
options, warrants or other rights in respect thereof, or payments by the
Company to repurchase or otherwise acquire Junior Securities or Parity
Securities or options, warrants or other rights in respect thereof, in
each case from Management Investors, such payments not to exceed an amount
equal to $500,000 in any fiscal year and $2.5 million in the aggregate
(plus the Net Cash Proceeds received by the Company since the Issue Date
as a capital contribution from the sale to Management Investors of Junior
Securities or Parity Securities or options, warrants or other rights in
respect thereof); and
(5) payments by the Company or any Restricted Subsidiary (x)
pursuant to the Management Agreements and (y) to G-IV, GSCP and SGCP and
their respective Affiliates, not to exceed an amount necessary to permit
each such Person, as the case may be, to (A) pay its costs (including all
professional fees and expenses) incurred to comply with its reporting
obligations under federal or state laws or under this Certificate of
Designation, including any reports filed with respect to the Securities
Act, Exchange Act or the respective rules and regulations promulgated
thereunder, to the extent such costs relate to the Company and its
Subsidiaries, (B) make payments in respect of its indemnification
obligations of such Persons owing to directors, officers, employees or
other Persons under their charters or by-laws or pursuant to written
agreements with any such Person, to the extent such payments relate to the
Company and its Subsidiaries, and (C) indemnify or reimburse, or pay on
behalf of, such Persons any taxes, charges or assessments arising by
reason of their ownership of Capital Stock of the Company and the GSD
Liquidation, so long as the GSD Liquidation occurs promptly after the
consummation of the Offerings;
(iii) Transactions with Affiliates.
(A) The Company will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, enter into or conduct any transaction or
series of transactions (including the purchase, sale, lease or exchange of any
property or the rendering of any service) with any Affiliate of the Company (an
"AFFILIATE TRANSACTION") on terms (1) that taken as a whole are less favorable
to the Company or such Restricted Subsidiary, as the case may be, than those
that could be obtained at the time of such transaction in arm's-length dealings
with a Person who is not such an Affiliate and (2) that, in the event such
Affiliate Transaction involves an aggregate amount in excess of $1.0 million,
are not in writing and have not been approved by a majority of the members of
the Board of Directors having no material personal financial interest in such
Affiliate Transaction, or in the event there are no such members, as to which
the Company has not obtained a Fairness Opinion (as hereinafter defined). In
addition, any transaction involving aggregate payments or other transfers by the
Company and its Restricted Subsidiaries in excess of $5.0 million will also
require an opinion (a "FAIRNESS OPINION") from an independent investment banking
firm or appraiser, as appropriate, of national prominence, to the effect that
the terms of such transaction taken as a whole are either (X) no less favorable
to the Company or such Restricted Subsidiary, as the case may be, than those
that could be obtained at the time of such transaction in arm's-length dealings
with
<PAGE> 17
a Person who is not an Affiliate or (Y) fair to the Company or such Restricted
Subsidiary, as the case may be, from a financial point of view.
(B) The provisions of paragraph (l)(ii)(A) shall not prohibit (1) any
Junior Payment permitted by paragraph (l)(ii), any Permitted Investment, or any
other transaction specifically excluded from the definition of the term "Junior
Payment," (2) the performance of the Company's or Restricted Subsidiary's
obligations under any employment contract, collective bargaining agreement,
employee benefit plan, related trust agreement or any other similar arrangement
heretofore or hereafter entered into in the ordinary course of business, (3)
payment of compensation, performance of indemnification or contribution
obligations, or any issuance, grant or award of stock, options or other
securities, to employees, officers or directors in the ordinary course of
business, (4) maintenance in the ordinary course of business of benefit programs
or arrangements for employees, officers or directors, including vacation plans,
health and the insurance plans, deferred compensation plans, and retirement or
savings plans and similar plans, (5) any transaction between the Company and a
Restricted Subsidiary or between Restricted Subsidiaries, (6) loans or advances
made to directors, officers or employees of the Company or any Restricted
Subsidiary, or guarantees in respect thereof or otherwise made on their behalf
(including any payments under such guarantees), (X) in respect of travel,
entertainment or moving-related expenses incurred in the ordinary course of
business, or (Y) in the ordinary course of business not exceeding $500,000 in
the aggregate outstanding at any time, (7) guarantees of borrowings by
Management Investors in connection with the purchase of Capital Stock of the
Company by such Management Investors, which guarantees are permitted by
paragraph (l)(iv)(B), and payments thereunder, (8) any other transaction arising
out of agreements in existence on the Issue Date, (9) execution, delivery and
performance of the Management Agreements, including but not limited to the
ongoing payment of fees to GSCP and SGCP of up to $1,000,000 per year plus
reasonable out of pocket expenses, (10) any commercial or other business
transaction in the ordinary course of business with any Permitted Holder or any
Affiliate thereof, on terms that taken as a whole are no less favorable to the
Company and its Restricted Subsidiaries than those that could be obtained at the
time in arm's-length dealings with a Person who is not an Affiliate of the
Company, and (11) any transaction between the Company or any Restricted
Subsidiary and any Affiliate of the Company controlled by the Company that is a
joint venture or similar entity primarily engaged in a Related Business so long
as such transaction is in the ordinary course of business and is on terms that
are not materially less favorable to the Company or the relevant Restricted
Subsidiary than those that would have been obtained in a comparable transaction
by the Company or such Restricted Subsidiary with an unrelated Person.
(iv) Limitation on Indebtedness. (A) The Company will not, and will
not permit any Restricted Subsidiary to, Incur any Indebtedness; provided,
however, that the Company and its Restricted Subsidiaries may Incur Indebtedness
if on the date of the Incurrence of such Indebtedness the Consolidated Coverage
Ratio would be greater than 2.00:1.00.
<PAGE> 18
(B) Notwithstanding paragraph (l)(iv)(A), the Company and, where
indicated, its Restricted Subsidiaries may Incur the following Indebtedness:
(1) Indebtedness of the Company Incurred pursuant to the Senior
Secured Credit Facility in a maximum principal amount not to exceed at any
time (A) an aggregate principal amount of $70.0 million under the Term
Loan Facility less the aggregate amount of all scheduled repayments of
principal, or mandatory prepayments of principal, applied to permanently
reduce the Indebtedness outstanding under the Term Loan Facility, plus (in
the case of any refinancing thereof) the aggregate amount of fees,
underwriting discounts, premiums and other costs and expenses incurred in
connection with such refinancing, and (B) an aggregate principal amount
outstanding at any time under the Revolving Credit Facility not to exceed
$20.0 million less the amount of all mandatory prepayments of principal,
applied to permanently reduce the commitments under the Revolving Credit
Facility, plus (in the case of any refinancing thereof) the aggregate
amount of fees, underwriting discounts, premiums and other costs and
expenses incurred in connection with such refinancing;
(2) Indebtedness of Foreign Subsidiaries for working capital
purposes and any Guarantees in respect thereof, the aggregate principal
amount of which Indebtedness outstanding at any time does not exceed, as
to all such Foreign Subsidiaries, $15.0 million;
(3) Indebtedness (A) of the Company to any Restricted Subsidiary
and (B) of any Wholly Owned Subsidiary to the Company or any Restricted
Subsidiary; provided, however, that (X) in the case of clause (a), any
such Indebtedness is junior to the Exchangeable Preferred Stock and (Y)
any subsequent issuance or transfer of any Capital Stock or any other
event that results in any such Wholly Owned Subsidiary ceasing to be a
Wholly Owned Subsidiary or any other subsequent transfer of any such
Indebtedness (except to the Company or a Wholly Owned Subsidiary) will be
deemed, in each case, an Incurrence of Indebtedness by the Company or such
Restricted Subsidiary, as the case may be;
(4) Indebtedness represented by the Notes, the 2005 Notes, the
Exchangeable Preferred Stock and the issuance of the Convertible
Preference Stock in the amount issued on the Issue Date, and any
Indebtedness (other than the Indebtedness described in clauses
(l)(iv)(B)(1), (2) or (3) above) outstanding on the Issue Date and any
Refinancing Indebtedness Incurred in respect of any Indebtedness described
in this clause (l)(iv)(B)(4) or paragraph (l)(iv)(A) above (excluding the
exchange of Exchangeable Preferred Stock for Exchange Debentures in
accordance with the terms of the Certificate of Designation for such
Exchangeable Preferred Stock as in effect on the Issue Date);
(5) Indebtedness of the Company or any Restricted Subsidiary (A)
to finance or refinance the deferred purchase price of newly acquired
property of the Company and its Subsidiaries used in the ordinary course
of business of the
<PAGE> 19
Company and its Subsidiaries (provided such purchase money financing is
entered into within six months of the acquisition of such property), and
any Refinancing Indebtedness with respect thereto, and (B) in the form of
Capitalized Lease Obligations or Attributable Debt, and any Refinancing
Indebtedness with respect thereto, in an aggregate amount (based on, in the
case of clause (A), the remaining balance of the obligations therefor on
the books of the Company and its Restricted Subsidiaries) not in excess, at
any one time outstanding, of $10.0 million:
(6) Indebtedness of the Company or any Restricted Subsidiary
(which may comprise Bank Indebtedness) in an aggregate principal amount at
any one time outstanding not in excess of $10.0 million;
(7) Indebtedness represented by the Note Guarantees and
Guarantees of Indebtedness Incurred pursuant to clause (l)(iv)(B)(1), (3)
or (4) above;
(8) Guarantees (A) by any Restricted Subsidiary of Indebtedness,
of any other Restricted Subsidiary or (B) by any Wholly Owned Subsidiary
that is not a Restricted Subsidiary of Indebtedness of any Wholly Owned
Subsidiary that is not a Restricted Subsidiary;
(9) Indebtedness (A) arising by reason of any Lien created or
permitted to exist in compliance with Section 4.11 of the Exchange
Debenture Indenture as if such covenant is in effect on the date of such
Incurrence of Indebtedness (without consideration of whether the Exchange
Debenture Indenture is in effect), including any Indebtedness of any
Exchange Debenture Guarantor arising by reason of any Lien granted by such
Person to secure Exchange Debenture Senior Indebtedness, or of the Company
or any Exchange Debenture Guarantor arising by reason of any Lien granted
by such Person to secure Exchange Debenture Guarantor Senior Indebtedness,
or (B) of any Restricted Subsidiary that is not a Exchange Debenture
Guarantor arising by reason of any Lien granted by such Person to secure
Indebtedness of any Restricted Subsidiary that is not a Exchange Debenture
Guarantor.
(10) Indebtedness of the Company or any Restricted Subsidiary
arising from the honoring of a check, draft or similar instrument of such
Person drawn against insufficient funds, provided that such Indebtedness
is extinguished within five Business Days of its incurrence;
(11) Indebtedness of the Company or any Restricted Subsidiary
consisting of guarantees, indemnities, or obligations in respect of
purchase price adjustments, in connection with the acquisition or
disposition of assets, other than guarantees of Indebtedness incurred by
any Person acquiring such assets for the purpose of financing such
acquisition; provided, however, that (X) such Indebtedness is not
reflected on the balance sheet of the Company or any Restricted
Subsidiaries (contingent obligations referred to in a footnote to
financial statements and not otherwise reflected on the balance sheet will
not be deemed to be reflected on such
<PAGE> 20
balance sheet for purposes of this clause (x)) and (Y) the maximum
Indebtedness Incurred in connection with such disposition shall at no time
exceed the gross proceeds being measured at the time received by the
Company and its Restricted Subsidiaries in connection with such
disposition (which proceeds would include assumed Indebtedness of the
Company or any Restricted Subsidiary and, with respect to any other
non-cash proceeds of any such disposition, the fair market value at the
time of receipt of such proceeds and without giving effect to any
subsequent changes in value);
(12) Indebtedness in respect of (A) commercial letters of
credit, or other letters of credit or other similar instruments or
obligations, issued in connection with liabilities incurred in the
ordinary course of business (including those issued to governmental
entities in connection with self-insurance under applicable workers'
compensation statutes), or (B) surety, judgment, appeal, performance and
other similar bonds, instruments or obligations provided in the ordinary
course of business;
(13) Indebtedness under Hedging Obligations; provided, however,
that such Hedging Obligations are entered into for bona fide hedging
purposes and are in the ordinary course of business;
(14) Indebtedness (A) of the Company consisting of Guarantees of
up to an aggregate principal amount of $500,000 of borrowings by
Management Investors in connection with the purchase of Capital Stock of
the Company by such Management Investors or (B) of the Company or any
Restricted Subsidiary consisting of guarantees in respect of loans or
advances made to officers or employees of the Company or any Restricted
Subsidiary, or guarantees otherwise made on their behalf, (X) in respect
of travel, entertainment and moving-related expenses incurred in the
ordinary course of business, or (Y) in the ordinary course of business not
exceeding $500,000 in the aggregate outstanding at any time;
(15) Indebtedness of any Restricted Subsidiary that is
Indebtedness of another Person assumed by such Restricted Subsidiary in
connection with its acquisition of assets from such Person (other than
Indebtedness Incurred in connection with, or in contemplation of, such
acquisition) and any Refinancing Indebtedness with respect thereto;
provided, however, that at the time of such acquisition of assets the
Company shall have been able to Incur at least an additional $1.00 of
Indebtedness under paragraph (l)(iv)(A) above after giving effect to such
acquisition;
(16) Indebtedness of a Restricted Subsidiary issued and
outstanding on or prior to the date on which such Restricted Subsidiary
was acquired by the Company (other than Indebtedness Incurred (X) as
consideration in, or to provide all or any portion of the funds or credit
support utilized to consummate, the transaction or series of related
transactions pursuant to which such Restricted Subsidiary became a
Restricted Subsidiary or was acquired by the Company or (Y) otherwise in
connection with, or in contemplation of, such acquisition) and any
Refinancing
<PAGE> 21
Indebtedness with respect thereto; provided, however, that on the date of
any such acquisition the Company shall have been able to Incur at least
$1.00 of Indebtedness under paragraph (l)(iv)(A) above after giving effect
to such acquisition;
(17) Exchangeable Preferred Stock issued as payment in kind
dividends on the Exchangeable Preferred Stock outstanding on the Issue
Date or issued subsequent to the Issue Date as dividends permitted
pursuant to this paragraph (l)(iv)(B)(17), to the extent such dividends
are made pursuant to the terms of the Certificate of Designation for such
Exchangeable Preferred Stock as in effect on the Issue Date.
(C) For purposes of determining compliance with, and the outstanding
principal amount of any particular Indebtedness Incurred pursuant to and in
compliance with, this covenant, (1) any other obligation of the obligor on such
Indebtedness arising under any Guarantee, Lien or letter of credit supporting
such Indebtedness shall be disregarded to the extent that such Guarantee, Lien
or letter of credit secures the principal amount of such Indebtedness; (2) in
the event that Indebtedness meets the criteria of more than one of the types of
Indebtedness described in any clause of paragraph (l)(iv)(B), the Company, in
its sole discretion, shall classify such item of Indebtedness and only be
required to include the amount and type of such Indebtedness in one of such
clauses; and (3) the amount of Indebtedness issued at a price that is less than
the principal amount thereof shall be equal to the amount of the liability in
respect thereof determined in accordance with GAAP.
(D) For purposes of determining compliance with any
Dollar-denominated restriction on the Incurrence of Indebtedness denominated in
a foreign currency, the Dollar-equivalent principal amount of such Indebtedness
Incurred pursuant thereto shall be calculated based on the relevant currency
exchange rate in effect on the date of such calculation.
(v) Withholding Taxes. The Company shall pay to each Holder of
outstanding shares of Convertible Preference Stock in connection with each
dividend payment pursuant to paragraph (c)(i) with respect to such shares, such
additional amount as shall be required so that the aggregate amount of such
dividend payment and such additional amount, after the deduction or withholding
or payment by the Holder of any U.S. federal withholding tax, is equal to the
amount of such dividend payment before the imposition of such tax. The Company
shall not be required to make such payments of additional amounts: (I) to or on
behalf of a Holder or beneficial owner of the Shares in connection with the
redemption of shares of Convertible Preference Stock, (II) to or on behalf of a
Holder or beneficial owner of shares of Convertible Preference Stock that is
liable for U.S. federal withholding taxes by reason of such Holder being treated
as engaged in the conduct of a U.S. trade or business or (III) to or on behalf
of a Holder or beneficial owner of shares of Convertible Preference Stock in
respect of a U.S. federal withholding tax that would not have been imposed but
for the failure of such Holder or beneficial owner (or if such Holder or
beneficial owner is treated as a partnership or other pass-through entity for
U.S. federal income tax purposes, any Person that directly or indirectly through
other entities that are treated as partnerships or other pass-through entities
for U.S. federal
<PAGE> 22
income tax purposes, holds an equity interest in such Holder or beneficial
owner) to comply with any applicable certification, identification, or other
information reporting requirement required, and reasonably requested by the
Company, to establish exemption from, or reduction in the rate of, U.S. federal
withholding tax.
(vi) Transfer. Shares of Convertible Preference Stock may not be
transferred without the prior written consent of Greenwich Street Capital
Partners, L.P., provided, however, that no such consent shall be necessary for
any transfer of Convertible Preference Stock, in whole or in part, (I) to any
Affiliate of Soros Private Equity Partners, L.P., (II) in connection with any
Sponsor Liquidity Event, or (III) following the occurrence of a Change of
Control to an institutional Accredited Investor.
(m) Definitions. As used in this Certificate of Designation, the
following terms shall have the following meanings (with terms defined in the
singular having comparable meanings when used in the plural and vice versa),
unless the context otherwise requires:
"Accredited Investor" has the meaning specified in Rule 501
promulgated under the Securities Act.
"Additional Director" has the meaning specified in paragraph
(f)(iv)(A).
"Affiliate" of any specified Person means any other Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
when used with respect to any Person means the power to direct the management
and policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Asset Disposition" means any sale, lease, transfer or other
disposition of shares of Capital Stock of a Restricted Subsidiary (other than
directors' qualifying shares, or (in the case of a Foreign Subsidiary) to the
extent required by applicable law), property or other assets (each referred to
for the purposes of this definition as a "disposition") by the Company or any of
its Restricted Subsidiaries (including any disposition by means of a merger,
consolidation or similar transaction) other than (I) a disposition by a
Restricted Subsidiary to the Company or by the Company or a Restricted
Subsidiary to a Restricted Subsidiary, (II) a disposition of inventory,
equipment, obsolete assets or surplus personal property in the ordinary course
of business, (III) the sale of Cash Equivalents in the ordinary course of
business, (IV) dispositions with a fair market value not exceeding $500,000 in
the aggregate in any fiscal year, (V) the sale or discount (with or without
recourse, and on commercially reasonable terms) of accounts receivable or notes
receivable arising in the ordinary course of business, or the conversion or
exchange of accounts receivable for notes receivable, (VI) the licensing of
intellectual property in the ordinary course of business, or (VII) a disposition
of property or assets that is governed by paragraph (l)(i).
"Affiliate Transaction" has the meaning specified in paragraph
(1)(iii).
<PAGE> 23
"Attributable Debt" in respect of a Sale/Leaseback Transaction means,
as at the time of determination, the present value (discounted at the interest
rate assumed in making calculations in accordance with FAS 13) of the total
obligations of the lessee for rental payments during the remaining term of the
lease included in such Sale/Leaseback Transaction (including any period for
which such lease has been extended).
"Average Life" means, as of the date of determination, with respect
to any Indebtedness or Exchangeable Preferred Stock, the quotient obtained by
dividing (I) the sum of the products of the numbers of years from the date of
determination to the dates of each successive scheduled principal payment of
such Indebtedness or redemption or similar payment with respect to such
Exchangeable Preferred Stock multiplied by the amount of such payment by (II)
the sum of all such payments.
"Bank Indebtedness" means any and all amounts, whether outstanding on
the Issue Date or thereafter incurred, payable under or in respect of the Senior
Secured Credit Facility, including without limitation principal, premium (if
any), interest (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Company or any
Restricted Subsidiary whether or not a claim for post-filing interest is allowed
in such proceedings), fees, charges, expenses, reimbursement obligations,
guarantees, other monetary obligations of any nature and all other amounts
payable thereunder or in respect thereof.
"Base Redemption Amount" means the sum of (a) the Future Warrants,
provided, however, that no warrants shall be issued during or in connection with
any liquidation or dissolution of the Company or winding-up of the Company
and/or its business and affairs, PLUS (b) subject to paragraph (g) hereof an
amount of cash equal to the GREATER of (I) the aggregate Liquidation Preference
of the shares of Convertible Preference Stock to be redeemed plus, without
duplication, an amount of cash equal to all accumulated and unpaid dividends per
share of Convertible Preference Stock to be redeemed (including an amount of
cash equal to a prorated dividend for the period from the Dividend Payment Date
immediately prior to the Redemption Date to the Redemption Date) or (II) the
Redemption Value of 7,348.7 shares of Common Stock (equaling 24% of the
Company's issued and outstanding Common Stock as of the Issue Date), as adjusted
(in the same manner as adjustments are made under Section 6.1 of the Future
Warrants) for stock splits, stock dividends, issuances of capital stock of the
Company or any securities of the Company convertible into capital stock to
persons other than the Company's directors, officers, or employees for a
consideration per share less than the then applicable Fair Market Value (as
defined in the Stockholders Agreement) and similar transactions affecting the
Common Stock occurring after the Issue Date, on the Redemption Date, such sum
(in the case of a redemption of less than all of the Convertible Preference
Stock) to be multiplied by a fraction equal to the number of shares of
Convertible Preference Stock to be redeemed over 38,500. Notwithstanding the
foregoing, in the event that the Redemption Date occurs during or in connection
with any liquidation or dissolution of the Company or winding-up of the Company
and/or its business and affairs, the Future Warrants component of the Base
Redemption Amount, if
<PAGE> 24
any, shall be converted into cash in an amount equal to the difference of the
Redemption Value of the shares of Common Stock which would otherwise be issuable
upon exercise of the Future Warrants (if such Future Warrants were issued) less
the exercise price of the Future Warrants.
"Board of Directors" means the Board of Directors of the Company or
any committee thereof duly authorized to act on behalf of such Board.
"Board Triggering Event" has the meaning specified in paragraph
(f)(iv)(A).
"Business Day" means any day other than a Saturday, Sunday or other
day on which commercial banking institutions are authorized or required by law
to close in New York City.
"Capital Stock" of any Person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into such equity.
"Capitalized Lease Obligations" means an obligation that is required
to be classified and accounted for as a capitalized lease for financial
reporting purposes in accordance with GAAP, and the amount of Indebtedness
represented by such obligation shall be the capitalized amount of such
obligation determined in accordance with GAAP; and the Stated Maturity thereof
shall be the date of the last payment of rent or any other amount due under such
lease.
"Cash Equivalents" means any of the following: (A) securities issued
or fully guaranteed or insured by the United States Government or any agency or
instrumentality thereof, (B) time deposits, certificates of deposit or bankers'
acceptances of (I) any lender under the Senior Credit Agreement or (II) any
commercial bank having capital and surplus in excess of $500,000,000 and the
commercial paper of the holding company of which is rated at least A-1 or the
equivalent thereof by S&P or at least P-1 or the equivalent thereof by Moody's
(or if at such time neither is issuing ratings, then a comparable rating of
another nationally recognized rating agency), (C) commercial paper rated at
least A-1 or the equivalent thereof by S&P or at least P-1 or the equivalent
thereof by Moody's (or if at such time neither is issuing ratings, then a
comparable rating of another nationally recognized rating agency) and (D)
investments in money market funds complying with the risk limiting conditions of
Rule 2a-7 or any successor rule of the SEC under the Investment Company Act of
1940, as amended.
"Change of Control" means the occurrence of any of the following
events:
(i) prior to the first public offering of Voting Stock of the
Company, either (X) Permitted Holders cease to be the "beneficial owner"
or "beneficial owners" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act), directly or indirectly, of more than 35% of the total
voting power of the Voting Stock of the Company, or
<PAGE> 25
(Y) Permitted Holders cease to be entitled by voting power, contract or
otherwise to elect or cause the election of directors of the Company
having a majority of the total voting power of the Board of Directors, in
each case, whether as a result of issuance of securities of the Company,
any merger, consolidation, liquidation or dissolution of the Company, any
direct or indirect transfer of securities by any Permitted Holder or
otherwise (for purposes of this clause (i) and clause (ii) below,
Permitted Holders shall be deemed to beneficially own any Voting Stock of
an entity (the "specified entity") held by any other entity (the "parent
entity") so long as the Permitted Holders beneficially own (as so
defined), directly or indirectly, a majority of the Voting Stock of the
parent entity);
(ii) following the first public offering of Voting Stock of the
Company, any "Person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act), other than one or more Permitted Holders, is or becomes
the beneficial owner (as defined in clause (i) above, except that a Person
shall be deemed to have "beneficial ownership" of all shares that any such
Person has the right to acquire within one year), directly or indirectly,
of more than 35% of the Voting Stock of the Company, provided that the
Permitted Holders beneficially own (as defined in clause (i) above),
directly or indirectly, in the aggregate a lesser percentage of the Voting
Stock of the Company than such other Person and do not have the right or
ability by voting power, contract or otherwise to elect or designate for
election a majority of the Board of Directors; or
(iii) during any period of two consecutive years, individuals
who at the beginning of such period constituted the Board of Directors
(together with any new directors whose election by such Board of Directors
or whose nomination for election by the shareholders of the Company was
approved by a vote of a majority of the directors of the Company then
still in office who were either directors at the beginning of such period
or whose election or nomination for election was previously so approved)
cease for any reason to constitute a majority of the Board of Directors
then in office.
"Change of Control Notice" has the meaning specified in paragraph
(h)(ii).
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" has the meaning specified in paragraph (b).
"Company" means Day International Group, Inc., a Delaware corporation
and any successor thereto.
"Consolidated Coverage Ratio" as of any date of determination means
the ratio of (I) the aggregate amount of EBITDA of the Company and its
Restricted Subsidiaries for the period of the most recent four consecutive
fiscal quarters ending prior to the date of such determination for which
consolidated financial statements of the Company are available to (II)
Consolidated Interest Expense for such four fiscal quarters (in each case,
<PAGE> 26
determined, for each fiscal quarter (or portion thereof) of the four fiscal
quarters ending prior to the Issue Date, on a pro forma basis; provided,
however, that:
(1) if the Company or any Restricted Subsidiary (X) has Incurred any
Indebtedness since the beginning of such period that remains outstanding
on such date of determination or if the transaction giving rise to the
need to calculate the Consolidated Coverage Ratio is an Incurrence of
Indebtedness, EBITDA and Consolidated Interest Expense for such period
shall be calculated after giving effect on a pro forma basis to such
Indebtedness as if such Indebtedness had been Incurred on the first day of
such period (except that in making such computation, the amount of
Indebtedness under any revolving credit facility outstanding on the date
of such calculation shall be computed based on (A) the average daily
balance of such Indebtedness during such four fiscal quarters or such
shorter period for which such facility was outstanding or (B) if such
facility was created after the end of such four fiscal quarters, the
average daily balance of such Indebtedness during the period from the date
of creation of such facility to the date of such calculation) and the
discharge of any other Indebtedness repaid, repurchased, defeased or
otherwise discharged with the proceeds of such new Indebtedness as if such
discharge had occurred on the first day of such period, or (Y) has repaid,
repurchased, defeased or otherwise discharged any Indebtedness since the
beginning of the period that is no longer outstanding on such date of
determination, or if the transaction giving rise to the need to calculate
the Consolidated Coverage Ratio involves a discharge of Indebtedness (in
each case other than Indebtedness Incurred under any revolving credit
facility unless such Indebtedness has been permanently repaid), EBITDA and
Consolidated Interest Expense for such period shall be calculated after
giving effect on a pro forma basis to such discharge of such Indebtedness,
including with the proceeds of such new Indebtedness, as if such discharge
had occurred on the first day of such period,
(2) if since the beginning of such period the Company or any
Restricted Subsidiary shall have made any Asset Disposition of any company
or any business or any group of assets constituting an operating unit of a
business, the EBITDA for such period shall be reduced by an amount equal
to the EBITDA (if positive) directly attributable to the assets that are
the subject of such Asset Disposition for such period or increased by an
amount equal to the EBITDA (if negative) directly attributable thereto for
such period and Consolidated Interest Expense for such period shall be
reduced by an amount equal to the Consolidated Interest Expense directly
attributable to any Indebtedness of the Company or any Restricted
Subsidiary repaid, repurchased, defeased or otherwise discharged with
respect to the Company and its continuing Restricted Subsidiaries in
connection with such Asset Disposition for such period (and, if the
Capital Stock of any Restricted Subsidiary is sold, the Consolidated
Interest Expense for such period directly attributable to the Indebtedness
of such Restricted Subsidiary to the extent the Company and its continuing
Restricted Subsidiaries are no longer liable for such Indebtedness after
such sale),
<PAGE> 27
(3) if since the beginning of such period the Company or any
Restricted Subsidiary (by merger or otherwise) shall have made an
Investment in any Person that thereby becomes a Restricted Subsidiary, or
otherwise acquired any company or any business or any group of assets
constituting an operating unit of a business, including any such
acquisition of assets occurring in connection with a transaction causing a
calculation to be made hereunder, EBITDA and Consolidated Interest Expense
for such period shall be calculated after giving pro forma effect thereto
(including the Incurrence of any Indebtedness) as if such Investment or
acquisition occurred on the first day of such period, and
(4) if since the beginning of such period any Person (that
subsequently became a Restricted Subsidiary or was merged with or into the
Company or any Restricted Subsidiary since the beginning of such period)
shall have made any Asset Disposition or any Investment or acquisition of
assets that would have required an adjustment pursuant to clause (2) or
(3) above if made by the Company or a Restricted Subsidiary during such
period, EBITDA and Consolidated Interest Expense for such period shall be
calculated after giving pro forma effect thereto as if such Asset
Disposition, Investment or acquisition of assets occurred on the first day
of such period.
For purposes of this definition, whenever pro forma effect is to be
given to an Asset Disposition, Investment or acquisition of assets, or any
transaction governed by the provisions of paragraph (l)(i), or the amount of
income or earnings relating thereto and the amount of Consolidated Interest
Expense associated with any Indebtedness Incurred or repaid, repurchased,
defeased or otherwise discharged in connection therewith, the pro forma
calculations in respect thereof shall be as determined in good faith by a
responsible financial or accounting Officer of the Company, based on reasonable
assumptions. If any Indebtedness bears a floating rate of interest and is being
given pro forma effect, the interest expense on such Indebtedness shall be
calculated as if the rate in effect on the date of determination had been the
applicable rate for the entire period (taking into account any Interest Rate
Agreement applicable to such Indebtedness if such Interest Rate Agreement has a
remaining term as at the date of determination in excess of 12 months). If any
Indebtedness bears, at the option of the Company or a Restricted Subsidiary, a
fixed or floating rate of interest and is being given pro forma effect, the
interest expense on such Indebtedness shall be computed by applying, at the
option of the Company or such Restricted Subsidiary, either a fixed or floating
rate. If any Indebtedness which is being given pro forma effect was Incurred
under a revolving credit facility, the interest expense on such Indebtedness
shall be computed based upon the average daily balance of such Indebtedness
during the applicable period.
"Consolidated Interest Expense" means, for any period, the total
consolidated interest expense of the Company and its Restricted Subsidiaries,
the Company and its consolidated Restricted Subsidiaries, determined in
accordance with GAAP, minus, to the extent included in such interest expense,
amortization or write-off of financing costs, and plus, to the extent incurred
by the Company and its Restricted Subsidiaries in such period but not included
in such interest expense, without duplication, (I) interest expense
<PAGE> 28
attributable to Capitalized Lease Obligations and the interest component of rent
expense associated with Attributable Debt in respect of the relevant lease
giving rise thereto, determined as if such lease were a capitalized lease, in
accordance with GAAP, (II) amortization of debt discount, (III) interest in
respect of Indebtedness of any other Person that has been Guaranteed by the
Company or any Restricted Subsidiary, (IV) non-cash interest expense, (V) net
costs associated with Hedging Obligations, (VI) cash dividends in respect of all
Preferred Stock of the Company and its Restricted Subsidiaries and Disqualified
Stock of the Company, in each case held by Persons other than the Company or a
Restricted Subsidiary; and (VII) the cash contributions to any employee stock
ownership plan or similar trust to the extent such contributions are used by
such plan or trust to pay interest to any Person (other than the Company or any
Restricted Subsidiary) on Indebtedness Incurred by such plan or trust; provided,
however, that there shall be excluded therefrom any such interest expense of any
Unrestricted Subsidiary to the extent the related Indebtedness is not Guaranteed
or paid by the Company or any Restricted Subsidiary. For purposes of the
foregoing, gross interest expense shall be determined after giving effect to any
net payments made or received by the Company and its Subsidiaries with respect
to Interest Rate Agreements.
"Consolidated Net Income" means, for any period, the consolidated net
income (loss) of the Company and its Restricted Subsidiaries, determined in
accordance with GAAP; provided, however, that there shall not be included in
such Consolidated Net Income:
(i) any net income (loss) of any Person if such Person is not a
Restricted Subsidiary, except that (A) subject to the limitations
contained in clause (iv) below, the Company's equity in the net income of
any such Person for such period shall be included in such Consolidated Net
Income up to the aggregate amount of cash actually distributed by such
Person during such period to the Company or a Restricted Subsidiary as a
dividend or other distribution (subject, in the case of a dividend or
other distribution to a Restricted Subsidiary, to the limitations
contained in clause (iii) below) and (B) the Company's equity in the net
loss of such Person shall be included to the extent of the aggregate
Investment of the Company or any of its Restricted Subsidiaries in such
Person,
(ii) any net income (loss) of any Person acquired by the Company or a
Restricted Subsidiary in a pooling of interests transaction for any period
prior to the date of such acquisition,
(iii) any net income (loss) of any Restricted Subsidiary that is not
a Exchange Debenture Guarantor if such Restricted Subsidiary is subject to
restrictions, directly or indirectly, on the payment of dividends or the
making of distributions by such Restricted Subsidiary, directly or
indirectly, to the Company, except that (A) subject to the limitations
contained in clause (iv) below, the Company's equity in the net income of
any such Restricted Subsidiary for such period shall be included in such
Consolidated Net Income up to the aggregate amount of cash that could have
been distributed by such Restricted Subsidiary during such period to the
Company or
<PAGE> 29
another Restricted Subsidiary as a dividend (subject, in the case of a
dividend that could have been made to another Restricted Subsidiary, to
the limitation contained in this clause) and (B) the net loss of such
Restricted Subsidiary shall be included to the extent of the aggregate
Investment of the Company or any of its other Restricted Subsidiaries in
such Restricted Subsidiary,
(iv) any gain or loss realized upon the sale or other disposition of
any asset of the Company or its consolidated Restricted Subsidiaries
(including pursuant to any Sale/Leaseback Transaction) that is not sold or
otherwise disposed of in the ordinary course of business,
(v) any extraordinary gain or loss, and
(vi) the cumulative effect of a change in accounting principles.
"Consulting Agreements" means the Consulting Agreement, dated as of
March 18, 1998, between the Company and SG Capital Partners LLC, as amended from
time to time, and the Consulting Agreement, dated as of March 18, 1998, between
the Company and Greenwich Street Capital Partners, Inc., as amended from time to
time.
"Conversion Ratio" means 0.1908747.
"Convertible Preference Stock" means the 18% Convertible Cumulative
Preference Stock of the Company due June 30, 2010.
"Currency Agreement" means in respect of a Person any foreign
exchange contract, currency swap agreement or other similar agreement or
arrangements (including derivative agreements or arrangements) as to which such
Person is a party or a beneficiary.
"Default" means any event or condition that is, or after notice or
passage of time or both would be, an Event of Default under the applicable
agreement.
"Disqualified Stock" means, with respect to any Person, any Capital
Stock (other than Management Stock) that by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable or
exercisable at the option of the Holder) or upon the happening of any event (I)
matures or is mandatorily redeemable pursuant to a sinking fund obligation or
otherwise, (II) is convertible or exchangeable for Indebtedness or Disqualified
Stock at the option of the Holder or (III) is redeemable at the option of the
holder thereof, in whole or in part, in each case on or prior to the 91st day
after the Stated Maturity of the Securities. For avoidance of doubt, the
Exchangeable Preferred Stock and the Convertible Preference Stock shall not be
deemed Disqualified Stock.
"Dividend Payment Date" means (I) March 30, June 30, September 30 and
December 30 of each year with respect to dividends required by Section (c)(i)(A)
hereof
<PAGE> 30
and (II) the date of payment of any dividend on the Company's Common Stock with
respect to dividends required by Section (c)(i)(B) hereof.
"Dividend Period" means the Initial Dividend Period and, thereafter,
each Quarterly Dividend Period.
"Early Redemption Premium" has the meaning specified in paragraph
(e)(i)(B).
"EBITDA" means, for any period, the Consolidated Net Income for such
period, plus the following to the extent deducted in calculating such
Consolidated Net Income: (I) income tax expense, (II) Consolidated Interest
Expense, (III) depreciation expense and (IV) amortization of intangibles and
other non-cash charges or non-cash losses.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Debentures" means the 12 1/4% Subordinated Exchange
Debentures of the Company due March 15, 2010 and any Exchange Debentures issued
as payment in kind interest thereon.
"Exchange Debenture Guarantee" means any guarantee that may from time
to time be executed and delivered by a Subsidiary of the Company pursuant to
Section 4.12 of the Exchange Debenture Indenture
"Exchange Debenture Guarantor" means any Subsidiary that has issued
an Exchange Debenture Guarantee.
"Exchange Debenture Indenture" means the Indenture, dated as of March
18, 1998, between the Company, Day International, Inc., and The Bank of New
York, as Trustee, under which Exchange Debentures may be issued, and which the
provisions thereof shall be effective only upon an exchange made in accordance
with paragraph (g) hereof.
"Exchangeable Preferred Stock" means the 12 1/4% Senior Exchangeable
Preferred Stock of the Company due March 15, 2010 outstanding on the Issue Date
and any Exchangeable Preferred Stock issued as payment of dividends thereon.
"Fairness Opinion" has the meaning specified in paragraph (l)(iii).
"Foreign Subsidiary" means (A) any Restricted Subsidiary of the
Company that is not organized under the laws of the United States of America or
any state thereof or the District of Columbia and (B) any Restricted Subsidiary
of the Company that has no material assets other than securities of one or more
Foreign Subsidiaries, and other assets relating to an ownership interest in any
such securities or Subsidiaries.
"Future Warrants" means those Warrants to purchase up to
approximately 1,500 shares of the Common Stock of the Company (the "Registrable
Shares") for $0.01 per
<PAGE> 31
share, issued in the form attached as Exhibit A hereto. The Warrants (A) will be
issuable on the Redemption Date, and (I) if the Base Redemption Amount is
calculated pursuant to clause (i) in the definition thereof, will be exercisable
for approximately 1,500 Registrable Shares (representing 5.4% of the pro forma
fully diluted outstanding common stock as of the Issue Date, assuming that no
shares of Convertible Preference Stock have been converted, including all vested
warrants and options as of the Issue Date) and (II) if the Base Redemption
Amount is calculated pursuant to clause (ii) in the definition thereof, will be
exercisable for a lesser number of Registrable Shares as specified in Schedule X
attached hereto and (B) will be exercisable at the earliest of (I) a Change in
Control (ii) a Qualified Public Offering (as defined in the Stockholders
Agreement) or (iii) the delivery of a Sale Notice under Section 9 of the
Stockholders Agreement.
"G-IV" means Greenwich IV, LLC, a Delaware limited liability company,
and any successor in interest thereto.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect on the Issue Date (for purposes of the
definitions of the terms "Consolidated Coverage Ratio," "Consolidated Interest
Expense," "Consolidated Net Income" and "EBITDA," all defined terms in this
Certificate of Designation to the extent used in or relating to any of the
foregoing definitions, and all ratios and computations based on any of the
foregoing definitions) and as in effect from time to time (for all other
purposes of this Certificate of Designation), including those set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as approved by a significant segment of the accounting profession
all ratios and computations based on GAAP contained in the Certificate of
Designation shall be computed in conformity with GAAP.
"GSCP" means Greenwich Street Capital Partners, Inc., a Delaware
corporation and its successors.
"GSD" means GSD Acquisition Corp., a Delaware Corporation.
"GSD Liquidation" has the meaning specified in the Prospectus for the
Company's 12 1/4% Senior Exchangeable Preferred Stock due 2010, dated June 22,
1998.
"Holder" means a registered holder of shares of Convertible
Preference Stock.
"Incur" means issue, assume, enter into any Guarantee of, incur or
otherwise become liable for; provided, however, that any Indebtedness or Capital
Stock of a Person existing at the time such Person becomes a Subsidiary (whether
by merger, consolidation, acquisition or otherwise) shall be deemed to be
Incurred by such Subsidiary at the time it becomes a Subsidiary. Any
Indebtedness issued at a discount (including Indebtedness on which interest is
payable through the issuance of additional Indebtedness) shall be
<PAGE> 32
deemed incurred at the time of original issuance of the Indebtedness at the
initial accreted amount thereof.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication):
(i) the principal of indebtedness of such Person for borrowed money,
(ii) the principal of obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments,
(iii) all reimbursement obligations of such Person (including
reimbursement obligations) in respect of letters of credit or other similar
instruments (the amount of such obligations being equal at any time to the
aggregate then undrawn and unexpired amount of such letters of credit or other
instruments plus the aggregate amount of drawings thereunder that have not then
been reimbursed),
(iv) all obligations of such Person to pay the deferred and unpaid
purchase price of property or services (except Trade Payables), which purchase
price is due more than one year after the date of placing such property in final
service or taking final delivery and title thereto or the completion of such
services,
(v) all Capitalized Lease Obligations and Attributable Debt of such
Person,
(vi) Disqualified Stock of the Company and Exchangeable Preferred
Stock of a Subsidiary (to the extent held by a Person other than the Company or
a Restricted Subsidiary), but excluding, in each case, any accrued dividends
(the amount of such obligation to be equal at any time to the maximum fixed
involuntary redemption, repayment or repurchase price for such Capital Stock, or
if such Capital Stock has no such fixed price, to the involuntary redemption,
repayment or repurchase price therefor calculated in accordance with the terms
thereof as if then redeemed, repaid or repurchased, and if such price is based
upon or measured by the fair market value of such Capital Stock, such fair
market value shall be as determined in good faith by the Board of Directors or
the board of directors of the issuer of such Capital Stock),
(vii) all Indebtedness of other Persons secured by a Lien on any
asset of such Person, whether or not such Indebtedness is assumed by such
Person; provided, however, that the amount of Indebtedness of such Person shall
be the lesser of (A) the fair market value of such asset at such date of
determination and (B) the amount of such Indebtedness of such other Persons,
(viii) All Indebtedness of other Persons to the extent Guaranteed by
such Person, and
(ix) to the extent not otherwise included in this definition, net
Hedging Obligations of such Person (the amount of any such obligation to be
equal at any time to
<PAGE> 33
the termination value of such agreement or arrangement giving rise to such
Hedging Obligation that would be payable by such Person at such time).
The amount of Indebtedness of any Person at any date shall be
determined as set forth above, or otherwise in accordance with GAAP.
"Indenture" means the Indenture, dated as of March 18, 1998 relating
to the Notes, among the Company, Day International, Inc. and The Bank of New
York.
"Initial Dividend Period" means the dividend period commencing on the
Issue Date and ending on the day before the first Dividend Payment Date to occur
thereafter.
"Interest Rate Agreement" means with respect to any Person any
interest rate protection agreement interest rate future agreement, interest rate
option agreement, interest rate swap agreement, interest rate cap agreement,
interest rate collar agreement, interest rate hedge agreement or other similar
agreement or arrangement (including derivative agreements or arrangements) as to
which such Person is party or a beneficiary.
"Investment" in any Person by any other Person means any direct or
indirect advance, loan or other extension of credit (other than to customers,
directors, officers or employees of any Person in the ordinary course of
business) or capital contribution (by means of any transfer of cash or other
property to others or any payment for property or services for the account or
use of others) to, or any purchase or acquisition of Capital Stock, Indebtedness
or other similar instruments issued by, such Person. For purposes of the
definition of "Unrestricted Subsidiary" and paragraph (l)(ii), (I) "Investment"
shall include the portion (proportionate to the Company's equity interest in
such Subsidiary) of the fair market value of the net assets of any Subsidiary of
the Company at the time that such Subsidiary is designated an Unrestricted
Subsidiary; provided, however, that upon a redesignation of such Subsidiary as a
Restricted Subsidiary, the Company shall be deemed to continue to have a
permanent "Investment" in an Unrestricted Subsidiary in an amount (if positive)
equal to (X) the Company's "Investment" in such Subsidiary at the time of such
redesignation less (Y) the portion (proportionate to the Company's equity
interest in such Subsidiary) of the fair market value of the net assets of such
Subsidiary at the time of such redesignation; and (II) any property transferred
to or from an Unrestricted Subsidiary shall be valued at its fair market value
at the time of such transfer, in each case as determined in good faith by the
Board of Directors.
"Issue Date" means the date on which the Convertible Preference Stock
is originally issued by the Company under this Certificate of Designation.
"Junior Payments" has the meaning specified in paragraph (l)(ii).
"Junior Securities" has the meaning specified in paragraph (b).
<PAGE> 34
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any conditional sale or other title
retention agreement or lease in the nature thereof).
"Liquidation Preference" has the meaning specified in paragraph (a).
"Management Agreements" means, collectively, the Consulting
Agreements, the Fee Agreement and the Indemnification Agreement, each between
the Company, GSCP and SGCP (and their permitted successors and assigns
thereunder), as each may be amended, supplemented, waived or otherwise modified
from time to time in accordance with the terms thereof and of the Exchange
Debenture Indenture.
"Management Investors" means the officers, directors, employees and
other members of the management of the Company or any of its Subsidiaries, or
family members or relatives thereof, or trusts for the benefit of any of the
foregoing, or any of their heirs, executors, successors and legal
representatives, who at any date beneficially own or have the right to acquire,
directly or indirectly, Capital Stock of the Company.
"Management Stock" means Capital Stock of the Company, or options,
warrants or other rights in respect thereof, held by any of the Management
Investors.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds," with respect to any issuance or sale of any
securities of the Company or any Subsidiary by the Company or any Subsidiary, or
any capital contribution, means the cash proceeds of such issuance, sale or
contribution net of attorneys' fees, accountants' fees, underwriters' or
placement agents' fees, discounts or commissions and brokerage, consultant and
other fees actually incurred in connection with such issuance, sale or
contribution and net of taxes paid or payable as a result thereof.
"Notes" means the Notes issued under the Indenture.
"Note Guarantee" means any guarantee that may from time to time be
executed and delivered by a Subsidiary of the Company pursuant to Section 4.12
of the Indenture.
"Note Guarantor" means any Subsidiary that has issued a Note
Guarantee.
The "Offering" means the Company's offering of the 9 1/2% Senior
Subordinated Notes due 2008 and the Exchangeable Preferred Stock pursuant to the
Purchase Agreement.
"Officer" means the President, Chief Financial Officer, any Vice
President, Controller or Treasurer of the Company.
"Officer's Certificate" means a certificate signed by one Officer.
<PAGE> 35
"Opinion of Counsel" means a written opinion from legal counsel who
is reasonably acceptable to the Transfer Agent. The counsel may be an employee
of or counsel to the Company or the Transfer Agent.
"Parity Securities" has the meaning specified in paragraph (b).
"Payment Default" has the meaning specified in paragraph (f)(iv)(A).
"Permitted Holder" means any of the following: (i) GSCP, SGCP, and
their respective Affiliates; provided that "Permitted Holders" in any event
shall include 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 Company Inc. and their
respective Affiliates; any other investment fund or vehicle managed, sponsored
or advised by Greenwich Street Capital Partners, Inc., the Travelers Insurance
Company, the Travelers Life and Annuity Company, Smith Barney Company, Inc. or
any of their respective Affiliates; and (ii) any Person acting in the capacity
of an underwriter in connection with a public or private offering of the
Company's capital stock.
"Permitted Investment" means an Investment by the Company or any
Restricted Subsidiary in, or consisting of, any of the following:
(i) a Restricted Subsidiary, the Company or a Person that will, upon
the making of such Investment, become a Restricted Subsidiary;
(ii) another Person if as a result of such Investment such other
Person is merged or consolidated with or into, or transfers or conveys all
or substantially all its assets to, the Company or a Restricted
Subsidiary;
(iii) Cash Equivalents;
(iv) receivables owing to the Company or any Restricted Subsidiary,
if created or acquired in the ordinary course of business and payable or
dischargeable in accordance with customary trade terms; provided, however,
that such trade terms may include such concessionary trade terms as the
Company or any such Restricted Subsidiary deems reasonable under the
circumstances;
(v) any Investments received as non-cash consideration in sales or
other dispositions of property or assets, including Asset Dispositions
made in compliance with Section 4.6 of the Exchange Debenture Indenture as
if such covenant is in effect on the date of such Investment (without
consideration of whether the Exchange Debenture Indenture is in effect);
(vi) securities or other Investments received in settlement of debts
created in the ordinary course of business and owing to the Company or any
Restricted Subsidiary,
<PAGE> 36
or as a result of foreclosure, perfection or enforcement of any Lien, or
in satisfaction of judgments, including in connection with any bankruptcy
proceeding or other reorganization of another Person;
(vii) Investments in existence or made pursuant to legally binding
written commitments in existence on the Issue Date;
(viii) Currency Agreements, Interest Rate Agreements and related
Hedging Obligations, which obligations are Incurred in compliance with
paragraph (l)(iv)(B)(13);
(ix) pledges or deposits (X) with respect to leases or utilities
provided to third parties in the ordinary course of business or (Y)
otherwise described in the definition of "Permitted Liens"; and
(x) other Investments in an aggregate amount outstanding at any time
not to exceed $12.5 million.
"Permitted Liens" means:
(a) Liens for taxes, assessments or other governmental charges not
yet delinquent or the nonpayment of which in the aggregate would not
reasonably be expected to have a material adverse effect on the Company
and its Restricted Subsidiaries, or that are being contested in good faith
and by appropriate proceedings if adequate reserves with respect thereto
are maintained on the books of the Company or a Subsidiary thereof, as the
case may be, in accordance with GAAP;
(b) carriers', warehousemen's, mechanics', landlords', materialmen's,
repairmen's or other like Liens arising in the ordinary course of business
in respect of obligations that are not overdue for a period of more than
60 days, or that are bonded or that are being contested in good faith and
by appropriate proceedings;
(c) pledges, deposits or Liens in connection with workers'
compensation, unemployment insurance and other social security and other
similar legislation or other insurance related obligations (including,
without limitation, pledges or deposits securing liability to insurance
carriers under insurance or self-insurance arrangements);
(d) pledges, deposits or Liens to secure the performance of bids,
tenders, trade, government or other contracts (other than for borrowed
money), obligations for utilities, leases, licenses, statutory
obligations, surety, judgment and appeal bonds, performance bonds and
other obligations of a like nature incurred in the ordinary course of
business;
(e) easements (including reciprocal easement agreements),
rights-of-way, building, zoning and similar restrictions, utility
agreements, covenants, reservations,
<PAGE> 37
restrictions, encroachments, changes, and other similar encumbrances or
title defects incurred, or leases or subleases granted to others, in the
ordinary course of business, which do not in the aggregate materially
interfere with the ordinary conduct of the business of the Company and its
Subsidiaries, taken as a whole;
(f) Liens existing on, or provided for under written arrangements
existing on, the Issue Date, or (in the case of any such Liens securing
Indebtedness of the Company or any of its Subsidiaries existing or arising
under written arrangements existing on the Issue Date) securing any
Refinancing Indebtedness in respect of such Indebtedness so long as the
Lien securing such Refinancing Indebtedness is limited to all or part of
the same property or assets (plus improvements, accessions, proceeds or
dividends or distributions in respect thereof) that secured (or under such
written arrangements could secure) the original Indebtedness;
(g) (I) mortgages, liens, security interests, restrictions,
encumbrances or any other matters of record that have been placed by any
developer, landlord or other third party on property over which the
Company or any Restricted Subsidiary of the Company has easement rights or
on any leased property and subordination or similar agreements relating
thereto and (II) any condemnation or eminent domain proceedings affecting
any real property;
(h) Liens securing Hedging Obligations Incurred in compliance with
paragraph (l)(iv)(B)(13);
(i) Liens arising out of judgments, decrees, orders or awards in
respect of which the Company shall in good faith be prosecuting an appeal
or proceedings for review, which appeal or proceedings shall not have been
finally terminated, or if the period within which such appeal or
proceedings may be initiated shall not have expired;
(j) leases, subleases, licenses or sublicenses to third parties;
(k) Liens securing (X) Indebtedness Incurred in compliance with
clause (1), (2), (5) or (7) of paragraph (l)(iv)(B), or clause (4) thereof
(other than Refinancing Indebtedness Incurred in respect of Indebtedness
described in paragraph (a) thereof) or (Y) Bank Indebtedness;
(l) Liens on properties or assets (1) of the Company or any Note
Guarantor securing Senior Indebtedness or Guarantor Senior Indebtedness,
(2) of any Wholly Owned Subsidiary that is not a Note Guarantor securing
Indebtedness of any Wholly Owned Subsidiary that is not a Note Guarantor
or (3) of any Restricted Subsidiary that is not a Note Guarantor securing
its Indebtedness;
(m) Liens existing on property or assets of a Person at the time such
Person becomes a Subsidiary of the Company (or at the time the Company or
a Restricted Subsidiary acquires such property or assets); provided,
however, that such Liens are not created in connection with, or in
contemplation of, such other Person becoming
<PAGE> 38
such a Subsidiary (or such acquisition of such property or assets), and
that such Liens are limited to all or part of the same property or assets
(plus improvements, accessions, proceeds or dividends or distributions in
respect thereof) that secured (or, under the written arrangements under
which such Liens arose, could secure) the obligations to which such Liens
relate;
(n) Liens on Capital Stock of an Unrestricted Subsidiary that secure
Indebtedness or other obligations of such Unrestricted Subsidiary;
(o) any encumbrance or restriction (including, but not limited to,
put and call agreements) with respect to Capital Stock of any joint
venture or similar arrangement pursuant to any joint venture or similar
agreement;
(p) Liens securing the Notes or the Exchange Debentures; and
(q) Liens securing Refinancing Indebtedness Incurred in respect of
any Indebtedness secured by, or securing any refinancing, refunding,
extension, renewal or replacement (in whole or in part) of any other
obligation secured by, any other Permitted Liens, provided that any such
new Lien is limited to all or part of the same property or assets (plus
improvements, accessions, proceeds or dividends or distributions in
respect thereof) that secured (or, under the written arrangements under
which the original Lien arose, could secure) the obligations to which such
Liens relate.
"Per-Share Redemption Amount" means as of any date the amount that
would be payable per share of Convertible Preference Stock if all of the
Convertible Preference Stock were being redeemed for cash on such date in
accordance with the terms hereof.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, limited liability company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Preferred Stock" as applied to the Capital Stock of any corporation
means Capital Stock of any class or classes (however designated) that is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"Public Equity Offering" means an underwritten primary public
offering of Common Stock of the Company pursuant to an effective registration
statement under the Securities Act (whether alone or in conjunction with any
secondary public offering).
"Public Market" means any time after a Public Equity Offering has
been consummated and either (X) at least 10% of the total issued and outstanding
common stock (or equivalent equity interests) of the Company has been
distributed by means of an
<PAGE> 39
effective registration statement under the Securities Act or (Y) an established
public trading market otherwise exists for any such common stock or equivalent
equity interests.
"Purchase Agreement" means the Agreement, dated March 13, 1998, among
the Company, the Initial Purchaser and the Guarantors signatory thereto,
providing for the purchase by the Initial Purchaser of $115.0 million aggregate
principal amount of the Company's 12 1/4% Senior Subordinated Notes due 2008 and
$35.0 million aggregate liquidation preference of the Company's 12 1/4% Senior
Exchangeable Preferred Stock due 2010.
"Put" has the meaning specified in paragraph (h)(i).
"Put Date" has the meaning specified in paragraph (h)(i).
"Put Price" has the meaning specified in paragraph (h)(i).
"Quarterly Dividend Period" shall mean the quarterly period
commencing on each March 31, June 30, September 30 and December 31 and ending on
the day before the following Dividend Payment Date.
"Redemption Date" with respect to any shares of Convertible
Preference Stock, means the date on which such shares of Convertible Preference
Stock are redeemed by the Company.
"Redemption Price" means the consideration due to the Holders of
Convertible Preference Stock on any Redemption Date as specified in paragraphs
(e)(i) and (e)(ii).
"Redemption Value" shall be determined (I) after the creation of a
Public Market, by reference to the price per share of the Common Stock as of
5:00 P.M. on the preceding Business Day; (II) after a Change of Control by
reference to (A) the cash consideration paid per share of Common Stock, (B) the
price of any publicly traded securities (as of 5 P.M. on the preceding Business
Day) received as consideration per share of Common Stock, and (C) the value of
any other consideration per share of Common Stock (determined as provided in
clause (iii) below); and (III) in all other circumstances, by the Company's
Board of Directors based on the consolidated results of operations, financial
condition and future prospects of the Company and such other factors as the
Board may deem appropriate, provided, however, that in the event the Holders of
a majority of the shares of the Convertible Preference Stock dispute such
determination, such determination shall be made by a nationally recognized,
unaffiliated, independent investment bank selected by the Company and reasonably
acceptable to the Holders.
"Refinancing Indebtedness" means Indebtedness that is Incurred to
refund, refinance, replace, renew, repay or extend (including pursuant to any
defeasance or discharge mechanism) (collectively, "refinances," "refinanced" and
"refinancing" as used in the Indenture shall have a correlative meaning) any
Indebtedness existing on the date
<PAGE> 40
of the Indenture or Incurred in compliance with the Indenture (including
Indebtedness of the Company that refinances Indebtedness of any Restricted
Subsidiary (to the extent permitted in the Indenture) and Indebtedness of any
Restricted Subsidiary that refinances Indebtedness of another Restricted
Subsidiary) including Indebtedness that refinances Refinancing Indebtedness;
provided, however, that (I) the Refinancing Indebtedness has a Stated Maturity
no earlier than the Stated Maturity of the Indebtedness being refinanced, (II)
the Refinancing Indebtedness has an Average Life at the time such Refinancing
Indebtedness is Incurred that is equal to or greater than the Average Life of
the Indebtedness being refinanced and (III) such Refinancing Indebtedness is
Incurred in an aggregate principal amount (or if issued with original issue
discount, an aggregate issue price) that is equal to or less than the sum of (X)
the aggregate principal amount (or if issued with original issue discount, the
aggregate accreted value) then outstanding of the Indebtedness being refinanced,
plus (Y) fees, underwriting discounts, premiums not in excess of the premiums
called for in the documentation related to such Indebtedness so refinanced and
other costs and expenses incurred in connection with such Refinancing
Indebtedness; provided further, however, that Refinancing Indebtedness shall not
include (A) Indebtedness of a Restricted Subsidiary that is not a Note Guarantor
that refinances Indebtedness of the Company or (B) Indebtedness of the Company
or a Restricted Subsidiary that refinances Indebtedness of an Unrestricted
Subsidiary.
"Related Business" means those businesses in which the Company or any
of its Subsidiaries is engaged on the Issue Date, or that are reasonably
related, complementary or incidental thereto.
"Restricted Subsidiary" means any Subsidiary of the Company other
than an Unrestricted Subsidiary.
"Restriction Default" has the meaning specified in paragraph
(f)(iv)(A).
"Revolving Credit Facility" means the revolving credit facility under
the Senior Secured Credit Facility (which may include any swing line or letter
of credit facility or subfacility thereunder).
"SGCP" means SG Capital Partners, LLC, a Delaware limited liability
company.
"S&P" means Standard & Poor's Ratings Service, a division of The
McGraw-Hill Companies, Inc. and its successors.
"Sale/Leaseback Transaction" means an arrangement relating to
property now owned or hereafter acquired by the Company or a Restricted
Subsidiary whereby the Company or such Restricted Subsidiary transfers such
property to a Person and the Company or such Restricted Subsidiary leases it
from such Person, other than leases (X) between the Company and a Restricted
Subsidiary or between or (Y) required to be classified and accounted for as
capitalized leases for financial reporting purposes in accordance with GAAP.
<PAGE> 41
"Senior Credit Agreement" means the Amended and Restated Senior
Secured Credit Agreement, dated on or about October 18, 1999, among the Company,
the several lenders party thereto from time to time, SG Cowen Securities
Corporation, as arranger, and Societe Generale, as administrative agent, as such
agreement may be assumed by any successor in interest, and as such agreement may
be amended, supplemented, waived or otherwise modified from time to time, or
refunded, refinanced, restructured, replaced, renewed, repaid, increased or
extended from time to time (whether in whole or in part, whether with the
original agent and lenders or other agents and lenders or otherwise, and whether
provided under the original Senior Credit Agreement or otherwise).
"Senior Indebtedness" means the following obligations, whether
outstanding on the date of the Indenture or thereafter issued, without
duplication: (I) all obligations consisting of Bank Indebtedness; (II) all
obligations relating to the 2005 Notes; (III) all obligations relating to the
Notes; and (IV) all obligations consisting of the principal of and premium, if
any, and accrued and unpaid interest (including interest accruing on or after
the filing of any petition in bankruptcy or for reorganization relating to the
Company regardless of whether post-filing interest is allowed in such
proceeding) on, and fees and other amounts owing in respect of, all other
Indebtedness of the Company, unless, in the instrument creating or evidencing
the same or pursuant to which the same is outstanding, it is expressly provided
that the obligations in respect of such Indebtedness are not senior in right of
payment to the Securities; provided, however, that Senior Indebtedness shall not
include (1) any obligation of the Company to any Subsidiary, (2) any liability
for Federal, state, foreign, local or other taxes owed or owing by the Company,
(3) any accounts payable or other liability to trade creditors arising in the
ordinary course of business (including Guarantees thereof or instruments
evidencing such liabilities), (4) any Indebtedness of the Company (or Guarantee
by the Company of any Indebtedness) that is expressly subordinate in right of
payment to any other Indebtedness of the Company (or Guarantee by the Company of
any Indebtedness) or (5) any Capital Stock. If any Designated Senior
Indebtedness is disallowed, avoided or subordinated pursuant to the provisions
of Section 548 of Title 11 of the United States Code or any applicable state
fraudulent conveyance law, such Designated Senior Indebtedness nevertheless will
constitute Senior Indebtedness.
"Senior Secured Credit Facility" means the collective reference to
the Senior Credit Agreement, any Loan Documents (as defined therein), any notes
and letters of credit issued pursuant thereto and any guarantee and collateral
agreement, patent and trademark security agreement, mortgages, letter of credit
applications and other security agreements and collateral documents, and other
instruments and documents, executed and delivered pursuant to or in connection
with any of the foregoing, in each case as the same may be amended,
supplemented, waived or otherwise modified from time to time, or refunded,
refinanced, restructured, replaced, renewed, repaid, increased or extended from
time to time (whether in whole or in part, whether with the original agent and
lenders or other agents and lenders or otherwise, and whether provided under the
original Senior Credit Agreement or otherwise). Without limiting the generality
of the foregoing, the term "Senior Secured Credit Facility" shall include any
agreement (I) changing the maturity of any Indebtedness incurred thereunder or
contemplated thereby, (II) adding
<PAGE> 42
Subsidiaries of the Company as additional borrowers or guarantors thereunder,
(III) increasing the amount of Indebtedness incurred thereunder or available to
be borrowed thereunder or (IV) otherwise altering the terms and conditions
thereof.
"Senior Securities" means the Exchangeable Preferred Stock, Bank
Indebtedness, the 2005 Notes and the Notes.
"SGCP" means SG Capital Partners, LLC, a Delaware limited liability
company.
"Sponsor Liquidity Event" has the meaning specified in the
Stockholders Agreement.
"Stated Maturity" means, with respect to any security, the date
specified in such security as the fixed date on which the payment of principal
of such security is due and payable, including pursuant to any mandatory
redemption provision (but excluding any provision providing for the repurchase
of such security at the option of the holder thereof upon the happening of any
contingency beyond the control of the issuer unless such contingency has
occurred).
"Stockholders Agreement" means the Amended and Restated Stockholders
Agreement, dated on or about October 18, 1999 among the Company and certain of
its stockholders, as the same may be amended, supplemented, waived or otherwise
modified from time to time.
"Subject Shares" has the meaning specified in paragraph (g)(i)(B).
"Subsidiary" of any Person means any corporation, association,
partnership or other business entity of which more than 50% of the total voting
power of shares of Capital Stock or other equity interests (including
partnership interests) entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by (i) such person
or (ii) one or more Subsidiaries of such Person.
"Successor Company" has the meaning specified in paragraph (l)(i).
"Term Loan Facility" means the term loan facility under the Senior
Secured Credit Facility.
"Trade Payables" means, with respect to any Person, any accounts
payable or any indebtedness or monetary obligation to trade creditors created,
assumed or Guaranteed by such Person arising in the ordinary course of business
in connection with the acquisition of goods or services.
"2005 Notes" means the Company's 11 1/8% Senior Subordinated Notes
due 2005.
<PAGE> 43
"Unrestricted Subsidiary" means (I) any Subsidiary of the Company
that at the time of determination shall be designated an Unrestricted Subsidiary
by the Board of Directors in the manner provided below and (II) any Subsidiary
of an Unrestricted Subsidiary. The Board of Directors may designate any
Subsidiary of the Company (including any newly acquired or newly formed
Subsidiary of the Company) to be an Unrestricted Subsidiary unless such
Subsidiary or any of its Subsidiaries owns any Capital Stock or Indebtedness of,
or owns or holds any Lien on any property of, the Company or any other
Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so
designated; provided, however, that either (A) the Subsidiary to be so
designated has total consolidated assets of $1,000 or less or (B) if such
Subsidiary has consolidated assets greater than $1,000, then such designation
would be permitted under Section 4.4. The Board of Directors may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; provided, however, that
immediately after giving effect to such designation (X) the Company could incur
at least $1.00 of additional Indebtedness under Section 4.3(a) and (Y) no
Default shall have occurred and be continuing. Any such designation by the Board
of Directors shall be evidenced to the Trustee by promptly filing with the
Trustee a copy of the resolution of the Company's Board of Directors giving
effect to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing provisions.
"U.S." means the United States of America.
"Voting Stock" of an entity means all classes of Capital Stock of
such entity then outstanding and normally entitled to vote in the election of
directors or all interests in such entity with the ability to control the
management or actions of such entity.
"Wholly Owned Subsidiary" means a Restricted Subsidiary of the
Company all the Capital Stock of which (other than directors' qualifying shares,
or (in the case of any Foreign Subsidiary) to the extent required by applicable
law) is owned by the Company or another Wholly Owned Subsidiary.
IN WITNESS WHEREOF, Day International Group, Inc. has caused this
Certificate of Designation to be signed by Dennis R. Wolters, its President,
on the date and year first above written.
DAY INTERNATIONAL GROUP, INC.
By: /s/ Dennis R. Wolters
---------------------
Name: Dennis R. Wolters
Title: President
SCHEDULE X
<PAGE> 44
to Certificate of Designation for
18% Convertible Cumulative Preference Stock Due 2010
Day International Group, Inc.
If the internal rate of return
on the Convertible Preference
Stock, without giving effect
to the Warrants issued upon The number of shares
redemption is: allocated shall be:
- -------------- -------------------
<18.0% 1,500
18.0%-19.0% 1,450
19.1%-20.0% 1,250
20.1%-21.0% 1,050
21.1%-22.0% 850
22.1%-23.0% 650
23.1%-24.0% 450
>24.0% 0
A copy of Exhibit A hereto (the form of Future Warrant) will be provided
supplementally to the SEC upon request.
<PAGE> 1
Exhibit 4.2
SUPPLEMENTAL INDENTURE
This Supplemental Indenture, dated as of October 19, 1999 (this
"Supplemental Indenture" or "Guarantee"), among the parties listed on Exhibit A
hereto (the "Guarantors"), Day International Group, Inc., a Delaware corporation
(together with its successors and assigns, the "Company"), and The Bank of New
York, a New York banking corporation, as Trustee (the "Trustee") under the
Indenture referred to below.
W I T N E S S E T H:
WHEREAS, the Company and the Trustee have heretofore executed and
delivered an Indenture, dated as of March 18, 1998 (as amended, supplemented,
waived or otherwise modified, the "Indenture"), providing for the issuance of an
aggregate principal amount of $115.0 million of 9 1/2% Senior Subordinated Notes
due 2008 of the Company (the "Securities");
WHEREAS, Section 4.12 of the Indenture provides that under certain
circumstances the Company is required to cause the Guarantors to execute and
deliver to the Trustee a supplemental indenture pursuant to which the Guarantors
shall unconditionally guarantee all of the Company's obligations under the
Securities pursuant to a Note Guarantee on the terms and conditions set forth
herein; and
WHEREAS, pursuant to Section 9.1 of the Indenture, the Trustee and
the Company are authorized to execute and deliver this Supplemental Indenture to
amend the Indenture, without the consent of any Securityholder;
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the
Guarantors, the Company and the Trustee mutually covenant and agree for the
equal and ratable benefit of the holders of the Securities as follows:
ARTICLE I
Definitions
-----------
SECTION 1.1 DEFINED TERMS. As used in this Guarantee, terms defined
in the Indenture or in the preamble or recitals hereto, are used herein as
therein defined, except that the term "Holders" in this Guarantee shall refer to
the term "Holders" as defined in the Indenture and the Trustee acting on behalf
or for the benefit of such holders. The words "herein," "hereof" and "hereby"
and other words of similar import used in this
<PAGE> 2
Supplemental Indenture refer to this Supplemental Indenture as a whole and not
to any particular section hereof.
ARTICLE II
Guarantee
---------
SECTION 2.1 GUARANTEE. The Guarantors hereby fully, unconditionally
and irrevocable guarantee, as primary obligors and not merely as sureties,
jointly and severally with each other Note Guarantor, to each Holder of the
Securities (a) the full and punctual payment when due, whether at Stated
Maturity, by acceleration, by redemption or otherwise, of principal of and
interest on the Securities and all other monetary obligations of the Company
under the Indenture and the Securities and (b) the full and punctual performance
within applicable grace periods of all other obligations of the Company under
the Indenture and the Securities (all the foregoing being hereinafter
collectively called the "Obligations"). The Guarantors further agree (to the
extent permitted by law) that the Obligations may be extended or renewed, in
whole or in part, without notice or further assent from them, and that they will
remain bound under this Article II notwithstanding any extension or renewal of
any Obligation.
To the extent permitted by applicable law, (i) the Guarantors waive
presentation to, demand of payment from and protest to the Company of any of the
Obligations and also waive notice of protest for nonpayment, (ii) the Guarantors
waive notice of any default under the Securities or the Obligations and (iii)
the Obligations of the Guarantors hereunder shall not be affected by (a) the
failure of any Holder to assert any claim or demand or to enforce any right or
remedy against the Company or any other person under the Indenture, the
Securities or any other agreement or otherwise; (b) any extension or renewal of
any thereof; (c) any rescission, waiver, amendment or modification of any of the
terms or provisions of the Indenture, the Securities or any other agreement; or
(d) the failure of any Holder to exercise any right or remedy against any other
Guarantor of the Obligations.
The Guarantors further agree that their Guarantee herein constitutes
a guarantee of payment, performance and compliance when due (and not a guarantee
of collection) and, to the extent permitted by applicable law, waive any right
to require that any resort be had by any Holder to any security held for payment
of the Obligations.
Except as otherwise provided herein or under applicable law, the
obligations of the Guarantors hereunder shall not be subject to any reduction,
limitation, impairment or termination for any reason (other than payment of the
Obligations in full), including any claim of waiver, release, surrender,
alteration or compromise, and shall not be subject to any defense of setoff,
counterclaim, recoupment or termination whatsoever or by reason
2
<PAGE> 3
of the invalidity, illegality or unenforceability of the Obligations or
otherwise. Without limiting the generality of the foregoing, to the extent
permitted by applicable law, the obligations of the Guarantors herein shall not
be discharged or impaired or otherwise affected by the failure of any Holder to
assert any claim or demand or to enforce any remedy under the Indenture, the
Securities or any other agreement, by any waiver or modification of any thereof,
by any default, failure or delay, willful or otherwise, in the performance of
the Obligations, or by any other act or thing or omission or delay to do any
other act or thing which may or might in any manner or to any extent vary the
risk of the Guarantors or would otherwise operate as a discharge of the
Guarantors as a matter of law or equity.
The Guarantors further agree that, subject to Section 2.2(b) hereof,
their Guarantee herein shall continue to be effective or be reinstated, as the
case may be, if at any time payment, or any part thereof, of principal of or
interest on any Obligation is rescinded or must otherwise be restored by any
Holder upon the bankruptcy or reorganization of the Company or otherwise.
In furtherance of the foregoing and not in limitation of any other
right which any Holder has at law or in equity against the Guarantors by virtue
hereof, upon the failure of the Company to pay the principal of or interest on
any Obligation when and as the same shall become due, whether at maturity, by
acceleration, by redemption or otherwise, or to perform or comply with any other
Obligation, the Guarantors hereby promise to and will, upon receipt of written
demand by the Trustee or the Holders of a majority in principal amount of the
then outstanding Securities (the "Majority Securityholders"), forthwith pay, or
cause to be paid, in cash, to the Holders an amount equal to the sum of (i) the
unpaid principal amount of such Obligations then due and owing, (ii) accrued and
unpaid interest on such Obligations then due and owing (but only to the extent
not prohibited by law) and (iii) all other monetary Obligations of the Company
to the Holders then due and owing.
The Guarantors agree that they shall not be entitled to any right of
subrogation in relation to the Holders in respect of any Obligations guarantied
hereby until payment in full of all Obligations. The Guarantors further agree
(to the extent permitted by applicable law) that, as between such Guarantors, on
the one hand, and the Holders, on the other hand, (x) the maturity of the
Obligations guarantied hereby may be accelerated for the purposes of such
Guarantors' Guarantee herein, notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the Obligations
guarantied hereby, and (y) in the event of any declaration of acceleration of
such Obligations, such Obligations (whether or not due and payable) shall
forthwith become due and payable by such Guarantors for the purposes of this
Section.
3
<PAGE> 4
The Guarantors also agree to pay any and all reasonable costs and
expenses (including reasonable attorneys' fees) incurred by the Trustee or the
Holders in enforcing any rights under this Section.
SECTION 2.2 LIMITATION ON LIABILITY; TERMINATION, RELEASE AND
DISCHARGE. (a) Any term or provision of this Guarantee to the contrary
notwithstanding, the maximum aggregate amount of the Obligations guarantied
hereunder by the Guarantors shall not exceed the maximum amount that can be
hereby guarantied without rendering this Guarantee, as it relates to such
Guarantors, voidable under applicable law, including without limitation
applicable law relating to fraudulent conveyance or fraudulent transfer or
affecting the rights or remedies of creditors generally.
(b) This Guarantee shall terminate and be of no further force or
effect, and the Guarantors shall automatically and unconditionally be released
and discharged from all liabilities and obligations in respect hereof, upon (w)
payment in full of the principal amount of all outstanding Securities (whether
by payment at maturity, purchase, redemption, defeasance, retirement or other
acquisition) and all other monetary Obligations then due and owing, (x) the
merger or consolidation of any Guarantor with and into the Company or another
Note Guarantor that is the surviving Person in such merger or consolidation, or
(y) the exercise by the Company of its legal defeasance option or its covenant
defeasance option, or (z) the sale or other transfer (i) by any Guarantor of all
or substantially all of its assets or (ii) by the Company or a Restricted
Subsidiary of all of the capital stock or other equity interests in any such
Guarantor held by the Company or such Restricted Subsidiary, to a Person that is
not an Affiliate of the Company; provided however, that, in the case of this
clause (z), (1) any such sale or transfer is made in accordance with the terms
of the Indenture (including Section 4.6 thereof), and (2) all obligations of any
such Guarantor under, and all of its guarantees of, and all of its pledges of
assets or other security interests which secure, any Bank Indebtedness of the
Company shall also terminate upon such release, sale or transfer (other than
with respect to any such Indebtedness that is assumed by any Person that is not
an Affiliate of the Company). Upon notice to the Trustee that any such payment,
merger, consolidation, exercise, sale or transfer has occurred or is occurring,
the Trustee shall execute all agreements and instruments confirming and
acknowledging such termination, release and discharge as may be reasonably
requested by any Guarantor, and the Trustee shall return the original Guarantee
to any such Guarantor.
ARTICLE III
Subordination
-------------
SECTION 3.1 SUBORDINATION. The Guarantors agree, and each
Securityholder by accepting a Security agrees, that (a) the obligations of the
Guarantors under this
4
<PAGE> 5
Guarantee are subordinated in right of payment to the prior payment in full
(when due) of all existing and future Guarantor Senior Indebtedness of the
Guarantors, including without limitation any Guarantee by the Guarantors of the
Bank Indebtedness or of any Senior Indebtedness of the Company or of any
Guarantor Senior Indebtedness of any other Note Guarantors, to the extent and in
the matter provided in Article 10 of the Indenture (as if the Guarantors were
the Company for purposes of such Article 10 and all defined terms used therein,
and the Guarantor Senior Indebtedness of the Guarantors were Senior
Indebtedness), and this Guarantee is made subject to such provisions (which are
hereby incorporated herein by reference), and (b) such subordination is for the
benefit of and enforceable by the holders of Guarantor Senior Indebtedness of
the Guarantors.
ARTICLE IV
Miscellaneous
-------------
SECTION 4.1 NOTICES. All notices and other communications pertaining
to this Guarantee or any Security shall be in writing and shall be deemed to
have been duly given upon the receipt thereof. Such notices shall be delivered
by hand, or mailed, certified or registered mail with postage prepaid (a) if to
the Guarantors, at their addresses set forth below, with a copy to the Company
as provided in the Indenture for notices to the Company, and (b) if to the
Holders or the Trustee, as provided in the Indenture. Each Guarantor by notice
to the Trustee may designate additional or different addresses for subsequent
notices to or communications with such Guarantor.
SECTION 4.2 PARTIES. Nothing expressed or mentioned in this Guarantee
is intended or shall be construed to give any Person, firm or corporation, other
than the Holders and the Trustee and the holders of any Guarantor Senior
Indebtedness, any legal or equitable right, remedy or claim under or in respect
of this Guarantee or any provision herein contained.
SECTION 4.3 GOVERNING LAW. This Agreement shall be governed by the
laws of the State of New York, without giving effect to applicable principles of
conflicts of law to the extent that the application of the law of another
jurisdiction would be required thereby.
SECTION 4.4 SEVERABILITY CLAUSE. In case any provision in this
Guarantee shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby and such provision shall be ineffective only to the extent of
such invalidity, illegality or unenforceability.
5
<PAGE> 6
SECTION 4.5 WAIVERS AND REMEDIES. Neither a failure nor a delay on
the part of the Holders or the Trustee in exercising any right, power or
privilege under this Guarantee shall operate as a waiver thereof, nor shall a
single or partial exercise thereof preclude any other or further exercise of any
right, power or privilege. The rights, remedies and benefits of the Holders and
the Trustee herein expressly specified are cumulative and not exclusive of any
other rights, remedies or benefits which either may have under this Guarantee or
at law, in equity, by statute or otherwise.
SECTION 4.6 SUCCESSORS AND ASSIGNS. Subject to Section 2.2(b) hereof,
(a) this Guarantee shall be binding upon and inure to the benefit of the
Guarantors, the Trustee, any other parties hereto, the Holders and their
respective successors and assigns and (b) in the event of any transfer or
assignment of rights by any Holder, the rights and privileges conferred upon
that party in this Guarantee and in the Securities shall automatically extend to
and be vested in such transferee or assignee, all subject to the terms and
conditions of this Guarantee and the Indenture.
SECTION 4.7 MODIFICATION, ETC. Subject to the provisions of, and
except as otherwise provided in, Article 9 of the Indenture (including without
limitation Section 9.1 thereof), no modification, amendment or waiver of any
provision of this Guarantee, nor the consent to any departure by the Guarantors
therefrom, shall in any event be effective unless the same shall be in writing
and consented to by the Majority Securityholders, and then such waiver or
consent shall be effective only in the specific instance and for the purpose for
which it was given. No notice to or demand on the Guarantors in any case shall
entitle such Guarantors or any other guarantor to any other or further notice or
demand in the same, similar or other circumstances.
SECTION 4.8 ENTIRE AGREEMENT. This Guarantee is intended by the
parties to be a final expression of their agreement in respect of the subject
matter contained herein and, together with the Indenture, supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
SECTION 4.9 RATIFICATION OF INDENTURE; SUPPLEMENTAL INDENTURES PART
OF INDENTURE. Except as expressly amended hereby, the Indenture is in all
respects ratified and confirmed and all the terms, conditions and provisions
thereof shall remain in full force and effect. This Supplemental Indenture shall
form a part of the Indenture for all purposes, and every holder of Securities
heretofore or hereafter authenticated and delivered shall be bound hereby. The
Trustee makes no representation or warranty as to the validity or sufficiency of
this Supplemental Indenture.
SECTION 4.10 COUNTERPARTS. The parties hereto may sign one or more
copies of this Supplemental Indenture in counterparts, all of which together
shall constitute one and the same agreement.
6
<PAGE> 7
SECTION 4.11 Headings. The headings of the Articles and the sections
in this Guarantee are for convenience of reference only and shall not be deemed
to alter or affect the meaning or interpretation of any provisions hereof.
7
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the date first above written.
VARNCO HOLDINGS INC.
By:
/s/ David B. Freimuth
--------------------------
Name: David B. Freimuth
Title: Treasurer
Address:
VARN PRODUCTS CO., INC.
By:
/s/ David B. Freimuth
--------------------------
Name: David B. Freimuth
Title: Treasurer
Address:
<PAGE> 9
JV TEX REALTY CORP.
By:
/s/ David B. Freimuth
--------------------------
Name: David B. Freimuth
Title: Treasurer
Address:
VARN PRODUCTS CO., INC.
By:
/s/ David B. Freimuth
--------------------------
Name: David B. Freimuth
Title: Treasurer
Address:
VARN PRODUCTS CO., INC.
By:
/s/ David B. Freimuth
--------------------------
Name: David B. Freimuth
Title: Treasurer
Address:
<PAGE> 10
VARN AEGIS INC.
By:
/s/ David B. Freimuth
--------------------------
Name: David B. Freimuth
Title: Treasurer
Address:
GRAPH TECH, INC.
By:
/s/ David B. Freimuth
--------------------------
Name: David B. Freimuth
Title: Treasurer
Address:
JV ILL REALTY CORP.
By:
/s/ David B. Freimuth
--------------------------
Name: David B. Freimuth
Title: Treasurer
Address:
<PAGE> 11
VARN ACQUISITION I, INC.
By:
/s/ David B. Freimuth
--------------------------
Name: David B. Freimuth
Title: Treasurer
Address:
VARN ACQUISITION II, INC.
By:
/s/ David B. Freimuth
--------------------------
Name: David B. Freimuth
Title: Treasurer
Address:
VARN ACQUISITION III, INC.
By:
/s/ David B. Freimuth
--------------------------
Name: David B. Freimuth
Title: Treasurer
Address:
<PAGE> 12
VARN OHIO ACQUISITION, INC.
By:
/s/ David B. Freimuth
--------------------------
Name: David B. Freimuth
Title: Treasurer
Address:
DAY INTERNATIONAL FINANCE, INC.
By:
/s/ David B. Freimuth
--------------------------
Name: David B. Freimuth
Title: Treasurer
Address:
DAY INTERNATIONAL GROUP, INC.
By:
/s/ David B. Freimuth
--------------------------
Name: David B. Freimuth
Title: Vice President
Address:
<PAGE> 13
THE BANK OF NEW YORK, AS TRUSTEE
By:
/s/ Van K. Brown
--------------------------
Name: Van K. Brown
Title: Assistant Vice President
Address:
<PAGE> 14
EXHIBIT A
GUARANTORS
VARNCO HOLDINGS INC.
VARN PRODUCTS CO, INC.
JV TEX REALTY CORP.
VARN PRODUCTS COMPANY, INC.
VARN PRODUCTS COMPANY, INC.
VARN AEGIS INC.
GRAPH TECH, INC.
JV ILL REALTY CORP.
VARN ACQUISITION I, INC.
VARN ACQUISITION II, INC.
VARN ACQUISITION III, INC.
VARN OHIO ACQUISITION, INC.
DAY INTERNATIONAL FINANCE, INC.
<PAGE> 1
Exhibit 4.3
SUBSIDIARY GUARANTEE
The Guarantors listed below (the "Guarantors") have irrevocably and
unconditionally guaranteed (i) the due and punctual payment of the principal of,
premium, if any, and interest on the 11 1/8% Senior Subordinated Notes due 2005
(the "Notes") of Day International Group, Inc., a Delaware corporation (the
"Company"), whether at stated maturity, by acceleration or otherwise, the due
and punctual payment of interest on the overdue principal, and premium if any,
and (to the extent permitted by law) interest on any interest, if any, on the
Notes, and the due and punctual performance of all other obligations of the
Company, to the Holders or the Trustee (defined below) all in accordance with
the terms set forth in Article 11 of the Indenture, dated as of June 6, 1995
(the "Indenture"), among the Company, Day International, Inc., a Delaware
corporation ("Day"), and Firstar Bank, N.A. (as successor in interest to
American Bank National Association), as supplemented by a First Supplemental
Indenture, dated as of March 13, 1998, among the Company, Day and Firstar Bank,
N.A. (as successor in interest to American Bank National Association), as
trustee (the "Trustee"), relating to the Company's 111/8% Senior Subordinated
Notes due June 1, 2005, (ii) in case of any extension of time of payment or
renewal of any Notes or any such other obligations, that the same will be
promptly paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at stated maturity, by acceleration or otherwise,
and (iii) the payment of any and all costs and expenses (including reasonable
attorneys' fees) incurred by the Trustee or any Holder in enforcing any rights
under this Subsidiary Guarantee.
The obligations of each Guarantor to the Holder and to the Trustee
pursuant to this Subsidiary Guarantee and the Indenture are expressly set forth
in Article 11 of the Indenture and reference is hereby made to such Indenture
for the precise terms of this Guarantee.
No stockholder, officer, director or incorporator, as such, past,
present or future of each Guarantor shall have any liability under this
Subsidiary Guarantee by reason of his or its status as such stockholder,
officer, director or incorporator.
This is a continuing Guarantee and shall remain in full force and
effect and shall be binding upon each Guarantor and its successors and assigns
until full and final payment of all of the Company's obligations under the Notes
and the Indenture and shall inure to the benefit of the successors and assigns
of the Trustee and the Holders, and, in the event
<PAGE> 2
of any transfer or assignment of rights by any Holder or the Trustee, the rights
and privileges herein conferred upon that party shall automatically extend to
and be vested in such transferee or assignee, all subject to the terms and
conditions hereof. This is a Guarantee of payment and not of collectibility.
This Subsidiary Guarantee shall not be valid or obligatory for any
purpose until the certificate of authentication on the Note upon which this
Subsidiary Guarantee is noted shall have been executed by the Trustee under the
Indenture by the manual signature of one of its authorized officers.
The Obligations of each Guarantor under this Subsidiary Guarantee
shall be limited to the extent necessary to insure that it does not constitute a
fraudulent conveyance under applicable law.
The Obligations of each Guarantor under this Subsidiary Guarantee
pursuant to Article 11 of the Indenture shall be junior and subordinated to the
Guarantor Senior Indebtedness (as defined in the Indenture) of such Guarantor on
the same basis as the Notes are junior and subordinated to the Senior
Indebtedness of the Company. For the purposes of the foregoing sentence, (a)
each Guarantor may make, and the Trustee and the Holders of the Notes shall have
the right to receive and/or retain, payments by any of the Guarantors only at
such times as they may receive and/or retain payments in respect of the Notes
pursuant to the Indenture, including Article 10 thereof and (b) the rights and
obligations of the relevant parties relative to the Subsidiary Guarantees and
the Guarantor Senior Indebtedness shall be the same as their respective rights
and obligations relative to the Notes and Senior Indebtedness of the Company
pursuant to Article 10 of the Indenture.
THE TERMS OF ARTICLE 11 OF THE INDENTURE ARE INCORPORATED HEREIN BY
REFERENCE.
Capitalized terms used herein have the same meanings given in the
Indenture unless otherwise indicated.
2
<PAGE> 3
Guarantors:
VARNCO HOLDINGS INC.
By: /s/ David B. Freimuth
---------------------------------
Name: David B. Freimuth
Title: Treasurer
VARN PRODUCTS CO., INC.
By: /s/ David B. Freimuth
---------------------------------
Name: David B. Freimuth
Title: Treasurer
JV TEX REALTY CORP.
By: /s/ David B. Freimuth
---------------------------------
Name: David B. Freimuth
Title: Treasurer
VARN PRODUCTS CO., INC.
By: /s/ David B. Freimuth
---------------------------------
Name: David B. Freimuth
Title: Treasurer
VARN PRODUCTS CO., INC.
By: /s/ David B. Freimuth
---------------------------------
Name: David B. Freimuth
Title: Treasurer
<PAGE> 4
VARN AEGIS INC.
By: /s/ David B. Freimuth
---------------------------------
Name: David B. Freimuth
Title: Treasurer
GRAPH TECH, INC.
By: /s/ David B. Freimuth
---------------------------------
Name: David B. Freimuth
Title: Treasurer
JV ILL REALTY CORP.
By: /s/ David B. Freimuth
---------------------------------
Name: David B. Freimuth
Title: Treasurer
VARN ACQUISITION I, INC.
By: /s/ David B. Freimuth
---------------------------------
Name: David B. Freimuth
Title: Treasurer
VARN ACQUISITION II, INC.
By: /s/ David B. Freimuth
---------------------------------
Name: David B. Freimuth
Title: Treasurer
<PAGE> 5
VARN ACQUISITION III, INC.
By: /s/ David B. Freimuth
---------------------------------
Name: David B. Freimuth
Title: Treasurer
VARN OHIO ACQUISITION, INC.
By: /s/ David B. Freimuth
---------------------------------
Name: David B. Freimuth
Title: Treasurer
DAY INTERNATIONAL FINANCE, INC.
By: /s/ David B. Freimuth
---------------------------------
Name: David B. Freimuth
Title: Treasurer
<PAGE> 6
Trustee:
FIRSTAR BANK, N.A.
By: /s/ Frank P. Leslie III
---------------------------------
Name: Frank P. Leslie III
Title: Vice President
<PAGE> 1
EXHIBIT 4.4
PREFERENCE STOCK
PURCHASE AGREEMENT
by and among
DAY INTERNATIONAL GROUP, INC.
and
QUANTUM INDUSTRIAL PARTNERS LDC,
SFM DOMESTIC INVESTMENTS LLC,
SGC PARTNERS I LLC,
GREENWICH STREET CAPITAL PARTNERS, L.P.,
TRV EMPLOYEES FUND, L.P.
GREENWICH STREET CAPITAL OFFSHORE FUND, LTD.,
THE TRAVELERS INSURANCE COMPANY,
THE TRAVELERS LIFE AND ANNUITY COMPANY,
UNIONE ITALIANA (U.K.) REINSURANCE COMPANY LIMITED
<PAGE> 2
TABLE OF CONTENTS
Page
----
Section 1. Issuance and Sale of the Preference Stock .....................1
1.1. The Purchase ..................................................1
1.2. The Use of Proceeds from the Purchase .........................1
1.3. The Closing ...................................................2
1.4. Actions at the Closing ........................................2
1.5. Deliveries at the Closing .....................................4
Section 2. Representations and Warranties of the Corporation .............4
2.1. Organization and Good Standing; Power and Authority;
Qualifications ................................................5
2.2. Authorization of the Documents ................................5
2.4. Authorization and Issuance of Capital Stock ...................7
2.5. Financial Statements ..........................................7
2.6. Absence of Undisclosed Liabilities ............................8
2.7. Absence of Changes ............................................8
2.8. No Conflict ...................................................8
2.9. Intellectual Property Matters .................................9
2.10. Corporate Minute Books ........................................9
2.11. Environmental Matters .........................................9
2.12. Employee Benefit Plans .......................................10
2.13. Litigation; Orders ...........................................12
2.14. Compliance with Laws; Permits ................................12
2.15. Offering Exemption ...........................................13
2.16. Taxes ........................................................13
2.17. Consents .....................................................14
2.18. Insurance ....................................................15
2.19. Brokers ......................................................15
2.20. Disclosure ...................................................15
2.21. Representations in Varn Acquisition Agreement ................15
2.22. Closing Actions ..............................................15
Section 3. Representations and Warranties of Each Investor ..............16
Section 4. Certain Covenants ............................................18
4.1. Access to Records ............................................18
4.2. Financial Reports ............................................18
4.3. Maintenance of Corporate Existence, Etc. .....................20
4.4. Compliance with Laws .........................................20
i
<PAGE> 3
4.5. Disclosure of Investment ........................................20
4.6. Compliance with the Certificate of Designation ..................20
Section 5. Survival of Representations, Warranties, Agreements and
Covenants, Etc. .................................................21
Section 6. Expenses ........................................................21
Section 7. Indemnification .................................................21
7.1. General Indemnification .........................................21
7.2. Indemnification Principles ......................................22
7.3. Claim Notice ....................................................23
Section 8. Remedies ........................................................24
Section 9. Further Assurances ..............................................24
Section 10. Successors and Assigns ..........................................24
Section 11. Entire Agreement ................................................24
Section 12. Notices .........................................................25
Section 13. Amendments; Enforcement .........................................27
Section 14. Counterparts ....................................................27
Section 15. Headings ........................................................27
Section 16. Nouns and Pronouns ..............................................27
Section 17. Governing Law ...................................................27
Section 18. Severability ....................................................28
ii
<PAGE> 4
Schedules
Schedule 1.4(b) Pro Forma Capitalization
Schedule 2.1 Qualifications in Certain Jurisdictions
Schedule 2.3(a)/(b) Equity Capitalization
Schedule 2.6 Liabilities
Schedule 2.7 Adverse Changes
Schedule 2.11 Environmental Matters
Schedule 2.12/(a)/(d)/(e) Employee Benefits Matters
Schedule 2.13 Litigation
Schedule 2.14 Compliance with Laws, Permits
Schedule 2.16(a)/(c) Taxes
Schedule 2.17 Consents
A copy of the Schedules will be furnished supplementally to the SEC upon
request.
iii
<PAGE> 5
Exhibits
Exhibit A Varn Acquisition Agreement
Exhibit B Form of Stockholders Agreement
Exhibit C Form of Amendment to Certificate of Incorporation
Exhibit D Form of Certificate of Designation
Exhibit E Form of Corporation Secretary's Certificate
Exhibit F Form of Corporation Officer's Certificate
Exhibit G Form of Opinion of Counsel to the Corporation
Exhibit H Form of Warrant
A copy of the Exhibits will be furnished supplementally to the SEC upon request.
Annexes
Annex I List of Investors
A copy of the Annex will be furnished supplementally to the SEC upon request.
iv
<PAGE> 6
INDEX OF DEFINED TERMS
Term Section
- ---- -------
1995 Indenture........................................................1.4(l)
1998 Indenture........................................................1.4(l)
AA Audited Financial Statements..........................................2.5
Armstrong Acquisition......................................................2
Armstrong Subsidiary.......................................................2
Benefit Plan.........................................................2.12(a)
By-Laws...............................................................1.4(e)
Certificate of Designation............................................1.4(d)
Certificate of Incorporation..........................................1.4(d)
Claim Notice.............................................................7.3
Class A Common Stock..............................................2.3(a)(ii)
Class B Common Stock..............................................2.3(a)(ii)
Closing..................................................................1.3
Closing Actions..........................................................1.4
Closing Date.............................................................1.3
Code.................................................................2.12(b)
Common Stock......................................................2.3(a)(ii)
Confidential Information................................................3(j)
Conversion Shares.....................................................2.3(b)
Corporation.........................................................Preamble
Credit Agreement......................................................1.4(l)
Day Entity(ies)............................................................2
Day International.....................................................1.4(l)
Debt Documents........................................................1.4(l)
Documents.............................................................1.4(a)
DT Audited Financial Statements..........................................2.5
Employee.............................................................2.12(a)
Employee Agreement...................................................2.12(a)
Environmental Laws......................................................2.11
ERISA................................................................2.12(a)
Existing Options..................................................2.3(a)(ii)
GAAP.....................................................................2.5
Graph Tech...............................................................1.2
Greenwich...........................................................Preamble
Hazardous Substances....................................................2.11
HMO..................................................................2.12(e)
Intellectual Property Rights.............................................2.9
v
<PAGE> 7
Investor Indemnitee......................................................7.1
Investor(s).........................................................Preamble
JVTEX....................................................................1.2
Law......................................................................2.8
Litigation..............................................................2.13
Losses...................................................................7.2
Management Options................................................2.3(a)(ii)
Material Adverse Effect..................................................2.7
Preference Stock....................................................Recitals
Purchase.................................................................1.1
Purchase Price...........................................................1.1
Real Property...........................................................2.11
Securities Act..........................................................2.15
Senior Certificate of Designation.....................................1.4(l)
Senior Preferred Stock.............................................2.3(a)(i)
Soros...............................................................Preamble
Stockholders' Agreement...............................................1.4(a)
Tax Return...........................................................2.16(d)
Tax(es)..............................................................2.16(d)
Unaudited Financial Statements...........................................2.5
Varn Acquisition.........................................................1.2
Varn Acquisition Agreement...............................................1.2
Varn Aegis...............................................................1.2
Varn Group Companies.....................................................1.2
Varn Holdings............................................................1.2
Varn Products Co.........................................................1.2
Varnco...................................................................1.2
Warrants..............................................................1.4(j)
vi
<PAGE> 8
DAY INTERNATIONAL GROUP, INC.
PREFERENCE STOCK PURCHASE AGREEMENT
AGREEMENT, dated as of October 19, 1999, by and among Day International
Group, Inc., a corporation formed under the laws of the State of Delaware (the
"Corporation"), Quantum Industrial Partners LDC, a Cayman Islands limited
duration company and SFM Domestic Investments LLC, a Delaware limited liability
company (collectively, "Soros"), and SGC Partners I LLC, Greenwich Street
Capital Partners, L.P., TRV Employees Fund, L.P., Greenwich Street Capital
Offshore Fund, Ltd., The Travelers Insurance Company, The Travelers Life and
Annuity Company, and Unione Italiana (U.K.) Reinsurance Company Limited
(collectively, "Greenwich," and together with Soros, the "Investors," each
individually referred to as an "Investor").
W I T N E S S E T H:
WHEREAS, the Corporation wishes to sell to the Investors and the
Investors wish to purchase from the Corporation shares of newly issued 18%
Convertible Cumulative Preference Stock, par value $.01 per share (the
"Preference Stock"), the terms of which will be set forth in the Certificate of
Designation; and a portion of the proceeds from such sale will be used to make
an acquisition, as more particularly described herein.
ACCORDINGLY, the parties hereto hereby agree as follows:
Section 1. ISSUANCE AND SALE OF THE PREFERENCE STOCK.
1.1. THE PURCHASE. At the Closing the Investors shall purchase from the
Corporation, and the Corporation shall sell to the Investors (as set forth on
Annex I hereto), an aggregate of 38,500 shares of the Preference Stock (the
"Purchase") at a purchase price of $1,000 per share and an aggregate purchase
price of $38,500,000 (the "Purchase Price").
1.2. THE USE OF PROCEEDS FROM THE PURCHASE. The Corporation shall use
the proceeds of the Purchase to finance the Armstrong Acquisition (as
hereinafter defined) and the acquisition (the "Varn Acquisition") of Varnco
Holdings Inc., a New Jersey corporation ("Varnco"), Varn Holdings PLC, a company
incorporated under the laws of England ("Varn Holdings"), Varn Aegis Co. GmbH
Hautschutzsysteme, a company incorporated under the laws of Germany ("Varn
Aegis"), Varn Products Co., Inc., a Texas corporation ("Varn Products Co."), JV
TEX Realty Corp., a Texas corporation ("JVTEX"), Graph Tech, Inc., an Ohio
corporation ("Graph Tech," and collectively with Varnco, Varn Holding GmbH, Varn
Aegis, Varn Products Co. and JVTEX, the "Varn
<PAGE> 9
Group Companies") pursuant to the Stock Purchase Agreement (the "Varn
Acquisition Agreement") among the Corporation and the stockholders of Varn Group
Companies identified on the signature pages thereto, substantially in the form
of Exhibit A hereto.
1.3. THE CLOSING. The closing of the transactions contemplated by the
Purchase (the "Closing") shall take place simultaneously with the execution and
delivery of this Agreement at the offices of Simpson, Thacher & Bartlett, 425
Lexington Avenue, New York, New York 10017-3954, on October 19, 1999 or on such
other date as the Corporation and the Investors may mutually determine (such
date, the "Closing Date").
1.4. ACTIONS AT THE CLOSING. Simultaneously with, or prior to, the
execution and delivery of this Agreement, the following actions shall occur (the
"Closing Actions"):
(a) A Stockholders' Agreement (as amended or supplemented from
time to time, the "Stockholders' Agreement," and together with this
Agreement (including the exhibits hereto), the Certificate of
Designation and all certificates, instruments and documents delivered
in connection herewith and therewith, collectively the "Documents"
among the Corporation, the Investors and the stockholders listed on
signature pages thereto, substantially in the form of Exhibit B hereto,
shall be duly executed and delivered by the parties thereto.
(b) The pro forma capitalization of the Corporation as of June
30, 1999 (after giving effect to the issuance and sale of the
Preference Stock) shall be as set forth on Schedule 1.4(b).
(c) Each domestic Day Entity shall deliver to the Investors
long form certificates of good standing from the jurisdictions set
forth on Schedule 2.1 under its name dated as of a date no earlier than
five days prior to the Closing.
(d) The Corporation shall deliver to the Investors a copy of
its amended certificate of incorporation (the "Certificate of
Incorporation" certified by the Secretary of State of the State of
Delaware, which Certificate of Incorporation shall have been duly
amended by the filing of (i) the amendment to the Certificate of
Incorporation, in the form of Exhibit C hereto, and (ii) the
Certificate of Designation on the Preference Stock (the "Certificate of
Designation" in the form of Exhibit D hereto.
(e) The Corporation shall deliver to the Investors a certified
copy of its by-laws (the "By-Laws".
2
<PAGE> 10
(f) The Corporation shall deliver to the Investors a
certificate executed by its Secretary, substantially in the form of
Exhibit E hereto, certifying (i) resolutions authorizing the
transactions contemplated in the Documents and (ii) incumbency matters.
(g) The Corporation shall deliver to the Investor a
certificate executed by its duly authorized officer certifying as to
the matters set forth in Exhibit F hereto.
(h) The Investors shall receive from Debevoise & Plimpton,
special counsel for the Corporation, an opinion addressed to the
Investors, dated as of the Closing, satisfactory in form and substance
to the Investors, which shall include the opinions set forth in Exhibit
G hereto.
(i) Colin Raymond shall have been elected to the board of
directors of the Corporation and shall hold such position as of the
Closing Date.
(j) The Corporation shall have reserved for issuance 8,848.7
shares of Common Stock issuable upon (i) conversion of the Preference
Stock under the circumstances provided in the Certificate of
Designation and (ii) exercise of warrants (the "Warrants") in the form
of Exhibit H hereto which will be issued when and as provided in the
Certificate of Designation, under the circumstances described therein
and in the Certificate of Designation.
(k) Each of the representations and warranties of the
Corporation in this Agreement and in each of the other Documents shall
be true and correct in all material respects when made and on or as of
the Closing Date as if made on and as of the Closing Date (unless
stated to relate to a specific earlier date, in which case such
representations and warranties shall be true and correct as of such
earlier date).
(l) Each Day Entity shall have performed and complied with all
agreements and conditions contained in this Agreement and each of the
other Documents required to be performed or complied with by it prior
to or at the Closing and, after giving effect to the issue and sale of
the Preference Stock (and the application of the proceeds thereof as
contemplated by Section 1.2), no default shall have occurred under the
Documents and no default or event of default shall have occurred and be
continuing under any of the following: (i) Amended and Restated Senior
Secured Credit Agreement, dated as of the date hereof, among the
Corporation, several banks and other financial institutions or entities
from time to time parties thereto as lenders, Societe Generale, as
administrative agent and SG-Cowen Securities Corporation as arranger
(as amended or supplemented from time to time, the "Credit Agreement");
(ii) Indenture, dated as of June 6, 1995, among the Corporation, Day
International,
3
<PAGE> 11
Inc., a Delaware corporation ("Day International"), as guarantor, and
American National Association, as trustee (as amended or supplemented
from time to time, the "1995 Indenture"); (iii) Indenture, dated March
18, 1998, between the Corporation, Day International and The Bank of
New York, as trustee (as amended or supplemented from time to time, the
"1998 Indenture"; and (iv) Certificate of Designation for the Senior
Preferred Stock (as amended or supplemented from time to time, the
"Senior Certificate of Designation," and together with the Credit
Agreement, the 1995 Indenture, the 1998 Indenture and the Exchange
Debenture Indenture, dated as of March 18, 1998, between the
Corporation, Day International and The Bank of New York, as trustee, as
amended or supplemented from time to time, the "Debt Documents").
(m) All consents, authorizations and filings, if any, required
in connection with the execution, delivery and performance by each Day
Entity, of the Documents to which it is a party (including any consents
under the Debt Documents) shall have been obtained or made and shall be
in full force and effect, except for such consents, authorizations and
filings the failure of which to obtain or make, individually or in the
aggregate, could not reasonably be expected to, have a Material Adverse
Effect.
(n) The Varn Acquisition shall have been consummated, or shall
be consummated contemporaneously with the Closing, in accordance with
the Varn Acquisition Agreement.
1.5. DELIVERIES AT THE CLOSING. At the Closing, the Corporation shall
deliver to each Investor a certificate or certificates representing the shares
of Preference Stock purchased by such Investor, registered in the name of such
Investor or its nominee, against receipt at the Closing by the Corporation from
the Investors of the Purchase Price, which shall be paid by wire transfer to an
account designated at least one business day prior to the Closing Date by the
Corporation.
Section 2. REPRESENTATIONS AND WARRANTIES OF THE CORPORATION. The
Corporation hereby represents and warrants to the Investors as follows (each of
the Corporation, direct and indirect subsidiaries of the Corporation (excluding
those acquired in the Varn Acquisition and in the acquisition by the Corporation
of certain assets and a subsidiary (the "Armstrong Subsidiary") of Armstrong
World Industries, Inc., a Pennsylvania corporation, as set forth in the Purchase
Agreement, dated as of July 29, 1999, among the Corporation, Armstrong World
Industries, Inc. and Armstrong World Industries GmbH (the "Armstrong
Acquisition")) and Day International, a "Day Entity" each and collectively, the
"Day Entities"):
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2.1. ORGANIZATION AND GOOD STANDING; POWER AND AUTHORITY;
QUALIFICATIONS. Each Day Entity (i) is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, (ii) has all requisite corporate power and authority to own,
lease and operate its properties, to carry on its business as presently
conducted and as proposed to be conducted. The Corporation has all requisite
corporate power and authority to enter into and carry out the transactions
contemplated by the Documents. Except as set forth on Schedule 2.1, each Day
Entity is qualified to transact business as a foreign corporation in, and is in
good standing under the laws of, those jurisdictions listed on Schedule 2.1
under its name, which jurisdictions constitute all of the jurisdictions wherein
the character of the property owned or leased or the nature of the activities
conducted by it makes such qualification necessary, except where the failure to
so qualify would not reasonably be expected, individually or in the aggregate,
to result in a Material Adverse Effect.
2.2. AUTHORIZATION OF THE DOCUMENTS. The execution, delivery and
performance of each of the Documents has been duly authorized by all requisite
corporate action on the part of the Corporation, and each of the Documents
constitutes a legal, valid and binding obligation of the Corporation,
enforceable against the Corporation in accordance with its terms, except to the
extent that enforceability may be limited by bankruptcy, insolvency or other
similar laws affecting creditors' rights generally and equitable principles
generally.
2.3. CAPITALIZATION. (a) As of the date hereof, the capitalization of
the Corporation consists of, and immediately prior to the Closing, will consist
of:
(i) PREFERRED STOCK. (A) 105,000 shares of 12 1/4% Senior
Exchangeable Preferred Stock, par value $.01 per share ("Senior
Preferred Stock"), of which 41,944.216 shares are outstanding and (B)
500,000 shares of Cumulative Preference Stock, par value $.01 per
share, to be designated prior to the Closing, of which no shares of
Preference Stock will be issued and outstanding prior to the issuance
of 38,500 shares of Preference Stock at the Closing.
(ii) COMMON STOCK. (A) 200,000 shares of Class A Voting Common
Stock of the Corporation, par value $.01 per share ("Class A Common
Stock"), of which (x) 19,520.5 shares of Class A Common Stock are
outstanding, and all such shares have been validly issued and are fully
paid and nonassessable, with no personal liability attaching to the
ownership thereof, (y) 9,167.5 shares of Class A Common Stock have been
duly reserved for issuance upon the exercise of certain options granted
to persons as set forth on Schedule 2.3(a) which options have the
exercise price as set forth on Schedule 2.3(a) ("Existing Options") and
(z) 1,564 shares of Class A Common Stock have been duly reserved for
issuance upon the exercise of certain options to be granted to certain
employees, which options have not yet been
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granted ("Management Options"), and (B) 50,000 shares of Class B
Nonvoting Common Stock of the Corporation, par value $.01 per share
("Class B Common Stock," and together with Class A Common Stock,
"Common Stock"), of which (x) 3,777.5 shares of Class B Common Stock
are outstanding, and all such shares have been validly issued and are
fully paid and nonassessable, with no personal liability attaching to
the ownership thereof, (y) 0 shares of Class B Common Stock have been
duly reserved for issuance upon the exercise of Existing Options and
(z) 0 shares of Class B Common Stock have been duly reserved for
issuance upon the exercise of Management Options.
(b) Immediately after the Purchase, the capitalization of the
Corporation will be as set forth in Section 2.3(a), with (i) 38,500
shares of Preference Stock outstanding; (ii) 41,944.216 shares of the
Senior Preferred Stock outstanding; (iii) 19,520.5 shares of Class A
Common Stock and 3,777.5 shares of Class B Common Stock outstanding;
(iv) 10,657.5 shares of Class A Common Stock and 0 shares of Class B
Common Stock reserved for issuance upon exercise of Existing Options
and Management Options as set forth in Section 2.3(a)(ii); and (v)
7,348.7 shares of Class A Common Stock and 0 shares of Class B Common
Stock reserved for issuance upon the conversion of the Preference Stock
and Warrants (if and when issued) (the "Conversion Shares").
Except as set forth above, there will be no equity securities of the
Corporation outstanding immediately following the Closing. Schedule 2.3(a)
contains a list of all outstanding warrants, options, agreements, convertible
securities or other commitments pursuant to which the Corporation is or may
become obligated to issue any shares of the capital stock or other securities of
the Corporation, which names all persons entitled of record to receive such
shares or other securities, the shares of capital stock or other securities
required to be issued thereunder as of the date hereof and the price per share,
if any, payable with respect to the issuance of any share of capital stock
issuable thereunder. Except as set forth on Schedule 2.3(b) or as contemplated
by the Documents there are, and immediately after the Closing, there will be, no
rights, including preemptive or similar rights, to purchase or otherwise acquire
shares or sell or otherwise transfer shares of the capital stock of the
Corporation pursuant to any provision of law, the Certificate of Incorporation,
the By-Laws, any agreement to which the Corporation is a party, and, except as
set forth on Schedule 2.3(b) or as contemplated by the Documents, the
Corporation is not a party to, and to the best knowledge of the Corporation,
there are, and immediately after the Closing, there will be, no agreement,
restriction or encumbrance (such as a right of first refusal, right of first
offer, proxy, voting agreement, voting trust, registration rights agreement,
stockholders' agreement, etc., whether or not the Corporation is a party
thereto) with respect to the purchase, sale or voting of any shares of capital
stock of the Corporation (whether outstanding or issuable upon conversion or
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exercise of outstanding securities). Except as set forth on Schedule 2.3(b) or
as contemplated by the Documents or except for the right to vote its shares of
Common Stock for the election of directors, no person has the right to nominate
or elect one or more directors of the Corporation.
2.4. AUTHORIZATION AND ISSUANCE OF CAPITAL STOCK. The authorization,
issuance, sale and delivery of the Preference Stock pursuant to this Agreement
and the authorization, reservation, issuance, sale and delivery of the Warrants
and the Conversion Shares have been or will be duly authorized by all requisite
corporate action on the part of the Corporation, and when and if issued, sold
and delivered in accordance with this Agreement, the Preference Stock will be,
and when issued and delivered in accordance with the Certificate of Designation,
the Warrants and the Conversion Shares will be, validly issued and outstanding,
fully paid and nonassessable with no personal liability attaching to the
ownership thereof, free of any Encumbrances and not subject to preemptive or
similar rights of the stockholders of the Corporation or others. The terms,
designations, powers, preferences and relative, participating, optional and
other special rights, and the qualifications, limitations and restrictions, of
Preference Stock are as stated in the Certificate of Designation and the
Certificate of Incorporation.
2.5. FINANCIAL STATEMENTS. The Corporation has furnished to the
Investors (a) the audited consolidated balance sheet at December 31, 1998, and
the related consolidated statements of income, retained earnings and cash flows
for the fiscal year ended December 31, 1998 of the Day Entities (the "AA Audited
Financial Statements") and an opinion of Arthur Andersen LLP to the Corporation
to the effect that such consolidated financial statements present fairly, in all
material respects, the financial position of the Day Entities at December 31,
1998, and the results of their operations and cash flows for the year then ended
in conformity with generally accepted accounting principles as in effect from
time to time in the United States of America ("GAAP"), consistently applied,
which opinion contained no qualification; (b) the audited consolidated balance
sheets at December 31, 1997 and the related consolidated statements of income,
retained earnings and cash flows of the Day Entities (the "DT Audited Financial
Statements"), together with the opinion of Deloitte & Touche LLP to the effect
that such consolidated financial statements present fairly, in all material
respects, the financial position of the Day Entities at December 31, 1997, and
the results of their operations and cash flows for the years then ended in
conformity with GAAP, consistently applied, which opinion contained no
qualification; and (c) the unaudited consolidated balance sheets at March 31,
1999 and June 30, 1999, and the related consolidated statements of income,
retained earnings and cash flows for the fiscal periods then ended of the Day
Entities (the "Unaudited Financial Statements"). The AA Audited Financial
Statements, the DT Audited Financial Statements and the Unaudited Financial
Statements (i) are in accordance with the books and records of the Day Entities;
(ii) have been prepared in accordance with
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GAAP consistently applied except, in the case of the Unaudited Financial
Statements, as to year-end adjustments and the absence of footnotes; and (iii)
fairly present in all material respects the financial position of the Day
Entities at the fiscal periods referred to therein, and the results of their
operations and their cash flows for the fiscal periods then ended in conformity
with GAAP, consistently applied.
2.6. ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed on
Schedule 2.6, no Day Entity has any liabilities or obligations (whether accrued,
absolute, contingent, unliquidated or otherwise, whether due or to become due)
other than (a) liabilities or obligations reserved against or otherwise
disclosed in the AA Audited Financial Statements and the Unaudited Financial
Statements and (b) liabilities or obligations arising since June 30, 1999 which
were incurred in the ordinary course of business consistent (in amount and kind)
with past practice (none of which is a liability resulting from breach of
contract, breach of warranty, tort, infringement claim or lawsuit) and which do
not, individually or in the aggregate, exceed $100,000.
2.7. ABSENCE OF CHANGES. Except as set forth on Schedule 2.7 and except
for the Varn Acquisition, the Armstrong Acquisition and the execution and
delivery of the Credit Agreement and the execution and delivery of the Documents
and the transactions contemplated hereby and thereby, or referred to herein or
therein, since June 30, 1999, each Day Entity has conducted its business in the
ordinary course, consistent with past practice, and there has not been (a) any
material adverse change having, or any event or condition which, individually or
in the aggregate, has had, or would reasonably be expected to have, a material
adverse effect on the business, properties, assets, condition (financial or
other), prospects or results of operations of the Day Entities taken as a whole
(a "Material Adverse Effect"), (b) any indebtedness incurred for borrowed money
other than in the ordinary course of business or pursuant to any Debt Document,
(c) any amendment to or termination of any Debt Document, or (d) any agreement
or commitment (contingent or otherwise) to do any of the foregoing.
2.8. NO CONFLICT. The execution, delivery and performance by the
Corporation of the Documents and the consummation by the Corporation of the
transactions contemplated hereby and thereby, and the issuance, sale and
delivery by the Corporation of the Preference Stock, and the issuance and
delivery of the Warrants in accordance with the terms thereof and the
Certificate of Designation and the Conversion Shares in accordance with the
Certificate of Designation, by the Corporation will not (a) to the best
knowledge of the Corporation, violate any provision of law, statute, rule or
regulation, or any ruling, writ, injunction, order, judgment or decree of any
court, administrative agency or other governmental body ("Law") applicable to
any of the Day Entities, or any of their properties or assets, (b) except as set
forth on Schedule 2.17, conflict with or result in any breach of any of the
terms, conditions or provisions of, or constitute (with due notice or
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<PAGE> 16
lapse of time, or both) a default (or give rise to any right of termination,
cancellation or acceleration) under, or result in the creation of any
Encumbrance upon any of the properties or assets of any of the Day Entities
under, any Debt Document or (c) violate the Certificate of Incorporation or the
By-Laws or a certificate of incorporation or by-laws of any of the Day Entities.
2.9. INTELLECTUAL PROPERTY MATTERS. Each Day Entity owns or has the
right to use, pursuant to license, sublicense, contract or permission, all of
the Intellectual Property Rights used in the operation of the business of such
Day Entity as currently conducted and as currently proposed to be conducted,
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, and all such
Intellectual Property Rights will be owned or available for use by such Day
Entity on identical terms and conditions immediately subsequent to the Closing.
"Intellectual Property Rights" means, (a) all patent rights and all
right, title and interest in and to all letters patent and applications for
letters patent, industrial models, industrial designs, petty patents, patents of
importation, utility models, certificates of invention and other government
issued or granted indicia of invention ownership including any reissue,
division, continuation or continuation-in-part applications throughout the
world; (b) all rights, title and interest in and to all trade secrets and trade
secret rights arising under any Law (including common law); (c) all copyright
rights, and all other author rights whether or not copyrightable; and all
rights, title and interest in and to all copyrights, copyright registrations,
certificates of copyright and copyrighted interests throughout the world; (d)
all rights, title and interest in and to all know-how and show-how whether or
not protectable by patent, copyright or trade secret law, or as a registered
mask work; and (e) all trademarks, trade names and service marks, whether
registered or arising under the common law or any other Law, and all
registrations thereof and interests therein throughout the world.
2.10. CORPORATE MINUTE BOOKS. The corporate records of each Day Entity
are true and complete and accurately reflect all meetings of and resolutions of,
or written consents by, the shareholders or board of directors (or committee
thereof) of such Day Entity since the day of corporate organization. The
Corporation has made available to the Investors true and correct copies of all
minutes of meetings or other actions by the directors, stockholders or
incorporators of each of the Day Entities since their respective inceptions.
2.11. ENVIRONMENTAL MATTERS. Except as set forth on Schedule 2.11, the
Day Entities are conducting, and have conducted, their business in material
compliance with all applicable Environmental Laws. Hazardous Substances have not
been transported or disposed of from any of the material real property presently
owned or leased by it (the
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"Real Property") in violation of, or in a manner or to a location which could
give rise to liability under, applicable Environmental Law, nor have any
Hazardous Substances been generated, treated, stored or disposed of at, on or
under any of the Real Property 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. The Corporation has received no notice of any past or present
conditions, events, circumstances, facts, activities, practices, incidents,
actions, omissions, or plans that can reasonably be expected to form the basis
of any claim, action, suit, proceeding, hearing, investigation, or inquiry
against or involving any Day Entity allegedly or actually based on or related
to any violation of any Environmental Law that would reasonably be expected to
result in a Material Adverse Effect. For purposes of this Agreement, the term
"Environmental Laws" shall mean any federal, state or local law, ordinance,
rule or regulation, in effect and as amended as of the date of this Agreement,
relating to human health, employee safety or the protection of the environment,
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. sec. 9601 ET SEQ., the
Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. sec.
11001, ET SEQ., the Resource Conversation and Recovery Act, 42 U.S.C. sec. 6901
ET SEQ., and the Occupational Health and Safety Act 29 U.S.C. sec. 641 ET SEQ.
For purposes of this Agreement, the term "Hazardous Substances" shall include
all substances, products or materials (including, without limitation,
asbestos-containing materials, petroleum or any by-products thereof) classified
as hazardous or toxic under any applicable Environmental Laws.
2.12. EMPLOYEE BENEFIT PLANS. (a) Schedule 2.12(a) hereto contains a
true and complete list of (i) each plan, program, policy, payroll practice,
contract, agreement or other arrangement providing for compensation, severance,
termination pay, performance awards, stock or stock-related awards, fringe
benefits or other material employee benefits of any kind, whether formal or
informal, funded or unfunded, written or oral and whether or not legally
binding, which is now or previously has been sponsored, maintained, contributed
to or required to be contributed to by any Day Entity or pursuant to which any
Day Entity has any liability, contingent or otherwise, including, but not
limited to, any "employee benefit plan" within the meaning of Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA") (each
a "Benefit Plan"); (ii) each management, bonus, option, equity (or equity
related), severance, non-compete, confidentiality or similar agreement or
contract between the Corporation and any current, former or retired employee,
officer, consultant, independent contractor, agent or director of any Day Entity
(an "Employee"); and (iii) each employment or consulting agreement or contract
between the Corporation and an Employee; PROVIDED, HOWEVER, that for scheduling
purposes only, the only Employee Agreements required to be listed pursuant to
clause (iii) shall be those Employee Agreements between the Corporation and an
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Employee who earns annual compensation in excess of $100,000 (each agreement in
clauses (ii) and (iii), an "Employee Agreement"). None of the Day Entities
currently sponsors, maintains, contributes to, nor is required to contribute to,
nor has any Day Entity during the preceding six years sponsored, maintained,
contributed to or been required to contribute to, or incurred any liability to,
(i) any "defined benefit plan" (as defined in ERISA Section 3(35)); or (ii) any
"multiemployer plan" (as defined in ERISA Section 3(37)). Except as set forth on
Schedule 2.12(a), none of the Day Entities has any plan or commitment, whether
legally binding or not, (i) to establish any new Benefit Plan, or to modify or
terminate any Benefit Plan or (ii) to enter into, modify or terminate any
Employee Agreement with any Employee who earns more than $100,000 annually.
(b) None of the Day Entities is (i) a member of a "controlled group of
corporations," under "common control" or an "affiliated service group" within
the meaning of Sections 414(b), (c) or (m) of the Internal Revenue Code, as
amended (the "Code"), (ii) required to be aggregated under Section 414(o) of the
Code, or (iii) under "common control," within the meaning of Section 4001(a)(14)
of ERISA, or any regulations promulgated or proposed under any of the foregoing
Sections, in each case with any other entity other than the remaining Day
Entities.
(c) The Corporation has made available to the Investors current,
accurate and complete copies of all documents embodying or relating to each
Benefit Plan and each Employee Agreement, including all amendments thereto,
interpretations thereof, trust or funding agreements relating thereto (if any),
the two most recent annual reports (Series 5500 and related schedules) required
under ERISA (if any), the most recent determination letter received from the IRS
(if any), the most recent summary plan description (with all material
modifications) (if any), and all material communications to any Employee or
Employees relating to any Benefit Plan or Employee Agreement required to be
listed on Schedule 2.12(a).
(d) Except as set forth on Schedule 2.12(d), each Benefit Plan has been
established and maintained in accordance with its terms and in compliance in all
material respects with all applicable, laws, statutes, orders, rules and
regulations, including but not limited to ERISA and the Code, and each Benefit
Plan intended to qualify under Section 401 of the Code is, and since its
inception has been, so qualified.
(e) No "prohibited transaction," within the meaning of Section 4975 of
the Code or Section 406 of ERISA, has occurred with respect to any Benefit Plan.
Except as set forth on Schedule 2.12(e), there are no actions, proceedings,
suits or claims pending, or to the best knowledge of the Corporation, threatened
or anticipated (other than routine claims for benefits) with respect to any
Benefit Plan or Employee Agreement. No Employee has been hired by any of the Day
Entities in violation of any restrictive covenant
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or any non-compete agreement with any other person. No liability under any
Benefit Plan has been funded nor has any such obligation been satisfied with the
purchase of a contract from an insurance company as to which the Corporation has
received notice that such insurance company is insolvent or is in rehabilitation
or any similar proceeding. No Benefit Plan is under audit or investigation by
the IRS, the Department of Labor or the Pension Benefit Guarantee Corporation,
and, to the knowledge of the Corporation, no such audit or investigation is
pending or has been threatened. With respect to each Benefit Plan which is an
employee welfare benefit plan (within the meaning of Section 3(1) of ERISA), all
claims incurred by the Corporation are (i) insured pursuant to a contract of
insurance whereby the insurance company bears any risk of loss with respect to
such claims; (ii) covered under a contract with a health maintenance
organization (an "HMO" ) pursuant to which the HMO bears the liability for
claims, or (iii) reflected as a liability or accrued for on the AA Audited
Financial Statements.
(f) The execution of, and performance of the transactions contemplated
in this Agreement will not (either alone or upon the occurrence of any
additional or subsequent events) (i) constitute an event under any Benefit Plan
or Employee Agreement that will or may result in any payment (whether of
severance pay or otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligations to fund benefits with respect
to any Employee or (ii) result in the triggering or imposition of any
restrictions or limitations on the right of any Day Entity to amend or terminate
any Benefit Plan and receive the full amount of any excess assets remaining or
resulting from such amendment or termination. No payment or benefit which will
or may be made by any Day Entity or any of their respective affiliates with
respect to any Employee may be characterized as an "excess parachute payment,"
within the meaning of Section 280G(b)(1) of the Code.
2.13. LITIGATION; ORDERS. Except as set forth on Schedule 2.13, there
is no civil, criminal or administrative action, suit, claim, notice, hearing,
examination, inquiry, proceeding or investigation at law or in equity or by or
before any court, arbitrator or similar panel, governmental instrumentality or
other agency ("Litigation") now in progress or pending or, to the best knowledge
of the Corporation, threatened against any Day Entity or the assets (including
the Intellectual Property Rights) or the business of any Day Entity that could
reasonably be expected to result, either individually or in the aggregate, in a
Material Adverse Effect.
2.14. COMPLIANCE WITH LAWS; PERMITS. To the best knowledge of the
Corporation, except as provided on Schedule 2.14, each Day Entity (a) has
complied in all material respects with all material federal, state, local and
foreign laws, rules, ordinances, codes, consents, authorizations, registrations,
regulations, decrees, directives, judgments and orders applicable to it and its
business and (b) has all federal, state, local and foreign
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governmental licenses, permits and qualifications material to and necessary in
the conduct of its business as currently conducted, such licenses, permits and
qualifications are in full force and effect, and no violations have been
recorded in respect of any such licenses, permits and qualifications, and no
proceeding is pending or, to the best knowledge of the Corporation, currently
threatened to revoke or limit any such license, permit or qualification.
2.15. OFFERING EXEMPTION. Assuming the accuracy of the representations
and warranties made by the Investors in Section 3, the offer and sale of the
Preference Stock as contemplated hereby, the issuance and delivery of the
Warrants and the Conversion Shares to the Investors upon the conversion of the
Preference Stock in accordance with the terms of the Certificate of Designation,
and all prior issuances of securities of the Corporation are each exempt from
registration under the Securities Act of 1933, as amended (the "Securities Act")
and under applicable state securities and "blue sky" laws, as currently in
effect. The Corporation has not offered any of its capital stock, or any other
securities, for sale to, or solicited any offers to buy any of the foregoing
from the Investors, or otherwise approached or negotiated with any other person
in respect thereof, in such a manner as to require registration under the
Securities Act.
2.16. TAXES. (a) Except as set forth on Schedule 2.16(a): (i) each Day
Entity has timely filed in accordance with all applicable laws (taking into
account valid extensions) all material Tax Returns required to be filed by it,
and all such Tax Returns are true, correct and complete in all material
respects; (ii) each Day Entity has timely paid all Taxes shown as due and
payable on such Tax Returns and all other material Taxes due and owing by it
(whether or not shown on a Tax Return) on or prior to the date hereof,
including, without limitation, any Taxes levied upon any of its properties,
assets, income or franchises; (iii) all amounts required to be collected or
withheld by each Day Entity have been collected or withheld and any such amounts
that are required to be remitted to any taxing authority have been or will be
duly and timely remitted by each Day Entity; (iv) no examination, investigation,
audit, claim, assessment, deficiency or administrative or judicial proceeding is
in progress, pending or currently proposed in writing, in each case with regard
to any Taxes or Tax Returns of any Day Entity; (v) no taxing authority in a
jurisdiction where a Day Entity or any shareholder of such Day Entity does not
file Tax Returns has made a claim, assertion or threat that such non-filing
entity or shareholder is or may be subject to taxation by such jurisdiction;
(vi) none of the Day Entities is a party to or bound by any Tax sharing or Tax
allocation or similar agreement or arrangement; and (vii) all federal income Tax
Returns of any Day Entity with respect to taxable periods through the year ended
December 31, 1994 have been examined and closed or are Tax Returns with respect
to which the applicable statute of limitations has expired without extension or
waiver.
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(b) Appropriate accruals and reserves for Taxes have been
established in accordance with GAAP on the balance sheets referenced in Section
2.5 for periods through the date of such balance sheets.
(c) Except as set forth on Schedule 2.16(c) or as contemplated by
Section 4.12 of this Agreement, there are no rulings, request for rulings,
closing agreements, adjustments pursuant to section 481(a) of the Code (or
analogous provisions of state or local law), or dispositions of property being
accounted for under the installment method pursuant to section 453 of the Code
(or analogous provisions of state or local law) related to any Day Entity which
could affect any Day Entity's liability for Taxes for any taxable period or
portion thereof beginning on or after the Closing Date.
(d) For purposes of this Agreement, "Tax" or "Taxes" means any
taxes, assessment, duties, fees, levies, imposts, deductions, or withholdings
including, without limitation, income, gross receipts, ad valorem, value added,
excise, real or personal property, asset, sales, use, license, payroll,
transaction, capital, net worth and franchise taxes, estimated taxes,
withholding, employment, social security, workers compensation, utility,
severance, production, unemployment compensation, occupation, premium, windfall
profits, transfer and gains taxes, or other governmental charges of any nature
whatsoever, imposed by any taxing authority of any government or country or
political subdivision of any country, and any liabilities with respect thereto,
including any penalties, additions to tax, fines or interest thereon, and "Tax
Return" means any report, return, statement, estimate, declaration, notice, form
or other information required to be supplied to a taxing authority in connection
with Taxes. For purposes of this Section 2.16, the term Day Entities shall
include any corporation or similar entity of which any of the Day Entities is a
successor by merger, liquidation or otherwise.
(e) Based on the provisions of the Code and the Treasury
regulations promulgated thereunder, and administrative and judicial
interpretations of each, all as in effect as of the Closing Date, the
Corporation does not intend to withhold any U.S. federal Tax on any payment to
or on behalf of a holder or beneficial owner of shares of Preference Stock in
connection with any redemption of such shares.
2.17. CONSENTS. Subject to compliance with the Securities Act and
any applicable state securities laws, the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the filing of the amendment to the
Corporation's Certificate of Incorporation and the Certificate of Designation
with the Secretary of State of the State of Delaware, except as set forth on
Schedule 2.17, no permit, authorization, consent or approval of or by, or any
notification of or filing with any person (governmental or private) is required
in connection with the execution, delivery and performance by the Corporation of
the Documents or any documentation relating thereto, the consummation
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by the Corporation of the transactions contemplated hereby or thereby, or the
issuance, sale or delivery of the Preference Stock, the Warrants and the
Conversion Shares.
2.18. INSURANCE. All of the material assets of each Day Entity
that are of insurable character are covered by insurance with reputable insurers
against risks of liability, casualty and fire and other losses and liabilities
customarily obtained to cover comparable businesses and assets in amounts, scope
and coverage which are consistent with prudent industry practice.
2.19. BROKERS. No Day Entity nor any of their respective officers,
directors, employees or stockholders has employed any broker or finder in
connection with the transactions with the Investors contemplated by this
Agreement.
2.20. DISCLOSURE. Neither this Agreement nor any certificate,
instrument or written statement furnished or made to any of the Investors by or
on behalf of any Day Entity pursuant to this Agreement for use in connection
with the transactions contemplated by this Agreement, contains as of the Closing
Date any untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements contained herein and therein not
misleading in light of the circumstances in 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 Corporation to be reasonable at the time made, it being
recognized by each Investor 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.
2.21. REPRESENTATIONS IN VARN ACQUISITION AGREEMENT. To the best
knowledge of the Corporation, all representations by or on behalf of the Varn
Group Companies set forth in the Varn Acquisition Agreement are true and correct
in all material respects; PROVIDED, HOWEVER, that Varn Products Co. GmbH is a
party to a lease agreement for a site at Willich-Munchelde, Germany which was
reflected as an operating lease in the financial statements of Varn Group
Companies and should properly have been reflected as a capital lease obligation;
the capital lease should have been reflected as a lien and encumbrance on
Schedule 4.7 of the Varn Acquisition Agreement and should also have been
appropriately reflected on Schedules 4.8(a) (Owned Real Property) and 4.8(b)
(Real Property Leases) of the Varn Acquisition Agreement.
2.22. CLOSING ACTIONS. Subject to the execution and delivery of
the Documents, the Closing Actions have been completed.
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Section 3. REPRESENTATIONS AND WARRANTIES OF EACH INVESTOR. Each
Investor represents and warrants to the Corporation as of the date hereof as
follows:
(a) Such Investor is acquiring the Preference Stock to be
purchased by it under this Agreement for its own account, for
investment and not with a view to the distribution thereof within the
meaning of the Securities Act.
(b) Such Investor understands that (i) the Preference Stock
have not been, and the Conversion Shares will not be, registered under
the Securities Act or any state securities laws, by reason of their
issuance by the Corporation in a transaction exempt from the
registration requirements thereof and (ii) the Preference Stock and the
Conversion Shares may not be sold unless such disposition is registered
under the Securities Act and applicable state securities laws or is
exempt from regulation thereunder.
(c) Such Investor has substantial experience in evaluating and
investing in private placement transactions of securities in companies
similar to the Corporation so that it is capable of evaluating the
merits and risks of its investment in the Corporation and has the
capacity to protect its own interests. Such Investor must bear the
economic risk of this investment indefinitely unless the Preference
Stock is registered pursuant to the Securities Act or an exemption from
registration is available. Such Investor also understands that there is
no assurance that any exemption from registration under the Securities
Act will be available and that, even if available, such exemption may
not allow such Investor to transfer all or any portion of the
Preference Stock under the circumstances, in the amounts or at the
times such Investor might propose.
(d) Such Investor represents that, by reason of its, or its
management's, business or financial experience, such Investor has the
capacity to protect its interests in connection with the transactions
contemplated in this Agreement.
(e) Such Investor further understands that the exemption from
registration afforded by Rule 144 (the provisions of which are known to
the Investor) promulgated under the Securities Act depends on the
satisfaction of various conditions, and that, if applicable, Rule 144
may afford the basis for sales only in limited amounts.
(f) Such Investor has not employed any broker or finder in
connection with the transactions contemplated by this Agreement.
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(g) Such Investor is an "Accredited Investor" (as defined in
Rule 501(a) under the Securities Act).
(h) Such Investor has had an opportunity to discuss the
Corporation's business, management and financial affairs with
directors, officers and management of the Corporation and has had the
opportunity to review the Corporation's operations and facilities. Such
Investor has also had the opportunity to ask questions of, and receive
answers from, the Corporation and its management regarding the terms
and conditions of this investment.
(i) Such Investor is duly organized and validly existing under
the laws of the state of its organization and has all power and
authority to enter into and perform the Documents. Each of the
Documents has been duly authorized by all necessary action on the part
of such Investor. Each of the Documents constitutes a valid and binding
agreement of such Investor enforceable against such Investor in
accordance with its terms except to the extent that enforceability may
be limited by bankruptcy, insolvency or other similar laws affecting
creditors' rights generally.
(j) For the purposes of this Section 3(j), "Confidential
Information" means information delivered to any Investor by or on
behalf of the Corporation, any Day Entity, the Armstrong Subsidiary or
any Varn Group Company in connection with the transactions contemplated
by or otherwise pursuant to this Agreement that is proprietary in
nature and that was clearly marked or labeled or otherwise adequately
identified when received by such Investor as being confidential
information of the Corporation, such Day Entity, the Armstrong
Subsidiary or any Varn Group Company; PROVIDED that such term does not
include information that (i) was publicly known or otherwise known to
such Investor prior to the time of such disclosure, (ii) subsequently
becomes publicly known through no act or omission by such Investor or
any person acting on its behalf, (iii) otherwise becomes known to such
Investor other than through disclosure by the Corporation, any Day
Entity, the Armstrong Subsidiary or any Varn Group Company or (iv)
constitutes financial statements delivered to such Investor under this
Agreement that are otherwise publicly available. Each Investor will
maintain the confidentiality of such Confidential Information in
accordance with procedures adopted by such Investor in good faith to
protect confidential information of third parties delivered to such
Investor; PROVIDED that each Investor may deliver or disclose
Confidential Information to (A) its directors, officers, employees,
agents, attorneys and affiliates (to the extent such disclosure
reasonably relates to the administration of the investment represented
by the Preference Stock), (B) its financial advisors and other
professional advisors who agree to hold confidential the Confidential
Information substantially in accordance with the terms of this Section
3(j), (C) any other holder of any Preference Stock, (D) any Person from
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which it offers to purchase any security of the Corporation (if such
Person has agreed in writing prior to its receipt of such Confidential
Information to be bound by the provisions of this Section 3(j)), (E)
any federal or state regulatory authority having jurisdiction over it,
(F) any nationally recognized rating agency that requires access to
information about its investment portfolio, (G) any lender of such
Investor or (H) any other Person to which such delivery or disclosure
may be necessary or appropriate (w) to effect compliance with any law,
rule, regulation or order applicable to it, (x) in response to any
subpoena or other legal process, (y) in connection with any litigation
to which such Investor is a party or (z) if a Board Triggering Event
(as defined in the Certificate of Designation) has occurred and is
continuing, to the extent such Investor may reasonably determine such
delivery and disclosure to be necessary or appropriate in the
enforcement or for the protection of such Investor's rights and
remedies under the Certificate of Designation or this Agreement. Each
holder of Preference Stock, by its acceptance of such stock, will be
deemed to have agreed to be bound by and to be entitled to the benefits
of this Section 3(j) as though it were a party to this Agreement. On
reasonable request by the Corporation in connection with the delivery
to any holder of a Preference Stock of information required to be
delivered to such holder under this Agreement or requested by such
holder (other than a holder that is a party to this Agreement or its
nominee), such holder will enter into an agreement with the Corporation
embodying the provisions of this Section 3(j).
(k) To the best knowledge of such Investor's management, such
Investor is not a "fiduciary" as defined by Section 3(21) of ERISA and
each Investor hereby represents and warrants that the execution and
delivery of this Agreement is not being effected on behalf of a benefit
plan investor within the meaning of 29 C.F.R., section
2510.3-101(f)(2), or on behalf of an employee benefit plan subject to
Part 4 of Title I of ERISA, or a "plan" within the meaning of Section
4975(e)(1) of the Code (or any entity whose assets include assets of
such a plan).
Section 4. CERTAIN COVENANTS.
4.1. ACCESS TO RECORDS. From and after the Closing, the
Corporation shall afford to each Investor and its employees, counsel,
accountants and other authorized representatives full access, during normal
business hours, upon reasonable advance notice, with due regard to the
Corporation's ongoing operations, to all of the books, records, accounts and
properties of or relating to (including, without limitation, all work papers of
the Corporation's accountants) the Corporation and to all officers and employees
of the Corporation, for any reasonable purpose whatsoever.
4.2. FINANCIAL REPORTS. From and after the Closing, the
Corporation agrees to furnish to each Investor the following:
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(a) As soon as available, but in any event within 90 days after the end
of each fiscal year of the Corporation, a copy of the audited consolidated
balance sheet of the Corporation 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 LLP, Deloitte & Touche LLP 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
Corporation, the unaudited consolidated balance sheet of the Corporation 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 the chief executive officer, president or chief financial officer
of the Corporation as being fairly stated in all material respects (subject to
normal year-end audit and other adjustments);
(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 Corporation
(other than the third, sixth, ninth and twelfth such month), the unaudited
consolidated balance sheets of the Corporation 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 the chief executive officer, president or
chief financial officer of the Corporation as being fairly stated in all
material respects (subject to normal year-end audit adjustments);
(d) Promptly (but in any event within seven business days) after the
discovery or receipt of notice by the Corporation of (i) any default under any
Debt Document or (ii) any other event or circumstance which, individually or in
the aggregate, has or would reasonably be expected to have a Material Adverse
Effect, a statement certified by the chief executive officer, president or chief
financial officer of the Corporation specifying the nature and period of
existence thereof and what actions the Corporation has taken and proposes to
take with respect thereto; and
(e) With reasonable promptness, such other information and financial
data concerning the Corporation, to the extent available, as any of the
Investors may reasonably request.
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4.3. MAINTENANCE OF CORPORATE EXISTENCE, ETC. At all times the
Corporation shall, and shall cause each other Day Entity, the Armstrong
Subsidiary and each Varn Group Company to, maintain in full force and effect its
corporate existence, rights, governmental approvals and franchises and all
licenses, permits and qualifications necessary or appropriate in the conduct of
business as proposed to be conducted, except where failure to do so,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect.
4.4. COMPLIANCE WITH LAWS. At all times the Corporation shall, and
shall cause each other Day Entity, the Armstrong Subsidiary and each Varn Group
Company to, comply with all applicable laws, rules, regulations and orders,
noncompliance with which, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect.
4.5. DISCLOSURE OF INVESTMENT. From and after the date hereof, the
Corporation agrees that it will not, (i) except as may be necessary or desirable
(x) in connection with a request by a governmental agency, regulatory or
supervisory authority or court or as required by law and other than to
affiliates of the Investors, and employees of the Investors or their affiliates,
and potential investors in the Corporation or (y) in connection with a request
by any lender to the Corporation, the Day Entities, the Armstrong Subsidiary or
the Varn Group Companies, disclose the transactions contemplated by the
Documents, or (ii) use in advertising or publicity the name of the other party
hereto, or any partner or employee of such party hereto or any of its respective
affiliates, or any trade name, trademark, trade device, service mark, symbol or
any abbreviation, contraction or simulation thereof owned by the other party
hereto or any of its respective affiliates, in either case without the prior
written consent of such party, such consent not to be unreasonably withheld or
delayed. In addition, the Corporation agrees that, prior to making any filing
with the Securities and Exchange Commission or distributing any private offering
materials which disclose the names of the Investors or the transactions
contemplated by the Documents, it will furnish to the Investors and their
counsel all such filings or such materials, which filings and materials will be
subject to the reasonable review and reasonable comment of the Investors and
their counsel, and no such filing shall be made or such materials shall be
distributed if any Investor or the Investors' counsel reasonably objects in
writing to such filings or such materials. From and after the date hereof,
neither the Corporation nor any of its subsidiaries will represent, directly or
indirectly, that any product or any service provided by, the Corporation or any
of its subsidiaries has been approved or endorsed by any Investor without the
prior written consent of the Investors.
4.6. COMPLIANCE WITH THE CERTIFICATE OF DESIGNATION. From and after the
Closing Date, the Corporation agrees that it shall, and shall cause each other
Day Entity, the
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Armstrong Subsidiary and each Varn Group Company to, comply with all covenants
of the Corporation set forth in paragraph (l) of the Certificate of Designation,
which paragraph (l) is hereby incorporated in this Agreement in its entirety, as
if fully set forth herein; PROVIDED, HOWEVER, that the Investors' remedies for
breach of this Section 4.6 shall be limited to an action for injunctive relief.
Section 5. SURVIVAL OF REPRESENTATIONS, WARRANTIES, AGREEMENTS AND
COVENANTS, ETC. All representations and warranties hereunder shall survive the
Closing for a period of two years and shall in no way be affected by any
knowledge possessed by, or investigation of the subject matter thereof made by
or on behalf of, the Investors; PROVIDED, HOWEVER, that (i) the representations
and warranties set forth in Sections 2.1, 2.2, 2.3 and 2.4 shall survive
indefinitely, (ii) the representations made in Section 2.6, as they relate to
Taxes, and in Section 2.16 (other than Section 2.16(e)), shall survive until 60
days after the expiration of the applicable statute of limitations (including
extensions thereof) and (iii) the representation made in Section 2.16(e) shall
survive for so long as any shares of Preference Stock remain outstanding. All
statements contained in any Schedule to this Agreement or in any certificate or
other instrument delivered by the Corporation pursuant to Section 1.4 shall
constitute representations and warranties by the Corporation under this
Agreement. All agreements contained herein shall survive indefinitely until, by
their respective terms, they are no longer operative; PROVIDED, HOWEVER, that
the rights of an Investor and the obligations of the Corporation to such
Investor under Section 4 of this Agreement shall, unless otherwise specified
therein, terminate at such time as such Investor and its Investor Affiliates do
not beneficially own any shares of the capital stock of the Corporation.
Section 6. EXPENSES. Whether or not the transactions contemplated
hereby are consummated, the Corporation shall pay and shall reimburse to the
Investors, promptly after receipt of the bill therefor, (a) all reasonable fees,
expenses and disbursements of the Investors' special counsel in connection with
the transactions contemplated by this Agreement; (b) all other reasonable
expenses in connection with the transactions contemplated by this Agreement; (c)
all reasonable costs and expenses incurred by the Investors relating to any
future amendment or supplement to this Agreement or the other Documents, whether
or not consummated; and (d) all costs and expenses incurred by the Investors
relating to the enforcement of this Agreement and the other Documents and the
transactions contemplated hereby and thereby, including reasonable printing and
reproduction expenses, inspection expenses and consultants' fees, costs and
expenses.
Section 7. INDEMNIFICATION.
7.1. GENERAL INDEMNIFICATION. The Corporation shall indemnify, defend
and hold each Investor and each of their respective officers, directors,
partners, managing directors,
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affiliates, employees, agents, consultants, representatives, successors and
assigns (each an "Investor Indemnitee") harmless from and against all Losses
incurred or suffered by an Investor Indemnitee (whether incurred or suffered
directly or indirectly through ownership of Common Stock or Preference Stock)
arising out of, relating to or resulting from (i) any breach of any of the
representations or warranties made by the Corporation in this Agreement or in
any certificate or other instrument delivered pursuant hereto including, without
limitation, the Documents and (ii) any breach of any of the covenants or
agreements made by the Corporation in this Agreement (other than Section 4.6) or
in any certificate or other instrument delivered pursuant hereto including,
without limitation, the Documents; PROVIDED, HOWEVER, that the Corporation's
indemnification obligations hereunder shall not extend to any Losses to the
extent arising out of, relating to or resulting from the gross negligence or
willful misconduct of any Investor Indemnitee. The Investors shall indemnify,
defend and hold the Corporation, its affiliates, and each of their respective
officers, directors, employees, agents, consultants, representatives, successors
and assigns harmless against all Losses arising from the breach of any of the
covenants or agreements of the Investors in this Agreement or in any certificate
or other instrument delivered pursuant hereto including, without limitation, the
Documents; PROVIDED, HOWEVER, that the Investors' indemnification obligations
hereunder shall not extend to any Losses to the extent arising out of, relating
to or resulting from the gross negligence or willful misconduct of the
Corporation.
7.2. INDEMNIFICATION PRINCIPLES. For purposes of this Agreement,
"Losses" shall mean each and all of the following items: claims, losses
(including, without limitation, losses of earnings), liabilities, obligations,
payments, damages (actual, punitive or consequential), charges, judgments,
fines, penalties, amounts paid in settlement, costs and expenses (including,
without limitation, interest which may be imposed in connection therewith, costs
and expenses of investigation, actions, suits, proceedings, demands, assessments
and fees, expenses and disbursements of counsel, consultants and other experts)
actually incurred by the applicable indemnitee. Notwithstanding the foregoing
sentence, in no event shall any Investor Indemnitee's claim for indemnification
hereunder in respect of any loss of value of such Investor Indemnitee's
Preference Stock exceed the amount by which the cash Redemption Price (as
defined in the Certificate of Designation solely by reference to clauses (a) and
(b)(i) in the definition of the Base Redemption Amount) (including any
applicable Early Redemption Premium (as defined in the Certificate of
Designation)) which such Investor Indemnitee would have been entitled to receive
if Preference Stock held by such Investor Indemnitee were redeemed on the date
of calculation (including the Warrants component of the Base Redemption Amount
(as defined in the Certificate of Designation), calculated as if it had been
converted into cash in an amount equal to the Redemption Value (as defined in
the Certificate of Designation) of the shares of Common Stock issuable upon
exercise of the Warrants, less the applicable exercise price, but excluding any
component of value of either the Warrants component of
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the Base Redemption Amount or the Warrants (when issued) based on any actual or
alleged loss of value of the Common Stock) exceeds the fair market value of such
Investor Indemnitee's Preference Stock. Any payment by the Corporation to any
Investor Indemnitee pursuant to this Section 7 or Section 6 shall be treated for
all income Tax purposes as an adjustment to the price paid by such Investor for
the Preference Stock pursuant to this Agreement.
7.3. CLAIM NOTICE. Any claim for indemnification pursuant to this
Section 7 must be made before the expiration of the survival periods set forth
in Section 5 of this Agreement. No party shall be entitled to indemnification
against a Loss arising from the breach of any representations or warranties of
any other party unless the party seeking indemnification shall have given to the
party from whom indemnification is being sought a claim notice relating to such
Loss (a "Claim Notice") prior to expiration of the representation or warranty
upon which the claim is based. The Claim Notice shall be given reasonably
promptly (but, in the case of a third party claim against the indemnified party,
within 15 days after the indemnified party has received written notification of
such claim) after the party seeking indemnity becomes aware of the facts
indicating that a claim for indemnification may be warranted. Each Claim Notice
shall specify in reasonable detail (to the extent known) the nature of the
claim, the applicable provision(s) of this Agreement or other instrument under
which the claim for indemnity arises, and, if possible, the amount or the
estimated amount thereof. The failure of any indemnified party to give a Claim
Notice shall not relieve the indemnifying party of its obligations under this
Section 7, except to the extent that the indemnified party is actually
materially prejudiced by failure to give such Claim Notice. The indemnifying
party may, through counsel of its own choosing and reasonably satisfactory to
the indemnified party, assume the defense thereof or other indemnification
obligation with respect thereto; PROVIDED, HOWEVER, that (a) any indemnified
party shall be entitled to participate in any such claim with counsel of its own
choice but at its own expense and (b) any indemnified party shall be entitled to
participate in any such claim with counsel of its own choice at the expense of
the indemnifying party if representation of both parties by the same counsel is
otherwise inappropriate under applicable standards of professional conduct. In
any event, if the indemnifying party fails to take reasonable steps necessary to
defend diligently the action or proceeding within twenty days after receiving
notice from such indemnified party that the indemnifying party believes it has
failed to do so, the indemnified party may assume such defense or other
indemnification obligation and the fees and expenses of its attorneys will be
covered by the indemnity provided for in this Section 7. Notwithstanding
anything in this Section 7 to the contrary, the indemnifying party shall not,
without the written consent of the indemnified party, settle or compromise any
pending or threatened action or claim in respect of which indemnification or
contribution may be sought hereunder (whether or not the indemnified party is an
actual or potential party to such action or claim) or consent to the entry of
any judgment (i) which does not, to the extent that an
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indemnified party has any liability with respect to such action or claim,
include as an unconditional term thereof the delivery by the claimant or
plaintiff to the indemnified party of a written release from all liability in
respect of such action or claim, (ii) which includes any statement as to or an
admission of fault, culpability or a failure to act, by or on behalf of any
indemnified party, or (iii) in any manner that involves any injunctive relief
against the indemnified party or may materially and adversely affect the
indemnified party. Notwithstanding anything in this Section 7 to the contrary,
the indemnified party may not compromise or settle any claim without the prior
written consent of the indemnifying party (which consent shall not be
unreasonably withheld or delayed), unless the sole relief granted is equitable
relief for which the indemnifying party would have no liability or to which the
indemnifying party would not be subject.
Section 8. REMEDIES. In case any one or more of the covenants and/or
agreements set forth in this Agreement shall have been breached by the
Corporation, any Investor may proceed to protect and enforce its rights either
by suit in equity and/or by action at law, including, but not limited to, an
action for damages as a result of any such breach and/or an action for specific
performance of any such covenant or agreement contained in this Agreement.
Section 9. FURTHER ASSURANCES. At any time or from time to time after
each Closing, the Corporation, on the one hand, and the Investors, on the other
hand, agree to cooperate with each other, and at the request of the other party,
to execute and deliver any further instruments or documents and to take all such
further action as the other party may reasonably request in order to evidence or
effectuate the consummation of the transactions contemplated hereby relating to
the Purchase and to otherwise carry out the intent of the parties hereunder.
Section 10. SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure
to the benefit of the Corporation and each of the Investors and the respective
successors, assigns, heirs and personal representatives of the Corporation and
each of the Investors. The Corporation acknowledges that, subject to compliance
with applicable securities laws, the provisions of the Certificate of
Designation and the Stockholders Agreement, any of the Investors may transfer,
all or part of, the securities acquired by it hereunder and assign, all or part
of, its rights and obligations under this Agreement.
Section 11. ENTIRE AGREEMENT. This Agreement and the other writings
expressly referred to herein which form a part hereof contain the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior and contemporaneous arrangements or understandings with
respect thereto.
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Section 12. NOTICES. All notices, requests, consents and other
communications hereunder to any party shall be deemed to be sufficient if
contained in a written instrument delivered in person or sent by telecopy (with
a confirmatory copy sent by a different means within three business days of such
notice), nationally recognized overnight courier or first class registered or
certified mail, return receipt requested, postage prepaid, addressed to such
party at the address set forth below or such other address as may hereafter be
designated in writing by such party to the other parties:
(i) if to the Corporation, to:
Day International Group, Inc.
P.O. Box 338
333 West First Street
Dayton, OH 45401
Telecopy: (937) 226-0052
Attention: Dennis R. Wolters
with a copy to:
Debevoise & Plimpton.
875 Third Avenue
New York, NY 10022
Telecopy: (212) 909-6836
Attention: William B. Beekman, Esq.
and
Greenwich Street Capital Partners, Inc.
388 Greenwich Street
New York, New York 10033
Telecopy: (212) 816-0166
Attention: Christine K. Vanden Beukel
and
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(ii) if to the Investors, to:
Quantum Industrial Partners LDC
Kaya Flambyan 9
Curacao, Williamsted
Netherlands Antilles
Telecopy: (599) 9-732-2410
Attention: Quantum Group Administrator
SFM Domestic Investments LLC
888 7th Avenue, 33rd floor
New York, New York 10106
Telecopy: (212) 315-1221
Attention: Colin Raymond
and
Greenwich Street Capital Partners, Inc.
388 Greenwich Street
New York, New York 10033
Telecopy: (212) 816-0166
Attention: Christine K. Vanden Beukel
with copies to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Telecopy: (212) 859-8586
Attention: Arthur S. Kaufman, Esq.
and
Soros Fund Management LLC
888 7th Avenue, 33rd floor
New York, New York 10106
Telecopy: (212) 664-0544
Attention: Michael C. Neus, Esq.
All such notices, requests, consents and other communications shall be
deemed to have been given when received.
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Section 13. AMENDMENTS; ENFORCEMENT. The terms and provisions of this
Agreement may be modified or amended, or any of the provisions hereof waived,
temporarily or permanently, pursuant to the written consent of the Corporation
and a majority in interest of the Investors.
Section 14. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, and each such counterpart hereof shall be deemed to be an
original instrument, but all such counterparts together shall constitute but one
agreement.
Section 15. HEADINGS. The headings of the sections of this Agreement
have been inserted for convenience of reference only and shall not be deemed to
be a part of this Agreement.
Section 16. NOUNS AND PRONOUNS. Whenever the context may require, any
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of names and pronouns shall include the
plural and vice versa.
Section 17. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without giving
effect to the principles of conflicts of law. Each of the parties hereto hereby
irrevocably and unconditionally consents to submit to the jurisdiction of the
courts of the State of New York and of the United States of America, in each
case located in the County of New York, for any Litigation arising out of or
relating to this Agreement and the transactions contemplated hereby (and agrees
not to commence any Litigation relating thereto except in such courts), and
further agrees that service of any process, summons, notice or document by U.S.
registered mail to its respective address set forth in this Agreement, or such
other address as may be given by one or more parties to the other parties in
accordance with the notice provisions of Section 12, shall be effective service
of process for any Litigation brought against it in any such court. Each of the
parties hereto hereby irrevocably and unconditionally waives any objection to
the laying of venue of any Litigation arising out of this Agreement or the
transactions contemplated hereby in the courts of the State of New York or the
United States of America, in each case located in the County of New York, and
hereby further irrevocably and unconditionally waives and agrees not to plead or
claim in any such court that any such Litigation brought in any such court has
been brought in an inconvenient forum.
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Section 18. SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid, but
if any provision of this Agreement is held to be invalid or unenforceable in any
respect, such invalidity or unenforceability shall not render invalid or
unenforceable any other provision of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
28
<PAGE> 36
IN WITNESS WHEREOF, the parties hereto have duly executed this
agreement as of the date first above written.
CORPORATION:
DAY INTERNATIONAL GROUP, INC.
By:
/s/ Dennis R. Walters
-----------------------------------
Name: Dennis R. Walters
Title: President
INVESTORS:
QUANTUM INDUSTRIAL PARTNERS LDC
By:
/s/ Michael C. Neus
-----------------------------------
Name: Michael C. Neus
Title: Attorney-in-Fact
SFM DOMESTIC INVESTMENTS LLC
By:
/s/ Michael C. Neus
-----------------------------------
Name: Michael C. Neus
Title: Attorney-in-Fact
SGC PARTNERS I LLC
By:
/s/ Elan Schultz
-----------------------------------
Name: Elan Schultz
Title: Vice President
29
<PAGE> 37
GREENWICH STREET CAPITAL
PARTNERS L.P.
By: /s/ Eric Bomze
-----------------------------------
Name: Eric Bomze
Title: Vice President
TRV EMPLOYEES FUND, L.P.
By: /s/ Eric Bomze
-----------------------------------
Name: Eric Bomze
Title: Vice President
GREENWICH STREET CAPITAL OFFSHORE
FUND, LTD.
By: /s/ Eric Bomze
-----------------------------------
Name: Eric Bomze
Title: Vice President
THE TRAVELERS INSURANCE COMPANY
By: /s/ F. Denney Voss
-----------------------------------
Name: F. Denney Voss
Title: Senior Vice President
THE TRAVELERS LIFE AND ANNUITY
COMPANY
By: /s/ F. Denney Voss
-----------------------------------
Name: F. Denney Voss
Title: Senior Vice President
30
<PAGE> 38
UNIONE ITALIANA (U.K.) REINSURANCE
COMPANY LIMITED
By: /s/ Robert Hamwee
-----------------------------------
Name: Robert Hamwee
Title: Managing Director
31
<PAGE> 39
<TABLE>
<CAPTION>
Annex I
-------
Investors
---------
Number of Shares of
Investor Preference Stock Purchase Price, $
-------- ------------------- -----------------
<S> <C> <C>
Quantum Industrial Partners LDC 24625 24625000
SFM Domestic Investments LLC 375 375000
SGC Partners I LLC 2248 2248000
Greenwich Street Capital Partners L.P. 4537.5 4537500
TRV Employees Fund, L.P. 1083.6 1083600
Greenwich Street Capital Offshore Fund, Ltd. 281.5 281500
The Travelers Insurance Company 234.1 234100
The Travelers Life and Annuity Company 115.3 115300
Unione Italiana (U.K.) Reinsurance Company Limited 5000 5000000
</TABLE>
<PAGE> 1
Exhibit 4.5
- --------------------------------------------------------------------------------
AMENDED AND RESTATED
STOCKHOLDERS AGREEMENT
Dated as of October 19, 1999
Among
DAY INTERNATIONAL GROUP, INC.
AND CERTAIN OF ITS STOCKHOLDERS
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 1. Stockholders Agreement Amended and Restated............................................2
Section 2. Definitions............................................................................2
Section 3. Voting Arrangements....................................................................7
(a) Election of Directors..................................................................7
(b) Removal of Directors...................................................................7
(c) Vacancies..............................................................................7
(d) Rights Unimpaired......................................................................7
(e) Board Observer.........................................................................8
Section 4. Repurchase Option......................................................................8
(a) Termination of Employment..............................................................8
(b) Repurchase Procedure for Employee Stock................................................8
Section 5. Restrictions on Transfer of Employee Stock.............................................9
(a) Restrictions on Transfer...............................................................9
(b) Certain Permitted Transfers............................................................9
Section 6. Restrictions on Transfer of SG Stock..................................................10
(a) Restrictions on Transfer..............................................................10
(b) Certain Permitted Transfers...........................................................10
(c) Right of First Refusal................................................................10
(d) Sponsor Liquidity Event...............................................................11
Section 6A. Restrictions on Transfer of Preference Stock and Future Warrants......................11
Section 7. Additional Restrictions on Transfer...................................................11
(a) Stock Legend..........................................................................11
(b) Additional Legends....................................................................12
(c) Preference Stock Legend...............................................................12
(d) Opinion of Counsel....................................................................12
Section 8. Sale of the Company...................................................................12
Section 9. Participation Rights..................................................................13
Section 10. Registration Rights...................................................................14
</TABLE>
ii
<PAGE> 3
<TABLE>
<S> <C>
(a) Demand Registration...................................................................14
(b) Company Registration..................................................................15
(c) Management Participation..............................................................15
(d) Costs of Registration.................................................................16
(e) Holdback Agreement....................................................................16
(f) Registration Procedures...............................................................16
(g) Other Limitations.....................................................................16
Section 11. Sponsor Liquidity Event...............................................................17
Section 12. Assignment of Rights; Representations on Sale.........................................17
Section 13. Equity Issuances......................................................................18
Section 14. Transfers in Violation of Agreement...................................................18
Section 15. New Employee Stockholders.............................................................18
Section 16. Amendment and Waiver..................................................................18
Section 17. Severability..........................................................................18
Section 18. Entire Agreement......................................................................19
Section 19. Successors and Assigns................................................................19
Section 20. Counterparts..........................................................................19
Section 21. Remedies..............................................................................19
Section 22. Notices...............................................................................19
Section 23. Governing Law.........................................................................21
Section 24. Descriptive Headings..................................................................21
Section 25. Termination; Survival.................................................................22
</TABLE>
iii
<PAGE> 4
AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
-------------------------------------------
This AMENDED AND RESTATED STOCKHOLDERS AGREEMENT (this
"AGREEMENT") is dated as of October 19, 1999 among DAY INTERNATIONAL GROUP,
INC., a Delaware corporation (the "COMPANY"), GREENWICH IV LLC, a Delaware
limited liability company ("GREENWICH"), Societe Generale Capital Corporation
("SG"), the holders of the Company's Preference Stock set forth on Schedule A
hereto and each other individual who hereafter executes a counterpart of this
Agreement (or otherwise agrees to be bound by the provisions hereof) and who is
designated as a Preference Holder (the "PREFERENCE HOLDERS"), and the Employee
Stockholders set forth on Schedule B hereto and each other individual who
hereafter executes a counterpart of this Agreement (or otherwise agrees to be
bound by the provisions hereof) and who is designated as an Employee Stockholder
(the "EMPLOYEE STOCKHOLDERS" and, together with Greenwich, SG and the Preference
Holders, the "STOCKHOLDERS").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Greenwich, GSD Acquisition Corp., a Delaware
corporation and the Company's former parent, SG and the Employee Stockholders
are parties to that certain Stockholders Agreement, dated as of January 16, 1998
(the "STOCKHOLDERS AGREEMENT");
WHEREAS, the Company has two classes of Common Stock, Class A
Common Stock, par value $.01 per share (the "VOTING COMMON STOCK") and Class B
Common Stock, par value $.01 per share (the "NON-VOTING COMMON STOCK," together
with the Voting Common Stock, the "COMMON STOCK");
WHEREAS, the Company plans to issue a series of 18%
Convertible Cumulative Preference Stock due 2010 (the "PREFERENCE STOCK")
pursuant to a Certificate of Designation which has been filed with the Secretary
of State of the State of Delaware (the "CERTIFICATE OF DESIGNATION");
WHEREAS, on October 19, 1999, the parties listed on Schedule A
hereto have entered into a Preference Stock Purchase Agreement with the Company
(the "Stock Purchase Agreement") agreeing to purchase the Preference Stock,
subject to the fulfilment of certain conditions (among them, that the Company
and the other Stockholders enter into this Agreement);
WHEREAS, the parties hereto wish to amend and restate the
Stockholders Agreement to account for the issuance of the Preference Stock;
<PAGE> 5
WHEREAS, the parties hereto believe it to be in their best
interests that they enter into this Agreement providing for certain rights and
restrictions with respect to the shares of Common Stock, options to acquire
shares of Common Stock, and Preference Stock owned from time to time by them or
their transferees.
NOW, THEREFORE, in consideration of the mutual covenants and
obligations set forth in this Agreement, the parties hereto agree as follows:
SECTION 1. STOCKHOLDERS AGREEMENT AMENDED AND RESTATED. The
Stockholders Agreement is hereby amended and restated in its entirety.
SECTION 2. DEFINITIONS. For purposes of this Agreement, the
following terms have the indicated meanings:
"AFFILIATE" of a Person means any other Person controlling,
controlled by or under common control with such Person, whether by ownership of
voting securities, by contract, ability to make investment decisions or
otherwise.
"APPROVED SALE" is defined in Section 8.
"BASE REDEMPTION AMOUNT" is defined in the Certificate of
Designation.
"BOARD" means the Company's Board of Directors.
"CAUSE" means (a) with respect to any Employee Stockholder
with an employment agreement that explicitly defines "Cause," the definition set
forth in such employment agreement and (b) with respect to any other Employee
Stockholder, (i) such Employee Stockholder's willful and repeated failure to
perform substantially his duties as an employee of the Company or any
Subsidiary, including, without limitation, such Employee Stockholder's willful
and repeated failure to comply with reasonable and lawful directives of the
Board (as set at any meeting of the Board in accordance with the Company's
bylaws) or such Employee Stockholder's supervisory personnel (provided such
directives are consistent with his or her position), (ii) any conviction of, or
the entering of a plea of guilty or NOLO CONTENDERE to, a crime that constitutes
a felony, or any willful or material violation by such Employee Stockholder of
any federal, state or foreign securities laws, (iii) any conviction of any other
criminal act or act of material dishonesty, disloyalty or misconduct by such
Employee Stockholder (other than minor traffic offenses and similar acts) that
is materially injurious to the property, operations, business or reputation of
the Company or any of its Subsidiaries, (iv) the failure to comply with the
terms of any
<PAGE> 6
equity plan, arrangement or agreement of the Company or any Affiliate, in which
such Employee Stockholder is a participant or to which such Employee Stockholder
is a party or (v) the willful and material breach by such Employee Stockholder
of any written covenant or agreement with the Company, any Subsidiary or any
Affiliate not to disclose any information pertaining to the Company, any
Subsidiaries or any Affiliates or not to compete or interfere with the Company,
any of its Subsidiaries or Affiliates.
"CERTIFICATE OF DESIGNATION" is defined in the third "Whereas"
clause.
"COMMON STOCK" is defined in the second "Whereas" clause.
"COMPANY" is defined in the preface.
"COMPANY REGISTRATION" is defined in Section 10(b).
"CONVERSION SHARES" means any shares of Common Stock issued in
a conversion of Preference Stock.
"DEMAND REGISTRATION" is defined in Section 10(a).
"EMPLOYEE STOCK" means Stockholder Shares held by the Employee
Stockholders and their respective Permitted Transferees.
"EMPLOYEE STOCKHOLDER" is defined in the preface.
"FAIR MARKET VALUE", as of any date of determination (the
"Determination Date"), means (A) with respect to Common Stock owned by any
Employee Stockholder (a) with respect to publicly traded Common Stock, the
market trading price of such Common Stock as of the Determination Date, (b) with
respect to non-publicly traded Common Stock, the fair market value of such
Common Stock (expressed on a per-share basis) as of the Determination Date, as
determined in good faith by the Board based on the consolidated results of
operations, financial condition and future prospects of the Company and such
other factors as the Board may deem appropriate and (c) with respect to Options,
the difference of (i) the product of the amount described in clause (a) or (b)
above (as appropriate) multiplied by the number of shares of Common Stock
issuable upon exercise of the Option, MINUS (ii) the aggregate exercise price of
the Option, (B) with respect to Common Stock owned by any Stockholder other than
an Employee Stockholder (a) with respect to publicly traded Common Stock, (i) if
the Determination Date is the date on which any class of Common
<PAGE> 7
Stock is first sold to the public pursuant to a Qualified Public Offering, then
the initial Qualified Public Offering price (before deducting commissions,
discounts or expenses) at which such Common Stock is sold in such Qualified
Public Offering; (ii) if the Determination Date is a date after the date on
which any shares of any class of Common Stock are first sold to the public
pursuant to a Qualified Public Offering, then the price per share of such Common
Stock equal to the average last sales price of such Common Stock on each of the
ten trading days prior to the Determination Date on the principal exchange on
which the Common Stock may at the time be listed or, if there shall have been no
sales on such exchange on any such trading day, the average of the closing bid
and asked prices on such exchange at the end of such trading day or if there is
no such bid and asked price on such trading day on the next preceding date when
such bid and asked price occurred or, if the Common Stock shall not be so
listed, the average of the closing sales prices as reported by NASDAQ at the end
of each of the ten trading days prior to the Determination Date in the
over-the-counter market; and (iii) if the Determination Date is prior to the
date on which any class of Common Stock is first sold to the public pursuant to
a Qualified Public Offering, as determined in good faith by the Company's Board
of Directors based on the consolidated result of operations, financial condition
and future prospects of the Company and such other factors as the Board may deem
appropriate, PROVIDED, HOWEVER, that in the event an affected holder of such
Common Stock or an affected Preference Holder (each, a "Holder") disputes such
determination of fair market value, such determination shall be made by a
nationally recognized independent investment bank selected by the Company and
reasonably acceptable to such Holder, and (b) with respect to Options, the
difference of (i) the product of the amount described in clause (a) above
multiplied by the number of shares of Common Stock issuable upon exercise of the
Option, MINUS (ii) the aggregate exercise price of the Option.
"FAMILY GROUP" is defined in Section 5(b).
"FUTURE WARRANTS" is defined in the Certificate of
Designation.
"GREENWICH" is defined in the preface.
"GREENWICH STOCK" means Stockholder Shares held by Greenwich,
its Affiliates and their respective transferees.
"INDEPENDENT THIRD PARTY" means any person who does not own in
excess of 10% of the Common Stock on a fully-diluted basis, who is not
controlling, controlled by or under common control with any such 10% owner of
Common Stock and
<PAGE> 8
who is not the spouse, ancestor or descendant (by birth or adoption) of any such
10% owner of Common Stock.
"NON-VOTING COMMON STOCK" is defined in the second "Whereas"
clause.
"OPTIONS" means options to purchase shares of Common Stock.
"ORIGINAL COST" means for any Employee Stockholder and with
respect to any share of Employee Stock, such Employee Stock's original purchase
price for such share of Employee Stock acquired from the Company and held by
such Employee Stockholder, as reflected in the records of the Company, provided
that (a) for any shares of Employee Stock which were Retained Shares, the
"original cost" of each such share will be $4,030.03, (b) for any shares of
Employee Stock which were acquired by the exercise of Retained Options, the
"original cost" of each such share will be the excess of $4,030.03 MINUS the
exercise price for such Retained Option and (c) for any Options which were
Retained Options, the "original cost" of each such Option will be the excess of
$4,030.03 MINUS the exercise price for such Option.
"OTHER STOCKHOLDERS" is defined in Section 8.
"PARTICIPATING STOCKHOLDERS" is defined in Section 9.
"PERMITTED TRANSFEREE" is defined in Section 5(b).
"PERSON" means any individual, corporation, partnership, firm,
joint venture, association, limited liability company, joint-stock company,
trust, unincorporated organization, governmental or regulatory body or other
legal entity.
"PREFERENCE HOLDER" is defined in the preface, and shall
include any holder of Warrant Shares or Conversion Shares.
"PREFERENCE STOCK" is defined in the third "Whereas" clause.
"QUALIFIED PUBLIC OFFERING" means the sale, in an underwritten
public offering registered under the Securities Act, of shares of Common Stock
having an aggregate offering value (before underwriters' discounts and selling
commissions) of at least $50 million.
"REDEMPTION PRICE" is defined in the Certificate of
Designation.
<PAGE> 9
"REDEMPTION VALUE" is defined in the Certificate of
Designation.
"REPURCHASE NOTICE" is defined in Section 4(b).
"REQUESTING STOCKHOLDER" is defined in Section 10.
"RESTRUCTURING" is defined in Section 1(a).
"SALE NOTICE" is defined in Section 9.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SG" is defined in the preface.
"SG STOCK" means Stockholder Shares held by SG and its
transferees.
"SPONSOR LIQUIDITY EVENT" is defined in Section 11.
"STOCK PURCHASE AGREEMENT" is defined in the fourth "Whereas"
clause.
"STOCKHOLDER" is defined in the preface.
"STOCKHOLDER SHARES" means (i) all shares of Common Stock
acquired by the Stockholders, including all shares of Common Stock acquired
pursuant to the exercise of Options, Warrant Shares and Conversion Shares and
(ii) all shares of Common Stock or other securities issued or issuable directly
or indirectly with respect to the securities referred to in clause (i) by way of
stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. Stockholder
Shares shall cease to be such when they have been sold (x) pursuant to a
registered public offering under the Securities Act or (y) to the public
pursuant to Rule 144 under the Securities Act, or any successor provision.
"SUBSIDIARY" means, with respect to any Person, any other
Person of which at least a majority of the outstanding shares or other equity
interests having ordinary voting power for the election of directors or
comparable managers of such Person are owned, directly or indirectly, by the
first Person or one or more Subsidiaries of such first Person.
<PAGE> 10
"TRANSFER NOTICE" is defined in Section 6(c).
"TRANSFER OFFER" is defined in Section 6(c).
"TRANSFER SECURITIES" is defined in Section 6(c).
"VESTED OPTIONS" means Options that are exercisable by the
holder thereof on the date of determination.
"VOTING COMMON STOCK" is defined in the second "Whereas"
clause.
"WARRANT SHARES" means any shares of Common Stock issued upon
the exercise of Future Warrants.
SECTION 3. VOTING ARRANGEMENTS.
(a) ELECTION OF DIRECTORS. Each holder of Stockholder Shares
and each Preference Holder holding shares of Preference Stock hereby agrees that
such Person will vote, or cause to be voted, all voting securities of the
Company over which such Person has the power to vote or direct the voting, and
will take all other necessary or desirable action within such Person's control,
and the Company will take all necessary and desirable actions within its control
to cause the authorized number of directors for the Board to be such number as
designated by Greenwich, which initially shall be six, and to elect or cause to
be elected to the Board and cause to be continued in such office, (i) four
individuals as designated by Greenwich from time to time and (ii) for so long as
SG holds 5% of the outstanding Common Stock, one individual designated by SG
from time to time.
(b) REMOVAL OF DIRECTORS. If at any time Greenwich or SG shall
notify any or all of the Preference Holders and the other holders of Stockholder
Shares of its desire to remove, with or without cause, any individual from a
directorship for which such Person has designation rights pursuant to Section
3(a) above, all such Persons so notified will vote, or cause to be voted, all
voting securities of the Company over which they have the power to vote or
direct the voting, and shall take all such other actions promptly as shall be
necessary or desirable to cause the removal of such director.
(c) VACANCIES. If at any time any Greenwich or SG director
ceases to serve on the Board (whether due to resignation, removal or otherwise),
then Greenwich or SG, as the case may be, shall be entitled to designate a
successor director to fill the
<PAGE> 11
vacancy created thereby on the terms and subject to the conditions of Section
3(a) above. Each holder of Stockholder Shares and each Preference Holder holding
shares of Preference Stock agrees that he, she or it will vote, or cause to be
voted, all voting securities of the Company over which such Person has the power
to vote or direct the voting, and shall take all such other actions as shall be
necessary or desirable, to cause the designated successor to be elected to fill
such vacancy.
(d) RIGHTS UNIMPAIRED. Nothing in this Agreement shall be
construed to impair any rights that the stockholders of the Company may have to
remove any director for cause. No removal for cause of an individual designated
pursuant to this Section 3 shall affect the right of Greenwich or SG, as the
case may be, to designate a different individual pursuant to Section 3 to fill
the directorship from which such individual was removed.
(e) BOARD OBSERVER. SG shall have the right, at any time upon
notice to the Company and to Greenwich, to have its right to designate a
director become a right to designate a non-voting observer. Such observer shall
have the right to receive notice of and attend and participate in discussions at
each regular and special meeting of the Board and will be entitled to receive at
the same time they are provided to the Board copies of any information
concerning the Company that is provided to each of the directors of the Company
with respect to such meetings, provided that such observer acknowledges and
agrees that such observer will be bound by the same duties and obligations of
loyalty and confidentiality with respect to such information that the directors
of the Company must satisfy. Observers will have no voting rights or any other
rights not expressly set forth above.
SECTION 4. REPURCHASE OPTION.
(a) TERMINATION OF EMPLOYMENT. Upon the termination of an
Employee Stockholder's employment by the Company or its Subsidiaries:
(i) if such termination is for any reason other than
for Cause (A) the Company may elect to repurchase all or any portion of
the Employee Stock or Vested Options held by such Employee Stockholder
and his or her Permitted Transferees at a price per share equal to Fair
Market Value as of the date of termination of the shares of Employee
Stock to be purchased (and, in the case of Vested Options, at the
excess of the aggregate Fair Market Value of all of the shares of
Common Stock which are subject to the Vested Options to be purchased
over the aggregate exercise price therefor) and (B) all Options held by
<PAGE> 12
such Employee Stockholder other than Vested Options shall be
automatically canceled; and
(ii) if such termination is for Cause, the Company
may elect to repurchase all or any portion of the Employee Stock held
by such Employee Stockholder and his or her Permitted Transferees at a
price per share equal to the lesser of Fair Market Value (as of the
date of termination) and Original Cost, and all Options (including
Vested Options other than Retained Options) held by such Employee
Stockholder shall be canceled automatically.
(b) REPURCHASE PROCEDURE FOR EMPLOYEE STOCK. The Company shall
exercise any election to purchase Employee Stock or Options pursuant to Section
4(a) by delivery to the Employee Stockholder, within 90 days after the
termination of such Employee Stockholder's employment, a written notice (the
"REPURCHASE NOTICE") specifying the number of shares of Employee Stock and
Options to be repurchased. The closing of any repurchase of Employee Stock or
Options shall take place not later than 190 days following the date on which the
Repurchase Notice is delivered to the Employee Stockholder. The shares of
Employee Stock or Options to be repurchased by the Company shall be satisfied
(i) first, from the shares of Employee Stock or Options held by the Employee
Stockholder at the time of delivery of the Repurchase Notice and (ii) second, if
the number of such shares is less than the number of shares elected to be
repurchased by the Company, from the shares of Employee Stock or Options held by
the Permitted Transferees of such Employee Stockholder in such proportions as
shall be determined by the Company. The Company will pay cash for any shares of
Employee Stock or Options to be repurchased under this Section 4, payable by
delivery of a check or wire transfer of funds in the amount of the aggregate
purchase price of the Employee Stock or Options being purchased by the Company;
PROVIDED, HOWEVER, that in the event that any such repurchase is prohibited by
or would cause a default under any of the Company's or its Subsidiaries'
agreements for borrowed money, the provisions of any preferred stock issuance by
the Company or the Certificate of Designation, the Company may elect to pay for
any shares of Employee Stock or Options to be repurchased through the delivery
of a three year subordinated promissory note of the Company, which note shall
accrue interest at 8% per annum, payable at maturity of the note, and shall be
fully subordinated in right of payment, including, without limitation, payment
upon maturity of such promissory note, and exercise of remedies to the lenders'
rights under such agreements for borrowed money.
SECTION 5. RESTRICTIONS ON TRANSFER OF EMPLOYEE STOCK.
<PAGE> 13
(a) RESTRICTIONS ON TRANSFER. Prior to the later to occur of
(i) January 16, 2003 and (ii) the consummation of a Qualified Public Offering,
no Employee Stock or Options may be transferred except as provided in Section
5(b).
(b) CERTAIN PERMITTED TRANSFERS. Section 5(a) shall not apply
to transfers of (i) Employee Stock by will or pursuant to applicable laws of
descent and distribution or within an Employee Stockholder's family group;
provided that, in connection with any such transfer, each such transferee (a
"PERMITTED TRANSFEREE") agrees in writing to be bound by the provisions of this
Agreement (ii) Employee Stock or Options pursuant to Section 4 (Repurchase
Option) or (iii) Employee Stock pursuant to Section 8 (Sale of the Company),
Section 9 (Participation Rights) or Section 10(b) (Company Registration). Any
shares of Employee Stock transferred to a Permitted Transferee shall continue to
be Employee Stock for purposes of this Agreement. An Employee Stockholder's
"FAMILY GROUP" means such Employee Stockholder's spouse and lineal descendants
(whether natural or adopted) and any trust formed and maintained solely for the
benefit of such Employee Stockholder, such Employee Stockholder's spouse or such
Employee Stockholder's lineal descendants.
SECTION 6. RESTRICTIONS ON TRANSFER OF SG STOCK.
(a) RESTRICTIONS ON TRANSFER. Prior to the earlier to occur of
(i) January 16, 2003 and (ii) the consummation of a Qualified Public Offering,
no SG Stock may be transferred except as set forth in Section 6(b).
(b) CERTAIN PERMITTED TRANSFERS. Section 6(a) shall not apply
to transfers by SG of SG Stock (i) to any of its Affiliates who agree to become
a party to, and to be bound to the same extent as its transferor by the terms of
this Agreement (ii) pursuant to Section 8 (Sales of the Company), Section 9
(Participation Rights) or Section 10 (Registration Rights) or (iii) pursuant to
Section 6(c) hereof.
(c) RIGHT OF FIRST REFUSAL. SG may transfer its shares of
Common Stock at any time provided that SG complies with the provisions of this
Section 6(c). SG agrees that if it or any of its Affiliates receives a bona fide
offer (a "TRANSFER OFFER") to purchase any or all the SG Stock (the "TRANSFER
SECURITIES") from any Person (the "OFFEROR") and intends to accept such offer,
SG shall provide a written notice (the "TRANSFER NOTICE") of such Transfer Offer
and the material terms thereof to the Company and Greenwich. The Transfer Notice
shall also contain an irrevocable offer to sell the Transfer Securities to
Greenwich (in a manner set forth below) at a price contained in, and upon
substantially the same terms and conditions as the terms and conditions
contained in,
<PAGE> 14
the Transfer Offer and shall identify the Offeror, the Transfer Securities, the
price contained in the Transfer Offer and the other material terms and
conditions of the Transfer Offer. At any time within 30 days after the date of
the receipt by the Company and Greenwich of the Transfer Notice, Greenwich shall
have the option to exercise its right to purchase (or assign its rights to one
of its Affiliates) all of the Transfer Securities at the same price and on such
substantially the same terms and conditions as the Transfer Offer, in which
event Greenwich will be obligated to purchase the Transfer Securities in
accordance with such terms within 60 days after the date of the receipt by the
Company and Greenwich of the Transfer Notice. At the closing of such purchase,
Greenwich or one or more of its Affiliates shall deliver a certified bank check
or checks in the appropriate amount to SG against delivery of certificates or
other instruments representing the Transfer Securities so purchased,
appropriately endorsed by SG. If the Company or Greenwich or one or more of its
Affiliates has not given notice of its intention to exercise such right to
purchase within such 30 day period or has not tendered the purchase price for
such Securities in the manner set forth above within such 60 day period, SG
shall be free for a period of 60 days from the end of such 30 day or 60 day
period, as the case may be, to transfer the Transfer Securities to the Offeror
on terms which are no more favorable in any material respect to the transferee
than the terms and conditions set forth in the Transfer Notice. If for any
reason SG does not transfer the Transfer Securities to the Offeror on such terms
and conditions or if SG wishes to sell the Transfer Securities on terms which
are more favorable in any material respect to the transferee than those set
forth in the Transfer Notice, the provisions of this Section 6(c) shall again be
applicable to the Transfer Securities. SG shall cause the transferee of such
shares to agree in writing to be bound by the provisions of this Agreement, and
such shares of SG Stock shall continue to be SG Stock for purposes of this
Agreement.
(d) SPONSOR LIQUIDITY EVENT. All transfers by SG shall be
subject to Section 11.
SECTION 6A. RESTRICTIONS ON TRANSFER OF PREFERENCE STOCK AND
FUTURE WARRANTS.
(a) No shares of Preference Stock may be transferred except as
provided in the Certificate of Designation.
(b) No Future Warrants may be transferred except as provided
in the Future Warrants.
SECTION 7. ADDITIONAL RESTRICTIONS ON TRANSFER.
<PAGE> 15
(a) STOCK LEGEND. The certificates representing Stockholder
Shares shall bear the following legends:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED
ON OCTOBER 19, 1999, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), OR UNDER ANY STATE SECURITIES LAWS AND
MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT AND APPLICABLE STATE SECURITIES
LAWS OR AN EXEMPTION FROM REGISTRATION THEREUNDER.
THE ISSUER WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO
REQUESTS THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OR SERIES
OF SHARES AUTHORIZED TO BE ISSUED AND THE QUALIFICATIONS, LIMITATIONS
OR RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS.
(b) ADDITIONAL LEGENDS. The certificates representing SG
Stock, Employee Stock and Preference Stock shall bear the following legend in
addition to the legends set forth in Section 7(a) above:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO A
STOCKHOLDERS AGREEMENT DATED AS OF OCTOBER 19, 1999 AMONG DAY
INTERNATIONAL GROUP, INC. AND CERTAIN STOCKHOLDERS THEREOF, A COPY OF
WHICH MAY BE OBTAINED WITHOUT CHARGE BY THE HOLDER HEREOF AT THE
PRINCIPAL PLACE OF BUSINESS OF DAY INTERNATIONAL GROUP, INC.
(c) PREFERENCE STOCK LEGEND. The certificates representing
Preference Stock shall bear the following legend in addition to the legends set
forth in Sections 7(a) and 7(b) above:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO A
CERTIFICATE OF DESIGNATION DATED AS OF OCTOBER 15, 1999, A COPY OF
WHICH MAY BE OBTAINED WITHOUT
<PAGE> 16
CHARGE BY THE HOLDER HEREOF AT THE PRINCIPAL PLACE OF BUSINESS OF DAY
INTERNATIONAL GROUP, INC.
(d) OPINION OF COUNSEL. No Employee Stockholder may sell,
transfer or dispose of any such stock (other than pursuant to an effective
registration statement under the Securities Act) without first delivering to the
Company, if the Company so requests, an opinion of counsel reasonably acceptable
in form and substance to the Company that registration under the Securities Act
is not required in connection with such transfer.
SECTION 8. SALE OF THE COMPANY. If Greenwich approves the sale
of the Company to an Independent Third Party, whether by merger, consolidation,
sale of all or substantially all of its assets, sale of more than 50% of the
outstanding voting securities of the Company or otherwise (an "APPROVED SALE"),
the other holders of Stockholder Shares (the "OTHER STOCKHOLDERS") and the
Preference Holders holding shares of Preference Stock shall consent to and raise
no objections against such Approved Sale (and shall waive any rights of
appraisal) and shall fully cooperate with and take all necessary and desirable
actions in connection with the consummation of such Approved Sale, including
without limitation executing a purchase and sale agreement in the form to be
entered into by Greenwich. If the Approved Sale is structured as a sale of
stock, the Other Stockholders shall agree to sell all of their shares of Common
Stock and rights to acquire shares of Common Stock on the terms and conditions
approved by the Board and Greenwich and the Preference Holders shall agree to
sell all their shares of Preference Stock for the amount payable in cash to
which they would be entitled upon an optional redemption of such Preference
Stock (including any Early Redemption Premium). In calculating the Redemption
Price for purposes of the preceding sentence, the Future Warrants component of
the Base Redemption Amount, if any, shall be converted into cash in an amount
equal to the Redemption Value (as defined in the Certificate of Designation) of
the shares of Common Stock issuable upon exercise of the Future Warrants. The
obligations of the Other Stockholders with respect to any Approved Sale are
subject to the condition that (a) upon the consummation of such Approved Sale,
all of the holders of Common Stock will receive the same form and amount of
consideration per share of Common Stock as is received by Greenwich, or if
Greenwich is given an option as to the form and amount of consideration to be
received, all holders will be given the same option and (b) no stockholder shall
be required to incur indemnification obligations which are joint and several
(unless Greenwich and the Other Stockholders enter into a contribution agreement
which effectively provides for several liability) or which are in excess of the
net proceeds received by such stockholder in connection with such Approved Sale.
The obligations of the Preference Holders holding Preference Shares with respect
to any
<PAGE> 17
Approved Sale are subject to the condition that (a) such Approved Sale is made
in compliance with Section 11 hereof and (b) no stockholder shall be required to
incur indemnification obligations which are joint and several (unless the
Preference Holders enter into a contribution agreement which effectively
provides for several liability) or which are in excess of the net proceeds
received by such stockholder in connection with such Approved Sale.
SECTION 9. PARTICIPATION RIGHTS. Not less than 20 days prior
to any proposed transfer (including by merger, consolidation or otherwise) of
Common Stock by Greenwich, Greenwich shall deliver to the Other Stockholders a
written notice (the "SALE NOTICE") specifying in reasonable detail the identity
of the proposed transferee(s) and the terms and conditions of the proposed
transfer. Any Other Stockholder may elect to participate in the proposed
transfer by delivering to Greenwich a written notice of such election within the
10 business day period following delivery of the Sale Notice. If one or more
Other Stockholders elect to participate in such transfer (the "PARTICIPATING
STOCKHOLDERS"), Greenwich and each such Participating Stockholder will be
entitled to sell in such proposed transfer, at the same price and on the same
terms, a number of shares of Common Stock equal to the product of (i) the
quotient determined by dividing the percentage of the Company's Common Stock
then held by Greenwich or such Participating Stockholder, as the case may be, by
the aggregate percentage of the Common Stock then held by Greenwich and all
Participating Stockholders, multiplied by (ii) the number of shares of Common
Stock to be sold in such proposed transfer. For purposes of this Section 9, the
amount of Common Stock held by each Participating Stockholder who is an Employee
Stockholder shall be deemed to include all shares of Common Stock acquirable
pursuant to the exercise of Vested Options then held by such Participating
Stockholder, PROVIDED that such Employee Stockholder exercises such Vested
Options prior to or in connection with such transfer. The Participating
Stockholders shall pay a pro rata portion of the transaction expenses associated
with such transfer. Notwithstanding the foregoing, this Section 9 shall not
apply to (A) with respect to Other Stockholders other than Preference Holders,
transfers by Greenwich of up to an aggregate of 20% of the outstanding Common
Stock, and (B) with respect to all Other Stockholders, (i) transfers by
Greenwich to Affiliates of Greenwich, provided that each such Affiliate agrees
in writing to be bound by the provisions of this Agreement binding Greenwich,
(ii) transfers pursuant to Rule 144 under the Securities Act (or any successor
provision), (iii) transfers pursuant to Section 8, or (iv) transfers pursuant to
Section 10.
SECTION 10. REGISTRATION RIGHTS.
<PAGE> 18
(a) DEMAND REGISTRATION. (i) From and after the date hereof,
the holders of a majority of the then outstanding Greenwich Stock shall have the
right to require the Company to effect up to two registrations of their Common
Stock on Form S-1 under the Securities Act and, if available, unlimited
registrations on Form S-2 or S-3 under the Securities Act, (ii) from and after a
Qualified Public Offering, SG shall have the right to require the Company to
effect up to two registrations of Common Stock on Form S-2 or S-3 , and (iii)
from and after a Qualified Public Offering, the holders of Warrant Shares shall
have the right to require the Company to effect up to three registrations of
Warrant Shares and Conversion Shares (any such registration, a "DEMAND
REGISTRATION") (the Stockholder requesting such Demand Registration, the
"REQUESTING STOCKHOLDER"), each such request to specify the intended method or
methods of distribution thereof (which may include a distribution in an
underwritten offering). Upon receipt of any request for a Demand Registration,
the Company shall give prompt written notice of such request to each
Stockholder, and, subject to the provisions set forth below, shall include in
such Demand Registration all Stockholder Shares with respect to which the
Company has received written requests for inclusion therein within 30 days after
the delivery of the Company's notice (including shares covered by Vested Options
to the extent that the Company receives appropriate assurances that such Options
will be exercised upon effectiveness of such registration). If other shares of
Common Stock are included in any Demand Registration that is not an underwritten
offering, all Stockholder Shares included in such offering shall be sold prior
to the sale of any of such other securities. If other shares of Common Stock are
included in any Demand Registration that is an underwritten offering, and the
managing underwriter for such offering advises the Company that in its opinion
the number of securities to be included exceeds the number of securities which
can be sold in such offering without adversely affecting the pricing or
marketability thereof, the Company will include in such registration FIRST, the
Stockholder Shares of the Requesting Stockholder, SECOND, the Stockholder Shares
of Greenwich and SG, on a pro rata basis and THIRD, all other Stockholder
Shares, pro rata among the holders thereof, based on the percentage of the
outstanding Stockholder Shares held by each such Stockholder (assuming the
exercise of all Vested Options held by participating Stockholders). The Company
shall have the right to select the investment banker(s) and manager(s) to
administer any Demand Registration that is an underwritten offering, subject to
the approval of the holders of a majority of the Greenwich Stock to be included
in such Demand Registration.
(b) COMPANY REGISTRATION. In the event that the Company
proposes to register any Common Stock under the Securities Act in connection
with a public offering (other than a Demand Registration) on any form (other
than (i) a registration on Form S-4 or Form S-8 or (ii) a registration statement
filed in connection with an exchange
<PAGE> 19
offer or an offering of securities solely to the Company's existing security
holders) that would legally permit the inclusion of Stockholder Shares (any such
registration, a "COMPANY REGISTRATION"), the Company shall give each of the
Stockholders written notice thereof as soon as practicable but in no event less
than 30 days prior to such registration, and shall include in such registration
all Stockholder Shares requested in writing to be included therein (including
shares covered by Vested Options to the extent that the Company receives
appropriate assurances that such Options will be exercised upon effectiveness of
such registration), subject to the limitations set forth in this Section 10(b).
If in connection with such proposed registration the managing underwriter for
such offering advises the Company that the number of Stockholder Shares
requested to be included therein exceeds the number of shares that can be sold
in such offering without affecting the pricing or marketability thereof, the
Company will include in such registration to the extent of the number which the
Company is so advised can be sold in such offering FIRST, the shares to be sold
by the Company, SECOND, the Stockholder Shares of Greenwich and SG, on a pro
rata basis and THIRD, all other Stockholder Shares, pro rata among the holders
thereof, based on the number of shares of Common Stock held by such Stockholder
(assuming the exercise of all Vested Options held by all participating
Stockholders) and all other holders (other than the Company) exercising similar
registration rights.
(c) MANAGEMENT PARTICIPATION. Notwithstanding the foregoing,
the Employee Stockholders shall not be entitled to participate in a Demand
Registration or a Company Registration pursuant to Sections 10(a) or 10(b),
respectively, to the extent that the managing underwriter (or, in the case of an
offering that is not underwritten, a nationally recognized investment banking
firm) shall determine in good faith that the participation of management would
adversely affect the marketability of the securities being sold by the Company
in such registration.
(d) COSTS OF REGISTRATION. The Company shall bear the costs of
each registration in which Stockholders participate pursuant to this Section 10,
including the reasonable fees and expenses of one counsel for the selling
Stockholders (to be selected by the holders of a majority of the Greenwich Stock
to be included in such registration or, if no Greenwich Stock has been requested
to be included, by the holders of a majority of the Stockholder Shares to be
included in such registration) but excluding any underwriting discounts or
commissions on the sale of Stockholder Shares or the fees and expenses of any
additional counsel retained by the Stockholders. As a condition to the inclusion
of Stockholder Shares in any registration, the participating Stockholder and the
Company shall execute an underwriting agreement or similar agreement in a form
reasonably acceptable to the Company and the underwriter(s), if any, for such
offering containing customary indemnification and holdback provisions.
Notwithstanding the foregoing, no
<PAGE> 20
Stockholder shall be required to incur indemnification obligations which are in
excess of the net proceeds received by such Stockholder pursuant to such
registration or which relate to information not supplied by such Stockholder for
inclusion in the registration statement.
(e) HOLDBACK AGREEMENT. If and whenever the Company proposes
to register any of its Common Stock for its own account or for the account of
any of its security holders under the Securities Act (other than on Forms S-4 or
S-8 or any successor form) or is required to use its best efforts to effect the
registration of any shares of Common Stock pursuant to Section 10(a) hereof,
each Stockholder agrees not to effect any public sale or distribution, including
any sale pursuant to Rule 144 under the Securities Act, of any Stockholder
Shares within 30 days prior to and 90 days after the date of such offering
(except as part of such offering) or such longer period as required by the
underwriters of such offering, but in no event to exceed 120 days.
(f) REGISTRATION PROCEDURES. The Company shall enter into such
agreements and take such other actions as the selling Stockholders or the
underwriters reasonably request in order to expedite and facilitate the
disposition of Stockholder Shares pursuant to this Section 10, including,
without limitation, preparing for, and participating in, such number of "road
shows" and all other customary selling efforts as the underwriters reasonably
request in order to expedite and facilitate such disposition, and generally use
its best efforts to take all other steps necessary to effect the registration of
such Stockholder Shares.
(g) OTHER LIMITATIONS. Notwithstanding any other provision of
this Section 10, (i) the Company shall not be required to include Stockholder
Shares in a registration that relates to the Company's initial public offering
of Common Stock if no Greenwich Stock or SG Stock is sold in such offering, (ii)
the Company shall not be required to include in any registration pursuant to
this Section 10 any Stockholder Shares (other than any Greenwich Stock or SG
Stock in the case of a Demand Registration) that are then eligible for transfer
pursuant to Rule 144 under the Securities Act or may otherwise be freely
transferred without registration under the Securities Act, (provided that the
Company shall be required to include such shares of the Preference Holders
unless such shares are eligible for transfer under Rule 144(k)) .
SECTION 11. SPONSOR LIQUIDITY EVENT. The Stockholders agree
that, in the event of a sale (whether by merger, consolidation, sale of all or
substantially all of the Company's assets, sale of any outstanding voting
securities or otherwise) of Common Stock by Greenwich or SG to an Independent
Third Party (other than one or more sales,
<PAGE> 21
each one of up to 250 shares of Common Stock, to Employee Stockholders) or any
other event with respect to which Greenwich or SG would be entitled to receive
liquidating distributions with respect to Common Stock held by either of them
(whether as a result of an Approved Sale or otherwise) (a "SPONSOR LIQUIDITY
EVENT"), any Sponsor Liquidity Event shall be structured in such a way that the
Preference Holders are entitled to sell all of their shares of Preference Stock
which are not converted into Common Stock by the Company pursuant to the
Certificate of Designation at or prior to such Sponsor Liquidity Event for cash
for an amount equal to the cash Redemption Price as of the date of the Sponsor
Liquidity Event (including any applicable Early Redemption Premium (as defined
in the Certificate of Designation)). In calculating the Redemption Price for
purposes of the preceding sentence, the Future Warrants component of the Base
Redemption Amount, if any, shall be converted into cash in an amount equal to
the Redemption Value (as defined in the Certificate of Designation) of the
shares of Common Stock issuable upon exercise of the Future Warrants. Neither
Greenwich nor SG may receive any distribution in respect of Common Stock as a
result of a Sponsor Liquidity Event unless and until the holders of Preference
Stock receive payment in full in cash of the Redemption Price (including any
applicable Early Redemption Premium) then payable for the Preference Stock held
by such holders of Preference Stock, or until such shares of Preference Stock
have been converted pursuant to paragraph (g) of the Certificate of Designation.
SECTION 12. ASSIGNMENT OF RIGHTS; REPRESENTATIONS ON SALE. The
Company may assign to Greenwich and SG (on a pro rata basis) or one or more
third parties its right to repurchase shares of Employee Stock pursuant to
Section 4, subject only to compliance with applicable securities laws. To the
extent that an Employee Stockholder purchased Employee Stock with a promissory
note that has not been repaid in full, the Company may apply the unpaid
principal balance of such promissory note and accrued and unpaid interest
thereon to a reduction of the repurchase price for such Employee Stock. The
purchasers of Employee Stock pursuant to Section 4 shall be entitled to receive
customary representations and warranties from the seller regarding the seller's
good title to, and freedom from liens, encumbrances and restrictions on the sale
of, such Employee Stock.
SECTION 13. EQUITY ISSUANCES. The Company shall not issue
additional equity Securities to Greenwich or any of its Affiliates unless, prior
to such issuance, the Company notifies SG in writing thereof and grants to SG
the right, which SG may assign to any of its Affiliates, to subscribe for and
purchase such additional shares or units of securities so issued at the same
price and upon the same terms and conditions as those to be issued to Greenwich
or any of its Affiliates and in an amount equal to the product of (a) the amount
of equity securities proposed to be issued to Greenwich or any of its
<PAGE> 22
Affiliates times (b) the quotient of the number of shares of Common Stock owned
by SG and its Affiliates, on a fully-diluted basis, divided by the number of
shares of Common Stock owned by SG, Greenwich and their respective Affiliates,
on a fully-diluted basis. If requested by SG, the Company will issue to SG (or
any Affiliate designated by SG) a different class of such equity securities
which is identical to those proposed to be issued but non-voting and convertible
into those equity securities which Greenwich is purchasing.
SECTION 14. TRANSFERS IN VIOLATION OF AGREEMENT. Any transfer
or attempted transfer of any Stockholder in violation of this Agreement shall be
void, and the Company shall not be obligated to record such transfer on its
books or treat any purported transferee of such Stockholder Shares as the owner
of such shares for any purpose.
SECTION 15 NEW EMPLOYEE STOCKHOLDERS. Each Stockholder hereby
agrees that any employee of the Company or any of its subsidiaries who after the
date of this Agreement is offered shares of Common Stock or Options shall, as a
condition precedent to the acquisition of such shares of Common Stock or
Options, as the case may be, become a party to this Agreement by executing the
same. Upon such execution and delivery, such employee shall be an Employee
Stockholder for all purposes of this Agreement.
SECTION 16. AMENDMENT AND WAIVER. Except as otherwise provided
herein, no amendment or waiver of any provision of this Agreement shall be
effective against the Company or Stockholders unless such amendment or waiver is
approved in writing by the Company, Greenwich, SG, the holders of at least a
majority of the then outstanding Employee Stock and the holders of at least a
majority of the then outstanding shares held by the Preference Holders,
respectively. The failure of any party to enforce any provision of this
Agreement shall not be construed as a waiver of such provision and shall not
affect the right of such party thereafter to enforce each provision of this
Agreement in accordance with its terms.
SECTION 17. SEVERABILITY. If any provision of this Agreement
is held to be invalid, illegal or unenforceable in any respect under any
applicable law or rule in any jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other provision or any other jurisdiction,
but this Agreement shall be reformed, construed and enforced in such
jurisdiction as if such invalid, illegal or unenforceable provision had never
been contained herein.
SECTION 18. ENTIRE AGREEMENT. Except as otherwise expressly
set forth herein, this document, embodies the complete agreement and
understanding among the parties hereto with respect to the subject matter hereof
and supersedes and preempts any
<PAGE> 23
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
SECTION 19. SUCCESSORS AND ASSIGNS. This Agreement shall bind
and inure to the benefit of and be enforceable by the Company and its successors
and assigns. Prior to any permitted transfer of any shares of SG Stock, Employee
Stock, Preference Stock, Warrant Shares or Conversion Shares, SG, the applicable
Employee Stockholder or Preference Holder, as the case may be, will cause the
transferee of such shares to agree in writing to be bound by the provisions of
this Agreement and such shares of SG Stock, Employee Stock, Preference Stock,
Warrant Shares or Conversion Shares will continue to be SG Stock, Employee
Stock, Preference Stock, Warrant Shares or Conversion Shares, respectively, for
purposes of this Agreement.
SECTION 20. COUNTERPARTS. This Agreement may be executed in
separate counterparts each of which shall be an original and all of which taken
together shall constitute one and the same agreement.
SECTION 21. REMEDIES. The Company and the Stockholders shall
be entitled to enforce their rights under this Agreement specifically to recover
damages by reason of any breach of any provision of this Agreement and to
exercise all other rights existing in their favor. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and that the Company or any Stockholder may in
its sole discretion apply to any court of law or equity of competent
jurisdiction for specific performance and/or injunctive relief (without posting
a bond or other security) in order to enforce or prevent any violation of the
provisions of this Agreement.
SECTION 22. NOTICES. Any notice provided for in this Agreement
shall be in writing and shall be deemed to have been duly given if personally
delivered, or mailed, certified or registered mail (postage prepaid) or sent by
reputable next-day or overnight mail courier service (charges prepaid) or sent
by fax to the Company, Greenwich or SG at the addresses set forth below, to any
Preference Holder at the address and fax number indicated in Schedule A hereto,
and to any Employee Stockholder at the address indicated on Schedule hereto and
to any subsequent holder of Stockholder Shares subject to this Agreement at such
address as indicated by the Company's records, or at such address or to the
attention of such other person as the recipient party has specified by prior
written notice to the sending party.
<PAGE> 24
(a) If to the Company, to:
Day International Group, Inc.
130 West Second Street
Suite 1700
Dayton, OH 45402
Fax: (937) 226-0052
Attention: David B. Freimuth
with a copy to:
Greenwich Street Capital Partners, Inc.
388 Greenwich Street
New York, New York 10033
Fax: (212) 816-0166
Attention: Christine K. Vanden Beukel
and a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Fax: (212) 909-6836
Attention: Andrew L. Sommer, Esq.
(b) If to Greenwich, to:
Greenwich Street Capital Partners, Inc.
388 Greenwich Street, 36th Floor
New York, New York 10013
Fax: (212) 816-0166
Attention: Christine K. Vanden Beukel
<PAGE> 25
With a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Fax: (212) 909-6836
Attention: Andrew L. Sommer, Esq.
(c) If to SG, to:
SG Capital Partners, LLC
1221 Avenue of the Americas
New York, New York 10020
Fax: (212) 278-5454
Attention: James N. Lane
With a copy to:
Kirkland & Ellis
153 East 53rd Street
New York, New York 10022
Fax: (212) 446-4900
Attention: John L. Kuehn, Esq.
All such notices, requests, demands, waivers and other communications shall be
deemed to have been received (A) if by personal delivery on the day after such
delivery, (B) if by certified or registered mail, on the fifth business day
after the mailing thereof, (C) if by next-day or overnight mail or delivery, on
the day delivered, or (D) if by fax, on the next day following the day on which
such fax was sent, provided that a copy is also sent by certified or registered
mail.
SECTION 23. GOVERNING LAW. This Agreement and the rights and
obligations of the parties hereunder and the Persons subject hereto shall be
governed by, and construed and interpreted in accordance with, the laws of the
State of Delaware, without giving effect to the conflicts of laws principles
thereof.
SECTION 24. DESCRIPTIVE HEADINGS. The descriptive headings of
this Agreement are inserted for convenience only and do not constitute a part of
this Agreement.
<PAGE> 26
SECTION 25. TERMINATION; SURVIVAL. Sections 3, 6, 8 and 9
hereof shall terminate on the date on which Greenwich collectively holds less
than 20% of the outstanding Common Stock of the Company. Section 4 hereof shall
terminate upon the occurrence of a Qualified Public Offering. Any Stockholder
that ceases to own any equity securities of the Company shall cease to be bound
by this Agreement; PROVIDED, HOWEVER, that any transfer of such securities was
made in accordance with this Agreement and PROVIDED, FURTHER, any Employee
Stockholder transferring any shares of Employee Stock to a Permitted Transferee
shall remain subject to this Agreement with respect to such shares.
<PAGE> 27
IN WITNESS WHEREOF, the parties have executed this
Stockholders Agreement as of the date first above written.
GREENWICH IV LLC
By: /s/ Christine K. Vanden Beukel
--------------------------------------------
Name: Christine K. Vanden Beukel
Title: Managing Director
SGC PARTNERS I LLC
By: /s/ Elan Schultz
--------------------------------------------
Name: Elan Schultz
Title: Vice President
EMPLOYEE STOCKHOLDERS:
/s/ Dennis R. Wolters
-----------------------------------------------
Dennis R. Wolters
/s/ David B. Freimuth
-----------------------------------------------
David B. Freimuth
<PAGE> 28
/s/ Christian Baldermann
-----------------------------------------------
Christian Baldermann
/s/ John R. Elia
-----------------------------------------------
John R. Elia
/s/ Michael E. Mclean
-----------------------------------------------
Michael E. McLean
/s/ Dermot Healy
-----------------------------------------------
Dermot Healy
/s/ Dwaine R. Brooks
-----------------------------------------------
Dwaine R. Brooks
/s/ William M. Howle
-----------------------------------------------
William M. Howle
/s/ William B. Branson
-----------------------------------------------
William B. Branson
/s/ Michael P. Neroni
-----------------------------------------------
Michael P. Neroni
<PAGE> 29
/s/ Edward P. Dzierzynski
-----------------------------------------------
Edward P. Dzierzynski
/s/ Jean Boret
-----------------------------------------------
Jean Boret
/s/ Lawrence E. Gates
-----------------------------------------------
Lawrence E. Gates
/s/ Thomas Powlas
-----------------------------------------------
Thomas Powlas
/s/ Mario Stevenel
-----------------------------------------------
Mario Stevenel
<PAGE> 30
/s/ Thomas J. Koenig
-----------------------------------------------
Thomas J. Koenig
/s/ Michael Whelchel
-----------------------------------------------
Michael Whelchel
/s/ Martin J. Nacrelli
-----------------------------------------------
Martin J. Nacrelli
/s/ Jerry Michael Treadway
-----------------------------------------------
Jerry Michael Treadway
/s/ Julio E. Vela
-----------------------------------------------
Julio E. Vela
/s/ Steven F. Skerl
-----------------------------------------------
Steven F. Skerl
<PAGE> 31
PREFERENCE HOLDERS:
QUANTUM INDUSTRIAL PARTNERS LDC
By: /s/ Michael C. Neus
-------------------------------------------
Name: Michael C. Neus
Title: Attorney-in-Fact
SFM DOMESTIC INVESTMENTS LLC
By: /s/ Michael C. Neus
-------------------------------------------
Name: Michael C. Neus
Title: Attorney-in-Fact
<PAGE> 32
GREENWICH STREET CAPITAL PARTNERS, L.P.
By: /s/ Eric Bomze
-------------------------------------------
Name: Eric Bomze
Title: Vice President
TRV EMPLOYEES FUND, L.P.
By: /s/ Eric Bomze
-------------------------------------------
Name: Eric Bomze
Title: Vice President
GREENWICH STREET CAPITAL OFFSHORE FUND, LTD.
By: /s/ Eric Bomze
-------------------------------------------
Name: Eric Bomze
Title: Vice President
THE TRAVELERS INSURANCE COMPANY
By: /s/ F. Denney Voss
-------------------------------------------
Name: F. Denney Voss
Title: Senior Vice President
THE TRAVELERS LIFE AND ANNUITY COMPANY
by /s/ F. Denney Voss
-------------------------------------------
Name: F. Denney Voss
Title: Senior Vice President
<PAGE> 33
UNIONE ITALIANA (U.K.) REINSURANCE
COMPANY LIMITED
By: /s/ Robert Hamwee
-------------------------------------------
Name: Robert Hamwee
Title: Managing Director
THE COMPANY:
DAY INTERNATIONAL GROUP, INC.
By: /s/ Christine K. Vanden Beukel
-------------------------------------------
Name: Christine K. Vanden Beukel
Title: Secretary
<PAGE> 34
Copies of Schedule A (Name and Address of Preference Holders) and Schedule B
(Name and Address of Employee Stockholders) will be furnished supplementally to
the SEC upon request.
<PAGE> 1
EXHIBIT 10.1
EXECUTION COPY
================================================================================
$90,000,000
AMENDED AND RESTATED
SENIOR SECURED CREDIT AGREEMENT
among
DAY INTERNATIONAL GROUP, INC.,
as Borrower,
The Several Lenders
from Time to Time Parties Hereto,
SG COWEN SECURITIES CORPORATION,
as Arranger
and
SOCIETE GENERALE,
as Administrative Agent
Dated as of October 19, 1999
================================================================================
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TABLE OF CONTENTS
Page
----
Section 1. Definitions ..................................................2
1.1 Defined Terms ................................................2
1.2 Other Definitional Provisions ...............................33
Section 2. Amount and Terms of Commitments .............................33
2.1 Term Loan Commitments .......................................34
2.2 Procedure for Term Loan Borrowing ...........................34
2.3 Repayment of Term Loans .....................................34
2.4 Revolving Credit Commitments ................................34
2.5 Procedure for Revolving Credit Borrowing ....................35
2.6 Swing Line Commitment .......................................36
2.7 Procedure for Swing Line Borrowing; Refunding of
Swing Line Loans ............................................36
2.8 Repayment of Loans; Evidence of Debt ........................38
2.9 Commitment Fees, etc. .......................................39
2.10 Termination or Reduction of Revolving Credit Commitments ....39
2.11 Optional Prepayments ........................................40
2.12 Mandatory Prepayments and Commitment Reductions .............40
2.13 Conversion and Continuation Options .........................42
2.14 Minimum Amounts and Maximum Number of Eurodollar Tranches ...43
2.15 Interest Rates and Payment Dates ............................43
2.16 Computation of Interest and Fees ............................44
2.17 Inability to Determine Interest Rate ........................44
2.18 Pro Rata Treatment and Payments .............................45
2.19 Requirements of Law .........................................47
2.20 Taxes .......................................................48
2.21 Indemnity ...................................................50
2.22 Illegality ..................................................51
2.23 Certain Rules Relating to the Payment of Additional
Amounts .....................................................51
Section 3. Letters of Credit ...........................................53
3.1 L/C Commitment ..............................................53
3.2 Procedure for Issuance of Letter of Credit ..................54
3.3 Commissions, Fees and Other Charges .........................54
3.4 L/C Participations ..........................................55
3.5 Reimbursement Obligation of the Borrower ....................56
3.6 Obligations Absolute ........................................56
3.7 Letter of Credit Payments ...................................57
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3.8 Applications ................................................57
Section 4. Representations and Warranties ..............................57
4.1 Financial Condition .........................................57
4.2 No Change ...................................................59
4.3 Corporate Existence; Compliance with Law ....................59
4.4 Corporate Power; Authorization; Enforceable Obligations .....59
4.5 No Legal Bar ................................................59
4.6 No Material Litigation ......................................60
4.7 No Default ..................................................60
4.8 Ownership of Property; Liens ................................60
4.9 Intellectual Property .......................................60
4.10 Taxes .......................................................61
4.11 Federal Regulations .........................................61
4.12 Labor Matters ...............................................61
4.13 ERISA .......................................................61
4.14 Investment Company Act; Other Regulations ...................62
4.15 Subsidiaries ................................................62
4.16 Use of Proceeds .............................................62
4.17 Environmental Matters .......................................62
4.18 Accuracy of Information, etc. ...............................64
4.19 Collateral ..................................................64
4.20 Solvency ....................................................65
4.21 Regulation H ................................................66
4.22 Ownership of Stock ..........................................66
4.23 Senior Indebtedness .........................................66
4.24 Year 2000 Matters ...........................................66
4.25 Mortgaged Property ..........................................66
4.26 Certain Agreements ..........................................66
Section 5. Conditions Precedent ........................................67
5.1 Conditions to Initial Extension of Credit ...................67
5.2 Conditions to Each Extension of Credit ......................71
Section 6. Affirmative Covenants .......................................72
6.1 Financial Statements ........................................72
6.2 Certificates; Other Information .............................73
6.3 Payment of Obligations ......................................74
6.4 Conduct of Business and Maintenance of Existence, etc. ......75
6.5 Maintenance of Property; Insurance ..........................75
6.6 Inspection of Property; Books and Records; Discussions ......75
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6.7 Notices .....................................................75
6.8 Environmental Laws ..........................................76
6.9 Additional Collateral, etc. .................................77
6.10 Surveys for New Mortgaged Properties ........................79
Section 7. Negative Covenants ..........................................79
7.1 Financial Condition Covenants ...............................79
7.2 Limitation on Indebtedness ..................................80
7.3 Limitation on Liens .........................................84
7.4 Limitation on Fundamental Changes ...........................87
7.5 Limitation on Sales of Assets ...............................87
7.6 Limitation on Dividends .....................................88
7.7 Limitation on Capital Expenditures ..........................89
7.8 Limitation on Investments, Loans and Advances ...............89
7.9 Limitation on Optional Payments and Modifications of
Debt Instruments, etc. ....................................91
7.10 Limitation on Transactions with Affiliates ..................92
7.11 Limitation on Sales and Leasebacks ..........................93
7.12 Limitation on Changes in Fiscal Periods .....................94
7.13 Limitation on Negative Pledge Clauses .......................94
7.14 Limitations on Currency and Commodity Hedging Transactions ..94
7.15 Limitation on Lines of Business .............................94
7.16 Limitation on Amendments to Acquisition Documents ...........94
Section 8. Events of Default ...........................................95
Section 9. The Administrative Agent ....................................99
9.1 Appointment .................................................99
9.2 Delegation of Duties ........................................99
9.3 Exculpatory Provisions ......................................99
9.4 Reliance by Administrative Agent ...........................100
9.5 Notice of Default ..........................................100
9.6 Non-Reliance on the Administrative Agent and Other
Lenders .................................................100
9.7 Indemnification ............................................101
9.8 Agent in Its Individual Capacity ...........................102
9.9 Successor Administrative Agent .............................102
9.10 Authorization to Release Liens .............................103
9.11 The Arranger ...............................................103
9.12 Release of Liens on Excluded Foreign Accounts ..............103
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Section 10. Miscellaneous .............................................103
10.1 Amendments and Waivers ....................................103
10.2 Notices ...................................................104
10.3 No Waiver; Cumulative Remedies ............................105
10.4 Survival of Representations and Warranties ................105
10.5 Payment of Expenses .......................................105
10.6 Successors and Assigns; Participations and Assignments ....106
10.7 Adjustments; Set-off ......................................109
10.8 Counterparts ..............................................110
10.9 Severability ..............................................110
10.10 Integration ...............................................110
10.11 GOVERNING LAW .............................................110
10.12 Submission To Jurisdiction; Waivers .......................111
10.13 Acknowledgements ..........................................111
10.14 WAIVERS OF JURY TRIAL .....................................112
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ANNEXES:
A Pricing Grid
SCHEDULES:
1.IA Commitments
1.IB Mortgaged Property
4.4 Consents, Authorizations, Filings and Notices
4.9 Material Claims Regarding Intellectual Property
4.10 Tax Matters
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 Borrower
7.8(1) Investments
7.10 Permitted Transactions with Affiliates
A copy of the Schedules will be furnished supplementally to the SEC upon
request.
EXHIBITS:
A Form of Amended and Restated Borrower Patent and Trademark Security
Agreement
B Form of Borrowing Base Certificate
C Form of Compliance Certificate
D Form of Amended and Restated 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
A copy of the Exhibits will be furnished supplementally to the SEC upon request.
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AMENDED AND RESTATED SENIOR SECURED CREDIT AGREEMENT, dated as of
October 19, 1999, 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"), SG COWEN 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, the Borrower, certain of the Lenders (the "EXISTING LENDERS"),
the Arranger and the Administrative Agent are parties to the Credit Agreement,
dated as of January 15, 1998 (as amended, the "EXISTING CREDIT AGREEMENT");
WHEREAS, the Borrower expects to acquire through several direct and
indirect wholly-owned Subsidiaries (the "ACQUISITION") all of the issued and
outstanding stock of Varnco Holdings Inc., a New Jersey corporation ("VARNCO"),
Varn Holdings PLC, a company incorporated under the laws of England ("VARN
HOLDINGS"), Varn Aegis Co. GmbH Hautschutzsysteme, a company incorporated under
the laws of Germany ("VARN AEGIS"), Varn Products Co., Inc. a Texas corporation
("VARN PRODUCTS CO."), JV Tex Realty Corp., a Texas corporation ("JVTEX"), Graph
Tech, Inc. an Ohio corporation ("GRAPH TECH", and collectively with Varnco, Varn
Holding GmbH, Varn Aegis, Varn Products Co. and JVTEX, the "VARN COMPANIES") for
aggregate consideration of approximately $60,000,000 (the "ACQUISITION
CONSIDERATION"), pursuant to a Stock Purchase Agreement among the Borrower and
the stockholders of the Varn Companies, dated as of August 13, 1999 (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 and continue the
existing Loans outstanding under the Existing Credit Agreement (the "EXISTING
LOANS") and (iv) finance working capital and other general corporate needs of
the Borrower and its Subsidiaries, the Borrower has requested that the Lenders
agree to amend and restate the Existing Credit Agreement;
WHEREAS, the Lenders are willing to amend and restate the Existing
Credit Agreement upon and subject to the terms and conditions hereinafter set
forth;
WHEREAS, all indebtedness and commitments under the Existing Credit
Agreement, as amended and restated in connection with this Agreement, will be
<PAGE> 8
continued under this Agreement and all obligations of the Loan Parties under the
Loan Documents (as such terms are defined herein) and all Liens created under
the Loan Documents will be continued, amended and restated as provided herein
and therein and will not be cancelled or discharged;
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 hereto.
"ACQUISITION AGREEMENT": as defined in the recitals hereto.
"ADJUSTMENT DATE": as defined in the Pricing Grid.
"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.
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"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.
"AIP AGREEMENT": the Stock Purchase Agreement, dated as of December 18,
1997, by and among Greenwich IV LLC, GSD Acquisition Corp., and the Stockholders
of Day International Group, Inc. parties thereto.
"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": (a) 2.75% per annum, in the case of Eurodollar
Loans and (b) 1.75% per annum, in the case of Base Rate Loans; PROVIDED, that on
and after the first Adjustment Date occurring after March 31, 2000, the
Applicable Margin with respect to Revolving Credit Loans, Swing Line Loans and
Term Loans will be determined pursuant to the Pricing Grid.
"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.
"ARMSTRONG PURCHASE AGREEMENT": the Purchase Agreement, dated as of
July 29, 1999, among Day International, Inc., Armstrong World Industries, Inc.
and Armstrong World Industries GmbH.
"ARMSTRONG TPO": Armstrong Textile Products GmbH and the assets
acquired from Armstrong World Industries, Inc., pursuant to the Armstrong TPO
Acquisition.
"ARMSTRONG TPO ACQUISITION": the acquisition by Day International, Inc.
of certain assets of Armstrong World Industries, Inc., a Pennsylvania
corporation, and the equity securities of Armstrong Textile Products GmbH as set
forth in the Armstrong Purchase Agreement.
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"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 greater 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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"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(e).
"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; PROVIDED, that the Capital Expenditures of the Borrower for
each of the fiscal quarters ended March 31, 1999, June 30, 1999 and
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September 30, 1999 shall be deemed to include, on a PRO FORMA basis, the Capital
Expenditures made during such fiscal quarters by the Varn Companies and their
Subsidiaries and the Capital Expenditures attributable during such fiscal
quarters to Armstrong TPO; PROVIDED FURTHER, that the Capital Expenditures of
the Varn Companies and their Subsidiaries for each of the fiscal quarters ended
March 31, 1999, June 30, 1999 and September 30, 1999 shall be deemed to be
$275,000 per quarter and the Capital Expenditures attributable to Armstrong TPO
for each of the fiscal quarters ended March 31, 1999, June 30, 1999 and
September 30, 1999 shall be deemed to be $450,000 per quarter.
"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 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
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<PAGE> 13
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 the Borrower 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 Note Indenture, the Exchange Debenture Indenture, the Senior
Preferred Stock, the Preference Stock Purchase Agreement or the Existing
Indenture 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 of this Agreement shall have been satisfied, which date is October
19, 1999.
"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.
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<PAGE> 14
"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 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 and the Armstrong TPO 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; PROVIDED, that the Consolidated EBITDA of the
Borrower for each of the fiscal quarters ended March 31, 1999, June 30, 1999 and
September 30, 1999 shall be deemed to include, on a PRO FORMA basis, the
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<PAGE> 15
consolidated EBITDA of the Varn Companies and their Subsidiairies for such
fiscal quarters and the consolidated EBITDA attributable during such fiscal
quarters to Armstrong TPO; PROVIDED FURTHER, that the consolidated EBITDA of the
Varn Companies and their Subsidiaries for each of the fiscal quarters ended
March 31, 1999, June 30, 1999 and September 30, 1999 shall be deemed to be
$2,235,000 per quarter and the consolidated EBITDA attributable to Armstrong TPO
for each of the fiscal quarters ended March 31, 1999, June 30, 1999 and
September 30, 1999 shall be deemed to be $875,000 per quarter.
"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 (other than Capital Expenditures not to exceed
$4,500,000 in the aggregate subsequent to the Closing Date relating to the
reorganization of the Borrower's global textile production facilities) 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 and (iii) 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); PROVIDED, that for any period of four consecutive fiscal
quarters of the Borrower commencing prior to the Closing Date, income taxes and
scheduled payments made on account of principal of Indebtedness shall be
calculated on a PRO FORMA basis as if the Pro Forma Events had occurred on the
first day of such period.
"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 write-off of financing
costs)
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over (b) interest income of the Borrower and its consolidated Subsidiaries for
such period; PROVIDED, that Consolidated Interest Expense for any period of four
consecutive fiscal quarters of the Borrower commencing prior to the Closing Date
shall be calculated, on a PRO FORMA basis, as if the Loans incurred pursuant to
the Pro Forma Events had been incurred on the first day of such period and had
been outstanding throughout such period and the interest rate applicable to such
Loans during fiscal quarters ending prior to the Closing Date had been equal to
the blended average interest rate applicable to such Loans under the Credit
Agreement during 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.
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"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.
"CONSOLIDATED WORKING CAPITAL": at any date, the excess of Consolidated
Current Assets on such date over Consolidated Current Liabilities on such date.
"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.
"DEPARTING LENDER": as defined in Section 5.1(b)(iii).
"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 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.
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"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 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
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<PAGE> 19
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;
(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-and-hold, 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
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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:
(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
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<PAGE> 21
(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, legally binding 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 first day of such Interest Period appearing on Page
3750 of the Telerate 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 Telerate 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.
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"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 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
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<PAGE> 23
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).
"EXCHANGE DEBENTURE INDENTURE": the Indenture dated as of March 18,
1998 entered into by the Borrower and Day International, Inc. with The Bank of
New York, as trustee, in connection with the issuance of the Subordinated
Exchange Debentures, as the same may be amended, supplemented or modified from
time to time in accordance with Section 7.9.
"EXCLUDED FOREIGN ACCOUNT": an Account owed to a Foreign Subsidiary.
"EXCLUDED FOREIGN SUBSIDIARY": any Foreign Subsidiary with respect to
which, pursuant to Section 6.9(d), either (1) no share of Capital Stock or (2)
shares of Capital Stock having no more than 65% of the aggregate voting power of
all Capital Stock, is required to be pledged to secure the Obligations.
"EXISTING CREDIT AGREEMENT": as defined in the recitals hereto.
"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 Section 7.9.
"EXISTING LENDERS": as defined in the recitals hereto.
"EXISTING LOANS": as defined in the recitals hereto.
"EXISTING MORTGAGES: as defined in the definition of "Mortgages."
"EXISTING NOTES": the senior notes due 2005 of the Borrower issued
pursuant to the Existing Indenture.
"EXISTING POLICIES: as defined in Section 5.1(o).
"EXISTING TERM LOAN LENDER": each Existing Lender which held term loans
under the Existing Credit Agreement.
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"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 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).
"GRAPH TECH": as defined in the recitals hereto.
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"GSCP ACQUISITION EQUITY INVESTMENT": as defined in Section 5.1(c).
"GSCP GROUP": Greenwich Street Capital Partners, L.P., Greenwich Street
Capital Offshore Fund, Ltd., Soros Private Equity Partners, L.P., Quantum
Industrial Partners LLC, SFM Domestic Investments LLC, 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, Quantum Industrial
Partners LLC, SFM Domestic Investments LLC, The Travelers Life and Annuity
Company, Smith Barney Holdings Inc., SG Capital Partners LLC or any of their
respective Affiliates.
"GUARANTEE AND COLLATERAL AGREEMENT": the Amended and Restated
Guarantee and Collateral Agreement to be executed and delivered by 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, counter indemnity
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 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
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<PAGE> 26
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.
"HOLDINGS": GSD Acquisition Corp., a Delaware corporation, including
its successors and assigns.
"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 Original Acquisition
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
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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 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 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.
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"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.
"JVTEX": as defined in the recitals hereto.
"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.
"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 and the Notes.
"LOAN PARTIES": the Borrower and each Subsidiary of the Borrower which
is a party to a Loan Document.
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"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.
"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 applicable Environmental Law, including, without limitation,
asbestos, polychlorinated biphenyls and urea-formaldehyde insulation.
"MORTGAGE AMENDMENTS": as defined in Section 5.1(o).
"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 to secure debt
delivered to the Administrative Agent pursuant to the Existing Credit Agreement,
as amended by the respective Mortgage Amendments (collectively, the "EXISTING
MORTGAGES"), and each other mortgage and deed of trust made by any Loan Party in
favor of, of 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.
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"NEW MORTGAGED PROPERTIES": the real properties listed on Schedule 1.1B
under the heading "New Mortgaged Properties", as to which the Administrative
Agent for the benefit of the Lenders shall be granted a Lien pursuant to the
Mortgages.
"NEW TERM LOAN LENDER": each Term Loan Lender which is not an Existing
Lender.
"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).
"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
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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.
"ORIGINAL ACQUISITION AGREEMENT": Purchase Agreement among Greenwich IV
LLC, GSD Acquisition Corp. and the former stockholders of the Borrower, dated as
of December 18, 1997, as amended.
"ORIGINAL CLOSING DATE": January 15, 1998.
"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 Amended and Restated
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.
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"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.
"PREFERENCE STOCK": the 38,500 shares of 18% Convertible Cumulative
Preference Stock, par value $.01 per share, having an initial liquidation
preference of $1,000 per share and having the rights and preferences set forth
in the Certificate of Designation with respect thereto that are to be issued by
the Borrower on the Closing Date, as the same may be amended, supplemented or
otherwise modified from time to time in accordance with Section 7.9.
"PREFERENCE STOCK PURCHASE AGREEMENT": the Preference Stock Purchase
Agreement, dated as of the date hereof, among the Borrower, Quantum Industrial
Partners LDC, a Cayman Islands limited duration company, SFM Domestic Investors
LLC, a Delaware limited liability company, SGC Partners I LLC, Greenwich Street
Capital Partners, L.P., TRV Employees Fund, L.P., Greenwich Street Capital
Offshore Fund, Ltd., The Travelers Insurance Company, The Travelers Life and
Annuity Company and Unione Italiana (U.K.) Reinsurance Company Limited, as the
same may be amended, supplemented or otherwise modified from time to time in
accordance with Section 7.9.
"PRICING GRID": the pricing grid attached hereto as Annex A.
"PRO FORMA BALANCE SHEET": as defined in Section 4.1(a).
"PRO FORMA EVENTS": the Armstrong TPO Acquisition, the Acquisition, the
sale of the Preference Stock, the Loans to be made on the Closing Date and the
use of the proceeds thereof and the payment of fees and expenses in connection
with the foregoing
"PROJECTIONS": as defined in Section 6.2(c).
"PROPERTIES": as defined in Section 4.17.
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"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.
"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 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.
"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 7.15 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
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<PAGE> 34
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).
"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. sec. 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 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.
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"REVOLVING CREDIT COMMITMENT PERIOD": the period from and including the
Closing Date to the Revolving Credit Termination Date.
"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 CREDIT TERMINATION DATE": March 31, 2005.
"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.
"ROTEC": Rotec Hulsensysteme GmbH, a German corporation.
"ROTEC ACQUISITION": the acquisition by the Borrower of all the shares
of the issued and outstanding Capital Stock of Rotec pursuant to the Rotec
Acquisition Agreement.
"ROTEC ACQUISITION AGREEMENT": the acquisition agreement to be entered
into by and between the Borrower or a Wholly Owned Subsidiary of the Borrower,
as purchaser, and the former shareholders of Rotec, as seller.
"SECURITY DOCUMENTS": the collective reference to the Guarantee and
Collateral 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.
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"SENIOR PREFERRED STOCK": the registered 12-1/4% senior exchangeable
preferred stock due 2010 issued by the Borrower on July 22, 1998 (in exchange
for the unregistered 12-1/4% senior exchangeable preferred stock due 2010 issued
by the Borrower on March 18, 1998), as the same may be amended, supplemented or
otherwise modified form time to time in accordance with Section 7.9.
"SENIOR SUBORDINATED NOTE INDENTURE": the Indenture dated as of March
18, 1998, entered into by the Borrower and Day International, Inc. with The Bank
of New York, as trustee, in connection with the issuance of the Senior
Subordinated Notes, 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.
"SENIOR SUBORDINATED NOTES": the registered 9-1/2% senior subordinated
notes due 2008 issued by the Borrower on July 22, 1998 (in exchange for the
unregistered 9-1/2% senior subordinated notes due 2008 issued by the Borrower on
March 18, 1998) pursuant to the Senior Subordinated Note Indenture.
"SINGLE EMPLOYER PLAN": any Plan which is covered by Title IV of ERISA,
but which is not a Multiemployer Plan.
"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.
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"SPONSORS": Greenwich Street Capital Partners, Inc. ("GSCP") and SG
Capital Partners, L.L.C.
"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.
"STOCKHOLDERS AGREEMENT": the Amended and Restated Stockholders
Agreement, dated as of October 19, 1999, among the Borrower and certain of its
stockholders.
"SUBORDINATED EXCHANGE DEBENTURES": any 12-1/2% subordinated notes due
2010 that may be issued by the Borrower in exchange for Senior Preferred Stock
pursuant to the Exchange Debenture Indenture.
"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 (including the Varn Companies).
"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.
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"SWING LINE LOANS": as defined in Section 2.6.
"SWING LINE PARTICIPATION AMOUNT": as defined in Section 2.7.
"TAX SHARING AGREEMENT": the Tax Sharing Agreement, dated January 15,
1998, among Holdings and the Borrower and any agreement or acknowledgment
entered into between the Borrower and its Subsidiaries pursuant to Section 9.1
of such Tax Sharing Agreement.
"TERM LOAN": as defined in Section 2.1.
"TERM LOAN COMMITMENT": as to any Lender, the obligation of such
Lender, if any, to make and/or continue 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 $70,000,000.
"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).
"TITLE INSURANCE COMPANY": as defined in Section 5.1(n).
"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.
"VARN AEGIS": as defined in the recitals hereto.
"VARNCO": as defined in the recitals hereto.
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"VARN COMPANIES": as defined in the recitals hereto.
"VARN HOLDINGS": as defined in the recitals hereto.
"VARN PRODUCTS CO.": as defined in the recitals hereto.
"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.
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 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. (a) Subject to the terms and conditions
hereof, each Existing Term Loan Lender severally agrees to make a term loan (a
"TERM LOAN"), including through the amendment, restatement and continuation of
its Term Loan outstanding under the Existing Credit Agreement, to the Borrower
on the Closing Date in an amount not to exceed the amount of the Term Loan
Commitment of such Existing
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Term Loan Lender. Subject to the terms and conditions hereof, each New Term Loan
Lender severally agrees to make a new Term Loan to the Borrower on the Closing
Date in an amount not to exceed the amount of the Term Loan Commitment of such
New Term Loan 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 and/or continue the Term Loans on the Closing Date. Unless the Lenders
otherwise agree, the Term Loans made and continued on the Closing Date shall
initially be Base Rate Loans. 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 21 consecutive quarterly installments, commencing on March 31, 2000, 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:
Installment Principal Amount
----------- ----------------
1-4 $1,875,000
5-8 $2,500,000
9-20 $3,750,000
21 $7,500,000
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
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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.
(c) On the Closing Date, the Revolving Credit Loans outstanding under
the Existing Credit Agreement, as amended and restated hereby, shall be
continued hereunder subject to Section 5.1(b)(ii).
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. 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 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
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foregoing, the Borrower shall not borrow more than $3,000,000 in Revolving
Credit Loans on the Closing Date.
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.
(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
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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.
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(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 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(d), 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.
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(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 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
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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.
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 the Borrower (except for shares of
Capital Stock of (i) the Borrower issued or sold to directors, officers and
employees of, or consultants to, the Borrower or any of its Subsidiaries or (ii)
of the Borrower issued pursuant to the GSCP Acquisition Equity Investment) or
Indebtedness shall be incurred by the Borrower or any of its Subsidiaries
(excluding 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 Reinvestment 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 Reinvestment 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 any fiscal year of the Borrower 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
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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 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
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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 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
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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 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
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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
(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,
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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
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Agent shall distribute such payments to the Lenders promptly upon receipt in
like funds as received. If 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.
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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):
(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
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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.
(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
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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.
(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 W-8BEN or Form
W- 8ECI, 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- 8BEN 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 (Z) in the case of a Participant, the Lender
from which the related participation shall have been purchased shall deliver to
the Borrower and the Administrative Agent two copies of U.S. Internal Revenue
Service Form W-8IMY, and in the case of (X), (Y) and (Z), 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
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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 and the Lender from which the
related participation shall have been purchased, 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 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
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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 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,
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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
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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 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 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
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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) 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.
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.
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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 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,
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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 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
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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.
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 June 30,
1999 (including the notes thereto) (the "PRO FORMA BALANCE SHEET"), copies of
which have heretofore been furnished to each Lender, has been prepared giving
effect (as if such events had occurred on such date) to (i) the Acquisition,
(ii) the Loans to be made on the Closing Date and the use of the proceeds
thereof and (iii) the payment of fees and expenses in connection with the
foregoing. 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
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Borrower and its consolidated Subsidiaries as at June 30, 1999, assuming that
the events specified in the preceding sentence had actually occurred at such
date.
(b) The audited consolidated balance sheets of the Borrower as at
December 31, 1997 and December 31, 1998, and the related consolidated statements
of income and of cash flows for the fiscal years ended on such dates, reported
on by Deloitte & Touche and Arthur Andersen, respectively, 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 the Borrower as at June
30, 1999, and the related unaudited consolidated statements of income and cash
flows for the six-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 six-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 June 30, 1999 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.
(c) The special purpose audited combined balance sheets of the Varn
Companies as at December 31, 1998, and the related special purpose combined
statements of income and of cash flows for the fiscal year ended on such date,
reported on by KPMG present fairly, in all material respects, the financial
position and results of operations of the Varn Companies and their Subsidiaries
as at the end of and for such fiscal year, provided, however, that Varn Products
Co. GmbH is a party to a lease agreement for a site at Willich-Munchelde,
Germany which was reflected as an operating lease in such financial statements
of the Varn Companies and should properly have been reflected as a Capital Lease
Obligation. All such financial statements have been prepared in accordance with
GAAP applied consistently, with the exception of income Taxes, as discussed in
the notes to the financial statements, and as otherwise stated in the financial
statements, including the related notes, provided, however, that Varn Products
Co. GmbH is a party to a lease agreement for a site at Willich-Munchelde,
Germany which was reflected as an operating lease in such financial statements
of the Varn Companies and should properly have been reflected as a Capital Lease
Obligation. During the period from December 31, 1998 to and including the date
hereof there has been no Disposition
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by the Varn Companies and their consolidated Subsidiaries of any material part
of their business or Property, taken as a whole, other than in connection with
the Acquisition.
4.2 NO CHANGE. Since June 30, 1999 (other than as may result from the
incurrence of the Indebtedness hereunder) 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 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 a foreign
corporation and in good standing under the laws of each jurisdiction other than
where the absence of such qualification would not reasonably be expected to 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).
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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) which is so pending or threatened at any time on or prior to the date hereof
and relates to any of the 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
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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) except as set
forth on Schedule 4.10 hereto.
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 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 U.
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 Acquisition 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
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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; such
Schedule identifies all such Subsidiaries which constitute Excluded Foreign
Subsidiaries.
4.16 USE OF PROCEEDS. The proceeds of the Term Loans made on the
Closing Date shall be used to finance a portion of the Acquisition and pay fees
and expenses related to the Acquisition. 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,
including through the issuance of the Preference Stock, and the fees and
expenses relating thereto).
4.17 ENVIRONMENTAL MATTERS. Other than as set forth in Schedule 4.17
hereto:
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(a) The facilities and properties owned, leased or operated by 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 except as in the
aggregate could not reasonably be expected to result in a Material Adverse
Effect; 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 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 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 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 the Borrower, threatened, under any
Environmental Law to which the Borrower or any Subsidiary is or will be
named as a party with 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
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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 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 of the Borrower and, to the knowledge of the Borrower, the
stockholders of the Varn Companies contained in the Acquisition Agreement are
true and correct in all material respects.
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
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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 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, (x) in the case
of Collateral owned by Varnco, Varn Products Co., JVTEX and Graph Tech, 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 and (y) in the case of all
other Collateral ("EXISTING COLLATERAL"), assuming 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 will constitute or, in the case of Existing Collateral, 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 or, in the case of Existing Collateral, are
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.
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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 the Borrower will be owned by the Sponsors and
certain of the management stockholders of the Borrower, except that the
Preference Stock will be owned by the parties to the Preference Stock Purchase
Agreement (other than the Borrower).
4.23 SENIOR INDEBTEDNESS. The Obligations constitute "Senior
Indebtedness" of the Borrower under and as defined in the Senior Subordinated
Note Indenture, the Senior Preferred Stock and the Exchange Debenture Indenture.
The obligations of each Subsidiary guarantor under the Guarantee and Collateral
Agreement constitute "Guarantor Senior Indebtedness" of such Subsidiary
Guarantor under and as defined in the Senior Subordinated Note Indenture and the
Exchange Debenture Indenture.
4.24 YEAR 2000 MATTERS. Any reprogramming required to permit the
proper functioning (but only to the extent that such proper functioning would
otherwise be impaired by the occurrence of the year 2000) in and following the
year 2000 of computer systems and other equipment containing embedded
microchips, in either case owned or operated by the Borrower or any of its
Subsidiaries or used or relied upon in the conduct of their business (including
any such system and other equipment supplied by others or with which the
computer systems of the Borrower or any of its Subsidiaries interface), and the
testing of all such systems and other equipment as so reprogrammed, have been
completed except insofar as any failure to so reprogram or test referred to in
this paragraph, or any aggregation thereof, would not reasonably be expected to
result in a Material Adverse Effect. The computer systems of the Borrower and
its Subsidiaries are and, with ordinary course upgrading and maintenance, will
continue for the term of this Agreement to be, sufficient for the conduct of
their business as currently conducted.
4.25 MORTGAGED PROPERTY. Set forth on Schedule 1.1B is a list of each
piece of domestic real property that will be owned by the Borrower or any of its
Subsidiaries on the Closing Date that has a value (together with the
improvements thereto) of at least $1,000,000.
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4.26 CERTAIN AGREEMENTS. The Borrower has delivered to the
Administrative Agent a complete and correct copy of the Acquisition Agreement,
the Preference Stock Purchase Agreement, the Certificate of Designation with
respect to the Preference Stock and the Stockholders Agreement, including any
amendments, supplements or modifications with respect to the foregoing.
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 New Mortgaged Properties, executed and
delivered by a duly authorized officer of each party thereto, (v) a
Mortgage Amendment with respect to each of the Existing Mortgages and (vi)
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.
(b) EXISTING CREDIT AGREEMENT. (i) All accrued unpaid interest, fees,
commissions and other amounts (other than principal) owing under the
Existing Credit Agreement shall have been paid.
(ii) The Revolving Credit Loans outstanding under the Existing
Credit Agreement shall be reallocated as directed by the
Administrative Agent, with the result that the Revolving Credit Loans
will be held by the Revolving Credit Lenders in accordance with their
respective Revolving Credit Commitments.
(iii) Each Existing Lender which will not continue as a Lender
hereunder (a "DEPARTING LENDER") shall deliver to the Administrative
Agent an acknowledgment that its Commitments and Loans under the
Existing Credit Agreement are being assigned and reallocated as set
forth herein.
(iv) The Lenders and Departing Lenders will make such payments
among themselves as directed by the Administrative Agent so that,
after giving effect thereto, the outstanding Revolving Credit Loans
and Term Loans will be held by
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the Lenders in accordance with their respective Revolving Credit
Percentages and Term Loan Percentages and with Interest Periods that
all begin on the Closing Date and end on the same later date, and the
Borrower shall pay all breakage costs owed to each Existing Lender
pursuant to Section 2.12 in connection with resetting the Interest
Periods of existing Eurodollar Loans on the Closing Date as if the
Borrower had prepaid Loans on the Closing Date.
(c) ACQUISITION, ETC. The following transactions shall have been
consummated, in each case on terms and conditions reasonably satisfactory
to the Lenders:
(i) The Borrower or its Subsidiaries shall have acquired all
of the Capital Stock of the Varn Companies pursuant to the terms of
the Acquisition Agreement without any waiver of any of the material
conditions to the obligations of the Borrower and its Subsidiaries to
consummate the Acquisition (including, without limitation, any such
waiver effected by the Borrower failing to exercise its right to
terminate the Acquisition Agreement pursuant to the provisions of
Section 9.1 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;
and
(ii) The Borrower shall have received at least $38,500,000
from the proceeds of shares of the Preference Stock issued by the
Borrower pursuant to the Preference Stock Purchase Agreement (the
"GSCP ACQUISITION EQUITY INVESTMENT").
(d) PRO FORMA BALANCE SHEET; FINANCIAL STATEMENTS. The Lenders shall
have received (i) the Pro Forma Balance Sheet, (ii) audited consolidated
financial statements of the Borrower and its Subsidiaries for the 1998 and
1997 fiscal years, (iii) the special purpose audited financial statements
of the Varn Companies for the year ended December 31, 1998, (iv) unaudited
interim consolidated financial statements of the Borrower and its
Subsidiaries, and the Varn Companies, for each fiscal quarterly period
ended subsequent to the date of the latest applicable financial statements
delivered pursuant to clause (ii) of this paragraph as to which such
financial statements are available and (v) unaudited interim consolidated
financial statements of the Borrower and its Subsidiaries (excluding the
Varn Companies and Armstrong TPO) for each fiscal month ended subsequent
to the date of the latest applicable financial statements delivered
pursuant to clause (iv) of this paragraph as to which such financial
statements are available.
(e) APPROVALS. All material governmental and third party approvals
(including landlords' and other consents) necessary in connection with the
Acquisition, the
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continuing operations 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.
(f) TERMINATION OF VARN INDEBTEDNESS. The Administrative Agent shall
have received evidence satisfactory to the Administrative Agent that all
material Indebtedness of the Varn Companies (other than the German Debt
(as such term is defined in the Acquisition Agreement)) 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 any 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) 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 shall not exceed
$3,500,000, which fees shall be payable on the Closing Date.
(i) 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.
(j) LEGAL OPINIONS. The Administrative Agent shall have received (i)
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 and (ii) to the extent consented to by the relevant counsel, each
legal opinion delivered in connection with the Acquisition authorizing
reliance thereon by the Administrative Agent and the Lenders.
(k) 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,
together with an undated stock power for each such certificate executed in
blank by a duly authorized
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officer of the pledgor thereof and (ii) each promissory note pledged to
the Administrative Agent pursuant to the Guarantee and Collateral
Agreement endorsed (without recourse) in blank (or accompanied by an
executed transfer form in blank satisfactory to the Administrative Agent)
by the pledgor thereof.
(l) 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.
(m) TITLE INSURANCE; FLOOD INSURANCE. (i) The Administrative Agent
shall have received in respect of each New 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 New 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 ALTA Loan Policy - 1992) (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 New Mortgaged Property as built it
complies with existing land use and zoning ordinances, regulations and
restrictions applicable to such New 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.
(ii) If reasonably requested by the Administrative Agent, the
Administrative Agent shall have received (A) a policy of flood
insurance which (1) covers any
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parcel of improved real property which is encumbered by any new
Mortgage, (2) is written in an amount equal to the lesser of (a) the
outstanding principal amount of the indebtedness secured by such new
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 new Mortgage and (B) confirmation that
the Borrower has received the notice delivered to the Borrower by the
Administrative Agent as required pursuant to Section 208(e)(3) of
Regulation H of the Board.
(iii) 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 (i) above and
a copy of all other material documents affecting the New Mortgaged
Properties as shall have been requested by the Administrative Agent.
(n) TITLE INSURANCE CONFIRMATION REGARDING EXISTING MORTGAGES. (i)
The Administrative Agent shall have received from the Title Insurance
Company endorsements to each of the title insurance policies issued
pursuant to the terms of the Existing Credit Agreement (the "EXISTING
POLICIES") stating (a) that the estates insured by the Existing Policies
are subject to no mechanics liens, judgment liens, tax liens, mortgages,
or other intervening liens or encumbrances which could have priority over
the Liens created by the Existing Mortgages as amended by the Mortgage
Amendments and (b) that the modification of the indebtedness contemplated
by this Agreement does not, in any way, affect the priority of the Liens
created by the Existing Mortgages as amended by the Mortgage Amendments.
Notwithstanding the foregoing, the Administrative Agent shall not require
an endorsement to the title insurance policy issued by First American
Title Insurance Company on February 2, 1998, number FA-36-111578.
(o) MORTGAGE AMENDMENTS. The Administrative Agent shall have received
an amendment to each of the Existing Mortgages (collectively, the
"MORTGAGE AMENDMENTS"), in recordable form, which modifies the respective
Existing Mortgages to secure the Indebtedness hereunder and under the
other Loan Documents as such Indebtedness is modified and increased after
giving effect to this Agreement, which Mortgage Amendments shall be
satisfactory to the Administrative Agent in all respects.
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(p) INSURANCE. The Administrative Agent shall have received insurance
certificates satisfying the requirements of Section 5.2.2 of the Guarantee
and Collateral Agreement.
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 greater 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
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
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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 (f), 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
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same relates 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, (ii) 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 (iii) 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 (iii) (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 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 the Borrower may make to, or file
with, the Securities and Exchange Commission or any successor or analogous
Governmental Authority;
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(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
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 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,
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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;
(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 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 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 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
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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 the Borrower or the relevant Subsidiary proposes to take
with respect thereto.
6.8 ENVIRONMENTAL LAWS. (a) Comply in all material respects with, and
take reasonable efforts to 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.
(b) Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under applicable
Environmental Laws and in a timely manner 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)),
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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 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
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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 SURVEYS FOR NEW MORTGAGED PROPERTIES. As soon as practicable,
but no later than 30 days following the Closing Date, the Borrower shall provide
the Administrative Agent and the title insurance company issuing the policy
referred to in clause (i) of Section 5.1(m) (the "TITLE INSURANCE COMPANY") maps
or plats of an as-built survey of the sites of the New Mortgaged Properties
certified to the Administrative Agent and the Title Insurance Company in a
manner satisfactory to them issued 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 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 New Mortgaged Properties are located.
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
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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:
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:
<TABLE>
<CAPTION>
Consolidated
Fiscal Quarter Leverage Ratio
-------------- --------------
<S> <C>
1 - 4 5.5
5 - 8 5.0
9 - 12 4.5
13 - 16 4.0
17 - 20 3.5
21 - 22 3.0
</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:
<TABLE>
<CAPTION>
Consolidated
Fiscal Quarter Leverage Ratio
-------------- --------------
<S> <C>
1 - 4 1.80
5 - 8 2.00
9 - 12 2.20
13 - 16 2.50
17 - 20 2.75
21 - 22 3.00
</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:
<TABLE>
<CAPTION>
Consolidated
Fiscal Quarter Leverage Ratio
-------------- --------------
<S> <C>
1 - 4 1.05
</TABLE>
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<TABLE>
<S> <C>
5 - 8 1.05
9 - 12 1.05
13 - 16 1.10
17 - 20 1.10
21 - 22 1.10
</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 in an aggregate amount incurred subsequent to the
Original Closing Date 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(i);
(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) the Senior Subordinated Notes and the Guarantee Obligations of
the Subsidiary Guarantors with respect to the Senior Subordinated Notes;
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(h) the Senior Preferred Stock and Subordinated Exchange Debentures
and the Guarantee Obligations of the Subsidiary Guarantors with respect to
the Subordinated Exchange Debentures;
(i) subordinated and/or senior unsecured Indebtedness of the Borrower
in an aggregate principal amount issued subsequent to the Original Closing
Date 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;
(j) 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; and PROVIDED FURTHER, that approximately $1,000,000 of
outstanding debt of Rotec shall be permitted to remain outstanding
following the closing of the Rotec Acquisition pursuant to this Section
7.2(j) but shall be disregarded in any calculation of whether the
$7,500,000 limitation set forth above in this Section 7.2(j) shall have
been exceeded;
(k) to the extent that any Indebtedness may be incurred or arise
thereunder, Indebtedness of the Borrower and its Subsidiaries under
Permitted Hedging Arrangements;
(l) Indebtedness of Borrower or any of its Subsidiaries incurred to
finance insurance premiums in the ordinary course of business;
(m) 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;
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(n) 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 the Borrower 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(b), 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 (as is in effect on the date hereof, without giving effect to
any amendments, supplements or other modifications thereto) 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;
(o) 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;
(p) Guarantee Obligations for performance, appeal, judgment, replevin
and similar bonds and suretyship arrangements, all in the ordinary course
of business;
(q) Reimbursement Obligations in respect of the Letters of Credit;
(r) 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;
(s) obligations to insurers required in connection with worker's
compensation and other insurance coverage incurred in the ordinary course
of business;
(t) 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;
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(u) Guarantee Obligations in connection with sales or other
dispositions permitted under Section 7.5, including indemnification
obligations with respect to leases, and guarantees of collectability in
respect of accounts receivable or notes receivable for up to face value;
(v) 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; (w) Guarantee Obligations incurred pursuant to the
Guarantee and Collateral Agreement or otherwise in respect of Indebtedness
permitted by Section 7.2(a);
(x) guarantees by Subsidiaries of the Borrower of the Senior
Subordinated Notes, which guarantees are subordinated pursuant to terms
and conditions approved in writing by the Required Lenders;
(y) guarantees of Indebtedness of Foreign Subsidiaries permitted by
Section 7.2(o);
(z) 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(o), shall not exceed the aggregate
amount of such Indebtedness permitted pursuant to such Section;
(aa) the Preference Stock;
(bb) any Earn-Out Payment or Purchase Price Adjustment pursuant to
Sections 2.3 and 2.4 of the Acquisition Agreement, respectively, and any
Purchase Price Adjustment pursuant to Sections 2.8, 2.9 and 4.4 of the
Armstrong Purchase Agreement and Section 3.3 of the AIP Agreement; and
(cc) 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
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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;
(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(j),
PROVIDED that (i) such
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<PAGE> 92
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;
(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;
(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(o) 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;
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(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; and
(p) Liens on Property of any of the Varn Companies that is a Foreign
Subsidiary securing foreign payroll fundings, special foreign commercial
considerations or customs letter of credit issued on behalf of any of the
Varn Companies.
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 Foreign Subsidiary of the Borrower may be merged or
consolidated with or into one or more Foreign Subsidiaries;
(c) 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; and
(d) as expressly permitted by Section 7.5.
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(c);
(d) the sale or issuance of any Subsidiary's Capital Stock to the
Borrower or any Wholly Owned Subsidiary Guarantor;
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(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;
(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(c) or 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(o); 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, 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:
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(a) any Subsidiary may make Restricted Payments to the Borrower or
any Wholly Owned Subsidiary Guarantor;
(b) the Borrower may repurchase shares of its common stock or rights,
options or units in respect thereof from directors, officers or employees
of the Borrower 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 subsequent to the Original Closing Date
shall not exceed $2,500,000;
(c) the Borrower may make payments to Holdings pursuant to the Tax
Sharing Agreement; and
(d) the Borrower may make any payment permitted under Section 7.10(c)
or (d).
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 $15,000,000 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 and the Armstrong TPO Acquisition;
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(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 the
Borrower or any of its Subsidiaries (i) in the ordinary course of business
for travel and entertainment expenses, (ii) in an amount less than $75,000
(or an equivalent amount in foreign currency) in the aggregate, (iii)
existing on the Closing Date and described in Schedule 7.8(h), (iv) made
after the Closing Date for relocation expenses in the ordinary course of
business, (v) made for other purposes in an aggregate amount (as to the
Borrower and all its Subsidiaries) of up to $500,000 outstanding at any
time or (vi) 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
7.8(i), 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
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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
$5,500,000;
(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 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 the aggregate consideration paid by the
Borrower and its Subsidiaries in connection with all such acquisitions
made pursuant to this paragraph (o) since the Original Closing Date (other
than the Rotec Acquisition) does not exceed at any time an amount equal to
$10,000,000; and
(p) any commitment by Day International (UK) Limited and/or
Rotec-Hulsensysteme GmbH to make a loan to Armstrong Textile Products GmbH
pursuant to the Deed, dated as of July 29, 1999, between Day International
(UK) Limited, Rotec-Hulsensysteme GmbH and Armstrong Textile Products
GmbH, provided that such loan, if and when made, would be permitted by
Section 7.2 hereof.
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(i)), the Senior Subordinated Notes, the Subordinated
Exchange Debentures, Senior Preferred Stock or the Preference Stock (other than
scheduled interest payments required to be made in cash) or the promissory notes
described in Section 7.2(n), (b) amend, modify, waive or otherwise change, or
consent or agree to any amendment, modification, waiver or other
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change to, any of the terms of the Existing Notes, the Senior Subordinated
Notes, the Subordinated Exchange Debentures, the Senior Preferred Stock or the
promissory notes described in Section 7.2(n) (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 (other
than obligations of the Loan Parties pursuant to the Loan Documents) as
"Designated Senior Indebtedness" (or any similar term) for the purposes of the
Senior Subordinated Note Indenture or the Exchange Debenture Indenture or (d)
except for the amendment of the Borrower's certificate of incorporation and the
designation of the Preference Stock pursuant to the Certificate of Designation
with respect thereto, in each case, as contemplated by the Preference Stock
Purchase Agreement, amend its certificate of incorporation (including the
Certificate of Designation with respect to the Preference Stock) 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 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, the Acquisition and the Armstrong TPO Acquisition;
(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 $1,000,000 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 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;
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(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, 7.8(h)
or 7.8(p), or any transaction with a Wholly Owned Subsidiary of the
Borrower;
(f) the Borrower or any of its Subsidiaries from performing its
obligations under the Tax Sharing Agreement; or
(g) the issuance of the Preference Stock.
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.
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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 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
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(o) 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.
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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 (a) the Original Acquisition
Agreement or any other document delivered by the Sellers (as defined in the
Original Acquisition Agreement) or any of their affiliates in connection
therewith, (b) the Rotec Acquisition Agreement or any other document delivered
by Rotec in connection therewith or (c) the Acquisition Agreement or any other
document delivered by the Varn Companies in connection therewith, in each case,
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.
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 the Borrower only), Section 6.7(a), Section 7 or Section 5.3.2
of the Guarantee and Collateral 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
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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 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
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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 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
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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 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 Notes, the Senior Preferred Stock, the
Subordinated Exchange Debentures, 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 Note Indenture,
Exchange Debenture Indenture or the Existing Indenture, or any Loan Party,
any Affiliate of any Loan Party, the trustee in respect of the Senior
Subordinated Notes, the Subordinated Exchange Debentures or the Existing
Notes, as the case may be, or the holders of at least 25% in aggregate
principal amount of the Senior Subordinated Notes, the Senior Preferred
Stock, the Subordinated Exchange Debentures or the Existing Notes, as the
case may be, 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 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
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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.
9.3 EXCULPATORY PROVISIONS. Neither the Administrative Agent nor any
of its respective officers, directors, employees, agents, attorneys-in-fact or
affiliates shall be
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(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
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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
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
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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
the Borrower and without limiting the obligation of 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 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 (i) may
resign as Administrative Agent or (ii) shall resign if such resignation is
requested by the Required Lenders, in either case of (i) or (ii) by giving not
less than 30 days' written 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
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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 30 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.
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.
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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 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
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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 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: Mr. David B. Freimuth
Telecopy: (937) 226-1855
Telephone: (937) 224-7124
The Administrative Agent: Societe Generale
1221 Avenue of the Americas
New York, New York 10020
Attention: Mr. John M. Stack
Telecopy: (212) 278-5460
Telephone: (212) 278-6402
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
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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
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, directors,
employees, advisors, agents or controlling persons,
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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 7.4) 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
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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 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.
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(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 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,
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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 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.
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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 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.
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
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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
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 the Borrower and the Lenders.
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
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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.
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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: /s/ Dennis R. Wolters
-----------------------------
Name: Dennis R. Wolters
Title: President
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SG COWEN SECURITIES CORPORATION,
as Arranger
By: /s/ John M. Stock
--------------------------------
Name: John M. Stock
Title: Director
SOCIETE GENERALE, NEW YORK BRANCH,
as Administrative Agent and as a Lender
By: /s/ John M. Stock
--------------------------------
Name: John M. Stock
Title: Director
BANK ONE, NA, as a Lender
By: /s/ John A. Kavanaugh
--------------------------------
Name: John A Kavanaugh
Title: Vice President
THE FUJI BANK, LIMITED, as a Lender
By: /s/ Teiji Teramoto
--------------------------------
Name: Teiji Teramoto
Title: Vice President & Manager
NATIONAL CITY BANK, as a Lender
By: /s/ Barry C. Robinson
- -------------------------------------
Name: Barry C. Robinson
Title: Vice President
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PNC BANK, NATIONAL ASSOCIATION, as a Lender
By: /s/ Warren F. Weber
-------------------------------------
Name: Warren F. Weber
Title: Vice President
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SUMMIT BANK, as a Lender
By: /s/ Paulette Laurenzi
-----------------------------
Name: Paulette Laurenzi
Title: Vice President
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Annex A
-------
PRICING GRID FOR REVOLVING CREDIT LOANS,
SWING LINE LOANS AND TERM LOANS
<TABLE>
<CAPTION>
===========================================================================================================
Consolidated Leverage Ratio Applicable Margin Applicable Margin for Base Rate
for Eurodollar Loans Loans
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
greater than 4.00 to 1 2.75 1.75
- -----------------------------------------------------------------------------------------------------------
less than or equal to 4.00 to 1 2.50 1.50
greater than 3.50 to 1
- -----------------------------------------------------------------------------------------------------------
less than or equal to 3.50 to 1 2.25 1.25
greater than 3.00 to 1
- -----------------------------------------------------------------------------------------------------------
less than or equal to 3.00 to 1 2.00 1.00
greater than 2.50 to 1
- -----------------------------------------------------------------------------------------------------------
less than or equal to 2.50 to 1 1.75 0.75
===========================================================================================================
</TABLE>
Changes in the Applicable Margin with respect to Term Loans resulting from
changes in 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> 1
Exhibit 99.1
130 W. Second St.
[LOGO DAY INTERNATIONAL] P.O. Box 338
Dayton, OH 45401-0338
(937) 224-7124
Fax (937) 226-1855
FOR IMMEDIATE RELEASE CONTACTS: Dennis R. Wolters
OCTOBER 21, 1999 President and CEO
Day International Group, Inc.
(937) 224-4000
Joseph Von Zwehl
President
Varn International
(201) 337-3600
DAY INTERNATIONAL COMPLETES ACQUISITION
OF INTERNATIONAL PRESS ROOM CHEMICALS SUPPLIER
ACQUISITION WILL EXPAND PRODUCT OFFERING TO GRAPHIC ARTS INDUSTRY
DAYTON, Ohio, October 21, 1999 - DAY International Group, Inc. announced today
that it has completed its acquisition of Varn International.
Varn is a leading worldwide supplier of pressroom chemicals to the printing
industry. Varn also manufactures the Kompac brand of automatic dampening systems
for printing presses through its Graph Tech subsidiary. Headquartered in
Oakland, New Jersey, Varn has manufacturing facilities in Addison, IL; Houston,
TX; Ontario, Canada; Manchester, England; Willich, Germany; Johannesburg, South
Africa; Melbourne, Australia; Kuala Lumpur and a joint venture in Foshan, China.
DAY intends to continue to operate Varn as a stand-alone business unit.
"With the acquisition of Varn, we continue to diversify our business and product
offering to the Image Transfer industry while maintaining the focus on our core
business competencies; engineered products, high quality and superior customer
service," said Day International President and CEO Dennis R. Wolters. "We have
had great success with our offset blanket and sleeve products. Varn has had
similar success with their press room chemical products. We decided to partner
with Varn so both product lines could benefit from aggressive technology
development and well-established market positions."
According to Varn's co-owners Joseph and Vincent Von Zwehl, "For more than 50
years we have striven to be problem solvers and very service oriented to our
customers. We believe this partnership with DAY International will enable Varn
to continue that philosophy while also providing an attractive opportunity to
expand sales of our products as we enter the new millenium."
<PAGE> 2
DAY International produces and distributes highly engineered consumable products
for the offset printing and textile industries. The company has developed a
strong presence worldwide in the manufacturing and marketing of high-quality
offset printing blankets and sleeves for offset and flexographic printing.
DAY International, a privately owned company, was founded in 1905 in Dayton,
Ohio. The company operates production, sales and distribution centers in North
America, Europe and the Pacific Rim. Product lines include dayGraphica(R) brand
printing blankets and sleeves, david M(R) brand printing blankets, day-Corr(R)
diecutting anvil covers, Day-Flo(R) pre-inked rolls, Rotec flexographic sleeves
and DAYtex(R) and Accotex(R) cots and aprons.
