SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended DECEMBER 31, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to ____________
Commission File Number 1-2299
Ohio 34-0117420 -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) One Applied Plaza, Cleveland, Ohio 44115 -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) |
Registrant's telephone number, including area code: (216) 426-4000
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes [X] No [ ]
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
INDEX
Page No. Part I: FINANCIAL INFORMATION Item 1: Financial Statements Condensed Statements of Consolidated Income - 2 Three Months and Six Months Ended December 31, 2003 and 2002 Condensed Consolidated Balance Sheets - 3 December 31, 2003 and June 30, 2003 Condensed Statements of Consolidated Cash Flows - 4 Six Months Ended December 31, 2003 and 2002 Notes to Condensed Consolidated Financial Statements 5 -10 Review By Independent Public Accountants 11 Item 2: Management's Discussion and Analysis of 12-17 Financial Condition and Results of Operations Item 3: Quantitative and Qualitative Disclosures About Market Risk 18 Item 4: Controls and Procedures 19 Part II: OTHER INFORMATION Item 1: Legal Proceedings 20 Item 4: Submission of Matters to a Vote of Security Holders 20 Item 6: Exhibits and Reports on Form 8-K 20 Signatures 22 Exhibit Index Exhibits |
PART I: FINANCIAL INFORMATION
ITEM I: Financial Statements
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED INCOME
(Unaudited)
(Thousands, except per share amounts)
THREE MONTHS ENDED SIX MONTHS ENDED DECEMBER 31 DECEMBER 31 2003 2002 2003 2002 ---------------------------- ---------------------------- Net Sales $ 359,711 $ 355,707 $ 720,857 $ 723,726 Cost of sales 264,545 264,516 532,214 542,633 ------------ ------------ ------------ ------------ Gross Profit 95,166 91,191 188,643 181,093 Selling, distribution and administrative expenses 85,916 83,871 170,397 165,929 ------------ ------------ ------------ ------------ Operating Income 9,250 7,320 18,246 15,164 Interest expense, net 1,405 1,342 2,723 2,603 Other, net (108) 38 58 326 ------------ ------------ ------------ ------------ Income Before Income Taxes 7,953 5,940 15,465 12,235 Income Taxes 2,820 2,080 5,500 4,470 ------------ ------------ ------------ ------------ Net Income (Loss) $ 5,133 $ 3,860 $ 9,965 $ 7,765 ============ ============ ============ ============ Earnings Per Share - Basic $ 0.27 $ 0.20 $ 0.52 $ 0.41 ============ ============ ============ ============ Earnings Per Share - Diluted $ 0.26 $ 0.20 $ 0.51 $ 0.40 ============ ============ ============ ============ Cash dividends per common share $ 0.12 $ 0.12 $ 0.24 $ 0.24 ============ ============ ============ ============ Weighted average common shares outstanding for basic computation 19,227 18,954 19,117 18,985 Dilutive effect of stock options and awards 410 279 423 282 ------------ ------------ ------------ ------------ Adjusted average common shares outstanding for diluted computation 19,637 19,233 19,540 19,267 ============ ============ ============ ============ |
See notes to condensed consolidated financial statements.
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Amounts in thousands)
DECEMBER 31 JUNE 30 2003 2003 ----------- --------- ASSETS Current assets Cash and temporary investments $ 24,401 $ 55,079 Accounts receivable, less allowances of $6,200 and $6,100 170,074 173,915 Inventories (at LIFO) 191,249 159,798 Other current assets 13,536 11,702 ----------- --------- Total current assets 399,260 400,494 Property, less accumulated depreciation of $92,746 and $85,836 81,207 77,942 Goodwill 50,433 49,687 Other assets 25,600 25,281 ----------- --------- TOTAL ASSETS $ 556,500 $ 553,404 =========== ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable $ 74,040 $ 75,411 Other accrued liabilities 58,592 65,724 ----------- --------- Total current liabilities 132,632 141,135 Long-term debt 78,163 78,558 Other liabilities 26,684 25,855 ----------- --------- TOTAL LIABILITIES 237,479 245,548 ----------- --------- Shareholders' Equity Preferred stock - no par value; 2,500 shares authorized; none issued or outstanding Common stock - no par value; 50,000 shares authorized; 24,096 shares issued 10,000 10,000 Additional paid-in capital 86,498 84,898 Income retained for use in the business 295,079 289,724 Treasury shares - at cost, 4,763 and 5,076 shares (74,418) (78,706) Unearned restricted common stock compensation (31) (114) Accumulated other comprehensive income 1,893 2,054 ----------- --------- TOTAL SHAREHOLDERS' EQUITY 319,021 307,856 ----------- --------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 556,500 $ 553,404 =========== ========= |
See notes to condensed consolidated financial statements.
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(Unaudited)
(Amounts in thousands)
Six Months Ended December 31 2003 2002 -------- -------- Cash Flows from Operating Activities Net income $ 9,965 $ 7,765 Adjustments to reconcile net income to cash provided by (used in) operating activities: Depreciation and amortization 8,491 7,953 Gain on sale of property (89) (2,577) Treasury shares contributed to employee benefit and deferred compensation plans 3,775 1,724 Changes in operating assets and liabilities, net of effects from acquisition of businesses (35,053) 8,063 Other - net (395) (330) -------- -------- Net Cash provided by (used in) Operating Activities (13,306) 22,598 -------- -------- Cash Flows from Investing Activities Property purchases (10,317) (5,049) Proceeds from property sales 373 5,151 Net cash paid for acquisition of businesses, net of cash (1,285) (10,255) Deposits and other (149) 1,426 -------- -------- Net Cash used in Investing Activities (11,378) (8,727) -------- -------- Cash Flows from Financing Activities Borrowings and (repayments) - net (2,850) Long-term debt repayments (5,714) Proceeds from termination of interest rate swap 2,517 Dividends paid (4,610) (4,596) Purchases of treasury shares (2,091) (3,934) Exercise of stock options 3,557 275 -------- -------- Net Cash used in Financing Activities (5,994) (11,452) -------- -------- Increase (decrease) in cash and temporary investments (30,678) 2,419 Cash and temporary investments at beginning of period 55,079 23,060 -------- -------- Cash and Temporary Investments at End of Period $ 24,401 $ 25,479 ======== ======== |
See notes to condensed consolidated financial statements.
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per share amounts) (Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and therefore do not include all information and footnotes necessary for a fair presentation of financial position, results of operations and cash flows in conformity with generally accepted accounting principles. However, in the opinion of management, all adjustments (consisting of only normal recurring adjustments) necessary to a fair statement of operations of the interim periods have been made. This Quarterly Report on Form 10-Q should be read in conjunction with the Applied Industrial Technologies, Inc. (the Company) Annual Report on Form 10-K for the year ended June 30, 2003.
The results of operations for the three and six month periods ended December 31, 2003 are not necessarily indicative of the results to be expected for the fiscal year.
Cost of sales for interim financial statements are computed using estimated gross profit percentages, which are adjusted throughout the year based upon available information. Adjustments to actual cost are made based on periodic physical inventories and the effect of year-end inventory quantities on LIFO costs.
The Company recognizes shipping and handling fees billed when products are shipped or delivered to a customer and includes such amounts in net sales. Third party freight payments are recorded in cost of sales in the accompanying consolidated statements of income.
2. SEGMENT INFORMATION
The accounting policies of the Company's reportable segment and its other businesses are the same as those used to prepare the condensed consolidated financial statements. Certain reclassifications have been made to prior year amounts to be consistent with the presentation in the current year. Sales between the service center based distribution segment and the other businesses are not significant. Operating results are in the United States, Canada, Mexico and Puerto Rico. Operations in Canada, Mexico and Puerto Rico represent approximately 9.0% of the total net sales of Applied for the six months ended December 31, 2003 and therefore are not presented separately. In addition, approximately 31.1% of these operations' net sales are included in the "Other" column relating to the fluid power business. The long-lived assets located outside of the United States are not material.
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per share amounts) (Unaudited)
SEGMENT FINANCIAL INFORMATION:
SERVICE CENTER BASED DISTRIBUTION OTHER TOTAL -------------- ----------- ----------- THREE MONTHS ENDED DECEMBER 31, 2003 Net sales $ 335,633 $ 24,078 $ 359,711 Operating income 10,844 1,299 12,143 Depreciation 3,707 167 3,874 Capital expenditures 1,552 23 1,575 -------------- ----------- ----------- THREE MONTHS ENDED DECEMBER 31, 2002 Net sales $ 333,964 $ 21,743 $ 355,707 Operating income 8,423 13 8,436 Depreciation 3,253 192 3,445 Capital expenditures 1,988 177 2,165 -------------- ----------- ----------- |
A reconciliation from the segment operating profit to the condensed consolidated balances is as follows:
THREE MONTHS ENDED DECEMBER 31 -------------------------- 2003 2002 ----------- ----------- Operating income for reportable segment $ 10,844 $ 8,423 Other operating income 1,299 13 Adjustments for: Other intangible amortization (188) (174) Corporate and other income (expense), net of allocations (a) (2,705) (942) ----------- ----------- Total operating income 9,250 7,320 Interest expense, net 1,405 1,342 Other expense, net (108) 38 ----------- ----------- Income before income taxes $ 7,953 $ 5,940 =========== =========== |
SEGMENT FINANCIAL INFORMATION:
SERVICE CENTER BASED DISTRIBUTION OTHER TOTAL -------------- ----------- ----------- SIX MONTHS ENDED DECEMBER 31, 2003 Net sales $ 673,536 $ 47,321 $ 720,857 Operating income 20,647 2,011 22,658 Assets used in the business 532,514 23,986 556,500 Depreciation 7,008 337 7,345 Capital expenditures 10,254 63 10,317 -------------- ----------- ----------- |
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per share amounts) (Unaudited)
SIX MONTHS ENDED DECEMBER 31, 2002 Net sales $ 678,934 $ 44,792 $ 723,726 Operating income 17,886 73 17,959 Assets used in the business 510,911 24,009 534,920 Depreciation 6,792 366 7,158 Capital expenditures 4,720 329 5,049 ----------- ------------ ------------- |
A reconciliation from the segment operating profit to the condensed consolidated balances is as follows:
SIX MONTHS ENDED DECEMBER 31 -------------------------- 2003 2002 ----------- ----------- Operating income for reportable segment $ 20,647 $ 17,886 Other operating income 2,011 73 Adjustments for: Other intangible amortization (377) (417) Corporate and other income (expense), net of allocations (a) (4,035) (2,378) ----------- ----------- Total operating income 18,246 15,164 Interest expense, net 2,723 2,603 Other expense, net 58 326 ----------- ------------ Income before income taxes $ 15,465 $ 12,235 =========== =========== |
(a) The change in corporate and other income (expense), net, is due to various changes in the levels and amounts of expense being allocated to the segments. The expenses being allocated include corporate charges for working capital, logistics support and other items.
3. GUARANTEES
The Company had a construction and lease facility under which a distribution center and three service centers were constructed by the lessor and leased to the Company under operating lease arrangements. The Company purchased the properties for $7,500 at the end of the lease term in September 2003. The residual value guarantee provisions of this lease arrangement expired with the purchase of the properties.
In December 2003, the Company paid the $2,990 outstanding balance of bank debt for iSource Performance Materials, L.L.C. (iSource) and assumed the bank's rights under the loan agreement. Prior to assuming the loan, the Company had guaranteed the bank debt of iSource.
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per share amounts) (Unaudited)
4. STOCK OPTIONS
Effective July 1, 2003, the Company adopted the fair value recognition provisions of SFAS 123, "Accounting for Stock-Based Compensation" as amended by SFAS 148, "Accounting for Stock-Based Compensation - Transition and Disclosure," using the modified prospective method for the transition. Under the modified prospective method, stock-based compensation cost recognized during this fiscal year is the same as that which would have been recognized had the fair value recognition provisions been applied to all awards granted after July 1, 1995. Results for prior years have not been restated. The compensation expense recorded during the quarter and six months ended December 31, 2003 was $327, $211 net of tax, or $0.01 per share and $686, $442 net of tax, or $0.02 per share, respectively. The following table discloses the compensation expense and net income as if the fair value based method had been applied in each period:
Three Months Ended Six Months Ended December 31 December 31 ---------------------- ---------------------- 2003 2002 2003 2002 --------- --------- --------- --------- Net income, as reported $ 5,133 $ 3,860 $ 9,965 $ 7,765 Plus: Stock-based employee compensation expense included in reported net income, net of related tax effects 211 442 Less: Total stock-based employee compensation expense determined under fair value based method, net of tax (211) (336) (442) (644) ========= ========= ========= ========= Pro forma net income $ 5,133 $ 3,524 $ 9,965 $ 7,121 ========= ========= ========= ========= Earnings per share: Basic - as reported $ 0.27 $ 0.20 $ 0.52 $ 0.41 ========= ========= ========= ========= Basic - pro forma $ 0.27 $ 0.19 $ 0.52 $ 0.38 ========= ========= ========= ========= Diluted - as reported $ 0.26 $ 0.20 $ 0.51 $ 0.40 ========= ========= ========= ========= Diluted - pro forma $ 0.26 $ 0.18 $ 0.51 $ 0.37 ========= ========= ========= ========= |
Compensation expense has been determined using the Black-Scholes option-pricing model. The assumptions used for grants issued during the six months ended December 31, 2003 and 2002 are:
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per share amounts) (Unaudited)
SIX MONTHS ENDED DECEMBER 31 ------------------ 2003 2002 ------- ------- Expected life 7 years 7 years Risk free interest rate 3.8% 3.9% Dividend yield 3.0% 3.0% Volatility 31.7% 30.9% |
5. CONSOLIDATION OF VARIABLE INTEREST ENTITIES
In January 2003, the Financial Accounting Standards Board issued FIN 46, "Consolidation of Variable Interest Entities" which the Company adopted as of July 1, 2003. The Company is a minority owner in iSource. iSource has assets of $2,500 and accounts payable of $2,300. In December 2003, the Company paid the outstanding amount of $2,990 of bank debt and assumed the bank's rights under the loan agreement. The Company's purchases currently account for more than 90% of iSource's sales and the Company is considered the primary beneficiary of iSource's operations. In accordance with FIN 46, iSource's financial statements were consolidated with the Company's beginning in July 2003. The effect of the consolidation was not material to the Company's consolidated financial statements.
6. BUSINESS COMBINATION
In November 2003, the Company acquired the stock of a Mexican distributor of industrial products for approximately $2,800. The results of the acquired operations are included in our service center based distribution segment from the acquisition date. Results of operations for this acquisition are not material for all periods presented. Other intangibles of $880, consisting of customer relationships and non-competition agreements were recognized in connection with this combination and will be amortized over a period of seven to ten years.
The preliminary fair value of the acquired assets and liabilities assumed at the date of acquisition are as follows:
Cash $ 815 Accounts receivable 2,313 Inventory 1,815 Other current assets 90 Property 238 Other assets 7 Goodwill 398 Other intangibles 880 --------- Total assets acquired 6,556 Liabilities assumed 3,756 --------- Net assets acquired $ 2,800 ========= |
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per share amounts) (Unaudited)
7. DEBT
During the quarter ended December 31, 2003, the Company replaced its existing revolving credit facility with a new, five year revolving credit facility with a group of banks. This agreement provides for unsecured borrowings of up to $100,000 at various interest rate options, none of which is in excess of the banks' prime rate at interest determination dates. The Company had no borrowings outstanding under this facility at December 31, 2003. Fees on this facility range from .15% to .30% per year on the average amount of the total revolving credit commitments during the year. Unused lines under this facility, net of outstanding letters of credit, totaling $92,114, are available to fund future acquisitions or other capital and operating requirements.
8. NEW ACCOUNTING STANDARD
During December 2003, the FASB issued a revision to Statement of Financial Accounting Standards No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits, an amendment of FASB Statements No. 87, 88, and 106," which expands the disclosure requirements regarding plan assets and benefit obligations for the Company's benefit and pension plans. Certain provisions of this statement are effective for the third quarter of fiscal 2004, while the remaining provisions relating to the annual financial statement disclosures, are effective for the fiscal year ending June 30, 2004.
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
REVIEW BY INDEPENDENT PUBLIC ACCOUNTANTS
The accompanying condensed consolidated financial statements of the Company have been reviewed by the Company's independent accountants, Deloitte & Touche LLP, whose report covering their review of the financial statements follows.
INDEPENDENT ACCOUNTANTS' REPORT
Applied Industrial Technologies, Inc.
We have reviewed the accompanying condensed consolidated balance sheet of Applied Industrial Technologies, Inc. and subsidiaries (the "Company") as of December 31, 2003, and the related condensed statements of consolidated income for the three-month and six-month periods ended December 31, 2003 and 2002, and of consolidated cash flows for the six-month periods ended December 31, 2003 and 2002. These interim financial statements are the responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States of America, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should be made to such condensed consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.
We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet of Applied Industrial Technologies, Inc. and subsidiaries as of June 30, 2003, and the related statements of consolidated income, shareholders' equity, and cash flows for the year then ended (not presented herein); and in our report dated August 8, 2003, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of June 30, 2003 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
As discussed in Note 4 to the condensed consolidated interim financial statements, effective July 1, 2003, the Company changed its method of accounting for stock-based compensation and adopted the fair value recognition provisions of SFAS 123 "Accounting for Stock-Based Compensation," as amended by SFAS 148, "Accounting for Stock-Based Compensation - Transition and Disclosure."
/s/ Deloitte & Touche LLP Cleveland, Ohio February 6, 2004 |
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is Management's Discussion and Analysis of certain significant factors which have affected the Company's (1) financial condition at December 31, 2003 and June 30, 2003, and (2) results of operations and cash flows during the periods included in the accompanying Condensed Statements of Consolidated Income and Consolidated Cash Flows.
Overview
During the quarter, income increased 33.0% compared to the same quarter in the prior year. Sales increased 1.1% primarily due to our Canadian operations. Gross margin performance was improved as our initiatives in the areas of product pricing, freight recovery, cost controls and asset management continue to show progress. The balance sheet remains solid. Inventories increased $27.2 million from September balances primarily due to special calendar year-end buying opportunities. These inventories of standard product are expected to be sold off in the normal course of business. We expect the total inventory dollars to return to the June 30, 2003 levels by the end of fiscal 2004.
The Company monitors the ISM Purchasing Managers Index (ISM) and the government's Manufacturers Capacity Utilization (MCU) index and considers these indexes key indicators of potential Company business environment changes. The ISM has increased recently and the MCU had increased for the 4th consecutive month. The Company's performance traditionally lags these key indicators by approximately 6 months. Therefore, the Company expects relatively flat sales on a sales per day basis for the fiscal third quarter with improvement possible in the 4th quarter of fiscal 2004.
The Company expects to sustain our improvements in profitability. We anticipate fiscal third quarter gross profit levels to be in the range of 26.0% to 26.5%. We anticipate that a decline in rebates during the remainder of the year will continue to be offset by improvements in freight recovery, pricing and asset management. We expect selling, distribution and administrative expenses for the third quarter to be relatively flat compared to the prior year.
Liquidity and Capital Resources
Cash used in operating activities was $13.3 million in the six months ended December 31, 2003. This compares to $22.6 million provided by operating activities in the same period a year ago.
Cash flow from operations depends primarily upon generating operating income, controlling the investment in inventories and receivables, and managing the timing of payments to suppliers. In the area of inventory, the Company has attempted to secure cost advantages by buying product through special vendor purchasing programs. In addition, the Company has made system enhancements in recent quarters to improve inventory tracking and receivables collection efforts. During the six month period ended December 31, 2003, inventories increased approximately $31.5 million primarily due to purchases made under special calendar year-end programs offered by certain of our suppliers. These inventories of standard product are expected to be sold in the normal course of business. The inventory increase also includes $2.3 million from the
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
consolidation of iSource resulting from the adoption of FIN 46 and $1.8 million from the acquisition of a Mexican distributor (see notes to the condensed consolidated financial statements). Accounts receivable decreased $3.8 million during the six months ended December 31, 2003 due to improved collections and accounts payable and other accrued liabilities decreased $12.0 million due to the payment during the period of fiscal year-end accrued compensation benefits.
Capital expenditures were $10.3 million for the period ended December 31, 2003 compared to $5.0 million in the prior year. In September 2003, the Company purchased, for $7.5 million, four operating facilities which had previously been leased (see notes to the condensed consolidated financial statements). For the entire year we expect our total capital expenditures to be approximately $15.0 million. Our depreciation and amortization for the entire year is expected to be within the range of $16.0 million to $17.0 million.
During the quarter ended December 31, 2003, the Company replaced its existing revolving credit facility with a new $100 million revolving credit facility with a group of banks expiring in November 2008. The Company had no borrowings outstanding under this facility at December 31, 2003. Unused lines under this facility, net of outstanding letters of credit, totaling $92.1 million are available to fund future acquisitions or other capital and operating requirements. Additionally, the Company is currently negotiating with Prudential Insurance Company for an uncommitted shelf facility that would enable the Company to borrow up to $100 million in additional long-term financing at the Company's sole discretion. This shelf agreement will replace a previously unused facility that expired on October 31, 2003. The new facility is expected to be completed by the end of February, 2004.
At December 31, 2003, the Company had $25.0 million of private placement debt outstanding that was entered into to refinance a portion of the debt incurred in connection with its 2000 Canadian acquisition. The full $25.0 million is due at maturity in November 2010. The Company has mitigated the foreign currency exposure though the use of cross currency swaps on the $25.0 million of debt.
The aggregate annual maturities of long-term debt include $50.0 million in fiscal 2008 and $25.0 million in fiscal 2011.
The Board of Directors has authorized the purchase of shares of the Company's common stock to fund employee benefit programs, stock option and award programs, and future business acquisitions. These purchases are made in open market and negotiated transactions, from time to time, depending upon market conditions. The Company acquired 96,000 shares of its common stock for $2.1 million during the six months ended December 31, 2003 compared to 232,000 shares for $3.9 million during the six months ended December 31, 2002. At December 31, 2003, the Company had remaining authorization to repurchase up to 1 million additional shares.
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Other Matters
In November 2003, the Company acquired the stock of a Mexican distributor of industrial products for approximately $2.8 million. The acquisition was paid for from our cash balances. The results of the acquired operations are not material for all periods presented. The acquired operations are reported in our service center based distribution segment from the acquisition date.
In January 2003, the Financial Accounting Standards Board issued FIN 46, "Consolidation of Variable Interest Entities." The Company is a minority owner in iSource Performance Materials L.L.C. (iSource). iSource has assets of $2.5 million and accounts payable of $2.3 million. In December 2003, the Company paid the outstanding amount of $3.0 million of bank debt and assumed the bank's rights under the loan agreement. The Company's purchases currently account for more than 90% of iSource's sales and the Company is considered the primary beneficiary of iSource's operations. In accordance with FIN 46, iSource's financial statements were consolidated with the Company's beginning in July 2003. The effect of the consolidation was not material to the Company's consolidated financial statements.
Effective July 1, 2003, the Company adopted the fair value recognition provisions of SFAS 123, "Accounting for Stock-Based Compensation," using the modified prospective method for the transition. Under the modified prospective method, stock-based compensation cost recognized during this fiscal year for stock options is the same as that which would have been recognized had the fair value recognition provisions been applied to all stock option awards granted after July 1, 1995. The compensation expense recorded during the quarter and six months ended December 31, 2003 related to stock options was $.3 million, or $.01 per share after tax and $.7 million or $.02 per share after tax, respectively.
RESULTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 2003 AND 2002
Net sales increased 1.1% compared to the prior year primarily due to the strength of performance of our Canadian operations. Service center based same store sales in the U.S. decreased 1.5% compared to those in the same quarter last year. The U.S. fluid power sales also declined 5.1% during the quarter.
Gross profit as a percentage of sales increased to 26.5% from 25.6%. This increase is primarily due to higher recovery of our shipping expenses, lower freight costs and improvements from product pricing initiatives. The increase was also due to recording cost adjustments during the quarter related to inventory cycle counting programs and interim inventory reconciliations. In the prior year, these factors were incorporated to a greater extent in the 4th quarter annual physical inventory results. These factors were offset somewhat by lower purchase rebates from our product suppliers.
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Selling, distribution and administrative expenses increased 2.4% compared to the prior year. The difference primarily relates to a relatively high level of gains on the sales of unneeded real estate and other property in the prior year. These gains are recorded as a reduction in selling, distribution and administrative expense. Health care and other benefit expenses increased versus last year and the Company also began to expense stock options during the quarter ended September 30, 2003.
Interest expense-net for the quarter increased by 4.7% as compared to the prior year as a result of the consolidation of iSource (see notes to the condensed consolidated financial statements).
Income tax expense as a percentage of income before taxes was 35.5% for the quarter ended December 31, 2003 compared to 35.0% for the quarter ended December 31, 2002 and 35.9% for all of fiscal 2003.
As a result of the above factors, net income increased by 33.0% compared to the same quarter of last year and earnings per share increased 30.0%.
SIX MONTHS ENDED DECEMBER 31, 2003 AND 2002
Net sales decreased slightly compared to the prior year. Same store sales for our U.S. service centers decreased 3.3% compared to those in the same period last year. The U.S. fluid power sales also declined 7.1% during the period. Offsetting the decrease was an increase in Canadian sales. While a portion of this increase was due to the strengthening of the Canadian dollar, the majority relates to actual year over year volume increases.
Gross profit as a percentage of sales increased to 26.2% from 25.0%. This increase is primarily due to higher recovery of our shipping expenses, lower freight costs and improvements from product pricing initiatives. The increase was also due to recording throughout the year, cost adjustments related to inventory cycle counting programs and interim inventory reconciliations. In the prior year, these factors were incorporated to a greater extent in the 4th quarter annual physical inventory results. These factors were offset somewhat by lower purchase rebates from our product suppliers.
Selling, distribution and administrative expenses increased 2.7% compared to the prior year. The difference primarily relates to a relatively high level of gains on the sales of unneeded real estate and other property in the prior year. Health care and other benefit expenses increased versus last year and the Company also began to expense stock options during the quarter ended September 30, 2003.
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Interest expense-net for the quarter increased by 4.6% as compared to the prior year as a result of lower interest income and the consolidation of iSource (see notes to the condensed consolidated financial statements).
Income tax expense as a percentage of income before taxes was 35.6% for the period ended December 31, 2003 compared to 36.5% for the period ended December 31, 2002. This decrease is due to a lower proportion of non-deductible expenses and lower effective state, local and Canadian tax rates.
As a result of the above factors, net income increased by 28.3% compared to the same period of last year and earnings per share increased 27.5%.
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CAUTIONARY STATEMENT UNDER PRIVATE SECURITIES LITIGATION REFORM ACT
Management's Discussion and Analysis and other sections of this Form 10-Q contain statements that are forward-looking, based on management's current expectations about the future. Forward-looking statements are often identified by qualifiers such as "expect", "believe", "anticipate", "should", "project", "forecast", "will", and similar expressions. The Company intends that the forward-looking statements be subject to the safe harbors established in the Private Securities Litigation Reform Act of 1995 and by the Securities and Exchange Commission in its rules, regulations and releases.
Readers are cautioned not to place undue reliance on any forward-looking statements. All forward-looking statements are based on current expectations regarding important risk factors, many of which are outside the Company's control. Accordingly, actual results may differ materially from those expressed in the forward-looking statements, and the making of such statements should not be regarded as a representation by the Company or any other person that the results expressed in the statements will be achieved. In addition, the Company undertakes no obligation publicly to update or revise any forward-looking statements, whether because of new information or events, or otherwise.
Important risk factors include, but are not limited to, the following: changes in the economy or in specific customer industries; reduction in manufacturing capacity in the Company's targeted geographic markets due to consolidation in customer industries or the transfer of manufacturing capacity to foreign countries; changes in interest rates; changes in customer procurement policies and practices; changes in product manufacturer sales policies and practices; the availability of product and labor; changes in operating expenses; the effect of price increases or decreases in both procuring and selling products and services; the variability and timing of business opportunities including acquisitions, alliances, customer agreements and supplier authorizations; the Company's ability to realize the anticipated benefits of acquisitions and marketing and other business strategies; the incurrence of additional debt and contingent liabilities in connection with acquisitions; changes in accounting policies and practices; the effect of organizational changes within the Company; the emergence of new competitors, including firms with greater financial resources than the Company; risks and uncertainties associated with the Company's expansion into foreign markets, including inflation rates, recessions, and foreign currency exchange rates; adverse results in significant litigation matters; adverse regulation and legislation; and the occurrence of extraordinary events (including prolonged labor disputes, war, natural events and acts of God, fires, floods and accidents).
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company has evaluated its exposure to various market risk factors, including but not limited to, interest rate, foreign currency exchange and commodity price risks. The Company is primarily affected by market risk exposure through the effect of changes in interest rates. The Company manages interest rate risk through the use of a combination of fixed rate long-term debt and variable rate borrowings under its committed revolving credit agreement and interest rate swaps. The Company had no variable rate borrowings outstanding under its committed revolving credit agreement at December 31, 2003. The Company has no interest rate swap agreements outstanding, therefore, all of the Company's outstanding long-term debt is currently at fixed interest rates at December 31, 2003 and scheduled for repayment in December 2007 and beyond.
The Company mitigates its foreign currency exposure from the Canadian dollar through the use of cross currency swap agreements as well as of foreign-currency denominated debt. Hedging of the US dollar denominated debt used to fund a substantial portion of Company's net investment in its Canadian operations is accomplished through the use of cross currency swaps. Any gain or loss on the hedging instrument offsets the gain or loss on the underlying debt. Translation exposures with regard to our Mexican business are not hedged because the Mexican activity is not material. The impact on the Company's future earnings from exposure to changes in foreign currency exchange rates is expected to be immaterial.
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
ITEM 4: CONTROLS AND PROCEDURES
Management, under the supervision and with the participation of the Chief Executive Officer (CEO) and the Chief Financial Officer (CFO), has evaluated the Company's disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, the CEO and the CFO have concluded that the disclosure controls and procedures are effective in timely alerting them to material information about the Company required to be included in the Company's Exchange Act reports.
Management has not identified any change in internal control over financial reporting occurring during the quarter ended December 31, 2003 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.
Applied Industrial Technologies, Inc. and/or one of its subsidiaries is a party to various pending judicial and administrative proceedings. Based on circumstances currently known, the Company does not believe that any liabilities that may result from these proceedings are reasonably likely to have a material adverse effect on the Company's consolidated financial position, results of operations, or cash flows.
ITEM 4. Submission of Matters to a Vote of Security Holders.
At the Company's Annual Meeting of Shareholders held on October 21, 2003, the Shareholders (i) elected Thomas A. Commes, Peter A. Dorsman, J. Michael Moore, and Dr. Jerry Sue Thornton as Directors for terms expiring in 2006, (ii) ratified the appointment of Deloitte & Touche LLP as the Company's independent auditors for the fiscal year ending June 30, 2004, (iii) approved the Deferred Compensation Plan for Non-Employee Directors, and (iv) approved the Deferred Compensation Plan. Substantially the same information was previously reported in Part II, Item 5 "Other Information" of the Company's Form 10-Q for the quarter ended September 30, 2003.
ITEM 6. Exhibits and Reports on Form 8-K. (a) Exhibits. Exhibit No. Description 3(a) Amended and Restated Articles of Incorporation of Applied Industrial Technologies, Inc., as amended on October 8, 1998 (filed as Exhibit 3(a) to the Company's Form 10-Q for the quarter ended September 30, 1998, SEC File No. 1-2299, and incorporated here by reference). 3(b) Code of Regulations of Applied Industrial Technologies, Inc., as amended on October 19, 1999 (filed as Exhibit 3(b) to the Company's Form 10-Q for the quarter ended September 30, 1999, SEC File No. 1-2299, and incorporated here by reference). 4(a) Certificate of Merger of Bearings, Inc. (Ohio) and Bearings, Inc. (Delaware) filed with the Ohio Secretary of State on October 18, 1988, including an Agreement and Plan of 20 |
Reorganization dated September 6, 1988 (filed as Exhibit 4(a) to the Company's Registration Statement on Form S-4 filed May 23, 1997, Registration No. 333-27801, and incorporated here by reference). 4(b) Private Shelf Agreement dated as of November 27, 1996, as amended on January 30, 1998, between the Company and The Prudential Insurance Company of America (filed as Exhibit 4(f) to the Company's Form 10-Q for the quarter ended March 31, 1998, SEC File No. 1-2299, and incorporated here by reference). 4(c) Amendment dated October 24, 2000 to 1996 Private Shelf Agreement between the Company and The Prudential Insurance Company of America (filed as Exhibit 4(e) to the Company's Form 10-Q for the quarter ended September 30, 2000, SEC File No. 1-2299, and incorporated here by reference). 4(d) Amendment dated November 14, 2003 to 1996 Private Shelf Agreement between the Company and The Prudential Insurance Company of America. 4(e) $100,000,000 Credit Agreement dated as of October 31, 2003 among the Company, KeyBank National Association as Agent, and various financial institutions. 4(f) Rights Agreement, dated as of February 2, 1998, between the Company and Computershare Investor Services LLP (successor to Harris Trust and Savings Bank), as Rights Agent, which includes as Exhibit B thereto the Form of Rights Certificate (filed as Exhibit No. 1 to the Company's Registration Statement on Form 8-A filed July 20, 1998, SEC File No. 1-2299, and incorporated here by reference). 10 First Amendment to the Company's Deferred Compensation Plan (September 1, 2003 Restatement). 15 Letter from independent accountants regarding unaudited interim financial information. 31 Rule 13a-14(a)/15d-14(a) certifications. 21 |
32 Section 1350 certifications. |
Applied will furnish a copy of any exhibit described above and not contained herein upon payment of a specified reasonable fee which shall be limited to Applied's reasonable expenses in furnishing the exhibit.
Certain instruments with respect to long-term debt have not been filed as exhibits because the total amount of securities authorized under any one of the instruments does not exceed 10 percent of the total assets of Applied and its subsidiaries on a consolidated basis. Applied agrees to furnish to the Securities and Exchange Commission, upon request, a copy of each such instrument.
(b) Reports on Form 8-K.
The Company filed the following Report on Form 8-K with the Securities and Exchange Commission during the quarter ended December 31, 2003:
1. Filing on October 14, 2003 - the Company attached its press release of October 13, 2003, regarding first quarter earnings.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
(Company)
Date: February 9, 2004 By: /s/ David L. Pugh ---------------------------------- David L. Pugh Chairman & Chief Executive Officer Date: February 9, 2004 By: /s/ Mark O. Eisele ---------------------------------- Mark O. Eisele Vice President-Chief Financial Officer & Treasurer |
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
EXHIBIT INDEX
TO FORM 10-Q FOR THE QUARTER ENDED DECEMBER 31, 2003
EXHIBIT NO. DESCRIPTION 3(a) Amended and Restated Articles of Incorporation of Applied Industrial Technologies, Inc., as amended on October 8, 1998 (filed as Exhibit 3(a) to the Company's Form 10-Q for the quarter ended September 30, 1998, SEC File No. 1-2299, and incorporated here by reference). 3(b) Code of Regulations of Applied Industrial Technologies, Inc., as amended on October 19, 1999 (filed as Exhibit 3(b) to the Company's Form 10-Q for the quarter ended September 30, 1999, SEC File No. 1-2299, and incorporated here by reference). 4(a) Certificate of Merger of Bearings, Inc. (Ohio) and Bearings, Inc. (Delaware) filed with the Ohio Secretary of State on October 18, 1988, including an Agreement and Plan of Reorganization dated September 6, 1988 (filed as Exhibit 4(a) to the Company's Registration Statement on Form S-4 filed May 23, 1997, Registration No. 333-27801, and incorporated here by reference). 4(b) Private Shelf Agreement dated as of November 27, 1996, as amended on January 30, 1998, between the Company and The Prudential Insurance Company of America (filed as Exhibit 4(f) to the Company's Form 10-Q for the quarter ended March 31, 1998, SEC File No. 1-2299, and incorporated here by reference). 4(c) Amendment dated October 24, 2000 to November 27, 1996 Private Shelf Agreement between the Company and The Prudential Insurance Company of America (filed as Exhibit 4(e) to the Company's Form 10-Q for the quarter ended September 30, 2000, SEC File No. 1-2299, and incorporated here by reference). |
4(d) Amendment dated November 14, 2003 to 1996 Attached Private Shelf Agreement between the Company and The Prudential Insurance Company of America. 4(e) $100,000,000 Credit Agreement dated as of Attached October 31, 2003 among the Company, KeyBank National Association as Agent, and various financial institutions. 4(f) Rights Agreement, dated as of February 2, 1998, between the Company and Computershare Investor Services LLP (successor to Harris Trust and Savings Bank), as Rights Agent, which includes as Exhibit B thereto the Form of Rights Certificate (filed as Exhibit No. 1 to the Company's Registration Statement on Form 8-A filed July 20, 1998, SEC File No. 1-2299, and incorporated here by reference). 10 First Amendment to the Company's Deferred Attached Compensation Plan (September 1, 2003 Restatement). 15 Letter from independent accountants regarding Attached unaudited interim financial information. 31 Rule 13a-14(a)/15d-14(a) certifications. Attached 32 Section 1350 certifications. Attached |
EXHIBIT 4(d)
Prudential Financial Prudential Capital Group Corporate Finance Two Prudential Plaza, Suite 5600 Chicago, IL 60601-6716 Tel 312-540-0931 Fax 312-540-4222
November 14, 2003
Applied Industrial Technologies, Inc.
One Applied Plaza
Cleveland, Ohio 44115
Ladies and Gentlemen:
Reference is made to that certain Private Shelf Agreement, dated as of November 27, 1996 (as heretofore amended, the "1996 Note Agreement"), between Applied Industrial Technologies, Inc., an Ohio corporation formerly known as Bearings, Inc. (the "Company"), and The Prudential Insurance Company of America ("Prudential"), pursuant to which the Company issued and sold and Prudential purchased the Company's 6.60% Series B Notes due December 8, 2007 in the original aggregate principal amount of $50,000,000.
Pursuant to the request of the Company and in accordance with the provisions of paragraph 11C of the 1996 Note Agreement, the parties hereto agree as follows:
SECTION 1. Amendment. From and after the date this letter becomes effective in accordance with Section 2 hereof, the 1996 Note Agreement is amended as follows:
(a) New paragraph 6A(4) is added to the 1996 Note Agreement, such paragraph 6A(4) to read as follows:
"6A(4). INTEREST COVERAGE RATIO. The Company shall not suffer or permit at any time the Interest Coverage Ratio to be less than 3.00 to 1.00."
(b) The following sentence is added to the end of paragraph 6B(1) of the 1996 Note Agreement:
"Except for guaranties permitted or contemplated by paragraph
6B(10) or with respect to banker's liens arising by operation
of law (so long as the Company is in compliance with clause
(v) of this paragraph 6B(1), with the amount of Debt secured
by such
banker's liens being equal, for the purpose of determining compliance with such clause (v), to the lesser of the value of assets subject to such banker's liens or the outstanding amount of the Debt as to which such banker's liens may be exercised), neither the Company nor any Subsidiary is permitted to create, incur, assume or suffer to exist any Lien upon any property or assets to secure any obligations under the Credit Agreement."
(c) Clause (x) in the proviso at the end of paragraph 6B(2) of the 1996 Note Agreement is amended in its entirety to read as follows:
"(x) that the aggregate principal amount of consolidated Debt of the Company and its Subsidiaries shall not exceed at any time an amount equal to 50% of Consolidated Capitalization and"
(d) Paragraph 6B(10) of the 1996 Note Agreement is amended in its entirety to read as follows::
"6B(10). OTHER SUBSIDIARY GUARANTIES. The Company covenants that it will not permit any Subsidiary organized under the laws of the United States or any state thereof to create, issue, incur, assume or become subject to or liable under any guarantee with respect to any Debt of the Company unless such Subsidiary promptly executes and delivers to the holders of the Notes a Guaranty of Payment of Debt substantially in the form of Exhibit I hereto."
(e) New paragraph 6B(11) is added to the 1996 Note Agreement, such paragraph 6B(11) to read as follows:
"6B(11). OTHER COVENANTS. In the event that the Company or any of its Subsidiaries shall enter into, or shall have entered into, any Material Indebtedness Agreement, wherein the covenants contained therein shall be more restrictive than the covenants set forth herein, then the Company and its Subsidiaries shall be bound hereunder by such more restrictive covenants with the same force and effect as if such covenants were written herein."
(f) The following definitions the 1996 Note Agreement are each amended in its entirety to read as follows or added to the 1996 Note Agreement, as applicable:
"CANADIAN BORROWER" shall mean each of the Subsidiaries of the Company set forth on Schedule 2 to the Credit Agreement.
"CONSOLIDATED EBIT" shall mean, for any period, Consolidated Net Income for such period plus the aggregate
amounts deducted in determining such Consolidated Net Income in respect of (a) Consolidated Interest Expense, (b) Consolidated Income Tax Expense, (c) stock option expenses, up to an aggregate amount of Two Million Dollars ($2,000,000) per fiscal year of the Company, and (d) (i) extraordinary or non-recurring charges, minus (ii) extraordinary or non-recurring cash gains, determined on a consolidated basis in accordance with generally accepted accounting principles.
"CONSOLIDATED INCOME TAX EXPENSE" shall mean, for any period, all provisions for taxes based on the gross or net income of the Company (including, without limitation, any additions to such taxes, and any penalties and interest with respect thereto), and all franchise taxes of the Company, determined on a consolidated basis and in accordance with generally accepted accounting principles.
"CONSOLIDATED INTEREST EXPENSE" shall mean, for any period, the interest expense of the Company for such period, determined on a consolidated basis and in accordance with generally accepted accounting principles.
"CREDIT AGREEMENT" shall mean the Credit Agreement, dated as of October 31, 2003, among the Company, the Canadian Borrowers, the Banks, Keybank National Association, as Lead Arranger, Book Runner and Administrative Agent, and U.S. Bank National Association, as Syndication Agent, as amended, modified, supplemented, restated, replaced or refinanced from time to time.
"INTEREST COVERAGE RATIO" shall mean, for the most
recently completed four fiscal quarters of the Company, on a
consolidated basis and in accordance with GAAP, the ratio of
(a) Consolidated EBIT to (b) Consolidated Interest Expense.
"MATERIAL INDEBTEDNESS AGREEMENT" shall mean any debt instrument, lease (capital, operating or otherwise), guaranty, contract, commitment, agreement or other arrangement evidencing or entered into in connection with Debt of the Company or any Subsidiary equal to or in excess of the amount of Twenty Million Dollars ($20,000,000).
"PRIORITY DEBT" shall mean, as of any time of
determination thereof, the aggregate amount, without
duplication, of (i) all obligations of the Company or
Subsidiaries secured by Liens permitted by clauses (iv) or (v)
of paragraph 6B(1), and (ii) Debt of Subsidiaries, other than
(a) Debt of the Canadian
Borrowers owed to the Canadian Banks under the Credit Agreement, (b) Debt consisting of guarantees by Subsidiaries of Debt of the Company so long as such guarantees are permitted under paragraph 6B(10) hereof and (c) Debt owed by a Subsidiary to the Company or another Subsidiary."
SECTION 2. Conditions Precedent. The amendments in Section 1 of this letter shall become effective upon the satisfaction of each of the following conditions:
(a) The Company shall have delivered to Prudential a counterpart of this letter duly executed by the Company and consented to by each Subsidiary party to a Guaranty of Payment of Debt or which executes a guarantee of the Company's obligations under the Credit Agreement;
(b) The Company and the Banks shall have executed and delivered the Credit Agreement in form and substance reasonably satisfactory to Prudential, and Prudential shall have received a photocopy thereto and of all operative agreements delivered in connection therewith;
(c) Prudential and Keybank National Association, for itself and as agent for the banks under the Credit Agreement, dated as of November 5, 1998, shall have executed a termination of the Intercreditor Agreement, in form and substance satisfactory to Prudential, and such Credit Agreement shall have been terminated; and
(d) The Company shall have paid the reasonable fees and disbursements of special counsel to Prudential in connection with this letter and the transactions contemplated hereby.
SECTION 3. Representation and Warranties. The Company represents and warrants to the Prudential that (i) there are no Defaults or Events of Default under the 1996 Note Agreement and (ii) the Company has full power, authority and legal right to enter into this letter.
SECTION 4. Reference to and Effect on Agreements. Upon the effectiveness of this letter, each reference to the 1996 Note Agreement in any other document, instrument or agreement shall mean and be a reference to the 1996 Note Agreement as modified by this letter. Except as specifically set forth in Section 1 hereof, the 1996 Note Agreement shall remain in full force and effect and is hereby ratified and confirmed in all respects.
SECTION 5. Governing Law. THIS LETTER SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF ILLINOIS (EXCLUDING ANY CONFLICTS OF LAW RULES WHICH WOULD OTHERWISE CAUSE THIS AGREEMENT TO BE CONSTRUED OR ENFORCED IN ACCORDANCE WITH, OR THE RIGHTS OF THE PARTIES TO BE GOVERNED BY, THE LAWS OF ANY OTHER JURISDICTION).
SECTION 6. Counterparts; Section Titles. This letter may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which
when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same instrument. The section titles contained in this letter are and shall be without substance, meaning or content of any kind whatsoever and are not a part of the agreement between the parties hereto.
Very truly yours,
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: /s/ William Engelking Vice President Agreed and accepted: |
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
By: /s/ John R. Whitten -------------------------- Name: John R. Whitten Title:VP-CFO Consented to: |
APPLIED INDUSTRIAL TECHNOLOGIES-CA LLC
APPLIED INDUSTRIAL TECHNOLOGIES-DBB, INC.
APPLIED INDUSTRIAL TECHNOLOGIES-DIXIE, INC.
APPLIED INDUSTRIAL TECHNOLOGIES-INDIANA LLC
APPLIED INDUSTRIAL TECHNOLOGIES-MAINLINE, INC.
APPLIED INDUSTRIAL TECHNOLOGIES-TX LP
APPLIED INDUSTRIAL TECHNOLOGIES-PA LLC
AIR AND HYDRAULICS ENGINEERING, INCORPORATED
ESI ACQUISITION CORPORATION
THE OHIO BALL BEARING COMPANY
BEARINGS PAN AMERICAN, INC.
BEARINGS SALES AND SERVICES, INC.
AIR DRAULICS ENGINEERING CO.
APPLIEDLINK, INC.
APPLIED-MICHIGAN, LTD
APPLIED INDUSTRIAL TECHNOLOGIES-CAPITAL LLC
By: /s/ John R. Whitten Name: John R. Whitten Title:VP-CFO |
EXHIBIT 4(e)
CREDIT AGREEMENT
AMONG
APPLIED INDUSTRIAL TECHNOLOGIES, INC.,
AND
THE CANADIAN BORROWERS NAMED HEREIN,
AS BORROWERS,
THE FINANCIAL INSTITUTIONS NAMED HEREIN,
AS LENDERS,
KEYBANK NATIONAL ASSOCIATION,
AS LEAD ARRANGER, BOOK RUNNER AND ADMINISTRATIVE AGENT,
AND
U.S. BANK NATIONAL ASSOCIATION,
AS SYNDICATION AGENT
DATED AS OF
OCTOBER 31, 2003
TABLE OF CONTENTS
PAGE ---- ARTICLE I. DEFINITIONS................................................................ 1 Section 1.1. Definitions..................................................... 1 Section 1.2. Accounting Terms................................................ 21 Section 1.3. Terms Generally................................................. 21 ARTICLE II. AMOUNT AND TERMS OF CREDIT................................................ 21 Section 2.1. Amount and Nature of Credit..................................... 21 Section 2.2. US Revolving Credit............................................. 22 Section 2.3. CAD Revolving Loans............................................. 27 Section 2.4. Interest........................................................ 27 Section 2.5. Evidence of Indebtedness........................................ 29 Section 2.6. Notice of Credit Event; Funding of Loans........................ 30 Section 2.7. Payment on Loans and Other Obligations.......................... 31 Section 2.8. Prepayment...................................................... 32 Section 2.9. Facility and Other Fees......................................... 33 Section 2.10. Modification of Commitment..................................... 34 Section 2.11. Computation of Interest and Fees............................... 35 Section 2.12. Mandatory Payment.............................................. 35 Section 2.13. Canadian Borrowers............................................. 36 Section 2.14. Waivers of Borrowers........................................... 37 Section 2.15. Extension of Commitment........................................ 37 ARTICLE III. ADDITIONAL PROVISIONS RELATING TO FIXED RATE LOANS; INCREASED CAPITAL; TAXES............................................................... 38 Section 3.1. Requirements of Law............................................. 38 Section 3.2. Taxes........................................................... 39 Section 3.3. Funding Losses.................................................. 40 Section 3.4. Eurodollar Rate or CAD Fixed Rate Lending Unlawful; Inability to Determine Rate......................................................... 41 ARTICLE IV. CONDITIONS PRECEDENT...................................................... 42 Section 4.1. Conditions to Each Credit Event................................. 42 Section 4.2. Conditions to the First Credit Event............................ 42 ARTICLE V. COVENANTS.................................................................. 44 Section 5.1. Insurance....................................................... 44 Section 5.2. Money Obligations............................................... 44 Section 5.3. Financial Statements and Information............................ 44 Section 5.4. Financial Records............................................... 45 Section 5.5. Franchises; Change in Business.................................. 45 Section 5.6. ERISA Compliance................................................ 45 Section 5.7. Financial Covenants............................................. 46 Section 5.8. Borrowing....................................................... 46 Section 5.9. Liens........................................................... 46 |
TABLE OF CONTENTS
PAGE ---- Section 5.10. Regulations U and X............................................ 47 Section 5.11. Investments and Loans.......................................... 47 Section 5.12. Merger and Sale of Assets...................................... 49 Section 5.13. Acquisitions................................................... 49 Section 5.14. Notice......................................................... 50 Section 5.15. Environmental Compliance....................................... 50 Section 5.16. Affiliate Transactions......................................... 51 Section 5.17. Use of Proceeds................................................ 51 Section 5.18. Corporate Names................................................ 51 Section 5.19. Subsidiary Guaranties.......................................... 51 Section 5.20. Other Covenants................................................ 52 Section 5.21. Guaranties Under the Note Purchase Agreement................... 52 Section 5.22. Pari Passu Ranking............................................. 52 ARTICLE VI. REPRESENTATIONS AND WARRANTIES............................................ 52 Section 6.1. Corporate Existence; Subsidiaries; Foreign Qualification........ 52 Section 6.2. Corporate Authority............................................. 53 Section 6.3. Compliance with Laws............................................ 53 Section 6.4. Litigation and Administrative Proceedings....................... 53 Section 6.5. Title to Assets................................................. 54 Section 6.6. Liens and Security Interests.................................... 54 Section 6.7. Tax Returns..................................................... 54 Section 6.8. Environmental Laws.............................................. 54 Section 6.9. Continued Business.............................................. 54 Section 6.10. Employee Benefits Plans........................................ 55 Section 6.11. Consents or Approvals.......................................... 55 Section 6.12. Solvency....................................................... 55 Section 6.13. Financial Statements........................................... 56 Section 6.14. Regulations.................................................... 56 Section 6.15. Material Agreements............................................ 56 Section 6.16. Intellectual Property.......................................... 56 Section 6.17. Insurance...................................................... 56 Section 6.18. Accurate and Complete Statements............................... 57 Section 6.19. Note Purchase Agreement........................................ 57 Section 6.20. Defaults....................................................... 57 ARTICLE VII. EVENTS OF DEFAULT........................................................ 57 Section 7.1. Payments........................................................ 57 Section 7.2. Special Covenants............................................... 57 Section 7.3. Other Covenants................................................. 57 Section 7.4. Representations and Warranties.................................. 57 Section 7.5. Cross Default................................................... 58 Section 7.6. ERISA Default................................................... 58 |
TABLE OF CONTENTS
PAGE ---- Section 7.7. Change in Control............................................... 58 Section 7.8. Money Judgment.................................................. 58 Section 7.9. Validity of Loan Documents...................................... 58 Section 7.10. Note Purchase Agreement........................................ 58 Section 7.11. Solvency....................................................... 58 ARTICLE VIII. REMEDIES UPON DEFAULT................................................... 59 Section 8.1. Optional Defaults............................................... 59 Section 8.2. Automatic Defaults.............................................. 59 Section 8.3. Letters of Credit............................................... 60 Section 8.4. Offsets......................................................... 60 Section 8.5. Equalization Provision.......................................... 60 Section 8.6. Other Remedies.................................................. 61 ARTICLE IX. THE AGENT................................................................. 61 Section 9.1. Appointment and Authorization................................... 61 Section 9.2. Note Holders.................................................... 62 Section 9.3. Consultation With Counsel....................................... 62 Section 9.4. Documents....................................................... 62 Section 9.5. Agent and Affiliates............................................ 62 Section 9.6. Knowledge of Default............................................ 62 Section 9.7. Action by Agent................................................. 62 Section 9.8. Notice of Default............................................... 63 Section 9.9. Indemnification of Agent........................................ 63 Section 9.10. Successor Agent................................................ 63 Section 9.11. Other Agents................................................... 63 Section 9.12. Designated Lending Office...................................... 63 ARTICLE X. MISCELLANEOUS.............................................................. 63 Section 10.1. Lenders' Independent Investigation............................. 64 Section 10.2. No Waiver; Cumulative Remedies................................. 64 Section 10.3. Amendments, Consents........................................... 64 Section 10.4. Notices........................................................ 64 Section 10.5. Costs, Expenses and Taxes...................................... 65 Section 10.6. Indemnification................................................ 65 Section 10.7. Obligations Several; No Fiduciary Obligations.................. 66 Section 10.8. Execution in Counterparts...................................... 66 Section 10.9. Binding Effect; Borrowers' Assignment.......................... 66 Section 10.10. Lender Assignments............................................ 66 Section 10.11. Sale of Participations........................................ 68 Section 10.12. Severability of Provisions; Captions; Attachments............. 69 Section 10.13. Investment Purpose............................................ 69 Section 10.14. Confidentiality............................................... 69 Section 10.15. Entire Agreement.............................................. 70 |
TABLE OF CONTENTS
PAGE --------------- Section 10.16. Legal Representation of Parties............................... 70 Section 10.17. Currency...................................................... 70 Section 10.18. Governing Law; Submission to Jurisdiction..................... 71 Section 10.19. Jury Trial Waiver............................................. Signatue Page 1 |
Exhibit A Form of US Revolving Credit Note Exhibit B Form of Swing Line Note Exhibit C Form of CAD Revolving Credit Note Exhibit D Form of Notice of Loan Exhibit E Form of Compliance Certificate Exhibit F Form of Assignment and Acceptance Agreement Exhibit G Form of Request for Extension Schedule 1 Lenders and Commitments Schedule 2 Canadian Borrowers Schedule 2.2 Existing Letters of Credit Schedule 3 Guarantors of Payment Schedule 5.9 Liens Schedule 6.1 Subsidiaries Schedule 6.4 Litigation and Administrative Proceedings Schedule 6.10 ERISA Plans Schedule 6.15 Material Agreements |
This CREDIT AGREEMENT (as the same may from time to time be amended, restated or otherwise modified, this "Agreement") is made effective as of the 31st day of October, 2003, among:
(a) APPLIED INDUSTRIAL TECHNOLOGIES, INC., an Ohio corporation ("US Borrower");
(b) each Canadian Borrower, as hereinafter defined (each such Canadian Borrower, together with US Borrower, collectively, "Borrowers" and, individually, each a "Borrower");
(c) the financial institutions listed on Schedule 1 hereto and each other Eligible Transferee, as hereinafter defined, that becomes a party hereto pursuant to Section 10.10 hereof (collectively, the "Lenders" and, individually, each a "Lender");
(d) KEYBANK NATIONAL ASSOCIATION, as lead arranger, book runner and administrative agent for the Lenders under this Agreement ("Agent"); and
(e) U.S. BANK NATIONAL ASSOCIATION, as syndication agent for the Lenders under this Agreement (the "Syndication Agent").
WITNESSETH:
WHEREAS, Borrowers, Agent and the Lenders desire to contract for the establishment of credits in the aggregate principal amounts hereinafter set forth, to be made available to Borrowers upon the terms and subject to the conditions hereinafter set forth;
NOW, THEREFORE, it is mutually agreed as follows:
ARTICLE I. DEFINITIONS
Section 1.1. Definitions. As used in this Agreement, the following terms shall have the following meanings:
"Acquisition" shall mean any transaction or series of related transactions for the purpose of or resulting, directly or indirectly, in (a) the acquisition of all or substantially all of the assets of any Person, or any business or division of any Person (other than a Company), (b) the acquisition of in excess of fifty percent (50%) of the stock (or other equity interest) of any Person (other than a Company), or (c) the acquisition of another Person (other than a Company) by a merger, amalgamation or consolidation or any other combination with such Person.
"Additional Commitment" shall have the meaning given to such term in
Section 2.10(b) hereof.
"Additional Lender" shall mean a financial institution that shall
become a Lender hereunder during the Commitment Increase Period pursuant to
Section 2.10(b) hereof.
"Additional Lender Assumption Agreement" shall mean an assumption agreement, in form and substance satisfactory to Agent, wherein an Additional Lender shall become a US Lender hereunder.
"Additional Lender Assumption Effective Date" shall have the meaning given such term in Section 2.10(b) hereof.
"Advantage" shall mean any payment (whether made voluntarily or involuntarily, by offset of any deposit or other indebtedness or otherwise) received by any Lender in respect of the Applicable Debt, if such payment results in that Lender having less than its pro rata share (based upon its Applicable Commitment Percentage and, in the case of an Equalization Event pursuant to the terms of Section 8.5 hereof, based upon its Equalization Percentage, as defined in Section 8.5 hereof) of the Applicable Debt then outstanding, than was the case immediately before such payment.
"Affiliate" shall mean any Person, directly or indirectly, controlling, controlled by or under common control with a Company and "control" (including the correlative meanings, the terms "controlling", "controlled by" and "under common control with") shall mean the power, directly or indirectly, to direct or cause the direction of the management and policies of a Company, whether through the ownership of voting securities, by contract or otherwise.
"Agent Fee Letter" shall mean the Agent Fee Letter between US Borrower and Agent, dated as of the Closing Date, as the same may from time to time be amended, restated or otherwise modified.
"Applicable Commitment Percentage" shall mean, for each Lender:
(a) with respect to any US Revolving Credit Commitment, the percentage, if any, set forth opposite such Lender's name under the column headed "US Revolving Credit Commitment Percentage" as described in Schedule 1 hereto; and
(b) with respect to the CAD Revolving Credit Commitment, the percentage, if any, set forth opposite such Lender's name under the column headed "CAD Revolving Credit Commitment Percentage" as described in Schedule 1 hereto.
"Applicable Debt" shall mean:
(a) with respect to the Canadian Commitment, collectively, (i) all Indebtedness incurred by Canadian Borrowers to the Canadian Lenders pursuant to this Agreement and includes, without limitation, the principal of and interest on all of the Notes payable by Canadian Borrowers to the Canadian Lenders, (ii) each extension, renewal or refinancing thereof in whole or in part, and (iii) the facility, usage, prepayment and other fees and amounts payable hereunder in connection with the Canadian Commitment; and
(b) with respect to the US Commitment, collectively, (i) all Indebtedness incurred by US Borrower to the US Lenders pursuant to this Agreement and includes, without limitation, the principal of and interest on all of the Notes payable by US Borrower to such US Lenders in connection with the US Commitment, and all obligations with respect to Letters of Credit, (ii) each extension, renewal or refinancing thereof, in whole or in part, and (iii) the facility, usage, prepayment and other fees and amounts payable hereunder in connection with the US Commitment.
"Applicable Facility Fee Rate" shall mean:
(a) for the period from the Closing Date through February 29, 2004, seventeen and one-half (17.50) basis points; and
(b) commencing with the Consolidated financial statements of US Borrower for the fiscal quarter ending December 31, 2003, the number of basis points set forth in the following matrix, based upon the result of the computation of the Capitalization Ratio, shall be used to establish the number of basis points that will go into effect on March 1, 2004 and thereafter:
CAPITALIZATION RATIO APPLICABLE FACILITY FEE RATE ---------------------------------------------------------------------- Greater than 0.40 to 1.00 30.00 basis points ---------------------------------------------------------------------- Less than or equal to 0.40 to 1.00 but 22.50 basis points greater than 0.30 to 1.00 ---------------------------------------------------------------------- Less than or equal to 0.30 to 1.00 but 17.50 basis points greater than 0.20 to 1.00 ---------------------------------------------------------------------- Less than or equal to 0.20 to 1.00 15.00 basis points ---------------------------------------------------------------------- |
After March 1, 2004, changes to the Applicable Facility Fee Rate shall be effective on the first day of each month following the date upon which Agent received, or, if earlier, Agent should have received, pursuant to Section 5.3(a) or (b) hereof, the financial statements of the Companies. The above matrix does not modify or waive, in any respect, the requirements of Section 5.7 hereof, the rights of Agent and the Lenders to charge the Default Rate, or the rights and remedies of Agent and the Lenders pursuant to Articles VII and VIII hereof.
"Applicable Lender" shall mean, (a) US Lenders with respect to the US Commitment, and (b) Canadian Lenders with respect to the Canadian Commitment.
"Applicable Margin" shall mean:
(a) for the period from the Closing Date through February 29, 2004, seventy (70) basis points; and
(b) commencing with the Consolidated financial statements of US Borrower for the fiscal quarter ending December 31, 2003, the number of basis points set forth in the following matrix, based upon the result of the computation of the Capitalization Ratio, shall be used to establish the number of basis points that will go into effect on March 1, 2004 and thereafter:
CAPITALIZATION RATIO APPLICABLE MARGIN ------------------------------------------------------------- Greater than 0.40 to 1.00 120.00 basis points ------------------------------------------------------------- Less than or equal to 0.40 to 1.00 but 90.00 basis points greater than 0.30 to 1.00 ------------------------------------------------------------- Less than or equal to 0.30 to 1.00 but 70.00 basis points greater than 0.20 to 1.00 ------------------------------------------------------------- Less than or equal to 0.20 to 1.00 60.00 basis points ------------------------------------------------------------- |
After March 1, 2004, changes to the Applicable Margin shall be effective on the first day of each month following the date upon which Agent received, or, if earlier, Agent should have received, pursuant to Section 5.3(a) or (b) hereof, the financial statements of the Companies. The above matrix does not modify or waive, in any respect, the requirements of Section 5.7 hereof, the rights of Agent and the Lenders to charge the Default Rate, or the rights and remedies of Agent and the Lenders pursuant to Articles VII and VIII hereof.
"Assignment Agreement" shall mean an Assignment and Acceptance Agreement in the form of the attached Exhibit F.
"Authorized Officer" shall mean a Financial Officer or other individual authorized by a Financial Officer in writing (with a copy to Agent) to handle certain administrative matters in connection with this Agreement.
"Base Rate" shall mean a rate per annum equal to the greater of (a) the Prime Rate or (b) one-half of one percent (0.50%) in excess of the Federal Funds Effective Rate. Any change in the Base Rate shall be effective immediately from and after such change in the Base Rate.
"Base Rate Loan" shall mean a US Revolving Loan described in Section 2.2 hereof on which US Borrower shall pay interest at a rate based on the Base Rate.
"Business Day" shall mean (a) a day of the year on which banks are not authorized or required to close in Cleveland, Ohio, (b) if the applicable Business Day shall relate to any Eurodollar Loan, a day of the year on which dealings in deposits are carried on in the London interbank Eurodollar market, or (c) if the applicable Business Day shall relate to any CAD Revolving Loan, a day of the year on which dealings in deposits are carried on in Canada.
"CAD Base Rate" shall mean the per annum interest rate established from time to time by Bank of Montreal as Bank of Montreal's "prime rate" or similar index, whether or not such rate is publicly announced, applicable to commercial loans made by Bank of Montreal in Canada in CAD; provided that the CAD Base Rate may not be the lowest interest rate charged by Bank of Montreal for such commercial loans. Each change in the CAD Base Rate shall be effective immediately from and after such change.
"CAD Base Rate Loan" shall mean a CAD Revolving Loan described in
Section 2.3 hereof on which Canadian Borrowers shall pay interest at a rate
based on the CAD Base Rate.
"CAD Equivalent" shall mean the amount denominated in CAD, as of any date of determination, that could be purchased with the applicable amount of Dollars at the most favorable spot exchange rate quoted by Agent at approximately 11:00 A.M. (Eastern time) on such date.
"CAD Fixed Rate" shall mean, in respect of any Interest Period
applicable to a CAD Fixed Rate Loan, the rate per annum determined by Agent by
reference to the average rate quoted on the Reuters Monitor Screen (Page CDOR,
or such other page as may replace such page on such screen for the purpose of
displaying Canadian interbank bid rates for Canadian Dollar bankers'
acceptances) applicable to Canadian Dollar bankers' acceptances (on a three
hundred sixty-five (365) day basis) with a term comparable to such Interest
Period as of 10:00 A.M. (Eastern time) on the first day of such Interest Period.
If for any reason the Reuters Monitor Screen rates are unavailable, CAD Fixed
Rate means the rate of interest determined by Agent that is equal to the rate
(rounded upwards to the nearest basis point) quoted by The Bank of Montreal in
respect of Canadian Dollar bankers' acceptances (on a three hundred sixty-five
(365) day basis) with a term comparable to such Interest Period. No adjustment
shall be made to account for the difference between the number of days in a year
on which the rates referred to in this definition are based and the number of
days in a year on the basis of which interest is calculated in this Agreement.
"CAD Fixed Rate Loan" shall mean a CAD Revolving Loan described in
Section 2.3 hereof on which Canadian Borrowers shall pay interest at a rate
based on the Derived CAD Fixed Rate.
"CAD Revolving Credit Commitment" shall mean the obligation hereunder, during the Commitment Period, of each Canadian Lender to make CAD Revolving Loans up to the Maximum Amount for such Canadian Lender.
"CAD Revolving Credit Note" shall mean a CAD Revolving Credit Note executed and delivered pursuant to Section 2.5(c) hereof.
"CAD Revolving Exposure" shall mean the Dollar Equivalent of the aggregate principal amount of all CAD Revolving Loans.
"CAD Revolving Loan" shall mean a CAD Base Rate Loan or a CAD Fixed Rate Loan granted to a Canadian Borrower in accordance with Section 2.3 hereof.
"Canadian Borrower" shall mean each of the Foreign Subsidiaries of US Borrower set forth on Schedule 2 hereto.
"Canadian Commitment" shall mean the obligation hereunder of the Canadian Lenders, during the Commitment Period, to make Loans pursuant to the CAD Revolving Credit Commitments, up to the Maximum CAD Revolving Amount.
"Canadian Dollar" or "CAD" shall mean lawful money of Canada.
"Canadian Guarantor of Payment" shall mean each Foreign Subsidiary that shall execute and deliver a Guaranty of Payment to Agent, pursuant to Section 5.19 hereof, subsequent to the Closing Date.
"Canadian Lender" shall mean each Lender that is designated as a Canadian Lender on Schedule 1 hereto.
"Capitalization Ratio" shall mean, for the most recently completed fiscal quarter of US Borrower, on a Consolidated basis and in accordance with GAAP, the ratio of (a) Consolidated Funded Indebtedness to (b) Consolidated Total Capitalization.
"Capitalized Lease Obligations" shall mean obligations of the Companies for the payment of rent for any real or personal property under leases or agreements to lease that, in accordance with GAAP, have been or should be capitalized on the books of the lessee and, for purposes hereof, the amount of any such obligation shall be the capitalized amount thereof determined in accordance with GAAP.
"Change in Control" shall mean (a) the acquisition of, or, if earlier, the shareholder or director approval of the acquisition of, ownership or voting control, directly or indirectly, beneficially or of record, on or after the Closing Date, by any Person or group (within the meaning of Rule 13d-3 of the SEC under the Securities Exchange Act of 1934, as then in effect), of shares representing more than thirty-three percent (33%) of the aggregate ordinary Voting Power represented by the issued and outstanding capital stock of US Borrower; (b) the occupation of a majority of the seats (other than vacant seats) on the board of directors of US Borrower by Persons who were neither (i) nominated by the board of directors of US Borrower nor (ii) appointed by directors so nominated; or (c) the occurrence of a change in control, or other similar provision, as defined in any Material Indebtedness Agreement.
"Closing Commitment Amount" shall mean the Dollar Equivalent of One Hundred Million Dollars ($100,000,000).
"Closing Date" shall mean the effective date of this Agreement as set forth in the first paragraph of this Agreement.
"Closing Fee Letter" shall mean the Closing Fee Letter among Borrowers, Agent and the Lenders, dated as of the Closing Date.
"Code" shall mean the Internal Revenue Code of 1986, as amended, together with the rules and regulations promulgated thereunder.
"Commitment" shall mean the US Commitment and the Canadian Commitment.
"Commitment Increase Period" shall mean the period from the Closing Date to the date that is thirty (30) days prior to the last day of the Commitment Period.
"Commitment Period" shall mean the period from the Closing Date to October 31, 2008 or such earlier date on which the Commitment shall have been terminated pursuant to Article VIII hereof.
"Companies" shall mean all Borrowers and all Subsidiaries.
"Company" shall mean a Borrower or a Subsidiary.
"Compliance Certificate" shall mean a certificate, substantially in the form of the attached Exhibit E.
"Confidential Information" shall mean all confidential or proprietary information about the Companies that has been furnished by any Company to Agent or any Lender, whether furnished before or after the Closing Date and regardless of the manner in which it is furnished, but does not include any such information that (a) is or becomes generally available to the public other than as a result of a disclosure by Agent or such Lender not permitted by this Agreement, (b) was available to Agent or such Lender on a nonconfidential basis prior to its disclosure to Agent or such Lender, or (c) becomes available to Agent or such Lender on a nonconfidential basis from a Person other than any Company that is not, to the best knowledge of Agent or such Lender, acting in violation of a confidentiality agreement with a Company or is not otherwise prohibited from disclosing the information to Agent or such Lender.
"Consideration" shall mean, in connection with an Acquisition (or a Disposition), the aggregate consideration paid, including borrowed funds, cash, the issuance of securities or notes, the assumption or incurring of liabilities (direct or contingent), the payment of consulting fees or fees for a covenant not to compete and any other consideration paid for such Acquisition (or Disposition).
"Consolidated" shall mean the resultant consolidation of the financial statements of US Borrower and its Subsidiaries in accordance with GAAP, including principles of consolidation consistent with those applied in preparation of the consolidated financial statements referred to in Section 6.13 hereof.
"Consolidated Depreciation and Amortization Charges" shall mean, for any period, the aggregate of all depreciation and amortization charges for fixed assets, leasehold improvements and general intangibles (specifically including goodwill) of US Borrower for such period, as determined on a Consolidated basis and in accordance with GAAP.
"Consolidated EBIT" shall mean, for any period, on a Consolidated basis and in accordance with GAAP, Consolidated Net Earnings for such period plus the aggregate amounts deducted in determining such Consolidated Net Earnings in respect of (a) Consolidated Interest Expense, (b) Consolidated Income Tax Expense, (c) Consolidated stock option expenses, up to an aggregate amount of Two Million Dollars ($2,000,000) per fiscal year of US Borrower, and (d) (i) extraordinary or non-recurring charges, minus (ii) extraordinary or non-recurring cash gains.
"Consolidated EBITDA" shall mean, for any period, on a Consolidated basis and in accordance with GAAP, Consolidated EBIT plus Consolidated Depreciation and Amortization Charges.
"Consolidated Funded Indebtedness" shall mean, for any period, Funded Indebtedness of US Borrower for such period, as determined on a Consolidated basis and in accordance with GAAP.
"Consolidated Income Tax Expense" shall mean, for any period, all provisions for taxes based on the gross or net income of US Borrower (including, without limitation, any additions to such taxes, and any penalties and interest with respect thereto), and all franchise taxes of Borrower, as determined on a Consolidated basis and in accordance with GAAP.
"Consolidated Interest Expense" shall mean, for any period, the interest expense of US Borrower for such period, as determined on a Consolidated basis and in accordance with GAAP.
"Consolidated Net Earnings" shall mean, for any period, without
duplication, an amount equal to (a) the net income (loss) of US Borrower for
such period, plus (b) upon the consummation of an Acquisition (with
Consideration in excess of Two Million Five Hundred Thousand Dollars
($2,500,000)) permitted under Section 5.13 hereof, trailing twelve months pro
forma historical net income (loss), less (c) upon the consummation of a
Disposition (with Consideration in excess of Two Million Five Hundred Thousand
Dollars ($2,500,000)), trailing twelve months pro forma historical net income
(loss), all as determined on a Consolidated basis and in accordance with GAAP.
"Consolidated Net Worth" shall mean, at any date, the stockholders' equity of US Borrower, determined as of such date on a Consolidated basis and in accordance with GAAP.
"Consolidated Tangible Net Worth" shall mean, at any date, (a) the net book value (after deducting all applicable reserves and excluding any re-appraisal or write-up of assets) of the assets (other than patents, goodwill, treasury stock and other intangibles) of US Borrower, minus (b) Consolidated Total Liabilities, as determined on a Consolidated basis and in accordance with GAAP.
"Consolidated Total Capitalization" shall mean, for any period, on a Consolidated basis and in accordance with GAAP, Consolidated Tangible Net Worth plus Consolidated Funded Indebtedness.
"Consolidated Total Liabilities" shall mean, at any date, the Total Liabilities of US Borrower, as determined on a Consolidated basis and in accordance with GAAP.
"Controlled Group" shall mean a Company and each Person required to be aggregated with a Company under Code Section 414(b), (c), (m) or (o).
"Credit Event" shall mean the making by the Lenders of a Loan, the conversion by the Lenders of a Base Rate Loan or a CAD Base Rate Loan to a Fixed Rate Loan, the continuation
by the Lenders of a Fixed Rate Loan after the end of the applicable Interest Period, the making by the Swing Line Lender of a Swing Loan, or the issuance by the Fronting Lender of a Letter of Credit.
"Credit Party" shall mean a Borrower, a Subsidiary or an Affiliate, including any Guarantor of Payment, that, in each case, is a party to any Loan Document.
"Debt" shall mean, collectively, all Indebtedness and other obligations incurred by any Borrower or Guarantor of Payment to Agent, the Fronting Lender, the Swing Line Lender, or any Lender (or any affiliate thereof) pursuant to this Agreement and includes the principal of and interest on all Loans and all obligations pursuant to the Letters of Credit, and each extension, renewal or refinancing thereof in whole or in part, the facility, usage, prepayment and other fees and amounts payable hereunder, and all fees and charges in connection with the Letters of Credit.
"Default" shall mean an event or condition that constitutes, or with the lapse of any applicable grace period or the giving of notice or both would constitute, an Event of Default, and that has not been waived by the Required Lenders in writing.
"Default Rate" shall mean (a) with respect to any Loan, a rate per annum equal to two percent (2%) in excess of the rate otherwise applicable thereto, and (b) with respect to any other amount, if no rate is specified or available, a rate per annum equal to two percent (2%) in excess of the Base Rate from time to time in effect.
"Derived CAD Fixed Rate" shall mean a rate per annum equal to the sum of the Applicable Margin (from time to time in effect) plus the CAD Fixed Rate.
"Derived Eurodollar Rate" shall mean a rate per annum equal to the sum of the Applicable Margin (from time to time in effect) plus the Eurodollar Rate.
"Derived Swing Loan Rate" shall mean a rate per annum equal to (a) Agent's cost of funds as quoted to US Borrower by Agent and agreed to by US Borrower, plus (b) the Applicable Margin (from time to time in effect).
"Designated Lending Office" shall mean the office of Agent, c/o Bank of Montreal, 1 First Canadian Place, 19th Floor, Toronto, Ontario M5X1A1, Attention: Manager, Global Distribution Services, or such other office and address in Canada as Agent may from time to time designate.
"Disposition" shall mean any transaction or series of related transactions for the purpose of or resulting, directly or indirectly, in the transfer or other disposition of (a) in excess of fifty percent (50%) of the stock (or other equity interest) or (b) all or substantially all of the assets of any Company, or any business unit or division of any Company.
"Dollar" or the sign $ shall mean lawful money of the United States of America.
"Dollar Equivalent" shall mean (a) with respect to a CAD Revolving Loan, the Dollar equivalent of the amount of such CAD Revolving Loan, determined by Agent on the basis of its spot rate at approximately 11:00 A.M. London time on the date two Business Days before the date of such CAD Revolving Loan, for the purchase of Canadian Dollars with Dollars for delivery on the date of such CAD Revolving Loan, and (b) with respect to any other amount, if such amount is denominated in Dollars, then such amount in Dollars and, otherwise the Dollar equivalent of such amount, determined by Agent on the basis of its spot rate at approximately 11:00 A.M. London time on the date for which the Dollar equivalent amount of such amount is being determined, for the purchase of Canadian Dollars with Dollars for delivery on such date; provided, however, that, in calculating the Dollar Equivalent for purposes of determining (i) any Borrower's obligation to prepay Loans pursuant to Section 2.12 hereof, or (ii) any Borrower's ability to request additional Loans pursuant to the Commitment, Agent may, in its discretion, on any Business Day selected by Agent (prior to payment in full of the Debt), calculate the Dollar Equivalent of each such Loan. Agent shall notify US Borrower of the Dollar Equivalent of the CAD Revolving Loans or any other amount, at the time that such Dollar Equivalent shall have been determined pursuant to this definition.
"Domestic Guarantor of Payment" shall mean each of the Companies designated a "Domestic Guarantor of Payment" on Schedule 3 hereto, each of which is executing and delivering a Guaranty of Payment, and any other Domestic Subsidiary that shall deliver a Guaranty of Payment to Agent subsequent to the Closing Date.
"Domestic Subsidiary" shall mean a Subsidiary that is not a Foreign Subsidiary.
"Dormant Subsidiary" shall mean a Company that (a) is not a Credit Party, (b) has aggregate assets of less than One Million Dollars ($1,000,000) and aggregate investments by the Companies of less than One Million Dollars ($1,000,000), and (c) has no direct or indirect Subsidiaries with aggregate assets for all such Subsidiaries of more than One Million Dollars ($1,000,000).
"Eligible Transferee" shall mean a commercial bank, financial institution or other "accredited investor" (as defined in SEC Regulation D) that is not a Borrower, a Subsidiary or an Affiliate.
"Environmental Laws" shall mean all provisions of law, statutes, ordinances, rules, regulations, permits, licenses, judgments, writs, injunctions, decrees, orders, awards and standards promulgated by the government of the United States of America by any state or municipality thereof or any foreign jurisdiction, or by any court, agency, instrumentality, regulatory authority or commission of any of the foregoing concerning health, safety and protection of, or regulation of the discharge of substances into, the environment.
"Equalization Event" shall mean the earlier of (a) the occurrence of an Event of Default under Section 7.11 hereof, or (b) the acceleration of the maturity of the Debt after the occurrence of an Event of Default.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated pursuant thereto.
"ERISA Event" shall mean (a) the existence of a condition or event with respect to an ERISA Plan that presents a significant risk of the imposition of an excise tax in a material amount or any other material liability on a Company or of the imposition of a Lien on the assets of a Company; (b) the engagement by a Controlled Group member in a non-exempt "prohibited transaction" (as defined under ERISA Section 406 or Code Section 4975) or a breach of a fiduciary duty under ERISA that, in either case, could result in a material liability to a Company; (c) the application by a Controlled Group member for a waiver from the minimum funding requirements of Code Section 412 or ERISA Section 302 or a Controlled Group member is required to provide security under Code Section 401(a)(29) or ERISA Section 307; (d) the occurrence of a Reportable Event with respect to any Pension Plan as to which 30-day notice is required to be provided to the PBGC; (e) the withdrawal by a Controlled Group member from a Multiemployer Plan in a "complete withdrawal" or a "partial withdrawal" (as such terms are defined in ERISA Sections 4203 and 4205, respectively) which results or is likely to result in a material liability to a Company; (f) the involvement of, or occurrence or existence of any event or condition that makes likely the involvement of, a Multiemployer Plan in any reorganization under ERISA Section 4241; (g) the failure of an ERISA Plan (and any related trust) that is intended to be qualified under Code Sections 401 and 501 to be so qualified or the failure of any "cash or deferred arrangement" under any such ERISA Plan to meet the requirements of Code Section 401(k), provided, in any such case, that the failure exposes or is likely to expose a Company to material liability; (h) the taking by the PBGC of any steps to terminate a Pension Plan or appoint a trustee to administer a Pension Plan, or the taking by a Controlled Group member of any steps to terminate a Pension Plan; (i) the failure by a Controlled Group member or an ERISA Plan to satisfy any requirements of law applicable to an ERISA Plan, provided, in any such case, that the failure exposes or is likely to expose a Company to material liability; (j) the commencement, existence or threatening of a claim, action, suit, audit or investigation with respect to an ERISA Plan, other than a routine claim for benefits, and such action or suit could reasonably be expected to have a Material Adverse Effect; or (k) any incurrence by or any expectation of the incurrence by a Controlled Group member of any liability for post-retirement medical benefits under any Welfare Plan, other than as required by ERISA Section 601, et. seq. or Code Section 4980B, except for limited benefits in connection with a severance arrangement or benefits for retired senior executives or directors of a Company.
"ERISA Plan" shall mean an "employee benefit plan" (within the meaning of ERISA Section 3(3)) that a Controlled Group member at any time sponsors or maintains, or to which a Controlled Group member contributes, has liability or has a contribution obligation.
"Eurocurrency Liabilities" shall have the meaning assigned to that term in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time.
"Eurodollar" shall mean a Dollar denominated deposit in a bank or branch outside of the United States.
"Eurodollar Loan" shall mean a Loan described in Section 2.2 hereof on which US Borrower shall pay interest at a rate based upon the Derived Eurodollar Rate.
"Eurodollar Rate" shall mean, with respect to a Eurodollar Loan, for any Interest Period, a rate per annum equal to the quotient obtained (rounded upwards, if necessary, to the nearest 1/16th of 1%) by dividing (a) the rate of interest, determined by Agent in accordance with its usual procedures (which determination shall be conclusive absent manifest error) as of approximately 11:00 A.M. (London time) three Business Days prior to the beginning of such Interest Period pertaining to such Eurodollar Loan, as listed on British Bankers Association Interest Rate LIBOR 01 or 02 as provided by Reuters (or, if for any reason such rate is unavailable from Reuters, from any other similar company or service that provides rate quotations comparable to those currently provided by Reuters) as the rate in the London interbank market for Dollar deposits in immediately available funds with a maturity comparable to such Interest Period, provided that, in the event that such rate quotation is not available for any reason, then the Eurodollar Rate shall be the average (rounded upward to the nearest 1/16th of 1%) of the per annum rates at which deposits in immediately available funds in Dollars for the relevant Interest Period and in the amount of the Eurodollar Loan to be disbursed or to remain outstanding during such Interest Period, as the case may be, are offered to Agent (or an affiliate of Agent, in Agent's discretion) by prime banks in any Eurodollar market reasonably selected by Agent, determined as of 11:00 A.M. (London time) (or as soon thereafter as practicable), three Business Days prior to the beginning of the relevant Interest Period pertaining to such Eurodollar Loan hereunder; by (b) 1.00 minus the Reserve Percentage.
"Event of Default" shall mean an event or condition that shall constitute an event of default as defined in Article VII hereof.
"Excluded Taxes" shall mean net income taxes (and franchise taxes imposed in lieu of net income taxes) imposed on Agent or any Lender by the Governmental Authority located in the jurisdiction where Agent or such Lender is organized (other than any such taxes arising solely from 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).
"Existing Letter of Credit" shall having the meaning given to such term in Section 2.2(b)(vii) hereof.
"Federal Funds Effective Rate" shall mean, for any day, the rate per annum (rounded upward to the nearest one one-hundredth of one percent (1/100 of 1%)) announced by the Federal Reserve Bank of New York (or any successor) on such day as being the weighted average of the rates on overnight federal funds transactions arranged by federal funds brokers on the previous trading day, as computed and announced by such Federal Reserve Bank (or any successor) in substantially the same manner as such Federal Reserve Bank computes and announces the weighted average it refers to as the "Federal Funds Effective Rate" as of the Closing Date.
"Financial Officer" shall mean any of the following officers: chief executive officer, president, any vice president, chief financial officer, treasurer, assistant treasurer, controller or
assistant controller. Unless otherwise qualified, all references to a Financial Officer in this Agreement shall refer to a Financial Officer of US Borrower.
"Fixed Rate Loan" shall mean a Eurodollar Loan or a CAD Fixed Rate Loan.
"Foreign Subsidiary" shall mean a Subsidiary that is organized outside of the United States.
"Fronting Lender" shall mean, (a) as to any Letter of Credit transaction hereunder, Agent as issuer of the Letter of Credit, or, in the event that Agent either shall be unable to issue or shall agree, with the consent of US Borrower, that another US Lender may issue, a Letter of Credit, such other US Lender as shall agree to issue the Letter of Credit in its own name, but on behalf of the Lenders hereunder, or (b) as to any Existing Letter of Credit, KeyBank National Association.
"Funded Indebtedness" shall mean, without duplication, the sum of (a)
all Indebtedness for borrowed money, (b) all Capitalized Lease Obligations and
(c) all Indebtedness pursuant to letters of credit, synthetic lease and asset
securitizations.
"GAAP" shall mean generally accepted accounting principles as then in effect, which shall include the official interpretations thereof by the Financial Accounting Standards Board, applied on a basis consistent with the past accounting practices and procedures of US Borrower.
"Governmental Authority" shall mean any nation or government, any state, province or territory or other political subdivision thereof, any governmental agency, authority, instrumentality, regulatory body, court, central bank or other governmental entity exercising executive, legislative, judicial, taxing, regulatory or administrative functions of or pertaining to government, any securities exchange and any self-regulatory organization.
"Guarantor" shall mean a Person that shall have pledged its credit or property in any manner for the payment or other performance of the indebtedness, contract or other obligation of another and includes (without limitation) any guarantor (whether of payment or of collection), surety, co-maker, endorser or Person that shall have agreed conditionally or otherwise to make any purchase, loan or investment in order thereby to enable another to prevent or correct a default of any kind.
"Guarantor of Payment" shall mean a Domestic Guarantor of Payment or a Canadian Guarantor of Payment.
"Guaranty of Payment" shall mean each Guaranty of Payment of Debt executed and delivered on or after the Closing Date in connection with this Agreement by the Guarantors of Payment, as the same may from time to time be amended, restated or otherwise modified.
"Hedge Agreement" shall mean any (a) hedge agreement, interest rate swap, cap, collar or floor agreement, or other interest rate management device entered into by a Company with any Person in connection with any Indebtedness of the Companies, or (b) currency swap
agreement, forward currency purchase agreement or similar arrangement or agreement designed to protect against fluctuations in currency exchange rates entered into by the Companies.
"Indebtedness" shall mean, for any Company (excluding in all cases trade payables payable in the ordinary course of business by such Company), without duplication, (a) all obligations to repay borrowed money, direct or indirect, incurred, assumed, or guaranteed, (b) all obligations for the deferred purchase price of capital assets, (c) all obligations under conditional sales or other title retention agreements, (d) all obligations (contingent or otherwise) under any letter of credit, banker's acceptance, currency swap agreement, interest rate swap, cap, collar or floor agreement or other interest rate management or hedging device, (e) all synthetic leases, (f) all lease obligations that have been or should be capitalized on the books of such Company in accordance with GAAP, (g) all obligations of such Company with respect to asset securitization financing programs to the extent that there is recourse against such Company or such Company is liable (contingent or otherwise) under any such program, (h) all obligations to advance funds to, or to purchase assets, property or services from, any other Person in order to maintain the financial condition of such Person, and (i) any other transaction (including forward sale or purchase agreements) having the commercial effect of a borrowing of money entered into by such Company to finance its operations or capital requirements.
"Interest Adjustment Date" shall mean the last day of each Interest Period.
"Interest Coverage Ratio" shall mean, for the most recently completed four fiscal quarters of US Borrower, on a Consolidated basis and in accordance with GAAP, the ratio of (a) Consolidated EBIT to (b) Consolidated Interest Expense.
"Interest Period" shall mean:
(a) with respect to a Eurodollar Loan, the period commencing on the date such Eurodollar Loan is made and ending on the last day of such period, as selected by US Borrower pursuant to the provisions hereof, and, thereafter (unless such Eurodollar Loan is converted to a Base Rate Loan), each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the last day of such period, as selected by US Borrower pursuant to the provisions hereof. The duration of each Interest Period for a Eurodollar Loan shall be one month, two months, three months or six months, in each case as US Borrower may select upon notice, as set forth in Section 2.6 hereof; provided that (i) if US Borrower shall fail to so select the duration of any Interest Period at least three Business Days prior to the Interest Adjustment Date applicable to such Loan, US Borrower shall be deemed to have converted such Eurodollar Loan to a Base Rate Loan at the end of the then current Interest Period; and (ii) US Borrower may not select any Interest Period for a Eurodollar Loan that ends after any date when principal is due on such Eurodollar Loan; and
(b) with respect to a CAD Fixed Rate Loan, the period commencing on the date such CAD Fixed Rate Loan is made and ending on the last day of such period, as selected by Canadian Borrowers pursuant to the provisions hereof, and, thereafter (unless such CAD Fixed Rate Loan is converted to a CAD Base Rate Loan), each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the last day of such period,
as selected by Canadian Borrowers pursuant to the provisions hereof. The duration of each Interest Period for a CAD Fixed Rate Loan shall be one month, two months, three months or six months, in each case as Canadian Borrowers may select upon notice, as set forth in Section 2.6 hereof; provided that (i) if Canadian Borrowers shall fail to so select the duration of any Interest Period at least three Business Days prior to the Interest Adjustment Date applicable to such Loan, Canadian Borrowers shall be deemed to have converted such CAD Fixed Rate Loan to a CAD Base Rate Loan at the end of the then current Interest Period; and (ii) Canadian Borrowers may not select any Interest Period for a CAD Fixed Rate Loan that ends after any date when principal is due on such CAD Fixed Rate Loan.
"Letter of Credit" shall mean a sight commercial documentary letter of credit or standby letter of credit that shall be issued by the Fronting Lender for the account of US Borrower or a Domestic Guarantor of Payment, including amendments thereto, if any, and shall have an expiration date no later than the earlier of (a) one year after its date of issuance or (b) thirty (30) days prior to the last day of the Commitment Period.
"Letter of Credit Commitment" shall mean the commitment of the Fronting Lender, on behalf of the Lenders, to issue Letters of Credit in an aggregate face amount of up to Fifteen Million Dollars ($15,000,000).
"Letter of Credit Exposure" shall mean, at any time, the sum of (a) the aggregate undrawn face amount of all issued and outstanding Letters of Credit, and (b) the aggregate of the draws made on Letters of Credit that have not been reimbursed by US Borrower or converted to a Revolving Loan pursuant to Section 2.2(b) hereof.
"Leverage Ratio" shall mean, at any time, on a Consolidated basis and in accordance with GAAP, the ratio of (a) Consolidated Funded Indebtedness (for the most recently completed fiscal quarter of US Borrower) to (b) Consolidated EBITDA (for the most recently completed four fiscal quarters of US Borrower).
"Lien" shall mean any mortgage, security interest, lien (statutory or other), charge, assignment, hypothecation, encumbrance on, pledge or deposit of, or conditional sale, leasing (other than operating leases), sale with a right of redemption or other title retention agreement and any capitalized lease with respect to any property (real or personal) or asset.
"Loan" shall mean a Revolving Loan or a Swing Loan granted to US Borrower or Canadian Borrowers by the Lenders in accordance with Section 2.2(a), 2.2(c) or 2.3 hereof.
"Loan Documents" shall mean, collectively, this Agreement, each Note, each Guaranty of Payment, all documentation relating to each Letter of Credit, the Agent Fee Letter and the Closing Fee Letter, as any of the foregoing may from time to time be amended, restated or otherwise modified or replaced, and any other document delivered pursuant thereto.
"Material Adverse Effect" shall mean a material adverse effect on (a) the business, operations, property, condition (financial or otherwise) or prospects of US Borrower or (b) the
business, operations, property, condition (financial or otherwise) or prospects of the Companies taken as a whole.
"Material Indebtedness Agreement" shall mean any debt instrument, lease (capital, operating or otherwise), guaranty, contract, commitment, agreement or other arrangement evidencing or entered into in connection with Funded Indebtedness of any Company or the Companies equal to or in excess of the amount of Twenty Million Dollars ($20,000,000).
"Maximum Amount" shall mean, for each Lender, the amount set forth opposite such Lender's name under the column headed "Maximum Amount" as set forth on Schedule 1 hereto, subject to decreases determined pursuant to Section 2.10(a) hereof, increases pursuant to Section 2.10(b) hereof and assignments of interests pursuant to Section 10.10 hereof; provided, however, that the Maximum Amount for the Swing Line Lender shall exclude the Swing Line Commitment.
"Maximum CAD Revolving Amount" shall mean the CAD Equivalent of Twenty-Five Million Dollars ($25,000,000), as such amount may be reduced pursuant to Section 2.10(a) hereof.
"Maximum Commitment Amount" shall mean the Dollar Equivalent of One Hundred Twenty-Five Million Dollars ($125,000,000).
"Maximum US Revolving Amount" shall mean Seventy-Five Million Dollars ($75,000,000), as such amount may be reduced pursuant to Section 2.10(a) hereof or increased pursuant to Section 2.10(b) hereof.
"Moody's" shall mean Moody's Investors Service, Inc., or any successor to such company.
"Multiemployer Plan" shall mean a Pension Plan that is subject to the requirements of Subtitle E of Title IV of ERISA.
"Note" shall mean a Revolving Credit Note or the Swing Line Note, or any other promissory note delivered pursuant to this Agreement.
"Note Purchase Agreement" shall mean, collectively, the (a) the Private
Shelf Agreement dated as of November 27, 1996, between US Borrower and each of
the Purchasers (as defined therein), as amended through the date of this
Agreement, (b) the Note Purchase Agreement, dated as of November 15, 2000, among
US Borrower, Applied Nova Scotia Company and each of the Purchasers (as defined
therein), relating to $20,000,000 of 7.98% Senior Notes due November 15, 2010,
(c) the Note Purchase Agreement, dated as of November 15, 2000, among US
Borrower and each of the Purchasers (as defined therein), relating to $5,000,000
of 7.98% Senior Notes due November 15, 2010, and (d) any other similar public or
private debt instrument or agreement that meets the definition of Material
Indebtedness Agreement; as each of the foregoing may from time to time be
further amended, restated or otherwise modified or replaced.
"Notice of Loan" shall mean a Notice of Loan in the form of the attached Exhibit D.
"Organizational Documents" shall mean, with respect to a Person (other than an individual), such Person's Articles (Certificate) of Incorporation, or equivalent formation documents, and Regulations (Bylaws), or equivalent governing documents, and any amendments to any of the foregoing.
"Other Taxes" shall mean any and all present or future stamp or documentary taxes or any other excise or property taxes, goods and services taxes, harmonized sales taxes and other sales taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Loan Document.
"Parent Guaranty of Payment" shall mean the Guaranty of Payment of Debt, executed and delivered by US Borrower with respect to the Canadian Borrowers, as the same may from time to time be amended, restated or otherwise modified.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or its successor.
"Pension Plan" shall mean an ERISA Plan that is a "pension plan" (within the meaning of ERISA Section 3(2)).
"Permitted Foreign Subsidiary Loans and Investments" shall mean:
(a) any loans made prior to the Closing Date by a Credit Party or a Domestic Subsidiary to a Foreign Subsidiary;
(b) any investments made prior to the Closing Date by a Credit Party or a Domestic Subsidiary in a Foreign Subsidiary; and
(c) any loans by a Company to, investments by a Company in, guaranties by a Company of Indebtedness of, and Letters of Credit issued to or for the benefit of, a Foreign Subsidiary that is not a Credit Party, made on or after the Closing Date, up to the aggregate amount, for all such Foreign Subsidiaries, equal to the lesser of (i) Fifteen Million Dollars ($15,000,000) per fiscal year of US Borrower, or (ii) ten percent (10%) of Consolidated Net Worth during the Commitment Period; provided that, if any loan, investment, guaranty or letter of credit is made for the benefit of a Foreign Subsidiary that becomes a Credit Party after the Closing Date, the amount attributable to such loan, investment, guaranty or letter of credit shall be excluded from the foregoing calculation.
"Permitted Investment" shall mean an investment of a Company in the stock (or other debt or equity instruments) of a Person (other than a Company), so long as the aggregate amount of all such investments of all Companies does not exceed, at any time, an aggregate amount equal to twenty percent (20%) of Consolidated Net Worth, based upon the financial statements of the Companies for the most recently completed fiscal quarter; provided that, at such time as a
Permitted Investment results in an Acquisition and the acquired Person becomes a Guarantor of Payment, the amount of such investment shall be excluded from the aforesaid calculation.
"Person" shall mean any individual, sole proprietorship, partnership, joint venture, unincorporated organization, corporation, limited liability company, institution, trust, estate, government or other agency or political subdivision thereof or any other entity.
"Prime Rate" shall mean the interest rate established from time to time by Agent as Agent's prime rate, whether or not such rate shall be publicly announced; the Prime Rate may not be the lowest interest rate charged by Agent for commercial or other extensions of credit. Each change in the Prime Rate shall be effective immediately from and after such change.
"Regularly Scheduled Payment Date" shall mean the last day of each March, June, September and December of each year.
"Related Writing" shall mean each Loan Document and any other assignment, mortgage, security agreement, guaranty agreement, subordination agreement, financial statement, audit report or other writing furnished by any Credit Party, or any of its officers, to Agent or the Lenders pursuant to or otherwise in connection with this Agreement.
"Reportable Event" shall mean a reportable event as that term is defined in Title IV of ERISA, except actions of general applicability by the Secretary of Labor under Section 110 of such Act.
"Request for Extension" shall mean a notice, substantially in the form of the attached Exhibit G.
"Required Lenders" shall mean (a) (i) the holders of at least fifty-one percent (51%) of the Total Commitment Amount, or, if there shall be any borrowing hereunder, the holders of at least fifty-one percent (51%) of the aggregate amount of the Revolving Credit Exposure (excluding the Swing Line Exposure), and (ii) at least three of the Lenders; or (b) (i) the holders of at least sixty-six and two-thirds percent (66-2/3%) of the Total Commitment Amount, or, if there shall be any borrowing hereunder, the holders of at least sixty-six and two-thirds percent (66-2/3%) of the aggregate amount of the Revolving Credit Exposure (excluding the Swing Line Exposure), and (ii) at least two of the Lenders.
"Requirement of Law" shall mean, as to any Person, any law, treaty, rule or regulation or determination or policy statement or interpretation 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.
"Reserve Percentage" shall mean for any day that percentage (expressed as a decimal) that is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, without limitation, all basic, supplemental, marginal and other reserves and taking into account any transitional adjustments or other scheduled changes in reserve requirements) for a member bank
of the Federal Reserve System in Cleveland, Ohio, in respect of Eurocurrency Liabilities. The Derived Eurodollar Rate shall be adjusted automatically on and as of the effective date of any change in the Reserve Percentage.
"Revolving Credit Commitment" shall mean the US Revolving Credit Commitment and the CAD Revolving Credit Commitment.
"Revolving Credit Exposure" shall mean, at any time, the sum of (a) the US Revolving Exposure, and (b) the CAD Revolving Exposure.
"Revolving Credit Note" shall mean a US Revolving Credit Note or a CAD Revolving Credit Note.
"Revolving Loan" shall mean a US Revolving Loan or a CAD Revolving Loan.
"SEC" shall mean the United States Securities and Exchange Commission, or any governmental body or agency succeeding to any of its principle functions.
"Standard & Poor's" shall mean Standard & Poor's Ratings Group, a division of McGraw-Hill, Inc., or any successor to such company.
"Subordinated" shall mean, as applied to Indebtedness, Indebtedness that shall have been subordinated (by written terms or written agreement being, in either case, in form and substance satisfactory to Agent and the Required Lenders) in favor of the prior payment in full of the Debt.
"Subsidiary" of a Company shall mean (a) a corporation more than fifty percent (50%) of the Voting Power of which is owned, directly or indirectly, by such Company or by one or more other subsidiaries of such Company or by such Company and one or more subsidiaries of such Company, (b) a partnership or limited liability company of which such Company, one or more other subsidiaries of such Company or such Company and one or more subsidiaries of such Company, directly or indirectly, is a general partner or managing member, as the case may be, or otherwise has an ownership interest greater than fifty percent (50%) of all of the ownership interests in such partnership or limited liability company, or (c) any other Person (other than a corporation, partnership or limited liability company) in which such Company, one or more other subsidiaries of such Company or such Company and one or more subsidiaries of such Company, directly or indirectly, has at least a majority interest in the Voting Power or the power to elect or direct the election of a majority of directors or other governing body of such Person.
"Swing Line" shall mean the credit facility established by the Swing Line Lender for US Borrower in accordance with Section 2.2(c) hereof.
"Swing Line Commitment" shall mean the commitment of the Swing Line Lender to make Swing Loans to US Borrower up to the aggregate amount at any time outstanding of Fifteen Million Dollars ($15,000,000).
"Swing Line Exposure" shall mean, at any time, the aggregate principal amount of all Swing Loans outstanding.
"Swing Line Lender" shall mean KeyBank National Association, as holder of the Swing Line Commitment.
"Swing Line Note" shall mean the Swing Line Note executed and delivered pursuant to Section 2.5(b) hereof.
"Swing Loan" shall mean a loan that shall be denominated in Dollars granted to US Borrower by the Swing Line Lender under the Swing Line.
"Swing Loan Maturity Date" shall mean, with respect to any Swing Loan, the earlier of (a) the date agreed to by US Borrower and the Swing Line Lender, which shall be no more than thirty (30) days after the date such Swing Loan is made, or (b) the last day of the Commitment Period.
"Taxes" shall mean any present or future taxes, levies, imposts, duties, charges, fees, deductions or withholdings now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority (together with any interest, penalties or similar liabilities with respect thereto) other than Excluded Taxes.
"Total Commitment Amount" shall mean the Closing Commitment Amount, as
such amount may be increased up to the Maximum Commitment Amount pursuant to
Section 2.10(b) hereof, or decreased pursuant to Section 2.10(a) hereof.
"Total Liabilities" shall mean, at any date, the total of all items of Indebtedness or liability that, in accordance with GAAP, would be included in determining total liabilities on the liability side of the balance sheet.
"US Commitment" shall mean the obligation hereunder of the US Lenders, during the Commitment Period, to make Loans and issue Letters of Credit pursuant to the US Revolving Credit Commitments, up to the Maximum US Revolving Amount.
"US Lender" shall mean each Lender that is designated as a US Lender on Schedule 1 hereto.
"US Revolving Credit Commitment" shall mean the obligation hereunder, during the Commitment Period, of (a) each US Lender to make US Revolving Loans up to the Maximum Amount for such US Lender, (b) the Fronting Lender to issue and each US Lender to participate in Letters of Credit pursuant to the Letter of Credit Commitment, and (c) the Swing Line Lender to make and each US Lender to participate in Swing Loans pursuant to the Swing Line Commitment.
"US Revolving Credit Note" shall mean a US Revolving Credit Note executed and delivered pursuant to Section 2.5(a) hereof.
"US Revolving Exposure" shall mean the sum of (a) the aggregate principal amount of all US Revolving Loans outstanding, (b) the Swing Line Exposure, and (c) the Letter of Credit Exposure.
"US Revolving Loan" shall mean a Base Rate Loan or a Eurodollar Loan granted to US Borrower in accordance with Section 2.2(a) hereof.
"Voting Power" shall mean, with respect to any Person, the exclusive ability to control, through the ownership of shares of capital stock, partnership interests, membership interests or otherwise, the election of members of the board of directors or other similar governing body of such Person. The holding of a designated percentage of Voting Power of a Person means the ownership of shares of capital stock, partnership interests, membership interests or other interests of such Person sufficient to control exclusively the election of that percentage of the members of the board of directors or similar governing body of such Person.
"Welfare Plan" shall mean an ERISA Plan that is a "welfare plan" within the meaning of ERISA Section 3(l).
"Wholly-Owned Subsidiary" shall mean, with respect to any Person, any corporation, limited liability company or other entity, all of the securities or other ownership interest of which having ordinary Voting Power to elect a majority of the board of directors, or other persons performing similar functions, are at the time directly or indirectly owned by such Person.
Section 1.2. Accounting Terms. Any accounting term not specifically defined in this Article I shall have the meaning ascribed thereto by GAAP.
Section 1.3. Terms Generally. The foregoing definitions shall be applicable to the singular and plurals of the foregoing defined terms.
ARTICLE II. AMOUNT AND TERMS OF CREDIT
Section 2.1. Amount and Nature of Credit.
(a) Subject to the terms and conditions of this Agreement, the Lenders, during the Commitment Period and to the extent hereinafter provided, shall make Loans to Borrowers, participate in Swing Loans made by the Swing Line Lender to US Borrower, and issue or participate in Letters of Credit at the request of US Borrower, in such aggregate amount as Borrowers shall request pursuant to the Commitment; provided, however, that in no event shall the Revolving Credit Exposure be in excess of the Total Commitment Amount.
(b) Each US Lender, for itself and not one for any other, agrees to make US Revolving Loans, make or participate in Swing Loans, and issue or participate in Letters of Credit, during the Commitment Period, on such basis that, immediately after the completion of any borrowing by US Borrower or the issuance of a Letter of Credit, (i) the aggregate principal
amount then outstanding on the US Revolving Credit Note issued to such US Lender, when combined with such US Lender's pro rata share of the Letter of Credit Exposure and the Swing Line Exposure, shall not be in excess of the Maximum Amount for such US Lender, and (ii) such aggregate principal amount outstanding on the US Revolving Credit Note issued to such US Lender shall represent that percentage of the aggregate principal amount then outstanding on all US Revolving Credit Notes that shall be such US Lender's Applicable Commitment Percentage. Each borrowing (other than Swing Loans) from the US Lenders hereunder shall be made pro rata according to the respective Applicable Commitment Percentages of the US Lenders.
(c) Each Canadian Lender, for itself and not one for any other,
agrees to make CAD Revolving Loans, during the Commitment Period, on such basis
that, immediately after the completion of any borrowing by Canadian Borrowers,
(i) the Dollar Equivalent of the aggregate principal amount then outstanding on
the CAD Revolving Credit Note issued to such Canadian Lender shall not be in
excess of the Maximum Amount for such Canadian Lender, and (ii) such aggregate
principal amount outstanding on the CAD Revolving Credit Note issued to such
Canadian Lender shall represent that percentage of the aggregate principal
amount then outstanding on all CAD Revolving Credit Notes that shall be such
Canadian Lender's Applicable Commitment Percentage. Each borrowing from the
Canadian Lenders hereunder shall be made pro rata according to the respective
Applicable Commitment Percentages of the Canadian Lenders.
(d) The Loans may be made as US Revolving Loans as described in
Section 2.2(a) hereof, CAD Revolving Loans as described in Section 2.3 hereof
and Swing Loans as described in Section 2.2(c) hereof, and Letters of Credit may
be issued in accordance with Section 2.2(b) hereof.
Section 2.2. US Revolving Credit.
(a) US Revolving Loans. Subject to the terms and conditions of this Agreement, during the Commitment Period, the US Lenders shall make a US Revolving Loan or US Revolving Loans to US Borrower in such amount or amounts as US Borrower may from time to time request, but not exceeding in aggregate principal amount at any time outstanding hereunder the Maximum US Revolving Amount, when such US Revolving Loans are combined with the Letter of Credit Exposure and the Swing Line Exposure. US Borrower shall have the option, subject to the terms and conditions set forth herein, to borrow US Revolving Loans, maturing on the last day of the Commitment Period, by means of any combination of Base Rate Loans or Eurodollar Loans. Subject to the provisions of this Agreement, US Borrower shall be entitled under this Section 2.2(a) to borrow funds, repay the same in whole or in part and re-borrow hereunder at any time and from time to time during the Commitment Period.
(b) Letters of Credit.
(i) Generally. Subject to the terms and conditions of this Agreement, during the Commitment Period, the Fronting Lender shall, in its own name, on behalf of the US Lenders, issue such Letters of Credit for the account of US Borrower or a Domestic Guarantor of Payment, as US Borrower may from time to time request. US Borrower
shall not request any Letter of Credit (and the Fronting Lender shall not be obligated to issue any Letter of Credit) if, after giving effect thereto, (A) the Letter of Credit Exposure would exceed the Letter of Credit Commitment or (B) the US Revolving Credit Exposure would exceed the Maximum US Revolving Amount. The issuance of each Letter of Credit shall confer upon each US Lender the benefits and liabilities of a participation consisting of an undivided pro rata interest in the Letter of Credit to the extent of such US Lender's Applicable Commitment Percentage.
(ii) Request for Letter of Credit. Each request for a Letter of Credit shall be delivered to Agent (and to the Fronting Lender, if the Fronting Lender is a Lender other than Agent) by an Authorized Officer not later than 11:00 A.M. (Eastern time) three Business Days prior to the day upon which the Letter of Credit is to be issued. Each such request shall be in a form acceptable to Agent (and the Fronting Lender, if the Fronting Lender is a Lender other than Agent) and specify the face amount thereof, whether such Letter of Credit shall be a commercial documentary or standby Letter of Credit, the account party, the beneficiary, the intended date of issuance, the expiry date thereof, and the nature of the transaction to be supported thereby. Concurrently with each such request, US Borrower, and any other Credit Party for whose account the Letter of Credit is to be issued, shall execute and deliver to the Fronting Lender an appropriate application and agreement, being in the standard form of the Fronting Lender for such letters of credit, as amended to conform to the provisions of this Agreement if required by Agent. Agent shall give the Fronting Lender and each US Lender notice of each such request for a Letter of Credit.
(iii) Commercial Documentary Letters of Credit. With respect to each Letter of Credit that shall be a commercial documentary letter of credit and the drafts thereunder, whether issued for the account of US Borrower or any other Credit Party, US Borrower agrees to (A) pay to Agent, for the pro rata benefit of the US Lenders, a non-refundable commission based upon the face amount of such Letter of Credit, which shall be paid quarterly in arrears, on each Regularly Scheduled Payment Date, at a rate per annum equal to the Applicable Margin for Eurodollar Loans (in effect on the date such payment is to be made) times the face amount of such Letter of Credit; (B) pay to Agent, for the sole benefit of the Fronting Lender, an additional Letter of Credit fee, which shall be paid on the date that any draw shall be made on such Letter of Credit, at the rate of one-eighth percent (1/8%) of the amount drawn under such Letter of Credit; and (C) pay to Agent, for the sole benefit of the Fronting Lender, such other issuance, amendment, negotiation, draw, acceptance, telex, courier, postage and similar transactional fees as are generally charged by the Fronting Lender under its fee schedule as in effect from time to time.
(iv) Standby Letters of Credit. With respect to each Letter of Credit that shall be a standby letter of credit and the drafts thereunder, if any, whether issued for the account of US Borrower or any other Credit Party, US Borrower agrees to (A) pay to Agent, for the pro rata benefit of the US Lenders, a non-refundable commission based upon the face amount of such Letter of Credit, which shall be paid quarterly in arrears, on each Regularly Scheduled Payment Date, at a rate per annum equal to the Applicable
Margin for Eurodollar Loans (in effect on the date such payment is to be made) times the undrawn face amount of such Letter of Credit; (B) pay to Agent, for the sole benefit of the Fronting Lender, an additional Letter of Credit fee, which shall be paid on each date that such Letter of Credit shall be issued, amended or renewed at the rate of one-eighth percent (1/8%) of the face amount of such Letter of Credit; and (C) pay to Agent, for the sole benefit of the Fronting Lender, such other issuance, amendment, negotiation, draw, acceptance, telex, courier, postage and similar transactional fees as are generally charged by the Fronting Lender under its fee schedule as in effect from time to time.
(v) Refunding of Letters of Credit with Revolving Loans. Whenever a Letter of Credit shall be drawn, US Borrower shall immediately reimburse the Fronting Lender for the amount drawn. In the event that the amount drawn shall not have been reimbursed by US Borrower within one Business Day of the drawing of such Letter of Credit, at the sole option of Agent (and the Fronting Lender, if the Fronting Lender is a Lender other than Agent), US Borrower shall be deemed to have requested a US Revolving Loan, subject to the provisions of Sections 2.2(a) and 2.6 hereof (other than the requirement set forth in Section 2.6(d) hereof), in the amount drawn. Such US Revolving Loan shall be evidenced by the US Revolving Credit Notes (or, if a US Lender has not requested a US Revolving Credit Note, by the records of Agent and such US Lender). Each US Lender agrees to make a US Revolving Loan on the date of such notice, subject to no conditions precedent whatsoever. Each US Lender acknowledges and agrees that its obligation to make a US Revolving Loan pursuant to Section 2.2(a) hereof when required by this subsection (v) shall be absolute and unconditional and shall not be affected by any circumstance whatsoever, including, without limitation, the occurrence and continuance of a Default or Event of Default, and that its payment to Agent, for the account of the Fronting Lender, of the proceeds of such US Revolving Loan shall be made without any offset, abatement, recoupment, counterclaim, withholding or reduction whatsoever and whether or not such US Lender's US Revolving Credit Commitment shall have been reduced or terminated. US Borrower irrevocably authorizes and instructs Agent to apply the proceeds of any borrowing pursuant to this subsection (v) to reimburse, in full, the Fronting Lender for the amount drawn on such Letter of Credit. Each such US Revolving Loan shall be deemed to be a Base Rate Loan unless otherwise requested by and available to US Borrower hereunder. Each US Lender is hereby authorized to record on its records relating to its US Revolving Credit Note (or, if such US Lender has not requested a US Revolving Credit Note, its records relating to US Revolving Loans) such US Lender's pro rata share of the amounts paid and not reimbursed on the Letters of Credit.
(vi) Participation in Letters of Credit. If, for any reason, Agent (or the Fronting Lender if the Fronting Lender shall be a Lender other than Agent) shall be unable to or, in the opinion of Agent, it shall be impracticable to, convert any Letter of Credit to a US Revolving Loan pursuant to the preceding subsection, Agent (or the Fronting Lender if the Fronting Lender is a Lender other than Agent) shall have the right to request that each US Lender purchase a participation in the amount due with respect to such Letter of Credit, and Agent shall promptly notify each US Lender thereof (by facsimile or telephone, confirmed in writing). Upon such notice, but without further
action, the Fronting Lender hereby agrees to grant to each US Lender, and each US Lender hereby agrees to acquire from the Fronting Lender, an undivided participation interest in the amount due with respect to such Letter of Credit in an amount equal to such US Lender's Applicable Commitment Percentage of the principal amount due with respect to such Letter of Credit. In consideration and in furtherance of the foregoing, each US Lender hereby absolutely and unconditionally agrees, upon receipt of notice as provided above, to pay to Agent, for the account of the Fronting Lender, such US Lender's ratable share of the amount due with respect to such Letter of Credit (determined in accordance with such US Lender's Applicable Commitment Percentage). Each US Lender acknowledges and agrees that its obligation to acquire participations in the amount due under any Letter of Credit that is drawn but not reimbursed by US Borrower pursuant to this subsection (vi) shall be absolute and unconditional and shall not be affected by any circumstance whatsoever, including, without limitation, the occurrence and continuance of a Default or Event of Default, and that each such payment shall be made without any offset, abatement, recoupment, counterclaim, withholding or reduction whatsoever and whether or not such US Lender's US Revolving Credit Commitment shall have been reduced or terminated. Each US Lender shall comply with its obligation under this subsection (vi) by wire transfer of immediately available funds, in the same manner as provided in Section 2.6 hereof with respect to US Revolving Loans. Each US Lender is hereby authorized to record on its records such US Lender's pro rata share of the amounts paid and not reimbursed on the Letters of Credit. In addition, each US Lender agrees to risk participate in the Existing Letters of Credit as provided in subsection (vii) below.
(vii) Existing Letters of Credit. Schedule 2.2 hereto contains a description of all letters of credit outstanding on, and to continue in effect after, the Closing Date. Each such letter of credit issued by a bank that is or becomes a US Lender under this Agreement on the Closing Date (each, an "Existing Letter of Credit") shall constitute a "Letter of Credit" for all purposes of this Agreement, issued, for purposes of subsection (vi) above, on the Closing Date. US Borrower, Agent and the US Lenders hereby agree that, from and after such date, the terms of this Agreement shall apply to the Existing Letters of Credit, superseding any other agreement theretofore applicable to them to the extent inconsistent with the terms hereof. Notwithstanding anything to the contrary in any reimbursement or other agreement applicable to the Existing Letters of Credit, the fees payable in connection with each Existing Letter of Credit to be shared with the US Lenders, or paid to the Fronting Lender for its own account, shall accrue from the Closing Date at the rate provided in this Section 2.2(b).
(c) Swing Loans.
(i) Generally. Subject to the terms and conditions of this Agreement, during the Commitment Period, the Swing Line Lender shall make a Swing Loan or Swing Loans to US Borrower in such amount or amounts as US Borrower, through an Authorized Officer, may from time to time request; provided that US Borrower shall not request any Swing Loan if, after giving effect thereto, (A) the US Revolving Credit Exposure would exceed the Maximum US Revolving Amount, or (B) the Swing Line
Exposure would exceed the Swing Line Commitment. Each Swing Loan shall be due and payable on the Swing Loan Maturity Date applicable thereto. US Borrower shall not request that more than two Swing Loans be outstanding at any time. Each Swing Loan shall be made in Dollars.
(ii) Refunding of Swing Loans. If the Swing Line Lender so elects, by giving notice to US Borrower and the US Lenders, US Borrower agrees that the Swing Line Lender shall have the right, in its sole discretion, to require that any Swing Loan be refinanced as a US Revolving Loan. Such US Revolving Loan shall be a Base Rate Loan unless otherwise requested by and available to US Borrower hereunder. Upon receipt of such notice by US Borrower and the US Lenders, US Borrower shall be deemed, on such day, to have requested a US Revolving Loan in the principal amount of the Swing Loan in accordance with Sections 2.2(a) and 2.6 hereof (other than the requirement set forth in Section 2.6(d) hereof). Each US Lender agrees to make a US Revolving Loan on the date of such notice, subject to no conditions precedent whatsoever. Such US Revolving Loan shall be evidenced by the US Revolving Credit Notes (or, if a US Lender has not requested a US Revolving Credit Note, by the records of Agent and such US Lender). Each US Lender acknowledges and agrees that such US Lender's obligation to make a US Revolving Loan pursuant to Section 2.2(a) hereof when required by this subsection (ii) is absolute and unconditional and shall not be affected by any circumstance whatsoever, including, without limitation, the occurrence and continuance of a Default or Event of Default, and that its payment to Agent, for the account of the Swing Line Lender, of the proceeds of such US Revolving Loan shall be made without any offset, abatement, recoupment, counterclaim, withholding or reduction whatsoever and whether or not such US Lender's US Revolving Credit Commitment shall have been reduced or terminated. US Borrower irrevocably authorizes and instructs Agent to apply the proceeds of any borrowing pursuant to this subsection (ii) to repay in full such Swing Loan.
(iii) Participation in Swing Loans. If, for any reason, Agent is unable to or, in the opinion of Agent, it is impracticable to, convert any Swing Loan to a US Revolving Loan pursuant to the preceding subsection (ii), then on any day that a Swing Loan is outstanding (whether before or after the maturity thereof), Agent shall have the right to request that each US Lender purchase a participation in such Swing Loan, and Agent shall promptly notify each US Lender thereof (by facsimile or telephone, confirmed in writing). Upon such notice, but without further action, the Swing Line Lender hereby agrees to grant to each US Lender, and each US Lender hereby agrees to acquire from the Swing Line Lender, an undivided participation interest in such Swing Loan in an amount equal to such US Lender's Applicable Commitment Percentage of the principal amount of such Swing Loan. In consideration and in furtherance of the foregoing, each US Lender hereby absolutely and unconditionally agrees, upon receipt of notice as provided above, to pay to Agent, for the benefit of the Swing Line Lender, such US Lender's ratable share of such Swing Loan (determined in accordance with such US Lender's Applicable Commitment Percentage). Each US Lender acknowledges and agrees that its obligation to acquire participations in Swing Loans pursuant to this subsection (iii) is absolute and unconditional and shall not be affected by any circumstance whatsoever,
including, without limitation, the occurrence and continuance of a
Default or an Event of Default, and that each such payment shall be
made without any offset, abatement, recoupment, counterclaim,
withholding or reduction whatsoever and whether or not such US Lender's
US Revolving Credit Commitment shall have been reduced or terminated.
Each US Lender shall comply with its obligation under this subsection
(iii) by wire transfer of immediately available funds, in the same
manner as provided in Section 2.6 hereof with respect to US Revolving
Loans to be made by such US Lender.
Section 2.3. CAD Revolving Loans. Subject to the terms and conditions
of this Agreement, during the Commitment Period, the Canadian Lenders shall make
a CAD Revolving Loan or CAD Revolving Loans to Canadian Borrowers in such amount
or amounts as Canadian Borrowers may from time to time request, but not
exceeding in aggregate principal amount at any time outstanding hereunder the
Maximum CAD Revolving Amount. Canadian Borrowers shall have the option, subject
to the terms and conditions set forth herein, to borrow CAD Revolving Loans,
maturing no later than the last day of the Commitment Period, by means of any
combination of CAD Base Rate Loans or CAD Fixed Rate Loans. Subject to the
provisions of this Agreement, Canadian Borrowers shall be entitled under this
Section 2.3 to borrow funds, repay the same in whole or in part and re-borrow
hereunder at any time and from time to time during the Commitment Period.
Section 2.4. Interest.
(a) US Revolving Loans.
(i) Base Rate Loan. US Borrower shall pay interest on the unpaid principal amount of a Base Rate Loan outstanding from time to time from the date thereof until paid at the Base Rate from time to time in effect. Interest on such Base Rate Loan shall be payable, commencing December 31, 2003, and on each Regularly Scheduled Payment Date thereafter and at the maturity thereof.
(ii) Eurodollar Loans. US Borrower shall pay interest on the unpaid principal amount of each Eurodollar Loan outstanding from time to time, fixed in advance on the first day of the Interest Period applicable thereto through the last day of the Interest Period applicable thereto (but subject to changes in the Applicable Margin), at the Derived Eurodollar Rate. Interest on such Eurodollar Loan shall be payable on each Interest Adjustment Date with respect to an Interest Period (provided that if an Interest Period shall exceed three months, the interest must be paid every three months, commencing three months from the beginning of such Interest Period).
(b) Swing Loans. US Borrower shall pay interest to Agent, for the sole benefit of the Swing Line Lender (and any US Lender that shall have purchased a participation in such Swing Loan), on the unpaid principal amount of each Swing Loan outstanding from time to time from the date thereof until paid at the Derived Swing Loan Rate applicable to such Swing Loan. Interest on each Swing Loan shall be payable on the Swing Loan Maturity Date applicable thereto. Each Swing Loan shall bear interest for a minimum of one day.
(c) CAD Revolving Loans.
(i) CAD Base Rate Loan. Canadian Borrowers shall pay interest on the unpaid principal amount of a CAD Base Rate Loan outstanding from time to time from the date thereof until paid at the CAD Base Rate from time to time in effect. Interest on such CAD Base Rate Loan shall be payable, commencing December 31, 2003, and on each Regularly Scheduled Payment Date thereafter and at the maturity thereof.
(ii) CAD Fixed Rate Loans. Canadian Borrowers shall pay interest on the unpaid principal amount of each CAD Fixed Rate Loan outstanding from time to time, fixed in advance on the first day of the Interest Period applicable thereto through the last day of the Interest Period applicable thereto (but subject to changes in the Applicable Margin), at the Derived CAD Fixed Rate. Interest on such CAD Fixed Rate Loan shall be payable on each Interest Adjustment Date with respect to an Interest Period (provided that if an Interest Period shall exceed ninety (90) days, the interest must be paid every ninety (90) days, commencing ninety (90) days from the beginning of such Interest Period).
(d) Default Rate. Anything herein to the contrary notwithstanding,
if an Event of Default shall occur, upon the election of the Required Lenders,
(i) the principal of each Loan and the unpaid interest thereon shall bear
interest, until paid, at the Default Rate, (ii) the fee for the aggregate
undrawn face amount of all issued and outstanding Letters of Credit shall be
increased by two percent (2%) in excess of the rate otherwise applicable
thereto, and (iii) in the case of any other amount then due and owing from
Borrowers hereunder or under any other Loan Document, such amount shall bear
interest at the Default Rate until paid; provided that, during an Event of
Default under Section 7.11 hereof, the applicable Default Rate shall apply
without any election or action on the part of Agent or any Lender.
(e) Limitation on Interest.
(i) General. In no event shall the rate of interest hereunder exceed the maximum rate allowable by law.
(ii) Canadian Interest. If any provision of this Agreement or any other Loan Document would obligate any Canadian Borrower to make any payment of interest or other amount payable to (including for the account of) any Canadian Lender in an amount, or calculated at a rate, that would be prohibited by law or would result in a receipt by such Canadian Lender of interest at a criminal rate (as such terms are construed under the Criminal Code (Canada)) then, notwithstanding such provision, such amount or rate shall be deemed to have been adjusted with retroactive effect to the maximum amount or rate of interest, as the case may be, as would not be so prohibited by law or so result in a receipt by such Canadian Lender of interest at a criminal rate, such adjustment to be effected, to the extent necessary, as follows: (A) first, by reducing the amount or rate of interest required to be paid to such Canadian Lender under this Article II; and (B) thereafter, by reducing any fees, commissions, premiums and other amounts required to be paid to such Canadian Lender that would constitute interest for purposes of
Section 347 of the Criminal Code (Canada). Notwithstanding the foregoing, and after giving effect to all adjustments contemplated thereby, if a Canadian Lender shall have received an amount in excess of the maximum amount permitted by that section of the Criminal Code (Canada), then Canadian Borrowers shall be entitled, by notice in writing to such Canadian Lender, to obtain reimbursement from such Canadian Lender in an amount equal to such excess, and pending such reimbursement, such amount shall be deemed to be an amount payable by such Canadian Lender to Canadian Borrowers. Any amount or rate of interest referred to in this Article II with respect to the Canadian Commitment shall be determined in accordance with generally accepted actuarial practices and principles as an effective annual rate of interest over the term that the Canadian Commitment remains outstanding on the assumption that any charges, fees or expenses that fall within the meaning of "interest" (as defined in the Criminal Code (Canada)) shall, if they relate to a specific period of time, be pro-rated over that period of time and otherwise be pro-rated over the Commitment Period and, in the event of a dispute, a certificate of a Fellow of the Canadian Institute of Actuaries appointed by Agent shall be conclusive for the purposes of such determination.
Section 2.5. Evidence of Indebtedness.
(a) US Revolving Loans. Upon the request of a US Lender, to evidence the obligation of US Borrower to repay the Base Rate Loans and Eurodollar Loans made by such US Lender and to pay interest thereon, US Borrower shall execute a US Revolving Credit Note in the form of the attached Exhibit A, payable to the order of such US Lender in the principal amount of its US Revolving Credit Commitment or, if less, the aggregate unpaid principal amount of US Revolving Loans made by such US Lender; provided, however, that failure of a US Lender to request a Revolving Credit Note shall in no way detract from US Borrower's obligations to such US Lender hereunder.
(b) Swing Loan. The obligation of US Borrower to repay the Swing Loans and to pay interest thereon shall be evidenced by a Swing Line Note of US Borrower in the form of the attached Exhibit B, and payable to the order of the Swing Line Lender in the principal amount of the Swing Line Commitment, or, if less, the aggregate unpaid principal amount of Swing Loans made by the Swing Line Lender.
(c) CAD Revolving Loans. Upon the request of a Canadian Lender, to evidence the obligation of Canadian Borrowers to repay the CAD Base Rate Loans and the CAD Fixed Rate Loans made by such Canadian Lender and to pay interest thereon, Canadian Borrowers shall execute a CAD Revolving Credit Note in the form of the attached Exhibit C, payable to the order of such Canadian Lender in the principal amount of its CAD Revolving Credit Commitment or, if less, the aggregate unpaid principal amount of CAD Revolving Loans made by such Canadian Lender; provided, however, that failure of a Canadian Lender to request a CAD Revolving Credit Note shall in no way detract from Canadian Borrowers' obligations to such Canadian Lender hereunder.
Section 2.6. Notice of Credit Event; Funding of Loans.
(a) Notice of Credit Event. US Borrower, through an Authorized
Officer, shall provide to Agent a Notice of Loan prior to (i) 11:00 A.M.
(Eastern time) on the proposed date of borrowing or conversion of any Base Rate
Loan, (ii) 11:00 A.M. (Eastern time) three Business Days prior to the proposed
date of borrowing, conversion or continuation of any Eurodollar Loan, (iii)
11:00 A.M. (Eastern time) on the proposed date of borrowing of any Swing Loan,
(iv) 11:00 A.M. (Eastern time) on the proposed date of borrowing or conversion
of any CAD Base Rate Loan, and (v) 11:00 A.M. (Eastern time) three Business Days
prior to the proposed date of borrowing, conversion or continuation of any CAD
Fixed Rate Loan. US Borrower shall comply with the notice provisions set forth
in Section 2.2(b) hereof with respect to Letters of Credit.
(b) Funding of Loans. Agent shall notify the Applicable Lenders of the date, amount and Interest Period (if applicable) promptly upon the receipt of a Notice of Loan, and, in any event, by 2:00 P.M. (Eastern time) on the date such Notice of Loan is received. On the date that the Credit Event set forth in such Notice of Loan is to occur, each such Applicable Lender shall provide to Agent at the Designated Lending Office, not later than 3:00 P.M. (Eastern time), the amount in Dollars, or, with respect to the Canadian Commitment, in Canadian Dollars, in federal or other immediately available funds, required of it. If Agent (or the Designated Lending Office) shall elect to advance the proceeds of such Loan prior to receiving funds from such Lender, Agent (or the Designated Lending Office, as appropriate) shall have the right, upon prior notice to the appropriate Borrower, to debit any account of the appropriate Borrower or otherwise receive such amount from the appropriate Borrower, on demand, in the event that such Lender shall fail to reimburse Agent (or the Designated Lending Office, as appropriate) in accordance with this subsection. Agent (or the Designated Lending Office, as appropriate) shall also have the right to receive interest from such Lender at the Federal Funds Effective Rate (or cost of funds with respect to the Designated Lending Office) in the event that such Lender shall fail to provide its portion of the Loan on the date requested and Agent (or the Designated Lending Office, as appropriate) shall elect to provide such funds.
(c) Conversion of Loans. At the request of US Borrower to Agent, subject to the notice and other provisions of this Section 2.6, the US Lenders shall convert a Base Rate Loan to one or more Eurodollar Loans at any time and shall convert a Eurodollar Loan to a Base Rate Loan on any Interest Adjustment Date applicable thereto. Swing Loans may be converted by the Swing Line Lender to US Revolving Loans in accordance with Section 2.2(c)(ii) hereof. At the request of Canadian Borrowers to Agent, subject to the notice and other provisions of this Section 2.6, the Canadian Lenders shall convert a CAD Base Rate Loan to one or more CAD Fixed Rate Loans at any time and shall convert a CAD Fixed Rate Loan to a CAD Base Rate Loan on any Interest Adjustment Date applicable thereto.
(d) Minimum Amount. Each request for:
(i) a Base Rate Loan shall be in an amount of not less than One Million Dollars ($1,000,000), increased by increments of Five Hundred Thousand Dollars ($500,000);
(ii) a Eurodollar Loan shall be in an amount of not less than Five Million Dollars ($5,000,000), increased by increments of One Million Dollars ($1,000,000);
(iii) a Swing Loan shall be in an amount of not less than Five Hundred Thousand Dollars ($500,000);
(iv) a CAD Base Rate Loan shall be in an amount of not less than One Million Canadian Dollars (CAD 1,000,000), increased by increments of Five Hundred Thousand Canadian Dollars (CAD 500,000); and
(v) a CAD Fixed Rate Loan shall be in an amount of not less than Five Million Canadian Dollars (CAD 5,000,000), increased by increments of One Million Canadian Dollars (CAD 1,000,000).
(e) Interest Periods. At no time shall US Borrower request that Eurodollar Loans be outstanding for more than six different Interest Periods, and, if a Base Rate Loan is outstanding, then Eurodollar Loans shall be limited to five different Interest Periods at any time. At no time shall Canadian Borrowers request that CAD Fixed Rate Loans be outstanding for more than six different Interest Periods, and, if a CAD Base Rate Loan is outstanding, then CAD Fixed Rate Loans shall be limited to five different Interest Periods at any time.
Section 2.7. Payment on Loans and Other Obligations.
(a) Payments Generally. Each payment made hereunder by a Credit Party shall be made without any offset, abatement, recoupment, counterclaim, withholding or reduction whatsoever.
(b) Payments in Canadian Dollars. With respect to any CAD Revolving Loan, all payments (including prepayments) to the Canadian Lenders of the principal of or interest on such CAD Revolving Loan or other payment, including but not limited to principal, interest, fees or any other amount owed by Canadian Borrowers under this Agreement, shall be made in Canadian Dollars. All such payments shall be remitted by Canadian Borrowers to Agent at the Designated Lending Office, for the account of the Canadian Lenders, not later than 1:00 P.M. (Eastern time) on the due date thereof in same day funds. Any payments received by the Designated Lending Office after 1:00 P.M. (Eastern time) shall be deemed to have been made and received on the next Business Day.
(c) Payments in Dollars. With respect to any Loan (other than a
CAD Revolving Loan), all payments (including prepayments) to Agent of the
principal of or interest on such Loan or other payment, including but not
limited to principal, interest, fees or any other amount owed by US Borrower
under this Agreement, shall be made in Dollars. All payments described in this
subsection (c) shall be remitted to Agent at the address of Agent for notices
referred to in Section 10.4 hereof for the account of the US Lenders (or the
Fronting Lender or the Swing Line Lender, as appropriate) not later than 11:00
A.M. (Eastern time) on the due date thereof in immediately available funds. Any
such payments received by Agent after 11:00 A.M. (Eastern time) shall be deemed
to have been made and received on the next Business Day.
(d) Payments to Lenders. Upon Agent's receipt of payments hereunder, Agent shall immediately distribute to the Applicable Lenders (except with respect to Swing Loans, which shall be paid to the Swing Line Lender) their respective ratable share, if any, of the amount of principal, interest, and facility and other fees received for the account of such Lender. Payments received by Agent in Dollars shall be delivered to the US Lenders in Dollars in immediately available funds and payments received at the Designated Lending Office in Canadian Dollars shall be delivered to the Canadian Lenders in Canadian Dollars in same day funds; provided that, if Agent receives a payment in a currency other than the currency in which the underlying obligation was made, Agent shall have the right, in its sole discretion, to convert such currency into its CAD Equivalent or Dollar Equivalent, as applicable. Each Lender shall record, as appropriate, any principal, interest or other payment, the principal amounts of Base Rate Loans, Eurodollar Loans, CAD Base Rate Loans and CAD Fixed Rate Loans, the type of currency for each Loan, all prepayments and the applicable dates, including Interest Periods, with respect to the Loans made, and payments received by such Lender, by such method as such Lender may generally employ; provided, however, that failure to make any such entry shall in no way detract from the obligations of Borrowers under this Agreement or any Note. The aggregate unpaid amount of Loans, types of Loans, Interest Periods and similar information with respect to the Loans and Letters of Credit set forth on the records of Agent shall be rebuttably presumptive evidence with respect to such information, including the amounts of principal, interest and fees owing to each Lender.
(e) Timing of Payments. Whenever any payment to be made hereunder, including, without limitation, any payment to be made on any Loan, shall be stated to be due on a day that is not a Business Day, such payment shall be made on the next Business Day and such extension of time shall in each case be included in the computation of the interest payable on such Loan; provided, however, that, with respect to any Eurodollar Loan, if the next Business Day shall fall in the succeeding calendar month, such payment shall be made on the preceding Business Day and the relevant Interest Period shall be adjusted accordingly.
Section 2.8. Prepayment.
(a) Right to Prepay. Borrowers shall have the right at any time or from time to time to prepay, on a pro rata basis for all of the Applicable Lenders, all or any part of the principal amount of the Loans then outstanding to such Lenders from such Borrowers, as designated by Borrowers. Such payment shall include interest accrued on the amount so prepaid to the date of such prepayment and any amount payable under Article III hereof with respect to the amount being prepaid. Prepayments of Base Rate Loans and CAD Base Rate Loans shall be without any premium or penalty, other than any prepayment fees, penalties or other charges that may be contained in any Hedge Agreement.
(b) Notice of Prepayment. US Borrower shall give Agent notice of prepayment of any Base Rate Loan or Swing Loan not later than 11:00 A.M. (Eastern time) on the Business Day such prepayment is to be made and written notice of the prepayment of any Eurodollar Loan not later than 1:00 P.M. (Eastern time) three Business Days before the Business Day on which such prepayment is to be made. Canadian Borrowers shall give Agent notice of prepayment of
any CAD Base Rate Loan not later than 11:00 A.M. (Eastern time) on the Business Day such prepayment is to be made and written notice of the prepayment of any CAD Fixed Rate Loan not later than 1:00 P.M. (Eastern time) three Business Days before the Business Day on which such prepayment is to be made.
(c) Minimum Amount. Other than in the case of a mandatory payment pursuant to Section 2.12 or Article III hereof, each prepayment of (i) a Eurodollar Loan shall be in the principal amount of not less than Three Million Dollars ($3,000,000), and (ii) a CAD Fixed Rate Loan shall be in the principal amount of not less than Three Million Canadian Dollars (CAD 3,000,000).
Section 2.9. Facility and Other Fees.
(a) Facility Fee.
(i) US Commitment. US Borrower shall pay to Agent, for the ratable account of the US Lenders, as a consideration for the US Commitment, a facility fee from the Closing Date to and including the last day of the Commitment Period, payable quarterly, at a rate per annum equal to (A) the Applicable Facility Fee Rate in effect on the payment date, times (B) the average daily Maximum US Revolving Amount in effect during such quarter. The facility fee shall be payable in arrears, on December 31, 2003 and on each Regularly Scheduled Payment Date thereafter, and on the last day of the Commitment Period.
(ii) Canadian Commitment. Canadian Borrowers shall pay to Agent at the Designated Lending Office, for the ratable account of the Canadian Lenders, as a consideration for the Canadian Commitment, a facility fee from the Closing Date to and including the last day of the Commitment Period, payable quarterly, at a rate per annum equal to (A) the Applicable Facility Fee Rate in effect on the payment date, times (B) the average daily Maximum CAD Revolving Amount in effect during such quarter. The facility fee shall be payable in arrears, on December 31, 2003 and on each Regularly Scheduled Payment Date thereafter, and on the last day of the Commitment Period.
(b) Usage Fee. If the Leverage Ratio for the most recently completed four fiscal quarters of US Borrower, at any time shall be greater than 3.50 to 1.00, then, commencing on the first day of the fiscal quarter after the quarter in which Agent receives the financial statements of US Borrower pursuant to Section 5.3(a) or (b) hereof, the interest rate to be paid by US Borrower on all Eurodollar Loans and by Canadian Borrowers on all CAD Fixed Rate Loans shall be fifty (50) basis points in excess of the rate otherwise payable pursuant to, respectively, Section 2.4(a) and (c) hereof. Such additional interest shall continue to be payable until the first day of the fiscal quarter after the quarter in which Agent receives the financial statements of US Borrower pursuant to Section 5.3(a) or (b) hereof that reflect that the Leverage Ratio is equal to or less than 3.50 to 1.00.
(c) Agent Fee. Borrowers shall pay to Agent, for its sole benefit, the fees set forth in the Agent Fee Letter.
Section 2.10. Modification of Commitment.
(a) Optional Reduction of Commitment.
(i) US Commitment. US Borrower may at any time or from time to time permanently reduce in whole or ratably in part the US Commitment of the US Lenders hereunder to an amount not less than the then existing US Revolving Credit Exposure, by giving Agent not fewer than three Business Days notice of such reduction, provided that any such partial reduction shall be in an aggregate amount, for all of the US Lenders, of not less than Five Million Dollars ($5,000,000), increased by increments of One Million Dollars ($1,000,000). Agent shall promptly notify each US Lender of the date of each such reduction and such US Lender's proportionate share thereof. After each such reduction, the facility fees payable hereunder shall be calculated upon the Maximum US Revolving Amount as so reduced.
(ii) Canadian Commitment. Canadian Borrowers may at any time or from time to time permanently reduce in whole or ratably in part the Canadian Commitment of the Canadian Lenders hereunder to an amount not less than the then existing CAD Revolving Exposure, by giving Agent not fewer than three Business Days notice of such reduction, provided that any such partial reduction shall be in an aggregate amount, for all of the Canadian Lenders, of not less than Five Million Canadian Dollars (CAD 5,000,000), increased by increments of One Million Canadian Dollars (CAD 1,000,000). Agent shall promptly notify each Canadian Lender of the date of each such reduction and such Canadian Lender's proportionate share thereof. After each such reduction, the facility fees payable hereunder shall be calculated upon the Maximum CAD Revolving Amount as so reduced.
(iii) Generally. If Borrowers reduce in whole the Commitment of the Lenders, on the effective date of such reduction (Borrowers having prepaid in full the unpaid principal balance, if any, of the Loans, together with all interest and facility and other fees accrued and unpaid), all of the Notes, if Notes have been issued, shall be delivered to Agent marked "Canceled" and Agent shall redeliver such Notes to Borrowers. Any partial reduction in the Total Commitment Amount shall be effective during the remainder of the Commitment Period. The US Commitment may not, at any time, be reduced to an amount less than the then existing amount of the Canadian Commitment.
(b) Increase in Commitment. At any time during the Commitment Increase Period, US Borrower may increase the Total Commitment Amount from the Closing Commitment Amount up to the Maximum Commitment Amount (with a corresponding increase in the Maximum US Revolving Amount) by either (i) proportionally increasing, for one or more US Lenders, with their prior written consent (and with the prior written consent of Agent), their respective US Revolving Credit Commitments, or (ii) including one or more Additional Lenders, with the prior written consent of Agent (which shall not be unreasonably withheld), each with a new US Revolving Credit Commitment, as a party to this Agreement (collectively, the "Additional Commitment"). During the Commitment Increase Period, the Lenders agree that
Agent, in its sole discretion, may permit one or more Additional Commitments
upon satisfaction of the following requirements: (A) each Additional Lender, if
any, shall execute an Additional Lender Assumption Agreement, (B) Agent shall
provide to each Lender a revised Schedule 1 to this Agreement, including revised
Applicable Commitment Percentages for each of the Lenders, if appropriate, at
least three Business Days prior to the date of the effectiveness of such
Additional Commitments (each an "Additional Lender Assumption Effective Date"),
(C) each Additional Lender's US Revolving Credit Commitment shall be for an
amount of no less than Ten Million Dollars ($10,000,000), and (D) US Borrower
shall execute and deliver to Agent and the US Lenders such replacement or
additional US Revolving Credit Notes as shall be required by Agent (to the
extent Notes have been requested by the affected Lenders). The Lenders hereby
authorize Agent to execute each Additional Lender Assumption Agreement on behalf
of the Lenders. On each Additional Lender Assumption Effective Date, the US
Lenders shall make adjustments among themselves with respect to the US Revolving
Loans then outstanding and amounts of principal, interest, facility and usage
fees and other amounts paid or payable with respect thereto as shall be
necessary, in the opinion of Agent, in order to reallocate among such US Lenders
such outstanding amounts, based on the revised Applicable Commitment Percentages
and to otherwise carry out fully the intent and terms of this Section 2.10(b).
In connection therewith, it is understood and agreed that the Maximum Amount of
any Lender will not be increased (or decreased except pursuant to Section
2.10(a) hereof) without the prior written consent of such Lender. US Borrower
shall not increase the Total Commitment Amount pursuant to this Section 2.10(b)
if a Default or an Event of Default shall then exist, or immediately after
giving effect to any such increase would exist.
Section 2.11. Computation of Interest and Fees.
(a) Generally. With the exception of Base Rate Loans, CAD Base Rate Loans and CAD Fixed Rate Loans, interest on Loans and facility and other fees and charges hereunder shall be computed on the basis of a year having three hundred sixty (360) days and calculated for the actual number of days elapsed. With respect to Base Rate Loans, CAD Base Rate Loans and CAD Fixed Rate Loans, interest shall be computed on the basis of a year having three hundred sixty-five (365) days or three hundred sixty-six (366) days, as the case may be, and calculated for the actual number of days elapsed.
(b) Interest Act (Canada). For purposes of disclosure pursuant to
the Interest Act (Canada), the annual rates of interest or fees to which the
rates of interest or fees provided in this Agreement and the other Loan
Documents (and stated herein and therein, as applicable, to be computed on the
basis of a year having three hundred sixty (360) days, three hundred sixty-five
(365) days or any other period of time less than a calendar year) are equivalent
to the rates so determined when multiplied by the actual number of days in the
applicable calendar year and divided by three hundred sixty (360), three hundred
sixty-five (365) days or such other period of time, respectively.
Section 2.12. Mandatory Payment.
(a) US Revolving Credit Commitment. If, at any time, the US Revolving Credit Exposure shall exceed the Maximum US Revolving Amount as then in effect, US Borrower
shall, as promptly as practicable, but in no event later than the next Business Day, prepay an aggregate principal amount of the US Revolving Loans sufficient to bring the US Revolving Credit Exposure within the Maximum US Revolving Amount.
(b) Swing Line Commitment. If, at any time, the Swing Line Exposure shall exceed the Swing Line Commitment, US Borrower shall, as promptly as practicable, but in no event later than the next Business Day, prepay an aggregate principal amount of the Swing Loans sufficient to bring the Swing Line Exposure within the Swing Line Commitment.
(c) CAD Revolving Credit Commitment. If, at any time, the CAD Revolving Exposure shall exceed the Maximum CAD Revolving Amount as then in effect, Canadian Borrowers shall, as promptly as practicable, but in no event later than the next Business Day, prepay an aggregate principal amount of the CAD Revolving Loans sufficient to bring the CAD Revolving Exposure within the Maximum CAD Revolving Amount.
(d) Total Commitment Amount. If, at any time, the Revolving Credit Exposure shall exceed the Total Commitment Amount as then in effect, Borrowers shall, as promptly as practicable, but in no event later than the next Business Day, prepay an aggregate principal amount of the Loans sufficient to bring the Revolving Credit Exposure within the Total Commitment Amount.
(e) Generally. Unless otherwise designated by Borrowers, each
prepayment pursuant to this Section 2.12 shall be applied in the following order
(i) first, on a pro rata basis among all of the outstanding Base Rate Loans or
CAD Base Rate Loans, as applicable, and (ii) second, on a pro rata basis among
all of the outstanding Eurodollar Loans and CAD Fixed Rate Loans, as applicable,
provided that, if the outstanding principal amount of any Eurodollar Loan or CAD
Fixed Rate Loan shall be reduced to an amount less than the minimum amount set
forth in Section 2.6 hereof as a result of such prepayment, then such Eurodollar
Loan or CAD Fixed Rate Loan, as the case may be, shall be converted into a Base
Rate Loan or CAD Base Rate Loan, as appropriate, on the date of such prepayment.
Any prepayment of a Eurodollar Loan, Swing Loan or CAD Fixed Rate Loan pursuant
to this Section 2.12 shall be subject to the prepayment provisions set forth in
Article III hereof.
Section 2.13. Canadian Borrowers.
(a) Joint and Several Liability of Canadian Borrowers. Each request by a Canadian Borrower for the making, conversion or continuation of a CAD Revolving Loan shall be deemed to be a joint and several request by all Canadian Borrowers. Each Canadian Borrower hereby authorizes any other Canadian Borrower to request that US Borrower submit a Notice of Loan for a CAD Revolving Loan on behalf of Canadian Borrowers. Each Canadian Borrower acknowledges and agrees that Agent and the Canadian Lenders are entering into this Agreement at the request of each Canadian Borrower and with the understanding that each Canadian Borrower is and shall remain fully liable, jointly and severally, for payment in full of the Applicable Debt; provided that, anything in this Agreement to the contrary notwithstanding, no Canadian Borrower will at any time be liable for the Indebtedness of US Borrower. Each
Canadian Borrower agrees that it is receiving or will receive a direct pecuniary benefit for each CAD Revolving Loan made hereunder.
(b) Maximum Liability of Each Canadian Borrower. Anything in this Agreement or any other Loan Document to the contrary notwithstanding, in no event shall the maximum liability of any Canadian Borrower exceed the maximum amount that (after giving effect to the incurring of the obligations hereunder and to any rights to contribution of such Canadian Borrower from other Affiliates of such Canadian Borrower) would not render the rights to payment of Agent and the Canadian Lenders hereunder void, voidable or avoidable under any applicable fraudulent transfer law.
(c) Appointment of US Borrower as Canadian Borrower's Agent. Each Canadian Borrower hereby irrevocably appoints US Borrower as the borrowing agent and attorney-in-fact for all Canadian Borrowers, which appointment shall remain in full force and effect unless and until Agent shall have received prior written notice signed by each Canadian Borrower that such appointment has been revoked. Each Canadian Borrower hereby irrevocably appoints and authorizes US Borrower (a) to provide Agent with all notices with respect to CAD Revolving Loans obtained for the benefit of any Canadian Borrower and all other notices and instructions under this Agreement, and (b) to take such action as US Borrower deems appropriate on its behalf to obtain CAD Revolving Loans and to exercise such other powers as are reasonably incidental thereto to carry out the purposes of this Agreement.
Section 2.14. Waivers of Borrowers. In the event that any obligation of any Borrower under this Agreement is deemed to be an agreement by such Borrower to answer for the debt or default of another Credit Party, each Borrower represents and warrants that (a) no representation has been made to such Borrower as to the creditworthiness of such other Credit Party, and (b) such Borrower has established adequate means of obtaining from such other Credit Party on a continuing basis, financial or other information pertaining to such other Credit Party's financial condition. Each Borrower expressly waives, except as expressly required under this Agreement, diligence, demand, presentment, protest and notice of every kind and nature whatsoever, and consents that Agent, the Lenders and any other Credit Party may deal with each other in connection with such obligations or otherwise, or alter any contracts now or hereafter existing between them, in any manner whatsoever, including without limitation the renewal, extension, acceleration or changes in time for payment of any such obligations or in the terms or conditions of any security held. Agent and the Lenders are hereby expressly given the right, at their option, to proceed in the enforcement of any of the Debt independently of any other remedy or security they may at any time hold in connection with such obligations secured and it shall not be necessary for Agent and the Lenders to proceed upon or against or exhaust any other security or remedy before proceeding to enforce their rights against such Borrower. Each Borrower further subordinates any right of subrogation, reimbursement, exoneration, contribution, indemnification, setoff or other recourse in respect of sums paid to Agent and the Lenders by any other Credit Party.
Section 2.15. Extension of Commitment. Contemporaneously with the delivery of the financial statements required pursuant to Section 5.3(b) hereof (beginning with the financial statements for the fiscal year of US Borrower ending June 30, 2004), US Borrower may deliver a
Request for Extension, requesting that the Lenders extend the maturity of the Commitment for an additional year. Each such extension shall require the unanimous written consent of all of the Lenders and shall be upon such terms and conditions as may be agreed to by Agent, Borrowers and the Lenders. US Borrower shall pay any reasonable and properly documented attorneys' fees or other expenses of Agent in connection with the documentation of any such extension, as well as such other fees as may be agreed upon between Borrowers and Agent.
ARTICLE III. ADDITIONAL PROVISIONS RELATING TO FIXED RATE
LOANS; INCREASED CAPITAL; TAXES
Section 3.1. Requirements of Law.
(a) If, after the Closing Date, (i) the adoption of or any change
in any Requirement of Law or in the interpretation or application thereof or
(ii) the 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:
(A) shall subject any Lender to any tax of any kind whatsoever with respect to this Agreement, any Letter of Credit or any Fixed Rate Loan made by it, or change the basis of taxation of payments to such Lender in respect thereof (except for Taxes and Excluded Taxes which are governed by Section 3.2 hereof);
(B) 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 that is not otherwise included in the determination of the Eurodollar Rate or the CAD Fixed Rate; or
(C) shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such Lender of making, converting into, continuing or maintaining Fixed Rate Loans or issuing or participating in Letters of Credit, or to reduce any amount receivable hereunder in respect thereof, then, in any such case, US Borrower (and any Canadian Borrower to which such Loan was made) shall pay to such Lender, promptly after receipt of a written request therefor, 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 subsection (a), such Lender shall promptly notify US Borrower (with a copy to Agent) of the event by reason of which it has become so entitled.
(b) If any Lender shall have determined that, after the Closing Date, 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 shall have the effect of reducing the rate of return on such
Lender's or such corporation's capital as a consequence of its obligations hereunder, or under or in respect of any Letter of Credit, to a level below that which such Lender or such corporation could have achieved but for such adoption, change or compliance (taking into consideration the policies of such Lender or corporation with respect to capital adequacy), then from time to time, upon submission by such Lender to US Borrower (with a copy to Agent) of a written request therefor (which shall include the method for calculating such amount and reasonable detail with respect to the calculation), the appropriate Borrowers shall promptly pay or cause to be paid to such Lender such additional amount or amounts as will compensate such Lender for such reduction.
(c) A certificate as to any additional amounts payable pursuant to this Section 3.1 together with a reasonably detailed calculation and description of such amounts contemplated by this Section 3.1, submitted by any Lender to US Borrower (with a copy to Agent) shall be rebuttably presumptive evidence of the amounts so payable. In determining any such additional amounts, such Lender may use any method of averaging and attribution that it (in its good-faith, reasonable credit judgment) shall deem applicable. The obligations of Borrowers pursuant to this Section 3.1 shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder.
Section 3.2. Taxes.
(a) All payments made by any Credit Party under any Loan Document shall be made free and clear of, and without deduction or withholding for or on account of any Taxes or Other Taxes. If any Taxes or Other Taxes are required to be withheld from any amounts payable to Agent or any Lender thereunder, the amounts so payable to Agent or such Lender shall be increased to the extent necessary to yield to Agent or such Lender (after payment of all Taxes and Other Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in the Loan Documents.
(b) In addition, the Credit Parties shall pay Other Taxes to the relevant Governmental Authority in accordance with applicable law.
(c) Whenever any Taxes or Other Taxes are required to be withheld and paid by a Credit Party, such Credit Party shall timely withhold and pay such taxes to the relevant Governmental Authorities. As promptly as possible thereafter, such Credit Party shall send to Agent for its own account or for the account of the relevant Lender, as the case may be, a certified copy of an original official receipt received by such Credit Party showing payment thereof. If such Credit Party shall fail to pay any Taxes or Other Taxes when due to the appropriate taxing authority or fails to remit to Agent the required receipts or other required documentary evidence, such Credit Party shall indemnify Agent and the appropriate Lenders on demand for any incremental taxes, interest or penalties that may become payable by Agent or such Lender as a result of any such failure.
(d) If any Lender shall be so indemnified by a Credit Party, such Lender shall use reasonable efforts to obtain the benefits of any refund, deduction or credit for any taxes or other amounts with respect to the amount paid by such Credit Party and shall reimburse such Credit
Party to the extent, but only to the extent, that such Lender shall receive a refund with respect to the amount paid by such Credit Party or an effective net reduction in taxes or other governmental charges (including any taxes imposed on or measured by the total net income of such Lender) of the United States or any state or subdivision or any other Governmental Authority thereof by virtue of any such deduction or credit, after first giving effect to all other deductions and credits otherwise available to such Lender. If, at the time any audit of such Lender's income tax return is completed, such Lender determines, based on such audit, that it shall not have been entitled to the full amount of any refund reimbursed to such Credit Party as aforesaid or that its net income taxes shall not have been reduced by a credit or deduction for the full amount reimbursed to such Credit Party as aforesaid, such Credit Party, upon request of such Lender, shall promptly pay to such Lender the amount so refunded to which such Lender shall not have been so entitled, or the amount by which the net income taxes of such Lender shall not have been so reduced, as the case may be.
(e) Each Lender that is not (i) a citizen or resident of the
United States of America, (ii) 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 (iii) an estate or trust that is subject to U.S.
federal income taxation regardless of the source of its income (any such Person,
a "Non-U.S. Lender") shall deliver to US Borrower and Agent two copies of either
U.S. Internal Revenue Service Form W-8BEN or Form W-8ECI, or, 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", a statement with respect to such interest and a Form W-8BEN, or 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 Credit Parties 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 such other Loan Document. In addition, each Non-U.S. Lender shall deliver
such forms or appropriate replacements 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 US Borrower at any time it determines that
such Lender is no longer in a position to provide any previously delivered
certificate to US Borrower (or any other form of certification adopted by the
U.S. taxing authorities for such purpose). Notwithstanding any other provision
of this subsection (e), a Non-U.S. Lender shall not be required to deliver any
form pursuant to this subsection (e) that such Non-U.S. Lender is not legally
able to deliver.
(f) The agreements in this Section 3.2 shall survive the termination of the Loan Documents and the payment of the Loans and all other amounts payable hereunder.
Section 3.3. Funding Losses. US Borrower, and any appropriate Canadian Borrower to the extent such activity involves a CAD Fixed Rate Loan made to such Canadian Borrower, agree to indemnify each Lender, promptly after receipt of a written request therefor, and to hold each Lender harmless from, any properly documented loss or expense that such Lender may sustain or incur as a consequence of (a) default by a Borrower in making a borrowing of, conversion into or continuation of Fixed Rate Loans after such Borrower has given a notice requesting the same in accordance with the provisions of this Agreement, (b) default by a
Borrower in making any prepayment of or conversion from Fixed Rate Loans after such Borrower has given a notice thereof in accordance with the provisions of this Agreement, (c) the making of a prepayment of a Fixed Rate Loan on a day that is not the last day of an Interest Period applicable thereto, (d) the making of a prepayment of a Swing Loan on a day that is not the Swing Loan Maturity Date applicable thereto, or (e) any conversion of a Fixed Rate Loan to a Base Rate Loan or CAD Base Rate Loan pursuant to Section 3.4 hereof on a day that is not the last day of an Interest Period applicable thereto. Such indemnification shall be in an amount equal to the excess, if any, of (i) the amount of interest that would have accrued on the amounts 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) or the applicable Swing Loan Maturity Date 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) that would have accrued to such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the appropriate London interbank market (or Canadian market, if applicable), along with any administration fee charged by such Lender. A certificate as to any amounts payable pursuant to this Section 3.3 submitted to US Borrower (with a copy to Agent) by any Lender, together with a reasonably detailed calculation and description of such amounts shall be rebuttably presumptive evidence of the amounts so payable. The obligations of Borrowers pursuant to this Section 3.3 shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder.
Section 3.4. Eurodollar Rate or CAD Fixed Rate Lending Unlawful; Inability to Determine Rate.
(a) If any Lender shall determine (which determination shall, upon notice thereof to US Borrower and Agent, be conclusive and binding on Borrowers) that, after the Closing Date, (i) the introduction of or any change in or in the interpretation of any law makes it unlawful, or (ii) any Governmental Authority asserts that it is unlawful, for such Lender to make or continue any Loan as, or to convert (if permitted pursuant to this Agreement) any Loan into, a Fixed Rate Loan, the obligations of such Lender to make, continue or convert any such Fixed Rate Loan shall, upon such determination, be suspended until such Lender shall notify Agent that the circumstances causing such suspension no longer exist, and all outstanding Fixed Rate Loans payable to such Lender shall automatically convert (if conversion is permitted under this Agreement) into a Base Rate Loan or CAD Base Rate Loan, or be repaid (if no conversion is permitted) at the end of the then current Interest Periods with respect thereto or sooner, if required by law or such assertion.
(b) If Agent or the Required Lenders determine that for any reason adequate and reasonable means do not exist for determining the Eurodollar Rate or CAD Fixed Rate for any requested Interest Period with respect to a proposed Fixed Rate Loan, or that the Eurodollar Rate or CAD Fixed Rate for any requested Interest Period with respect to a proposed Fixed Rate Loan does not adequately and fairly reflect the cost to the applicable Lenders of funding such Loan, Agent will promptly so notify US Borrower and each applicable Lender. Thereafter, the
obligation of the applicable Lenders to make or maintain such Fixed Rate Loan shall be suspended until Agent (upon the instruction of the Required Lenders) revokes such notice. Upon receipt of such notice, US Borrower may revoke any pending request for a borrowing of, conversion to or continuation of such Fixed Rate Loan or, failing that, will be deemed to have converted such request into a request for a borrowing of a Base Rate Loan or CAD Base Rate Loan in the amount specified therein.
ARTICLE IV. CONDITIONS PRECEDENT
Section 4.1. Conditions to Each Credit Event. The obligation of the Lenders to participate in any Credit Event shall be conditioned, in the case of each Credit Event, upon the following:
(a) all conditions precedent as listed in Section 4.2 hereof required to be satisfied prior to the first Credit Event shall have been satisfied prior to or as of the first Credit Event;
(b) US Borrower shall have submitted a Notice of Loan (or with respect to a Letter of Credit, complied with the provisions of Section 2.2(b) hereof) and otherwise complied with Section 2.6 hereof;
(c) no Default or Event of Default shall then exist or immediately after the Credit Event would exist; and
(d) each of the representations and warranties contained in Article VI hereof shall be true in all material respects as if made on and as of the date of the Credit Event, except to the extent that any thereof expressly relate to an earlier date.
Each request by US Borrower or a Canadian Borrower for a Credit Event shall be deemed to be a representation and warranty by Borrowers as of the date of such request as to the satisfaction of the conditions precedent specified in subsections (c) and (d) above.
Section 4.2. Conditions to the First Credit Event. The obligation of the Lenders to participate in the first Credit Event is subject to Borrowers satisfying each of the following conditions prior to or concurrently with such Credit Event:
(a) Notes. US Borrower shall have executed and delivered to each US Lender requesting a US Revolving Credit Note its US Revolving Credit Note and shall have executed and delivered to Swing Line Lender the Swing Line Note. Each Canadian Borrower shall have executed and delivered to each Canadian Lender requesting a CAD Revolving Credit Note its CAD Revolving Credit Note.
(b) Guaranties of Payment of Debt. Each Guarantor of Payment shall have executed and delivered to Agent a Guaranty of Payment of Debt.
(c) Officer's Certificate, Resolutions, Organizational Documents. Borrowers shall have delivered to Agent an officer's certificate (or comparable domestic or foreign documents) certifying the names of the officers of each Credit Party signing any of the Loan Documents, together with the true signatures of such officers and certified copies of (i) the resolutions of the board of directors (or comparable domestic or foreign documents) of such Credit Party evidencing approval of the execution and delivery of the Loan Documents and the execution of other Related Writings to which such Credit Party is a party, and (ii) the Organizational Documents of such Credit Party.
(d) Legal Opinions. Borrowers shall have delivered to Agent opinions of counsel, in form and substance satisfactory to Agent and the Lenders, for each Credit Party.
(e) Good Standing and Full Force and Effect Certificates. Borrowers shall have delivered to Agent a good standing certificate or full force and effect certificate (or comparable domestic or foreign document), for each Credit Party, issued on or about the Closing Date by the Secretary of State in the state where such Credit Party is incorporated or formed (or appropriate foreign official).
(f) Closing and Legal Fees; Agent Fee Letter. Borrowers shall have
(i) executed and delivered to Agent, the Agent Fee Letter and paid to Agent, for
its sole account, the fees stated therein to be paid on or prior to the Closing
Date, (ii) executed and delivered to Agent the Closing Fee Letter and paid to
Agent, for the account of the Lenders, the fees stated therein to be paid on or
prior to the Closing Date, and (iii) paid all reasonable and properly documented
legal fees and expenses of Agent in connection with the preparation and
negotiation of the Loan Documents.
(g) Letter of Direction. US Borrower shall have delivered to Agent a letter of direction authorizing Agent, on behalf of the Lenders, to disburse the proceeds of the Loans, which includes the transfer of funds under this Agreement and wire instructions setting forth the locations to which such funds shall be sent.
(h) Long Term Debt Instruments. US Borrower shall have provided to Agent copies of all long term debt instruments, certified by a Financial Officer as complete, of the Companies.
(i) Existing Credit Agreement. Borrowers shall have terminated the Credit Agreement between Borrowers and KeyBank National Association, as agent, dated as of November 5, 1998, as amended, which termination shall be deemed to have occurred upon payment in full of all of the Indebtedness outstanding thereunder and termination of the commitments established therein.
(j) No Material Adverse Change. No material adverse change, in the opinion of Agent, shall have occurred in the financial condition, operations or prospects of the Companies since June 30, 2003.
(k) Miscellaneous. Borrowers shall have provided to Agent and the Lenders such other items and shall have satisfied such other conditions as may be reasonably required by Agent or the Lenders.
ARTICLE V. COVENANTS
Section 5.1. Insurance. The Companies shall (a) maintain insurance to such extent and against such hazards and liabilities as is commonly maintained by Persons similarly situated; and (b) within ten days of any Lender's written request, furnish to such Lender such information about the Companies' insurance as that Lender may from time to time reasonably request.
Section 5.2. Money Obligations. Each Company shall pay in full (a) prior in each case to the date when penalties would attach, all material taxes, assessments and governmental charges and levies (except only those so long as and to the extent that the same shall be contested in good faith by appropriate and timely proceedings and for which adequate provisions have been established in accordance with GAAP) for which it may be or become liable or to which any or all of its properties may be or become subject; (b) all material wage obligations to its employees in compliance with the Fair Labor Standards Act (29 U.S.C. Sections 206-207) or any comparable provisions; and (c) all of its other obligations calling for the payment of money (except only those so long as and to the extent that nonpayment would not cause a Material Adverse Effect) before such payment becomes overdue.
Section 5.3. Financial Statements and Information.
(a) Quarterly Financials. Borrowers shall furnish to Agent and the Lenders, within forty-five (45) days after the end of each of the first three quarter-annual periods of each fiscal year of US Borrower, balance sheets of the Companies as of the end of such period and statements of income (loss), stockholders' equity and cash flow for the quarter and fiscal year to date periods, all prepared on a Consolidated basis, in accordance with GAAP, and in form and detail satisfactory to Agent and the Lenders and certified by a Financial Officer of US Borrower; provided, however, that delivery pursuant to paragraph (d) below of copies of the Quarterly Report on Form 10-Q of the Companies for such quarterly period filed with the SEC shall be deemed to satisfy the requirements of this subsection (a).
(b) Annual Audit Report. Borrowers shall furnish to Agent and the
Lenders, within ninety (90) days after the end of each fiscal year of US
Borrower, an annual audit report of the Companies for that year prepared on a
Consolidated basis, in accordance with GAAP, and in form and detail satisfactory
to Agent and the Lenders and certified by an independent public accountant
satisfactory to Agent, which report shall include balance sheets and statements
of income (loss), stockholders' equity and cash-flow for that period, together
with a certificate by the accountant setting forth the Defaults and Events of
Default coming to its attention during the course of its audit or, if none, a
statement to that effect; provided, however, that delivery pursuant to paragraph
(d) below of copies of the Annual Report on Form 10-K of the Companies for such
period filed with the SEC shall be deemed to satisfy the requirements of this
paragraph (b).
(c) Compliance Certificate. Borrowers shall furnish to Agent and the Lenders, concurrently with the delivery of the financial statements set forth in subsections (a) and (b) above, a Compliance Certificate.
(d) Public Financial Information. Borrowers shall furnish to Agent and the Lenders, as soon as available, (i) copies of Form 10-Q quarterly reports, Form 10-K annual reports, and Form 8-K current reports, (ii) notice of (and, upon the request of Agent, copies of) any other filings made by US Borrower with the SEC, and (iii) notice of (and, upon the request of Agent, copies of) any other information that is provided by US Borrower to its shareholders generally, provided that if any such materials are available electronically as a filing with the SEC, Borrowers shall give Agent prompt notice of such filing and the giving of such notice shall satisfy Borrowers' obligation to provide Agent and the Lenders copies of such publicly filed materials.
(e) Financial Information of Companies. Borrowers shall furnish to Agent and the Lenders, within ten Business Days of the written request of Agent or any Lender, such other information about the material financial condition, properties and operations of the Companies as Agent or such Lender may from time to time reasonably request, which information shall be submitted in form and detail reasonably satisfactory to Agent or such Lender and certified by a Financial Officer of the Company or Companies in question.
Section 5.4. Financial Records. The Companies shall at all times maintain true and complete, in all material respects, records and books of account, all in accordance with GAAP, and at all reasonable times (during normal business hours and upon notice to such Company) permit Agent, or any representative of Agent, to examine such Company's books and records and to make excerpts therefrom and transcripts thereof.
Section 5.5. Franchises; Change in Business.
(a) Each Company shall preserve and maintain at all times its existence (except as otherwise permitted under Section 5.12 hereof) and its material rights and franchises.
(b) No Company shall engage in any business if, as a result thereof, the general nature of the business of the Companies taken as a whole would be substantially changed from the general nature of the business the Companies are engaged in on the Closing Date.
Section 5.6. ERISA Compliance. No Company shall incur any material accumulated funding deficiency within the meaning of ERISA, or any material liability to the PBGC, established thereunder in connection with any ERISA Plan. Borrowers shall furnish to the Lenders (a) as soon as possible and in any event within thirty (30) days after any Company knows or has reason to know that any material Reportable Event with respect to any ERISA Plan has occurred, a statement of a Financial Officer of such Company, setting forth details as to such Reportable Event and the action that such Company proposes to take with respect thereto, together with a copy of the notice of such Reportable Event given to the PBGC if a copy of such notice is available to such Company, and (b) promptly after receipt thereof a copy of any
material notice such Company, or any member of the Controlled Group may receive from the PBGC or the Internal Revenue Service with respect to any ERISA Plan administered by such Company; provided that this latter clause shall not apply to notices of general application promulgated by the PBGC or the Internal Revenue Service or to letters or notices (such as favorable Determination Letter) with respect to an ERISA Plan, which do not threaten a material liability to the Companies. Borrowers shall promptly notify the Lenders of any material taxes assessed, proposed to be assessed or that Borrowers have reason to believe may be assessed against a Company by the Internal Revenue Service with respect to any ERISA Plan. As used in this Section 5.6 and in Section 6.10 hereof, "material" means the measure of a matter of significance that shall be determined as being an amount equal to five percent (5%) of Consolidated Net Worth. As soon as practicable, and in any event within twenty (20) days, after any Company shall become aware that a material ERISA Event shall have occurred, such Company shall provide Agent with notice of such ERISA Event with a certificate by a Financial Officer of such Company setting forth the details of the event and the action such Company or another Controlled Group member proposes to take with respect thereto. Borrowers shall, at the request of Agent or any Lender, deliver or cause to be delivered to Agent or such Lender, as the case may be, true and correct copies of any documents relating to the ERISA Plan of any Company.
Section 5.7. Financial Covenants.
(a) Capitalization Ratio. US Borrower shall not suffer or permit at any time the Capitalization Ratio to exceed 0.50 to 1.00.
(b) Interest Coverage Ratio. US Borrower shall not suffer or permit at any time the Interest Coverage Ratio to be less than 3.00 to 1.00.
Section 5.8. Borrowing. No Company shall create, incur or have outstanding any Indebtedness of any kind; provided that this Section 5.8 shall not apply to the following:
(a) the Loans, the Letters of Credit or any other Indebtedness under this Agreement;
(b) asset securitizations up to the maximum aggregate amount, for all Companies, of Fifty Million Dollars ($50,000,000);
(c) secured Indebtedness (including Capitalized Lease Obligations) so long as the aggregate amount of all such Indebtedness (exclusive of asset securitizations) outstanding at any time for all Companies does not exceed an amount equal to ten percent (10%) of Consolidated Net Worth, based upon the financial statements of US Borrower for the most recently completed fiscal quarter; and
(d) unsecured Indebtedness.
Section 5.9. Liens. No Company shall create, assume or suffer to exist any Lien upon any of its property or assets, whether now owned or hereafter acquired; provided that this Section shall not apply to the following:
(a) (i) Liens for taxes, assessments or governmental charges or levies on such Company's property or assets if the same shall not at the time be delinquent or thereafter can be paid without penalty, or are being actively contested in good faith by appropriate and timely proceedings and for which adequate reserves shall have been established in accordance with GAAP, and (ii) Liens arising in the ordinary course of business out of pledges or deposits under workers' compensation laws, unemployment insurance, old age pensions, or social security, retirement benefits or similar legislation;
(b) other statutory Liens incidental to the conduct of its business or the ownership of its property and assets that (i) were not incurred in connection with the borrowing of money or the obtaining of advances or credit, and (ii) do not in the aggregate materially detract from the value of its property or assets or materially impair the use thereof in the operation of its business;
(c) Liens on property or assets of a Domestic Subsidiary to secure obligations of such Domestic Subsidiary to US Borrower or a Domestic Guarantor of Payment;
(d) Liens on property or assets of a Foreign Subsidiary to secure obligations of such Foreign Subsidiary to a Canadian Borrower or a Canadian Guarantor of Payment;
(e) easements or other minor defects or irregularities in title of real property not interfering in any material respect with the use of such property in the business of any Company;
(f) Liens relating to ledger balances, consignments and other similar arrangements;
(g) asset securitizations permitted pursuant to Section 5.12(i) hereof; or
(h) any other Liens (including all Liens existing on the Closing Date as set forth in Schedule 5.9 hereto), so long as the aggregate amount of Indebtedness secured by all such Liens (exclusive of asset securitizations) does not exceed for all Companies at any time an aggregate amount equal to ten percent (10%) of Consolidated Net Worth, based upon the financial statements of US Borrower for the most recently completed fiscal quarter.
Section 5.10. Regulations U and X. No Company shall take any action that would result in any non-compliance of the Loans or Letters of Credit with Regulations U or X, or any other applicable regulation, of the Board of Governors of the Federal Reserve System.
Section 5.11. Investments and Loans. No Company shall, without the
prior written consent of Agent and the Required Lenders, (a) create, acquire or
hold any Subsidiary, (b) make or hold any investment in any stocks, bonds or
securities of any kind, (c) be or become a party to any joint venture or other
partnership, (d) make or keep outstanding any advance or loan to any Person, or
(e) be or become a Guarantor of any kind; provided that this Section 5.11 shall
not apply to the following:
(i) any endorsement of a check or other medium of payment for deposit or collection through normal banking channels or similar transaction in the normal course of business;
(ii) any investment in direct obligations of the United States of America or in certificates of deposit issued by a member bank (having capital resources in excess of One Hundred Million Dollars ($100,000,000)) of the Federal Reserve System;
(iii) any investment in commercial paper or securities that at the time of such investment is assigned the highest quality rating in accordance with the rating systems employed by either Moody's or Standard & Poor's;
(iv) the holding of each of the Subsidiaries listed on Schedule 6.1 hereto, and the creation, acquisition and holding of any new Subsidiary after the Closing Date so long as such new Subsidiary shall have been created, acquired or held in accordance with the terms and conditions of this Agreement;
(v) loans to a Credit Party or Domestic Subsidiary from a Company that are not prohibited under Section 5.8 hereof;
(vi) any guaranty by a Company of Indebtedness of another Company so long as such Indebtedness is permitted pursuant to Section 5.8 hereof;
(vii) the holding of any stock or equity interest that remains following the sale or other disposition of a Company (or a majority interest therein) permitted by Section 5.12 hereof;
(viii) any advance or loan to an officer, employee, agent or similar Person of or consultant to a Company as an advance on commissions, travel, relocation expenses and other items in the ordinary course of business, so long as all such advances and loans from all Companies aggregate not more than the maximum principal sum of Five Million Dollars ($5,000,000) at any time outstanding;
(ix) Permitted Investments;
(x) Permitted Foreign Subsidiary Loans and Investments;
(xi) the holding of any stock or equity interest that has been acquired pursuant to an Acquisition permitted by Section 5.13 hereof, subject to the restriction in subsection (x) hereof; or
(xii) the creation, acquisition or holding of any Domestic
Subsidiary so long as such Domestic Subsidiary, if required pursuant to
Section 5.19 hereof, becomes a Guarantor of Payment in accordance with
Section 5.19 hereof, and, subject to the restriction in subsection (x)
hereof, the creation, acquisition or holding of any Foreign Subsidiary.
Section 5.12. Merger and Sale of Assets. No Company shall merge or consolidate with any other Person, or sell, lease or transfer or otherwise dispose of all or a substantial part of its assets to any Person, except that, if no Default or Event of Default shall then exist or immediately thereafter shall begin to exist:
(a) any Domestic Subsidiary may merge with US Borrower (provided that US Borrower shall be the continuing or surviving Person) or any one or more Domestic Guarantors of Payment;
(b) any Domestic Subsidiary may sell, lease, transfer or otherwise dispose of any of its assets to (i) US Borrower or (ii) any Domestic Guarantor of Payment;
(c) any Domestic Subsidiary (other than a Credit Party) may merge with or sell, lease, transfer or otherwise dispose of any of its assets to any other Domestic Subsidiary;
(d) any Foreign Subsidiary may merge or amalgamate with a Canadian Borrower (provided that such Canadian Borrower shall be the continuing or surviving Person) or one or more Canadian Guarantors of Payment (provided that such Canadian Guarantor of Payment shall be the continuing or surviving Person);
(e) any Foreign Subsidiary may sell, lease, transfer or otherwise dispose of any of its assets to a Canadian Borrower or a Canadian Guarantor of Payment;
(f) any Foreign Subsidiary other than a Credit Party may merge or amalgamate with or sell, lease, transfer or otherwise dispose of any of its assets to any other Foreign Subsidiary;
(g) any Company may sell, lease, transfer or otherwise dispose of any of its assets to any Person (in addition to any such sale, lease, transfer or disposal to US Borrower or a Domestic Guarantor of Payment) so long as the aggregate amount of all such assets sold, leased, transferred or otherwise disposed of by all Companies in any fiscal year of US Borrower does not exceed an amount equal to seven and one-half percent (7 1/2%) of the rolling two-year average of Consolidated Net Worth;
(h) Acquisitions may be effected in accordance with the provisions of Section 5.13 hereof; and
(i) any Company may enter into (or have existing on the Closing Date) asset securitization financing programs, up to an aggregate amount, for all such programs of all Companies (including existing asset securitization programs), not to exceed Fifty Million Dollars ($50,000,000) during the Commitment Period.
Section 5.13. Acquisitions. No Company shall effect an Acquisition; provided, however, that a Credit Party may effect an Acquisition so long as:
(a) in the case of a merger, amalgamation or other combination with a Borrower, such Borrower shall be the surviving entity, and in each case, US Borrower shall be a surviving entity;
(b) in the case of a merger, amalgamation or other combination with a Credit Party (other than a Borrower), a Credit Party shall be the surviving entity;
(c) the Companies shall be in full compliance with the Loan Documents both prior to and subsequent to the transaction;
(d) no Default or Event of Default shall exist prior to or after giving effect to such Acquisition; and
(e) Borrowers shall have provided to Agent and the Lenders, at least ten days prior to such Acquisition, written notice of each proposed Acquisition with respect to which the Consideration is in excess of Five Million Dollars ($5,000,000), and, with respect to any Acquisition in which the Consideration paid is in excess of the Dollar Equivalent of Fifty Million Dollars ($50,000,000), historical financial statements of the target entity and a pro forma financial statement of the Companies accompanied by a certificate of a Financial Officer of US Borrower showing pro forma compliance with Section 5.7 hereof, both before and after the proposed Acquisition.
Section 5.14. Notice. Each Borrower shall cause a Financial Officer of such Borrower to promptly notify Agent and the Lenders whenever any Default or Event of Default may occur hereunder or any representation or warranty made in Article VI hereof or elsewhere in this Agreement or in any Related Writing may for any reason cease in any material respect to be true and complete.
Section 5.15. Environmental Compliance. Each Company shall comply in all material respects with any and all Environmental Laws including, without limitation, all Environmental Laws in jurisdictions in which such Company owns or operates a facility or site, arranges for disposal or treatment of hazardous substances, solid waste or other wastes, accepts for transport any hazardous substances, solid waste or other wastes or holds any interest in real property or otherwise. Borrowers shall furnish to the Lenders, promptly after receipt thereof, a copy of any notice such Company may receive from any Governmental Authority or private Person or otherwise that any material litigation or proceeding pertaining to any environmental, health or safety matter has been filed or is threatened against such Company, any real property in which such Company holds any interest or any past or present operation of such Company. No Company shall allow the release or disposal of hazardous waste, solid waste or other wastes on, under or to any real property in which any Company holds any interest or performs any of its operations, in violation of any material provision of Environmental Law. As used in this Section, "litigation or proceeding" means any demand, claim, notice, suit, suit in equity action, administrative action, investigation or inquiry whether brought by any Governmental Authority or private Person or otherwise. Borrowers shall defend, indemnify and hold Agent and the Lenders harmless against all properly documented costs, expenses, claims, damages, penalties and liabilities of every kind or nature whatsoever (including attorneys' fees) arising out of or
resulting from the noncompliance of any Company with any Environmental Law. Such indemnification shall survive any termination of this Agreement.
Section 5.16. Affiliate Transactions. No Company shall, directly or indirectly, enter into or permit to exist any transaction (including, without limitation, the purchase, sale, lease or exchange of any property or the rendering of any service) with any Affiliate of a Company (other than a Company that is a Credit Party) on terms that shall be less favorable to such Company than those that might be obtained at the time in a transaction with a non-Affiliate; provided, however, that the foregoing shall not prohibit (a) the payment of customary and reasonable directors' fees to directors who are not employees of a Company or an Affiliate; (b) any transaction between a Company (if a Credit Party) and an Affiliate (if a Credit Party) which US Borrower reasonably determines in good faith is beneficial to the Companies as a whole and which is not entered into for the purpose of hindering the exercise by Agent or the Lenders of their rights or remedies under this Agreement; (c) any employment agreement, employee benefit plan, stock option plan, officer and director indemnification agreement or any similar arrangement entered into by a Company in the ordinary course of business; or (d) loans to employees or officers to the extent permitted under this Agreement.
Section 5.17. Use of Proceeds. US Borrower's use of the proceeds of the US Revolving Loans shall be solely for working capital and other general corporate purposes (including, without limitation, share repurchases) of the Companies, for refinancing of existing credit facilities and for Acquisitions. Canadian Borrowers' use of the proceeds of the CAD Revolving Loans shall be for working capital and other general corporate purposes (including, without limitation, share repurchases) of the Canadian Borrowers, for refinancing of existing credit facilities and for Acquisitions.
Section 5.18. Corporate Names. No Borrower shall change its corporate name and no Credit Party shall change its state or jurisdiction of organization, unless, in each case, US Borrower shall have provided Agent and the Lenders with prompt written notice thereof.
Section 5.19. Subsidiary Guaranties. Each Domestic Subsidiary and any other Subsidiary that shall be organized under the laws of Canada or a Province of Canada created, acquired or held subsequent to the Closing Date, shall, within ten days after such Subsidiary is created or acquired, execute and deliver to Agent a Guaranty of Payment of all of the Applicable Debt, such agreement to be in form and substance acceptable to Agent and the Required Lenders, along with such corporate governance and authorization documents and an opinion of counsel as may be deemed necessary or advisable by Agent and the Required Lenders; provided, however, that:
(a) a Subsidiary shall not be required to execute such Guaranty of Payment so long as (i) the total assets of such Subsidiary shall be less than Two Million Five Hundred Thousand Dollars ($2,500,000), and (ii) the aggregate of the total assets of all such Subsidiaries with total asset values of less than Two Million Five Hundred Thousand Dollars ($2,500,000) and which have not executed a Guaranty of Payment does not exceed the aggregate amount of Five Million Dollars ($5,000,000). In the event that the total assets of any Subsidiary that shall not be a Guarantor of Payment shall be at any time equal to or greater than Two Million Five Hundred
Thousand Dollars ($2,500,000) (or the foregoing Five Million Dollars ($5,000,000) shall be exceeded), Borrowers shall provide Agent and the Lenders with prompt written notice of such asset value;
(b) with respect to a Subsidiary required to execute a Guaranty of Payment pursuant to this Section 5.19, if (i) the total assets of such Subsidiary shall be less than Fifteen Million Dollars ($15,000,000), and (ii) the aggregate of the total assets of all such Subsidiaries shall be less than Thirty Million Dollars ($30,000,000), then such Subsidiary may delay the delivery to Agent of such Guaranty of Payment and ancillary documentation until the first quarterly financial reporting date of US Borrower immediately following such Subsidiary's creation, acquisition or increase in amount of assets;
(c) a Foreign Subsidiary (other than a Subsidiary organized under the laws of Canada or a Province of Canada) shall not be required to execute such Guaranty of Payment; and
(d) a Foreign Subsidiary organized under the laws of Canada or a Providence of Canada that is required to execute a Guaranty of Payment pursuant to this Section 5.19 may, at Borrowers' option, in lieu of executing a Guaranty of Payment, be joined as a Canadian Borrower pursuant to documentation in form and substance acceptable to Agent, in its sole discretion.
Section 5.20. Other Covenants. In the event that any Company shall enter into, or shall have entered into, any Material Indebtedness Agreement, wherein the covenants contained therein shall be more restrictive than the covenants set forth herein, then the Companies shall be bound hereunder by such more restrictive covenants with the same force and effect as if such covenants were written herein.
Section 5.21. Guaranties Under the Note Purchase Agreement. No Company shall be or become a Guarantor of any Indebtedness incurred pursuant to the Note Purchase Agreement unless such Company is also a Guarantor of Payment under this Agreement.
Section 5.22. Pari Passu Ranking. The Debt shall, and Borrowers shall take all necessary action to ensure that the Debt shall, at all times, rank at least pari passu in right of payment with any Indebtedness under the Note Purchase Agreement and all other senior unsecured Indebtedness of each Borrower.
ARTICLE VI. REPRESENTATIONS AND WARRANTIES
Section 6.1. Corporate Existence; Subsidiaries; Foreign Qualification.
(a) Each Company is duly organized, validly existing and in good standing under the laws of its state or jurisdiction of incorporation or organization, and is duly qualified and authorized to do business and is in good standing as a foreign entity in each jurisdiction where the character of its property or its business activities makes such qualification necessary, except
where the failure to so qualify could not reasonably be expected to cause or result in a Material Adverse Effect.
(b) As of the Closing Date, Schedule 6.1 hereto sets forth (i)
each Company, (ii) each Company's state or jurisdiction of organization, and
(iii) each Person that owns the stock or other equity interest of each Company
(other than US Borrower).
Section 6.2. Corporate Authority. Each Credit Party has the right and power and is duly authorized and empowered to enter into, execute and deliver the Loan Documents to which it is a party and to perform and observe the provisions of the Loan Documents. The Loan Documents to which each Credit Party is a party have been duly authorized and approved by such Credit Party's board of directors or other governing body, as applicable, and are the valid and binding obligations of such Credit Party, enforceable against such Credit Party in accordance with their respective terms, except as enforceability may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally and by equitable principles (regardless of whether enforcement is sought in equity or at law). The execution, delivery and performance of the Loan Documents will not conflict with nor result in any breach in any of the provisions of, or constitute a default under, or result in the creation of any Lien (other than Liens permitted under Section 5.9 hereof) upon any assets or property of any Company under the provisions of, such Company's Organizational Documents or any agreement.
Section 6.3. Compliance with Laws. Each Company:
(a) holds all material permits, certificates, licenses, orders, registrations, franchises, authorizations, and other approvals from any Governmental Authority necessary for the conduct of its business and is in compliance in all material respects with all applicable laws relating thereto;
(b) is in compliance in all material respects with all federal, state, local, or foreign applicable statutes, rules, regulations, and orders including, without limitation, those relating to environmental protection, occupational safety and health, and equal employment practices on the Closing Date and, except where the failure to be in compliance could not reasonably be expected to have or result in a Material Adverse Effect, after the Closing Date; and
(c) is not in material violation of or in default under any agreement to which it is a party or by which its assets are subject or bound on the Closing Date and, except with respect to any violation or default that could not reasonably be expected to have or result in a Material Adverse Effect, after the Closing Date.
Section 6.4. Litigation and Administrative Proceedings. Except as disclosed on Schedule 6.4 hereto, there are (a) no lawsuits, actions, investigations, or other proceedings pending or threatened against any Company, or in respect of which any Company may have any liability, in any court or before any Governmental Authority, arbitration board, or other tribunal, (b) no orders, writs, injunctions, judgments, or decrees of any court or government agency or instrumentality to which any Company is a party or by which the property or assets of any Company are bound, and (c) no grievances, disputes, or controversies outstanding with any
union or other organization of the employees of any Company, or threats of work stoppage, strike, or pending demands for collective bargaining, that, as to (a) through (c) above, could reasonably be expected to have a Material Adverse Effect.
Section 6.5. Title to Assets. Each Credit Party has good title to and ownership of all property it purports to own, which property is free and clear of all Liens, except those permitted under Section 5.9 hereof.
Section 6.6. Liens and Security Interests. On and after the Closing Date, except for Liens permitted pursuant to Section 5.9 hereof, (a) there is no financing statement or similar notice of Lien outstanding covering any personal property of any Company; (b) there is no mortgage or charge outstanding covering any real property of any Company; and (c) no real or personal property of any Company is subject to any security interest or Lien of any kind.
Section 6.7. Tax Returns. All federal, state, provincial and local tax returns and other reports required by law to be filed in respect of the income, business, properties and employees of each Company have been filed and all taxes, assessments, fees and other governmental charges that are due and payable have been paid, except as otherwise permitted herein or where the failure to do so could not reasonably be expected to cause or result in a Material Adverse Effect. The provision for taxes on the books of each Company is adequate, in all material respects, for all years not closed by applicable statutes and for the current fiscal year.
Section 6.8. Environmental Laws. Each Company is in compliance, in all material respects, with all Environmental Laws, including, without limitation, all Environmental Laws in all jurisdictions in which any Company owns or operates, or has owned or operated, a facility or site, arranges or has arranged for disposal or treatment of hazardous substances, solid waste or other wastes, accepts or has accepted for transport any hazardous substances, solid waste or other wastes or holds or has held any interest in real property or otherwise. No litigation or proceeding arising under, relating to or in connection with any Environmental Law is pending or, to the best knowledge of each Company, threatened, against any Company, any real property in which any Company holds or has held an interest or any past or present operation of any Company that is likely to have a Material Adverse Effect. No release, threatened release or disposal of hazardous waste, solid waste or other wastes is occurring, or has occurred (other than those that are currently being cleaned up in accordance with Environmental Laws), on, under or to any real property in which any Company holds any interest or performs any of its operations, in violation of any Environmental Law that is likely to have a Material Adverse Effect. As used in this Section, "litigation or proceeding" means any demand, claim, notice, suit, suit in equity, action, administrative action, investigation or inquiry whether brought by any Governmental Authority or private Person or otherwise.
Section 6.9. Continued Business. There exists no actual, pending, or, to each Borrower's knowledge, any threatened termination, cancellation or limitation of, or any modification or change in the business relationship of any Company and any customer or supplier, or any group of customers or suppliers, whose purchases or supplies, individually or in the aggregate, are material to the business of any Company, and there exists no present condition or state of facts or circumstances that could reasonably be expected to have a Material Adverse Effect or prevent a
Company from conducting such business or the transactions contemplated by this Agreement in substantially the same manner in which it was previously conducted.
Section 6.10. Employee Benefits Plans. Schedule 6.10 hereto identifies
each ERISA Plan. No ERISA Event has occurred or is expected to occur with
respect to an ERISA Plan. Full payment has been made of all amounts that a
Controlled Group member is required, under applicable law or under the governing
documents, to have paid as a contribution to or a benefit under each ERISA Plan.
The liability of each Controlled Group member with respect to each ERISA Plan
has been fully funded based upon reasonable and proper actuarial assumptions,
has been fully insured, or has been fully reserved for on its financial
statements. No changes have occurred or are expected to occur that would cause a
material increase in the cost of providing benefits under the ERISA Plan. With
respect to each ERISA Plan that is intended to be qualified under Code Section
401(a), (a) the ERISA Plan and any associated trust operationally comply with
the applicable requirements of Code Section 401(a); (b) the ERISA Plan and any
associated trust have been amended to comply, in all material respects, with all
such requirements as currently in effect, other than those requirements for
which a retroactive amendment can be made within the "remedial amendment period"
available under Code Section 401(b) (as extended under Treasury Regulations and
other Treasury pronouncements upon which taxpayers may rely); (c) the ERISA Plan
and any associated trust have received a favorable determination letter from the
Internal Revenue Service stating that the ERISA Plan qualifies under Code
Section 401(a), that the associated trust qualifies under Code Section 501(a)
and, if applicable, that any cash or deferred arrangement under the ERISA Plan
qualifies under Code Section 401(k), unless the ERISA Plan was first adopted at
a time for which the above-described "remedial amendment period" has not yet
expired; (d) the ERISA Plan currently satisfies the requirements of Code Section
410(b), without regard to any retroactive amendment that may be made within the
above-described "remedial amendment period"; and (e) no contribution made to the
ERISA Plan is subject to an excise tax under Code Section 4972. With respect to
any Pension Plan (other than with respect to the Detroit Ball Bearing Company
Union Employees' Retirement Plan), the "accumulated benefit obligation" of
Controlled Group members with respect to the Pension Plan (as determined in
accordance with Statement of Accounting Standards No. 87, "Employers' Accounting
for Pensions") does not exceed the fair market value of Pension Plan assets.
Section 6.11. Consents or Approvals. No consent, approval or authorization of, or filing, registration or qualification with, any Governmental Authority or any other Person is required to be obtained or completed by any Company in connection with the execution, delivery or performance of any of the Loan Documents, that has not already been obtained or completed.
Section 6.12. Solvency.
(a) US Borrower. US Borrower has received consideration that is the reasonable equivalent value of the obligations and liabilities that US Borrower has incurred to Agent and the Lenders. US Borrower is not insolvent as defined in any applicable state, federal or relevant foreign statute, nor will US Borrower be rendered insolvent by the execution and delivery of the Loan Documents to Agent and the Lenders. US Borrower is not engaged or about to engage in any business or transaction for which the assets retained by it are or will be an unreasonably small amount of capital, taking into consideration the obligations to Agent and the Lenders
incurred hereunder. US Borrower does not intend to, nor does it believe that it will, incur debts beyond its ability to pay such debts as they mature.
(b) Canadian Borrowers. Each Canadian Borrower has received consideration that is the reasonable equivalent value of the obligations and liabilities that such Canadian Borrower has incurred to Agent and the Canadian Lenders. No Canadian Borrower is insolvent as defined in any applicable state, federal or relevant foreign statute, nor will any Canadian Borrower be rendered insolvent by the execution and delivery of the Loan Documents to Agent and the Canadian Lenders. No Canadian Borrower is engaged or about to engage in any business or transaction for which the assets retained by it are or will be an unreasonably small amount of capital, taking into consideration the obligations to Agent and the Canadian Lenders incurred hereunder. No Canadian Borrower intends to, nor does it believe that it will, incur debts beyond its ability to pay such debts as they mature.
Section 6.13. Financial Statements. The audited Consolidated financial statements of Borrowers for the fiscal year ended June 30, 2003 furnished to Agent and the Lenders, are true and complete, have been prepared in accordance with GAAP, and fairly present, in all material respects, the financial condition of the Companies as of the dates of such financial statements and the results of their operations for the periods then ending. Since the dates of such statements, there has been no material adverse change in any Company's financial condition, properties or business or any change in any Company's accounting procedures.
Section 6.14. Regulations. No Company is engaged principally or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying any "margin stock" (within the meaning of Regulation U of the Board of Governors of the Federal Reserve System of the United States of America). Neither the granting of any Loan (or any conversion thereof) or Letter of Credit nor the use of the proceeds of any Loan or Letter of Credit will violate, or be inconsistent with, the provisions of Regulation T, U or X or any other Regulation of such Board of Governors.
Section 6.15. Material Agreements. Except as disclosed on Schedule 6.15 hereto, no Company is a party to any (a) debt instrument (excluding the Loan Documents); (b) lease (capital, operating or otherwise), whether as lessee or lessor thereunder; or (c) collective bargaining agreement that, as to subsections (a) through (c), above, if violated, breached, or terminated for any reason, would have or would be reasonably expected to have a Material Adverse Effect.
Section 6.16. Intellectual Property. Each Company owns, possesses, or has the right to use all of the patents, patent applications, industrial designs, trademarks, service marks, copyrights, licenses, and rights with respect to the foregoing necessary for the conduct of its business without any known material conflict with the rights of others.
Section 6.17. Insurance. The Companies maintain with financially sound and reputable insurers insurance with coverage and limits as required by law and as is customary with Persons engaged in the same businesses as the Companies.
Section 6.18. Accurate and Complete Statements. Neither the Loan Documents nor any written statement made by any Company in connection with any of the Loan Documents contains any untrue statement of a material fact or omits a material fact necessary to make the statements contained therein or in the Loan Documents not misleading. After due inquiry by Borrowers, there is no known fact that any Company has not disclosed to Agent and the Lenders that has or is likely to have a Material Adverse Effect.
Section 6.19. Note Purchase Agreement. (a) No Default or Event of Default (as each term (or similar term, if any) is defined in the Note Purchase Agreement) exists, nor will any such Default or Event of Default exist immediately after the granting of any loan under this Agreement or the Note Purchase Agreement, or any agreement executed in connection therewith; (b) no Company has incurred any "Debt" (as defined, or as a similar term is defined, in each Note Purchase Agreement) in violation of the provisions of any Note Purchase Agreement; and (c) the Debt (as defined herein) constitutes "Debt" (as defined or, as a similar term is defined, in each Note Purchase Agreement) permitted pursuant to the provisions of the Note Purchase Agreements. No Subsidiary is a Guarantor under any Note Purchase Agreement or any other Material Indebtedness Agreement that is not also a Guarantor of Payment hereunder.
Section 6.20. Defaults. No Default or Event of Default exists hereunder, nor will any begin to exist immediately after the execution and delivery hereof.
ARTICLE VII. EVENTS OF DEFAULT
Each of the following shall constitute an Event of Default hereunder:
Section 7.1. Payments. If (a) the interest on any Loan or any facility or other fee shall not be paid in full punctually when due and payable or within three Business Days thereafter, or (b) the principal of any Loan or any obligation under any Letter of Credit shall not be paid in full when due and payable.
Section 7.2. Special Covenants. If any Company shall fail or omit to perform and observe Section 5.7, 5.8, 5.9, 5.11, 5.12 or 5.13 hereof.
Section 7.3. Other Covenants. If any Company shall fail or omit to perform and observe any agreement or other provision (other than those referred to in Section 7.1 or 7.2 hereof) contained or referred to in this Agreement or any Related Writing that is on such Company's part to be complied with, and that Default shall not have been fully corrected within thirty (30) days after the giving of written notice thereof to a Borrower by Agent or any Lender that the specified Default is to be remedied.
Section 7.4. Representations and Warranties. If any representation, warranty or statement made in or pursuant to this Agreement or any Related Writing or any other material information furnished by any Company to the Lenders or any thereof or any other holder of any Note, shall be false or erroneous in any material respect.
Section 7.5. Cross Default. If any Company shall default in the payment of principal or interest due and owing upon any other obligation for borrowed money in excess of the aggregate, for all such obligations of all such Companies, of the Dollar Equivalent of Twenty Million Dollars ($20,000,000) beyond any period of grace provided with respect thereto or in the performance or observance of any other agreement, term or condition contained in any agreement under which such obligation is created, if the effect of such default is to allow the acceleration of the maturity of such Indebtedness or to permit the holder thereof to cause such Indebtedness to become due prior to its stated maturity.
Section 7.6. ERISA Default. The occurrence of one or more ERISA Events that (a) the Required Lenders determine could reasonably be expected to have a Material Adverse Effect, or (b) results in a Lien on any of the assets of any Company, in the aggregate for all such Liens for all Companies, in excess of One Million Dollars ($1,000,000).
Section 7.7. Change in Control. If any Change in Control shall occur.
Section 7.8. Money Judgment. A final judgment or order for the payment of money shall be rendered against any Company by a court of competent jurisdiction, that remains unpaid or unstayed and undischarged for a period (during which execution shall not be effectively stayed) of thirty (30) days after the date on which the right to appeal has expired, provided that the aggregate of all such judgments, for all such Companies, shall exceed the Dollar Equivalent of Ten Million Dollars ($10,000,000) (less any amount that will be covered by the proceeds of insurance and is not subject to dispute by the insurance provider).
Section 7.9. Validity of Loan Documents. (a) Any material provision, in the reasonable opinion of Agent, of any Loan Document shall at any time for any reason cease to be valid, binding and enforceable against any Credit Party; (b) the validity, binding effect or enforceability of any Loan Document against any Credit Party shall be contested by any Credit Party; (c) any Credit Party shall deny that it has any or further liability or obligation thereunder; or (d) any Loan Document shall be terminated, invalidated or set aside, or be declared ineffective or inoperative or in any way cease to give or provide to Agent and the Lenders the benefits purported to be created thereby. In addition to any other material Loan Documents, this Agreement, each Note and each Guaranty of Payment shall be deemed to be "material".
Section 7.10. Note Purchase Agreement. If (a) any event of default (as each term or similar term is defined in any Note Purchase Agreement) shall occur under any Note Purchase Agreement or any agreement executed in connection therewith, or (b) the Indebtedness incurred in connection with any Note Purchase Agreement shall be accelerated for any reason.
Section 7.11. Solvency. If any Borrower or other Company (other than a
Foreign Subsidiary with aggregate assets of less than Two Million Dollars
($2,000,000) or a Dormant Subsidiary) shall (i) except as permitted in Section
5.12 hereof, discontinue business, (ii) generally not pay its debts as such
debts become due, (iii) make a general assignment for the benefit of creditors,
(iv) apply for or consent to the appointment of an interim receiver, a receiver
and manager, an administrator, sequestrator, monitor, a custodian, a trustee, an
interim trustee or liquidator of all or a substantial part of its assets or of
such Company (or Companies), (v) be
adjudicated a debtor or insolvent or have entered against it an order for relief
under Title 11 of the United States Code, or under any other bankruptcy
insolvency, liquidation, winding-up, corporate or similar statute or law,
foreign, federal, state or provincial, in any applicable jurisdiction, now or
hereafter existing, as any of the foregoing may be amended from time to time,
(vi) file a voluntary petition in bankruptcy, or file a proposal or notice of
intention to file a proposal or have an involuntary proceeding filed against it
and the same shall continue undismissed for a period of thirty (30) days from
commencement of such proceeding or case, or file a petition or an answer or an
application or a proposal seeking reorganization or an arrangement with
creditors or seeking to take advantage of any other law (whether federal,
provincial or state, or, if applicable, other jurisdiction) relating to relief
of debtors, or admit (by answer, by default or otherwise) the material
allegations of a petition filed against it in any bankruptcy, reorganization,
insolvency or other proceeding (whether federal, provincial or state, or, if
applicable, other jurisdiction) relating to relief of debtors, (vii) suffer or
permit to continue unstayed and in effect for thirty (30) consecutive days any
judgment, decree or order entered by a court of competent jurisdiction, that
approves a petition or an application or a proposal seeking its reorganization
or appoints an interim receiver, a receiver and manager, an administrator,
custodian, trustee, interim trustee or liquidator of all or a substantial part
of its assets, or of such Company (or Companies), or (viii) take, or omit to
take, any action in order thereby to effect any of the foregoing.
ARTICLE VIII. REMEDIES UPON DEFAULT
Notwithstanding any contrary provision or inference herein or elsewhere:
Section 8.1. Optional Defaults. If any Event of Default referred to in
Section 7.1, 7.2, 7.3, 7.4, 7.5, 7.6, 7.7, 7.8, 7.9 or 7.10 hereof shall occur,
Agent may, with the consent of the Required Lenders, and shall, at the request
of the Required Lenders, give written notice to Borrowers, to:
(a) terminate the Commitment, if not previously terminated, and, immediately upon such election, the obligations of the Lenders, and each thereof, to make any further Loan and the obligation of the Fronting Lender to issue any Letter of Credit immediately shall be terminated, and/or
(b) accelerate the maturity of all of the Debt (if the Debt is not already due and payable), whereupon all of the Debt shall become and thereafter be immediately due and payable in full without any presentment or demand and without any further or other notice of any kind, all of which are hereby waived by each Borrower.
Section 8.2. Automatic Defaults. If any Event of Default referred to in
Section 7.11 hereof shall occur:
(a) all of the Commitment shall automatically and immediately terminate, if not previously terminated, and no Lender thereafter shall be under any obligation to grant any further Loan, nor shall the Fronting Lender be obligated to issue any Letter of Credit, and
(b) the principal of and interest then outstanding on all of the Loans, and all of the other Debt, shall thereupon become and thereafter be immediately due and payable in full (if the Debt is not already due and payable), all without any presentment, demand or notice of any kind, which are hereby waived by each Borrower.
Section 8.3. Letters of Credit. If the maturity of the Debt shall be accelerated pursuant to Section 8.1 or 8.2 hereof, US Borrower shall immediately deposit with Agent, as security for the obligations of US Borrower and any other Credit Party to reimburse Agent and the Lenders for any then outstanding Letters of Credit, cash equal to the sum of the aggregate undrawn balance of any then outstanding Letters of Credit. Agent and the Lenders are hereby authorized, at their option, to deduct any and all such amounts from any deposit balances then owing by any Lender (or any affiliate of such Lender) to or for the credit or account of any Company, as security for the obligations of US Borrower and any other Credit Party to reimburse Agent and the Lenders for any then outstanding Letters of Credit.
Section 8.4. Offsets. If there shall occur or exist any Event of
Default referred to in Section 7.11 hereof or if the maturity of the Debt is
accelerated pursuant to Section 8.1 or 8.2 hereof, each Lender shall have the
right at any time to set off against, and to appropriate and apply toward the
payment of, any and all Debt then owing by a Borrower to such Lender (including,
without limitation, any participation purchased or to be purchased pursuant to
Section 2.2(b), 2.2(c) or 8.5 hereof), whether or not the same shall then have
matured, any and all deposit (general or special) balances and all other
indebtedness then held or owing by such Lender (including, without limitation,
by branches and agencies or any affiliate of such Lender, wherever located) to
or for the credit or account of such Borrower, all without notice to or demand
upon any Borrower or any other Person, all such notices and demands being hereby
expressly waived by each Borrower.
Section 8.5. Equalization Provision.
(a) Equalization Prior to an Equalization Event. Each US Lender agrees with the other US Lenders that if it, at any time, shall obtain any Advantage over the other US Lenders, or any thereof, in respect of the Applicable Debt (except as to Swing Loans and amounts under Article III hereof), such US Lender shall purchase from the other US Lenders, for cash and at par, such additional participation in the Applicable Debt as shall be necessary to nullify the Advantage. Each Canadian Lender agrees with the other Canadian Lenders that if it, at any time, shall obtain any Advantage over the other Canadian Lenders, or any thereof, in respect of the Applicable Debt (except as to amounts under Article III hereof), such Canadian Lender shall purchase from the other Canadian Lenders, for cash and at par, such additional participation in the Applicable Debt as shall be necessary to nullify the Advantage.
(b) Equalization After an Equalization Event. After the occurrence of an Equalization Event, each Lender agrees with the other Lenders that if such Lender, at any time, shall obtain any Advantage over the other Lenders or any thereof determined in respect of the Debt (including Swing Loans but excluding amounts under Article III hereof) then outstanding (as calculated, with respect to any amounts outstanding in Canadian Dollars, using the Dollar
Equivalent in effect on the Equalization Date, as hereinafter defined), such Lender shall purchase from the other Lenders, for cash and at par, such additional participation in the Debt as shall be necessary to nullify the Advantage in respect of the Debt. For purposes of determining whether or not, after the occurrence of an Equalization Event, an Advantage in respect of the Debt shall exist, Agent shall, as of the date that the Equalization Event occurs (the "Equalization Date"), determine an equalization percentage (the "Equalization Percentage") for each Lender by dividing the aggregate amount of such Lender's US Revolving Exposure and Canadian Revolving Exposure by the Revolving Credit Exposure.
(c) Recovery of Advantage. If any such Advantage resulting in the purchase of an additional participation as aforesaid shall be recovered in whole or in part from the Lender receiving the Advantage, each such purchase shall be rescinded, and the purchase price restored (but without interest unless such Lender receiving the Advantage is required to pay interest on the Advantage to the Person recovering the Advantage from such Lender) ratably to the extent of the recovery.
(d) Application and Sharing of Set-Off Amounts. Each Lender further agrees with the other Lenders that if it at any time shall receive any payment for or on behalf of a Credit Party on any Indebtedness owing by such Credit Party to such Lender by reason of offset of any deposit or other Indebtedness, it shall apply such payment first to any and all Indebtedness owing by such Credit Party to such Lender pursuant to this Agreement (including, without limitation, any participation purchased or to be purchased pursuant to this Section or any other Section of this Agreement). Each Credit Party agrees that any Lender so purchasing a participation from the other Lenders, or any thereof, pursuant to this Section may exercise all of its rights of payment (including the right of set-off) with respect to such participation as fully as if such Lender were a direct creditor of such Credit Party in the amount of such participation.
Section 8.6. Other Remedies. The remedies in this Article VIII are in addition to, not in limitation of, any other right, power, privilege, or remedy, either in law, in equity, or otherwise, to which the Lenders may be entitled. Agent shall exercise the rights under this Article VIII and all other collection efforts on behalf of the Lenders and no Lender shall act independently with respect thereto, except as otherwise specifically set forth in this Agreement.
ARTICLE IX. THE AGENT
The Lenders authorize KeyBank National Association and KeyBank National Association hereby agrees to act as agent for the Lenders in respect of this Agreement upon the terms and conditions set forth elsewhere in this Agreement, and upon the following terms and conditions:
Section 9.1. Appointment and Authorization. Each Lender hereby irrevocably appoints and authorizes Agent to take such action as agent on its behalf and to exercise such powers hereunder as are delegated to Agent by the terms hereof, together with such powers as are reasonably incidental thereto. Neither Agent nor any of its affiliates, directors, officers, attorneys or employees shall (a) be liable for any action taken or omitted to be taken by it or
them hereunder or in connection herewith, except for its or their own gross negligence or willful misconduct (as determined by a court of competent jurisdiction), or be responsible in any manner to any of the Lenders for the effectiveness, enforceability, genuineness, validity or due execution of this Agreement or any other Loan Documents, (b) be under any obligation to any Lender to ascertain or to inquire as to the performance or observance or any of the terms, covenants or conditions hereof or thereof on the part of Borrowers, or the financial condition of Borrowers, or (c) be liable to any of the Companies for consequential damages resulting from any breach of contract, tort or other wrong in connection with the negotiation, documentation, administration or collection of the Loans or Letters of Credit or any of the Loan Documents.
Section 9.2. Note Holders. Agent may treat the payee of any Note as the holder thereof until written notice of transfer shall have been filed with it, signed by such payee and in form satisfactory to Agent.
Section 9.3. Consultation With Counsel. Agent may consult with legal counsel selected by it and shall not be liable for any action taken or suffered in good faith by it in accordance with the opinion of such counsel.
Section 9.4. Documents. Agent shall not be under any duty to examine into or pass upon the validity, effectiveness, genuineness or value of any Loan Document or any other Related Writing furnished pursuant hereto or in connection herewith or the value of any collateral obtained hereunder, and Agent shall be entitled to assume that the same are valid, effective and genuine and what they purport to be.
Section 9.5. Agent and Affiliates. With respect to the Loans, Agent shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not Agent, and Agent and its affiliates may accept deposits from, lend money to and generally engage in any kind of business with any Company or any affiliate thereof.
Section 9.6. Knowledge of Default. It is expressly understood and agreed that Agent shall be entitled to assume that no Default or Event of Default has occurred, unless Agent has been notified by a Lender in writing that such Lender believes that a Default or Event of Default has occurred and is continuing and specifying the nature thereof or has been notified by a Borrower pursuant to Section 5.14 hereof.
Section 9.7. Action by Agent. Subject to the other terms and conditions hereof, so long as Agent shall be entitled, pursuant to Section 9.6 hereof, to assume that no Default or Event of Default shall have occurred and be continuing, Agent shall be entitled to use its discretion with respect to exercising or refraining from exercising any rights that may be vested in it by, or with respect to taking or refraining from taking any action or actions that it may be able to take under or in respect of, this Agreement. Agent shall incur no liability under or in respect of this Agreement by acting upon any notice, certificate, warranty or other paper or instrument believed by it to be genuine or authentic or to be signed by the proper party or parties, or with respect to anything that it may do or refrain from doing in the reasonable exercise of its judgment, or that may seem to it to be necessary or desirable in the premises.
Section 9.8. Notice of Default. In the event that Agent shall have acquired actual knowledge of any Default or Event of Default, Agent shall promptly notify the Lenders and shall take such action and assert such rights under this Agreement as the Required Lenders shall direct and Agent shall inform the other Lenders in writing of the action taken. Agent may take such action and assert such rights as it deems to be advisable, in its discretion, for the protection of the interests of the holders of the Debt.
Section 9.9. Indemnification of Agent. The Lenders agree to indemnify Agent (to the extent not reimbursed by Borrowers) ratably, according to their respective Applicable Commitment Percentages, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be imposed on, incurred by or asserted against Agent in its capacity as agent in any way relating to or arising out of this Agreement or any Loan Document or any action taken or omitted by Agent with respect to this Agreement or any Loan Document, provided that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including attorneys' fees) or disbursements resulting from Agent's gross negligence or willful misconduct (as determined by a court of competent jurisdiction), or from any action taken or omitted by Agent in any capacity other than as agent under this Agreement.
Section 9.10. Successor Agent. Agent may resign as agent hereunder by giving not fewer than thirty (30) days prior written notice to Borrowers and the Lenders. If Agent shall resign under this Agreement, then either (a) the Required Lenders shall appoint from among the Lenders a successor agent for the Lenders (with the consent of US Borrower so long as an Event of Default has not occurred and which consent shall not be unreasonably withheld), or (b) if a successor agent shall not be so appointed and approved within the thirty (30) day period following Agent's notice to the Lenders of its resignation, then Agent shall appoint a successor agent that shall serve as agent until such time as the Required Lenders appoint a successor agent. Upon its appointment, such successor agent shall succeed to the rights, powers and duties as agent, and the term "Agent" shall mean such successor effective upon its appointment, and the former agent's rights, powers and duties as agent shall be terminated without any other or further act or deed on the part of such former agent or any of the parties to this Agreement.
Section 9.11. Other Agents. As used in this Agreement, the term "Agent" shall only include Agent. The Syndication Agent shall not have any rights, obligations or responsibilities hereunder in such capacity.
Section 9.12. Designated Lending Office. The Lender that acts as the Designated Lending Office of Agent from time to time shall be entitled to the same indemnifications with respect to Borrowers and the other Lenders that Agent would have were it performing the administrative duties that the Designated Lending Office performs from time to time.
ARTICLE X. MISCELLANEOUS
Section 10.1. Lenders' Independent Investigation. Each Lender, by its signature to this Agreement, acknowledges and agrees that Agent has made no representation or warranty, express or implied, with respect to the creditworthiness, financial condition, or any other condition of any Company or with respect to the statements contained in any information memorandum furnished in connection herewith or in any other oral or written communication between Agent and such Lender. Each Lender represents that it has made and shall continue to make its own independent investigation of the creditworthiness, financial condition and affairs of the Companies in connection with the extension of credit hereunder, and agrees that Agent has no duty or responsibility, either initially or on a continuing basis, to provide any Lender with any credit or other information with respect thereto (other than such notices as may be expressly required to be given by Agent to the Lenders hereunder), whether coming into its possession before the first Credit Event hereunder or at any time or times thereafter.
Section 10.2. No Waiver; Cumulative Remedies. No omission or course of dealing on the part of Agent, any Lender or the holder of any Note in exercising any right, power or remedy hereunder or under any of the Loan Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy hereunder or under any of the Loan Documents. The remedies herein provided are cumulative and in addition to any other rights, powers or privileges held by operation of law, by contract or otherwise.
Section 10.3. Amendments, Consents. No amendment, modification, termination, or waiver of any provision of any Loan Document nor consent to any variance therefrom, shall be effective unless the same shall be in writing and signed by the Required Lenders and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. Anything herein to the contrary notwithstanding, unanimous consent of the Lenders shall be required with respect to (a) any increase in the Commitment hereunder (except as specified in Section 2.10(b) hereof), (b) the extension of maturity of the Debt, the payment date of interest or principal thereunder, or the payment of facility or other fees or amounts payable hereunder, (c) any reduction in the rate of interest on the Debt, or in any amount of principal or interest due on the Debt, or the payment of facility or other fees hereunder or any change in the manner of pro rata application of any payments made by Borrowers to the Lenders hereunder, (d) any change in any percentage voting requirement, voting rights, or the Required Lenders definition in this Agreement, (e) the release of any Borrower or Guarantor of Payment, or (f) any amendment to this Section 10.3 or Section 8.5 hereof. Notice of amendments or consents ratified by the Lenders hereunder shall be forwarded by Agent to all of the Lenders. Each Lender or other holder of a Note shall be bound by any amendment, waiver or consent obtained as authorized by this Section, regardless of its failure to agree thereto.
Section 10.4. Notices. All notices, requests, demands and other communications provided for hereunder shall be in writing and, if to a Borrower, mailed or delivered to it, addressed to it at the address specified on the signature pages of this Agreement, if to a Lender, mailed or delivered to it, addressed to the address of such Lender specified on the signature pages of this Agreement, or, as to each party, at such other address as shall be designated by such party in a written notice to each of the other parties. All notices, statements, requests, demands and other communications provided for hereunder shall be given by overnight delivery or first
class mail with postage prepaid by registered or certified mail, addressed as aforesaid, or sent by facsimile or e-mail (with telephonic confirmation of receipt of such facsimile or e-mail, except that telephonic confirmation is not required when notice is being provided under Section 5.3(d) hereof); provided that all notices hereunder shall not be effective until received.
Section 10.5. Costs, Expenses and Taxes. US Borrower and, to the extent relating to the Canadian Commitment, Canadian Borrowers agree to pay, on demand, all reasonable and properly documented costs and expenses of Agent, including but not limited to, (a) syndication, administration, travel and out-of-pocket expenses, including but not limited to attorneys' fees and expenses, of Agent in connection with the preparation, negotiation and closing of the Loan Documents and the administration of the Loan Documents, the collection and disbursement of all funds hereunder and the other instruments and documents to be delivered hereunder, (b) extraordinary expenses of Agent in connection with the administration of the Loan Documents and the other instruments and documents to be delivered hereunder, and (c) the reasonable fees and out-of-pocket expenses of special counsel for Agent, with respect to the foregoing, and of local counsel, if any, who may be retained by said special counsel with respect thereto. US Borrower and, to the extent relating to the Canadian Commitment, Canadian Borrowers also agree to pay, on demand, all properly documented costs and expenses of Agent and the Lenders, including reasonable attorneys' fees, in connection with the restructuring or enforcement of the Debt, this Agreement or any Related Writing. In addition, US Borrower and, to the extent relating to the Canadian Commitment, Canadian Borrowers shall pay any and all properly documented stamp and other taxes and fees payable or determined to be payable in connection with the execution and delivery of the Loan Documents, and the other instruments and documents to be delivered hereunder, and agree to hold Agent and each Lender harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay such taxes or fees other than those liabilities resulting from the gross negligence or willful misconduct (as determined by a court of competent jurisdiction) of Agent, or, with respect to amounts owing to a Lender, such Lender, in each case.
Section 10.6. Indemnification.
(a) US Borrower. US Borrower agrees to defend, indemnify and hold harmless Agent and the Lenders (and their respective affiliates, officers, directors, attorneys, agents and employees) from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including attorneys' fees) or disbursements of any kind or nature whatsoever that may be imposed on, incurred by or asserted against Agent or any Lender in connection with any investigative, administrative or judicial proceeding (whether or not such Lender or Agent shall be designated a party thereto) or any other claim by any Person relating to or arising out of any Loan Document or any actual or proposed use of proceeds of the Loans or any of the Debt, or any activities of any Company or its Affiliates.
(b) Canadian Borrowers. Each Canadian Borrower agrees to defend, indemnify and hold harmless Agent and the Canadian Lenders (and their respective affiliates, officers, directors, attorneys, agents and employees) from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including attorneys' fees) or disbursements of any kind or nature whatsoever that may be imposed on, incurred by or asserted
against Agent or any Canadian Lender in connection with any investigative, administrative or judicial proceeding (whether or not such Canadian Lender or Agent shall be designated a party thereto) or any other claim by any Person relating to or arising out of any Loan Document executed by a Canadian Borrower or any actual or proposed use of proceeds of the CAD Revolving Loans or any of the Applicable Debt, or any activities of any Company or its Affiliates.
(c) Generally. No Lender nor Agent shall have the right to be indemnified under this Section for its own gross negligence or willful misconduct, as determined by a court of competent jurisdiction. All obligations provided for in this Section 10.6 shall survive any termination of this Agreement.
Section 10.7. Obligations Several; No Fiduciary Obligations. The obligations of the Lenders hereunder are several and not joint. Nothing contained in this Agreement and no action taken by Agent or the Lenders pursuant hereto shall be deemed to constitute Agent or the Lenders a partnership, association, joint venture or other entity. No default by any Lender hereunder shall excuse the other Lenders from any obligation under this Agreement; but no Lender shall have or acquire any additional obligation of any kind by reason of such default. The relationship between Borrowers and the Lenders with respect to the Loan Documents and the Related Writings is and shall be solely that of debtors and creditors, respectively, and neither Agent nor any Lender shall have any fiduciary obligation toward any Credit Party with respect to any such documents or the transactions contemplated thereby.
Section 10.8. Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, and by facsimile signature, each of which counterparts when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement.
Section 10.9. Binding Effect; Borrowers' Assignment. This Agreement shall become effective when it shall have been executed by each Borrower, Agent and each Lender and thereafter shall be binding upon and inure to the benefit of each Borrower, Agent and each of the Lenders and their respective successors and assigns, except that no Borrower shall have the right to assign its rights hereunder or any interest herein without the prior written consent of Agent and all of the Lenders.
Section 10.10. Lender Assignments.
(a) Assignments of Commitments. Each Lender shall have the right at any time or times to assign to an Eligible Transferee (other than to a Lender that shall not be in compliance with this Agreement), without recourse, all or a percentage of all of the following: (i) such Lender's Commitment, (ii) all Loans made by that Lender, (iii) such Lender's Notes, and (iv) such Lender's interest in any Letter of Credit or Swing Loan, and any participation purchased pursuant to Section 2.2(b), 2.2(c) or 8.5 hereof.
(b) Prior Consent. No assignment may be consummated pursuant to this Section 10.10 without the prior written consent of US Borrower and Agent (other than an assignment by
any Lender to another Lender or to any affiliate of such Lender which affiliate is an Eligible Transferee and either wholly-owned by a Lender or is wholly-owned by a Person that wholly owns, either directly or indirectly, such Lender), which consent of US Borrower and Agent shall not be unreasonably withheld (a failure of US Borrower to approve a distressed debt fund or vulture fund shall not be deemed to be unreasonable so long as the Leverage Ratio for the most recently completed four fiscal quarters of US Borrower shall be less than 3.00 to 1.00); provided, however, that US Borrower's consent shall not be required if, at the time of the proposed assignment, any Default or Event of Default shall then exist. Anything herein to the contrary notwithstanding, any Lender may at any time make a collateral assignment of all or any portion of its rights under the Loan Documents to a Federal Reserve Bank, and no such assignment shall release such assigning Lender from its obligations hereunder.
(c) Minimum Amount. Each such assignment shall be in a minimum amount of the lesser of Five Million Dollars ($5,000,000) of the assignor's Commitment and interest herein, or the entire amount of the assignor's Commitment and interest herein.
(d) Assignment Fee. Unless the assignment shall be to an affiliate of the assignor or the assignment shall be due to merger of the assignor or for regulatory purposes, either the assignor or the assignee shall remit to Agent, for its own account, an administrative fee of Three Thousand Five Hundred Dollars ($3,500).
(e) Assignment Agreement. Unless the assignment shall be due to merger of the assignor or a collateral assignment for regulatory purposes, the assignor shall (i) cause the assignee to execute and deliver to US Borrower and Agent an Assignment Agreement, and (ii) execute and deliver, or cause the assignee to execute and deliver, as the case may be, to Agent such additional amendments, assurances and other writings as Agent may reasonably require.
(f) Non-U.S. Assignee. If the assignment is to be made to an assignee that is organized under the laws of any jurisdiction other than the United States or any state thereof, the assignor Lender shall cause such assignee, at least five Business Days prior to the effective date of such assignment, (i) to represent to the assignor Lender (for the benefit of the assignor Lender, Agent and Borrowers) that under applicable law and treaties no taxes will be required to be withheld by Agent, Borrowers or the assignor with respect to any payments to be made to such assignee in respect of the Loans hereunder, (ii) to furnish to the assignor Lender (and, in the case of any assignee registered in the Register (as defined below), Agent and US Borrower) either (A) U.S. Internal Revenue Service Form W-8ECI or U.S. Internal Revenue Service Form W-8BEN or (B) United States Internal Revenue Service Form W-8 or W-9, as applicable (wherein such assignee claims entitlement to complete exemption from U.S. federal withholding tax on all interest payments hereunder), and (iii) to agree (for the benefit of the assignor, Agent and Borrowers) to provide to the assignor Lender (and, in the case of any assignee registered in the Register, to Agent and US Borrower) a new Form W-8ECI or Form W-8BEN or Form W-8 or W-9, as applicable, upon the expiration or obsolescence of any previously delivered form and comparable statements in accordance with applicable U.S. laws and regulations and amendments duly executed and completed by such assignee, and to comply from time to time with all applicable U.S. laws and regulations with regard to such withholding tax exemption. Notwithstanding any other provisions hereof, a Canadian Lender may not make any assignment
to an Eligible Assignee that is a non-resident of Canada for purposes of the Income Tax Act of Canada (with respect to which payments to such non-resident of principal, interest, fees and other amounts by the Canadian Borrowers would be subject to Canadian withholding tax) at a rate higher than that then applicable to the assignor.
(g) Deliveries by Borrowers. Upon satisfaction of all applicable requirements specified in subsections (a) through (f) above, Borrowers shall execute and deliver (i) to Agent, the assignor and the assignee, any consent or release (of all or a portion of the obligations of the assignor) required to be delivered by Borrowers in connection with the Assignment Agreement, and (ii) to the assignee and the assignor, if applicable, an appropriate Note or Notes. After delivery of the new Note or Notes, the assignor's Note or Notes being replaced shall be returned to US Borrower marked "replaced".
(h) Effect of Assignment. Upon satisfaction of all applicable requirements set forth in subsections (a) through (g) above, and any other condition contained in this Section 10.10, (i) the assignee shall become and thereafter be deemed to be a "Lender" for the purposes of this Agreement, (ii) the Assignor shall be released from its obligations hereunder to the extent that its interest has been assigned, (iii) in the event that the assignor's entire interest has been assigned, the assignor shall cease to be and thereafter shall no longer be deemed to be a "Lender" and (iv) the signature pages hereto and Schedule 1 hereto shall be automatically amended, without further action, to reflect the result of any such assignment.
(i) Agent to Maintain Register. Agent shall maintain at the address for notices referred to in Section 10.4 hereof a copy of each Assignment Agreement 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. The entries in the Register shall be conclusive, in the absence of manifest error, and Borrowers, Agent and the Lenders may treat each Person whose name is recorded in the Register as the owner of the Loan recorded therein for all purposes of this Agreement. The Register shall be available for inspection by Borrowers or any Lender at any reasonable time and from time to time upon reasonable prior notice.
Section 10.11. Sale of Participations. Any Lender may, in the ordinary course of its commercial banking business and in accordance with applicable law, at any time sell participations to one or more commercial banks or other Persons other than a Company or an Affiliate of a Company (each a "Participant") in all or a portion of its rights or obligations under this Agreement and the other Loan Documents (including, without limitation, all or a portion of the Commitment and the Loans and participations owing to it and the Note held by it); provided that:
(a) any such Lender's obligations under this Agreement and the other Loan Documents shall remain unchanged;
(b) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations;
(c) the parties hereto shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and each of the other Loan Documents;
(d) such Participant shall be bound by the provisions of Section 8.5 hereof, and the Lender selling such participation shall obtain from such Participant a written confirmation of its agreement to be so bound; and
(e) no Participant (unless such Participant is itself a Lender) shall be entitled to require such Lender to take or refrain from taking action under this Agreement or under any other Loan Document, except that such Lender may agree with such Participant that such Lender will not, without such Participant's consent, take action of the type described as follows:
(i) increase the portion of the participation amount of any Participant over the amount thereof then in effect, or extend the Commitment Period, without the written consent of each Participant affected thereby; or
(ii) reduce the principal amount of or extend the time for any payment of principal of any Loan, or reduce the rate of interest or extend the time for payment of interest on any Loan, or reduce the commitment fee, without the written consent of each Participant affected thereby.
Borrowers agree that any Lender that sells participations pursuant to this
Section shall still be entitled to the benefits of Article III hereof,
notwithstanding any such transfer; provided, however, that the obligations of
Borrowers shall not increase as a result of such transfer and Borrowers shall
have no obligation to any Participant.
Section 10.12. Severability of Provisions; Captions; Attachments. Any provision of this Agreement that shall be prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. The several captions to Sections and subsections herein are inserted for convenience only and shall be ignored in interpreting the provisions of this Agreement. Each schedule or exhibit attached to this Agreement shall be incorporated herein and shall be deemed to be a part hereof.
Section 10.13. Investment Purpose. Each of the Lenders represents and warrants to Borrowers that it is entering into this Agreement with the present intention of acquiring any Note issued pursuant hereto for investment purposes only and not for the purpose of distribution or resale, it being understood, however, that each Lender shall at all times retain full control over the disposition of its assets.
Section 10.14. Confidentiality. Agent and each Lender shall hold all Confidential Information in accordance with the customary procedures of Agent or such Lender for handling confidential information of this nature, and in accordance with safe and sound banking practices. Notwithstanding the foregoing, Agent or any Lender may in any event make disclosures of, and
furnish copies of Confidential Information (a) to another agent under this
Agreement or another Lender; (b) when reasonably required by any bona fide
transferee or participant in connection with the contemplated transfer of any
Loans or Commitment or participation therein (provided that each such
prospective transferee or participant shall execute an agreement for the benefit
of Borrowers with such prospective transferor Lender or participant containing
provisions substantially identical to those contained in this Section 10.14);
(c) to the parent corporation or other affiliates of Agent or such Lender, and
to their respective auditors and attorneys; and (d) as required or requested by
any governmental agency or representative thereof, or pursuant to legal process,
provided, that, unless specifically prohibited by applicable law or court order,
Agent or such Lender, as applicable, shall notify the chief financial officer of
US Borrower of any request by any governmental agency or representative thereof
(other than any such request in connection with an examination of the financial
condition of Agent or such Lender by such governmental agency), and of any other
request pursuant to legal process, for disclosure of any such non-public
information prior to disclosure of such Confidential Information. In no event
shall Agent or any Lender be obligated or required to return any materials
furnished by or on behalf of any Company. Each Borrower hereby agrees that the
failure of Agent or any Lender to comply with the provisions of this Section
10.14 shall not relieve any Borrower of any of the obligations to Agent and the
Lenders under this Agreement and the other Loan Documents.
Section 10.15. Entire Agreement. This Agreement, any Note and any other Loan Document or other agreement, document or instrument attached hereto or executed on or as of the Closing Date integrate all of the terms and conditions mentioned herein or incidental hereto and supersede all oral representations and negotiations and prior writings with respect to the subject matter hereof.
Section 10.16. Legal Representation of Parties. The Loan Documents were negotiated by the parties with the benefit of legal representation and any rule of construction or interpretation otherwise requiring this Agreement or any other Loan Document to be construed or interpreted against any party shall not apply to any construction or interpretation hereof or thereof.
Section 10.17. Currency.
(a) Currency Equivalent Generally. For the purposes of making valuations or computations under this Agreement (but not for the purposes of the preparation of any financial statements delivered pursuant hereto), unless expressly provided otherwise, where a reference is made to a dollar amount the amount is to be considered as the amount in Dollars and, therefor, each other currency shall be converted into the Dollar Equivalent.
(b) Judgment Currency. If Agent, on behalf of the Lenders, obtains a judgment or judgments against any Credit Party in Canadian Dollars, the obligations of such Credit Party in respect of any sum adjudged to be due to Agent or the Lenders hereunder or under the Notes (the "Judgment Amount") shall be discharged only to the extent that, on the Business Day following receipt by Agent of the Judgment Amount in Canadian Dollars, Agent, in accordance with normal banking procedures, purchases Dollars with the Judgment Amount in Canadian Dollars. If the amount of Dollars so purchased is less than the amount of Dollars that could have been
purchased with the Judgment Amount on the date or dates the Judgment Amount (excluding the portion of the Judgment Amount that has accrued as a result of the failure of such Credit Party to pay the sum originally due hereunder or under the Notes when it was originally due and owing to Agent or the Lenders hereunder or under the Notes) was originally due and owing to Agent or the Lenders hereunder or under the Notes (the "Original Due Date") (the "Loss"), such Credit Party agrees as a separate obligation and notwithstanding any such judgment, to indemnify Agent or such Lender, as the case may be, against the Loss, and if the amount of Dollars so purchased exceeds the amount of Dollars that could have been purchased with the Judgment Amount on the Original Due Date, Agent or such Lender agrees to remit such excess to such Credit Party.
Section 10.18. Governing Law; Submission to Jurisdiction. This Agreement, each of the Notes and any Related Writing shall be governed by and construed in accordance with the laws of the State of Ohio and the respective rights and obligations of Borrowers, Agent, and the Lenders shall be governed by Ohio law, without regard to principles of conflict of laws. Each Borrower hereby irrevocably submits to the non-exclusive jurisdiction of any Ohio state or federal court sitting in Cleveland, Ohio, over any action or proceeding arising out of or relating to this Agreement, the Debt or any Related Writing, and each Borrower hereby irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in such Ohio state or federal court. Each Borrower, on behalf of itself and its Subsidiaries, hereby irrevocably waives, to the fullest extent permitted by law, any objection it may now or hereafter have to the laying of venue in any action or proceeding in any such court as well as any right it may now or hereafter have to remove such action or proceeding, once commenced, to another court on the grounds of FORUM NON CONVENIENS or otherwise. Each Borrower agrees that a final, nonappealable judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.
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Section 10.19. JURY TRIAL WAIVER. TO THE EXTENT PERMITTED BY LAW, EACH BORROWER, AGENT AND EACH LENDER WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG BORROWERS, AGENT AND THE LENDERS, OR ANY THEREOF, ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT OR ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO.
IN WITNESS WHEREOF, the parties have executed and delivered this Credit Agreement in Cleveland, Ohio as of the date first set forth above.
Address: One Applied Plaza APPLIED INDUSTRIAL TECHNOLOGIES, Cleveland, Ohio 44115 INC. Attn: Chief Financial Officer By: /s/ Mark O. Eisele ---------------------------- Name: Mark O. Eisele Title: Vice President and Controller By: /s/ John R. Whitten -------------------------------- Name: John R. Whitten Title: Vice President-Chief Financial Officer & Treasurer Address: One Applied Plaza AIT LIMITED PARTNERSHIP Cleveland, Ohio 44115 by: Applied Nova Scotia Company, its Attn: Chief Financial Officer general partner By: /s/ Mark O. Eisele -------------------------------- Name: Mark O. Eisele Title: Vice President and Controller By: /s/ John R. Whitten -------------------------------- Name: John R. Whitten Title: Vice President-Chief Financial Officer & Treasurer |
Signature Page 1 of 3 of the Credit Agreement
Address: One Applied Plaza APPLIED INDUSTRIAL TECHNOLOGIES, Cleveland, Ohio 44115 LTD. Attn: Chief Financial Officer By: /s/ Mark O. Eisele --------------------------------- Name: Mark O. Eisele Title: Vice President By: /s/ John R. Whitten --------------------------------- Name: John R. Whitten Title: Vice President-Chief Financial Officer & Treasurer Address: One Applied Plaza APPLIED NOVA SCOTIA COMPANY Cleveland, Ohio 44115 Attn: Chief Financial Officer By: /s/ Mark O. Eisele --------------------------------- Name: Mark O. Eisele Title: Vice President and Controller By: /s/ John R. Whitten --------------------------------- Name: John R. Whitten Title: Vice President-Chief Financial Officer & Treasurer Address: One Applied Plaza DYNAVEST NOVA SCOTIA COMPANY Cleveland, Ohio 44115 Attn: Chief Financial Officer By: /s/ Mark O. Eisele --------------------------------- Name: Mark O. Eisele Title: Vice President and Controller By: /s/ John R. Whitten --------------------------------- Name: John R. Whitten Title: Vice President-Chief Financial Officer & Treasurer Address: 127 Public Square KEYBANK NATIONAL ASSOCIATION Cleveland, Ohio 44114-1306 as Agent and as a Lender Attention: Marianne T. Meil By: /s/ Marianne T. Meil --------------------------------- Name: Marianne T. Meil Title: Vice President |
Signature Page 2 of 3 of the Credit Agreement
Address: 1350 Euclid Avenue, 11th Floor U.S. BANK NATIONAL ASSOCIATION, Cleveland, Ohio 44115 as Syndication Agent and as a Attention: Christine Gencer Lender By: /s/ Christine C. Gencer ------------------------------ Name: Christine C. Gencer Title: Vice President Address: 1404 East Ninth Street FIFTH THIRD BANK Cleveland, Ohio 44114 Attention: James P. Byrnes By: /s/ James P. Byrnes ------------------------------ Name: James P. Byrnes Title: Vice President Address: 1375 East Ninth Street, Suite 2430 PNC BANK, NATIONAL ASSOCIATION Cleveland, Ohio 44114 Attention: Joseph Moran By: /s/ Peter A. Yanief ------------------------------ Name: Peter A. Yanief Title: Assistant Vice President Address: Bank One Center BANK ONE, NATIONAL ASSOCIATION, 131 South Dearborn, 6th Floor CANADA BRANCH Chicago, Illinois 60603 Attention: Mike Kelly By: /s/ Mike Kelly ------------------------------ Name: Mike Kelly Title: Associate Address: 1 First Canadian Place, 4th Floor BANK OF MONTREAL P.O. Box 150 Toronto, Ontario M5X 1H3 By: /s/ Ben Ciallella Attention: Ben Ciallella ------------------------------ Name: Ben Ciallella Title: Vice President |
Signature Page 3 of 3 of the Credit Agreement
EXHIBIT 10
FIRST AMENDMENT
TO THE
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
DEFERRED COMPENSATION PLAN
(SEPTEMBER 1, 2003 RESTATEMENT)
WHEREAS, the Applied Industrial Technologies, Inc. Deferred Compensation Plan which was originally known as the Bearings, Inc. Deferred Compensation Plan, was established as of July 1, 1993, by Bearings, Inc., which later became known as Applied Industrial Technologies, Inc. (the "Company") to provide key employees of the Company and its affiliates with a means by which to defer receipt of all or a portion of their incentive compensation received from the Company; and
WHEREAS, the Company restated the Plan, effective as of September 1, 2003, in order to reflect certain revisions to Section 303A(8) of the New York Stock Exchange Listed Company Manual;
NOW, THEREFORE, effective as of October 21, 2003, Section 6.1 of the Plan is hereby amended to provide as follows:
6.1 AMENDMENT AND TERMINATION OF THE PLAN. The Company reserves the right to amend or terminate the Plan at any time; provided, however, that no amendment or termination shall affect the rights of Participants to amounts previously credited to their Deferral Accounts pursuant to Section 3.2; and provided further, that, effective on and after October 21, 2003, the provisions of Section 3.2 providing for the crediting of 110% of a Deferral deemed invested in a Fund comprised of Common Shares shall continue in effect until the earlier of (i) the tenth anniversary of the date as of which the Plan was last approved by the holders of a majority of the Common Shares then outstanding, or, if later, the date as of which the limited transition period under Section 303A(8) of the New York Stock Exchange Listed Company Manual would end unless otherwise permitted to continue under said Section; or (ii) the date as of which the Plan is terminated by the Company. Notwithstanding any other provision to the contrary, the number of Common Shares comprising a Fund in which Deferrals made on and after October 21, 2003 under Section 3.2 are deemed invested shall be limited to 1,800,000 (adjusted accordingly, however, for stock splits occurring after said date), until subsequent approval by shareholders.
Executed at Cleveland, Ohio, this 19th day of December, 2003.
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
By: /s/ Fred D. Bauer --------------------------- Fred D. Bauer Vice President |
EXHIBIT 15
February 6, 2004
Applied Industrial Technologies, Inc.
One Applied Plaza
Euclid Avenue at East 36th Street
Cleveland, Ohio 44115
We have made a review, in accordance with standards established by the American Institute of Certified Public Accountants, of the unaudited interim financial information of Applied Industrial Technologies, Inc. and subsidiaries for the periods ended December 31, 2003 and 2002, as indicated in our report dated February 6, 2004 (which report includes an explanatory paragraph concerning the adoption of a new accounting principle in fiscal 2004); because we did not perform an audit, we expressed no opinion on that information.
We are aware that our report referred to above, which is included in your Quarterly Report on Form 10-Q for the quarter ended December 31, 2003, is incorporated by reference in Registration Statement Nos. 33-42623, 33-43506, 33-53401, 33-60687, 33-65509, 33-65513, 333-83809 and 333-69002 of Applied Industrial Technologies, Inc. on Forms S-8.
We also are aware that the aforementioned report, pursuant to Rule 436(c) under the Securities Act of 1933, is not considered a part of the Registration Statement prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of Sections 7 and 11 of that Act.
/s/ Deloitte & Touche LLP Cleveland, Ohio |
EXHIBIT 31
Certifications of Disclosure in Quarterly Report on Form 10-Q
I, David L. Pugh, Chairman & Chief Executive Officer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Applied Industrial Technologies, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: February 9, 2004 /s/ David L. Pugh ---------------------------------- David L. Pugh Chairman & Chief Executive Officer |
I, Mark O. Eisele, Vice President-Chief Financial Officer & Treasurer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Applied Industrial Technologies, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: February 9, 2004 /s/ Mark O. Eisele ------------------------------------- Mark O. Eisele Vice President-Chief Financial Officer & Treasurer |
EXHIBIT 32
[The following certification accompanies Applied Industrial Technologies' Quarterly Report on Form 10-Q for the quarter ended December 31, 2003, and is not filed, as provided in applicable SEC releases.]
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND
PRINCIPAL FINANCIAL OFFICER PURSUANT TO
18 U.S.C. 1350
In connection with the Form 10-Q (the "Report") of Applied Industrial Technologies, Inc. (the "Company") for the period ending December 31, 2003, we, David L. Pugh, Chairman & Chief Executive Officer, and Mark O. Eisele, Vice President-Chief Financial Officer & Treasurer of the Company, certify that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ David L. Pugh /s/ Mark O. Eisele ----------------------------- -------------------------------------- David L. Pugh Mark O. Eisele Chairman & Chief Executive Vice President-Chief Financial Officer Officer & Treasurer Dated: February 9, 2004 |
[A signed original of this written statement required by Section 906 has been provided to Applied Industrial Technologies, Inc. and will be retained by Applied Industrial Technologies, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.]