EXHIBIT 10(i)
CHECKPOINT SYSTEMS, INC.
NOTE AGREEMENT
Dated as of March 1, 1994
$12,000,000 Principal Amount
8.27% Series A Senior Notes
Due April 1, 2002
1. DESCRIPTION OF NOTES AND COMMITMENT 1
1.1. Description of Notes 1
1.2. Commitment; Closing Date 1
1.3. Guaranty Agreement; Release 2
2. PREPAYMENT OF NOTES 2
2.1. Required Prepayments 2
2.2. Optional Prepayments 2
2.3. Notice of Prepayments 3
2.4. Surrender of Notes on Prepayment or Exchange 4
2.5. Direct Payment and Deemed Date of Receipt 4
2.6. Allocation of Payments 4
2.7. Payments Due on Saturdays, Sundays and Holidays 4
3. REPRESENTATIONS 4
3.1. Representations of the Company 4
3.2. Representations of the Purchasers 10
4. CLOSING CONDITIONS 11
4.1. Representations and Warranties 11
4.2. Legal Opinions 11
4.3. Events of Default 12
4.4. Payment of Fees and Expenses 12
4.5. Sale of Notes to Other Purchasers 12
4.6. Guaranty Agreement 12
4.7. Legality of Investment 12
4.8. Private Placement Number 12
4.9. Proceedings and Documents 12
5. INTERPRETATION OF AGREEMENT 12
5.1. Certain Terms Defined 12
5.2. Accounting Principles 21
5.3. Valuation Principles 21
5.4. Direct or Indirect Actions 22
6. AFFIRMATIVE COVENANTS 22
6.1. Corporate Existence 22
6.2. Insurance 22
6.3. Taxes, Claims for Labor and Materials 22
6.4. Maintenance of Properties 22
6.5. Maintenance of Records 23
6.6. Financial Information and Reports 23
6.7. Inspection of Properties and Records 25
6.8. ERISA 25
6.9. Compliance with Laws 26
6.10 Acquisition of Notes 27
6.11.Private Placement Number; NAIC 27
6.12.Nature of Business 27
6.13.Description of Actual Use of Proceeds 27
7. NEGATIVE COVENANTS 27
7.1. Net Worth 27
7.2. Fixed Charge Ratio 27
7.3. Funded Debt 28
7.4. Funded Debt of Subsidiaries 28
7.5. Liens 29
7.6. Restricted Payments 30
7.7. Merger or Consolidation 30
7.8. Sale of Assets 31
7.9. Disposition of Stock of Subsidiaries 32
7.10.Repurchase of Leases 32
7.11.Transactions with Affiliates 33
7.12.Guaranties 33
7.13.Consolidated Tax Returns 33
7.14.Restrictions on Dividends 33
8. EVENTS OF DEFAULT AND REMEDIES THEREFOR 33
8.1. Nature of Events 33
8.2. Remedies on Default 35
8.3. Annulment of Acceleration of Notes 35
8.4. Other Remedies 36
8.5. Conduct No Waiver; Collection Expenses 36
8.6. Remedies Cumulative 36
8.7. Notice of Default 36
9. AMENDMENTS, WAIVERS AND CONSENTS 37
9.1. Matters Subject to Modification 37
9.2. Solicitation of Holders of Notes 37
9.3. Binding Effect 37
10. FORM OF NOTES, REGISTRATION, TRANSFER, EXCHANGE
AND REPLACEMENT 38
10.1.Form of Notes 38
10.2.Note Register 38
10.3.Issuance of New Notes upon
Exchange or Transfer 38
10.4. Replacement of Notes 38
11. ADDITIONAL SERIES OF NOTES 39
11.1. Provision for Additional Series of Notes 39
11.2. Conditions to Additional Series of Notes 39
12. MISCELLANEOUS 39
12.1. Expenses 39
12.2. Notices 40
12.3. Reproduction of Documents 40
12.4. Successors and Assigns 40
12.5. Law Governing 40
12.6. Headings 40
12.7. Counterparts 41
12.8. Reliance on and Survival of Provisions 41
12.9. Integration and Severability 41
12.10.Confidentiality 41
SCHEDULE I - Purchasers and Commitments 43
CHECKPOINT SYSTEMS, INC.
NOTE AGREEMENT
Dated as of March 1, 1994
To Each of the Purchasers
Named in Attached Schedule I
Ladies and Gentlemen:
CHECKPOINT SYSTEMS, INC., a Pennsylvania corporation (the "Company"),
agrees with you as follows:
1. DESCRIPTION OF NOTES AND COMMITMENT
1.1. Description of Notes. The Company has authorized the issuance and
sale of $12,000,000 aggregate principal amount of its Series A Senior
Notes (the "Notes"), to be dated the date of issuance, to bear interest
from such date (computed on the basis of a 360-day year comprised of
twelve 30-day months), payable semi-annually on April 1 and October 1 of
each year, commencing October 1, 1994, and at maturity, at the rate of
8.27% per annum prior to maturity and shall bear interest on any overdue
principal (including any overdue optional or required prepayment), on any
overdue Make-Whole Amount, and (to the extent legally enforceable) on any
overdue installment of interest at the rate of 10.27% per annum. The
Notes shall be expressed to mature on April 1, 2002 and shall be
substantially in the form attached as Exhibit A. The term "Notes" as used
herein shall include each Note delivered pursuant to this Note Agreement
(the "Agreement") and each Note delivered in substitution or exchange
therefor and, where applicable, shall include the singular number as well
as the plural. Any reference to you in this Agreement shall in all
instances be deemed to include any nominee of yours or any separate
account or other person on whose behalf you are purchasing Notes. You and
the other purchasers are sometimes referred to herein individually as a
"Purchaser" and collectively as the "Purchasers."
1.2. Commitment; Closing Date. Subject to the terms and conditions hereof
and on the basis of the representations and warranties hereinafter set
forth, the Company agrees to issue and sell to you, and you agree to
purchase from the Company, Notes in the aggregate principal amount set
forth opposite your name in the attached Schedule I at a price of 100% of
the principal amount thereof.
Delivery of and payment for the Notes shall be made at the offices of
Gardner, Carton & Douglas, 321 North Clark Street, Quaker Tower, Chicago,
Illinois 60610, at 9:00 a.m., Chicago time, on March 23, 1994 or on such
other date not later than March 31, 1994, as you and the Company may
mutually agree (the "Closing Date"). The Notes shall be delivered to you
in the form of one or more Notes in fully registered form, issued in your
name or in the name of your nominee. Delivery of the Notes to you on the
Closing Date shall be against payment of the purchase price therefor in
Federal funds or other funds in U.S. dollars immediately available at
First Fidelity Bank, N.A., Philadelphia, Pennsylvania, A.B.A. No. 031-000-
503, for deposit in the Company's Account No. 4920450. If on the Closing
Date the Company shall fail to tender the Notes to you, you shall be
relieved of all remaining obligations under this Agreement. Nothing in
the preceding sentence shall relieve the Company of any liability
occasioned by such failure to deliver the Notes. The funding and other
obligations of the Purchasers under this Agreement shall be several and
not joint.
1.3. Guaranty Agreement; Release. The Notes will be guaranteed by
Checkpoint Systems of Puerto Rico, Inc. (the "Guarantor") pursuant to the
Guaranty Agreement. In the event the Guarantor has been released from
its guaranty under or pursuant to the Credit Agreement, the Company will
promptly notify you of such release and, upon delivery by the Company to
you of evidence reasonably satisfactory to you that the Guarantor has been
so released, you agree to release the Guarantor from its obligations
under the Guaranty Agreement within 10 days thereafter. In the event any
other Subsidiary shall at any time guarantee all or any portion of
Indebtedness or any other obligation (contingent or otherwise) of the
Company outstanding under the Credit Agreement, the Company shall cause
such Subsidiary to contemporaneously guarantee the Notes and become a
party to the Guaranty Agreement.
2. PREPAYMENT OF NOTES
2.1. Required Prepayments. In addition to payment of all outstanding
principal of the Notes at maturity and regardless of the amount of Notes
which may be outstanding from time to time, the Company shall prepay and
there shall become due and payable on April 1 in each year $4,000,000 of
the principal amount of the Notes or such lesser amount as would
constitute payment in full on the Notes, commencing April 1, 2000 and
ending April 1, 2001, inclusive, with the remaining principal payable on
April 1, 2002. Each such prepayment shall be at a price of 100% of the
principal amount prepaid, together with interest accrued thereon to the
date of prepayment, without a Make-Whole Amount.
2.2. Optional Prepayments.
(a) Upon notice as provided in Section 2.3, the Company may prepay the
Notes, in whole or in part, at any time, in an amount not less than
$1,000,000, an integral multiple of $100,000 in excess thereof or such
lesser amount as shall constitute payment in full of the Notes. Each such
prepayment shall be at a price of 100% of the principal amount to be
prepaid, plus interest accrued thereon to the date of prepayment, plus the
Make-Whole Amount.
(b) Upon learning of a Change of Control, the Company shall immediately
give notice to each holder of a Note of the Change of Control, accompanied
by a certificate of an authorized officer of the Company specifying the
nature of the Change of Control. Such notice shall (i) set forth the
effective date of the Change of Control, (ii) contain the written,
irrevocable offer of the Company to prepay, on a date specified in such
notice which shall be not less than 30 nor more than 45 calendar days
after the date of such notice, the entire principal amount of the Notes
held by each holder at a price equal to 100% thereof, plus interest
accrued thereon to the date of prepayment, plus, in the event that a
Default or Event of Default exists, or after giving effect to such Change
of Control, would exist, the Make-Whole Amount, (ii) state that notice of
acceptance of the Company's offer to prepay under this Section 2.2(b) must
be delivered to the Company not later than 10 Business Days prior to the
date fixed for prepayment, and (iii) contain the information specified in
clauses (iii), (iv) and (v) of the first sentence of Section 2.3. Upon
receipt by the Company of such notice of acceptance from any holder, but
subject to the following sentence, the aggregate principal amount of Notes
held by such holder, plus the interest accrued thereon, plus, in the event
that a Default or Event of Default exists or, after giving effect to such
Change of Control, would exist, the Make-Whole Amount shall become due
and payable on the day specified in the Company's notice. Not earlier
than 7 Business Days prior to the date fixed for prepayment, the Company
shall give written notice to each holder of those holders, and the
principal amount of Notes held by each, who have given notices of
acceptance of the Company's offer, and thereafter any holder may change
its response to the Company's offer by written notice to such effect
delivered to the Company not less than 3 Business Days prior to the date
fixed for prepayment.
(c) Any optional prepayment of less than all of the Notes outstanding
pursuant to Section 2.2(a), Section 2.2(b) or Section 7.7 shall be applied
to the outstanding principal amount of the Notes, in inverse order of
maturity.
(d) Except as provided in Section 7.7, Section 2.1 and this Section 2.2,
the Notes shall not be prepayable in whole or in part.
2.3. Notice of Prepayments. The Company shall give notice of any optional
prepayment of the Notes pursuant to Section 2.2(a) to each holder of the
Notes not less than 30 days nor more than 60 days before the date fixed
for prepayment, specifying (i) such date, (ii) the principal amount of the
holder's Notes to be prepaid on such date, (iii) the Determination Date
for calculating the Make-Whole Amount, (iv) a calculation of the estimated
amount of the Make-Whole Amount showing in detail the method of
calculation and (v) the accrued interest applicable to the prepayment.
Notice of prepayment having been so given, the aggregate principal amount
of the Notes specified in such notice, together with the Make-Whole
Amount, if any, and accrued interest thereon shall become due and payable
on the prepayment date.
The Company also shall give notice to each holder of the Notes to be
prepaid pursuant to Section 2.2(a) or (b) or Section 7.7 by telecopy,
telegram, telex or other same-day written communication, confirmed by
notice delivered by overnight courier, as soon as practicable but in any
event no less than 1 Business Day prior to the prepayment date, of the
Make-Whole Amount applicable to such prepayment and the details of the
calculations used to determine the amount of such Make-Whole Amount.
In the event of a miscalculation of the Make-Whole Amount that
results in an additional amount due to holders of the Notes in respect
thereof, such additional amount shall be payable no later than 2 Business
Days following notice to the Company by any holder of the Notes.
2.4. Surrender of Notes on Prepayment or Exchange. Subject to Section
2.5, upon any partial prepayment of a Note pursuant to this Section 2 or
partial exchange of a Note pursuant to Section 10.3, such Note may, at the
option of the holder thereof, (i) be surrendered to the Company pursuant
to Section 10.3 in exchange for a new Note or Notes equal to the principal
amount remaining unpaid on the surrendered Note, or (ii) be made available
to the Company, at the Company's principal office, for notation thereon of
the portion of the principal so prepaid or exchanged. In case the entire
principal amount of any Note is prepaid or exchanged, such Note shall be
surrendered to the Company for cancellation and shall not be reissued, and
no Note shall be issued in lieu of such Note.
2.5. Direct Payment and Deemed Date of Receipt. Notwithstanding any other
provision contained in the Notes or this Agreement, the Company will pay
all sums becoming due on each Note held by you or any subsequent
Institutional Holder by wire transfer of immediately available funds to
such account as you or such subsequent Institutional Holder have
designated in Schedule I, or as you or such subsequent Institutional
Holder may otherwise designate by notice to the Company (upon which notice
the Company may rely without independent investigation), in each case
without presentment and without notations being made thereon, except that
any such Note so paid or prepaid in full shall be surrendered to the
Company for cancellation. Any wire transfer shall identify such payment
in the manner set forth in Schedule I and shall identify the payment as
principal, Make-Whole Amount, if any, and/or interest. You and any
subsequent Institutional Holder of a Note to which this Section 2.5
applies agree that, before selling or otherwise transferring any such
Note, you or it will make a notation thereon of the aggregate amount of
all payments of principal theretofore made and of the date to which
interest has been paid and, upon written request of the Company, will
provide a copy of such notations to the Company. Any payment made
pursuant to this Section 2.5 shall be deemed received on the payment date
only if received before 11:00 a.m., Chicago time. Payments received after
11:00 a.m., Chicago time, shall be deemed received on the next succeeding
Business Day.
2.6. Allocation of Payments. In the case of a prepayment pursuant to
Sections 2.1, 2.2(a) or 7.7, if less than the entire principal amount of
all the Notes outstanding is to be paid, the Company will prorate the
aggregate principal amount to be paid among the Notes in proportion to the
aggregate unpaid principal amounts thereof.
2.7. Payments Due on Saturdays, Sundays and Holidays. If the date of any
required prepayment of the Notes or any interest payment date on the Notes
or the date fixed for any other payment of any Note or exchange of any
Note is a day other than a Business Day, then such payment, prepayment or
exchange shall be made on the next succeeding Business Day with interest
paid through the date of payment.
3. REPRESENTATIONS
3.1. Representations of the Company. As an inducement to, and as part of
the consideration for, your purchase of the Notes pursuant to this
Agreement, the Company represents and warrants to you as follows:
(a) Corporate Organization and Authority. The Company is a solvent
corporation duly organized, validly existing and in good standing under
the laws of the Commonwealth of Pennsylvania, has all requisite corporate
power and authority to own and operate its properties, to carry on its
business as now conducted and as presently proposed to be conducted, to
enter into and perform the Agreement and to issue and sell the Notes as
contemplated in the Agreement.
(b) Qualification to Do Business. The Company is duly licensed or
qualified and in good standing as a foreign corporation authorized to do
business in each jurisdiction where the nature of the business transacted
by it or the character of its properties owned or leased makes such
qualification or licensing necessary, except for jurisdictions,
individually or in the aggregate, where the failure to be so licensed or
qualified could not reasonably be expected to have a Material Adverse
Effect.
(c) Subsidiaries. The Company has no Subsidiaries except those listed in
the attached Annex I, which correctly sets forth the jurisdiction of
incorporation and the percentage of the outstanding Voting Stock or
equivalent interest of each Subsidiary which is owned, of record or
beneficially, by the Company and/or one or more Subsidiaries. Each
Subsidiary which is a Material Subsidiary is so designated in Annex I.
Each Subsidiary has been duly organized and is validly existing and in
good standing under the laws of its jurisdiction of incorporation or
organization and is duly licensed or qualified and in good standing as a
foreign corporation in each other jurisdiction where the nature of the
business transacted by it or the character of its properties owned or
leased makes such qualification or licensing necessary, except for
jurisdictions, individually or in the aggregate, where the failure to be
so licensed or qualified could not reasonably be expected to have a
Material Adverse Effect. Each Subsidiary has full corporate power and
authority to own and operate its properties and to carry on its business
as now conducted and as presently proposed to be conducted, except for
instances, individually or in the aggregate, where the failure to have
such power and authority could not reasonably be expected to have a
Material Adverse Effect. The Company and each Subsidiary have good and
marketable title to all of the shares they purport to own of the capital
stock of each Subsidiary, free and clear in each case of any Lien, except,
with respect to Subsidiaries other than Material Subsidiaries, for defects
or liens which, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect, and all such shares have been
duly issued and are fully paid and nonassessable.
(d) Financial Statements. The consolidated balance sheets of the Company
and its Subsidiaries as of December 25, 1988, December 31, 1989, December
30, 1990, December 29, 1991, and December 27, 1992, and the related
consolidated earnings statements, statements of shareholders' equity and
cash flows for each of the years ended on such dates, accompanied by the
reports and unqualified opinions of Coopers & Lybrand, independent public
accountants, copies of which have heretofore been delivered to you, were
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved (except as otherwise
noted therein) and present fairly the consolidated financial condition of
the Company and its Subsidiaries on such dates and their consolidated
results of operations and cash flows for the years then ended. The
unaudited consolidated balance sheet of the Company and its Subsidiaries
as of September 26, 1993 and the related unaudited consolidated
statements of operations, shareholders' equity and cash flows for the
three months (13 weeks) and the nine months (39 weeks) ended September 26,
1993 and September 27, 1992, copies of which have heretofore been
delivered to you, were prepared in accordance with generally accepted
accounting principles (except for the absence of footnotes) and, subject
to customary year end audit adjustments, present fairly the consolidated
financial condition of the Company and its Subsidiaries as of such dates
and the consolidated results of their operations and changes in their cash
flows for the periods then ended. Annex VIII hereto contains a complete
list of all goodwill incurred and all non-tax deductible intangible assets
acquired by the Company and its Subsidiaries prior to the Closing Date.
(e) No Contingent Liabilities or Adverse Changes. Except as described on
the attached Annex II, neither the Company nor any of its Subsidiaries has
any contingent liabilities which, individually or in the aggregate, are
material to the Company and its Subsidiaries taken as a whole, and since
December 27, 1992, there have been no changes in the condition, financial
or otherwise, of the Company and its Subsidiaries except changes occurring
in the ordinary course of business, none of which, individually or in the
aggregate, has been materially adverse.
(f) No Pending Litigation or Proceedings. Except as disclosed in the
attached Annex III, there are no actions, suits or proceedings pending or,
to the knowledge of the Company, threatened against or affecting the
Company or any of its Subsidiaries, at law or in equity or before or by
any Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
which could reasonably be expected to result, either individually or in
the aggregate, in a Material Adverse Effect.
(g) Compliance with Law.
(i) Neither the Company nor any of its Subsidiaries is: (x) in default
with respect to, or in violation of, any order, writ, injunction or decree
of any court to which it is a named party; or (y) in default under, or in
violation of, any law, rule, regulation, ordinance or order relating to
its or their respective businesses or properties, the sanctions and
penalties resulting from which defaults or violations described in clauses
(x) and (y) could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
(ii) Neither the Company nor any Subsidiary nor any Affiliate of the
Company is an entity defined as a "designated national" within the meaning
of the Foreign Assets Control Regulations, 31 C.F.R. Chapter V, or is in
violation of, any Federal statute or Presidential Executive Order, or any
rules or regulations of any department, agency or administrative body
promulgated under any such statute or Order, concerning trade or other
relations with any foreign country or any citizen or national thereof or
the ownership or operation of any property, and no restriction or
prohibition under any such statute, Order, rule or regulation which could
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.
(h) ERISA. Assuming the representations of the Purchasers in Section 3.2
of this Agreement are true and accurate, neither the purchase of the Notes
by the Purchasers nor the consummation of the transactions contemplated by
this Agreement is or will constitute a "prohibited transaction" within the
meaning of Section 4975 of the Code or Section 406 of ERISA. The Internal
Revenue Service has issued a determination that each "employee pension
benefit plan," as defined in Section 3(2) of ERISA (a "Plan"),
established, maintained or contributed to by the Company or any Subsidiary
(except for any Plan which is unfunded and maintained primarily for the
purpose of providing deferred compensation and supplemental retirement
benefits for a select group of management or highly compensated employees
pursuant to ERISA Sections 201, 301 and 401) is qualified under Section
401(a) and related provisions of the Code and that each related trust or
custodial account is exempt from taxation under Section 501(a) of the
Code, or if a determination letter has not been issued, the Company will
request in a timely manner such a determination from the Internal Revenue
Service and the Company knows of no reason that would present the Internal
Revenue Service from issuing such a determination. All Plans of the
Company or any Subsidiary comply in all material respects with ERISA and
other applicable laws. Neither the Company nor any Subsidiary has ever
maintained or become obligated to contribute to a "multi-employer plan,"
as defined in Section 4001(a)(3) of ERISA. There exist with respect to
all Plans or trusts established or maintained by the Company or any
Subsidiary: (i) no accumulated funding deficiency within the meaning of
ERISA; (ii) no termination of any Plan or trust which would result in any
material liability to the PBGC or any "reportable event," as that term is
defined in ERISA, which is likely to constitute grounds for termination of
any Plan or trust by the PBGC; and (iii) no "prohibited transaction," as
that term is defined in ERISA, which is likely to subject any Plan, trust
or party dealing with any such Plan or trust to any material tax or
penalty on prohibited transactions imposed by Section 4975 of the Code.
(i) Title to Properties. Except as disclosed on the most recent audited
consolidated balance sheet described in the foregoing paragraph (d) of
this Section 3.1, the Company and its Subsidiaries have (i) good and
marketable title in fee simple or its equivalent under applicable law to
all the real property owned by them and (ii) good title to all of the
personal property reflected in such balance sheet or subsequently acquired
by the Company or its Subsidiaries (except as sold or otherwise disposed
of in the ordinary course of business), in each case free from all Liens
or defects in title except those permitted by Section 7.5.
(j) Leases. The Company and its Subsidiaries enjoy peaceful and
undisturbed possession under all leases under which they are a lessee or
are operating, except for leases the termination of which, individually or
in the aggregate, could not reasonably be expected to have a Material
Adverse Effect.
(k) Franchises, Patents, Trademarks and Other Rights. Except as
described in the attached Annex IV, the Company and its Subsidiaries have
all franchises, permits, licenses and other authority necessary to carry
on their businesses as now being conducted and are not in default
thereunder, except for such franchises, permits, licenses or other
authority and defaults which, individually or in the aggregate, do not and
could not reasonably be expected to have a Material Adverse Effect. The
Company and its Subsidiaries own or possess all patents, trademarks,
service marks, trade names, copyrights, licenses and rights with respect
to the foregoing necessary for the present conduct of their businesses,
without any known conflict with the rights of others which could
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.
(l) Authorization. This Agreement and the Notes have been duly
authorized on the part of the Company and the Agreement does, and the
Notes when issued will, constitute the legal, valid and binding
obligations of the Company, enforceable in 0accordance with their terms,
except to the extent that enforcement of the Notes may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws of general application relating to or affecting the enforcement of
the rights of creditors or by equitable principles, regardless of whether
enforcement is sought in equity or at law. The sale of the Notes and
compliance by the Company with all of the provisions of this Agreement and
of the Notes (i) are within the corporate powers of the Company, (ii) have
been duly authorized by proper corporate action, (iii) are legal and will
not violate any provisions of any law or regulation or order of any court,
governmental authority or agency and (iv) will not result in any breach of
any of the provisions of, or constitute a default under, or result in the
creation of any Lien on any property of the Company or any Subsidiary
under the provisions of, any charter document, by-law, loan agreement or
other agreement or instrument to which the Company or any Subsidiary is a
party or by which any of them or their property may be bound. The
Guaranty Agreement has been duly authorized on the part of the Guarantor
and when duly executed and delivered will constitute the legal, valid and
binding obligation of the Guarantor, enforceable in accordance with its
terms, except to the extent that enforcement thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws of general application relating to or affecting the enforcement of
the rights of creditors or by equitable principles, regardless of whether
enforcement is sought in equity or at law. Compliance by the Guarantor
with all of the provisions of the Guaranty Agreement (i) is within its
corporate powers, (ii) has been duly authorized by proper corporate
action, (iii) is legal and will not violate any provisions of any law or
regulation or order of any court, governmental authority or agency and
(iv) will not result in any breach of any of the provisions of, or
constitute a default under, or result in the creation of any Lien on any
property of the Guarantor under the provisions of, any charter document,
bylaw, loan agreement or other agreement or instrument to which the
Guarantor is a party or by which it or its property may be bound.
(m) No Defaults. No event has occurred and no condition exists which,
upon the issuance of the Notes, would constitute a Default or an Event of
Default under this Agreement. Neither the Company nor any Subsidiary is
in default under any charter document, by-law, loan agreement or other
agreement or instrument to which it is a party or by which it or its
property may be bound, except for defaults, individually or in the
aggregate, which could not reasonably be expected to have a Material
Adverse Effect.
(n) Governmental Consent. Neither the nature of the Company or any of
its Subsidiaries, their respective businesses or properties, nor any
relationship between the Company or any of its Subsidiaries and any other
Person, nor any circumstances in connection with the offer, issuance, sale
or delivery of the Notes is such as to require a consent, approval or
authorization of, or withholding of objection on the part of, or filing,
registration or qualification with, any governmental authority on the part
of the Company or any Subsidiary in connection with the execution,
delivery and performance of this Agreement or the Guaranty Agreement or
the offer, issuance, sale or delivery of the Notes.
(o) Taxes. All income tax returns and all other material tax returns
required to be filed by the Company or any Subsidiary in any jurisdiction
have been filed, and all taxes, assessments, fees and other governmental
charges upon the Company or any Subsidiary, or upon any of their
respective properties, income or franchises, which are due and payable,
have been paid timely or within appropriate extension periods or contested
in good faith by appropriate proceedings and the collection thereof has
been stayed by the applicable governmental authority during the period of
the contest and as to which adequate reserves are maintained in accordance
with generally accepted accounting principles. The Company does not know
of any proposed additional tax assessment against it or any Subsidiary for
which adequate provision has not been made on its books. The statute of
limitations with respect to Federal income tax liability of the Company
and its consolidated Subsidiaries has expired for all taxable years up to
and including the taxable year ended December 31, 1986 and no material
controversy in respect of additional taxes due since such date is pending
or, to the Company's knowledge, has been threatened. The provisions for
taxes on the books of the Company and each Subsidiary are adequate for all
open years and for the current fiscal period.
(p) Status under Certain Statutes. Neither the Company nor any
Subsidiary is: (i) a "public utility company" or a "holding company," or
an "affiliate" or a "subsidiary company" of a "holding company," or an
"affiliate" of such a "subsidiary company," as such terms are defined in
the Public Utility Holding Company Act of 1935, as amended, or (ii) a
"public utility" as defined in the Federal Power Act, as amended, or (iii)
an "investment company" or an "affiliated person" thereof or an
"affiliated person" of any such "affiliated person," as such terms are
defined in the Investment Company Act of 1940, as amended.
(q) Private Offering. Neither the Company nor SPP Hambro & Co. nor First
Fidelity Bank, N.A. (the only Persons authorized or employed by the
Company as agent, broker, dealer or otherwise in connection with the
offering of the Notes or any similar security of the Company) has offered
any of the Notes or any similar security of the Company for sale to, or
solicited offers to buy any thereof from, or otherwise approached or
negotiated with respect thereto with, any prospective purchaser, other
than not more than 45 institutional investors, including the Purchasers,
each of whom was offered all or a portion of the Notes at private sale for
investment. Neither the Company nor anyone acting on its authorization
will offer the Notes or any part thereof or any similar securities for
issuance or sale to, or solicit any offer to acquire any of the same from,
anyone so as to bring the issuance and sale of the Notes within the
provisions of Section 5 of the Securities Act.
(r) Effect of Other Instruments. Neither the Company nor any Subsidiary
is bound by any agreement or instrument or subject to any charter or other
corporate restriction which, individually or in the aggregate, (i) in any
way materially restricts the Company's ability to perform its obligations
under this Agreement or the Notes or any Subsidiary's ability to pay
dividends or make advances to the Company or to perform under the Guaranty
Agreement or (ii) could reasonably be expected to have a Material Adverse
Effect.
(s) Use of Proceeds. The Company will apply the net proceeds from the
sale of the Notes to repay Indebtedness to First Fidelity Bank, National
Association, in the principal amount of $8,000,000 and for general
corporate purposes. None of the transactions contemplated in this
Agreement (including, without limitation thereof, the use of the proceeds
from the sale of the Notes) will violate or result in a violation of
Section 7 of the Exchange Act, or any regulations issued pursuant thereto,
including, without limitation, Regulations G, T, U and X of the Board of
Governors of the Federal Reserve System (12 C.F.R., Chapter II). Neither
the Company nor any Subsidiary owns or presently intends to carry or
purchase any "margin stock" within the meaning of Regulation G, and none
of the proceeds from the sale of the Notes will be used to purchase or
carry or refinance any borrowing the proceeds of which were used to
purchase or carry any "margin stock" or "margin security" in violation of
Regulations G, T, U or X.
(t) Condition of Property. All of the facilities of the Company and its
Subsidiaries are in sound operating condition and repair except for
facilities being repaired in the ordinary course of business or facilities
which, individually or in the aggregate, are not material to the Company
and its Subsidiaries, on a consolidated basis.
(u) Books and Records. The Company and each of its Subsidiaries (i)
maintain books, records and accounts in reasonable detail which accurately
and fairly reflect their respective transactions and business affairs, and
(ii) maintain a system of internal accounting controls sufficient to
provide reasonable assurances that transactions are executed in accordance
with management's general or specific authorization and to permit
preparation of financial statements in accordance with generally accepted
accounting principles.
(v) Environmental Compliance. The operations of the Company and each
Subsidiary (including, without limitation, all operations and conditions
at or in the Facilities) comply in all material respects with all
Environmental Laws; the Company and each Subsidiary have obtained all
permits under Environmental Laws necessary to their respective operations,
and all such permits are in good standing, and the Company and each
Subsidiary are in compliance with all terms and conditions of such permits
failure to comply with which could not reasonably be expected to have a
Material Adverse Effect; and neither the Company nor any of its
Subsidiaries has any known liability (contingent or otherwise) in
connection with any Release of any Hazardous Materials by the Company or
any of its Subsidiaries or the existence of any Hazardous Material on,
under or about any Facility that could give rise to an Environmental Claim
that, individually or in the aggregate, could reasonably be expected to
have a Material Adverse Effect.
(w) Solvency of the Guarantor. After giving effect to the transactions
contemplated herein, (i) the present fair salable value of the assets of
the Guarantor is in excess of the amount that will be required by the
Guarantor to pay its probable liability on its existing debts as such
debts become absolute and matured, (ii) the property remaining in the
hands of the Guarantor is not an unreasonably small amount of capital,
and (iii) the Guarantor is able to pay, and does not intend to take or
fail to take any action such that it will be unable to pay, its debts as
they mature.
(x) Full Disclosure. Neither the Private Placement Memorandum dated
December 1993 (including the enclosures) prepared by SPP Hambro & Co. and
First Fidelity Bank, N.A. (the "Memorandum"), the financial statements
referred to in paragraph (d) of this Section 3.1, nor this Agreement, nor
any other written statement or document furnished by the Company to you in
connection with the negotiation of the sale of the Notes, taken together,
contain any untrue statement of a material fact or omit a material fact
necessary to make the statements contained therein or herein not
misleading in light of the circumstances under which they were made.
There is no fact (exclusive of general economic, political or social
conditions or trends) particular to the Company and known by the Company
which the Company has not disclosed to you in writing and which has or
could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.
3.2. Representations of the Purchasers. (a) You represent, and in
entering into this Agreement the Company understands, that you are
acquiring Notes for your own account and not with a view to any
distribution thereof; provided that the disposition of your property shall
at all times be and remain within your control, subject, however, to
compliance with Federal securities laws. You acknowledge that the Notes
have not been registered under the Securities Act and you understand that
the Notes must be held indefinitely unless they are subsequently
registered under the Securities Act or an exemption from such registration
is available. You have been advised that the Company does not contemplate
registering, and is not legally required to register, the Notes under the
Securities Act.
(b) You further represent that either: (i) no part of the funds to
be used by you to purchase the Notes will constitute assets allocated to
any separate account maintained by you; or (ii) no part of the funds to be
used by you to purchase the Notes will constitute assets allocated to any
separate account maintained by you such that the application of such funds
will constitute a prohibited transaction under Section 406 of ERISA or
Section 4975 of the Code; or (iii) all or a part of such funds will
constitute assets of one or more separate accounts maintained by you, and
you have disclosed to the Company the names of such employee benefit plans
whose assets in such separate account or accounts exceed 10% of the total
assets or are expected to exceed 10% of the total assets of such account
or accounts as of the date of such purchase and the Company has advised
you in writing that the Company is not a party-in-interest nor are the
Notes employer securities with respect to the particular employee benefit
plans disclosed to the Company by you as aforesaid (for the purpose of
this clause (iii), all employee benefit plans maintained by the same
employer or employee organization are deemed to be a single plan). As
used herein, the terms "separate account," "party-in-interest," "employer
securities," and "employee benefit plan" have the meanings assigned to
them in ERISA.
(c) You represent that you are a "qualified institutional buyer" (as
that term is defined in Rule 144A under the Securities Act).
(d) You acknowledge receipt of the Memorandum.
4. CLOSING CONDITIONS
Your obligation to purchase the Notes on the Closing Date shall be
subject to the performance by the Company of its agreements hereunder,
which are to be performed at or prior to the time of delivery of the
Notes, and to the following conditions to be satisfied on or before the
Closing Date:
4.1. Representations and Warranties. The representations and warranties
of the Company contained in this Agreement or otherwise made in writing in
connection herewith shall be true and correct on or as of the Closing Date
and the Company shall have delivered to you a certificate to such effect,
dated the Closing Date and executed by the president, the chief financial
officer, chief accounting officer or treasurer of the Company.
4.2. Legal Opinions. You shall have received from Gardner, Carton &
Douglas, who is acting as your special counsel in this transaction, and
from Stradley, Ronon, Stevens & Young, counsel for the Company, Neil D.
Austin, General Counsel of the Company and Louis Colon Ramery, Esquire,
counsel for the Guarantor, their respective opinions, dated such Closing
Date, in form and substance satisfactory to you and covering substantially
the matters set forth or provided in the attached Exhibits B, C, D, E and
F.
4.3. Events of Default. No event shall have occurred and be continuing on
the Closing Date which would constitute a Default or an Event of Default,
and the Company shall have delivered to you a certificate to such effect,
dated the Closing Date and executed by the president, the chief financial
officer, chief accounting officer or treasurer of the Company.
4.4. Payment of Fees and Expenses. The Company shall have paid all
reasonable fees, expenses, costs and charges, including the fees and
expenses of Gardner, Carton & Douglas, your special counsel, incurred by
you through the Closing Date and incident to the proceedings in connection
with, and transactions contemplated by, this Agreement and the Notes,
provided that the Company shall have received a detailed invoice of such
fees and expenses at least 3 Business Days prior to the Closing Date.
4.5. Sale of Notes to Other Purchasers. The Company shall have
consummated the sale of the entire $12,000,000 principal amount of the
Notes to be sold on the Closing Date pursuant to this Agreement.
4.6. Guaranty Agreement . The Guarantor shall have executed and delivered
the Guaranty Agreement.
4.7. Legality of Investment. Your acquisition of the Notes shall
constitute a legal investment as of the Closing Date under the laws and
regulations of each jurisdiction to which you may be subject (without
resort to any "basket" or "leeway" provision which permits the making of
an investment without restrictions as to the character of the particular
investment being made), and such acquisition shall not subject you to any
penalty or other onerous condition in or pursuant to any such law or
regulation; and you shall have received such certificates or other
evidence as you may reasonably request to establish compliance with this
condition.
4.8. Private Placement Number. A private placement number with respect to
the Notes shall have been issued by Standard & Poor's Corporation.
4.9. Proceedings and Documents. All proceedings taken in connection with
the transactions contemplated by this Agreement, and all documents
necessary to the consummation of such transactions shall be satisfactory
in form and substance to you and your special counsel, and you and your
special counsel shall have received copies (executed or certified as may
be appropriate) of all legal documents or proceedings which you and they
may reasonably request.
5. INTERPRETATION OF AGREEMENT
5.1. Certain Terms Defined. The terms hereinafter set forth when used in
this Agreement shall have the following meanings:
Affiliate - Any Person (other than a Wholly-Owned Subsidiary) (i) who
is a director or executive officer of the Company or any Subsidiary, (ii)
which directly or indirectly through one or more intermediaries controls,
or is controlled by, or is under common control with, the Company, (iii)
which beneficially owns or holds securities representing 5% or more of the
combined voting power of the Voting Stock of the Company or any Subsidiary
or (iv) of which securities representing 5% or more of the combined voting
power of the Voting Stock (or in the case of a Person which is not a
corporation, 5% or more of the equity) are beneficially owned or held by
the Company or a Subsidiary. The term "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of
the management and policies of a Person, whether through the ownership of
voting securities, by contract or otherwise.
Agreement - As defined in Section 1.1.
Business Day - Any day, other than Saturday, Sunday or a legal
holiday or any other day on which banking institutions in Chicago, Des
Moines or New York generally are authorized by law to close.
Capitalized Lease - Any lease the obligation for Rentals with respect
to which, in accordance with generally accepted accounting principles,
would be required to be capitalized on a balance sheet of the lessee or
for which the amount of the asset and liability thereunder, as if so
capitalized, would be required to be disclosed in a note to such balance
sheet.
CERCLA - The Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as now or hereafter amended, and any successor to
such law.
Change of Control - The acquisition, through purchase or otherwise,
by any "person" (as such term is used in Sections 13(d) and 14(d)(2) of
the Exchange Act) other than the Current Management Team or any person
which includes the Current Management Team who is or becomes a "beneficial
owner" (as such term is defined in Rule 13d-3 under the Exchange Act) of
shares of Voting Stock of the Company which in the aggregate exceed 50% of
the Voting Stock of the Company.
Closing Date - As defined in Section 1.2.
Code - The Internal Revenue Code of 1986, as amended.
Consolidated Net Earnings - For any period, the net earnings (or
deficit) of the Company and its Subsidiaries for such period, determined
on a consolidated basis in accordance with generally accepted accounting
principles and after eliminating earnings or losses attributable to
outstanding minority interests, but excluding in any event (i) net
earnings and losses of any Subsidiary accrued prior to the date it became
a Subsidiary; (ii) net earnings and losses of any Person (other than a
Subsidiary), substantially all the assets of which have been acquired in
any manner, realized by such Person prior to the date of such acquisition;
(iii) net earnings and losses of any Person (other than a Subsidiary) with
which the Company or a Subsidiary shall have consolidated or which shall
have merged into or with the Company or a Subsidiary prior to the date of
such consolidation or merger; (iv) net earnings of any Person (other than
a Subsidiary) in which the Company or any Subsidiary has an ownership
interest except to the extent actually received in the form of cash
distributions to the Company or such Subsidiary; (v) any portion of the
net earnings of any Subsidiary which for any reason is legally or
contractually unavailable for payment of cash dividends to the Company or
any other Subsidiary; (vi) earnings resulting from any reappraisal,
revaluation or write-up of assets; (vii) any gains or losses, or other
earnings, properly classified as extraordinary in accordance with
generally accepted accounting principles; (viii) any gains or losses on
the sale or other disposition of Investments or fixed or capital assets,
and any taxes on such excluded gains and any tax deductions or credits on
account of any such excluded losses; (ix) the proceeds of any life
insurance policy; (x) any deferred or other credit representing any excess
of the equity in any Subsidiary at the date of acquisition thereof over
the amount invested in such Subsidiary; (xi) any gain arising from the
acquisition of any securities of the Company or any Subsidiary; (xii) the
reversal of any reserve, except to the extent that provision for such
reserve shall have been made during the 12 months immediately preceding
such reversal.
Consolidated Net Earnings Available for Fixed Charges - For any
period, the sum of (i) Consolidated Net Earnings, plus (to the extent
deducted in determining Consolidated Net Earnings), (ii) all provisions
for any Federal, state, or other income taxes made by the Company and its
Subsidiaries during such period plus (iii) Fixed Charges; provided,
however, that for the first three quarters of fiscal 1994, there shall be
excluded from the calculation of Consolidated Net Earnings the expenses
(not to exceed in the aggregate $2,000,000) relating to the Company's
patent infringement suit before the International Trade Commission against
Actron et al.
Consolidated Net Worth - The sum of consolidated shareholders' equity
of the Company and its Subsidiaries and the Company's ownership interest
in any Person (other than a Subsidiary), as determined in accordance with
generally accepted accounting principles, less the sum of all goodwill
incurred and all non-tax deductible intangible assets acquired after the
Closing Date; provided that Consolidated Net Worth shall be determined
without adjustment (whether positive or negative) for any foreign currency
translation.
Consolidated Total Assets - The total assets of the Company and its
Subsidiaries determined on a consolidated basis in accordance with
generally accepted accounting principles, less the sum of all goodwill
incurred and all non-tax deductible intangible assets acquired after the
Closing Date.
Consolidated Total Capitalization - The sum of Consolidated Net Worth
and Funded Debt.
Credit Agreement - The Loan Agreement dated as of December 21, 1992
between the Company and First Fidelity Bank, National Association, as
amended from time to time, and any similar agreement entered into by the
Company in replacement or substitution therefor or in connection with a
refinancing thereof.
Current Management Team - Four or more of the Persons who, at the
time of a Change of Control, hold the officer positions with the Company
as follows: Chairman and Chief Executive Officer; President and Chief
Operating Officer; Senior Vice President of Operations and Chief Financial
Officer; Vice President - General Counsel and Secretary; Senior Vice
President - Manufacturing; Senior Vice President of Sales Americas and
Pacific Rim; and Senior Vice President of Marketing and Western European
Operations.
Debt - Without duplication, (i) all Indebtedness for borrowed money,
(ii) all obligations under Capitalized Leases, (iii) all recourse
obligations incurred in connection with the sale of leases, and (iv) all
Guaranties of Debt of other Persons, but excluding any such obligations of
a Wholly-Owned Subsidiary to the Company and of the Company to a Wholly-
Owned Subsidiary and any present or future unfunded obligations of the
Company under its Plans, provided such unfunded obligations are not
required to be classified as Debt in accordance with generally accepted
accounting principles.
Default - Any event which, with the lapse of time or the giving of
notice, or both, would become an Event of Default.
Determination Date - The Business Day immediately preceding the date
fixed for a prepayment pursuant to Section 2.2(a) or 2.2(b) or Section 7.7
or the date of declaration pursuant to Section 8.2.
Disposition - As defined in Section 7.8(a).
Environmental Claim - Any notice of violation, claim, demand,
abatement order or other order by any governmental authority or any Person
for any damage, including, without limitation, personal injury (including
sickness, disease or death), tangible or intangible property damage,
contribution, indemnity, indirect or consequential damages, damage to the
environment, nuisance, pollution, contamination or other adverse effects
on the environment, or for fines, penalties or restrictions, resulting
from or based upon (i) the existence of a Release (whether sudden or non-
sudden or accidental or non-accidental) of, or exposure to, any Hazardous
Material in, into or onto the environment at, in, by, from or related to
any Facility, (ii) the use, handling, transportation, storage, treatment
or disposal of Hazardous Materials in connection with the operation of any
Facility, or (iii) the violation, or alleged violation, of any statutes,
ordinances, orders, rules, regulations, permits, licenses or
authorizations of or from any governmental authority, agency or court
relating to environmental matters connected with the Facilities.
Environmental Laws - All laws relating to environmental matters,
including, without limitation, those relating to (i) fines, orders,
injunctions, penalties, damages, contribution, cost recovery compensation,
losses or injuries resulting from the Release or threatened Release of
Hazardous Materials and to the generation, use, storage, transportation,
or disposal of Hazardous Materials, in any manner applicable to the
Company or any of its Subsidiaries or any or their respective properties,
including, without limitation, the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C. 9601 et seq.), the Hazardous
Material Transportation Act (49 U.S.C. 1801 et seq.), the Resource
Conservation and Recovery Act (42 U.S.C. 6901 et seq.), the Federal
Water Pollution Control Act (33 U.S.C. 1251 et seq.), the Clean Air Act
(42 U.S.C. 7401 et seq.), the Toxic Substances Control Act (15 U.S.C.
2601 et seq.), the Occupational Safety and Health Act (29 U.S.C. 651 et
seq.), and the Emergency Planning and Community Right-to-Know Act (42
U.S.C. 11001 et seq.), and (ii) environmental protection, including,
without limitation, the National Environmental Policy Act (42 U.S.C.
4321 et seq.), and comparable state laws, each as amended or supplemented,
and any similar or analogous local, state and federal statutes and
regulations promulgated pursuant thereto, each as in effect as of the date
of determination.
ERISA - The Employee Retirement Income Security Act of 1974, as
amended from time to time and any successor statute.
ERISA Affiliate - The Company and (i) any corporation that is a
member of a controlled group of corporations within the meaning of Section
414(b) of the Code of which the Company is a member; (ii) any trade or
business (whether or not incorporated) which is a member of a group of
trades or businesses under common control within the meaning of Section
414(c) of the Code of which the Company is a member; and (iii) any member
of an affiliated service group within the meaning of Section 414(m) or (o)
of the Code of which the Company, any corporation described in clause (i)
above or any trade or business described in clause (ii) above is a member.
Event of Default - As defined in Section 8.1.
Exchange Act - The Securities Exchange Act of 1934, as amended, and
as it may be further amended from time to time.
Facilities - Any real property (including, without limitation, all
buildings, fixtures or other improvements located thereon) now, or
heretofore or hereafter, owned, leased, operated or used (under permit or
otherwise) by the Company or any of its Subsidiaries or any of their
respective predecessors.
Fixed Charges - For any period, the sum of (i) interest expense
(including capitalized interest and the interest component of Rentals
under Capitalized Leases) and (ii) 33-1/3% of Operating Rentals of the
Company and its Subsidiaries on a consolidated basis during such period.
Funded Debt - The sum of (without duplication) (a) all Debt properly
classified as long-term debt in accordance with generally accepted
accounting principles, including (i) Debt which by its terms matures more
than one year from the date of creation or which may be renewed or
extended at the option of the obligor for more than one year from such
date, (ii) obligations under Capitalized Leases and (iii) Guaranties of
Funded Debt of other Persons, (b) all recourse obligations incurred in
connection with the sale of leases and (c) the smallest average daily
amount of Debt, if any, outstanding under each working capital line,
revolving credit agreement or similar agreement of an obligor for borrowed
money, and any renewals or extensions of such agreements, during a period
of 30 consecutive days or more during the 12 calendar months immediately
preceding the date of determination of Funded Debt.
Guaranties - All obligations (other than endorsements in the ordinary
course of business of negotiable instruments for deposit or collection) of
a Person guaranteeing or, in effect, guaranteeing any Indebtedness,
dividend or other obligation of any other Person in any manner, whether
directly or indirectly, including, without limitation, all obligations
incurred through an agreement, contingent or otherwise, by such Person:
(i) to purchase such Indebtedness or obligation or any property or assets
constituting security therefor, (ii) to advance or supply funds (x) for
the purchase or payment of such Indebtedness or obligation, (y) to
maintain working capital or other balance sheet condition or (z) otherwise
to advance or make available funds for the purchase or payment of such
Indebtedness or obligation, (iii) to lease property or to purchase
securities or other property or services primarily for the purpose of
assuring the owner of such Indebtedness or obligation against loss in
respect thereof, or (iv) otherwise to assure the owner of the Indebtedness
or obligation against loss in respect thereof. For the purposes of all
computations made under this Agreement, Guaranties in respect of any
Indebtedness for borrowed money shall be deemed to be Indebtedness equal
to the principal amount of such Indebtedness for borrowed money which has
been guaranteed, and Guaranties in respect of any other obligation or
liability or any dividend shall be deemed to be Indebtedness equal to the
maximum aggregate amount of such obligation, liability or dividend.
Guarantor - As defined in Section 1.3.
Guaranty Agreement - The Guaranty Agreement, dated the Closing Date,
of the Guarantor in the form attached as Exhibit D.
Hazardous Materials - (i) Any chemical, material or substance defined
as or included in the definition of "hazardous substances," "hazardous
wastes," "hazardous materials," "extremely hazardous waste," "restricted
hazardous waste," or "toxic substances" or words of similar import under
any applicable Environmental Laws; (ii) any oil, petroleum or petroleum
derived substance, any drilling fluids, produced waters and other wastes
associated with the exploration, development or production of crude oil,
any flammable substances or explosives, any radioactive materials, any
hazardous wastes or substances, any toxic wastes or substances or any
other materials or pollutants that (a) pose a hazard to any property of
the Company or any of its Subsidiaries or to Persons on or about such
property or (b) cause such property to be in violation of any
Environmental Laws; (iii) friable asbestos, urea formaldehyde foam
insulation, electrical equipment which contains any oil or dielectric
fluid containing levels of polychlorinated biphenyls in excess of fifty
parts per million; and (iv) any other chemical, material or substance,
exposure to which is prohibited, limited or regulated by any governmental
authority.
Indebtedness - (i) All obligations (including obligations under
Capitalized Leases, obligations incurred in connection with the
acquisition of assets or property or nonrecourse obligations) which in
accordance with generally accepted accounting principles would be included
in determining total liabilities as shown on the liability side of a
balance sheet as of the date at which Indebtedness is to be determined,
(ii) all Guaranties of obligations of other Persons of the character
referred to in clause (i), and (iii) the amount of any recourse obligation
incurred in connection with the sale of leases.
Institutional Holder - Any bank, trust company, insurance company,
pension fund, mutual fund or other similar financial institution,
including, without limiting the foregoing, any "qualified institutional
buyer" within the meaning of Rule 144A under the Securities Act, which is
or becomes a holder of any Note.
Investments - All investments made in cash or by delivery of
property, directly or indirectly, in any Person, whether by acquisition of
shares of capital stock, indebtedness or other obligations of securities
or by loan, advance, capital contribution or otherwise; provided, however,
that "Investments" shall not mean or include investments in property to be
used, held for use or consumed in the ordinary course of business.
Lien - Any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind, including any agreement to grant any of the foregoing,
any conditional sale or other title retention agreement, any lease in the
nature thereof, and the filing of or agreement to file any financing
statement under the Uniform Commercial Code of any jurisdiction in
connection with any of the foregoing, but excluding precautionary filings
in connection with leases which are not Capitalized Leases.
Make-Whole Amount - As of any Determination Date, if the Reinvestment
Yield on such Determination Date is lower than the interest rate payable
on or in respect of the Notes, the excess of (a) the present value of the
principal and interest payments to be foregone by any prepayment
(exclusive of accrued interest on such Notes through the date of
prepayment) on such Notes to be prepaid (taking into account the manner of
application of such prepayment required by Section 2.2(c)), determined by
discounting (semi-annually on the basis of a 360-day year composed of
twelve 30-day months), such payments at a rate that is equal to the
Reinvestment Yield over (b) the aggregate principal amount of such Notes
then to be paid or prepaid. To the extent that the Reinvestment Yield on
any Determination Date is equal to or higher than the interest rate
payable on or in respect of such Notes, the Make-Whole Amount is zero.
Material Adverse Effect - (i) A material adverse effect on the
business, properties, assets, results of operations or condition,
financial or otherwise, of the Company and its Subsidiaries, taken as a
whole, (ii) the material impairment of the ability of the Company to
perform its obligations under this Agreement or the Notes, (iii) the
material impairment of the ability of the Guarantor to perform its
obligations under the Guaranty Agreement, or (iv) the impairment of the
ability of the holders of the Notes to enforce any of such obligations.
Material Subsidiary - As of any date of determination, any
Subsidiary, or any group of Subsidiaries, the total assets of which (after
intercompany eliminations) accounted for more than 10% of Consolidated
Total Assets or the total earnings of which accounted for more than 20% of
Consolidated Net Earnings, in each case, of the Company and its
Subsidiaries as of the end of the Company's most recently completed fiscal
year.
Notes - As defined in Section 1.1.
Operating Rentals - For any period, the aggregate Rentals payable by
the Company and its Subsidiaries during such period under all leases other
than Capitalized Leases.
PBGC - The Pension Benefit Guaranty Corporation or any successor
thereto.
Person - Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
Plan - As defined in Section 3.1(h).
Purchaser - As defined in Section 1.1.
Reinvestment Yield - The sum of (i) 0.60% plus (ii) the yield
reported on the Bloomberg Financial Markets Service (or other on-the-run
service acceptable to the holders of not less than a majority in principal
amount of the outstanding Notes) at 10:00 A.M. (Chicago time) on the
Determination Date for U.S. Treasury Securities having a maturity equal to
the Weighted Average Life to Maturity of the Notes then being prepaid or
paid as of the date of prepayment or payment, rounded to the nearest
month, or if such yields shall not be reported as of such time or the
yields reported as of such time are not ascertainable in accordance with
the preceding clause, then the arithmetic mean of the yields published in
the statistical release designated H.15(519) of the Board of Governors of
the Federal Reserve System under the caption "U.S. Government Securities--
Treasury Constant Maturities" (the "statistical release") for the maturity
corresponding to the remaining Weighted Average Life to Maturity of the
Notes then being prepaid or paid as of the date of such prepayment or
payment rounded to the nearest month. For purposes of calculating the
Reinvestment Yield, the most recent weekly statistical release published
prior to the applicable Determination Date shall be used. If no maturity
exactly corresponding to such rounded Weighted Average Life to Maturity
shall appear in the statistical release, or in any or other acceptable
service, yields for the two most closely corresponding published
maturities (one of which occurs prior and the other subsequent to the
Weighted Average Life to Maturity) shall be calculated pursuant to this
provision and the Reinvestment Yield shall be interpolated from such
yields on a straight-line basis (rounding in each of such relevant
periods, to the nearest month).
Release - Any release, spill, emission, leaking, pumping, pouring,
injection, escaping, deposit, disposal, discharge, dispersal, leaching or
migration into the indoor or outdoor environment (including, without
limitation, the abandonment or disposal of any barrels, containers or
other closed receptacles containing any Hazardous Materials), or into or
out of any Facility, including the movement of any Hazardous Material
through the air, soil, surface water, groundwater or property.
Rentals - As of the date of any determination thereof, all fixed
payments (including all payments which the lessee is obligated to make to
the lessor on termination of the lease or surrender of the property)
payable by the Company or a Subsidiary, as lessee or sublessee under a
lease of real or personal property, but exclusive of any amounts required
to be paid by the Company or a Subsidiary (whether or not designated as
rents or additional rents) on account of maintenance, repairs, insurance,
taxes, assessments, amortization and similar charges. Fixed rents under
any so-called "percentage leases" shall be computed on the basis of the
minimum rents, if any, required to be paid by the lessee, regardless of
sales volume or gross revenues.
Restricted Investment - Any Investment by the Company or any
Subsidiary other than the following:
(i) Investments existing as of the date of this Agreement which are
listed in the attached Annex III;
(ii) Investments in Subsidiaries or in Persons which, simultaneously
with such Investment, become Subsidiaries;
(iii) Investments in certificates of deposit and banker's
acceptances with final maturities of one year or less issued by United
States or Canadian commercial banks that have capital and surplus of more
than $100,000,000 and are rated A- or better by Standard & Poor's
Corporation or A3 or better by Moody's Investors Service, Inc.;
(iv) Investments in commercial paper rated "A1" or better by Standard
& Poor's Corporation or "P1" or better by Moody's Investors Service, Inc.;
(v) Investments in direct obligations of the United States of
America or in obligations of an agency thereof carrying the full faith and
credit of the Untied States of America maturing within one year from the
date of issuance;
(vi) Investments in money market preferred stocks rated A or better
by Standard & Poor's Corporation or Moody's Investors Service, Inc.;
(vii) Investments in tax exempt floating rate option tender
bonds, backed by a letter of credit issued by a bank having the capital
and surplus described in clause (iii), rated A- or better by Standard &
Poor's Corporation or A3 by Moody's Investors Service, Inc.; and
(viii) Investments in any joint venture, unconsolidated subsidiary
or other Person, the business of which is related to the ongoing business
of the Company, and in which the Company or any Subsidiary owns less than
50% of the combined voting power of the Voting Stock (or in the case of a
Person that is not a corporation less than 50% of the equity), provided
such Investments, in the aggregate, do not exceed 5% of Consolidated Total
Assets.
Securities Act - The Securities Act of 1933, as amended, and as it
may be further amended from time to time.
Subsidiary - Any corporation of which shares of Voting Stock
representing more than 50% of the combined voting power of each
outstanding class of Voting Stock are owned or controlled, directly or
indirectly, by the Company.
Voting Stock - Capital stock of any class of a corporation having
power to vote under ordinary circumstances for the election of members of
the board of directors of such corporation, or persons performing similar
functions, irrespective of whether or not at the time any class shall have
special voting power or rights as the result of the occurrence of any
contingency.
Weighted Average Life to Maturity - As applied to any payment or
prepayment of principal of the Notes, at any date, the number of years
obtained by dividing (a) the principal amount of the Notes to be paid or
prepaid into (b) the sum of the products obtained by multiplying (i) the
amount of each then remaining required prepayment, including payment at
final maturity, forgone by virtue of such payment or prepayment, by (ii)
the number of years (calculated to the nearest 1/12th) which would have
elapsed between such date and the making of such required prepayment or
payment.
Wholly-Owned - When applied to a Subsidiary, any Subsidiary 100% of
the Voting Stock of which is owned by the Company and/or its Wholly-Owned
Subsidiaries, other than directors' qualifying shares or, in the case of
Subsidiaries organized under the laws of a jurisdiction other than the
United States of America or any State thereof, nominal shares held by
foreign nationals in accordance with local law.
Terms which are defined in other Sections of this Agreement shall
have the meanings specified therein.
5.2. Accounting Principles. Where the character or amount of any asset or
liability or item of income or expense is required to be determined or any
consolidation or other accounting computation is required to be made for
the purposes of this Agreement, the same shall be done in accordance with
(and references elsewhere in this Agreement to generally accepted
accounting principles shall mean) United States generally accepted
accounting principles in effect from time to time, except where such
principles are inconsistent with any accounting treatment or computation
required by this Agreement and except for the application of non-United
States accounting principles and practices to the books and transactions
of non-United States Subsidiaries to the extent not prohibited by
generally accepted accounting principles.
5.3. Valuation Principles. Except where indicated expressly to the
contrary by the use of terms such as "fair value," "fair market value" or
"market value," each asset, each liability and each capital item of any
Person, and any quantity derivable by a computation involving any of such
assets, liabilities or capital items, shall be taken at the net book value
thereof for all purposes of this Agreement. "Net book value" with respect
to any asset, liability or capital item of any Person shall mean the
amount at which the same is recorded or, in accordance with generally
accepted accounting principles, should have been recorded in the books of
account of such Person, as reduced by any reserves which have been or, in
accordance with generally accepted accounting principles, should have been
set aside with respect thereto, but in every case (whether or not
permitted in accordance with generally accepted accounting principles)
without giving effect to any write-up, write-down or write-off (other than
any write-down or write-off the entire amount of which was charged to
Consolidated Net Earnings or to a reserve which was a charge to
Consolidated Net Earnings) relating thereto which was made after the date
of this Agreement.
5.4. Direct or Indirect Actions. Where any provision in this Agreement
refers to action to be taken by any Person, or which such Person is
prohibited from taking, such provision shall be applicable whether the
action in question is taken directly or indirectly by such Person.
6. AFFIRMATIVE COVENANTS
The Company agrees that, for so long as any amount remains unpaid on
any Note:
6.1. Corporate Existence. The Company will, and will cause each
Subsidiary to, maintain and preserve, its corporate existence and right to
carry on its business and use, and the Company will, and will cause each
Subsidiary to maintain, preserve, renew and extend all of its rights,
powers, privileges, franchises, licenses and permits necessary to the
proper conduct of its business; provided, however, that the foregoing
shall not prevent any transaction permitted by Section 7.7 or Section 7.8
or the termination of the corporate existence of any Subsidiary, other
than the Guarantor, or of any right, power, privilege or franchise of the
Company or any Subsidiary if, in the opinion of the Board of Directors of
the Company, such termination is in the best interests of the Company, is
not (individually or in the aggregate) disadvantageous to the holders of
the Notes and is not otherwise prohibited by this Agreement.
6.2. Insurance. The Company will, and will cause each Subsidiary to,
maintain insurance coverage with financially sound and reputable insurers
in such forms and amounts, with such deductibles and against such risks as
are required by law or sound business practice and are customary for
corporations engaged in the same or similar businesses and owning and
operating similar properties as the Company and its Subsidiaries.
6.3. Taxes, Claims for Labor and Materials. The Company will, and will
cause each Subsidiary to, pay and discharge when due, all taxes,
assessments and governmental charges or levies imposed upon it or its
property or assets, or upon properties leased by it (but only to the
extent required to do so by the applicable lease), trade accounts, and
claims for work, labor or materials, other than taxes which, individually
or in the aggregate, are not material in amount or the non-payment of
which, individually or in the aggregate, could not reasonably be expected
to have a Material Adverse Effect, provided that neither the Company nor
any Subsidiary shall be required to pay any such tax, assessment, charge,
levy, account or claim, the payment of which is being contested in good
faith and by proper proceedings that will stay the forfeiture or sale of
any property and with respect to which adequate reserves are maintained in
accordance with generally accepted accounting principles.
6.4. Maintenance of Properties. The Company will, and will cause each
Subsidiary to, maintain, preserve and keep, its properties (whether owned
in fee or a leasehold interest) in good repair and working order, ordinary
wear and tear excepted, and from time to time will make all necessary
repairs, replacements, renewals and additions.
6.5. Maintenance of Records. The Company will, and will cause each
Subsidiary to, keep at all times proper books of record and account in
which full, true and correct entries will be made of all dealings or
transactions of or in relation to the business and affairs of the Company
or such Subsidiary, in accordance with generally accepted accounting
principles consistently applied throughout the period involved (except for
such changes as are disclosed in such financial statements or in the notes
thereto), and the Company will, and will cause each Subsidiary to, provide
reasonable protection against loss or damage to such books of record and
account.
6.6. Financial Information and Reports. The Company will furnish to you
and to any other Institutional Holder (in duplicate if you or such other
holder so request) the following:
(a) As soon as available and in any event within 45 days after the end of
each of the first three quarterly accounting periods of each fiscal year
of the Company, a consolidated balance sheet of the Company and its
Subsidiaries as of the end of such period and consolidated statements of
operations of the Company and its Subsidiaries for the periods beginning
on the first day of such fiscal year and the first day of such quarterly
accounting period and consolidated statements of shareholders' equity and
cash flows beginning on the first day of such fiscal year and ending in
each case on the date of such balance sheet, setting forth in comparative
form (x) the corresponding consolidated statements of operations for the
corresponding periods of the preceding fiscal year, (y) the corresponding
consolidated statements of cash flows for the corresponding year to date
period of the preceding fiscal year and (z) a consolidated balance sheet
as of the end of the preceding fiscal year, all in reasonable detail
prepared in accordance with generally accepted accounting principles
consistently applied throughout the period involved (except for changes
disclosed in such financial statements or in the notes thereto) and
certified by the chief financial officer or chief accounting officer of
the Company (i) outlining the basis of presentation, and (ii) stating that
the information presented in such statements presents fairly the financial
position of the Company and its Subsidiaries and the results of operations
for the period, subject to customary year-end audit adjustments;
(b) As soon as available and in any event within 90 days after the last
day of each fiscal year, a consolidated balance sheet of the Company and
its Subsidiaries as of the end of such fiscal year and the related
consolidated statements of earnings, shareholders' equity and cash flows
for such fiscal year, in each case setting forth in comparative form
figures for the preceding fiscal year, all in reasonable detail, prepared
in accordance with generally accepted accounting principles consistently
applied throughout the period involved (except for changes disclosed in
such financial statements or in the notes thereto) and accompanied by a
report, unqualified as to scope of audit and unqualified as to going
concern as to the consolidated balance sheet and the related consolidated
statements of earnings, shareholders' equity and cash flows, of Coopers &
Lybrand or any other firm of independent public accountants of recognized
national standing selected by the Company to the effect that such
financial statements have been prepared in conformity with generally
accepted accounting principles and present fairly, in all material
respects, the financial position of the Company and its Subsidiaries and
that the examination of such financial statements by such accounting firm
has been made in accordance with generally accepted auditing standards;
(c) Together with the financial statements delivered pursuant to
paragraphs (a) and (b) of this Section 6.6, (i) a management's discussion
and analysis of the financial condition and results of operations for the
periods reported upon by such financial statements, which discussion and
analysis shall satisfy the requirements of Item 303 of Securities and
Exchange Commission Regulation S-K, and (ii) a certificate of the chief
financial officer or chief accounting officer, (x) to the effect that such
officer has re-examined the terms and provisions of this Agreement and
that at the date of such certificate, during the periods covered by such
financial reports and as of the end of such periods, the Company is not,
or was not, in default in the fulfillment of any of the terms, covenants,
provisions and conditions of this Agreement and that no Default or Event
of Default is occurring or has occurred as of the date of such
certificate, during such periods and as of the end of such periods, or if
the signer is aware of any Default or Event of Default, such officer shall
disclose in such statement the nature thereof, its period of existence and
what action, if any, the Company has taken or proposes to take with
respect thereto, and (y) stating whether the Company is in compliance with
Sections 7.1 through 7.13 and setting forth, in sufficient detail, the
information and computations required to establish whether or not the
Company was in compliance with the requirements of Sections 7.1 through
7.9 during the periods covered by the financial reports then being
furnished and as of the end of such periods;
(d) Together with the financial reports delivered pursuant to paragraph
(b) of this Section 6.6, an opinion of the independent certified public
accountants stating (i) that in making the examination necessary for
expressing an opinion on such financial statements, nothing came to their
attention that caused them to believe that there is in existence or has
occurred any Default or Event of Default hereunder (the occurrence of
which is ascertainable by accountants in the course of normal audit
procedures) or, if such accountants shall have obtained knowledge of any
such Default or Event of Default, describing the nature thereof and the
length of time it has existed;
(e) Promptly after the Company obtains knowledge thereof, notice of any
litigation or any governmental proceeding pending against the Company or
any Subsidiary in which, individually or in the aggregate, liability could
reasonably be expected to exceed $1,000,000 or which could reasonably be
expected to otherwise have a Material Adverse Effect;
(f) As soon as available, copies of each financial statement, notice,
report and proxy statement which the Company shall furnish to its
shareholders; copies of each registration statement and periodic report,
including but not limited to Forms 8-K, 10-K and 10-Q, which the Company
may file with the Securities and Exchange Commission, and any other
similar or successor agency of the Federal government administering the
Securities Act, the Exchange Act or the Trust Indenture Act of 1939, as
amended; without duplication, copies of each report (other than reports
relating solely to the issuance of, or transactions by others involving,
its securities) relating to the Company or its securities which the
Company may file with any securities exchange on which any of the
Company's securities may be registered; copies of any orders in any
material proceedings to which the Company or any of its Subsidiaries is a
party, issued by any governmental agency, Federal or state, having
jurisdiction over the Company or any of its Subsidiaries; and, except at
such times as the Company is a reporting company under Section 13 or 15(d)
of the Exchange Act or has complied with the requirements for the
exemption from registration under the Exchange Act set forth in Rule 12g-
3-2(b), such financial or other information as any holder of the Notes or
prospective purchaser of the Notes may reasonably determine is required to
permit such holder to comply with the requirements of Rule 144A under the
Securities Act in connection with the resale by it of the Notes;
(g) As soon as available, a copy of each other report submitted to the
Company or any Subsidiary by independent accountants retained by the
Company or any Subsidiary in connection with any interim or special audit
made by them of the books of the Company or any Subsidiary;
(h) Promptly following any change in the composition of the Company's
Subsidiaries from that set forth in Annex I, as theretofore updated
pursuant to this paragraph, an updated list setting forth the information
specified in Annex I; and
(i) Such additional information as you or such other Institutional Holder
of the Notes may reasonably request concerning the Company and its
Subsidiaries.
6.7. Inspection of Properties and Records. The Company will, and will
cause each Subsidiary to, permit any representative of you or any other
Institutional Holder, from the date hereof and until payment in full of
the Notes, to visit and inspect any of their properties, to examine their
books of account (including, without limitation, the financial and
reporting systems of the Company and its Subsidiaries), records, reports
and other papers, to make copies and extracts therefrom and to discuss
their affairs, finances and accounts with their officers, employees and
independent public accountants (and by this provision the Company and its
Subsidiaries authorize such accountants to discuss with you or such
Institutional Holder their affairs, finances and accounts), all at such
reasonable times and with reasonable notice and as often as you or such
Institutional Holder may reasonably request, and if at the time thereof a
Default or Event of Default has occurred and is continuing, at the
Company's expense.
6.8. ERISA.
(a) All assumptions and methods used to determine the actuarial valuation
of employee benefits, both vested and unvested, under each Plan subject to
Title IV of ERISA of the Company or any ERISA Affiliate, and each such
Plan, whether now existing or adopted after the date hereof, will comply
in all material respects with ERISA.
(b) The Company will not at any time permit any Plan established,
maintained or contributed to by it or any Subsidiary in the United States
or any ERISA Affiliate to:
(i) engage in any "prohibited transaction" as such term is defined in
Section 4975 of the Code or in Section 406 of ERISA;
(ii) incur any "accumulated funding deficiency" as such term is defined in
Section 302 of ERISA, whether or not waived; or
(iii) be terminated under circumstances which are likely to result in
the imposition of a lien on the property of the Company or any such
Subsidiary pursuant to Section 4068 of ERISA, if the event or condition
described in clauses (i), (ii) or (iii) above is likely to subject the
Company or any Subsidiary or ERISA Affiliate to liabilities which,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
(c) Upon request, the Company will furnish you or any other Institutional
Holder a copy of the annual report of each Plan (Form 5500) required to be
filed with the Internal Revenue Service no later than 45 days after the
date such report has been filed with the Internal Revenue Service.
(d) Promptly upon obtaining knowledge of the occurrence thereof, the
Company will give you and each other Institutional Holder notice of (i) a
reportable event with respect to any Plan; (ii) the institution of any
steps by the Company, any Subsidiary, any ERISA Affiliate or the PBGC to
terminate any Plan; (iii) the institution of any steps by the Company, any
Subsidiary, or any ERISA Affiliate to withdraw from any Plan; (iv) a
prohibited transaction in connection with any Plan; (v) any material
increase in the contingent liability of the Company or any Subsidiary with
respect to any post-retirement welfare liability; or (vi) the taking of
any action by the Internal Revenue Service, the Department of Labor or the
PBGC or any other Person with respect to any of the foregoing which,
individually or in the aggregate, in any of the events specified above,
could reasonably be expected to result in a Material Adverse Effect.
6.9. Compliance with Laws.
(a) The Company will, and will cause each Subsidiary to, comply with all
laws, rules and regulations, including Environmental Laws, relating to its
or their respective businesses, other than laws, rules and regulations the
failure to comply with which or the sanctions and penalties resulting
therefrom, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect; provided, however, that the
Company and its Subsidiaries shall not be required to comply with laws,
rules and regulations the validity or applicability of which are being
contested in good faith and by appropriate proceedings which stay the
enforcement thereof and as to which the Company has established adequate
reserves on its books in accordance with generally accepted accounting
principles.
(b) Promptly upon the occurrence thereof, the Company will give you and
each other Institutional Holder notice of the institution of any
proceedings against the Company or any Subsidiary, or the receipt of
notice of any Environmental Claim, which if determined adversely could,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
6.10. Acquisition of Notes. Neither the Company nor any Subsidiary or
Affiliate, directly or indirectly, will repurchase or offer to repurchase
any Notes unless the offer is made to repurchase Notes pro rata from all
holders at the same time and on the same terms. The Company will
forthwith cancel any Notes in any manner or at any time acquired by the
Company or any Subsidiary or Affiliate and such Notes shall not be deemed
to be outstanding for any of the purposes of this Agreement or the Notes.
6.11. Private Placement Number; NAIC . The Company consents to (i)
the filing of copies of this Agreement with Standard & Poor's Corporation
to obtain a private placement number and with the National Association of
Insurance Commissioners and (ii) the filing of copies of the financial
statements delivered pursuant to Section 6.6(b) with the National
Association of Insurance Commissioners.
6.12. Nature of Business. The Company will, and will cause each
Subsidiary to, engage only in the development, production and sale of
advanced microprocessor and radio frequency-based merchandising systems
(including but not limited to electronic article merchandising and
electronic access control systems), CCTV systems and other security
systems and in businesses related thereto.
6.13. Description of Actual Use of Proceeds. Within 30 days following
the Closing Date, the Company will provide you with a listing of the
Indebtedness repaid with the net proceeds from the sale of the Notes.
7. NEGATIVE COVENANTS
The Company agrees that, for so long as any amount remains unpaid on
any Note:
7.1. Net Worth. The Company will not permit at any time its Consolidated
Net Worth to be less than $45,000,000 plus the cumulative sum of 45% of
its Consolidated Net Earnings (without reduction for any losses) for each
of its fiscal quarters ending after December 26, 1993.
7.2. Fixed Charge Ratio. The Company will not permit at any time the
ratio of Consolidated Net Earnings Available for Fixed Charges to Fixed
Charges for the most recently completed three fiscal quarters to be less
than the ratios set forth below:
For the Three Fiscal Quarters Ending Ratio
March 27, 1994 .75 to 1.00
June 26, 1994 1.25 to 1.00
September 25, 1994 1.75 to 1.00
and thereafter the Company will not permit at any time the ratio of
Consolidated Net Earnings Available for Fixed Charges to Fixed Charges for
the most recently completed four fiscal quarters to be less than 2.00 to
1.00.
7.3. Funded Debt. The Company will not, and will not permit any
Subsidiary to, permit to exist, create, assume, incur, maintain or
otherwise be or become liable for, directly or indirectly, any Funded Debt
other than:
(a) the Notes;
(b) Funded Debt of the Company and its Subsidiaries outstanding on the
Closing Date and described in the attached Annex IV and extensions,
renewals, replacements, refundings or refinancings thereof, provided that
there is no increase in the principal amount of such Funded Debt; and
(c) additional Funded Debt, provided that at the time of incurring such
additional Funded Debt and after giving effect thereto and to the
application of the proceeds therefrom, (i) the Funded Debt of the Company
and its Subsidiaries then to be outstanding does not exceed 55% of
Consolidated Total Capitalization and (ii) if such Funded Debt is incurred
or assumed in connection with an acquisition, the Company would be in
compliance with Section 7.2 for the applicable period ending as of its
most recently completed fiscal quarter, (A) calculating Consolidated Net
Earnings Available for Fixed Charges, on a pro forma basis, as if the
acquisition had occurred on the first day of the period of three
consecutive fiscal quarters ending with the most recently completed fiscal
quarter (if the acquisition occurs during any of the three fiscal quarters
ending March 27, 1994, June 26, 1994 and September 25, 1994) and on the
first day of the period of four consecutive fiscal quarters ending with
the most recently completed fiscal quarter (if the acquisition occurs
thereafter), and (B) calculating Fixed Charges, on a projected basis,
giving effect to any Funded Debt incurred in connection with the
acquisition, for the three fiscal quarters following the acquisition (if
the acquisition occurs during any of the three fiscal quarters ending
March 27, 1994, June 26, 1994 and September 25, 1994) and for the four
fiscal quarters following the acquisition (if the acquisition occurs
thereafter).
7.4. Funded Debt of Subsidiaries. The Company will not permit any
Subsidiary to permit to exist, create, assume, incur, maintain or
otherwise be or become liable for, directly or indirectly, any additional
Funded Debt unless Funded Debt of Subsidiaries outstanding on the Closing
Date does not exceed $1,500,000 and unless, at the time of incurring such
additional Funded Debt and after giving effect thereto and to the
application of the proceeds therefrom,
(a) such Funded Debt may be incurred pursuant to Section 7.3(c), and
(b) the sum (without duplication) of outstanding (i) Funded Debt of
Subsidiaries (excluding for this purpose all recourse obligations incurred
in connection with the sale of leases) and (ii) Indebtedness of the
Company and Indebtedness of any Subsidiary secured by Liens permitted by
Section 7.5(g) does not exceed 15% of Consolidated Net Worth.
7.5. Liens. The Company will not, and will not permit any Subsidiary to,
permit to exist, create, assume or incur, directly or indirectly, any Lien
on its properties or assets, whether now owned or hereafter acquired,
except:
(a) Liens existing on property or assets of the Company or any Subsidiary
as of the Closing Date that are described in the attached Annex V; and
Liens resulting from extensions, renewals, refinancings and refundings of
such Liens, provided that there is no increase in the principal amount of
the Indebtedness secured thereby at the time of extension, renewal,
refinancing or refunding, and any new Lien attaches only to the property
which was subject to such Lien at the time of such extension, renewal,
refinancing or refunding;
(b) Liens for taxes, assessments or governmental charges or levies not
then due and delinquent or the validity of which is being contested in
good faith by appropriate proceedings which stay the enforcement thereof
and as to which the Company has established adequate reserves on its books
in accordance with generally accepted accounting principles;
(c) Liens arising in connection with any legal proceeding, provided the
execution of such Liens is effectively stayed and such Liens are being
contested in good faith by appropriate proceedings and as to which the
Company has established adequate reserves on its books in accordance with
generally accepted accounting principles;
(d) Liens arising in the ordinary course of business and not incurred in
connection with the borrowing of money, including encumbrances in the
nature of zoning restrictions, easements, rights and restrictions of
record on the use of real property, landlord's and lessor's liens in the
ordinary course of business, which in the aggregate do not materially
interfere with the conduct of the business of the Company and its
Subsidiaries taken as a whole or materially impair the value of the
property subject thereto for the purpose of such business;
(e) Liens securing Indebtedness of a Wholly-Owned Subsidiary to the
Company or another Wholly-Owned Subsidiary or of the Company to a Wholly-
Owned Subsidiary;
(f) Liens (i) existing on tangible property at the time of its
acquisition by the Company or a Subsidiary and not created in
contemplation thereof, whether or not the Indebtedness secured by such
Lien is assumed by the Company or such Subsidiary, or (ii) on tangible
property created substantially contemporaneously with the date of
acquisition or within 180 days of the acquisition or completion of
construction thereof to secure or provide for all or a portion of the
purchase price or cost of construction of such tangible property or (iii)
existing on tangible property of a corporation at the time such
corporation is merged into or consolidated with or is acquired by, or
substantially all of its tangible assets are acquired by, the Company or a
Subsidiary and not created in contemplation thereof; provided, in each
case, that such Liens do not extend to other property of the Company or
any Subsidiary and that the aggregate principal amount of Indebtedness
secured by each such Lien does not exceed 100% of the fair market value of
the tangible property subject thereto; and
(g) Liens not otherwise permitted by paragraphs (a) through (f) above
incurred subsequent to the Closing Date to secure Debt, provided that, (i)
the sum of (x) Debt of the Company and its Subsidiaries secured by Liens
incurred pursuant to this paragraph (g) and, without duplication, (y)
other Funded Debt of Subsidiaries incurred subsequent to the Closing Date
does not exceed 15% of Consolidated Net Worth and (ii) such Liens are not
used to secure Debt outstanding on the Closing Date not subject to any
Lien or any extension, renewal, replacement, refunding or refinancing of
such Debt.
7.6. Restricted Payments. The Company will not, except as hereinafter
provided:
(a) declare or pay any dividends, either in cash or property, on any
shares of its capital stock of any class (except dividends or other
distributions payable solely in shares of common stock of the Company);
(b) directly or indirectly, or through any Subsidiary, purchase, redeem
or retire any shares of its capital stock of any class or any warrants,
rights or options to purchase or acquire any shares of its capital stock;
(c) make any other payment or distribution, directly or indirectly, or
through any Subsidiary, in respect of its capital stock; or
(d) make, or permit any Subsidiary to make, any Restricted Investment;
(all such declarations, payments, purchases, redemptions, retirements,
distributions and Investments described in clauses (a) through (d) being
herein collectively referred to as "Restricted Payments") if, after giving
effect thereto, the aggregate amount of Restricted Payments made after
December 26, 1993 to and including the date of the making of the
Restricted Payment in question would exceed the sum of (i) $10,000,000,
plus (ii) 50% of Consolidated Net Earnings (or less 100% of any deficit)
for each fiscal quarter of the Company subsequent to December 26, 1993,
plus (iii) the net cash proceeds received by the Company after December
26, 1993 from the sale of shares of any class of its common or
nonredeemable preferred stock or from any contribution to its capital,
plus (iv) the net cash proceeds received by the Company after December 26,
1993 from the maturation, sale or other disposition of any Restricted
Investment.
7.7. Merger or Consolidation. The Company will not, and will not permit
any Subsidiary to, merge or consolidate with, or sell all or substantially
all of its assets to, any Person, except that:
(a) The Company may merge into or consolidate with, or sell all or
substantially all of its assets to, any Person or permit any Person to
merge into it, provided that no Default or Event of Default exists and
that immediately after giving effect thereto,
(i) The Company is the successor corporation or, if the Company is not
the successor corporation, (x) the successor corporation is a solvent
corporation organized under the laws of a state of the United States of
America or the District of Columbia and expressly assumes in writing
satisfactory to holders of 66-2/3% of the Notes outstanding the Company's
obligations under the Notes and this Agreement and (y) the holders of the
Notes shall have received an opinion of legal counsel reasonably
acceptable to them that this Agreement and the Notes are legal, valid and
binding obligations of the successor corporation, enforceable against the
successor corporation in accordance with their terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance, fraudulent transfer and other similar laws affecting
creditors' rights generally, and to the application of general principles
of equity;
(ii) There shall exist no Default or Event of Default; and
(iii) The Company or such successor corporation could incur at least
$1.00 of additional Funded Debt under Section 7.3 and Section 7.5(g); and
(b) Any Subsidiary may (i) merge into the Company or a Wholly-Owned
Subsidiary, or (ii) sell, transfer or lease all or any part of its assets
to the Company or a Wholly-Owned Subsidiary or (iii) merge with any Person
which, as a result of such merger, becomes a Wholly-Owned Subsidiary, or
(iv) merge with any Person which does not become a Wholly-Owned Subsidiary
as a result of such merger so long as such merger is not prohibited by
Section 7.8(a); provided in each instance set forth in clauses (i) through
(iv) that immediately before and after giving effect thereto there shall
exist no Default or Event of Default and if the Subsidiary that merges or
disposes of its assets is the Guarantor, the successor becomes a party to
the Guaranty Agreement and expressly assumes in writing satisfactory to
the holders of 66-2/3% of the Notes outstanding all of the Guarantor's
obligations thereunder.
7.8. Sale of Assets.
(a) The Company will not, and will not permit any Subsidiary to (other
than in the ordinary course of business, sell, lease, transfer or
otherwise (including by way of merger) dispose of (collectively a
"Disposition") any assets, including capital stock of Subsidiaries, in one
or a series of transactions, to any Person, (i) if in any fiscal year,
after giving effect to such Disposition, the aggregate net book value of
assets subject to Dispositions during such fiscal year would exceed 10% of
Consolidated Total Assets as of the end of the immediately preceding
fiscal year or (ii) if, after giving effect to such Disposition and all
prior Dispositions since the Closing Date, the aggregate net book value of
assets subject to Dispositions would exceed, on a cumulative basis, 25% of
Consolidated Total Assets as of the end of the immediately preceding
fiscal quarter or (iii) if a Default or Event of Default exists or would
exist after giving effect thereto or (iv) if the Company cannot incur at
least $1.00 of additional Funded Debt pursuant to Section 7.3 and Section
7.5(g).
(b) Notwithstanding the foregoing limitations in paragraph (a) of this
Section 7.8, the Company or a Subsidiary may make a Disposition and the
net book value of the assets subject to such Disposition shall not be
subject to or included in the foregoing limitations and computations (i)
if the proceeds (net of taxes and related expenses) from such Disposition
are either (A) reinvested, within twelve months after such Disposition, in
productive tangible assets of a similar nature of the Company or its
Subsidiaries or (B) applied to the prepayment, on a pro rata basis, of
outstanding senior Debt of the Company and its Subsidiaries, including
prepayment of the Notes pursuant to Section 2.2(a).
(c) Notwithstanding the foregoing, (i) the Company will not, and will not
permit any Subsidiary to, make any Disposition of any receivables, with or
without recourse, and (ii) the Company or any Subsidiary may sell for cash
leases of equipment in which it is lessor and which were entered into in
the ordinary course of business, provided that, as of the end of each
fiscal quarter, the aggregate net present value of all recourse
obligations incurred in connection with the sale of such leases cannot
exceed the greater of $1 million or 25% of the aggregate net present value
of the future lease payments payable under all leases sold by the Company
or any Subsidiary to which such recourse obligations relate.
7.9. Disposition of Stock of Subsidiaries . The Company will not, and
will not permit any Subsidiary to, issue, sell or transfer the capital
stock of a Subsidiary to any Person other than the Company or a Wholly-
Owned Subsidiary if such issuance, sale or transfer would cause it to
cease to be a Subsidiary, unless (i) such sale would not be prohibited
under Section 7.8 and (ii) such Subsidiary does not own any shares of
capital stock or Indebtedness of the Company or another Subsidiary which
Subsidiary is not being disposed of as a part of such transaction.
7.10. Repurchase of Leases . The Company will not, and will not
permit any Subsidiary to, make any payments to repurchase leases of
equipment entered into in the ordinary course of business and sold by the
Company or any Subsidiary as lessor with recourse to the Company or any
Subsidiary ("Recourse Equipment Leases") or to repurchase the equipment
subject to any Recourse Equipment Lease unless after giving effect to such
payment: (i) for any fiscal quarter ending March 27, 1994, June 26, 1994,
September 25, 1994 or December 25, 1994, the aggregate of such payments,
net of the aggregate cash recoupment, cash recovery or other cash
realization from the sale or other disposition of the Recourse Equipment
Leases so repurchased or equipment subject to any Recourse Equipment
Lease, during such fiscal quarter would not exceed the amount set forth
below opposite the applicable fiscal quarter:
Applicable Amount Fiscal Quarter Ending
$250,000 March 27, 1994
500,000 June 26, 1994
750,000 September 25, 1994
1,000,000 December 25, 1994
and (ii) for any fiscal quarter thereafter, the aggregate of such
payments, net of the aggregate cash recoupment, cash recovery or other
cash realization from the sale or other disposition of the Recourse
Equipment Leases so repurchased or equipment subject to any Recourse
Equipment Lease so repurchased, during such fiscal year would not exceed,
for the four most recently completed fiscal quarters, the amount set forth
below opposite the applicable fiscal year:
Applicable Amount Fiscal Year Ending
$1,500,000 December 31, 1995
2,000,000 December 29, 1996
2,500,000 December 28, 1997
3,000,000 December 27, 1998 and thereafter
7.11. Transactions with Affiliates. The Company will not, and will
not permit any Subsidiary to, enter into any transaction (including the
furnishing of goods or services) with an Affiliate except in the ordinary
course of business as presently conducted and on terms and conditions no
less favorable to the Company or such Subsidiary than would be obtained in
a comparable arm's-length transaction with a Person not an Affiliate.
7.12. Guaranties. The Company will not, and will not permit any
Subsidiary to, be or become liable in respect to any Guaranty except the
Guaranty Agreement and Guaranties which are limited in amount to a stated
maximum principal amount of dollar exposure.
7.13. Consolidated Tax Returns. The Company will not file, or consent
to the filing of, any consolidated Federal income tax return with any
Person other than a Subsidiary, except to the extent that the Company is
required under the Code to do otherwise.
7.14. Restrictions on Dividends . The Company will not, and it will
not permit any Subsidiary to, enter into or become bound by any agreement
or instrument or any charter or other corporate restriction which in any
way prohibits or restricts any Subsidiary's ability to pay dividends or
make advances to the Company or to perform under the Guaranty Agreement.
8. EVENTS OF DEFAULT AND REMEDIES THEREFOR
8.1. Nature of Events. An "Event of Default" shall exist if any one or
more of the following occurs:
(a) Any default in the payment of interest when due on any of the Notes
and continuance of such default for a period of five Business Days;
(b) Any default in the payment of the principal of any of the Notes or
the Make-Whole Amount thereon, if any, at maturity, upon acceleration of
maturity or at any date fixed for prepayment;
(c) Any default (i) in the payment of the principal of, premium, if any,
interest on or any other amounts with respect to any other Indebtedness of
the Company or any Material Subsidiary aggregating in excess of $2,500,000
as and when due and payable (whether by lapse of time, declaration, call
for redemption or otherwise) and the continuation of such default beyond
the period of grace (without regard to any waiver or amendment), if any,
allowed with respect thereto, or (ii) (other than a payment default) under
any agreements of the Company or any Material Subsidiary under or pursuant
to which such Indebtedness aggregating in excess of $2,500,000 is issued,
resulting in the acceleration of such Indebtedness;
(d) Any default in the observance of any covenant or agreement contained
in Section 6.12, Sections 7.1 through 7.8 or Section 8.7;
(e) Any default in the observance or performance of any other covenant or
provision of this Agreement which is not remedied within 30 Business Days
following the earlier to occur of (i) the day on which an officer of the
Company first obtains knowledge of such default or (ii) the day on which
written notice thereof is given to the Company by any holder of a Note;
(f) Any representation or warranty made by the Company in this Agreement
or by the Guarantor in the Guaranty Agreement, or made by the Company in
any written statement or certificate furnished by the Company in
connection with the issuance and sale of the Notes or furnished by the
Company pursuant to this Agreement, proves incorrect in any material
respect as of the date of the issuance or making thereof;
(g) Any judgment, writ or warrant of attachment or any similar process in
an aggregate amount in excess of $1,000,000 shall be entered or filed
against the Company or any Subsidiary or against any property or assets of
either and remain unpaid, unvacated, unbonded or unstayed (through appeal
or otherwise) for a period of 30 Business Days;
(h) This Agreement, the Notes or the Guaranty, at any time for any reason
cease to be in full force and effect as a result of acts taken by the
Company or the Guarantor or shall be declared to be null and void in whole
or in material part by a court or other governmental or regulatory
authority having jurisdiction or the validity or enforceability thereof
shall be contested by the Company or the Guarantor or either of them shall
renounce any of the same or deny that it has any or further liability
thereunder;
(i) The Company or any Material Subsidiary shall
(i) generally not pay its debts as they become due or admit in writing
its inability to pay its debts generally as they become due;
(ii) file a petition in bankruptcy or for reorganization or for the
adoption of an arrangement under the Federal Bankruptcy Code, or any
similar applicable bankruptcy or insolvency law, as now or in the future
amended (herein collectively called "Bankruptcy Laws"); file an answer or
other pleading admitting or failing to deny the material allegations of
such a petition; fail to file, within the time allowed for such purpose,
an answer or other pleading denying or otherwise controverting the
material allegations of such a petition; or file an answer or other
pleading seeking, consenting to or acquiescing in relief provided for
under the Bankruptcy Laws;
(iii) make an assignment of all or a substantial part of its property
for the benefit of its creditors;
(iv) seek or consent to or acquiesce in the appointment of a receiver,
liquidator, custodian or trustee of it or for all or a substantial part of
its property;
(v) be finally adjudicated a bankrupt or insolvent;
(vi) be subject to the entry of a court order, which shall not be vacated,
set aside or stayed within 60 days from the date of entry, (A) appointing
a receiver, liquidator, custodian or trustee of it or for all or a
substantial part of its property, or (B) for relief pursuant to an
involuntary case brought under, or effecting an arrangement in, bankruptcy
or (C) for a reorganization pursuant to the Bankruptcy Laws or (D) for any
other judicial modification or alteration of the rights of creditors; or
(vii) be subject to the assumption of custody or sequestration by a
court of competent jurisdiction of all or a substantial part of its
property, which custody or sequestration shall not be suspended or
terminated within 60 days from its inception.
8.2. Remedies on Default. When any Event of Default described in
paragraphs (a) through (h) of Section 8.1 has occurred and is continuing,
the holders of more than 25% in aggregate principal amount of the Notes
then outstanding may, by notice to the Company, declare the entire
principal, together with the Make-Whole Amount (to the extent permitted by
law), and all interest accrued on all Notes to be, and such Notes shall
thereupon become, forthwith due and payable, without any presentment,
demand, protest or other notice of any kind, all of which are expressly
waived. Notwithstanding the foregoing, when (i) any Event of Default
described in paragraphs (a) or (b) of Section 8.1 has occurred and is
continuing, any holder may by notice to the Company declare the entire
principal, together with the Make-Whole Amount (to the extent permitted by
law), and all interest accrued on the Notes then held by such holder to
be, and such Notes shall thereupon become, forthwith due and payable,
without any presentment, demand, protest or other notice of any kind, all
of which are expressly waived and (ii) any Event of Default described in
paragraph (i) of Section 8.1 has occurred, then the entire principal,
together with the Make-Whole Amount (to the extent permitted by law) and
all interest accrued on all outstanding Notes shall immediately become due
and payable without presentment, demand or notice of any kind. Upon the
Notes or any of them becoming due and payable as aforesaid, the Company
will forthwith pay to the holders of such Notes the entire principal of
and interest accrued on such Notes, plus the Make-Whole Amount which shall
be calculated on the Determination Date.
8.3. Annulment of Acceleration of Notes. The provisions of Section 8.2
are subject to the condition that if the principal of and accrued interest
on the Notes have been declared immediately due and payable by reason of
the occurrence of any Event of Default described in paragraphs (a) through
(g), inclusive, of Section 8.1, the holder or holders of more than 66-2/3%
in aggregate principal amount of the Notes then outstanding may, by
written instrument filed with the Company, rescind and annul such
declaration and the consequences thereof, provided that (i) at the time
such declaration is annulled and rescinded no judgment or decree has been
entered for the payment of any monies due pursuant to the Notes, this
Agreement or the Guaranty, (ii) all arrears of interest upon all the Notes
and all other sums payable under the Notes and under this Agreement or the
Guaranty (except any principal, interest or Make-Whole Amount, if any, on
the Notes which has become due and payable solely by reason of such
declaration under Section 8.2) shall have been duly paid and (iii) each
and every Default or Event of Default shall have been cured or waived; and
provided further, that no such rescission and annulment shall extend to or
affect any subsequent Default or Event of Default or impair any right
consequent thereto.
8.4. Other Remedies. If any Event of Default shall be continuing, any
holder of Notes may enforce its rights by suit in equity, by action at
law, or by any other appropriate proceedings, whether for the specific
performance (to the extent permitted by law) of any covenant or agreement
contained in this Agreement or in the Notes or in aid of the exercise of
any power granted in this Agreement, and may enforce the payment of any
Note held by such holder and any of its other legal or equitable rights.
8.5. Conduct No Waiver; Collection Expenses. No course of dealing on the
part of any holder of Notes, nor any delay or failure on the part of any
holder of Notes to exercise any of its rights, shall operate as a waiver
of such rights or otherwise prejudice such holder's rights, powers and
remedies. If the Company fails to pay, when due, the principal of, or the
interest on, any Note, or fails to comply with any other provision of this
Agreement, the Company will pay to each holder, to the extent permitted by
law, on demand, such further amounts as shall be sufficient to cover the
costs and expenses, including but not limited to reasonable attorneys'
fees, incurred by such holders of the Notes in collecting any sums due on
the Notes or in otherwise enforcing any of their rights.
8.6. Remedies Cumulative. No right or remedy conferred upon or reserved
to any holder of Notes under this Agreement is intended to be exclusive of
any other right or remedy, and every right and remedy shall be cumulative
and in addition to every other right or remedy given under this Agreement
or now or hereafter existing under any applicable law. Every right and
remedy given by this Agreement or by applicable law to any holder of Notes
may be exercised from time to time and as often as may be deemed expedient
by such holder, as the case may be.
8.7. Notice of Default. With respect to Defaults, Events of Default or
claimed defaults, the Company will give the following notices:
(a) The Company promptly, but in any event within 5 days after the day on
which an officer of the Company first obtains actual knowledge thereof,
will furnish to each holder of a Note written notice of the occurrence of
a Default or an Event of Default. Such notice shall specify the nature of
such default, the period of existence thereof and what action the Company
has taken or is taking or proposes to take with respect thereto.
(b) If the holder of any Note or of any other evidence of Indebtedness of
the Company or any Subsidiary gives any notice or takes any other action
with respect to a claimed default, the Company will forthwith give written
notice thereof to each holder of the then outstanding Notes, describing
the notice or action and the nature of the claimed default.
9. AMENDMENTS, WAIVERS AND CONSENTS
9.1. Matters Subject to Modification. Any term, covenant, agreement or
condition of this Agreement or the Guaranty Agreement may, with the
consent of the Company, be amended, or compliance therewith may be waived
(either generally or in a particular instance and either retroactively or
prospectively), if the Company shall have obtained the consent in writing
of the holder or holders of at least 66-2/3% in aggregate principal amount
of outstanding Notes; provided, however, that, without the written consent
of the holder or holders of all of the Notes then outstanding, no such
waiver, modification, alteration or amendment shall be effective which
will (i) change the time of payment (including any required prepayment) of
the principal of or the interest on any Note, (ii) reduce the principal
amount thereof or the Make-Whole Amount, if any, or change the rate of
interest thereon, (iii) change any provision of any instrument affecting
the preferences between holders of the Notes or between holders of the
Notes and other creditors of the Company, or (iv) change any of the
provisions of Section 8.2, Section 8.3 or this Section 9.
For the purpose of determining whether holders of the requisite
principal amount of Notes have made or concurred in any waiver, consent,
approval, notice or other communication under this Agreement, Notes held
in the name of, or owned beneficially by, the Company, any Subsidiary or
any Affiliate thereof, shall not be deemed outstanding.
9.2. Solicitation of Holders of Notes. The Company will not, directly or
indirectly, solicit, request or negotiate for or with respect to any
proposed waiver or amendment of any of the provisions of this Agreement or
the Notes unless each holder of the Notes (irrespective of the amount of
Notes then owned by it) shall concurrently be informed thereof by the
Company and shall be afforded the opportunity of considering the same and
shall be supplied by the Company with sufficient information to enable it
to make an informed decision with respect thereto. Executed or true and
correct copies of any waiver or consent effected pursuant to the
provisions of this Section 9 shall be delivered by the Company to each
holder of outstanding Notes forthwith following the date on which the same
shall have been executed and delivered by the holder or holders of the
requisite percentage of outstanding Notes. The Company will not, directly
or indirectly, pay or cause to be paid any remuneration, whether by way of
supplemental or additional interest, fee or otherwise, to any holder of
the Notes as consideration for or as an inducement to the entering into by
any holder of the Notes of any waiver or amendment of any of the terms and
provisions of this Agreement unless such remuneration is concurrently
paid, on the same terms, ratably to each holder of the then outstanding
Notes.
9.3. Binding Effect. Any such amendment or waiver shall apply equally to
all the holders of the Notes and shall be binding upon them, upon each
future holder of any Note and upon the Company whether or not such Note
shall have been marked to indicate such amendment or waiver. No such
amendment or waiver shall extend to or affect any obligation not expressly
amended or waived or impair any right related thereto.
10. FORM OF NOTES, REGISTRATION, TRANSFER, EXCHANGE AND REPLACEMENT
10.1. Form of Notes. Each Note initially delivered under this
Agreement will be in the form of one fully registered Note in the form
attached as Exhibit A. The Notes are issuable only in fully registered
form and in denominations of at least $100,000 (or the remaining
outstanding balance thereof, if less than $100,000).
10.2. Note Register. The Company shall cause to be kept at its
principal office a register (the "Note Register") for the registration and
transfer of the Notes. The names and addresses of the holders of Notes,
the transfer thereof and the names and addresses of the transferees of the
Notes shall be registered in the Note Register. The Company may deem and
treat the person in whose name a Note is so registered as the holder and
owner thereof for all purposes and shall not be affected by any notice to
the contrary, until due presentment of such Note for registration of
transfer as provided in this Section 10.
10.3. Issuance of New Notes upon Exchange or Transfer. Upon surrender
for exchange or registration of transfer of any Note at the office of the
Company designated for notices in accordance with Section 12.2, the
Company shall execute and deliver, at its expense, one or more new Notes
of any authorized denominations requested by the holder of the surrendered
Note, each dated the date to which interest has been paid on the Notes so
surrendered (or, if no interest has been paid, the date of such
surrendered Note), but in the same aggregate unpaid principal amount as
such surrendered Note, and registered in the name of such person or
persons as shall be designated in writing by such holder. Every Note
surrendered for registration of transfer shall be duly endorsed, or be
accompanied by a written instrument of transfer duly executed, by the
holder of such Note or by his attorney duly authorized in writing. The
Company may condition its issuance of any new Note in connection with a
transfer by any Person on the transferee making the representation in
Section 3.2, by Institutional Holders on compliance with Section 2.5 and
on the payment to the Company of a sum sufficient to cover any stamp tax
or other governmental charge imposed in respect of such transfer.
10.4. Replacement of Notes. Upon receipt of evidence satisfactory to
the Company of the loss, theft, mutilation or destruction of any Note, and
in the case of any such loss, theft or destruction upon delivery of a bond
of indemnity in such form and amount as shall be reasonably satisfactory
to the Company or in the event of such mutilation upon surrender and
cancellation of the Note, the Company, without charge to the holder
thereof, will make and deliver a new Note, of like tenor in lieu of such
lost, stolen, destroyed or mutilated Note. If any such lost, stolen or
destroyed Note is owned by you or any other Institutional Holder, then the
affidavit of an authorized officer of such owner setting forth the fact of
such loss, theft or destruction and of its ownership of the Note at the
time of such loss, theft or destruction shall be accepted as satisfactory
evidence thereof, and no further indemnity shall be required as a
condition to the execution and delivery of a new Note, other than a
written agreement of such owner (in form reasonably satisfactory to the
Company) to indemnify the Company.
11. ADDITIONAL SERIES OF NOTES
11.1. Provision for Additional Series of Notes. The Company may, from
time to time, issue and sell additional series of its unsecured promissory
notes (each additional series being designated by the next succeeding
letter of the alphabet following designation of the immediately preceding
series) to one or more additional purchasers (which may include one or
more of the Purchasers if such Purchaser or Purchasers shall in its or
their sole discretion consent thereto) and may, in connection with the
documentation of such additional series, incorporate by reference all of
or certain of the provisions of this Agreement; provided, however, that
such incorporation by reference shall not dilute or otherwise affect the
relative priority or other rights of the Purchasers of the Notes hereunder
or any subsequent series of notes, including, without limitation, the
percentages of the Notes required to approve an amendment to this
Agreement or to effect a waiver pursuant to Section 9.1 hereof or the
percentages of the Notes required to accelerate the maturity of the Notes
or to rescind such an acceleration of the maturity of the Notes pursuant
to Sections 8.2 and 8.3 hereof. This Section 11 does not in any manner
obligate any of the Purchasers or the holders of the Notes to purchase or
agree to purchase additional series of the Company's unsecured promissory
notes now or at any time in the future.
11.2. Conditions to Additional Series of Notes. The Company may (but
shall not be required to) at any time, or from time to time, offer to any
one or more of the Purchasers an opportunity to purchase additional
promissory notes. At such time the Company shall provide such offeree
with additional information regarding the terms of such additional
promissory notes, the timing of the offering and whatever additional
information as the Purchaser may request. If a Purchaser fails to respond
to such an offer, the Purchaser shall be deemed to have rejected the
Company's offer. The Purchasers shall have no obligation to make any such
additional purchase, and may reject such offers at their sole discretion.
In the event that the Company and one or more of the Purchasers shall
mutually agree to such an additional purchase, the issuance of each such
additional series of promissory notes shall occur upon the execution by
the Company and each of such Purchasers participating therein of a terms
agreement substantially in the form of Exhibit F hereto, appropriately
completed, and satisfaction by the Company of all of the conditions to
closing and funding set forth in Section 4 hereof, with such changes as
shall be appropriate to such additional series of promissory notes, and
the delivery of such additional closing documents and opinions as such
Purchasers shall request.
12. MISCELLANEOUS
12.1. Expenses. Whether or not the purchase of Notes herein
contemplated shall be consummated, the Company agrees to pay directly all
reasonable expenses in connection with the preparation, execution and
delivery of this Agreement and the transactions contemplated by this
Agreement, including, but not limited to, out-of-pocket expenses, filing
fees of Standard & Poor's Corporation in connection with obtaining a
private placement number, charges and disbursements of special counsel,
photocopying and printing costs and charges for shipping the Notes,
adequately insured, to you at your home office or at such other address as
you may designate, and all similar expenses (including the fees and
expenses of counsel) relating to any proposed amendments, waivers or
consents, whether or not consummated, in connection with this Agreement or
the Notes, including, but not limited to, any such amendments, waivers or
consents resulting from any work-out, renegotiation or restructuring
relating to the performance by the Company of its obligations under this
Agreement and the Notes. The Company also agrees that it will pay and
save you harmless against any and all liability with respect to stamp and
other documentary taxes, if any, which may be payable, or which may be
determined to be payable in connection with the execution and delivery of
this Agreement or the Notes (but not in connection with a transfer of any
Notes), whether or not any Notes are then outstanding. The obligations of
the Company under this Section 12.1 shall survive the retirement of the
Notes. The Company agrees to pay the fees and expenses of counsel (to the
extent not previously paid pursuant to Section 4.4) within 3 Business Days
of receipt of an itemized statement therefor.
12.2. Notices. Except as otherwise expressly provided herein, all
communications provided for in this Agreement shall be in writing and
delivered by overnight courier or by a facsimile with a copy also
contemporaneously sent by overnight courier, such notice to be deemed
effective as of the time of actual receipt by overnight courier (i) if to
you, to the address set forth below your name in Schedule I, or to such
other address as you may in writing designate, (ii) if to any other holder
of the Notes, to such address as the holder may designate in writing to
the Company, and (iii) if to the Company, to Checkpoint Systems, Inc., 550
Grove Road, Thorofare, New Jersey 08086, Attention: Chief Financial
Officer, or to such other address as the Company may in writing designate.
12.3. Reproduction of Documents. This Agreement and all documents
relating hereto, including, without limitation, (i) consents, waivers and
modifications which may hereafter be executed, (ii) documents received by
you at the closing of the purchase of the Notes (except the Notes
themselves), and (iii) financial statements, certificates and other
information previously or hereafter furnished to you, may be reproduced by
you by any photographic, photostatic, microfilm, micro-card, miniature
photographic or other similar process, and you may destroy any original
document so reproduced. The Company agrees and stipulates that any such
reproduction which is legible shall be admissible in evidence as the
original itself in any judicial or administrative proceeding (whether or
not the original is in existence and whether or not such reproduction was
made by you in the regular course of business) and that any enlargement,
facsimile or further reproduction of such reproduction shall likewise be
admissible in evidence; provided that nothing herein contained shall
preclude the Company from objecting to the admission of any reproduction
on the basis that such reproduction is not accurate, has been altered or
is otherwise incomplete.
12.4. Successors and Assigns. This Agreement will inure to the
benefit of and be binding upon the parties hereto and their respective
successors and assigns.
12.5. Law Governing. This Agreement shall be governed by and
construed in accordance with the laws of the State of Illinois.
12.6. Headings. The headings of the sections and subsections of this
Agreement are inserted for convenience only and do not constitute a part
of this Agreement.
12.7. Counterparts. This Agreement may be executed simultaneously in
one or more counterparts, each of which shall be deemed an original, but
all such counterparts shall together constitute one and the same
instrument, and it shall not be necessary in making proof of this
Agreement to produce or account for more than one such counterpart or
reproduction thereof permitted by Section 12.3.
12.8. Reliance on and Survival of Provisions. All covenants,
representations and warranties made by the Company herein and in any
certificates delivered pursuant to this Agreement, whether or not in
connection with a closing, (i) shall be deemed to have been relied upon by
you, notwithstanding any investigation heretofore or hereafter made by you
or on your behalf and (ii) shall survive the delivery of this Agreement
and the Notes.
12.9. Integration and Severability. This Agreement embodies the
entire agreement and understanding between you and the Company, and
supersedes all prior agreements and understandings relating to the subject
matter hereof. In case any one or more of the provisions contained in
this Agreement or in any Note, or application thereof, shall be invalid,
illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained in this Agreement and
in any Note, and any other application thereof, shall not in any way be
affected or impaired thereby.
12.10. Confidentiality. You agree that you will keep confidential in
accordance with your internal policies and procedures in effect from time
to time any written information with respect to the Company or its
Subsidiaries which is furnished pursuant to this Agreement and which is
designated by the Company or its Subsidiaries to you in writing as
confidential, provided that you may disclose any such information (a) as
has become generally available to the public (other than as a consequence
of your actions) or to you on a non-confidential basis from a source other
than the Company or its Subsidiaries or as was known to you on a non-
confidential basis prior to its disclosure by the Company or its
Subsidiaries, (b) as may be required or appropriate in any report,
statement or testimony submitted to any municipal, state or Federal
regulatory body having or claiming to have jurisdiction over you or to the
National Association of Insurance Commissioners or similar organizations
or their successors, (c) as may be required or appropriate in response to
any summons or subpoena or in connection with any litigation, (d) to the
extent that you reasonably believe it appropriate in order to protect your
investment in the Notes or in order to comply with any law, order,
regulation or ruling applicable to you, (e) to your officers, trustees,
employees, auditors or counsel or to rating agencies or another holder of
the Notes, (f) to Persons who are parties to similar confidentiality
agreements, or (g) to the prospective transferee in connection with any
contemplated transfer of any of the Notes by you. By its acceptance of a
Note, any transferee shall be bound by the terms of this Section 12.10.
IN WITNESS WHEREOF, the Company and the Purchasers have caused this
Agreement to be executed and delivered by their respective officer or
officers thereunto duly authorized.
CHECKPOINT SYSTEMS, INC.
By:
Title:
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
By:
Title:
By:
Title:
TMG Life Insurance Company
By: THE MUTUAL GROUP, Its Agent
By:
Name: Robert Lapointe
Title: Vice President
By:
Name: Michael J. Carew
Title: Assistant Vice President
SCHEDULE I
Principal Amount of Notes to Be Purchased
Name and Address of Purchaser Principal Amount of Notes
Principal Mutual Life Insurance Company $10,000,000
711 High Street
Des Moines, Iowa 50392-0800
Attention: Investment Department -
Securities Division
Address for all communications is as above, except notices of payment and
written confirmations of wire or inter-bank transfers, which shall be
addressed to:
Principal Mutual Life Insurance Company
711 High Street
Des Moines, Iowa 50392-0810
Attn: Investment Department -
Accounting and Treasury
All payments are to be by bank wire transfer of immediately available
funds to:
Norwest Bank Iowa, N.A.
7th & Walnut Streets
Des Moines, Iowa 50309
Account No. 014752
Each wire transfer shall identify such payment as "Checkpoint Systems,
Inc., 8.27% Series A Senior Notes due April 1, 2002," Bond No. 1-B-60027.
Tax ID # 42-0127290
SCHEDULE I
Principal Amount of Notes to Be Purchased
Name and Address of Purchaser Principal Amount of Notes
TMG Life Insurance Company $2,000,000
401 North Executive Drive
Brookfield, Wisconsin 53008-0980
Attention: Lisa Harris
Address for all communications is as above.
All payments are to be by bank wire transfer
of immediately available funds to:
Federal Reserve Bank Minneapolis
Norwest Bank MN/Trust
ABA# 091000019
Credit Account # 08-40-245
For Credit to TMG Life - Universal
Account # 12250600
Contact: Jane Busch
Each wire transfer shall identify such payment as "Checkpoint Systems,
Inc., Series A 8.27% Senior Notes due April 1, 2002."
Tax ID # 45-0208990