SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED OCTOBER 2, 2004
---------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
----- -----
COMMISSION FILE NUMBER 0-362
FRANKLIN ELECTRIC CO., INC.
---------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
INDIANA 35-0827455
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
400 EAST SPRING STREET
BLUFFTON, INDIANA 46714
----------------- -----
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(260) 824-2900
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(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
NOT APPLICABLE
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(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST
REPORT)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
----- -----
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
YES X NO
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
OUTSTANDING AT
CLASS OF COMMON STOCK NOVEMBER 1, 2004
- --------------------- ----------------
$.10 PAR VALUE 22,011,432 SHARES
2
FRANKLIN ELECTRIC CO., INC.
Index
Page
PART I. FINANCIAL INFORMATION Number
- --------------------------------- ------
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets
as of October 2, 2004
and January 3, 2004 .......................... 3
Condensed Consolidated Statements of
Income for the Third Quarter and Nine
Months Ended October 2, 2004 and
September 27, 2003 ........................... 4
Condensed Consolidated Statements
Of Cash Flows for the Nine Months
Ended October 2, 2004 and
September 27, 2003 ........................... 5
Notes to Condensed Consolidated
Financial Statements ......................... 6-12
Item 2. Management's Discussion and Analysis
of Financial Condition and
Results of Operations......................... 12-15
Item 3. Quantitative and Qualitative Disclosures
About Market Risk............................. 15
Item 4. Controls and Procedures ...................... 15
PART II. OTHER INFORMATION
- -----------------------------
Item 1. Legal Proceedings............................. 16
Item 2. Unregistered Sales of Equity Securities
and Use Of Proceeds........................... 16
Item 6. Exhibits...................................... 17
Signatures................................................ 18
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Exhibits..................................................19-194
- --------
3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
- -----------------------------
FRANKLIN ELECTRIC CO., INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands) October 2, January 3,
2004 2004
---- ----
ASSETS
Current assets:
Cash and equivalents.................... $ 61,543 $ 29,962
Receivables, less allowances of
$2,033 and $1,949, respectively....... 25,835 29,194
Inventories............................. 60,201 54,653
Other current assets (including
deferred income taxes of $9,777
and $9,672, respectively)............. 13,996 14,232
-------- --------
Total current assets.................. 161,575 128,041
Property, plant and equipment,
net..................................... 89,451 83,916
Deferred and other assets................. 15,581 13,828
Goodwill.................................. 55,927 56,186
-------- --------
Total assets.............................. $322,534 $281,971
======== ========
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Current maturities of long-term
debt and short-term borrowings........ $ 1,386 $ 1,392
Accounts payable........................ 20,390 15,958
Accrued expenses........................ 34,559 28,051
Income taxes............................ 5,486 -
-------- --------
Total current liabilities............. 61,821 45,401
Long-term debt............................ 14,299 14,960
Deferred income taxes..................... 4,352 4,354
Employee benefit plan obligations......... 18,918 18,697
Other long-term liabilities............... 5,870 5,621
Shareowners' equity:
Common stock............................ 2,201 1,091
Additional capital...................... 52,181 46,917
Retained earnings....................... 157,358 139,057
Loan to ESOP Trust...................... (665) (897)
Accumulated other comprehensive
income................................ 6,199 6,770
-------- --------
Total shareowners' equity............. 217,274 192,938
-------- --------
Total liabilities and shareowners' equity. $322,534 $281,971
======== ========
See Notes to Condensed Consolidated Financial Statements.
4
FRANKLIN ELECTRIC CO., INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share amounts)
Third Quarter Ended Nine Months Ended
------------------- -----------------
Oct. 2, Sept. 27, Oct. 2, Sept. 27,
2004 2003 2004 2003
---- ---- ---- ----
Net sales.............................$110,336 $99,685 $296,687 $263,303
Cost of sales......................... 74,280 68,827 202,499 183,687
------- ------- -------- --------
Gross profit.......................... 36,056 30,858 94,188 79,616
Selling and administrative expenses... 16,875 15,070 47,856 43,860
Restructuring expense................. 1,724 - 3,676 -
------- ------- ------- -------
Operating income...................... 17,457 15,788 42,656 35,756
Interest expense...................... (163) (313) (362) (975)
Other income, net..................... 70 61 98 448
Foreign exchange income/(loss)........ (109) (278) (333) 404
------- ------ ------- --------
Income before income taxes............ 17,255 15,258 42,059 35,633
Income taxes.......................... 6,125 4,745 14,930 11,724
------- ------- -------- --------
Net income............................ $11,130 $10,513 $ 27,129 $ 23,909
======= ======= ======== ========
Per share data:
Basic Earnings per Share............ $ 0.51 $ 0.49 $ 1.24 $ 1.11
======= ======= ======== ========
Diluted Earnings per Share.......... $ 0.48 $ 0.46 $ 1.18 $ 1.06
======= ======= ======== ========
Dividends per common share.......... $ 0.08 $ 0.07 $ 0.23 $ 0.20
======= ======= ======== ========
See Notes to Condensed Consolidated Financial Statements.
5
FRANKLIN ELECTRIC CO., INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands) Nine Months Ended
-----------------
October 2, September 27,
2004 2003
---- ----
Cash flows from operating activities:
Net income................................ $27,129 $23,909
Adjustments to reconcile net income to net
cash flows from operating activities:
Depreciation and amortization........... 11,654 10,329
Loss on disposals of plant and
equipment............................. 96 436
Changes in assets and liabilities:
Receivables........................... 3,313 (1,083)
Inventories........................... (5,634) (2,882)
Accounts payable and other accrued
expenses............................ 18,647 1,992
Employee benefit plan obligations..... (3,494) (3,245)
Other, net............................ (32) (915)
------- -------
Net cash flows from operating activities.... 51,679 28,541
------- -------
Cash flows from investing activities:
Additions to plant and equipment.......... (15,724) (8,925)
Proceeds from sale of plant and
equipment............................... 8 243
Additions to deferred assets.............. (9) (433)
------- -------
Net cash flows from investing activities.... (15,725) (9,115)
------- -------
Cash flows from financing activities:
Borrowing on long-term debt - 6,648
Repayment of long-term debt............... (478) (18,407)
Borrowing on line of credit
and short-term borrowings............... - 11,000
Repayment of line of credit
and short-term borrowings............... - (11,024)
Proceeds from issuance of common stock.... 3,739 3,282
Purchases of common stock................. (3,091) (9,782)
Reduction of loan to ESOP Trust........... 232 233
Dividends paid............................ (5,054) (4,420)
------- -------
Net cash flows from financing activities.... (4,652) (22,470)
------ -------
Effect of exchange rate changes on cash..... 279 975
------- -------
Net change in cash and equivalents.......... 31,581 (2,069)
Cash and equivalents at beginning of period. 29,962 20,133
------- -------
Cash and equivalents at end of period....... $61,543 $18,064
======= =======
See Notes to Condensed Consolidated Financial Statements.
6
FRANKLIN ELECTRIC CO., INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1: Condensed Consolidated Financial Statements
- ----------------------------------------------------
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
accounting entries and adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation of the financial position and the
results of operation for the interim period have been made. Prior year
amounts are reclassified when necessary to conform to current year
presentation. Operating results for the third quarter and nine months ended
October 2, 2004 are not necessarily indicative of the results that may be
expected for the fiscal year ending January 1, 2005. For further information,
including a description of Franklin Electric's critical accounting policies,
refer to the consolidated financial statements and footnotes thereto included
in Franklin Electric Co., Inc.'s annual report on Form 10-K for the year ended
January 3, 2004.
Note 2: Inventories
- --------------------
Inventories consist of the following:
(In millions) October 2, January 3,
2004 2004
---- ----
Raw Materials........................ $ 22.5 $ 17.7
Work in Process...................... 7.5 6.6
Finished Goods....................... 43.0 40.7
LIFO Reserve......................... (12.8) (10.4)
------ ------
Total Inventory...................... $ 60.2 $ 54.6
====== ======
Note 3: Property, Plant and Equipment
- --------------------------------------
Property, plant and equipment, at cost, consists of the following:
(In millions) October 2, January 3,
2004 2004
---- ----
Land and Building.................... $ 49.8 $ 44.6
Machinery and Equipment.............. 156.7 147.3
------- -------
206.5 191.9
Allowance for Depreciation........... (117.0) (108.0)
------- -------
$ 89.5 $ 83.9
======= =======
7
Note 4: Goodwill and Other Intangible Assets
- ---------------------------------------------
Pursuant to the adoption of SFAS No. 141 "Business Combinations" and SFAS No.
142 "Goodwill and Other Intangible Assets" in December 2001, the Company
accounts for business combinations using the purchase method and accounts for
goodwill using an impairment-only approach. During the fourth quarter of
2003, the Company performed its annual impartment testing required by SFAS No.
142. No impairment loss was required to be recognized.
Information regarding the Company's other intangible assets which are included
in deferred and other assets, and goodwill follows:
October 2, January 3,
(In millions) 2004 2004
---- ----
Amortized intangibles
Patents............................. $ 3.5 $ 3.5
Supply agreements................... 10.1 10.2
Other............................... 1.6 1.6
Accumulated amortization............ (8.4) (6.8)
----- -----
Total............................. $ 6.8 $ 8.5
===== =====
Goodwill.............................. $55.9 $56.2
===== =====
Amortization expense related to intangible assets for the nine months ended
October 2, 2004 and September 27, 2003, was $1.7 and $1.5 million
respectively.
Note 5: Employee Benefits
- --------------------------
The following table sets forth aggregated net domestic periodic benefit cost:
- -----------------------------------------------------------------------------
(In millions)
Pension Benefits Pension Benefits
Third Quarter Ended Nine Months Ended
Oct. 2, Sept. 27, Oct. 2, Sept. 27,
2004 2003 2004 2003
---- ---- ---- ----
Service cost............. $0.9 $0.9 $2.7 $2.6
Interest cost............ 1.9 1.9 5.6 5.7
Expected return
on assets............... (2.7) (2.6) (8.1) (7.9)
Amortization of
unrecognized:
obligation/(asset)..... - - - -
Prior service cost..... 0.4 0.4 1.1 1.1
Loss/(Gain)............ - (0.1) - (0.2)
---- ---- ---- ----
Net periodic
benefit cost............ 0.5 0.5 1.3 1.3
Settlement cost.......... 0.1 0.1 .2 0.2
---- ---- ---- ----
Total benefit cost....... $0.6 $0.6 $1.5 $1.5
==== ==== ==== ====
8
Other Benefits Other Benefits
Third Quarter Ended Nine Months Ended
Oct. 2, Sept. 27, Oct. 2, Sept. 27,
2004 2003 2004 2003
---- ---- ---- ----
Service cost............. $0.1 $0.1 $0.3 $0.2
Interest cost............ 0.2 0.2 0.7 0.6
Expected return
on assets............... - - - -
Amortization of
unrecognized:
obligation/(asset)..... 0.1 0.1 0.3 0.4
Prior service cost..... - - 0.1 -
Loss/(Gain)............ 0.1 - 0.1 0.1
----- ----- ---- ----
Net periodic
benefit cost............ 0.5 0.4 $1.5 $1.3
Settlement cost.......... - - - -
----- ----- ---- ----
Total benefit cost....... $ 0.5 $ 0.4 $1.5 $1.3
===== ===== ==== ====
- ------------------------------------------------------------------------------
The Company previously disclosed in its financial statements for the year
ended January 3, 2004, that it expected to contribute $2.5 million in 2004.
As of October 2, 2004 the Company has contributed $6.1 million which includes
a $4.0 million voluntary contribution to one of its defined benefit plans.
The Company estimates total contributions of $0.4 million for the remainder of
2004.
On December 8, 2003, the Medicare Prescription Drug, Improvement and
Modernization Act of 2003, (the "Act") was signed into law. The Act expands
Medicare, primarily by adding a prescription drug benefit for Medicare-
eligible retirees starting in 2006. The Act provides employers currently
sponsoring prescription drug programs for Medicare-eligible retirees with a
range of options for complying with the new government-sponsored program to
potentially reduce program cost.
Pursuant to guidance from the FASB under FSP FAS 106-2, the Company chose to
defer recognition of the potential effects of the Act until the impact could
be properly measured. After reviewing the Act the Company determined that
there was no direct impact to its post retirement medical plan. However, to
assist retirees in maintaining their current standard of living, the Company
increased its post-65 benefit payment to retirees. The Act did impact the
final benefit amount that would be granted in 2006 and thereafter.
Accumulated Postretirement Benefit Obligation for this benefit change
increased $2.4 million and annual net periodic postretirement benefit cost
increased $0.3 million.
Note 6: Tax Rates
- ------------------
The effective tax rate on income before income taxes in 2004 and 2003 varies
from the United States statutory rate of 35 percent primarily due to the
foreign income exclusion and R & D credits and to the effects of state and
foreign income taxes net of federal tax benefits.
9
Note 7: Shareowners' Equity
- ----------------------------
The Company had 22,011,432 shares of common stock (45,000,000 shares
authorized, $.10 par value) outstanding as of October 2, 2004.
For year to date 2004, pursuant to the stock repurchase program authorized by
the Company's Board of Directors, the Company repurchased a total of 102,800
shares for $3.1 million. All repurchased shares were retired.
During the second quarter, under terms of a Company stock option plan, an
officer of the Company delivered 21,312 shares ($0.7 million) of Company
common stock as consideration for stock issued upon the exercise of stock
options. The shares delivered to the Company were subsequently retired.
Note 8: Earnings Per Share
- ---------------------------
Following is the computation of basic and diluted earnings per share:
(In millions, except Third Quarter Ended Nine Months Ended
------------------- -----------------
per share amounts) Oct. 2, Sept. 27, Oct. 2, Sept. 27,
2004 2003 2004 2003
---- ---- ---- ----
Numerator:
Net Income..................... $11.1 $10.5 $27.1 $23.9
===== ===== ===== =====
Denominator:
Basic
-----
Weighted average common
shares....................... 22.0 21.6 22.0 21.6
Diluted
-------
Effect of dilutive securities:
Employee and director incentive
stock options and awards... 1.1 1.1 1.0 1.0
----- ----- ----- -----
Adjusted weighted average
common shares................ 23.1 22.7 23.0 22.6
===== ===== ===== =====
Basic earnings per share......... $0.51 $0.49 $1.24 $1.11
===== ===== ===== =====
Diluted earnings per share....... $0.48 $0.46 $1.18 $1.06
===== ===== ===== =====
10
Note 9: Other Comprehensive Income
- -----------------------------------
Comprehensive income is as follows:
(In millions) Third Quarter Ended Nine Months Ended
------------------- -----------------
Oct. 2, Sept. 27, Oct. 2, Sept. 27,
2004 2003 2004 2003
---- ---- ---- ----
Net income......................... $11.1 $10.5 $27.1 $23.9
Other comprehensive loss:
Foreign currency translation
adjustments..................... 0.4 .4 (0.6) 4.4
----- ----- ----- -----
Comprehensive income, net of tax... $11.5 $10.9 $26.5 $28.3
===== ===== ===== =====
Accumulated other comprehensive income consists of the following:
(In millions) October 2, January 3,
2004 2004
---- ----
Cumulative translation adjustment........... $ 8.1 $ 8.7
Minimum pension liability adjustment,
net of tax................................ (1.9) (1.9)
----- -----
$ 6.2 $ 6.8
===== =====
Note 10: Warranty
- ------------------
The Company provides warranties on most of its products. The warranty terms
vary but are generally two years from date of manufacture or one year from
date of installation. Provisions for estimated expenses related to product
warranty are made at the time products are sold or when specific warranty
issues are identified. These estimates are established using historical
information about the nature, frequency, and average cost of warranty claims.
The Company actively studies trends of warranty claims and takes action to
improve product quality and minimize warranty claims. The Company believes
that the warranty reserve is appropriate; however, actual claims incurred
could differ from the original estimates, requiring adjustments to the
reserve.
Below is a table that shows the activity in the warranty accrual accounts:
(In millions) Third Quarter Ended Nine Months Ended
------------------- -----------------
Oct. 2, Sept. 27, Oct. 2, Sept. 27,
2004 2003 2004 2003
---- ---- ---- ----
Beginning Balance.................. $ 5.8 $ 5.5 $ 5.4 $ 5.3
Accruals related to
product warranties............... 1.2 1.2 3.6 3.3
Reductions for Payments made....... (1.0) (1.1) (3.0) (3.0)
----- ----- ----- -----
Ending Balance..................... $ 6.0 $ 5.6 $ 6.0 $ 5.6
===== ===== ===== =====
11
Note 11: Stock-Based Compensation
- ----------------------------------
The Company accounts for stock-based employee compensation plans under the
recognition and measurement principles of APB Opinion No. 25, "Accounting for
Stock Issued to Employees." No stock-based employee compensation cost is
reflected in net income (loss), as all options granted under those plans had
an exercise price equal to the market value of the stock at date of grant. As
permitted by SFAS No. 123, "Accounting for Stock-Based Compensation," and
amended by SFAS No. 148, "Accounting for Stock-based Compensation - Transition
and Disclosure, an amendment of FASB Statement No. 123," the Company follows
the disclosure requirements only of SFAS No. 123. The following table
illustrates the effect on net income (loss) and earnings (loss) per share if
the Company had applied the fair value recognition provisions of SFAS No. 123:
(In millions, except Third Quarter Ended Nine Months Ended
------------------- -----------------
per share amounts) Oct. 2, Sept. 27, Oct. 2, Sept. 27,
2004 2003 2004 2003
---- ---- ---- ----
Net income ...................... $11.1 $10.5 $27.1 $23.9
Deduct: Stock-based
employee compensation
cost, net of income tax........ 0.4 0.4 1.1 1.2
----- ----- ----- -----
Pro forma net income ............ $10.7 $10.1 $26.0 $22.7
===== ===== ===== =====
Earnings per share:
Basic - as reported.............. $ .51 $ .49 $1.24 $1.11
Basic - pro forma................ $ .49 $ .47 $1.19 $1.05
Diluted - as reported............ $ .48 $ .46 $1.18 $1.06
Diluted - pro forma.............. $ .46 $ .45 $1.13 $1.00
Note 12: Restructuring
- -----------------------
The Company incurred $1.7 million of expenses during the third quarter of 2004
(included in "Restructuring Expense" on the income statement) related to its
global manufacturing realignment program. The costs in the third quarter were
primarily severance, training, equipment transfers, travel, and employee
relocations related to the consolidation of the Company's Motta di Livenza,
Italy factory into other European factories and to the Fueling Systems
consolidation. The Company will incur additional severance expenses
throughout 2004 as well as costs to transfer equipment, train employees and
other related expenses during 2004 and 2005. The global manufacturing
realignment program is estimated to cost in total $10.0 million and is
expected to be substantially complete by the end of 2005.
The components and use of the restructuring reserve is summarized below:
(In millions)
Severance
Benefits: Other:
Balance January 3, 2004 $0.0 $0.0
Restructuring Expense 2.0 1.7
Costs Incurred (0.9) (1.7)
---- ----
Balance October 2, 2004 $1.1 $0.0
==== ====
12
Note 13: Subsequent Events
- ---------------------------
On October 3, 2004, the Company completed the acquisition of certain assets of
JBD, Inc., the former Jacuzzi brand pump company, based in Little Rock,
Arkansas. The assets acquired comprise the pump product line and include all
of the assets necessary to manufacture pumps. The pump product line will
enhance the Company's core global water well system products which already
include submersible electric motors, drives and controls. The acquisition was
funded primarily from cash on hand and will be accounted for by the purchase
method of accounting.
Item 2. Management's Discussion and Analysis of Financial Condition and
- ------------------------------------------------------------------------
Results of Operations
- ---------------------
Overview
- --------
Sales and earnings for the third quarter of 2004 were up from the same quarter
of 2003. The increase in sales was primarily due to volume increases across
North American and International markets for water systems and petroleum
products, while the North American industrial motor market continues to be
flat. However, some of the strength in sales in North America water systems
came from our original equipment manufacturer customers buying ahead of an
announced price increase which was precipitated by increases in the cost of
our raw materials, particularly steel and copper. Earnings improved in the
third quarter of 2004 primarily due to the increased sales. Increased
earnings were partially offset by increased commodity prices and costs
associated with the Company's global manufacturing realignment program.
Included in the results for the third quarter of 2004 are restructuring
expenses of $1.7 million pre-tax.
Results of Operations
- ---------------------
Sales for the third quarter of 2004 were $110.3 million, an increase of $10.6
million or 11 percent compared to sales of $99.7 million for the same period a
year ago. Foreign currencies, particularly the euro, strengthened relative to
the U.S. dollar since the third quarter of 2003. The impact of this change in
exchange rates was a $2.2 million increase in the Company's reported third
quarter 2004 sales. Excluding the impact of changes in foreign currencies,
net sales increased $8.6 million or 9 percent. The sales increase of $8.6
million relates primarily to increased sales of small and large submersible
motor products, including electronic drives and controls to North American
customers of about $7.2 million and higher demand by European customers of
about $1.1 million (when comparing both quarters at the current year exchange
rate). Sales of fueling systems motors and related products increased about
$0.5 million during the third quarter of 2004 compared to the third quarter of
2003. Sales of fueling systems motors and related products have increased
primarily due to increased demand from service station equipment suppliers for
submersible motors and monitoring equipment. For the nine months of 2004,
sales were $296.7 million, an increase of 13 percent compared to 2003 sales of
$263.3 million. Sales increased by $33.4 million of which foreign currencies
accounted for $7.5 million due primarily to the stronger euro and Rand.
Excluding the impact of the change in exchange rates, the Company's sales, for
the nine month period were up about 10 percent due to strong demand in North
13
America and Europa for water systems products and continued growth of fueling
systems products.
Cost of sales as a percent of net sales for the third quarter of 2004 was 67.3
percent, a decrease from 69.0 percent for the same period in 2003, primarily
as a result of increased sales. Cost of sales as a percent of net sales for
the year to date 2004 was 68.3 percent, a decrease from 69.8 percent for the
same period in 2003, primarily as a result of increased sales. The decrease
was partially offset by increased costs for certain commodities, used in the
manufacture of the electric motors primarily steel and copper.
Selling and administrative ("SG&A") expense as a percent of net sales for the
third quarter of 2004 was 15.3 percent compared to 15.1 percent for the same
period in 2003. SG&A expense as a percent of net sales for the first nine
months of 2004 was 16.1 percent compared to 16.7 percent for the first nine
months of 2003. The increase of SG&A expense of $4.0 million in the first
nine months of 2004 from the same period for 2003 was partially due to the
effect of changes in the foreign exchange rate, $0.8 million. The Company also
has incurred additional SG&A costs related to the continued growth of new
electronic products related to submersible motors, about $0.3 million. Other
additional SG&A costs include higher commissions related to the increased
sales, approximately $0.4 million, general insurance costs of about $0.4
million and costs of internal control compliance procedures associated with
the Sarbanes-Oxley Act, about $0.3 million. The Company further incurred
expenses of about $0.5 million related to the announced change in distribution
channels.
Restructuring expenses of $1.7 million pre-tax were incurred in the third
quarter. The expenses during the third quarter of 2004 (included in
"Restructuring Expense" on the income statement) related to the global
manufacturing realignment program. The costs in the third quarter were
primarily severance, training, equipment transfers, travel, and employee
relocations. The Company has completed the consolidation of FE Petro, EBW and
APT operations into a new state-of-the-art manufacturing and distribution
facility in Madison, Wisconsin has been completed. With the ramp-up of our
Linares, Mexico facility and the recently announced consolidation of our Motta
di Livenza, Italy factory into our other European factories, the Company will
incur additional severance expenses throughout 2004 as well as costs to
transfer equipment, train employees and other related expenses during 2004 and
2005. The operations performed in these closed facilities will be relocated
to other Company facilities and consolidated. The global manufacturing
realignment program is estimated to cost in total $10.0 million and is
expected to be substantially complete by the end of 2005.
Interest expense for the third quarter of 2004 of $0.2 million is $0.1 million
less than the prior year quarter and for the nine months of 2004 of $0.4
million is $0.6 million less than the prior year, due primarily to lower
outstanding debt.
Foreign currency-based transactions produced a loss for the third quarter of
2004 of $0.1 million compared to a loss of $0.3 million for the prior year.
The foreign currency-based transactions loss was due primarily to changes in
the euro relative to the U.S. dollar.
The provision for income taxes for the third quarter of 2004 is $6.1 million.
The effective tax rate for the third quarter of 2004 was 35.5 percent an
increase from the full year 2003 rate of 32.8 percent. The lower rate for 2003
was primarily the result of prior years' tax credits realized in 2003. The tax
credits resulted from tax planning activities performed in 2002 and 2003 in
14
the areas of foreign income exclusion and R&D credits. The effective tax rate
differs from the United States statutory rate of 35 percent, due to the
foreign income exclusion and R&D credits and to the effects of state and
foreign income taxes, net of federal tax benefits.
Net income for the third quarter of 2004 was $11.1 million, or $.48 per
diluted share, a 6 percent increase compared to net income of $10.5 million,
or $.46 per diluted share, for the same period a year ago. Year to date 2004
net income was $27.1 million, or $1.18 per diluted share, a 13 percent
increase compared to year to date 2003 net income of $23.9 million, or $1.06
per diluted share.
Capital Resources and Liquidity
- -------------------------------
Operating activities contributed approximately $51.7 million of cash during
the first nine months of 2004 compared to cash contributed for the same period
a year ago of $28.5 million. Working capital changes included increases in
inventories in conjunction with our global manufacturing realignment program
and increases in accounts payables and other accrued expenses due to accruals
for income taxes and severance, and timing of payments.
The primary uses of cash for investing activities for the first quarters of
2004 and 2003 were additions to property, plant and equipment of $15.7 million
and $8.9 million, respectively. Additions during 2004 were primarily related
to the building additions included in the global manufacturing realignment
program.
Net cash flows used in financing activities during 2004 and 2003 were $4.7
million and $22.5 million, respectively. The principal uses of cash during
2004 and 2003 were for purchases of Company common stock under the Company's
repurchase program and the payment of dividends. In 2003 the company had an
$18.4 million repayment of long-term debt.
Cash and equivalents at the end of the three quarters of 2004 and 2003 were
$61.5 million and $18.1 million, respectively.
Critical Accounting Policies and Estimates
- ------------------------------------------
Management's discussion and analysis of its financial condition and results of
operations are based upon the Company's condensed consolidated financial
statements, which have been prepared in accordance with accounting principles
generally accepted in the United States of America. The preparation of these
financial statements requires management to make estimates and judgments that
affect the reported amounts of assets, liabilities, revenues and expenses, and
the related disclosure of contingent assets and liabilities. On an on-going
basis, management evaluates its estimates, including those related to revenue
recognition, allowance for doubtful accounts, accounts receivable,
inventories, recoverability of long-lived assets, intangible assets, income
taxes, warranty obligations, pensions and other employee benefit plan
obligations, and contingencies. Management bases its estimates on historical
experience and on other assumptions that are believed to be reasonable under
the circumstances, the results of which form the basis for making judgments
about the carrying value of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these estimates
under different assumptions or conditions.
15
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
- -----------------------------------------------------------------------------
1995
- ----
Any forward-looking statements contained herein involve risks and
uncertainties, including, but not limited to, general economic and currency
conditions, various conditions specific to the Company's business and
industry, market demand, competitive factors, supply constraints, technology
factors, litigation, government and regulatory actions, the Company's
accounting policies, future trends, customer response to new distribution
strategy, and other risks which are described in detail in Exhibit 99 to the
Company's Annual Report on Form 10-K for the fiscal year ended January 3,
2004. These risks and uncertainties may cause actual results to differ
materially from those indicated by the forward-looking statements.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
- -------------------------------------------------------------------
The Company is subject to market risk associated with changes in foreign
currency exchange rates and interest rates. Foreign currency exchange rate
risk is mitigated through several means: maintenance of local production
facilities in the markets served, invoicing of customers in the same currency
as the source of the products, prompt settlement of intercompany balances
utilizing a global netting system and limited use of foreign currency
denominated debt. Interest rate exposure is limited to variable rate interest
borrowings under the Company's revolving credit agreement and an interest rate
swap.
Item 4. Controls and Procedures
- --------------------------------
As of the end of the period covered by this report (the "Evaluation Date"),
the Company carried out an evaluation, under the supervision and with the
participation of the Company's management, including the Company's Chief
Executive Officer and the Company's Chief Financial Officer, of the
effectiveness of the design and operation of the Company's disclosure controls
and procedures (as such term is defined in Exchange Act Rules 13a-15(e) and
15d-15(e)). Based upon that evaluation, the Company's Chief Executive Officer
and the Company's Chief Financial Officer concluded that as of the Evaluation
Date, the Company's disclosure controls and procedures are effective in timely
alerting them to material information relating to the Company and its
subsidiaries required to be included in the Company's periodic SEC filings.
During the last fiscal quarter there have been no significant changes in the
Company's internal controls or in other factors that have materially affected
or that are reasonably likely to materially affect the Company's internal
control over financial reporting.
16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
- --------------------------
In July-August 2004, Franklin informed its original equipment manufacturer
("OEM") submersible motor customers that it intended to change its pricing and
warranty programs for submersible motors, controls, accessories and parts. In
addition, on August 27, 2004, Franklin issued a press release announcing that
it intended to begin selling its submersible motor products directly to water
systems distributors in North America, in addition to its existing OEM
customers.
In response to these announcements, on August 27, 2004, ITT Water Technology,
Inc. ("ITT") filed suit against Franklin in the U.S. District Court for the
Eastern District of Texas. ITT filed an amended complaint in the same court
on October 25, 2004. ITT's amended complaint alleges that, for 4-inch
submersible motors, the announced changes to Franklin's pricing and warranty
programs and the changes to its submersible motor distribution strategy breach
contracts between ITT and Franklin and violate state and federal unfair
competition and antitrust laws. In addition, the ITT suit alleges that
certain Franklin motor product line acquisitions over the seven year period
ending in 1998, violated Section 7 of the Clayton Act and it also asserts
certain common law claims. The ITT suit seeks damages and injunctive relief.
The Company denies ITT's allegations in their entirety, and, if a settlement
cannot be reached, the Company is prepared to vigorously defend the lawsuit.
In the opinion of management, after discussion with counsel, this suit can be
successfully defended or resolved without a material adverse effect on the
Company's financial position and results of operation.
On September 30, 2004, Pentair Pump Group, Inc. and Sta-Rite Industries, LLC
("Pentair") filed suit in the U.S. District Court for the Northern District of
Ohio alleging that Franklin's changes to its pricing and warranty programs and
the changes to its submersible motor distribution strategies breached
contracts between Franklin and Pentair and violated state and federal unfair
competition and antitrust laws. Like ITT's complaint, Pentair's complaint
also alleges that certain Franklin motor acquisitions violated Section 7 of
the Clayton Act, and it asserted several common law claims. Pentair's suit
seeks damages and injunctive relief. On November 1, the Company issued a press
release announcing that the suit had been settled. Under the terms of the
settlement, Pentair will continue to purchase from Franklin the majority of
their 4-inch submersible electric motor requirements in the United States and
Canada in the 1/3 through 2hp size ratings through December 31, 2006.
Franklin has agreed, for this same time period, to continue supplying such
products to Pentair under the terms of previous arrangements as amended
between the parties. The settlement agreement contains no limitation on the
sale of any other Franklin products to distributors, including assembled pump
motor units sold through its newly acquired Franklin Pump Systems business
unit. The pending litigation has been dismissed with prejudice in accordance
with the terms of the settlement agreement.
17
Item 6. Exhibits
- -----------------
Exhibit
Number Description
- ------ -----------
10.11 $80,000,000 Credit Agreement dated as of September 9, 2004
between the Company and Bank One, N.A., as Administrative Agent
10.12 Amended and Restated Note Purchase and Private Shelf Agreement
dated as of September 9, 2004 between the Company and the
Prudential Insurance Company of America.
31.1 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
31.2 Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
32.1 Chief Executive Officer Certification Pursuant to 18 U.S.C.
Section 1350 As Adopted Pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002
32.2 Chief Financial Officer Certification Pursuant to 18 U.S.C.
Section 1350 As Adopted Pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002
18
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this quarterly report to be signed on its behalf by
the undersigned thereunto duly authorized.
FRANKLIN ELECTRIC CO., INC.
---------------------------
Registrant
Date November 8, 2004 By /s/ R. Scott Trumbull
---------------- ----------------------
R. Scott Trumbull, Chairman
and Chief Executive Officer
(Principal Executive Officer)
Date November 8, 2004 By /s/ Gregg C. Sengstack
---------------- -----------------------
Gregg C. Sengstack, Senior Vice
President, Chief Financial
Officer and Secretary (Principal
Financial and Accounting Officer)
19
EXHIBIT 10.11
-------------
EXECUTION COPY
CREDIT AGREEMENT
dated as of
September 9, 2004
among
FRANKLIN ELECTRIC CO., INC.,
The Lenders Party Hereto
and
BANK ONE, NA,
as Administrative Agent
---------------------------
J.P. MORGAN SECURITIES INC.,
as Sole Bookrunner and Sole Lead Arranger
20
TABLE OF CONTENTS
Page
----
ARTICLE I
Definitions
-----------
SECTION 1.01 Defined Terms.................................. 1
SECTION 1.02 Classification of Loans and Borrowings......... 15
SECTION 1.03 Terms Generally................................ 15
SECTION 1.04 Accounting Terms; GAAP......................... 16
ARTICLE II
The Credits
-----------
SECTION 2.01 Commitments..................................... 16
SECTION 2.01A Determination of Dollar Amounts;
Required Payments............................... 16
SECTION 2.02 Loans and Borrowings............................ 17
SECTION 2.03 Requests for Revolving Borrowings............... 17
SECTION 2.04 [Reserved]...................................... 18
SECTION 2.05 Swingline Loans................................. 18
SECTION 2.06 Letters of Credit............................... 19
SECTION 2.07 Funding of Borrowings........................... 22
SECTION 2.08 Interest Elections.............................. 23
SECTION 2.09 Termination and Reduction of Commitments........ 24
SECTION 2.10 Repayment of Loans; Evidence of Debt............ 25
SECTION 2.11 Prepayment of Loans............................. 25
SECTION 2.12 Fees............................................ 26
SECTION 2.13 Interest........................................ 27
SECTION 2.14 Alternate Rate of Interest...................... 27
SECTION 2.15 Increased Costs................................. 28
SECTION 2.16 Break Funding Payments.......................... 29
SECTION 2.17 Taxes........................................... 29
SECTION 2.18 Payments Generally; Pro Rata Treatment;
Sharing of Set-offs............................. 30
SECTION 2.19 Mitigation Obligations; Replacement of Lenders.. 32
SECTION 2.20 Market Disruption............................... 32
SECTION 2.21 Judgment Currency............................... 33
ARTICLE III
Representations and Warranties
------------------------------
SECTION 3.01 Organization; Powers............................. 33
SECTION 3.02 Authorization; Enforceability.................... 34
SECTION 3.03 Governmental Approvals; No Conflicts............. 34
SECTION 3.04 Financial Condition; No Material Adverse Change.. 34
SECTION 3.05 Properties..... ................................. 34
21
SECTION 3.06 Litigation and Environmental Matters............ 34
SECTION 3.07 Compliance with Laws and Agreements............. 35
SECTION 3.08 Investment and Holding Company Status........... 35
SECTION 3.09 Taxes........................................... 35
SECTION 3.10 ERISA........................................... 35
SECTION 3.11 Capital Stock................................... 35
SECTION 3.12 Use of Proceeds................................. 35
SECTION 3.13 Insolvency...................................... 36
SECTION 3.14 Insurance....................................... 36
SECTION 3.15 Partnerships and Joint Ventures................. 36
SECTION 3.16 Subsidiaries.................................... 36
SECTION 3.17 Debt............................................ 36
SECTION 3.18 Disclosure...................................... 36
ARTICLE IV
Conditions
----------
SECTION 4.01 Effective Date.................................. 37
SECTION 4.02 Each Credit Event............................... 38
ARTICLE V
Affirmative Covenants
---------------------
SECTION 5.01 Financial Statements; Other Information......... 38
SECTION 5.02 Notices of Material Events .................. 39
SECTION 5.03 Existence; Conduct of Business ................. 39
SECTION 5.04 Payment of Obligations ......................... 40
SECTION 5.05 Maintenance of Properties; Insurance............ 40
SECTION 5.06 Books and Records; Inspection Rights............ 40
SECTION 5.07 Compliance with Laws............................ 40
SECTION 5.08 Leverage Ratio.................................. 40
SECTION 5.09 Interest Coverage Ratio......................... 40
SECTION 5.10 Environmental Matters........................... 40
SECTION 5.11 Most Favored Lender Status...................... 41
ARTICLE VI
Negative Covenants
------------------
SECTION 6.01 Loans or Advances............................... 41
SECTION 6.02 Investments..................................... 41
SECTION 6.03 Liens........................................... 42
SECTION 6.04 Consolidations, Mergers and Sales
of Assets....................................... 42
SECTION 6.05 Use of Proceeds................................. 43
SECTION 6.06 Change in Fiscal Year........................... 43
SECTION 6.07 Dissolution..................................... 43
SECTION 6.08 Sale or Discount of Receivables................. 43
22
SECTION 6.09 Acquisitions.................................... 43
SECTION 6.10 Transactions with Affiliates.................... 43
SECTION 6.11 Restricted Payments............................. 44
SECTION 6.12 Limitation on Debt.............................. 44
SECTION 6.13 No Restrictions on Subsidiary Dividends......... 44
SECTION 6.14 Sale of Stock and Debt of Subsidiaries.......... 44
ARTICLE VII
Events of Default
-----------------
SECTION 7.01 Events of Default............................... 44
ARTICLE VIII
The Administrative Agent
------------------------
SECTION 8.01 The Administrative Agent........................ 46
ARTICLE IX
Miscellaneous
-------------
SECTION 9.01 Notices......................................... 48
SECTION 9.02 Waivers; Amendments............................. 49
SECTION 9.03 Expenses; Indemnity; Damage Waiver.............. 50
SECTION 9.04 Successors and Assigns.......................... 51
SECTION 9.05 Survival........................................ 53
SECTION 9.06 Counterparts; Integration; Effectiveness....... 53
SECTION 9.07 Severability.................................... 54
SECTION 9.08 Right of Setoff................................. 54
SECTION 9.09 Governing Law; Jurisdiction; Consent to
Service of Process.............................. 54
SECTION 9.10 WAIVER OF JURY TRIAL............................ 54
SECTION 9.11 Headings........................................ 55
SECTION 9.12 Confidentiality ................................ 55
SECTION 9.13 Interest Rate Limitatio......................... 55
SECTION 9.14 USA PATRIOT Act ................................ 56
23
SCHEDULES:
- ----------
Pricing Schedule
Schedule 2.01 - Commitments
Schedule 2.18 - Eurocurrency Payment Offices
Schedule 3.06 -- Disclosed Matters
Schedule 3.15 -- Existing Partnerships and Joint Ventures
Schedule 3.16 - Existing Subsidiaries
EXHIBITS:
- ---------
Exhibit A -- Form of Assignment and Assumption
Exhibit B -- Form of Opinion of Borrower's Counsel
24
CREDIT AGREEMENT dated as of September 9, 2004, among FRANKLIN
ELECTRIC CO., INC., an Indiana corporation, the LENDERS party hereto, and BANK
ONE, NA, as Administrative Agent.
The parties hereto agree as follows:
ARTICLE I
Definitions
-----------
SECTION 1.01 DEFINED TERMS. As used in this Agreement,
the following terms have the meanings specified below:
"ABR", when used in reference to any Loan or Borrowing, refers to
whether such Loan, or the Loans comprising such Borrowing, are bearing
interest at a rate determined by reference to the Alternate Base Rate.
"ABR BORROWING" means a Borrowing which, except as otherwise
provided in Section 2.13(c), bears interest at the Alternate Base Rate.
"ABR LOAN" means a Loan which, except as otherwise provided in
Section 2.13(c), bears interest at the Alternate Base Rate.
"ACQUISITION" means any transaction pursuant to which the Borrower
or any of its Subsidiaries, directly or indirectly, in its own name or by or
through a nominee or an agent (a) acquires equity Securities (or warrants,
options or other rights to acquire such Securities) of any Person other than
the Borrower or any Person which is not then (before giving effect to such
transaction) a Subsidiary of the Borrower, pursuant to a solicitation of
tenders therefor, or in one or more negotiated block, market or other
transactions not involving a tender offer or a combination of any of the
foregoing or (b) makes any Person a Subsidiary of the Borrower or causes any
Person to be merged into the Borrower or any of its Subsidiaries in any case
pursuant to a merger, purchase of assets or any reorganization providing for
the delivery or issuance to the holders of such Person's then outstanding
Securities, in exchange for such Securities, of cash or Securities of the
Borrower or any of its Subsidiaries, or a combination thereof or (c) purchases
all or substantially all of the business or assets of any Person.
"ADMINISTRATIVE AGENT" means Bank One, NA, in its capacity as
administrative agent for the Lenders hereunder.
"ADMINISTRATIVE QUESTIONNAIRE" means an Administrative
Questionnaire in a form supplied by the Administrative Agent.
"AFFILIATE" means, with respect to a specified Person, another
Person that directly, or indirectly through one or more intermediaries,
Controls or is Controlled by or is under common Control with the Person
specified.
25
"AGREED CURRENCIES" means (i) Dollars, (ii) so long as such
currencies remain Eligible Currencies, European Union Euros, Japanese Yen,
Australian Dollars and (iii) any other Eligible Currency which the Borrower
requests the Administrative Agent to include as an Agreed Currency hereunder
and which is acceptable to all of the Lenders. For the purposes of this
definition, each of the specific currencies referred to in clause (ii), above,
shall mean and be deemed to refer to the lawful currency of the jurisdiction
referred to in connection with such currency, e.g., "Australian Dollars" means
the lawful currency of Australia.
"ALTERNATE BASE RATE" means, for any day, a rate per annum equal
to the greatest of (a) the Prime Rate in effect on such day and (b) the
Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. Any change
in the Alternate Base Rate due to a change in the Prime Rate or the Federal
Funds Effective Rate shall be effective from and including the effective date
of such change in the Prime Rate or the Federal Funds Effective Rate,
respectively.
"ANTI-TERRORISM ORDER" means Executive Order No. 13,224, 66 Fed.
Reg. 49,079 (2001) issued by the President of the United States (Executive
Order Blocking Property and Prohibiting Transactions with Persons Who Commit,
Threaten to Commit, or Support Terrorism).
"APPLICABLE FEE RATE" means, at any time, the percentage rate per
annum at which Facility Fees are accruing on the aggregate Commitments
(without regard to usage) at such time as set forth in the Pricing Schedule.
"APPLICABLE MARGIN" means, at any time, the percentage rate per
annum which is applicable at such time with respect to Eurocurrency Loans as
set forth in the Pricing Schedule.
"APPLICABLE PERCENTAGE" means, with respect to any Lender, the
percentage of the total Commitments represented by such Lender's Commitment.
If the Commitments have terminated or expired, the Applicable Percentages
shall be determined based upon the Commitments most recently in effect, giving
effect to any assignments.
"APPROVED FUND" has the meaning assigned to such term in Section
9.04.
"APPROXIMATE EQUIVALENT AMOUNT" of any currency with respect to
any amount of Dollars shall mean the Equivalent Amount of such currency with
respect to such amount of Dollars on or as of such date, rounded up to the
nearest amount of such currency as determined by the Administrative Agent from
time to time.
"ASSIGNMENT AND ASSUMPTION" means an assignment and assumption
entered into by a Lender and an assignee (with the consent of any party whose
consent is required by Section 9.04), and accepted by the Administrative
Agent, in the form of Exhibit A or any other form approved by the
Administrative Agent.
26
"AVAILABILITY PERIOD" means the period from and including the
Effective Date to but excluding the earlier of the Maturity Date and the date
of termination of the Commitments.
"BOARD" means the Board of Governors of the Federal Reserve System
of the United States of America.
"BORROWER" means Franklin Electric Co., Inc., an Indiana
corporation.
"BORROWING" means (a) Revolving Loans of the same Type, made,
converted or continued on the same date and, in the case of Eurocurrency
Revolving Loans, as to which a single Interest Period is in effect, or (b) a
Swingline Loan.
"BORROWING REQUEST" means a request by the Borrower for a
Revolving Borrowing in accordance with Section 2.03.
"BUSINESS DAY" means (i) with respect to any borrowing, payment or
rate selection of Eurocurrency Advances, a day (other than a Saturday or
Sunday) on which banks generally are open in Chicago and New York for the
conduct of substantially all of their commercial lending activities, interbank
wire transfers can be made on the Fedwire system and dealings in Dollars and
the other Agreed Currencies are carried on in the London interbank market
(and, if the Advances which are the subject of such borrowing, payment or rate
selection are denominated in Euro, a day upon which such clearing system as is
determined by the Administrative Agent to be suitable for clearing or
settlement of the Euro is open for business), and (ii) for all other purposes,
a day (other than a Saturday or Sunday) on which banks generally are open in
Chicago for the conduct of substantially all of their commercial lending
activities and interbank wire transfers can be made on the Fedwire system.
"CAPITALIZED LEASE OBLIGATIONS" of a Person means the amount of
the obligations of such Person under Capital Leases which would be shown as a
liability on a balance sheet of such Person, prepared in accordance with GAAP.
"CAPITAL LEASE" means at any date any lease of Property which in
accordance with GAAP would be required to be capitalized on a balance sheet of
the lessee.
"CAPITAL STOCK" means any nonredeemable capital stock of the
Borrower or any Consolidated Subsidiary (to the extent issued to a Person
other than the Borrower), whether common or preferred.
"CERCLA" means the Comprehensive Environmental Response
Compensation and Liability Act, 42 U.S.C. 9601 et seq. and its
implementing regulations and amendments.
"CERCLIS" means the Comprehensive Environmental Response
Compensation and Liability Information System established pursuant to CERCLA.
27
"CHANGE IN CONTROL" means (a) the acquisition of ownership,
directly or indirectly, beneficially or of record, by any Person or group
(within the meaning of the Securities Exchange Act of 1934 and the rules of
the Securities and Exchange Commission thereunder as in effect on the date
hereof) of Equity Interests representing 35% or more of the aggregate ordinary
voting power represented by the issued and outstanding Equity Interests of the
Borrower; (b) occupation of a majority of the seats (other than vacant seats)
on the board of directors of the Borrower by Persons who were neither (i)
nominated by the board of directors of the Borrower nor (ii) appointed by
directors so nominated; or (c) the acquisition of direct or indirect Control
of the Borrower by any Person or group.
"CHANGE IN LAW" means (a) the adoption of any law, rule or
regulation after the date of this Agreement, (b) any change in any law, rule
or regulation or in the interpretation or application thereof by any
Governmental Authority after the date of this Agreement or (c) compliance by
any Lender (or, for purposes of Section 2.15(b), by any lending office of such
Lender or by such Lender's or the Issuing Bank's holding company, if any) with
any request, guideline or directive (whether or not having the force of law)
of any Governmental Authority made or issued after the date of this Agreement.
"CLASS", when used in reference to any Loan or Borrowing, refers
to whether such Loan, or the Loans comprising such Borrowing, are Revolving
Loans or Swingline Loans.
"CODE" means the Internal Revenue Code of 1986, as amended from
time to time, or any successor Federal tax code. Any reference to any
provision of the Code shall also be deemed to be a reference to any successor
provision or provisions thereof.
"COMMITMENT" means, with respect to each Lender, the commitment of
such Lender to make Revolving Loans and to acquire participations in Letters
of Credit and Swingline Loans hereunder, expressed as an amount representing
the maximum aggregate amount of such Lender's Revolving Credit Exposure
hereunder, as such commitment may be (a) reduced from time to time pursuant to
Section 2.09 and (b) reduced or increased from time to time pursuant to
assignments by or to such Lender pursuant to Section 9.04. The initial amount
of each Lender's Commitment is set forth on Schedule 2.01, or in the
Assignment and Assumption pursuant to which such Lender shall have assumed its
Commitment, as applicable. The initial aggregate amount of the Lenders'
Commitments is $80,000,000.00.
"COMPUTATION DATE" is defined in Section 2.01A.
"CONSOLIDATED EBIT" for any period means the sum of (i)
Consolidated Net Income for such period, (ii) Consolidated Interest Expense
for such period and (iii) taxes on income of the Borrower and its Consolidated
Subsidiaries for such period to the extent deducted in determining Consolidated
Net Income for such period.
28
"CONSOLIDATED EBITDA" for any period means the sum of (i)
Consolidated EBIT for such period, (ii) Depreciation for such period, (iii)
amortization of intangible assets of the Borrower and its Consolidated
Subsidiaries for such period, and (iv) extraordinary or other non-operating
losses for such period, MINUS extraordinary or other non-operating gains for
such period, all determined in accordance with GAAP. In determining
Consolidated EBITDA for any period, (a) any Consolidated Subsidiary acquired
during such period by the Borrower or any other Consolidated Subsidiary
shall be included on a pro forma, historical basis as if it had been a
Consolidated Subsidiary during such entire period and (b) any amounts which
would be included in a determination of Consolidated EBITDA for such
period with respect to assets acquired during such period by the Borrower
or any Consolidated Subsidiary shall be included in the determination of
Consolidated EBITDA for such period and the amount thereof shall be
calculated on a pro forma, historical basis as if such assets had been
acquired by the Borrower or such Consolidated Subsidiary prior to the first day
of such period.
"CONSOLIDATED INTEREST EXPENSE" for any period means interest
expense, whether expensed or capitalized, in respect of Debt of the
Borrower or any of its Consolidated Subsidiaries outstanding during such
period, determined on a consolidated basis for such period in accordance
with GAAP.
"CONSOLIDATED NET INCOME" means, for any period, the net income,
after taxes, of the Borrower and its Consolidated Subsidiaries determined on a
consolidated basis for such period in accordance with GAAP, but excluding
extraordinary and other non-recurring items.
"CONSOLIDATED NET WORTH" means the sum of (i) the par value (or
value stated on the books of the Borrower) of the capital stock of all classes
of the Borrower, plus (or minus in the case of a surplus deficit) (ii) the
amount of the consolidated surplus, whether capital or earned, of the Borrower
and its Subsidiaries after subtracting therefrom the aggregate of treasury
stock and any other contra-equity accounts including, without limitation,
minority interests; all determined in accordance with GAAP.
"CONSOLIDATED NET EARNINGS" means with respect to any period:
(i) consolidated gross revenues of the Borrower and its
Subsidiaries for such period less
(ii) all operating and non-operating expenses of the Borrower and
its Subsidiaries for such period including all charges of a proper character
(including current and deferred taxes on income, provision for taxes on
unremitted foreign earnings which are included in gross revenues, and current
additions to reserves),
29
but not including in gross revenues:
(a) any gains (net of expenses and taxes applicable
thereto) in excess of losses resulting from the sale, conversion or
other disposition of capital assets (i.e., assets other than
current assets) other than in the ordinary course of business;
(b) any gains resulting from the write-up of assets;
(c) any equity of the Borrower or any Subsidiary in the
unremitted earnings of any corporation which is not a Subsidiary;
(d) undistributed earnings of any Subsidiary to the extent
that such Subsidiary is not at the time permitted to make or pay
dividends to the Borrower, repay intercompany indebtedness to the
Borrower, repatriate earnings to the Borrower or otherwise transfer
property or assets to the Borrower whether by the terms of its
charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to such
Subsidiary; or
(e) any deferred credit representing the excess of equity
in any Subsidiary at the date of acquisition over the cost of the
investment in such Subsidiary;
all determined in accordance with GAAP as in effect on the date hereof and
applied on a consistent basis.
"CONSOLIDATED SUBSIDIARY" means at any date any Subsidiary or
other entity the accounts of which, in accordance with GAAP, would be
consolidated with those of the Borrower in its consolidated financial
statements as of such date.
"CONSOLIDATED TOTAL ASSETS" means, at any time, the total assets of
the Borrower and its Consolidated Subsidiaries, determined on a consolidated
basis, as set forth or reflected on the most recent consolidated balance
sheet of the Borrower and its Consolidated Subsidiaries, prepared in
accordance with GAAP.
"CONSOLIDATED TOTAL DEBT" means at any date all Debt of the
Borrower and its Consolidated Subsidiaries at such date, determined on a
consolidated basis as of such date.
"CONTROL" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a
Person, whether through the ability to exercise voting power, by contract or
otherwise. "CONTROLLING" and "CONTROLLED" have meanings correlative thereto.
"DEBT" of any Person means at any date, without duplication, (i)
all obligations of such Person for borrowed money, (ii) all obligations of
such Person evidenced by bonds, debentures, notes or other similar
instruments, (iii) all obligations of such Person to pay the deferred
purchase price of property or services, except trade accounts payable arising
in the ordinary course of business, (iv) all Capitalized Lease Obligations,
(v) all obligations of such Person to reimburse any bank or other Person in
respect of amounts payable under a banker's acceptance, (vi) all Redeemable
30
Preferred Stock of such Person (in the event such Person is a corporation),
(vii) all non-contingent obligations of such Person to reimburse any bank or
other Person in respect of amounts paid under a letter of credit or similar
instrument, (viii) all Debt of others secured by a Lien on any asset of such
Person, whether or not such Debt is assumed by such Person, (ix) all Debt of
others Guaranteed by such Person, and (x) for purposes of Article VII only,
all obligations of such Person with respect to Swap Agreements (valued as the
termination value thereof) computed in accordance with a method approved by
the International Swaps and Derivatives Association, Inc. and agreed to
by such Person in the applicable Swap Agreement, if any.
"DEFAULT" means any event or condition which constitutes an Event
of Default or which upon notice, lapse of time or both would, unless cured or
waived, become an Event of Default.
"DEPRECIATION" means, for any period, the sum of all
depreciation expenses of the Borrower and its Consolidated Subsidiaries for
such period, as determined on a consolidated basis in accordance with GAAP.
"DISCLOSED MATTERS" means the actions, suits and proceedings and
the environmental matters disclosed in Schedule 3.06.
"DOLLAR AMOUNT" of any currency at any date shall mean (i) the
amount of such currency if such currency is Dollars or (ii) the equivalent in
Dollars of such amount if such currency is any currency other than Dollars,
calculated on the basis of the arithmetical mean of the buy and sell spot
rates of exchange of the Administrative Agent for such currency on the London
market at 11:00 a.m., London time, on or as of the most recent Computation
Date provided for in Section 2.2.
"DOLLARS" or "$" refers to the lawful currency of the United
States of America.
"EFFECTIVE DATE" means the date on which the conditions specified
in Section 4.01 are satisfied (or waived in accordance with Section 9.02).
"ELIGIBLE CURRENCY" means any currency other than Dollars (i) that
is readily available, (ii) that is freely traded, (iii) in which deposits are
customarily offered to banks in the London interbank market, (iv) which is
convertible into Dollars in the international interbank market and (v) as to
which an Equivalent Amount may be readily calculated. If, after the
designation by the Lenders of any currency as an Agreed Currency, (x) currency
control or other exchange regulations are imposed in the country in which such
currency is issued with the result that different types of such currency are
introduced, (y) such currency is, in the determination of the Administrative
Agent, no longer readily available or freely traded or (z) in the
determination of the Administrative Agent, an Equivalent Amount of such
currency is not readily calculable, the Administrative Agent shall promptly
notify the Lenders and the Borrower, and such currency shall no longer be an
Agreed Currency until such time as all of the Lenders agree to reinstate such
currency as an Agreed Currency and promptly, but in any event within five
Business Days of receipt of such notice from the Administrative Agent, the
Borrower shall repay all Loans in such affected currency or convert such Loans
into Loans in Dollars or another Agreed Currency, subject to the other terms
set forth in Article II.
31
"ENVIRONMENTAL AUTHORITY" means any foreign, federal, state, local
or regional government that exercises any form of jurisdiction or authority
under any Environmental Requirement.
"ENVIRONMENTAL AUTHORIZATIONS" means all licenses, permits, orders,
approvals, notices, registrations or other legal prerequisites for conducting
the business of the Borrower or any Subsidiary required by any Environmental
Requirement.
"ENVIRONMENTAL JUDGMENTS AND ORDERS" means all judgments, decrees
or orders arising from or in any way associated with any Environmental
Requirements, whether or not entered upon consent or written agreements with an
Environmental Authority or other entity arising from or in any way associated
with any Environmental Requirement.
"ENVIRONMENTAL LAWS" means any and all federal, state, local and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or
other governmental restrictions relating to the environment or to emissions,
discharges or releases of Hazardous Materials, pollutants, contaminants,
petroleum or petroleum products, chemicals or industrial, toxic or hazardous
substances or wastes into the environment, including, without limitation,
ambient air, surface water, groundwater or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials, pollutants, contaminants,
petroleum or petroleum products, chemicals or industrial, toxic or hazardous
substances or wastes or the investigation, clean-up or other remediation
thereof.
"ENVIRONMENTAL LIABILITIES" means any liabilities, whether
accrued, contingent or otherwise, arising from and in any way associated with
any Environmental Requirements.
"ENVIRONMENTAL NOTICES" means notice from any Environmental
Authority or by any other person or entity, of possible or alleged
noncompliance with or liability under any Environmental Requirement,
including without limitation any complaints, citations, demands or requests
from any Environmental Authority or from any other person or entity
regarding any violation or alleged violation of any Environmental
Requirement or any investigations concerning any violation or alleged
violation of any Environmental Requirement.
"ENVIRONMENTAL PROCEEDINGS" means any judicial or administrative
proceedings arising from or in any way associated with any Environmental
Requirement.
"ENVIRONMENTAL RELEASES" means releases as defined in CERCLA or
under any applicable state or local environmental law or regulation.
"ENVIRONMENTAL REQUIREMENTS" means any legal requirement relating
to health, safety or the environment and applicable to the Borrower, any
Subsidiary or the Properties, including but not limited to any such
requirement under CERCLA or similar state legislation and all federal, state
and local laws, ordinances, regulations, orders, writs, decrees and common law.
32
"EQUITY INTERESTS " means shares of capital stock, partnership
interests, membership interests in a limited liability company, beneficial
interests in a trust or other equity ownership interests in a Person, and any
warrants, options or other rights entitling the holder thereof to purchase or
acquire any such equity interest.
"EQUIVALENT AMOUNT" of any currency with respect to any amount of
Dollars at any date shall mean the equivalent in such currency of such amount
of Dollars, calculated on the basis of the arithmetical mean of the buy and
sell spot rates of exchange of the Administrative Agent for such other
currency at 11:00 a.m., London time, on the date on or as of which such amount
is to be determined.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) that, together with the Borrower, is treated as a single
employer under Section 414(b) or (c) of the Code or, solely for purposes of
Section 302 of ERISA and Section 412 of the Code, is treated as a single
employer under Section 414 of the Code.
"ERISA EVENT" means (a) any "reportable event", as defined in
Section 4043 of ERISA or the regulations issued thereunder with respect to a
Plan (other than an event for which the 30-day notice period is waived);
(b) the existence with respect to any Plan of an "accumulated funding
deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA),
whether or not waived; (c) the filing pursuant to Section 412(d) of the Code
or Section 303(d) of ERISA of an application for a waiver of the minimum
funding standard with respect to any Plan; (d) the incurrence by the Borrower
or any of its ERISA Affiliates of any liability under Title IV of ERISA with
respect to the termination of any Plan; (e) the receipt by the Borrower or any
ERISA Affiliate from the PBGC or a plan administrator of any notice relating
to an intention to terminate any Plan or Plans or to appoint a trustee to
administer any Plan; (f) the incurrence by the Borrower or any of its ERISA
Affiliates of any liability with respect to the withdrawal or partial
withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by the
Borrower or any ERISA Affiliate of any notice, or the receipt by any
Multiemployer Plan from the Borrower or any ERISA Affiliate of any notice,
concerning the imposition of Withdrawal Liability or a determination that a
Multiemployer Plan is, or is expected to be, insolvent or in reorganization,
within the meaning of Title IV of ERISA.
"EURO" AND/OR "EUR" means the euro referred to in Council
Regulation (EC) No. 1103/97 dated June 17, 1997 passed by the Council of the
European Union, or, if different, the then lawful currency of the member
states of the European Union that participate in the third stage of Economic
and Monetary Union.
"EUROCURRENCY" means any Agreed Currency.
"EUROCURRENCY BORROWING" means a Revolving Borrowing which, except
as otherwise provided in Section 2.13(c), bears interest at the applicable
Eurocurrency Rate.
33
"EUROCURRENCY LOAN" means a Revolving Loan which, except as
otherwise provided in Section 2.13(c), bears interest at the applicable
Eurocurrency Rate.
"EUROCURRENCY PAYMENT OFFICE" of the Administrative Agent shall
mean, for each of the Agreed Currencies, the office, branch, affiliate or
correspondent bank of the Administrative Agent specified as the "Eurocurrency
Payment Office" for such currency in Schedule 2.18 hereto or such other
office, branch, affiliate or correspondent bank of the Administrative Agent as
it may from time to time specify to the Borrower and each Lender as its
Eurocurrency Payment Office.
"EUROCURRENCY RATE" means, with respect to a Eurocurrency
Borrowing for the relevant Interest Period, an interest rate per annum equal
to the sum of (i) the product of (a) the Eurocurrency Reference Rate
applicable to such Interest Period, multiplied by (b) the Statutory Reserve
Rate plus (ii) the Applicable Margin.
"EUROCURRENCY REFERENCE RATE" means, with respect to a
Eurocurrency Loan for the relevant Interest Period, the applicable British
Bankers' Association LIBOR rate for deposits in the applicable Agreed Currency
as reported by any generally recognized financial information service as of
11:00 a.m. (London time) two Business Days prior to the first day of such
Interest Period, and having a maturity equal to such Interest Period, provided
that, if no such British Bankers' Association LIBOR rate is available, the
applicable Eurocurrency Reference Rate for the relevant Interest Period shall
instead be the rate determined by the Administrative Agent to be the rate at
which Bank One offers to place deposits in the applicable Agreed Currency with
first-class banks in the London interbank market at approximately 11:00 a.m.
(London time) two Business Days prior to the first day of such Interest
Period, in the approximate amount of Bank One's relevant Eurocurrency Loan and
having a maturity equal to such Interest Period.
"EVENT OF DEFAULT" has the meaning assigned to such term in
Article VII.
"EXCLUDED TAXES" means, with respect to the Administrative Agent,
any Lender, the Issuing Bank or any other recipient of any payment to be made
by or on account of any obligation of the Borrower hereunder, (a) income or
franchise taxes imposed on (or measured by) its net income by the United
States of America, or by the jurisdiction under the laws of which such
recipient is organized or in which its principal office is located or, in the
case of any Lender, in which its applicable lending office is located, (b) any
branch profits taxes imposed by the United States of America or any similar
tax imposed by any other jurisdiction in which the Borrower is located and (c)
in the case of a Foreign Lender (other than an assignee pursuant to a request
by the Borrower under Section 2.19(b)), any withholding tax that is imposed on
amounts payable to such Foreign Lender at the time such Foreign Lender becomes
a party to this Agreement (or designates a new lending office) or is
attributable to such Foreign Lender's failure to comply with Section 2.17(e),
except to the extent that such Foreign Lender (or its assignor, if any) was
entitled, at the time of designation of a new lending office (or assignment),
to receive additional amounts from the Borrower with respect to such
withholding tax pursuant to Section 2.17(a).
34
"FACILITY FEE" is defined in Section 2.12(a).
"FEDERAL FUNDS EFFECTIVE RATE" means, for any day, the weighted
average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates
on overnight Federal funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers, as published on the next succeeding
Business Day by the Federal Reserve Bank of New York, or, if such rate is not
so published for any day that is a Business Day, the average (rounded upwards,
if necessary, to the next 1/100 of 1%) of the quotations for such day for such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it.
"FINANCIAL OFFICER" means any of the chief executive officer,
chief operating officer, chief financial officer, chief accounting officer,
treasurer or controller of the Borrower or any other officer of the Borrower
involved principally in its financial administration or its controllership
function.
"FOREIGN LENDER" means any Lender that is organized under the laws
of a jurisdiction other than that in which the Borrower is located. For
purposes of this definition, the United States of America, each State thereof
and the District of Columbia shall be deemed to constitute a single
jurisdiction.
"GAAP" means generally accepted accounting principles in the
United States of America.
"GOVERNMENTAL AUTHORITY" means the government of the United States
of America, any other nation or any political subdivision thereof, whether
state or local, and any agency, authority, instrumentality, regulatory body,
court, central bank or other entity exercising executive, legislative,
judicial, taxing, regulatory or administrative powers or functions of or
pertaining to government.
"GUARANTEE" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt or
other obligation of any other Person and, without limiting the generality
of the foregoing, any obligation, direct or indirect, contingent or
otherwise, of such Person (i) to secure, purchase or pay (or advance or
supply funds for the purchase or payment of) such Debt or other
obligation (whether arising by virtue of partnership arrangements, by
agreement to keep-well, to purchase assets, goods, securities or services, to
provide collateral security, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for the purpose of
assuring in any other manner the obligee of such Debt or other obligation of
the payment thereof or to protect such obligee against loss in respect thereof
(in whole or in part), provided that the term Guarantee shall not include
endorsements for collection or deposit in the ordinary course of business. The
term "Guarantee" used as a verb has a corresponding meaning.
35
"HAZARDOUS MATERIALS" includes, without limitation, (a) solid or
hazardous waste, as defined in the Resource Conservation and Recovery Act of
1980, 42 U.S.C. 6901 et seq., its implementing regulations and any amendments,
or in any applicable state or local law or regulation, (b) any "hazardous
substance", "pollutant" or "contaminant", as defined in CERCLA, the Clean
Water Act, or in any applicable state or local law or regulation, (c) gasoline,
or any other petroleum product or by-product, including crude oil or any
fraction thereof, (d) toxic substances, as defined in the Toxic
Substances Control Act of 1976, or in any applicable state or local law
or regulation and (e) insecticides, fungicides, or rodenticides, as defined in
the Federal Insecticide, Fungicide, and Rodenticide Act of 1975, or in any
applicable state or local law or regulation, as each such Act, statute or
regulation may be amended from time to time.
"INDEMNIFIED TAXES" means Taxes other than Excluded Taxes.
"INFORMATION MEMORANDUM" means the Confidential Information
Memorandum dated July 21, 2004 relating to the Borrower and the Transactions.
"INTEREST COVERAGE RATIO" means the ratio, as of the end of each
fiscal quarter of the Borrower, of Consolidated EBIT for the four (4)
consecutive fiscal quarters then ended to Consolidated Interest Expense for
the period of four (4) consecutive fiscal quarters then ended.
"INTEREST ELECTION REQUEST" means a request by the Borrower to
convert or continue a Revolving Borrowing in accordance with Section 2.08.
"INTEREST PAYMENT DATE" means (a) with respect to any ABR Loan
(other than a Swingline Loan), the last day of each March, June, September and
December, (b) with respect to any Eurocurrency Loan, the last day of the
Interest Period applicable to the Borrowing of which such Loan is a part and,
in the case of a Eurocurrency Borrowing with an Interest Period of more than
three months' duration, each day prior to the last day of such Interest Period
that occurs at intervals of three months' duration after the first day of such
Interest Period, and (c) with respect to any Swingline Loan, the day that such
Loan is required to be repaid.
"INTEREST PERIOD" means, with respect to any Eurocurrency
Borrowing, the period commencing on the date of such Borrowing and ending on
the numerically corresponding day in the calendar month that is one, two,
three or six months thereafter, as the Borrower may elect; PROVIDED, that (i)
if any Interest Period would end on a day other than a Business Day, such
Interest Period shall be extended to the next succeeding Business Day unless
such next succeeding Business Day would fall in the next calendar month, in
which case such Interest Period shall end on the next preceding Business Day
and (ii) any Interest Period that commences on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding
day in the last calendar month of such Interest Period) shall end on the last
Business Day of the last calendar month of such Interest Period. For purposes
hereof, the date of a Borrowing initially shall be the date on which such
Borrowing is made and thereafter shall be the effective date of the most
recent conversion or continuation of such Borrowing.
36
"INVESTMENT" means any investment in any Person, whether by
means of purchase or acquisition of obligations or securities of such Person,
capital contribution to such Person, loan or advance to such Person, making of
a time deposit with such Person, Guarantee or assumption of any obligation of
such Person or otherwise; provided that Investment shall not include the
repurchase or redemption by the Borrower of shares of Capital Stock of the
Borrower.
"ISSUING BANK" means Bank One, NA, in its capacity as the issuer
of Letters of Credit hereunder, and its successors in such capacity as
provided in Section 2.06(i). The Issuing Bank may, in its discretion, arrange
for one or more Letters of Credit to be issued by Affiliates of the Issuing
Bank, in which case the term "Issuing Bank" shall include any such Affiliate
with respect to Letters of Credit issued by such Affiliate.
"LC DISBURSEMENT" means a payment made by the Issuing Bank
pursuant to a Letter of Credit.
"LC EXPOSURE" means, at any time, the sum of (a) the aggregate
undrawn amount of all outstanding Letters of Credit at such time plus (b) the
aggregate amount of all LC Disbursements that have not yet been reimbursed by
or on behalf of the Borrower at such time. The LC Exposure of any Lender at
any time shall be its Applicable Percentage of the total LC Exposure at such
time.
"LENDERS" means the Persons listed on Schedule 2.01 and any other
Person that shall have become a party hereto pursuant to an Assignment and
Assumption, other than any such Person that ceases to be a party hereto
pursuant to an Assignment and Assumption. Unless the context otherwise
requires, the term "Lenders" includes the Swingline Lender.
"LETTER OF CREDIT" means any letter of credit issued pursuant to
this Agreement.
"LEVERAGE RATIO'" means the ratio, as of the end of each fiscal
quarter of the Borrower, of Consolidated Total Debt at the end of such fiscal
quarter to Consolidated EBITDA for the period of four (4) consecutive fiscal
quarters then ended.
"LIEN" means, with respect to any asset, any mortgage, deed to
secure debt, deed of trust, lien, pledge, charge, security interest, security
title, preferential arrangement which has the practical effect of constituting
a security interest, servitude or encumbrance of any kind in respect of such
asset to secure or assure payment of a Debt or a Guarantee or any trade
payables of the Borrower or any Subsidiary, whether by consensual agreement or
by operation of statute or other law, or by any agreement, contingent or
otherwise, to provide any of the foregoing. For the purposes of this
Agreement, the Borrower or any Subsidiary shall be deemed to own subject
to a Lien any asset which it has acquired or holds subject to the interest
of a vendor or lessor under any conditional sale agreement, capital lease or
other title retention agreement relating to such asset.
"LOANS" means the loans made by the Lenders to the Borrower
pursuant to this Agreement.
37
"MARGIN STOCK" means "margin stock" as defined in Regulation T, U
or X of the Board of Governors of the Federal Reserve System, as in effect
from time to time, together with all official rulings and interpretations
issued thereunder.
"MATERIAL ADVERSE EFFECT" means, with respect to any
event, act, condition or occurrence of whatever nature (including any
adverse determination in any litigation, arbitration, or governmental
investigation or proceeding), whether singly or in conjunction with any other
event or events, act or acts, condition or conditions, occurrence or
occurrences, whether or not related, a material adverse change in, or a
material adverse effect upon, any of (a) the financial condition, operations,
business or properties of the Borrower and its Consolidated Subsidiaries
taken as a whole, (b) the rights and remedies of the Administrative Agent or
the Lenders under the Loan Documents, or the ability of the Borrower to
perform its obligations under the Loan Documents to which it is a party, as
applicable, or (c) the legality, validity or enforceability of any Loan
Document.
"MATERIAL DEBT'" means Debt (other than the Loans) or
obligations in respect of one or more Swap Agreements, of any one or
more of the Borrower and its Subsidiaries in an aggregate principal
amount exceeding $10,000,000. For purposes of determining Material Debt,
the "principal amount" of the obligations of the Borrower or any Subsidiary
in respect of any Swap Agreement at any time shall be the maximum aggregate
amount (giving effect to any netting agreements) that the Borrower or such
Subsidiary would be required to pay if such Swap Agreement were terminated
at such time.
"MATERIAL SUBSIDIARY" means at any time (i) any Subsidiary
having total assets (determined in accordance with GAAP) in excess of
$10,000,000 and (ii) any Significant Subsidiary.
"MATURITY DATE" means September 9, 2009.
"MULTICURRENCY BORROWING" means a Eurocurrency Borrowing
denominated in an Agreed Currency other than Dollars.
"MULTICURRENCY COMMITMENT" means, with respect to each Lender, the
portion of such Lender's Commitment representing the commitment of such Lender
to make Multicurrency Loans, expressed as an amount representing the maximum
aggregate amount of such lender's Multicurrency Loans hereunder, as such
commitment may be (a) reduced from time to time pursuant to Section 2.09 and
(b) reduced or increased from time to time pursuant to assignments by or to
such Lender pursuant to Section 9.04. The initial amount of each Lender's
Multicurrency Commitment is set forth on Schedule 2.01, or in the Assignment
and Assumption pursuant to which such Lender shall have assumed its
Multicurrency Commitment, as applicable. The initial aggregate amount of the
Lenders' Multicurrency Commitments is $50,000,000.00.
"MULTICURRENCY LOAN" means a Eurocurrency Loan denominated in an
Agreed Currency other than Dollars.
"MULTIEMPLOYER PLAN" means a multiemployer plan as defined in
Section 4001(a)(3) of ERISA.
38
"NATIONAL CURRENCY UNIT" means the unit of currency (other than a
Euro unit) of each member state of the European Union that participates in the
third stage of Economic and Monetary Union.
"OTHER TAXES" means any and all present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies arising from any payment made hereunder or from the execution, delivery
or enforcement of, or otherwise with respect to, this Agreement.
"PARTICIPANT" has the meaning set forth in Section 9.04.
"PBGC" means the Pension Benefit Guaranty Corporation referred to
and defined in ERISA and any successor entity performing similar functions.
"PERMITTED ACQUISITION" means any Acquisition (i) which is of a
Person approved by the board of directors of the Borrower and (ii) which has
been approved by the Person to be acquired in connection with such
Acquisition.
"PERSON" means any natural person, corporation, limited liability
company, trust, joint venture, association, company, partnership, Governmental
Authority or other entity.
"PLAN" means at any time an employee pension benefit plan which is
covered by Title IV of ERISA or subject to the minimum funding standards under
Section 412 of the Code and is either (i) maintained by a member of the
Controlled Group for employees of any member of the Controlled Group or (ii)
maintained pursuant to a collective bargaining agreement or any other
arrangement under which more than one employer makes contributions and to
which a member of the Controlled Group is then making or accruing an obligation
to make contributions or has within the preceding 5 plan years made
contributions.
"PRICING SCHEDULE" means the Schedule attached hereto identified as
such.
"PRIME RATE" means the rate of interest per annum publicly
announced from time to time by Bank One, NA as its prime rate in effect at its
principal office in Chicago; each change in the Prime Rate shall be effective
from and including the date such change is publicly announced as being
effective.
"PRIORITY DEBT" shall mean the sum of (i) Debt of the Borrower
which is secured by a Lien under Section 6.03(vi) and (ii) Debt of any
Subsidiary (including, but not limited to, any Debt of a Subsidiary which
consists of a Guarantee of Debt of the Borrower), excluding, however, Debt of
Subsidiaries owing to the Borrower and Debt of any Subsidiary (other than a
Significant Subsidiary) to any other Subsidiary.
"REDEEMABLE PREFERRED STOCK" of any Person means any preferred
stock issued by such Person which is at any time prior to the Termination
Date either (i) mandatorily redeemable (by sinking fund or similar
payments or otherwise) or (ii) redeemable at the option of the holder
thereof.
39
"REGISTER" has the meaning set forth in Section 9.04.
"RELATED PARTIES" means, with respect to any specified Person,
such Person's Affiliates and the respective directors, officers, employees,
agents and advisors of such Person and such Person's Affiliates.
"Required Lenders" means, at any time, Lenders having Revolving
Credit Exposures and unused Commitments representing at least 51% of the sum
of the total Revolving Credit Exposures and unused Commitments at such time.
"RESTRICTED PAYMENT" means (i) any dividend or other
distribution on any shares of the Borrower's capital stock (except dividends
payable solely in shares of its capital stock) or (ii) any payment on account
of the purchase, redemption, retirement or acquisition of (a) any shares of the
Borrower's capital stock (except shares acquired upon the conversion thereof
into other shares of its capital stock) or (b) any option, warrant or other
right to acquire shares of the Borrower's capital stock.
"REVOLVING CREDIT EXPOSURE" means, with respect to any Lender at
any time, the sum of the outstanding principal amount of such Lender's
Revolving Loans and its LC Exposure and Swingline Exposure at such time.
"REVOLVING LOAN" means a Loan made pursuant to Section 2.03.
"S&P" means Standard & Poor's Ratings Group, a division of McGraw
Hill, Inc.
"SIGNIFICANT SUBSIDIARY" means each of Franklin Electric
Manufacturing, Inc. and Franklin Electric Sales, Inc.
"STATUTORY RESERVE RATE" means a fraction (expressed as a
decimal), the numerator of which is the number one and the denominator of
which is the number one minus the aggregate of the maximum reserve percentages
(including any marginal, special, emergency or supplemental reserves)
expressed as a decimal established by the Board to which the Administrative
Agent is subject with respect to the Eurocurrency Rate, for eurocurrency
funding (currently referred to as "Eurocurrency Liabilities" in Regulation D
of the Board). Such reserve percentages shall include those imposed pursuant
to such Regulation D. Eurocurrency Loans shall be deemed to constitute
eurocurrency funding and to be subject to such reserve requirements without
benefit of or credit for proration, exemptions or offsets that may be
available from time to time to any Lender under such Regulation D or any
comparable regulation. The Statutory Reserve Rate shall be adjusted
automatically on and as of the effective date of any change in any reserve
percentage.
"STOCK PURCHASE PLAN" means the Franklin Electric Co., Inc.
Amended 1988 Executive Stock Purchase Plan, as it may be amended from time to
time with the consent of the Administrative Agent (which consent shall not be
unreasonably withheld).
40
"STOCKHOLDERS' EQUITY" means, at any time, the shareholders'
equity of the Borrower and its Consolidated Subsidiaries, as set forth or
reflected on the most recent consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries prepared in accordance with GAAP, but excluding any
Redeemable Preferred Stock of the Borrower or any of its Consolidated
Subsidiaries. Shareholders' equity generally would include, but not be limited
to (i) the par or stated value of all outstanding Capital Stock, (ii)
capital surplus, (iii) retained earnings, and (iv) various deductions such
as (A) purchases of treasury stock, (B) valuation allowances, (C)
receivables due from an employee stock ownership plan, (D) employee stock
ownership plan debt guarantees, and (E) translation adjustments for foreign
currency transactions.
"SUBSIDIARY" means any corporation or other entity of which
securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing
similar functions are at the time directly or indirectly owned by the
Borrower.
"SWAP AGREEMENT" means any agreement with respect to any swap,
forward, future or derivative transaction or option or similar agreement
involving, or settled by reference to, one or more rates, currencies,
commodities, equity or debt instruments or securities, or economic, financial
or pricing indices or measures of economic, financial or pricing risk or value
or any similar transaction or any combination of these transactions; provided
that no phantom stock or similar plan providing for payments only on account
of services provided by current or former directors, officers, employees or
consultants of the Borrower or the Subsidiaries shall be a Swap Agreement.
"SWINGLINE EXPOSURE" means, at any time, the aggregate principal
amount of all Swingline Loans outstanding at such time. The Swingline
Exposure of any Lender at any time shall be its Applicable Percentage of the
total Swingline Exposure at such time.
"SWINGLINE LENDER" means Bank One, NA, in its capacity as lender
of Swingline Loans hereunder.
"SWINGLINE LOAN" means a Loan made pursuant to Section 2.05.
"TAXES" means any and all present or future taxes, levies,
imposts, duties, deductions, charges or withholdings imposed by any
Governmental Authority.
"TRANSACTIONS" means the execution, delivery and performance by
the Borrower of this Agreement, the borrowing of Loans, and the use of the
proceeds thereof.
"TYPE", when used in reference to any Loan or Borrowing, refers to
whether the rate of interest on such Loan, or on the Loans comprising such
Borrowing, is determined by reference to the Eurocurrency Rate or the
Alternate Base Rate.
"WHOLLY OWNED SUBSIDIARY" means any Subsidiary all of the shares
of capital stock or other ownership interests of which (except directors'
qualifying shares) are at the time directly or indirectly owned by the
Borrower.
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"WITHDRAWAL LIABILITY" means liability to a Multiemployer Plan as
a result of a complete or partial withdrawal from such Multiemployer Plan, as
such terms are defined in Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02 CLASSIFICATION OF LOANS AND BORROWINGS. For purposes
of this Agreement, Loans may be classified and referred to by Class (e.g., a
"Revolving Loan") or by Type (e.g., a "Eurocurrency Loan") or by Class and
Type (e.g., a "Eurocurrency Revolving Loan"). Borrowings also may be
classified and referred to by Class (e.g., a "Revolving Borrowing") or by Type
(e.g., a "Eurocurrency Borrowing") or by Class and Type (e.g., a "Eurocurrency
Revolving Borrowing").
SECTION 1.03 TERMS GENERALLY. The definitions of terms herein
shall apply equally to the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include", "includes" and
"including" shall be deemed to be followed by the phrase "without limitation".
The word "will" shall be construed to have the same meaning and effect as the
word "shall". Unless the context requires otherwise (a) any definition of or
reference to any agreement, instrument or other document herein shall be
construed as referring to such agreement, instrument or other document as from
time to time amended, supplemented or otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth
herein), (b) any reference herein to any Person shall be construed to include
such Person's successors and assigns, (c) the words "herein", "hereof" and
"hereunder", and words of similar import, shall be construed to refer to this
Agreement in its entirety and not to any particular provision hereof, (d) all
references herein to Articles, Sections, Exhibits and Schedules shall be
construed to refer to Articles and Sections of, and Exhibits and Schedules to,
this Agreement and (e) the words "asset" and "property" shall be construed to
have the same meaning and effect and to refer to any and all tangible and
intangible assets and properties, including cash, securities, accounts and
contract rights.
SECTION 1.04 ACCOUNTING TERMS; GAAP. Except as otherwise
expressly provided herein, all terms of an accounting or financial nature
shall be construed in accordance with GAAP, as in effect from time to time;
PROVIDED that, if the Borrower notifies the Administrative Agent that the
Borrower requests an amendment to any provision hereof to eliminate the effect
of any change occurring after the date hereof in GAAP or in the application
thereof on the operation of such provision (or if the Administrative Agent
notifies the Borrower that the Required Lenders request an amendment to any
provision hereof for such purpose), regardless of whether any such notice is
41
given before or after such change in GAAP or in the application thereof, then
such provision shall be interpreted on the basis of GAAP as in effect and
applied immediately before such change shall have become effective until such
notice shall have been withdrawn or such provision amended in accordance
herewith.
42
ARTICLE II
The Credits
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SECTION 2.01 COMMITMENTS. (a) Subject to the terms and
conditions set forth herein, each Lender agrees to make Revolving Loans to the
Borrower in Agreed Currencies from time to time during the Availability Period
in an aggregate Dollar Amount at any one time outstanding that will not result
in such Lender's Revolving Credit Exposure exceeding such Lender's Commitment,
PROVIDED that (i) at no time shall the aggregate Dollar Amount of
Multicurrency Loans of each Lender at any one time outstanding exceed an
amount equal to 110% of such Lender's Multicurrency Commitment, and (ii) all
ABR Loans shall be made in Dollars. Within the foregoing limits and subject
to the terms and conditions set forth herein, the Borrower may borrow, prepay
and reborrow Revolving Loans.
(b) At any time subsequent to the Effective Date and so long as
no Default or Event of Default has occurred and is continuing, the Borrower
may, at its option, request to increase the aggregate Commitments by up to
$40,000,000 (not to exceed a total of $120,000,000) by obtaining one or more
Commitments from one or more existing Lenders or new Lenders with the consent
of the Agent, but without the consent of any other Lenders, provided that no
Lender's Commitment shall be increased without its consent. In the event that
the aggregate Commitments are increased pursuant to the exercise of such
option by the Borrower, the aggregate amount of the Multicurrency Commitments
will be reviewed upon Borrower's request and may be increased based upon the
willingness and capacity of the Lenders at the time.
SECTION 2.01A. DETERMINATION OF DOLLAR AMOUNTS; REQUIRED
PAYMENTS. The Administrative Agent will determine the Dollar Amount of:
(a) each Borrowing as of the date three Business Days prior to
the date of the proposed Borrowing or, if applicable, date of
conversion/continuation of such Borrowing, and
(b) all outstanding Borrowings on and as of the last Business
Day of each quarter and on any other Business Day elected by the
Administrative Agent in its discretion or upon instruction by the Required
Lenders.
Each day upon or as of which the Administrative Agent determines Dollar
Amounts as described in the preceding clauses (a) and (b) is herein described
as a "Computation Date" with respect to each Borrowing for which a Dollar
Amount is determined on or as of such day. If at any time the Dollar Amount
of the sum of the aggregate principal amount of all outstanding Borrowings or
all outstanding Multicurrency Borrowings (calculated in each case, with
respect to those Borrowings denominated in Agreed Currencies other than
Dollars, as of the most recent Computation Date with respect to each such
Borrowing) exceeds (i) with respect to all Borrowings, the aggregate amount of
the Commitments or (ii) with respect to Multicurrency Borrowings, an amount
equal to 110% of the aggregate amount of the Multicurrency Commitments, the
Borrower shall immediately repay Borrowings (including Multicurrency
Borrowings, as applicable) in an aggregate principal amount sufficient to
eliminate any such excess.
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SECTION 2.02 LOANS AND BORROWINGS. (a) Each Revolving Loan shall
be made as part of a Borrowing consisting of Revolving Loans made by the
Lenders ratably in accordance with their respective Commitments. The failure
of any Lender to make any Loan required to be made by it shall not relieve any
other Lender of its obligations hereunder; PROVIDED that the Commitments of
the Lenders are several and no Lender shall be responsible for any other
Lender's failure to make Loans as required.
(b) Subject to Section 2.14, each Revolving Borrowing shall be
comprised entirely of ABR Loans or Eurocurrency Loans as the Borrower may
request in accordance herewith. Each Swingline Loan shall be an ABR Loan.
Lender at its option may make any Eurocurrency Loan by causing any domestic or
foreign branch or Affiliate of such Lender to make such Loan; PROVIDED that
any exercise of such option shall not affect the obligation of the Borrower to
repay such Loan in accordance with the terms of this Agreement.
(c) At the commencement of each Interest Period for any
Eurocurrency Revolving Borrowing, such Borrowing shall be in an aggregate
amount that is an integral multiple of $1,000,000 and not less than $5,000,000
(or the Approximate Equivalent Amounts if denominated in an Agreed Currency
other than Dollars). At the time that each ABR Revolving Borrowing is made,
such Borrowing shall be in an aggregate amount that is an integral multiple of
$500,000 and not less than $1,000,000; PROVIDED that an ABR Revolving
Borrowing may be in an aggregate amount that is equal to the entire unused
balance of the total Commitments or that is required to finance the
reimbursement of an LC Disbursement as contemplated by Section 2.06(e). Each
Swingline Loan shall be in an amount that is an integral multiple of $500,000
and not less than $500,000. Borrowings of more than one Type may be
outstanding at the same time; PROVIDED that there shall not at any time be
more than a total of eight (8) Eurocurrency Revolving Borrowings outstanding.
(d) Notwithstanding any other provision of this Agreement, the
Borrower shall not be entitled to request, or to elect to convert or continue,
any Borrowing if the Interest Period requested with respect thereto would end
after the Maturity Date.
SECTION 2.03 REQUESTS FOR REVOLVING BORROWINGS. (a) To request a
Revolving Borrowing, the Borrower shall notify the Administrative Agent of
such request by telephone (a) in the case of a Eurocurrency Borrowing
denominated in Dollars, not later than 11:00 a.m., Chicago time, three
Business Days before the date of the proposed Borrowing, (b) in the case of a
Eurocurrency Borrowing denominated in an Agreed Currency other than Dollars,
not later than 11:00 a.m., Chicago time, four (4) Business Days before the
date of the proposed Borrowing, or (c) in the case of an ABR Borrowing, not
later than 11:00 a.m., Chicago time, one Business Day before the date of the
proposed Borrowing; PROVIDED that any such notice of an ABR Revolving
Borrowing to finance the reimbursement of an LC Disbursement as contemplated
by Section 2.06(e) may be given not later than 10:00 a.m., Chicago time, on
the date of the proposed Borrowing. Each such telephonic Borrowing Request
shall be irrevocable and shall be confirmed promptly by hand delivery or
telecopy to the Administrative Agent of a written Borrowing Request in a form
approved by the Administrative Agent and signed by the Borrower. Each such
telephonic and written Borrowing Request shall specify the following
information in compliance with Section 2.02:
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(i) the aggregate amount of the requested Borrowing;
(ii) the date of such Borrowing, which shall be a Business Day;
(iii) whether such Borrowing is to be an ABR Borrowing or a
Eurocurrency Borrowing;
(iv) in the case of a Eurocurrency Borrowing, the Agreed Currency
to be applicable thereto, and the initial Interest Period to
be applicable thereto, which shall be a period contemplated
by the definition of the term "Interest Period"; and
(v) the location and number of the Borrower's account to which
funds are to be disbursed, which shall comply with the
requirements of Section 2.07.
If no election as to the Type of Revolving Borrowing is specified, then the
requested Revolving Borrowing shall be an ABR Borrowing. If no Interest
Period is specified with respect to any requested Eurocurrency Revolving
Borrowing, then the Borrower shall be deemed to have selected an Interest
Period of one month's duration. Promptly following receipt of a Borrowing
Request in accordance with this Section, the Administrative Agent shall advise
each Lender of the details thereof and of the amount of such Lender's Loan to
be made as part of the requested Borrowing.
(b) Notwithstanding any other provision of this Agreement, if
any Loan would, but for the provisions of this Section 2.03(b), be capable of
being made in either the Euro or in a National Currency Unit, such Loan shall
be made in the Euro.
SECTION 2.04 Reserved.
SECTION 2.05 SWINGLINE LOANS. (a) Subject to the terms and
conditions set forth herein, the Swingline Lender agrees to make Swingline
Loans to the Borrower from time to time during the Availability Period, in an
aggregate principal amount at any time outstanding that will not result in
(i) the aggregate principal amount of outstanding Swingline Loans exceeding
$5,000,000 or (ii) the total Revolving Credit Exposures exceeding the total
Commitments; PROVIDED that the Swingline Lender shall not be required to make
a Swingline Loan to refinance an outstanding Swingline Loan. Within the
foregoing limits and subject to the terms and conditions set forth herein, the
Borrower may borrow, prepay and reborrow Swingline Loans. All Swingline Loans
shall be made in Dollars.
(b) To request a Swingline Loan, the Borrower shall notify the
Administrative Agent of such request by telephone (confirmed by telecopy), not
later than 12:00 noon, Chicago time, on the day of a proposed Swingline Loan.
Each such notice shall be irrevocable and shall specify the requested date
(which shall be a Business Day) and amount of the requested Swingline Loan.
The Administrative Agent will promptly advise the Swingline Lender of any such
notice received from the Borrower. The Swingline Lender shall make each
Swingline Loan available to the Borrower by means of a credit to the general
deposit account of the Borrower with the Swingline Lender (or, in the case of
a Swingline Loan made to finance the reimbursement of an LC Disbursement as
provided in Section 2.06(e), by remittance to the Issuing Bank) by 3:00 p.m.,
Chicago time, on the requested date of such Swingline Loan.
45
(c) The Swingline Lender may by written notice given to the
Administrative Agent not later than 10:00 a.m., Chicago time, on any Business
Day require the Lenders to acquire participations on such Business Day in all
or a portion of the Swingline Loans outstanding. Such notice shall specify
the aggregate amount of Swingline Loans in which Lenders will participate.
Promptly upon receipt of such notice, the Administrative Agent will give
notice thereof to each Lender, specifying in such notice such Lender's
Applicable Percentage of such Swingline Loan or Loans. Each Lender hereby
absolutely and unconditionally agrees, upon receipt of notice as provided
above, to pay to the Administrative Agent, for the account of the Swingline
Lender, such Lender's Applicable Percentage of such Swingline Loan or Loans.
Each Lender acknowledges and agrees that its obligation to acquire
participations in Swingline Loans pursuant to this paragraph is absolute and
unconditional and shall not be affected by any circumstance whatsoever,
including the occurrence and continuance of a Default or reduction or
termination of the Commitments, and that each such payment shall be made
without any offset, abatement, withholding or reduction whatsoever. Each
Lender shall comply with its obligation under this paragraph by wire transfer
of immediately available funds, in the same manner as provided in Section 2.07
with respect to Loans made by such Lender (and Section 2.07 shall apply,
MUTATIS MUTANDIS, to the payment obligations of the Lenders), and the
Administrative Agent shall promptly pay to the Swingline Lender the amounts so
received by it from the Lenders. The Administrative Agent shall notify the
Borrower of any participations in any Swingline Loan acquired pursuant to this
paragraph, and thereafter payments in respect of such Swingline Loan shall be
made to the Administrative Agent and not to the Swingline Lender. Any amounts
received by the Swingline Lender from the Borrower (or other party on behalf
of the Borrower) in respect of a Swingline Loan after receipt by the Swingline
Lender of the proceeds of a sale of participations therein shall be promptly
remitted to the Administrative Agent; any such amounts received by the
Administrative Agent shall be promptly remitted by the Administrative Agent to
the Lenders that shall have made their payments pursuant to this paragraph and
to the Swingline Lender, as their interests may appear; provided that any such
payment so remitted shall be repaid to the Swingline Lender or to the
Administrative Agent, as applicable, if and to the extent such payment is
required to be refunded to the Borrower for any reason. The purchase of
participations in a Swingline Loan pursuant to this paragraph shall not
relieve the Borrower of any default in the payment thereof.
ECTION 2.06 LETTERS OF CREDIT. (a) GENERAL. Subject to the terms
and conditions set forth herein, the Borrower may request the issuance of
Letters of Credit for its own account, in a form reasonably acceptable to the
Administrative Agent and the Issuing Bank, at any time and from time to time
during the Availability Period. In the event of any inconsistency between the
terms and conditions of this Agreement and the terms and conditions of any
form of letter of credit application or other agreement submitted by the
Borrower to, or entered into by the Borrower with, the Issuing Bank relating
to any Letter of Credit, the terms and conditions of this Agreement shall
control. Each Letter of Credit shall provide that any payments thereunder
shall be in Dollars.
46
(b) NOTICE OF ISSUANCE, AMENDMENT, RENEWAL, EXTENSION; CERTAIN
CONDITIONS. To request the issuance of a Letter of Credit (or the amendment,
renewal or extension of an outstanding Letter of Credit), the Borrower shall
hand deliver or telecopy (or transmit by electronic communication, if
arrangements for doing so have been approved by the Issuing Bank) to the
Issuing Bank and the Administrative Agent (reasonably in advance of the
requested date of issuance, amendment, renewal or extension) a notice
requesting the issuance of a Letter of Credit, or identifying the Letter of
Credit to be amended, renewed or extended, and specifying the date of
issuance, amendment, renewal or extension (which shall be a Business Day), the
date on which such Letter of Credit is to expire (which shall comply with
paragraph (c) of this Section), the amount of such Letter of Credit, the name
and address of the beneficiary thereof and such other information as shall be
necessary to prepare, amend, renew or extend such Letter of Credit. If
requested by the Issuing Bank, the Borrower also shall submit a letter of
credit application on the Issuing Bank's standard form in connection with any
request for a Letter of Credit. A Letter of Credit shall be issued, amended,
renewed or extended only if (and upon issuance, amendment, renewal or
extension of each Letter of Credit the Borrower shall be deemed to represent
and warrant that), after giving effect to such issuance, amendment, renewal or
extension (i) the LC Exposure shall not exceed $10,000,000.00 and (ii) the
total Revolving Credit Exposures shall not exceed the total Commitments.
(c) EXPIRATION DATE. Each Letter of Credit shall expire at or
prior to the close of business on the earlier of (i) the date one year after
the date of the issuance of such Letter of Credit (or, in the case of any
renewal or extension thereof, one year after such renewal or extension) and
(ii) the date that is five Business Days prior to the Maturity Date.
(d) PARTICIPATIONS. By the issuance of a Letter of Credit (or
an amendment to a Letter of Credit increasing the amount thereof) and without
any further action on the part of the Issuing Bank or the Lenders, the Issuing
Bank hereby grants to each Lender, and each Lender hereby acquires from the
Issuing Bank, a participation in such Letter of Credit equal to such Lender's
Applicable Percentage of the aggregate amount available to be drawn under such
Letter of Credit. In consideration and in furtherance of the foregoing, each
Lender hereby absolutely and unconditionally agrees to pay to the
Administrative Agent, for the account of the Issuing Bank, such Lender's
Applicable Percentage of each LC Disbursement made by the Issuing Bank and not
reimbursed by the Borrower on the date due as provided in paragraph (e) of
this Section, or of any reimbursement payment required to be refunded to the
Borrower for any reason. Each Lender acknowledges and agrees that its
obligation to acquire participations pursuant to this paragraph in respect of
Letters of Credit is absolute and unconditional and shall not be affected by
any circumstance whatsoever, including any amendment, renewal or extension of
any Letter of Credit or the occurrence and continuance of a Default or
reduction or termination of the Commitments, and that each such payment shall
be made without any offset, abatement, withholding or reduction whatsoever.
(e) REIMBURSEMENT. If the Issuing Bank shall make any LC
Disbursement in respect of a Letter of Credit, the Borrower shall reimburse
such LC Disbursement by paying to the Administrative Agent an amount equal to
such LC Disbursement not later than 12:00 noon, Chicago time, on the date that
such LC Disbursement is made, if the Borrower shall have received notice of
such LC Disbursement prior to 10:00 a.m., Chicago time, on such date, or, if
such notice has not been received by the Borrower prior to such time on such
47
date, then not later than 12:00 noon, Chicago time, on (i) the Business Day
that the Borrower receives such notice, if such notice is received prior to
10:00 a.m., Chicago time, on the day of receipt, or (ii) the Business Day
immediately following the day that the Borrower receives such notice, if such
notice is not received prior to such time on the day of receipt; PROVIDED
that, if such LC Disbursement is not less than $500,000, the Borrower may,
subject to the conditions to borrowing set forth herein, request in accordance
with Section 2.03 or 2.05 that such payment be financed with an ABR Revolving
Loan or Swingline Loan in an equivalent amount and, to the extent so financed,
the Borrower's obligation to make such payment shall be discharged and
replaced by the resulting ABR Revolving Loan or Swingline Loan. If the
Borrower fails to make such payment when due, the Administrative Agent shall
notify each Lender of the applicable LC Disbursement, the payment then due
from the Borrower in respect thereof and such Lender's Applicable Percentage
thereof. Promptly following receipt of such notice, each Lender shall pay to
the Administrative Agent its Applicable Percentage of the payment then due
from the Borrower, in the same manner as provided in Section 2.07 with respect
to Loans made by such Lender (and Section 2.07 shall apply, MUTATIS MUTANDIS,
to the payment obligations of the Lenders), and the Administrative Agent shall
promptly pay to the Issuing Bank the amounts so received by it from the
Lenders. Promptly following receipt by the Administrative Agent of any
payment from the Borrower pursuant to this paragraph, the Administrative Agent
shall distribute such payment to the Issuing Bank or, to the extent that
Lenders have made payments pursuant to this paragraph to reimburse the Issuing
Bank, then to such Lenders and the Issuing Bank as their interests may appear.
Any payment made by a Lender pursuant to this paragraph to reimburse the
Issuing Bank for any LC Disbursement (other than the funding of ABR Revolving
Loans or a Swingline Loan as contemplated above) shall not constitute a Loan
and shall not relieve the Borrower of its obligation to reimburse such LC
Disbursement.
(f) OBLIGATIONS ABSOLUTE. The Borrower's obligation to reimburse
LC Disbursements as provided in paragraph (e) of this Section shall be
absolute, unconditional and irrevocable, and shall be performed strictly in
accordance with the terms of this Agreement under any and all circumstances
whatsoever and irrespective of (i) any lack of validity or enforceability of
any Letter of Credit or this Agreement, or any term or provision therein, (ii)
any draft or other document presented under a Letter of Credit proving to be
forged, fraudulent or invalid in any respect or any statement therein being
untrue or inaccurate in any respect, (iii) payment by the Issuing Bank under a
Letter of Credit against presentation of a draft or other document that does
not comply with the terms of such Letter of Credit, or (iv) any other event or
circumstance whatsoever, whether or not similar to any of the foregoing, that
might, but for the provisions of this Section, constitute a legal or equitable
discharge of, or provide a right of setoff against, the Borrower's obligations
hereunder. Neither the Administrative Agent, the Lenders nor the Issuing
Bank, nor any of their Related Parties, shall have any liability or
responsibility by reason of or in connection with the issuance or transfer of
any Letter of Credit or any payment or failure to make any payment thereunder
(irrespective of any of the circumstances referred to in the preceding
sentence), or any error, omission, interruption, loss or delay in transmission
or delivery of any draft, notice or other communication under or relating to
any Letter of Credit (including any document required to make a drawing
thereunder), any error in interpretation of technical terms or any consequence
arising from causes beyond the control of the Issuing Bank; PROVIDED that the
foregoing shall not be construed to excuse the Issuing Bank from liability to
48
the Borrower to the extent of any direct damages (as opposed to consequential
damages, claims in respect of which are hereby waived by the Borrower to the
extent permitted by applicable law) suffered by the Borrower that are caused
by the Issuing Bank's failure to exercise care when determining whether drafts
and other documents presented under a Letter of Credit comply with the terms
thereof. The parties hereto expressly agree that, in the absence of gross
negligence or willful misconduct on the part of the Issuing Bank (as finally
determined by a court of competent jurisdiction), the Issuing Bank shall be
deemed to have exercised care in each such determination. In furtherance of
the foregoing and without limiting the generality thereof, the parties agree
that, with respect to documents presented which appear on their face to be in
substantial compliance with the terms of a Letter of Credit, the Issuing Bank
may, in its sole discretion, either accept and make payment upon such
documents without responsibility for further investigation, regardless of any
notice or information to the contrary, or refuse to accept and make payment
upon such documents if such documents are not in strict compliance with the
terms of such Letter of Credit.
(g) DISBURSEMENT PROCEDURES. The Issuing Bank shall, promptly
following its receipt thereof, examine all documents purporting to represent a
demand for payment under a Letter of Credit. The Issuing Bank shall promptly
notify the Administrative Agent and the Borrower by telephone (confirmed by
telecopy) of such demand for payment and whether the Issuing Bank has made or
will make an LC Disbursement thereunder; PROVIDED that any failure to give or
delay in giving such notice shall not relieve the Borrower of its obligation
to reimburse the Issuing Bank and the Lenders with respect to any such LC
Disbursement. All LC Disbursements shall be made in Dollars.
(h) INTERIM INTEREST. If the Issuing Bank shall make any LC
Disbursement, then, unless the Borrower shall reimburse such LC Disbursement
in full on the date such LC Disbursement is made, the unpaid amount thereof
shall bear interest, for each day from and including the date such LC
Disbursement is made to but excluding the date that the Borrower reimburses
such LC Disbursement, at the rate per annum then applicable to ABR Revolving
Loans; PROVIDED that, if the Borrower fails to reimburse such LC Disbursement
when due pursuant to paragraph (e) of this Section, then Section 2.13(c) shall
apply. Interest accrued pursuant to this paragraph shall be for the account
of the Issuing Bank, except that interest accrued on and after the date of
payment by any Lender pursuant to paragraph (e) of this Section to reimburse
the Issuing Bank shall be for the account of such Lender to the extent of such
payment.
(i) REPLACEMENT OF THE ISSUING BANK. The Issuing Bank may be
replaced at any time by written agreement among the Borrower, the
Administrative Agent, the replaced Issuing Bank and the successor Issuing
Bank. The Administrative Agent shall notify the Lenders of any such
replacement of the Issuing Bank. At the time any such replacement shall
become effective, the Borrower shall pay all unpaid fees accrued for the
account of the replaced Issuing Bank pursuant to Section 2.12(b). From and
after the effective date of any such replacement, (i) the successor Issuing
Bank shall have all the rights and obligations of the Issuing Bank under this
Agreement with respect to Letters of Credit to be issued thereafter and (ii)
references herein to the term "Issuing Bank" shall be deemed to refer to such
successor or to any previous Issuing Bank, or to such successor and all
previous Issuing Banks, as the context shall require. After the replacement
of an Issuing Bank hereunder, the replaced Issuing Bank shall remain a party
49
hereto and shall continue to have all the rights and obligations of an Issuing
Bank under this Agreement with respect to Letters of Credit issued by it prior
to such replacement, but shall not be required to issue additional Letters of
Credit.
(j) CASH COLLATERALIZATION. If any Event of Default shall occur
and be continuing, on the Business Day that the Borrower receives notice from
the Administrative Agent or the Required Lenders (or, if the maturity of the
Loans has been accelerated, Lenders with LC Exposure representing at least 51%
of the total LC Exposure) demanding the deposit of cash collateral pursuant to
this paragraph, the Borrower shall deposit in an account with the
Administrative Agent, in the name of the Administrative Agent and for the
benefit of the Lenders, an amount in cash equal to the LC Exposure as of such
date plus any accrued and unpaid interest thereon; PROVIDED that the
obligation to deposit such cash collateral shall become effective immediately,
and such deposit shall become immediately due and payable, without demand or
other notice of any kind, upon the occurrence of any Event of Default with
respect to the Borrower described in clause (h) or (i) of Article VII. Such
deposit shall be held by the Administrative Agent as collateral for the
payment and performance of the obligations of the Borrower under this
Agreement. The Administrative Agent shall have exclusive dominion and
control, including the exclusive right of withdrawal, over such account.
Other than any interest earned on the investment of such deposits, which
investments shall be made at the option and sole discretion of the
Administrative Agent and at the Borrower's risk and expense, such deposits
shall not bear interest. Interest or profits, if any, on such investments
shall accumulate in such account. Moneys in such account shall be applied by
the Administrative Agent to reimburse the Issuing Bank for LC Disbursements
for which it has not been reimbursed and, to the extent not so applied, shall
be held for the satisfaction of the reimbursement obligations of the Borrower
for the LC Exposure at such time or, if the maturity of the Loans has been
accelerated (but subject to the consent of Lenders with LC Exposure
representing at least 51% of the total LC Exposure), be applied to satisfy
other obligations of the Borrower under this Agreement. If the Borrower is
required to provide an amount of cash collateral hereunder as a result of the
occurrence of an Event of Default, such amount (to the extent not applied as
aforesaid) shall be returned to the Borrower within three Business Days after
all Events of Default have been cured or waived.
SECTION 2.07 FUNDING OF BORROWINGS. (a) On the proposed date of
each Borrowing, each Lender shall make available its Loan or Loans, if any,
(i) if such Loan is denominated in Dollars, not later than 12:00 noon, Chicago
time, in Federal or other funds immediately available to the Administrative
Agent, in Chicago, Illinois, to the account of the Administrative Agent most
recently designated by it for such purpose by notice to the Lenders, and (ii)
if such Loan is denominated in an Agreed Currency other than Dollars, not
later than 12:00 noon, local time, in the city of the Administrative Agent's
Eurocurrency Payment Office for such currency, in such funds as may then be
customary for the settlement of international transactions in such currency in
the city of and at the address of the Administrative Agent's Eurocurrency
Payment Office for such currency. Unless the Administrative Agent determines
that any applicable condition specified in Article IV has not been satisfied,
the Administrative Agent will make the funds so received from the Lenders
available to the Borrower to an account of the Borrower maintained with one of
the Lenders and designated by the Borrower in the applicable Borrowing
Request; PROVIDED that ABR Revolving Loans made to finance the reimbursement
50
of an LC Disbursement as provided in Section 2.06(e) shall be remitted by the
Administrative Agent to the Issuing Bank. Notwithstanding the foregoing
provisions of this Section 2.07, to the extent that a Loan made by a Lender
matures on the same date of a Borrowing hereunder, such Lender shall apply the
proceeds of the Loan it is then making to the repayment of principal of the
maturing Loan. Further, notwithstanding the foregoing provisions of this
Section 2.07, Swingline Loans shall be made as provided in Section 2.05.
(b) Unless the Administrative Agent shall have received notice
from a Lender prior to the proposed date of any Borrowing that such Lender
will not make available to the Administrative Agent such Lender's share of
such Borrowing, the Administrative Agent may assume that such Lender has made
such share available on such date in accordance with paragraph (a) of this
Section and may, in reliance upon such assumption, make available to the
Borrower a corresponding amount. In such event, if a Lender has not in fact
made its share of the applicable Borrowing available to the Administrative
Agent, then the applicable Lender and the Borrower severally agree to pay to
the Administrative Agent forthwith on demand such corresponding amount with
interest thereon, for each day from and including the date such amount is made
available to the Borrower to but excluding the date of payment to the
Administrative Agent, at (i) in the case of such Lender, the greater of the
Federal Funds Effective Rate and a rate determined by the Administrative Agent
in accordance with banking industry rules on interbank compensation or (ii) in
the case of the Borrower, the interest rate applicable to ABR Loans. If such
Lender pays such amount to the Administrative Agent, then such amount shall
constitute such Lender's Loan included in such Borrowing.
SECTION 2.08 INTEREST ELECTIONS. (a) Each Revolving Borrowing
initially shall be of the Type specified in the applicable Borrowing Request
and, in the case of a Eurocurrency Revolving Borrowing, shall have an initial
Interest Period as specified in such Borrowing Request. Thereafter, the
Borrower may elect to convert such Borrowing to a different Type or to
continue such Borrowing and, in the case of a Eurocurrency Revolving
Borrowing, may elect the same or different Interest Periods therefor or the
same or different Agreed Currency, all as provided in this Section; provided,
however, that any conversion of any Eurocurrency Borrowing shall be made on,
and only on, the last day of the Interest Period applicable thereto. The
Borrower may elect different options with respect to different portions of the
affected Borrowing, in which case each such portion shall be allocated ratably
among the Lenders holding the Loans comprising such Borrowing, and the Loans
comprising each such portion shall be considered a separate Borrowing. This
Section shall not apply to Swingline Borrowings, which may not be converted or
continued.
(b) To make an election pursuant to this Section, the Borrower
shall notify the Administrative Agent of such election by telephone by the
time that a Borrowing Request would be required under Section 2.03 if the
Borrower were requesting a Revolving Borrowing of the Type resulting from such
election to be made on the effective date of such election. Each such
telephonic Interest Election Request shall be irrevocable and shall be
confirmed promptly by hand delivery or telecopy to the Administrative Agent of
a written Interest Election Request in a form approved by the Administrative
Agent and signed by the Borrower.
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(c) Each telephonic and written Interest Election Request shall
specify the following information in compliance with Section 2.02:
(i) the Borrowing to which such Interest Election Request
applies and, if different options are being elected with respect to
different portions thereof, the portions thereof to be allocated to
each resulting Borrowing (in which case the information to be specified
pursuant to clauses (iii) and (iv) below shall be specified for each
resulting Borrowing);
(ii) the effective date of the election made pursuant to such
Interest Election Request, which shall be a Business Day;
(iii) whether the resulting Borrowing is to be an ABR Borrowing or
a Eurocurrency Borrowing; and
(iv) if the resulting Borrowing is a Eurocurrency Borrowing, the
Agreed Currency to be applicable thereto and the Interest Period to be
applicable thereto, which shall be a period contemplated by the
definition of the term "Interest Period".
If any such Interest Election Request requests a Eurocurrency Borrowing but
does not specify an Interest Period, then the Borrower shall be deemed to have
selected an Interest Period of one month's duration.
(d) Promptly following receipt of an Interest Election Request,
the Administrative Agent shall advise each Lender of the details thereof and
of such Lender's portion of each resulting Borrowing.
(e) If the Borrower fails to deliver a timely Interest Election
Request with respect to a Eurocurrency Revolving Borrowing prior to the end of
the Interest Period applicable thereto, then, unless such Borrowing is repaid
as provided herein, at the end of such Interest Period such Borrowing, if
denominated in Dollars, shall be converted to an ABR Borrowing, or, if
denominated in an Agreed Currency other than Dollars, shall automatically
continue as a Eurocurrency Borrowing in the same Agreed Currency with an
Interest Period of one month. Notwithstanding any contrary provision hereof,
if an Event of Default has occurred and is continuing and the Administrative
Agent, at the request of the Required Lenders, so notifies the Borrower, then,
so long as an Event of Default is continuing (i) no outstanding Revolving
Borrowing may be converted to or continued as a Eurocurrency Revolving
Borrowing and (ii) unless repaid, each Eurocurrency Revolving Borrowing shall
be converted to an ABR Borrowing at the end of the Interest Period applicable
thereto.
SECTION 2.09 TERMINATION AND REDUCTION OF COMMITMENTS. (a)
Unless previously terminated, the Commitments shall terminate on the Maturity
Date.
(b) The Borrower may at any time terminate, or from time to time
reduce, the Commitments; PROVIDED that (i) each reduction of the Commitments
shall be in an amount that is an integral multiple of $5,000,000.00 and not
less than $5,000,000.00 (or the Approximate Equivalent Amount if denominated
in an Agreed Currency other than Dollars) and (ii) the Borrower shall not
terminate or reduce the Commitments if, after giving effect to any concurrent
prepayment of the Loans in accordance with Section 2.11, the aggregate
52
outstanding principal Dollar Amount of the Revolving Credit Exposure would
exceed the total Commitments.
(c) The Borrower shall notify the Administrative Agent of any
election to terminate or reduce the Commitments under paragraph (b) of this
Section at least three Business Days prior to the effective date of such
termination or reduction, specifying such election and the effective date
thereof. Promptly following receipt of any notice, the Administrative Agent
shall advise the Lenders of the contents thereof. Each notice delivered by
the Borrower pursuant to this Section shall be irrevocable; PROVIDED that a
notice of termination of the Commitments delivered by the Borrower may state
that such notice is conditioned upon the effectiveness of other credit
facilities, in which case such notice may be revoked by the Borrower (by
notice to the Administrative Agent on or prior to the specified effective
date) if such condition is not satisfied. Any termination or reduction of the
Commitments shall be permanent. Each reduction of the Commitments shall be
made ratably among the Lenders in accordance with their respective
Commitments.
SECTION 2.10 REPAYMENT OF LOANS; EVIDENCE OF DEBT. (a) The
Borrower hereby unconditionally promises to pay (i) to the Administrative
Agent for the account of each Lender the then unpaid principal amount of each
Revolving Loan on the Maturity Date, and (ii) to the Swingline Lender the then
unpaid principal amount of each Swingline Loan on the earlier of the Maturity
Date and the date that is fifteen (15) Business Days after such Swingline Loan
is made; PROVIDED that on each date that a Revolving Borrowing is made, the
Borrower shall repay all Swingline Loans then outstanding.
(b) Each Lender shall maintain in accordance with its usual
practice an account or accounts evidencing the Debt of the Borrower to such
Lender resulting from each Loan made by such Lender, including the amounts of
principal and interest payable and paid to such Lender from time to time
hereunder.
(c) The Administrative Agent shall maintain accounts in which it
shall record (i) the amount of each Loan made hereunder, the Class and Type
thereof and, if applicable, the Interest Period and Agreed Currency applicable
thereto, (ii) the amount of any principal or interest due and payable or to
become due and payable from the Borrower to each Lender hereunder and
(iii) the amount of any sum received by the Administrative Agent hereunder for
the account of the Lenders and each Lender's share thereof.
(d) The entries made in the accounts maintained pursuant to
paragraph (b) or (c) of this Section shall be PRIMA FACIE evidence of the
existence and amounts of the obligations recorded therein; PROVIDED that the
failure of any Lender or the Administrative Agent to maintain such accounts or
any error therein shall not in any manner affect the obligation of the
Borrower to repay the Loans in accordance with the terms of this Agreement.
(e) Any Lender may request that Loans made by it be evidenced by
a promissory note. In such event, the Borrower shall prepare, execute and
deliver to such Lender a promissory note payable to the order of such Lender
(or, if requested by such Lender, to such Lender and its registered assigns)
and in a form approved by the Administrative Agent. Thereafter, the Loans
evidenced by such promissory note and interest thereon shall at all times
(including after assignment pursuant to Section 9.04) be represented by one or
53
more promissory notes in such form payable to the order of the payee named
therein (or, if such promissory note is a registered note, to such payee and
its registered assigns).
SECTION 2.11 PREPAYMENT OF LOANS. (a) Subject to prior notice in
accordance with paragraph (b) of this Section, the Borrower may from time to
time prepay, without penalty or premium, all outstanding ABR Borrowings, or,
in a minimum aggregate amount of $5,000,000, any portion of the outstanding
ABR Borrowings, and may from time to time prepay, subject to the payment of
any break funding amounts required by Section 2.16 but without penalty or
premium, all outstanding Eurocurrency Borrowings, or, in a minimum aggregate
amount of $5,000,000 or any integral multiple of $1,000,000 in excess thereof
(or the Approximate Equivalent Amount if denominated in an Agreed Currency
other than Dollars), any portion of the outstanding Eurocurrency Borrowings.
(b) The Borrower shall notify the Administrative Agent (and, in
the case of prepayment of a Swingline Loan, the Swingline Lender) by telephone
(confirmed by telecopy) of any prepayment hereunder (i) in the case of
prepayment of a Eurocurrency Revolving Borrowing, not later than 11:00 a.m.,
Chicago time, three Business Days before the date of prepayment, or (ii) in
the case of prepayment of an ABR Revolving Borrowing, not later than 11:00
a.m., Chicago time, one Business Day before the date of prepayment, or (iii)
in the case of prepayment of a Swingline Loan, not later than 12:00 noon,
Chicago time, on the date of prepayment. Each such notice shall be
irrevocable and shall specify the prepayment date and the principal amount of
each Borrowing or portion thereof to be prepaid; PROVIDED that, if a notice of
prepayment is given in connection with a conditional notice of termination of
the Commitments as contemplated by Section 2.09, then such notice of
prepayment may be revoked if such notice of termination is revoked in
accordance with Section 2.09. Promptly following receipt of any such notice
relating to a Revolving Borrowing, the Administrative Agent shall advise the
Lenders of the contents thereof. Each prepayment of a Revolving Borrowing
shall be applied ratably to the Loans included in the prepaid Borrowing.
Prepayments shall be accompanied by accrued interest to the extent required by
Section 2.13.
SECTION 2.12 FEES. (a) The Borrower agrees to pay to the
Administrative Agent for the account of each Lender a fee (the "Facility
Fee"), which shall accrue at the Applicable Fee Rate on the daily amount of
the Commitment of such Lender (whether used or unused) during the period from
and including the Effective Date to but excluding the date on which such
Commitment terminates; PROVIDED that, if such Lender continues to have any
Revolving Credit Exposure after its Commitment terminates, then such Facility
Fee shall continue to accrue on the daily amount of such Lender's Revolving
Credit Exposure from and including the date on which its Commitment terminates
to but excluding the date on which such Lender ceases to have any Revolving
Credit Exposure. Accrued Facility Fees shall be payable in arrears on the
last day of March, June, September and December of each year and on the date
on which the Commitments terminate, commencing on the first such date to occur
after the date hereof; PROVIDED that any Facility Fees accruing after the date
on which the Commitments terminate shall be payable on demand. All Facility
Fees shall be computed on the basis of a year of 360 days and shall be payable
for the actual number of days elapsed (including the first day but excluding
the last day). For purposes of calculating the Facility Fee hereunder, the
principal amount of each Borrowing made in an Agreed Currency other than
54
Dollars shall be at any time the Dollar Amount of such Borrowing as determined
on the most recent Computation Date with respect to such Borrowing.
(b) The Borrower agrees to pay (i) to the Administrative Agent
for the account of each Lender a participation fee with respect to its
participations in Letters of Credit, which shall accrue at the same Applicable
Margin used to determine the interest rate applicable to Eurocurrency
Revolving Loans on the average daily amount of such Lender's LC Exposure
(excluding any portion thereof attributable to unreimbursed LC Disbursements)
during the period from and including the Effective Date to but excluding the
later of the date on which such Lender's Commitment terminates and the date on
which such Lender ceases to have any LC Exposure, and (ii) to the Issuing Bank
a fronting fee, which shall accrue at the rate of 0.1% per annum on the
average daily amount of the LC Exposure (excluding any portion thereof
attributable to unreimbursed LC Disbursements) during the period from and
including the Effective Date to but excluding the later of the date of
termination of the Commitments and the date on which there ceases to be any LC
Exposure, as well as the Issuing Bank's standard fees with respect to the
issuance, amendment, renewal or extension of any Letter of Credit or
processing of drawings thereunder. Participation fees and fronting fees
accrued through and including the last day of March, June, September and
December of each year shall be payable on the third Business Day following
such last day, commencing on the first such date to occur after the Effective
Date; PROVIDED that all such fees shall be payable on the date on which the
Commitments terminate and any such fees accruing after the date on which the
Commitments terminate shall be payable on demand. Any other fees payable to
the Issuing Bank pursuant to this paragraph shall be payable within 10 days
after demand. All participation fees and fronting fees shall be computed on
the basis of a year of 360 days and shall be payable for the actual number of
days elapsed (including the first day but excluding the last day).
(c) The Borrower agrees to pay to the Administrative Agent, for
its own account, fees payable in the amounts and at the times separately
agreed upon between the Borrower and the Administrative Agent.
(d) All fees payable hereunder shall be paid on the dates due,
in immediately available funds, to the Administrative Agent (or to the Issuing
Bank, in the case of fees payable to it) for distribution, in the case of
Facility Fees and participation fees, to the Lenders. Fees paid shall not be
refundable under any circumstances.
SECTION 2.13 INTEREST. (a) The Loans comprising each ABR
Borrowing (including each Swingline Loan) shall bear interest at the Alternate
Base Rate.
(b) The Loans comprising each Eurocurrency Borrowing shall bear
interest at the Eurocurrency Rate for the Interest Period in effect for such
Borrowing.
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(c) Notwithstanding the foregoing, during the continuance of an
Event of Default the Required Lenders may, at their option, by notice to the
Borrower declare that (i) each Eurocurrency Loan shall bear interest for the
remainder of the applicable Interest Period at the rate otherwise applicable
to such Interest Period plus 2% per annum and (ii) each ABR Loan shall bear
interest at a rate per annum equal to the Alternate Base Rate in effect from
time to time plus 2% per annum, PROVIDED that, during the continuance of an
Event of Default under Section 7.01(h) or (i), the interest rates set forth in
clauses (i) and (ii) above shall be applicable to all Loans without any
election or action on the part of the Administrative Agent or any Lender.
(d) Accrued interest on each Loan shall be payable in arrears on
each Interest Payment Date for such Loan and upon termination of the
Commitments; PROVIDED that (i) interest accrued pursuant to paragraph (c) of
this Section shall be payable on demand, (ii) in the event of any repayment or
prepayment of any Loan (other than a prepayment of an ABR Revolving Loan prior
to the end of the Availability Period), accrued interest on the principal
amount repaid or prepaid shall be payable on the date of such repayment or
prepayment and (iii) in the event of any conversion of any Eurocurrency
Revolving Loan prior to the end of the current Interest Period therefor,
accrued interest on such Loan shall be payable on the effective date of such
conversion.
(e) All interest hereunder shall be computed on the basis of a
year of 360 days, except that interest computed by reference to the Alternate
Base Rate at times when the Alternate Base Rate is based on the Prime Rate
shall be computed on the basis of a year of 365 days (or 366 days in a leap
year), and in each case shall be payable for the actual number of days elapsed
(including the first day but excluding the last day). The applicable
Alternate Base Rate or Eurocurrency Rate shall be determined by the
Administrative Agent, and such determination shall be conclusive absent
manifest error.
SECTION 2.14 ALTERNATE RATE OF INTEREST. If prior to the
commencement of any Interest Period for a Eurocurrency Borrowing:
(a) the Administrative Agent determines (which determination
shall be conclusive absent manifest error) that adequate and reasonable means
do not exist for ascertaining the Eurocurrency Reference Rate for such
Interest Period; or
(b) the Administrative Agent is advised by the Required Lenders
that the Eurocurrency Rate for such Interest Period will not adequately and
fairly reflect the cost to such Lenders (or Lender) of making or maintaining
their Loans (or its Loan) included in such Borrowing for such Interest Period;
then the Administrative Agent shall give notice thereof to the Borrower and
the Lenders by telephone or telecopy as promptly as practicable thereafter
and, until the Administrative Agent notifies the Borrower and the Lenders that
the circumstances giving rise to such notice no longer exist, (i) any Interest
Election Request that requests the conversion of any Revolving Borrowing to,
or continuation of any Revolving Borrowing as, a Eurocurrency Borrowing shall
be ineffective, and (ii) if any Borrowing Request requests a Eurocurrency
Borrowing, such Borrowing shall be made as an ABR Borrowing; PROVIDED that if
the circumstances giving rise to such notice affect only one Type of
Borrowings, then the other Type of Borrowings shall be permitted.
56
SECTION 2.15 INCREASED COSTS. (a) If any Change in Law shall:
(i) impose, modify or deem applicable any reserve, special
deposit or similar requirement against assets of, deposits with or for
the account of, or credit extended by, any Lender (except any such
reserve requirement reflected in the Eurocurrency Rate) or the Issuing
Bank; or
(ii) impose on any Lender or the Issuing Bank or the London
interbank market any other condition affecting this Agreement or
Eurocurrency Loans made by such Lender or any Letter of Credit or
participation therein;
and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Eurocurrency Loan (or of maintaining its
obligation to make any such Loan) or to increase the cost to such Lender or
the Issuing Bank of participating in, issuing or maintaining any Letter of
Credit or to reduce the amount of any sum received or receivable by such
Lender or the Issuing Bank hereunder (whether of principal, interest or
otherwise), then the Borrower will pay to such Lender or the Issuing Bank, as
the case may be, such additional amount or amounts as will compensate such
Lender or the Issuing Bank, as the case may be, for such additional costs
incurred or reduction suffered.
(b) If any Lender or the Issuing Bank determines that any Change
in Law regarding capital requirements has or would have the effect of reducing
the rate of return on such Lender's or the Issuing Bank's capital or on the
capital of such Lender's or the Issuing Bank's holding company, if any, as a
consequence of this Agreement or the Loans made by, or participations in
Letters of Credit held by, such Lender, or the Letters of Credit issued by the
Issuing Bank, to a level below that which such Lender or the Issuing Bank or
such Lender's or the Issuing Bank's holding company could have achieved but
for such Change in Law (taking into consideration such Lender's or the Issuing
Bank's policies and the policies of such Lender's or the Issuing Bank's
holding company with respect to capital adequacy), then from time to time the
Borrower will pay to such Lender or the Issuing Bank, as the case may be, such
additional amount or amounts as will compensate such Lender or the Issuing
Bank or such Lender's or the Issuing Bank's holding company for any such
reduction suffered. "Change in Law regarding capital requirements", as used
herein, means (i) any change after the date of this Agreement in the
Risk-Based Capital Guidelines or (ii) any adoption of or change in any other
law, governmental or quasi-governmental rule, regulation, policy, guideline,
interpretation, or directive (whether or not having the force of law) after
the date of this Agreement which affects the amount of capital required or
expected to be maintained by any Lender or the Issuing Bank or any Lender's or
the Issuing Bank's holding company. "Risk-Based Capital Guidelines" means (i)
the risk-based capital guidelines in effect in the United States on the date
of this Agreement, including transition rules, and (ii) the corresponding
capital regulations promulgated by regulatory authorities outside the United
States implementing the July 1988 report of the Basle Committee on Banking
Regulation and Supervisory Practices Entitled "International Convergence of
Capital Measurements and Capital Standards," including transition rules, and
any amendments to such regulations adopted prior to the date of this
Agreement.
57
(c) A certificate of a Lender or the Issuing Bank setting forth
the amount or amounts necessary to compensate such Lender or the Issuing Bank
or its holding company, as the case may be, as specified in paragraph (a) or
(b) of this Section shall be delivered to the Borrower and shall be conclusive
absent manifest error. The Borrower shall pay such Lender or the Issuing
Bank, as the case may be, the amount shown as due on any such certificate
within 10 days after receipt thereof.
(d) Failure or delay on the part of any Lender or the Issuing
Bank to demand compensation pursuant to this Section shall not constitute a
waiver of such Lender's or the Issuing Bank's right to demand such
compensation; PROVIDED that the Borrower shall not be required to compensate a
Lender or the Issuing Bank pursuant to this Section for any increased costs or
reductions incurred more than 90 days prior to the date that such Lender or
the Issuing Bank, as the case may be, notifies the Borrower of the Change in
Law giving rise to such increased costs or reductions and of such Lender's or
the Issuing Bank's intention to claim compensation therefor; PROVIDED FURTHER
that, if the Change in Law giving rise to such increased costs or reductions
is retroactive, then the 90-day period referred to above shall be extended to
include the period of retroactive effect thereof.
SECTION 2.16 BREAK FUNDING PAYMENTS. In the event of (a) the
payment of any principal of any Eurocurrency Loan other than on the last day
of an Interest Period applicable thereto (including as a result of an Event of
Default), (b) the conversion of any Eurocurrency Loan other than on the last
day of the Interest Period applicable thereto, (c) the failure to borrow,
convert, continue or prepay any Eurocurrency Loan on the date specified in any
notice delivered pursuant hereto (regardless of whether such notice may be
revoked under Section 2.11(b) and is revoked in accordance therewith), or
(d) the assignment of any Eurocurrency Loan other than on the last day of the
Interest Period applicable thereto as a result of a request by the Borrower
pursuant to Section 2.19, then, in any such event, the Borrower shall
compensate each Lender for the loss, cost and expense attributable to such
event. In the case of a Eurocurrency Loan, such loss, cost or expense to any
Lender shall be deemed to include an amount determined by such Lender to be
the excess, if any, of (i) the amount of interest which would have accrued on
the principal amount of such Loan had such event not occurred, at the
Eurocurrency Rate that would have been applicable to such Loan, for the period
from the date of such event to the last day of the then current Interest
Period therefor (or, in the case of a failure to borrow, convert or continue,
for the period that would have been the Interest Period for such Loan), over
(ii) the amount of interest which would accrue on such principal amount for
such period at the interest rate which such Lender would bid were it to bid,
at the commencement of such period, for dollar deposits of a comparable amount
and period from other banks in the eurocurrency market. A certificate of any
Lender setting forth any amount or amounts that such Lender is entitled to
receive pursuant to this Section shall be delivered to the Borrower and shall
be conclusive absent manifest error. The Borrower shall pay such Lender the
amount shown as due on any such certificate within 10 days after receipt
thereof.
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SECTION 2.17 TAXES. (a) Any and all payments by or on account
of any obligation of the Borrower hereunder shall be made free and clear of
and without deduction for any Indemnified Taxes or Other Taxes; PROVIDED that
if the Borrower shall be required to deduct any Indemnified Taxes or Other
Taxes from such payments, then (i) the sum payable shall be increased as
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section) the Administrative
Agent, Lender or the Issuing Bank (as the case may be) receives an amount
equal to the sum it would have received had no such deductions been made,
(ii) the Borrower shall make such deductions and (iii) the Borrower shall pay
the full amount deducted to the relevant Governmental Authority in accordance
with applicable law.
(b) In addition, the Borrower shall pay any Other Taxes to the
relevant Governmental Authority in accordance with applicable law.
(c) The Borrower shall indemnify the Administrative Agent, each
Lender, and the Issuing Bank, within 10 days after written demand therefor,
for the full amount of any Indemnified Taxes or Other Taxes paid by the
Administrative Agent, such Lender or the Issuing Bank, as the case may be, on
or with respect to any payment by or on account of any obligation of the
Borrower hereunder (including Indemnified Taxes or Other Taxes imposed or
asserted on or attributable to amounts payable under this Section) and any
penalties, interest and reasonable expenses arising therefrom or with respect
thereto, whether or not such Indemnified Taxes or Other Taxes were correctly
or legally imposed or asserted by the relevant Governmental Authority. A
certificate as to the amount of such payment or liability delivered to the
Borrower by a Lender, or the Issuing Bank, or by the Administrative Agent on
its own behalf or on behalf of a Lender or the Issuing Bank, shall be
conclusive absent manifest error.
(d) As soon as practicable after any payment of Indemnified
Taxes or Other Taxes by the Borrower to a Governmental Authority, the Borrower
shall deliver to the Administrative Agent the original or a certified copy of
a receipt issued by such Governmental Authority evidencing such payment, a
copy of the return reporting such payment or other evidence of such payment
reasonably satisfactory to the Administrative Agent.
(e) Any Foreign Lender that is entitled to an exemption from or
reduction of withholding tax under the law of the jurisdiction in which the
Borrower is located, or any treaty to which such jurisdiction is a party, with
respect to payments under this Agreement shall deliver to the Borrower (with a
copy to the Administrative Agent), at the time or times prescribed by
applicable law, such properly completed and executed documentation prescribed
by applicable law or reasonably requested by the Borrower as will permit such
payments to be made without withholding or at a reduced rate.
(f) If the Administrative Agent or a Lender determines, in its
sole discretion, that it has received a refund of any Taxes or Other Taxes as
to which it has been indemnified by the Borrower or with respect to which the
Borrower has paid additional amounts pursuant to this Section 2.17, it shall
pay over such refund to the Borrower (but only to the extent of indemnity
payments made, or additional amounts paid, by the Borrower under this Section
2.17 with respect to the Taxes or Other Taxes giving rise to such refund), net
of all out-of-pocket expenses of the Administrative Agent or such Lender and
without interest (other than any interest paid by the relevant Governmental
59
Authority with respect to such refund); provided, that the Borrower, upon the
request of the Administrative Agent or such Lender, agrees to repay the amount
paid over to the Borrower (plus any penalties, interest or other charges
imposed by the relevant Governmental Authority) to the Administrative Agent or
such Lender in the event the Administrative Agent or such Lender is required
to repay such refund to such Governmental Authority. This Section shall not be
construed to require the Administrative Agent or any Lender to make available
its tax returns (or any other information relating to its taxes which it deems
confidential) to the Borrower or any other Person.
SECTION 2.18 PAYMENTS GENERALLY; PRO RATA TREATMENT; SHARING OF
SET-OFFS. (a) (i) Each Loan shall be repaid and each payment of interest
thereon shall be paid in the currency in which such Loan was made or, where
such currency has converted to the Euro, in the Euro. The Borrower shall make
each payment required to be made by it hereunder (whether of principal,
interest, fees or reimbursement of LC Disbursements, or of amounts payable
under Section 2.15, 2.16 or 2.17, or otherwise) prior to 12:00 noon, Chicago
time, on the date when due, in immediately available funds, without set-off or
counterclaim. Any amounts received after such time on any date may, in the
discretion of the Administrative Agent, be deemed to have been received on the
next succeeding Business Day for purposes of calculating interest thereon.
All such payments shall be made to the Administrative Agent at its offices at
One Summit Square, Fort Wayne, Indiana, except payments to be made directly to
the Issuing Bank or Swingline Lender as expressly provided herein and except
that payments pursuant to Sections 2.15, 2.16, 2.17 and 9.03 shall be made
directly to the Persons entitled thereto, and except that all payments to be
made by the Borrower hereunder in any currency other than Dollars shall be
made in such currency on the date due in such funds as may then be customary
for the settlement of international transactions in such currency for the
account of the Administrative Agent, at its Eurocurrency Payment Office for
such currency and shall be applied ratably by the Administrative Agent among
the Lenders. Each payment delivered to the Administrative Agent for the
account of any Lender shall be delivered promptly by the Administrative Agent
to such Lender in the same type of funds that the Administrative Agent
received at, (a) with respect to ABR Loans and Eurocurrency Loans denominated
in Dollars, its address specified in the Administrative Questionnaire or at
any address specified in a notice received by the Administrative Agent from
such Lender and (b) with respect to Eurocurrency Loans denominated in an
Agreed Currency other than Dollars, in the funds received from the Borrower at
the address of the Administrative Agent's Eurocurrency Payment Office for such
currency. The Administrative Agent is hereby authorized to charge any account
of the Borrower maintained with Bank One or any of its Affiliates for each
payment of principal, interest and fees as it becomes due hereunder. If any
payment hereunder shall be due on a day that is not a Business Day, the date
for payment shall be extended to the next succeeding Business Day, and, in the
case of any payment accruing interest, interest thereon shall be payable for
the period of such extension.
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(ii) Notwithstanding the foregoing provisions of this Section,
if, after the making of any Loan in any currency other than Dollars, currency
control or exchange regulations are imposed in the country which issues such
currency with the result that the type of currency in which the Loan was made
(the "Original Currency") no longer exists or the Borrower is not able to make
payment to the Administrative Agent for the account of the Lenders in such
Original Currency, then all payments to be made by the Borrower hereunder in
such currency shall instead be made when due in Dollars in an amount equal to
the Dollar Amount (as of the date of repayment) of such payment due, it being
the intention of the parties hereto that the Borrower take all risks of the
imposition of any such currency control or exchange regulations.
(b) If at any time insufficient funds are received by and
available to the Administrative Agent to pay fully all amounts of principal,
unreimbursed LC Disbursements, interest and fees then due hereunder, such
funds shall be applied (i) first, towards payment of interest and fees then
due hereunder, ratably among the parties entitled thereto in accordance with
the amounts of interest and fees then due to such parties, and (ii) second,
towards payment of principal and unreimbursed LC Disbursements then due
hereunder, ratably among the parties entitled thereto in accordance with the
amounts of principal and unreimbursed LC Disbursements then due to such
parties.
(c) If any Lender shall, by exercising any right of set-off or
counterclaim or otherwise, obtain payment in respect of any principal of or
interest on any of its Revolving Loans or participations in LC Disbursements
or Swingline Loans resulting in such Lender receiving payment of a greater
proportion of the aggregate amount of its Revolving Loans and participations
in LC Disbursements and Swingline Loans and accrued interest thereon than the
proportion received by any other Lender, then the Lender receiving such
greater proportion shall purchase (for cash at face value) participations in
the Revolving Loans and participations in LC Disbursements and Swingline Loans
of other Lenders to the extent necessary so that the benefit of all such
payments shall be shared by the Lenders ratably in accordance with the
aggregate amount of principal of and accrued interest on their respective
Revolving Loans and participations in LC Disbursements and Swingline Loans;
PROVIDED that (i) if any such participations are purchased and all or any
portion of the payment giving rise thereto is recovered, such participations
shall be rescinded and the purchase price restored to the extent of such
recovery, without interest, and (ii) the provisions of this paragraph shall
not be construed to apply to any payment made by the Borrower pursuant to and
in accordance with the express terms of this Agreement or any payment obtained
by a Lender as consideration for the assignment of or sale of a participation
in any of its Loans or participations in LC Disbursements to any assignee or
participant, other than to the Borrower or any Subsidiary or Affiliate thereof
(as to which the provisions of this paragraph shall apply). The Borrower
consents to the foregoing and agrees, to the extent it may effectively do so
under applicable law, that any Lender acquiring a participation pursuant to
the foregoing arrangements may exercise against the Borrower rights of set-off
and counterclaim with respect to such participation as fully as if such Lender
were a direct creditor of the Borrower in the amount of such participation.
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(d) Unless the Administrative Agent shall have received notice
from the Borrower prior to the date on which any payment is due to the
Administrative Agent for the account of the Lenders or the Issuing Bank
hereunder that the Borrower will not make such payment, the Administrative
Agent may assume that the Borrower has made such payment on such date in
accordance herewith and may, in reliance upon such assumption, distribute to
the Lenders or the Issuing Bank, as the case may be, the amount due. In such
event, if the Borrower has not in fact made such payment, then each of the
Lenders or the Issuing Bank, as the case may be, severally agrees to repay to
the Administrative Agent forthwith on demand the amount so distributed to such
Lender or Issuing Bank with interest thereon, for each day from and including
the date such amount is distributed to it to but excluding the date of payment
to the Administrative Agent, at the greater of the Federal Funds Effective
Rate and a rate determined by the Administrative Agent in accordance with
banking industry rules on interbank compensation.
(e) If any Lender shall fail to make any payment required to be
made by it pursuant to Section 2.05(c), 2.06(d) or (e), 2.07(b), 2.18(d) or
9.03(c), then the Administrative Agent may, in its discretion (notwithstanding
any contrary provision hereof), apply any amounts thereafter received by the
Administrative Agent for the account of such Lender to satisfy such Lender's
obligations under such Sections until all such unsatisfied obligations are
fully paid.
SECTION 2.19 MITIGATION OBLIGATIONS; REPLACEMENT OF LENDERS.
(a) If any Lender requests compensation under Section 2.15, or if the
Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 2.17,
then such Lender shall use reasonable efforts to designate a different lending
office for funding or booking its Loans hereunder or to assign its rights and
obligations hereunder to another of its offices, branches or affiliates, if,
in the judgment of such Lender, such designation or assignment (i) would
eliminate or reduce amounts payable pursuant to Section 2.15 or 2.17, as the
case may be, in the future and (ii) would not subject such Lender to any
unreimbursed cost or expense and would not otherwise be disadvantageous to
such Lender. The Borrower hereby agrees to pay all reasonable costs and
expenses incurred by any Lender in connection with any such designation or
assignment.
(b) If any Lender requests compensation under Section 2.15, or
if the Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 2.17,
or if any Lender defaults in its obligation to fund Loans hereunder, then the
Borrower may, at its sole expense and effort, upon notice to such Lender and
the Administrative Agent, require such Lender to assign and delegate, without
recourse (in accordance with and subject to the restrictions contained in
Section 9.04), all its interests, rights and obligations under this Agreement
to an assignee that shall assume such obligations (which assignee may be
another Lender, if a Lender accepts such assignment); PROVIDED that (i) the
Borrower shall have received the prior written consent of the Administrative
Agent (and if a Commitment is being assigned, the Issuing Bank), which consent
shall not unreasonably be withheld, (ii) such Lender shall have received
payment of an amount equal to the outstanding principal of its Loans and
participations in LC Disbursements and Swingline Loans, accrued interest
thereon, accrued fees and all other amounts payable to it hereunder, from the
assignee (to the extent of such outstanding principal and accrued interest and
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fees) or the Borrower (in the case of all other amounts) and (iii) in the case
of any such assignment resulting from a claim for compensation under
Section 2.15 or payments required to be made pursuant to Section 2.17, such
assignment will result in a reduction in such compensation or payments. A
Lender shall not be required to make any such assignment and delegation if,
prior thereto, as a result of a waiver by such Lender or otherwise, the
circumstances entitling the Borrower to require such assignment and
delegation cease to apply.
SECTION 2.20 MARKET DISRUPTION. Notwithstanding the
satisfaction of all conditions referred to in Article II and Article IV with
respect to any Borrowing in any Agreed Currency other than Dollars, if there
shall occur on or prior to the date of such Borrowing any change in national
or international financial, political or economic conditions or currency
exchange rates or exchange controls which would in the reasonable opinion of
the Administrative Agent or the Required Lenders make it impracticable for the
Eurocurrency Loans comprising such Borrowing to be denominated in the Agreed
Currency specified by the Borrower, then the Administrative Agent shall
forthwith give notice thereof to the Borrower and the Lenders, and such Loans
shall not be denominated in such Agreed Currency but shall, except as
otherwise set forth in Section 2.03(b), be made on the proposed date of such
Borrowing in Dollars, in an aggregate principal amount equal to the Dollar
Amount of the aggregate principal amount specified in the related Borrowing
Request or Interest Election Request, as the case may be, as ABR Loans, unless
the Borrower notifies the Administrative Agent at least one Business Day
before such date that (i) it elects not to borrow on such date or (ii) it
elects to borrow on such date in a different Agreed Currency, as the case may
be, in which the denomination of such Loans would in the opinion of the
Administrative Agent and the Required Lenders be practicable and in an
aggregate principal amount equal to the Dollar Amount of the aggregate
principal amount specified in the related Borrowing Request or Interest
Election Request, as the case may be.
SECTION 2.21 JUDGMENT CURRENCY. If for the purposes of
obtaining judgment in any court it is necessary to convert a sum due from the
Borrower hereunder in the currency expressed to be payable herein (the
"specified currency") into another currency, the parties hereto agree, to the
fullest extent that they may effectively do so, that the rate of exchange used
shall be that at which in accordance with normal banking procedures the
Administrative Agent could purchase the specified currency with such other
currency at the Administrative Agent's main Chicago office on the Business Day
preceding that on which final, non-appealable judgment is given. The
obligations of the Borrower in respect of any sum due to any Lender or the
Administrative Agent hereunder shall, notwithstanding any judgment in a
currency other than the specified currency, be discharged only to the extent
that on the Business Day following receipt by such Lender or the
Administrative Agent (as the case may be) of any sum adjudged to be so due in
such other currency such Lender or the Administrative Agent (as the case may
be) may in accordance with normal, reasonable banking procedures purchase the
specified currency with such other currency. If the amount of the specified
currency so purchased is less than the sum originally due to such Lender or
the Administrative Agent, as the case may be, in the specified currency, the
Borrower agrees, to the fullest extent that it may effectively do so, as a
separate obligation and notwithstanding any such judgment, to indemnify such
Lender or the Administrative Agent, as the case may be, against such loss, and
if the amount of the specified currency so purchased exceeds (a) the sum
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originally due to any Lender or the Administrative Agent, as the case may be,
in the specified currency and (b) any amounts shared with other Lenders as a
result of allocations of such excess as a disproportionate payment to such
Lender under Section 2.18(c), such Lender or the Administrative Agent, as the
case may be, agrees to remit such excess to the Borrower.
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ARTICLE III
Representations and Warranties
------------------------------
The Borrower represents and warrants to the Lenders that:
SECTION 3.01 ORGANIZATION; POWERS. The Borrower is a corporation
duly organized, validly existing, and in good standing under the laws of the
jurisdiction of its organization, and has all requisite power and authority to
carry on its business as now conducted. Each Subsidiary is duly organized,
validly existing, and in good standing under the laws of the jurisdiction of
its organization and, except for the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect, has all requisite power and authority to carry on its business as now
conducted. Each of the Borrower and its Subsidiaries is qualified to do
business in, and is in good standing in, every jurisdiction where such
qualification is required except where the failure to do so, individually or
in the aggregate, could not reasonably be expected to result in a Material
Adverse Effect.
SECTION 3.02 AUTHORIZATION; ENFORCEABILITY. The Transactions are
within the Borrower's corporate powers and have been duly authorized by all
necessary corporate and, if required, stockholder action. This Agreement has
been duly executed and delivered by the Borrower and constitutes a legal,
valid and binding obligation of the Borrower, enforceable in accordance with
its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other laws affecting creditors' rights generally and subject to
general principles of equity, regardless of whether considered in a proceeding
in equity or at law.
SECTION 3.03 GOVERNMENTAL APPROVALS; NO CONFLICTS. The
Transactions (a) do not require any consent or approval of, registration or
filing with, or any other action by, any Governmental Authority, except such
as have been obtained or made and are in full force and effect, (b) will not
violate any applicable law or regulation or the charter, by-laws or other
organizational documents of the Borrower or any of its Subsidiaries or any
order of any Governmental Authority, (c) will not violate or result in a
default under any indenture, agreement or other instrument binding upon the
Borrower or any of its Subsidiaries or its assets, or give rise to a right
thereunder to require any payment to be made by the Borrower or any of its
Subsidiaries, and (d) will not result in the creation or imposition of any
Lien on any asset of the Borrower or any of its Subsidiaries.
SECTION 3.04 FINANCIAL CONDITION; NO MATERIAL ADVERSE CHANGE.
(a) The Borrower has heretofore furnished to the Lenders its consolidated
balance sheet and statements of income, stockholders equity and cash flows (i)
as of and for the fiscal year ended January 3, 2004, reported on by Deloitte &
Touche LLP, independent public accountants, and (ii) as of and for the fiscal
quarter and the portion of the fiscal year ended July 3, 2004, certified by
its chief financial officer. Such financial statements present fairly, in all
material respects, the financial position and results of operations and cash
flows of the Borrower and its consolidated Subsidiaries as of such dates and
for such periods in accordance with GAAP, subject to year-end audit
adjustments and the absence of footnotes in the case of the statements
referred to in clause (ii) above.
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(b) Since January 3, 2004, there has been no event, act,
condition or occurrence having a Material Adverse Effect.
SECTION 3.05 PROPERTIES. (a) Each of the Borrower and its
Subsidiaries has good title to, or valid leasehold interests in, all its real
and personal property material to its business, except for minor defects in
title that do not materially interfere with its ability to conduct its
business as currently conducted or to utilize such properties for their
intended purposes.
(b) Each of the Borrower and its Subsidiaries owns, or is
licensed to use, all trademarks, tradenames, copyrights, patents and other
intellectual property material to its business, and the use thereof by the
Borrower and its Subsidiaries does not infringe upon the rights of any other
Person, except for any such infringements that, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.
SECTION 3.06 LITIGATION AND ENVIRONMENTAL MATTERS. (a) There are
no actions, suits or proceedings by or before any arbitrator or Governmental
Authority pending against or, to the knowledge of the Borrower, threatened
against or affecting the Borrower or any of its Subsidiaries (i) as to which
there is a reasonable possibility of an adverse determination and that, if
adversely determined, could reasonably be expected, individually or in the
aggregate, to result in a Material Adverse Effect (other than the Disclosed
Matters) or (ii) that involve this Agreement or the Transactions.
(b) Except for the Disclosed Matters and except with respect to
any other matters that, individually or in the aggregate, could not reasonably
be expected to result in a Material Adverse Effect, neither the Borrower nor
any of its Subsidiaries (i) has failed to comply with any Environmental Law or
to obtain, maintain or comply with any permit, license or other approval
required under any Environmental Law, (ii) has become subject to any
Environmental Liability, (iii) has received notice of any claim with respect
to any Environmental Liability or (iv) knows of any basis for any
Environmental Liability.
(c) Since the date of this Agreement, there has been no change
in the status of the Disclosed Matters that, individually or in the aggregate,
has resulted in, or materially increased the likelihood of, a Material Adverse
Effect.
SECTION 3.07 COMPLIANCE WITH LAWS AND AGREEMENTS. Each of the
Borrower and its Subsidiaries is in compliance with all laws, regulations and
orders of any Governmental Authority applicable to it or its property and all
indentures, agreements and other instruments binding upon it or its property,
except where the failure to do so, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect. No Default has
occurred and is continuing.
SECTION 3.08 INVESTMENT AND HOLDING COMPANY STATUS. Neither the
Borrower nor any of its Subsidiaries is (a) an "investment company" as defined
in, or subject to regulation under, the Investment Company Act of 1940 or
(b) a "holding company" as defined in, or subject to regulation under, the
Public Utility Holding Company Act of 1935.
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SECTION 3.09 TAXES. Each of the Borrower and its Subsidiaries
has timely filed or caused to be filed all Tax returns and reports required to
have been filed and has paid or caused to be paid all Taxes required to have
been paid by it, except (a) Taxes that are being contested in good faith by
appropriate proceedings and for which the Borrower or such Subsidiary, as
applicable, has set aside on its books adequate reserves or (b) to the extent
that the failure to do so could not reasonably be expected to result in a
Material Adverse Effect. The charges, accruals and reserves on the books of
the Borrower and its Subsidiaries in respect of taxes or other governmental
charges are, in the opinion of the Borrower, adequate. United States income
tax returns of the Borrower and its Subsidiaries have been examined and closed
through the fiscal year ended December 30, 2000.
SECTION 3.10 ERISA. No ERISA Event has occurred or is reasonably
expected to occur that, when taken together with all other such ERISA Events
for which liability is reasonably expected to occur, could reasonably be
expected to result in a Material Adverse Effect.
SECTION 3.11 CAPITAL STOCK. All Capital Stock, debentures,
bonds, notes and all other securities of the Borrower and its Subsidiaries
presently issued and outstanding are validly and properly issued in accordance
with all applicable laws, including, but not limited to, the "Blue Sky" laws
of all applicable states and the federal securities laws. The issued shares of
Capital Stock of the Borrower's Wholly Owned Subsidiaries are owned by the
Borrower free and clear of any Lien or adverse claim. At least a majority
of the issued shares of stock of each of the Borrower's other Subsidiaries
(other than Wholly Owned Subsidiaries) having ordinary voting power to elect a
majority of the board of directors of such Subsidiary is owned by the Borrower
free and clear of any Lien or adverse claim.
SECTION 3.12 USE OF PROCEEDS. Neither the Borrower nor any
Subsidiary owns or has any present intention of acquiring any "margin stock"
as defined in Regulation U (12 CFR Part 221) of the Board (herein called
"margin stock"). The proceeds of the Loans will be used primarily to replace
the Borrower's existing bank credit facility, for working capital purposes,
capital expenditures, Investments, and other purposes permitted by or not in
contravention of any provision of this Agreement. None of such proceeds will
be used, directly or indirectly, for the purpose, whether immediate,
incidental or ultimate, of purchasing or carrying any margin stock or for the
purpose of maintaining, reducing or retiring any indebtedness which was
originally incurred to purchase or carry any stock that is currently a margin
stock or for any other purpose which might constitute this transaction a
"purpose credit" within the meaning of such Regulation U. Neither the
Borrower nor any agent acting on its behalf has taken or will take any action
which might cause this Agreement to violate Regulation U, Regulation T or any
other regulation of the Board or to violate the Securities Exchange Act of
1934, as amended, in each case as in effect now or as the same may hereafter
be in effect. Neither the Borrower nor any of its Subsidiaries is a Person
described in Section 1 of the Anti-Terrorism Order and none of the proceeds of
the Loans will, directly or indirectly, be transferred to or used for the
benefit of any such Person in violation of the Anti-Terrorism Order.
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SECTION 3.13 INSOLVENCY. After giving effect to the execution
and delivery of the Loan Documents and the making of the Loans under this
Agreement, the Borrower will not be "insolvent," within the meaning of such
term as defined in 101 of Title 11 of the United States Code or Section 2 of
the Uniform Fraudulent Transfer Act, or any other applicable state law
pertaining to fraudulent transfers, as each may be amended from time to time,
or be unable to pay its debts generally as such debts become due, or have
an unreasonably small capital to engage in any business or transaction,
whether current or contemplated.
SECTION 3.14 INSURANCE. The Borrower maintains and each
Subsidiary maintains (either in the name of the Borrower or in such
Subsidiary's own name) insurance on all of its Properties in compliance
with the requirements of Section 5.05.
SECTION 3.15 PARTNERSHIPS AND JOINT VENTURES. As of the
Effective Date, except as disclosed on Schedule 3.15, neither the Borrower
nor any of its Subsidiaries has any ownership interests in any partnership or
joint venture.
SECTION 3.16 SUBSIDIARIES. As of the Effective Date, the
Borrower has no Subsidiaries except those Subsidiaries listed on Schedule
3.16, which accurately sets forth each such Subsidiary's complete name and
jurisdiction of organization.
SECTION 3.18 DEBT. As of the Effective Date, there exists no
Debt (a) of the Borrower which is secured by a Lien under Section 6.03(vi),
(b) of any Significant Subsidiary except Debt owing to the Borrower, and
(c) of any Subsidiary (other than a Significant Subsidiary) except (i) Debt
owing to the Borrower or to another Subsidiary and (ii) other Debt which does
not exceed in the aggregate as to all such Subsidiaries the sum of $2,000,000.
SECTION 3.18 DISCLOSURE. The Borrower has disclosed to the
Lenders all agreements, instruments and corporate or other restrictions to
which it or any of its Subsidiaries is subject, and all other matters known to
it, that, individually or in the aggregate, could reasonably be expected to
result in a Material Adverse Effect. Neither the Information Memorandum nor
any of the other reports, financial statements, certificates or other written
information furnished by or on behalf of the Borrower to the Administrative
Agent or any Lender in connection with the negotiation of this Agreement or
delivered hereunder (as modified or supplemented by other information so
furnished) contains any material misstatement of fact or omits to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided that, with
respect to projected financial information (if any), the Borrower represents
only that such information was prepared in good faith based upon assumptions
believed to be reasonable at the time.
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ARTICLE IV
Conditions
----------
SECTION 4.01 EFFECTIVE DATE. The obligations of the Lenders to
make Loans and of the Issuing Bank to issue Letters of Credit hereunder shall
not become effective until the date on which each of the following conditions
is satisfied (or waived in accordance with Section 9.02):
(a) The Administrative Agent (or its counsel) shall have
received from each party hereto either (i) a counterpart of this Agreement
signed on behalf of such party or (ii) written evidence satisfactory to the
Administrative Agent (which may include telecopy transmission of a signed
signature page of this Agreement) that such party has signed a counterpart of
this Agreement.
(b) The Administrative Agent shall have received a favorable
written opinion (addressed to the Administrative Agent and the Lenders and
dated the Effective Date) of Schiff Hardin LLP, counsel for the Borrower,
substantially in the form of Exhibit B. The Borrower hereby requests such
counsel to deliver such opinion.
(c) The Administrative Agent shall have received such documents
and certificates as the Administrative Agent or its counsel may reasonably
request relating to the organization, existence and good standing of the
Borrower, the authorization of the Transactions and any other legal matters
relating to the Borrower, this Agreement or the Transactions, all in form and
substance satisfactory to the Administrative Agent and its counsel.
(d) The Administrative Agent shall have received a certificate
dated the Effective Date and signed by the President, a Vice President or a
Financial Officer of the Borrower, confirming compliance with the conditions
set forth in paragraphs (a) and (b) of Section 4.02.
(e) The Administrative Agent shall have received all fees and
other amounts due and payable on or prior to the Effective Date, including, to
the extent invoiced, reimbursement or payment of all out-of-pocket expenses
required to be reimbursed or paid by the Borrower hereunder.
(f) The Administrative Agent shall have received satisfactory
evidence that the Credit Agreement dated as of November 26, 2001, among the
Borrower, the lenders party thereto, and Wachovia Bank, N.A., as
Administrative Agent thereunder, shall have been terminated and all
indebtedness, liabilities, and obligations outstanding thereunder shall have
been paid in full.
The Administrative Agent shall notify the Borrower and the Lenders of the
Effective Date, and such notice shall be conclusive and binding.
Notwithstanding the foregoing, the obligations of the Lenders to make Loans
hereunder shall not become effective unless each of the foregoing conditions
is satisfied (or waived pursuant to Section 9.02) at or prior to 3:00 p.m.,
Chicago time, on September 9, 2004 (and, in the event such conditions are not
so satisfied or waived, the Commitments shall terminate at such time).
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SECTION 4.02 EACH CREDIT EVENT. The obligation of each Lender to
make a Loan on the occasion of any Borrowing, and of the Issuing Bank to
issue, amend, renew or extend any Letter of Credit, is subject to the
satisfaction of the following conditions:
(a) The representations and warranties of the Borrower set forth
in this Agreement shall be true and correct on and as of the date of such
Borrowing or the date of issuance, amendment, renewal or extension of such
Letter of Credit, as applicable, except (i) to the extent any such
representation or warranty is stated to relate to an earlier date and (ii) for
changes in the Schedules hereto reflecting transactions after the Effective
Date permitted by this Agreement.
(b) At the time of and immediately after giving effect to such
Borrowing or the issuance, amendment, renewal or extension of such Letter of
Credit, as applicable, no Default shall have occurred and be continuing. Each
Borrowing and each issuance, amendment, renewal or extension of a Letter of
Credit shall be deemed to constitute a representation and warranty by the
Borrower on the date thereof as to the matters specified in paragraphs (a) and
(b) of this Section.
ARTICLE V
Affirmative Covenants
---------------------
Until the Commitments have expired or been terminated and the
principal of and interest on each Loan and all fees payable hereunder shall
have been paid in full and all Letters of Credit shall have expired or
terminated and all LC Disbursements shall have been reimbursed, the Borrower
covenants and agrees with the Lenders that:
SECTION 5.01 FINANCIAL STATEMENTS; OTHER INFORMATION. The
Borrower will furnish to the Administrative Agent and each Lender:
(a) within 90 days after the end of each fiscal year of the
Borrower, its audited consolidated balance sheet and related statements of
operations, stockholders' equity and cash flows as of the end of and for such
year, setting forth in each case in comparative form the figures for the
previous fiscal year, all reported on by Deloitte & Touche LLP, or other
independent public accountants of recognized national standing (without a
"going concern" or like qualification or exception and without any
qualification or exception as to the scope of such audit) to the effect that
such consolidated financial statements present fairly in all material respects
the financial condition and results of operations of the Borrower and its
consolidated Subsidiaries on a consolidated basis in accordance with GAAP
consistently applied; PROVIDED, HOWEVER, that delivery (within the time period
specified above), pursuant to Section 5.01(d) hereof, of a copy of the annual
report on the "Form 10-K" of the Borrower for such fiscal year filed with the
Securities and Exchange Commission, shall be deemed to satisfy the
requirements of this Section 5.01(a);
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(b) within 60 days after the end of each of the first three
fiscal quarters of each fiscal year of the Borrower, its consolidated balance
sheet and related statements of operations, stockholders' equity and cash
flows as of the end of and for such fiscal quarter and the then elapsed
portion of the fiscal year, setting forth in each case in comparative form the
figures for the corresponding period or periods of (or, in the case of the
balance sheet, as of the end of) the previous fiscal year, all certified by
one of its Financial Officers as presenting fairly in all material respects
the financial condition and results of operations of the Borrower and its
consolidated Subsidiaries on a consolidated basis in accordance with GAAP
consistently applied, subject to normal year-end audit adjustments and the
absence of footnotes; PROVIDED, HOWEVER, that delivery (within the time period
specified above), pursuant to Section 5.01(d) hereof, of a copy of the
quarterly report on the "Form 10-Q" of the Borrower for such quarterly period
filed with the Securities and Exchange Commission, shall be deemed to satisfy
the requirements of this Section 5.01(b);
(c) concurrently with any delivery of financial statements under
clause (a) or (b) above, a certificate of a Financial Officer of the Borrower
(i) certifying as to whether a Default has occurred and, if a Default has
occurred, specifying the details thereof and any action taken or proposed to
be taken with respect thereto, (ii) setting forth reasonably detailed
calculations demonstrating compliance with Sections 5.08 and 5.09 and
(iii) stating whether any change in GAAP or in the application thereof has
occurred since the date of the audited financial statements referred to in
Section 3.04 and, if any such change has occurred, specifying the effect of
such change on the financial statements accompanying such certificate;
(d) promptly after the same become publicly available, copies of
all periodic and other reports, proxy statements and other materials filed by
the Borrower or any Subsidiary with the Securities and Exchange Commission, or
any Governmental Authority succeeding to any or all of the functions of said
Commission, or with any national securities exchange, or distributed by the
Borrower to its shareholders generally, as the case may be; and
(e) promptly following any request therefor, such other
information regarding the operations, business affairs and financial condition
of the Borrower or any Subsidiary, or compliance with the terms of this
Agreement, as the Administrative Agent or any Lender may reasonably request.
SECTION 5.02 NOTICES OF MATERIAL EVENTS. The Borrower will
furnish to the Administrative Agent and each Lender:
(a) within five (5) Business Days after any Financial Officer
becomes aware of the occurrence of any Default, written notice of such
Default;
(b) promptly after a Financial Officer knows of the filing or
commencement thereof, written notice of the filing or commencement of any
action, suit or proceeding by or before any arbitrator or Governmental
Authority against or affecting the Borrower or any Affiliate thereof that, if
adversely determined, could reasonably be expected to result in a Material
Adverse Effect;
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(c) prompt written notice of the occurrence of any ERISA Event
that, alone or together with any other ERISA Events that have occurred, could
reasonably be expected to result in liability of the Borrower and its
Subsidiaries in an aggregate amount exceeding $2,000,000.00;
(d) prompt written notice of any other development that results
in, or could reasonably be expected to result in, a Material Adverse Effect.
Each notice delivered under this Section shall be accompanied by a statement
of a Financial Officer or other executive officer of the Borrower setting
forth the details of the event or development requiring such notice and any
action taken or proposed to be taken with respect thereto.
SECTION 5.03 EXISTENCE; CONDUCT OF BUSINESS. The Borrower will,
and will cause each of its Subsidiaries to, do or cause to be done all things
necessary to preserve, renew and keep in full force and effect its legal
existence and the rights, licenses, permits, privileges and franchises
material to the conduct of its business; PROVIDED that the foregoing shall not
prohibit any merger, consolidation, liquidation or dissolution permitted under
Section 6.03.
SECTION 5.04 PAYMENT OF OBLIGATIONS. The Borrower will, and will
cause each of its Subsidiaries to, pay its obligations, including Tax
liabilities, that, if not paid, could result in a Material Adverse Effect
before the same shall become delinquent or in default, except where (a) the
validity or amount thereof is being contested in good faith by appropriate
proceedings, (b) the Borrower or such Subsidiary has set aside on its books
adequate reserves with respect thereto in accordance with GAAP and (c) the
failure to make payment pending such contest could not reasonably be expected
to result in a Material Adverse Effect.
SECTION 5.05 MAINTENANCE OF PROPERTIES; INSURANCE. The Borrower
will, and will cause each of its Subsidiaries to, (a) keep and maintain all
property material to the conduct of its business in good working order and
condition, ordinary wear and tear excepted, and (b) maintain, with financially
sound and reputable insurance companies, insurance in such amounts and against
such risks as are customarily maintained by companies engaged in the same or
similar businesses operating in the same or similar locations, provided that
the Borrower may satisfy such insurance requirements through adequate self-
insurance programs.
SECTION 5.06 BOOKS AND RECORDS; INSPECTION RIGHTS. The Borrower
will, and will cause each of its Subsidiaries to, keep proper books of record
and account in which full, true and correct entries are made of all dealings
and transactions in relation to its business and activities. The Borrower
will, and will cause each of its Subsidiaries to, permit any representatives
designated by the Administrative Agent or any Lender, upon reasonable prior
notice, to visit and inspect its properties, to examine and make extracts from
its books and records, and to discuss its affairs, finances and condition with
its officers and independent accountants, all at such reasonable times and as
often as reasonably requested.
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SECTION 5.07 COMPLIANCE WITH LAWS. The Borrower will, and will
cause each of its Subsidiaries to, comply with all laws, rules, regulations
and orders of any Governmental Authority applicable to it or its property,
except where the failure to do so, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect. Without
limitation of the foregoing, the Borrower will, and will cause each of its
Subsidiaries to, not be a Person described in Section 1 of, and not engage in
any transaction or activity prohibited by, the Anti-Terrorism Order.
SECTION 5.08 LEVERAGE RATIO. As of the end of each fiscal
quarter, the Leverage Ratio shall not exceed 3.0 to 1.0.
SECTION 5.09 INTEREST COVERAGE RATIO. As of the end of each
fiscal quarter, the Interest Coverage Ratio shall be equal to or greater
than 3.0 to 1.0.
SECTION 5.10 ENVIRONMENTAL MATTERS.
(a) The Borrower shall furnish to the Lenders and the
Administrative Agent written notice of all pending or threatened
Environmental Liabilities, Environmental Proceedings, Environmental Notices,
Environmental Judgments and Orders, and Environmental Releases at, on, in or
under the Properties or any adjacent property, any of which, taken alone
or in the aggregate, could reasonably be expected to have a Material Adverse
Effect, promptly after a Financial Officer learns thereof.
(b) The Borrower and its Subsidiaries will substantially
comply with all applicable material Environmental Requirements.
(c) The Borrower agrees that upon the occurrence of an
Environmental Release at or on any of the Properties that could reasonably be
expected to have a Material Adverse Effect it will act immediately to
investigate the extent of, and to take appropriate remedial action to
eliminate, such Environmental Release, whether or not ordered or otherwise
directed to do so by any Environmental Authority.
SECTION 5.11 MOST FAVORED LENDER STATUS. In the event that
the Borrower or any Subsidiary shall enter into, assume or otherwise become
bound by or obligated under, or amend, any agreement evidencing any present or
future Debt in excess of $10,000,000, which instrument includes covenants,
warranties, representations or defaults, or events of default (or any other
type of restriction which would have the practical effect of any of the
foregoing, including, without limitation, any "put" or mandatory prepayment of
such Debt) other than those set forth herein or in any of the other Loan
Documents, the Borrower shall promptly so notify the Administrative Agent, and
if the Administrative Agent shall so request by written notice to the Borrower
(after a determination has been made by the Required Lenders that any of
the above-referenced documents or instruments contain any provisions, which
either individually or in the aggregate, are more favorable than any of the
provisions set forth in this Agreement), the Borrower and the Lenders shall
promptly amend this Agreement to incorporate some or all of such provisions, in
the discretion of the Required Lenders, into this Agreement and, to the extent
necessary and reasonably desirable to the Required Lenders, into any of
the other Loan Documents, all at the election of the Required Lenders.
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ARTICLE VI
Negative Covenants
------------------
Until the Commitments have expired or terminated and the principal
of and interest on each Loan and all fees payable hereunder have been paid in
full and all Letters of Credit have expired or terminated and all LC
Disbursements shall have been reimbursed, the Borrower covenants and agrees
with the Lenders that:
SECTIN 6.01 LOANS OR ADVANCES. Neither the Borrower nor any of
its Subsidiaries shall make loans or advances to any Person except: (i)
loans or advances to employees made in the ordinary course of business and
consistently with practices existing on the Effective Date; (ii) deposits
required by government agencies or public utilities; (iii) loans or
advances by the Borrower to any Subsidiary or by any Subsidiary to the
Borrower or any other Subsidiary (other than a Significant Subsidiary);
(iv) loans or advances to senior management of the Borrower pursuant to
the Stock Purchase Plan to the extent the aggregate outstanding amount of
all such loans or advances does not exceed $5,000,000; (v) loans to the
existing employee stock ownership plan of the Borrower; (vi) loans to any new
employee stock ownership plan of the Borrower which is approved by the
Borrower's shareholders; and (vii) loans or advances permitted by Section
6.02; provided that after giving effect to the making of any loans, advances
or deposits permitted by clause (i), (ii), (iii), (iv), (v), (vi) or (vii)
of this Section, no Default shall have occurred and be continuing.
SECTION 6.02 INVESTMENTS. Neither the Borrower nor any of its
Subsidiaries shall make Investments in any Person except Investments (i) in
direct obligations of or guaranteed by the United States Government or any
state of the United States or any agency of either thereof maturing within
2 years, (ii) in certificates of deposit issued by, and time deposits with,
a commercial bank with a capital of $100,000,000 or more or whose credit is
reasonably satisfactory to the Administrative Agent, (iii) in commercial paper
rated A-1 or better by S&P, or the equivalent thereof by any nationally
recognized rating agency, (iv) in the form of loans and advances permitted
by Section 6.01, (v) in tender bonds the payment of the principal of and
interest on which is fully supported by a letter of credit issued by a
United States bank whose long-term certificates of deposit are rated at
least A or better by S&P, or the equivalent thereof by any nationally
recognized rating agency, (vi) in any Subsidiary or any corporation or other
Person which immediately after such Investment is made will be a Subsidiary,
(vii) consisting of stock, obligations or securities received in
settlement of debts created in the ordinary course of business owing
to the Borrower or any Subsidiary, to the extent the aggregate amount of all
such Investments described in this clause (vii) made after the Effective Date
does not exceed $1,000,000, (viii) consisting of demand deposit accounts, (ix)
consisting of repurchase agreements with respect to Investments described in
clauses (ii) and (iii) above, (x) consisting of money market funds which
invest exclusively in Investments described in clauses (i), (ii), (iii) and
(ix) above, (xi) in Permitted Acquisitions, and (xii) not otherwise permitted
by the foregoing clauses (i) through (xi) in an aggregate amount not to exceed
an amount equal to 25% of Consolidated Net Worth.
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SECTION 6.03 LIENS. Neither the Borrower nor any Subsidiary will
create, assume or suffer to exist any Lien on any asset now owned or hereafter
acquired by it, except:
(i) any Lien existing on any asset of any corporation or
other Person at the time such corporation or other Person becomes a
Subsidiary and not created in contemplation of such event;
(ii) any Lien on any asset of any corporation or other
Person existing at the time such corporation or other Person is merged or
consolidated with or into the Borrower or a Subsidiary and not created in
contemplation of such event;
(iii) any Lien existing on any asset prior to the
acquisition thereof by the Borrower or a Subsidiary and not created in
contemplation of such acquisition;
(iv) Liens securing Debt owing by any Subsidiary to the Borrower
or by the Borrower or any Subsidiary (other than a Significant Subsidiary) to
any Subsidiary;
(v) Liens incidental to the conduct of its business or the
ownership of its assets which (A) do not secure Debt and (B) do not in the
aggregate materially detract from the value of its assets or materially
impair the use thereof in the operation of its business; and
(vi) Liens not otherwise permitted by the foregoing clauses of
this Section securing Debt (other than the Loans) provided that Priority
Debt at no time exceeds twenty percent (20%) of Consolidated Net Worth
(notwithstanding the foregoing, the basket in this subclause (vi) shall not be
used to provide credit enhancements (in any form, including Liens and
Guarantees) to the purchasers under the Borrower's note purchase agreement with
Prudential Investment Management, Inc., as the same may be amended, modified,
renewed or extended from time to time).
SECTION 6.04 CONSOLIDATIONS, MERGERS AND SALES OF ASSETS. The
Borrower will not, nor will it permit any Subsidiary to, consolidate or merge
with or into, or sell, lease or otherwise transfer all or any substantial
part of its assets to, any other Person, PROVIDED that: (a) the Borrower
may merge with another Person if (i) such Person was organized under the laws
of the United States of America or one of its states, (ii) the Borrower is the
corporation surviving such merger and (iii) immediately after giving effect to
such merger, no Default shall have occurred and be continuing, (b)
Subsidiaries of the Borrower may merge with the Borrower or may merge with one
another if, in the event such merger is between a Significant Subsidiary and
another Subsidiary, such Significant Subsidiary is the corporation surviving
such merger, and (c) the foregoing limitation on the sale, lease or other
transfer of assets shall not prohibit (i) any sale and leaseback of any
Property owned by the Borrower or any of its Subsidiaries, PROVIDED that the
aggregate amount of assets sold and leased back under this clause (c)(i) in
the most recent twelve (12) month period do not constitute more than five
percent (5%) of Consolidated Total Assets determined as of the end of the most
recently ended fiscal year, (ii) any sale, lease or other transfer of assets
made by the Borrower or any Subsidiary in the ordinary course of its
business, (iii) any sale, lease or other transfer of assets by a
Subsidiary (other than a Significant Subsidiary) to the Borrower or to a
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Wholly Owned Subsidiary, (iv) any sale, lease or other transfer of assets
by the Borrower to a Wholly Owned Subsidiary, (v) any sale, lease or other
transfer of assets by a Significant Subsidiary to the Borrower or to the
other Significant Subsidiary, (vi) any transfer of assets consisting solely
of cash as consideration for any Investment permitted under Section 6.02,
(vii) any sale of receivables permitted under Section 6.08, or (viii) any
sale, lease or other transfer of assets outside of the ordinary course of
business so long as the aggregate amount of assets sold, leased or otherwise
transferred outside of the ordinary course of business in the then most recent
twelve (12) month period which were not otherwise permitted by this Section
6.04 to be sold, leased or otherwise transferred together with the amount of
any assets then proposed to be sold, leased or otherwise transferred outside
of the ordinary course of business which are not otherwise permitted by
this Section 6.04 to be sold, leased or otherwise transferred (A) does
not constitute more than fifteen percent (15%) of Consolidated Total Assets
determined as of the end of the most recently ended fiscal year and (B) has
not contributed more than fifteen percent (15%) of Consolidated Net Earnings
for the most recently ended fiscal year.
SECTION 6.05 USE OF PROCEEDS. No portion of the proceeds of the
Loans will be used by the Borrower or any Subsidiary (i) in a manner which
would violate or cause any Lender to be in violation of Regulation T, U or
X of the Board, (ii) for any purpose in violation of any applicable law or
regulation, or (iii) to finance any Acquisition other than a Permitted
Acquisition.
SECTION 6.06 CHANGE IN FISCAL YEAR. The Borrower will not change
its fiscal year without the consent of the Required Lenders.
SECTION 6.07 DISSOLUTION. Neither the Borrower nor any of its
Material Subsidiaries shall suffer or permit dissolution or liquidation,
except to the extent permitted by Section 6.04.
SECTION 6.08 SALE OR DISCOUNT OF RECEIVABLES. The Borrower shall
not, nor shall it permit any of its Subsidiaries to, sell with or without
recourse, discount or pledge or otherwise sell any of its notes or accounts
receivable excluding, however, the sale on a non-recourse basis of receivables
in the ordinary course of business owing from foreign account debtors so long
as such sale is not for the exclusive purpose of raising a financing (e.g., a
securitization).
SECTION 6.09 ACQUISITIONS. Neither the Borrower nor any of its
Subsidiaries shall make any Acquisitions, provided that Permitted
Acquisitions may be made if, after giving effect thereto, no Default would
be caused thereby (giving effect thereto on a pro forma basis as to
financial covenants).
SECTION 6.10 Transactions with Affiliates. Neither the Borrower
nor any of its Subsidiaries shall enter into, or be a party to, any
transaction with any Affiliate of the Borrower or such Subsidiary (which
Affiliate is not the Borrower or a Subsidiary), except as permitted by law and
pursuant to terms that are no less favorable to Borrower or such Subsidiary
than would be obtained in a comparable arm's length transaction with a Person
which is not an Affiliate.
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SECTION6.11 RESTRICTED PAYMENTS. If any Default has occurred and
is continuing or would result therefrom, the Borrower will not declare or make
any Restricted Payment.
SECTION 6.12 LIMITATION ON DEBT. The Borrower shall not
(a) permit any Significant Subsidiary to create, incur, assume or suffer to
exist any Debt, except Debt owing by any Significant Subsidiary to the
Borrower, or (b) create, incur, assume, permit or suffer to exist any other
Debt, except:
(i) Debt of the Borrower or any Subsidiary (other than a
Significant Subsidiary) owing to the Borrower or any Subsidiary; and
(ii) other Debt of the Borrower or Subsidiaries (other than
Significant Subsidiaries), so long as Priority Debt at no time exceeds
twenty percent (20%) of Consolidated Net Worth (notwithstanding the
foregoing, the basket in this subclause (ii) shall not be used to provide
credit enhancements (in any form, including Liens and Guarantees) to the
purchasers under the Borrower's note purchase agreement with Prudential
Investment Management, Inc., as the same may be amended, modified,
renewed or extended from time to time).
SECTION 6.13 NO RESTRICTIONS ON SUBSIDIARY DIVIDENDS. Neither
the Borrower nor any Subsidiary shall agree to, enter into, consent to,
become subject to or permit to exist any contractual restriction or other
binding obligation (including its charter) that directly or indirectly limits
the amount of, or otherwise restricts (i) the payment to the Borrower by any
Subsidiary of dividends or other redemptions or distributions with respect to
such Subsidiary's capital stock, (ii) the repayment to the Borrower by any
Subsidiary of intercompany loans or advances, (iii) the making of loans or
advances by any Subsidiary to the Borrower or any Wholly-Owned Subsidiary
(other than a Significant Subsidiary) or (iv) other intercompany transfers to
the Borrower of property or other assets by Subsidiaries.
SECTION 6.14 SALE OF STOCK AND DEBT OF SUBSIDIARIES. Except for
sales and other dispositions expressly permitted under Section 6.04(c),
neither the Borrower nor any Subsidiary shall sell or otherwise dispose of, or
part with control of, any shares of stock or Debt of any Subsidiary, except to
the Borrower or any Subsidiary. Notwithstanding the foregoing, each
Significant Subsidiary shall at all times be a Wholly-Owned Subsidiary of the
Borrower.
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ARTICLE VII
Events of Default
-----------------
SECTION 7.01 EVENTS OF DEFAULT. If any of the following events
("EVENTS OF DEFAULT") shall occur:
(a) the Borrower shall fail to pay any principal of any Loan or
any reimbursement obligation in respect of any LC Disbursement when and as the
same shall become due and payable, whether at the due date thereof or at a
date fixed for prepayment thereof or otherwise;
(b) the Borrower shall fail to pay any interest on any Loan or
any fee or any other amount (other than an amount referred to in clause (a) of
this Article) payable under this Agreement, when and as the same shall become
due and payable, and such failure shall continue unremedied for a period of
ten (10) Business Days;
(c) any representation or warranty made or deemed made by or on
behalf of the Borrower or any Subsidiary in or in connection with this
Agreement or any amendment or modification hereof or waiver hereunder, or in
any report, certificate, financial statement or other document furnished
pursuant to or in connection with this Agreement or any amendment or
modification hereof or waiver hereunder, shall prove to have been incorrect in
any material respect when made or deemed made;
(d) the Borrower shall fail to observe or perform any covenant,
condition or agreement contained in Sections 5.02, 5.03 (with respect to the
Borrower's existence), 5.06, 5.08 or 5.09, or in Article VI;
(e) the Borrower shall fail to observe or perform any covenant,
condition or agreement contained in this Agreement (other than those specified
in clause (a), (b) or (d) of this Article), and such failure shall continue
unremedied for a period of thirty (30) days after the earlier of (i) the
first day on which any Financial Officer has knowledge of such failure or (ii)
the date written notice thereof is given by the Administrative Agent to the
Borrower (which notice will be given at the request of any Lender);
(f) the Borrower or any Subsidiary shall fail to make any
payment (whether of principal or interest and regardless of amount) in respect
of any Material Debt, when due or within any applicable grace period;
(g) any event or condition occurs that results in any Material
Debt becoming due prior to its scheduled maturity or that enables or permits
(with or without the giving of notice, the lapse of time or both) the holder
or holders of any Material Debt or any trustee or agent on its or their behalf
to cause any Material Debt to become due, or to require the prepayment,
repurchase, redemption or defeasance thereof, prior to its scheduled maturity;
PROVIDED that this clause (g) shall not apply to secured Debt that becomes due
as a result of the voluntary sale or transfer of the property or assets
securing such Debt;
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(h) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed seeking (i) liquidation, reorganization or
other relief in respect of the Borrower or any Subsidiary or its debts, or of
a substantial part of its assets, under any Federal, state or foreign
bankruptcy, insolvency, receivership or similar law now or hereafter in effect
or (ii) the appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for the Borrower or any Subsidiary or for a
substantial part of its assets, and, in any such case, such proceeding or
petition shall continue undismissed for 60 days or an order or decree
approving or ordering any of the foregoing shall be entered;
(i) the Borrower or any Subsidiary shall (i) voluntarily
commence any proceeding or file any petition seeking liquidation,
reorganization or other relief under any Federal, state or foreign bankruptcy,
insolvency, receivership or similar law now or hereafter in effect,
(ii) consent to the institution of, or fail to contest in a timely and
appropriate manner, any proceeding or petition described in clause (h) of this
Article, (iii) apply for or consent to the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for the Borrower or
any Subsidiary or for a substantial part of its assets, (iv) file an answer
admitting the material allegations of a petition filed against it in any such
proceeding, (v) make a general assignment for the benefit of creditors or
(vi) take any action for the purpose of effecting any of the foregoing;
(j) the Borrower or any Subsidiary shall become unable, admit in
writing its inability or fail generally to pay its debts as they become due;
(k) one or more judgments for the payment of money in an
aggregate amount in excess of $2,000,000 shall be rendered against the
Borrower, any Subsidiary or any combination thereof and the same shall remain
undischarged for a period of 60 consecutive days during which execution shall
not be effectively stayed, or any action shall be legally taken by a judgment
creditor to attach or levy upon any assets of the Borrower or any Subsidiary
to enforce any such judgment;
(l) an ERISA Event shall have occurred that, in the opinion of
the Required Lenders, when taken together with all other ERISA Events that
have occurred, could reasonably be expected to result in liability of the
Borrower and its Subsidiaries in an aggregate amount exceeding $2,000,000.00
in any year;
(m) a Change in Control shall occur; or
(n) any Significant Subsidiary shall cease, for any reason, to
be a Wholly Owned Subsidiary; then, and in every such event (other than an
event with respect to the Borrower described in clause (h) or (i) of this
Article), and at any time thereafter during the continuance of such event, the
Administrative Agent may, and at the request of the Required Lenders shall, by
notice to the Borrower, take either or both of the following actions, at the
same or different times: (i) terminate the Commitments, and thereupon the
Commitments shall terminate immediately, and (ii) declare the Loans then out-
standing to be due and payable in whole (or in part, in which case any
principal not so declared to be due and payable may thereafter be declared to
be due and payable), and thereupon the principal of the Loans so declared to
be due and payable, together with accrued interest thereon and all fees and
other obligations of the Borrower accrued hereunder, shall become due and
79
payable immediately, without presentment, demand, protest or other notice of
any kind, all of which are hereby waived by the Borrower; and in case of any
event with respect to the Borrower described in clause (h) or (i) of this
Article, the Commitments shall automatically terminate and the principal of
the Loans then outstanding, together with accrued interest thereon and all
fees and other obligations of the Borrower accrued hereunder, shall
automatically become due and payable, without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the Borrower.
ARTICLE VIII
The Administrative Agent
------------------------
SECTIN 8.01 THE ADMINISTRATIVE AGENT. (a) Each of the Lenders
and the Issuing Bank hereby irrevocably appoints the Administrative Agent as
its agent and authorizes the Administrative Agent to take such actions on its
behalf and to exercise such powers as are delegated to the Administrative
Agent by the terms hereof, together with such actions and powers as are
reasonably incidental thereto.
(b) The bank serving as the Administrative Agent hereunder shall
have the same rights and powers in its capacity as a Lender as any other
Lender and may exercise the same as though it were not the Administrative
Agent, and such bank and its Affiliates may accept deposits from, lend money
to and generally engage in any kind of business with the Borrower or any
Subsidiary or other Affiliate thereof as if it were not the Administrative
Agent hereunder.
(c) The Administrative Agent shall not have any duties or
obligations except those expressly set forth herein. Without limiting the
generality of the foregoing, (a) the Administrative Agent shall not be subject
to any fiduciary or other implied duties, regardless of whether a Default has
occurred and is continuing, (b) the Administrative Agent shall not have any
duty to take any discretionary action or exercise any discretionary powers,
except discretionary rights and powers expressly contemplated hereby that the
Administrative Agent is required to exercise in writing as directed by the
Required Lenders (or such other number or percentage of the Lenders as shall
be necessary under the circumstances as provided in Section 9.02), and (c)
except as expressly set forth herein, the Administrative Agent shall not have
any duty to disclose, and shall not be liable for the failure to disclose, any
information relating to the Borrower or any of its Subsidiaries that is
communicated to or obtained by the bank serving as Administrative Agent or any
of its Affiliates in any capacity. The Administrative Agent shall not be
liable for any action taken or not taken by it with the consent or at the
request of the Required Lenders (or such other number or percentage of the
Lenders as shall be necessary under the circumstances as provided in
Section 9.02) or in the absence of its own gross negligence or willful
misconduct. The Administrative Agent shall be deemed not to have knowledge of
any Default unless and until written notice thereof is given to the
Administrative Agent by the Borrower or a Lender, and the Administrative Agent
shall not be responsible for or have any duty to ascertain or inquire into
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(i) any statement, warranty or representation made in or in connection with
this Agreement, (ii) the contents of any certificate, report or other document
delivered hereunder or in connection herewith, (iii) the performance or
observance of any of the covenants, agreements or other terms or conditions
set forth herein, (iv) the validity, enforceability, effectiveness or
genuineness of this Agreement or any other agreement, instrument or document,
or (v) the satisfaction of any condition set forth in Article IV or elsewhere
herein, other than to confirm receipt of items expressly required to be
delivered to the Administrative Agent.
(d) The Administrative Agent shall be entitled to rely upon, and
shall not incur any liability for relying upon, any notice, request,
certificate, consent, statement, instrument, document or other writing
believed by it to be genuine and to have been signed or sent by the proper
Person. The Administrative Agent also may rely upon any statement made to it
orally or by telephone and believed by it to be made by the proper Person, and
shall not incur any liability for relying thereon. The Administrative Agent
may consult with legal counsel (who may be counsel for the Borrower),
independent accountants and other experts selected by it, and shall not be
liable for any action taken or not taken by it in accordance with the advice
of any such counsel, accountants or experts.
(e) The Administrative Agent may perform any and all its duties
and exercise its rights and powers by or through any one or more sub-agents
appointed by the Administrative Agent. The Administrative Agent and any such
sub-agent may perform any and all its duties and exercise its rights and
powers through their respective Related Parties. The exculpatory provisions
of the preceding paragraphs shall apply to any such sub-agent and to the
Related Parties of the Administrative Agent and any such sub-agent, and shall
apply to their respective activities in connection with the syndication of the
credit facilities provided for herein as well as activities as Administrative
Agent.
(f) Subject to the appointment and acceptance of a successor
Administrative Agent as provided in this paragraph, the Administrative Agent
may resign at any time by notifying the Lenders and the Borrower. Upon any
such resignation, the Required Lenders shall have the right to appoint a
successor Administrative Agent, PROVIDED that such appointment shall be in
consultation with the Borrower if such successor is one of the Lenders and
shall be subject to the approval of the Borrower (which approval shall not be
unreasonably withheld) if such successor is not one of the Lenders. If no
successor shall have been so appointed by the Required Lenders and shall have
accepted such appointment within 30 days after the retiring Administrative
Agent gives notice of its resignation, then the retiring Administrative Agent
may, on behalf of the Lenders and the Issuing Bank, appoint a successor
Administrative Agent which shall be a bank with an office in Chicago,
Illinois, or an Affiliate of any such bank. Upon the acceptance of its
appointment as Administrative Agent hereunder by a successor, such successor
shall succeed to and become vested with all the rights, powers, privileges and
duties of the retiring Administrative Agent, and the retiring Administrative
Agent shall be discharged from its duties and obligations hereunder. The fees
payable by the Borrower to a successor Administrative Agent shall be the same
as those payable to its predecessor unless otherwise agreed between the
Borrower and such successor. After the Administrative Agent's resignation
hereunder, the provisions of this Article and Section 9.03 shall continue in
effect for the benefit of such retiring Administrative Agent, its sub-agents
and their respective Related Parties in respect of any actions taken or
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omitted to be taken by any of them while it was acting as Administrative
Agent.
(g) Each Lender acknowledges that it has, independently and
without reliance upon the Administrative Agent or any other Lender and based
on such documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the
Administrative Agent or any other Lender and based on such documents and
information as it shall from time to time deem appropriate, continue to make
its own decisions in taking or not taking action under or based upon this
Agreement, any related agreement or any document furnished hereunder or
thereunder.
(h) None of the Sole Bookrunner or Sole Lead Arranger listed on
the cover page hereof shall have any powers, duties or responsibilities under
this Agreement or any of the other Loan Documents, except in its capacity, as
applicable, as the Administrative Agent, a Lender or the Issuing Bank
hereunder.
ARTICLE IX
Miscellaneous
-------------
SECTIN 9.01 NOTICES. (a) Except in the case of notices and other
communications expressly permitted to be given by telephone (and subject to
paragraph (b) below), all notices and other communications provided for herein
shall be in writing and shall be delivered by hand or overnight courier
service, mailed by certified or registered mail or sent by telecopy, as
follows:
(i) if to the Borrower, to it at 400 E. Spring Street, Bluffton,
IN 46714, Attention of Treasurer, Telecopy No. 260-827-5530; and in
the case of a Notice to Borrower pursuant to Article VII of this
Agreement, and in the case of a notice to the Borrower pursuant to
Article VII of this Agreement, with a copy to: Schiff Hardin LLP, 6600
Sears Tower, Chicago, IL 60606, Attention of: Robert J. Regan,
Telecopy No. 312-258-5600;
(ii) if to the Administrative Agent, to Bank One, NA, One Summit
Square, Fort Wayne, Indiana 46802, Attention of Robert H. Hall, First
Vice President, Telecopy No. 260-427-8883, and in the case of a notice
pursuant to Section 5.02 of this Agreement, with a copy to Baker &
Daniels, 111 East Wayne Street, Suite 800, Fort Wayne, IN 46802;
Attention of David A. Scott, Telecopy No. 260-460-1700;
(iii) if to the Issuing Bank, to Bank One, NA, One Summit Square,
Fort Wayne, Indiana 46802, Attention of Robert H. Hall, First Vice
President, Telecopy No. 260-427-8883;
(iv) if to the Swingline Lender, to Bank One, NA, One Summit
Square, Fort Wayne, Indiana 46802, Attention of Robert H. Hall, First
Vice President, Telecopy No. 260-427-8883;
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(v) if to any other Lender, to it at its address (or telecopy
number) set forth in its Administrative Questionnaire (provided in the
case of a notice from Borrower, a copy of such Administrative
Questionnaire has been provided to Borrower).
(b) Notices and other communications to the Lenders hereunder
may be delivered or furnished by electronic communications pursuant to
procedures approved by the Administrative Agent; provided that the foregoing
shall not apply to notices pursuant to Article II unless otherwise agreed by
the Administrative Agent and the applicable Lender. The Administrative Agent
or the Borrower may, in its discretion, agree to accept notices and other
communications to it hereunder by electronic communications pursuant to
procedures approved by it; provided that approval of such procedures may be
limited to particular notices or communications.
(c) Any party hereto may change its address or telecopy number
for notices and other communications hereunder by notice to the other parties
hereto. All notices and other communications given to any party hereto in
accordance with the provisions of this Agreement shall be deemed to have been
given on the date of receipt.
SECTION 9.02 WAIVERS; AMENDMENTS. (a) No failure or delay by
the Administrative Agent or the Issuing Bank or any Lender in exercising any
right or power hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other
or further exercise thereof or the exercise of any other right or power. The
rights and remedies of the Administrative Agent, the Issuing Bank, and the
Lenders hereunder are cumulative and are not exclusive of any rights or
remedies that they would otherwise have. No waiver of any provision of this
Agreement or consent to any departure by the Borrower therefrom shall in any
event be effective unless the same shall be permitted by paragraph (b) of this
Section, and then such waiver or consent shall be effective only in the
specific instance and for the purpose for which given. Without limiting the
generality of the foregoing, the making of a Loan or issuance of a Letter of
Credit shall not be construed as a waiver of any Default, regardless of
whether the Administrative Agent, any Lender or the Issuing Bank may have had
notice or knowledge of such Default at the time.
(b) Neither this Agreement nor any provision hereof may be
waived, amended or modified except pursuant to an agreement or agreements in
writing entered into by the Borrower and the Required Lenders or by the
Borrower and the Administrative Agent with the consent of the Required
Lenders; PROVIDED that no such agreement shall (i) increase the Commitment of
any Lender without the written consent of such Lender, (ii) reduce the
principal amount of any Loan or LC Disbursement or reduce the rate of interest
thereon, or reduce any fees payable hereunder, without the written consent of
each Lender affected thereby, (iii) postpone the scheduled date of payment of
the principal amount of any Loan or LC Disbursement, or any interest thereon,
or any fees payable hereunder, or reduce the amount of, waive or excuse any
such payment, or postpone the scheduled date of expiration of any Commitment,
without the written consent of each Lender affected thereby, (iv) change
Section 2.18(b) or (c) in a manner that would alter the pro rata sharing of
payments required thereby, without the written consent of each Lender, or (v)
change any of the provisions of this Section or the definition of "Required
Lenders" or any other provision hereof specifying the number or percentage of
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Lenders required to waive, amend or modify any rights hereunder or make any
determination or grant any consent hereunder, without the written consent of
each Lender; PROVIDED FURTHER that no such agreement shall amend, modify or
otherwise affect the rights or duties of the Administrative Agent, the Issuing
Bank or the Swingline Lender hereunder without the prior written consent of
the Administrative Agent, the Issuing Bank or the Swingline Lender, as the
case may be.
SECTION 9.03 EXPENSES; INDEMNITY; DAMAGE WAIVER. (a) The
Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by the
Administrative Agent and its Affiliates, including the reasonable fees,
charges and disbursements of counsel for the Administrative Agent, in
connection with the syndication of the credit facilities provided for herein,
the preparation and administration of this Agreement or any amendments,
modifications or waivers of the provisions hereof (whether or not the
transactions contemplated hereby or thereby shall be consummated), (ii) all
reasonable out-of-pocket expenses incurred by the Issuing Bank in connection
with the issuance, amendment, renewal or extension of any Letter of Credit or
any demand for payment thereunder, and (iii) all reasonable out-of-pocket
expenses incurred by the Administrative Agent, the Issuing Bank or any Lender,
including the fees, charges and disbursements of any counsel for the
Administrative Agent, the Issuing Bank or any Lender, in connection with the
enforcement or protection of its rights in connection with this Agreement,
including its rights under this Section, or in connection with the Loans made
or Letters of Credit issued hereunder, including all such reasonable out-
of-pocket expenses incurred during any workout, restructuring or negotiations
in respect of such Loans or Letters of Credit.
(b) The Borrower shall indemnify the Administrative Agent, the
Issuing Bank, and each Lender, and each Related Party of any of the foregoing
Persons (each such Person being called an "Indemnitee") against, and hold each
Indemnitee harmless from, any and all losses, claims, damages, liabilities and
related expenses, including the reasonable fees, charges and disbursements of
any counsel for any Indemnitee, incurred by or asserted against any Indemnitee
arising out of, in connection with, or as a result of (i) the execution or
delivery of this Agreement or any agreement or instrument contemplated hereby,
the performance by the parties hereto of their respective obligations
hereunder or the consummation of the Transactions or any other transactions
contemplated hereby, (ii) any Loan or Letter of Credit or the use of the
proceeds therefrom (including any refusal by the Issuing Bank to honor a
demand for payment under a Letter of Credit if the documents presented in
connection with such demand do not strictly comply with the terms of such
Letter of Credit), (iii) any actual or alleged presence or release of
Hazardous Materials on or from any property owned or operated by the Borrower
or any of its Subsidiaries, or any Environmental Liability related in any way
to the Borrower or any of its Subsidiaries, or (iv) any actual or prospective
claim, litigation, investigation or proceeding relating to any of the
foregoing, whether based on contract, tort or any other theory and regardless
of whether any Indemnitee is a party thereto; PROVIDED that such indemnity
shall not, as to any Indemnitee, be available to the extent that such losses,
claims, damages, liabilities or related expenses resulted from the gross
negligence or willful misconduct of such Indemnitee.
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(c) To the extent that the Borrower fails to pay any amount
required to be paid by it to the Administrative Agent, the Issuing Bank or the
Swingline Lender under paragraph (a) or (b) of this Section, each Lender
severally agrees to pay to the Administrative Agent, the Issuing Bank or the
Swingline Lender, as the case may be, such Lender's Applicable Percentage
(determined as of the time that the applicable unreimbursed expense or
indemnity payment is sought) of such unpaid amount; PROVIDED that the
unreimbursed expense or indemnified loss, claim, damage, liability or related
expense, as the case may be, was incurred by or asserted against the
Administrative Agent, the Issuing Bank or the Swingline Lender in its capacity
as such.
(d) To the extent permitted by applicable law, the Borrower
shall not assert, and hereby waives, any claim against any Indemnitee, on any
theory of liability, for special, indirect, consequential or punitive damages
(as opposed to direct or actual damages) arising out of, in connection with,
or as a result of, this Agreement or any agreement or instrument contemplated
hereby, the Transactions, any Loan or Letter of Credit or the use of the
proceeds thereof.
(e) All amounts due under this Section shall be payable not
later than 30 days after written demand therefor.
SECTION 9.04 SUCCESSORS AND ASSIGNS. (a) The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns permitted hereby (including any
Affiliate of the Issuing Bank that issues any Letter of Credit), except that
(i) the Borrower may not assign or otherwise transfer any of its rights or
obligations hereunder without the prior written consent of each Lender (and
any attempted assignment or transfer by the Borrower without such consent
shall be null and void) and (ii) no Lender may assign or otherwise transfer
its rights or obligations hereunder except in accordance with this Section.
Nothing in this Agreement, expressed or implied, shall be construed to confer
upon any Person (other than the parties hereto, their respective successors
and assigns permitted hereby (including any Affiliate of the Issuing Bank that
issues any Letter of Credit), Participants (to the extent provided in
paragraph (c) of this Section) and, to the extent expressly contemplated
hereby, the Related Parties of each of the Administrative Agent, the Issuing
Bank, and the Lenders) any legal or equitable right, remedy or claim under or
by reason of this Agreement.
(b)(i) Subject to the conditions set forth in paragraph (b)(ii)
below, any Lender may assign to one or more assignees all or a portion of its
rights and obligations under this Agreement (including all or a portion of its
Commitment and the Loans at the time owing to it) with the prior written
consent (such consent not to be unreasonably withheld) of:
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(A) the Borrower, PROVIDED that no consent of the Borrower
shall be required for an assignment to a Lender, an Affiliate of a
Lender, an Approved Fund or, if an Event of Default has occurred
and is continuing, any other assignee;
(B) the Administrative Agent, and
(C) the Issuing Bank.
(ii) Assignments shall be subject to the following additional
conditions:
(A) except in the case of an assignment to a Lender or an
Affiliate of a Lender or an assignment of the entire remaining
amount of the assigning Lender's Commitment or Loans of any Class,
the amount of the Commitment or Loans of the assigning Lender
subject to each such assignment (determined as of the date the
Assignment and Assumption with respect to such assignment is
delivered to the Administrative Agent) shall not be less than
$5,000,000 unless each of the Borrower and the Administrative
Agent otherwise consent, PROVIDED that no such consent of the
Borrower shall be required if an Event of Default has occurred and
is continuing;
(B) each partial assignment shall be made as an assignment
of a proportionate part of all the assigning Lender's rights and
obligations under this Agreement, PROVIDED that this clause shall
not be construed to prohibit the assignment of a proportionate
part of all the assigning Lender's rights and obligations in
respect of one Class of Commitments or Loans;
(C) the parties to each assignment shall execute and
deliver to the Administrative Agent an Assignment and Assumption,
together with a processing and recordation fee of $3,500; and
(D) the assignee, if it shall not be a Lender, shall
deliver to the Administrative Agent a completed Administrative
Questionnaire.
For the purposes of this Section 9.04(b), the term "APPROVED FUND"
has the following meaning:
"APPROVED FUND" means any Person (other than a natural person)
that is engaged in making, purchasing, holding or investing in bank loans and
similar extensions of credit in the ordinary course of its business and that
is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or
(c) an entity or an Affiliate of an entity that administers or manages a
Lender.
(iii) Subject to acceptance and recording thereof pursuant to
paragraph (b)(iv) of this Section, from and after the effective date specified
in each Assignment and Assumption the assignee thereunder shall be a party
hereto and, to the extent of the interest assigned by such Assignment and
Assumption, have the rights and obligations of a Lender under this Agreement,
and the assigning Lender thereunder shall, to the extent of the interest
assigned by such Assignment and Assumption, be released from its obligations
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under this Agreement (and, in the case of an Assignment and Assumption
covering all of the assigning Lender's rights and obligations under this
Agreement, such Lender shall cease to be a party hereto but shall continue to
be entitled to the benefits of Sections 2.15, 2.16, 2.17 and 9.03). Any
assignment or transfer by a Lender of rights or obligations under this
Agreement that does not comply with this Section 9.04 shall be treated for
purposes of this Agreement as a sale by such Lender of a participation in such
rights and obligations in accordance with paragraph (c) of this Section.
(iv) The Administrative Agent, acting for this purpose as an
agent of the Borrower, shall maintain at one of its offices a copy of each
Assignment and Assumption delivered to it and a register for the recordation
of the names and addresses of the Lenders, and the Commitment of, and
principal amount of the Loans and LC Disbursements owing to, each Lender
pursuant to the terms hereof from time to time (the "REGISTER"). The entries
in the Register shall be conclusive, and the Borrower, the Administrative
Agent, the Issuing Bank, and the Lenders may treat each Person whose name is
recorded in the Register pursuant to the terms hereof as a Lender hereunder
for all purposes of this Agreement, notwithstanding notice to the contrary.
The Register shall be available for inspection by the Borrower, the Issuing
Bank, and any Lender, at any reasonable time and from time to time upon
reasonable prior notice.
(v) Upon its receipt of a duly completed Assignment and
Assumption executed by an assigning Lender and an assignee, the assignee's
completed Administrative Questionnaire (unless the assignee shall already be a
Lender hereunder), the processing and recordation fee referred to in
paragraph (b) of this Section and any written consent to such assignment
required by paragraph (b) of this Section, the Administrative Agent shall
accept such Assignment and Assumption and record the information contained
therein in the Register; PROVIDED that if either the assigning Lender or the
assignee shall have failed to make any payment required to be made by it
pursuant to Section 2.05(c), 2.06(d) or (e), 2.07(b), 2.18(d) or 9.03(c), the
Administrative Agent shall have no obligation to accept such Assignment and
Assumption and record the information therein in the Register unless and until
such payment shall have been made in full, together with all accrued interest
thereon. No assignment shall be effective for purposes of this Agreement
unless it has been recorded in the Register as provided in this paragraph.
(c)(i) Any Lender may, without the consent of the Borrower, the
Administrative Agent, the Issuing Bank or the Swingline Lender, sell
participations to one or more banks or other entities (a "PARTICIPANT") in all
or a portion of such Lender's rights and obligations under this Agreement
(including all or a portion of its Commitment and the Loans owing to it);
PROVIDED that (A) such Lender's obligations under this Agreement shall remain
unchanged, (B) such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations and (C) the Borrower,
the Administrative Agent, the Issuing Bank, and the other Lenders shall
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement. Any agreement or
instrument pursuant to which a Lender sells such a participation shall provide
that such Lender shall retain the sole right to enforce this Agreement and to
approve any amendment, modification or waiver of any provision of this
Agreement; PROVIDED that such agreement or instrument may provide that such
Lender will not, without the consent of the Participant, agree to any
amendment, modification or waiver described in the first proviso to Section
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9.02(b) that affects such Participant. Subject to paragraph (c)(ii) of this
Section, the Borrower agrees that each Participant shall be entitled to the
benefits of Sections 2.15, 2.16 and 2.17 to the same extent as if it were a
Lender and had acquired its interest by assignment pursuant to paragraph (b)
of this Section. To the extent permitted by law, each Participant also shall
be entitled to the benefits of Section 9.08 as though it were a Lender,
provided such Participant agrees to be subject to Section 2.18(c) as though it
were a Lender.
(ii) A Participant shall not be entitled to receive any greater
payment under Section 2.15 or 2.17 than the applicable Lender would have been
entitled to receive with respect to the participation sold to such
Participant, unless the sale of the participation to such Participant is made
with the Borrower's prior written consent. A Participant that would be a
Foreign Lender if it were a Lender shall not be entitled to the benefits of
Section 2.17 unless the Borrower is notified of the participation sold to such
Participant and such Participant agrees, for the benefit of the Borrower, to
comply with Section 2.17(e) as though it were a Lender.
(d) Any Lender may at any time pledge or assign a security
interest in all or any portion of its rights under this Agreement to secure
obligations of such Lender, including without limitation any pledge or
assignment to secure obligations to a Federal Reserve Bank, and this Section
shall not apply to any such pledge or assignment of a security interest;
PROVIDED that no such pledge or assignment of a security interest shall
release a Lender from any of its obligations hereunder or substitute any such
pledgee or assignee for such Lender as a party hereto.
SECTION 9.05 SURVIVAL. All covenants, agreements,
representations and warranties made by the Borrower herein and in the
certificates or other instruments delivered in connection with or pursuant to
this Agreement shall be considered to have been relied upon by the other
parties hereto and shall survive the execution and delivery of this Agreement
and the making of any Loans and issuance of any Letters of Credit, regardless
of any investigation made by any such other party or on its behalf and
notwithstanding that the Administrative Agent, the Issuing Bank or any Lender
may have had notice or knowledge of any Default or incorrect representation or
warranty at the time any credit is extended hereunder, and shall continue in
full force and effect as long as the principal of or any accrued interest on
any Loan or any fee or any other amount payable under this Agreement is
outstanding and unpaid or any Letter of Credit is outstanding and so long as
the Commitments have not expired or terminated. The provisions of Sections
2.15, 2.16, 2.17 and 9.03 and Article VIII shall survive and remain in full
force and effect regardless of the consummation of the transactions
contemplated hereby, the repayment of the Loans, the expiration or termination
of the Letters of Credit and the Commitments or the termination of this
Agreement or any provision hereof.
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SECTION 9.06 COUNTERPARTS; INTEGRATION; EFFECTIVENESS. This
Agreement may be executed in counterparts (and by different parties hereto on
different counterparts), each of which shall constitute an original, but all
of which when taken together shall constitute a single contract. This
Agreement and any separate letter agreements with respect to fees payable to
the Administrative Agent constitute the entire contract among the parties
relating to the subject matter hereof and supersede any and all previous
agreements and understandings, oral or written, relating to the subject matter
hereof. Except as provided in Section 4.01, this Agreement shall become
effective when it shall have been executed by the Administrative Agent and
when the Administrative Agent shall have received counterparts hereof which,
when taken together, bear the signatures of each of the other parties hereto,
and thereafter shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns. Delivery of an executed
counterpart of a signature page of this Agreement by telecopy shall be
effective as delivery of a manually executed counterpart of this Agreement.
SECTION 9.07 SEVERABILITY. Any provision of this Agreement held
to be invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability
of the remaining provisions hereof; and the invalidity of a particular
provision in a particular jurisdiction shall not invalidate such provision in
any other jurisdiction.
SECTION 9.08 RIGHT OF SETOFF. If an Event of Default shall have
occurred and be continuing, each Lender and each of its Affiliates is hereby
authorized at any time and from time to time, to the fullest extent permitted
by law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other obligations at any
time owing by such Lender or Affiliate to or for the credit or the account of
the Borrower against any of and all the obligations of the Borrower now or
hereafter existing under this Agreement held by such Lender, irrespective of
whether or not such Lender shall have made any demand under this Agreement and
although such obligations may be unmatured. The rights of each Lender under
this Section are in addition to other rights and remedies (including other
rights of setoff) which such Lender may have.
SECTION 9.09 GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF
PROCESS. (a) This Agreement shall be construed in accordance with and
governed by the law of the State of Illinois.
(b) The Borrower hereby irrevocably and unconditionally submits,
for itself and its property, to the nonexclusive jurisdiction of the State of
Illinois sitting in Cook County and of the United States District Court of the
Northern District of Illinois, and any appellate court from any thereof, in
any action or proceeding arising out of or relating to this Agreement, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of
any such action or proceeding may be heard and determined in Illinois or, to
the extent permitted by law, in such Federal court. Each of the parties
hereto agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment
or in any other manner provided by law. Nothing in this Agreement shall
affect any right that the Administrative Agent or any Lender may otherwise
have to bring any action or proceeding relating to this Agreement against the
Borrower or its properties in the courts of any jurisdiction.
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(c) The Borrower hereby irrevocably and unconditionally waives,
to the fullest extent it may legally and effectively do so, any objection
which it may now or hereafter have to the laying of venue of any suit, action
or proceeding arising out of or relating to this Agreement in any court
referred to in paragraph (b) of this Section. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such action or proceeding in
any such court.
(d) Each party to this Agreement irrevocably consents to service
of process in the manner provided for notices in Section 9.01. Nothing in
this Agreement will affect the right of any party to this Agreement to serve
process in any other manner permitted by law.
SECTION 9.10 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY
HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY
(WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO
(A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES
THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN
THIS SECTION.
SECTION 9.11 HEADINGS. Article and Section headings and the
Table of Contents used herein are for convenience of reference only, are not
part of this Agreement and shall not affect the construction of, or be taken
into consideration in interpreting, this Agreement.
SECTION 9.12 CONFIDENTIALITY. Each of the Administrative Agent,
the Issuing Bank, and the Lenders agrees to use reasonable efforts to maintain
the confidentiality of the Information (as defined below), except that
Information may be disclosed (a) to its and its Affiliates' directors,
officers, employees and agents, including accountants, legal counsel and other
advisors (it being understood that the Persons to whom such disclosure is made
will be informed of the confidential nature of such Information and instructed
to keep such Information confidential), (b) to the extent requested by any
regulatory authority, (c) to the extent required by applicable laws or
regulations or by any subpoena or similar legal process, (d) to any other
party to this Agreement, (e) in connection with the exercise of any remedies
hereunder or any suit, action or proceeding relating to this Agreement or the
enforcement of rights hereunder, (f) subject to an agreement containing
provisions substantially the same as those of this Section, to (i) any
assignee of or Participant in, or any prospective assignee of or Participant
in, any of its rights or obligations under this Agreement or (ii) any actual
or prospective counterparty (or its advisors) to any swap or derivative
transaction relating to the Borrower and its obligations, (g) with the consent
of the Borrower or (h) to the extent such Information (i) becomes publicly
available other than as a result of a breach of this Section or (ii) becomes
available to the Administrative Agent, the Issuing Bank or any Lender on a
nonconfidential basis from a source other than the Borrower. For the purposes
of this Section, "INFORMATION" means all information received from the
Borrower relating to the Borrower, any Subsidiary or their respective
businesses, other than any such information that is available to the
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Administrative Agent, the Issuing Bank or any Lender on a nonconfidential
basis prior to disclosure by the Borrower, PROVIDED that as to any such
information which is communicated to the Administrative Agent after the date
of this Agreement and is not in the form of a writing, such information is
clearly identified as confidential at the time of such communication. Any
Person required to use reasonable efforts to maintain the confidentiality of
Information as provided in this Section shall be considered to have complied
with its obligation to do so if such Person has exercised the same degree of
care to maintain the confidentiality of such Information as such Person would
accord to its own confidential information.
SECTION 9.13 INTEREST RATE LIMITATION. Notwithstanding anything
herein to the contrary, if at any time the interest rate applicable to any
Loan, together with all fees, charges and other amounts which are treated as
interest on such Loan under applicable law (collectively the "CHARGES"), shall
exceed the maximum lawful rate (the "MAXIMUM RATE") which may be contracted
for, charged, taken, received or reserved by the Lender holding such Loan in
accordance with applicable law, the rate of interest payable in respect of
such Loan hereunder, together with all Charges payable in respect thereof,
shall be limited to the Maximum Rate and, to the extent lawful, the interest
and Charges that would have been payable in respect of such Loan but were not
payable as a result of the operation of this Section shall be cumulated and
the interest and Charges payable to such Lender in respect of other Loans or
periods shall be increased (but not above the Maximum Rate therefor) until
such cumulated amount, together with interest thereon at the Federal Funds
Effective Rate to the date of repayment, shall have been received by such
Lender.
SECTION 9.14 USA PATRIOT ACT. Each Lender that is subject to the
requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into
law October 26, 2001)) (the "Act") hereby notifies the Borrower that pursuant
to the requirements of the Act, it is required to obtain, verify and record
information that identifies the Borrower, which information includes the name
and address of the Borrower and other information that will allow such Lender
to identify the Borrower in accordance with the Act.
91
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their respective authorized officers as of the day and
year first above written.
FRANKLIN ELECTRIC CO., INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
BANK ONE, NA,
individually and as Administrative Agent,
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
WACHOVIA BANK, N.A.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
WELLS FARGO BANK, NATIONAL ASSOCIATION
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
LASALLE BANK NATIONAL ASSOCIATION
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
92
PRICING SCHEDULE
APPLICABLE LEVEL I LEVEL II LEVEL III LEVEL IV LEVEL V
MARGIN STATUS STATUS STATUS STATUS STATUS
---------- ------- -------- --------- -------- -------
EUROCURRENCY 0.30% 0.35% 0.45% 0.625% 0.75%
LOANS
APPLICABLE LEVEL I LEVEL II LEVEL III LEVEL IV LEVEL V
FEE RATE STATUS STATUS STATUS STATUS STATUS
---------- ------- -------- --------- -------- -------
FACITLITY FEE 0.10% 0.15% 0.175% 0.25% 0.35%
For purposes of this Schedule, the following terms have the
following meanings, subject to the final paragraph of this Schedule:
"Financials" means the annual or quarterly financial statements of
the Borrower delivered pursuant to Section 5.01(i) or (ii).
"Level I Status" exists at any date if, as of the last day of the
fiscal quarter of the Borrower referred to in the most recent Financials, the
Leverage Ratio is less than or equal to 1.0 to 1.00.
"Level II Status" exists at any date if, as of the last day of the
fiscal quarter of the Borrower referred to in the most recent Financials, (i)
the Borrower has not qualified for Level I Status and (ii) the Leverage Ratio
is less than or equal to 1.5 to 1.00.
"Level III Status" exists at any date if, as of the last day of
the fiscal quarter of the Borrower referred to in the most recent Financials,
(i) the Borrower has not qualified for Level I Status or Level II Status and
(ii) the Leverage Ratio is less than or equal to 2.0 to 1.00.
"Level IV Status" exists at any date if, as of the last day of the
fiscal quarter of the Borrower referred to in the most recent Financials, (i)
the Borrower has not qualified for Level I Status, Level II Status or Level
III Status and (ii) the Leverage Ratio is less than or equal to 2.5 to 1.00.
"Level V Status" exists at any date if, as of the last day of the
fiscal quarter of the Borrower referred to in the most recent Financials, the
Borrower has not qualified for Level I Status, Level II Status, Level III
Status, or Level IV Status.
"Status" means either Level I Status, Level II Status, Level III
Status, Level IV Status, or Level V Status.
The Applicable Margin and Applicable Fee Rate shall be determined
in accordance with the foregoing table based on the Borrower's Status as
reflected in the then most recent Financials. Adjustments, if any, to the
Applicable Margin or Applicable Fee Rate shall be effective five Business Days
after the Agent has received the applicable Financials. If the Borrower fails
to deliver the Financials to the Agent at the time required pursuant to
Section 5.01, then the Applicable Margin and Applicable Fee Rate shall be the
highest Applicable Margin and Applicable Fee Rate set forth in the foregoing
table until five days after such Financials are so delivered.
93
SCHEDULE 2.01
COMMITMENTS
Bank One, NA $25,000,000
Wachovia Bank, N.A. $20,000,000
Wells Fargo Bank, National Association $20,000,000
LaSalle Bank National Association $15,000,000
94
SCHEDULE 3.15
EXISTING PARTNERSHIPS AND JOINT VENTURES
75% of voting stock of Motori Sommersi Riavvolgibili S.r.l. (incorporated in
Italy).
95
SCHEDULE 3.16
EXISTING SUBSIDIARIES
State or country Percent of voting
Subsidiary: of incorporation stock owned
----------- ---------------- -----------------
Advanced Polymer Technology, Inc. Michigan 100
Coverco S.r.1. Italy 100
EBW, Inc. Michigan 100
FE Petro, Inc. Indiana 100
Franklin Electric
International, Inc. Delaware 100
Franklin Electric
Subsidiaries, Inc.
(inactive) Indiana 100
Franklin Electric Foreign Sales U.S. Virgin Islands 100
Corporation
Franklin Electric B.V. Netherlands 100
Franklin Electric Europa, GmbH Germany 100
Franklin Electric spol s.r.o. Czech Republic 100
Franklin Electric (Australia)
Pty. Ltd. Australia 100
Franklin Electric (South Africa)
Pty. Limited South Africa 100
Franklin Electric (Suzhou) Co., Ltd. China 100
Intelligent Controls, Inc. Maine 100
Motores Electricos Sumergibles De
Mexico S De Rl De Co Mexico 100
Motores Franklin S.A. de C.V. Mexico 100
Motori Sommersi Riavvolgibili S.r.l. Italy 75
Servicios De Mesmex S De Rl De Co Mexico 100
Franklin Electric Sales, Inc. Indiana 100
Franklin Electric Manufacturing, Inc. Indiana 100
Franklin Fueling Systems, GmbH Germany 100
96
EXHIBIT A
ASSIGNMENT AND ASSUMPTION
This Assignment and Assumption (the "ASSIGNMENT AND ASSUMPTION")
is dated as of the Effective Date set forth below and is entered into by and
between [Insert name of Assignor] (the "ASSIGNOR") and [Insert name of
Assignee] (the "ASSIGNEE"). Capitalized terms used but not defined herein
shall have the meanings given to them in the Credit Agreement identified below
(as amended, the "CREDIT AGREEMENT"), receipt of a copy of which is hereby
acknowledged by the Assignee. The Standard Terms and Conditions set forth in
Annex 1 attached hereto are hereby agreed to and incorporated herein by
reference and made a part of this Assignment and Assumption as if set forth
herein in full.
For an agreed consideration, the Assignor hereby irrevocably sells
and assigns to the Assignee, and the Assignee hereby irrevocably purchases and
assumes from the Assignor, subject to and in accordance with the Standard
Terms and Conditions and the Credit Agreement, as of the Effective Date
inserted by the Administrative Agent as contemplated below (i) all of the
Assignor's rights and obligations in its capacity as a Lender under the Credit
Agreement and any other documents or instruments delivered pursuant thereto to
the extent related to the amount and percentage interest identified below of
all of such outstanding rights and obligations of the Assignor under the
respective facilities identified below (including any letters of credit,
guarantees, and swingline loans included in such facilities) and (ii) to the
extent permitted to be assigned under applicable law, all claims, suits,
causes of action and any other right of the Assignor (in its capacity as a
Lender) against any Person, whether known or unknown, arising under or in
connection with the Credit Agreement, any other documents or instruments
delivered pursuant thereto or the loan transactions governed thereby or in any
way based on or related to any of the foregoing, including contract claims,
tort claims, malpractice claims, statutory claims and all other claims at law
or in equity related to the rights and obligations sold and assigned pursuant
to clause (i) above (the rights and obligations sold and assigned pursuant to
clauses (i) and (ii) above being referred to herein collectively as the
"ASSIGNED INTEREST"). Such sale and assignment is without recourse to the
Assignor and, except as expressly provided in this Assignment and Assumption,
without representation or warranty by the Assignor.
97
1. Assignor:
------------------------------
2. Assignee:
------------------------------
[AND IS AN AFFILIATE/APPROVED FUND OF [IDENTIFY LENDER]2]
3. Borrower(s):
------------------------------
4. Administrative Agent: , as the administrative
----------------------
agent under the Credit Agreement
5. Credit Agreement: [The [amount] Credit Agreement dated as of
-------
among [name of Borrower(s)], the Lenders parties thereto, [NAME OF
ADMINISTRATIVE AGENT], as Administrative Agent, and
the other agents parties thereto]
2 Select as applicable.
98
6. Assigned Interest:
Facility Assigned3 Aggregate Amount Amount of Percentage
Of Commitment/Loans Assigned of
Commitment/Loans Assigned Commitment/Loans4
------------------ ---------------- ----------------- ----------------
$ $ %
$ $ %
$ $ %
Effective Date: , 20 [TO BE INSERTED BY ADMINISTRATIVE AGENT
AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE
REGISTER THEREFOR.]
The terms set forth in this Assignment and Assumption are hereby agreed to:
ASSIGNOR
--------
[NAME OF ASSIGNOR]
By:
------------------------------
Title:
ASSIGNEE
--------
[NAME OF ASSIGNEE]
By:
------------------------------
Title:
3 Fill in the appropriate terminology for the types of facilities under the
Credit Agreement that are being assigned under this Assignment (e.g.,
"Commitment," "Tranche A Commitment," "Tranche B Commitment," etc.)
4 Set forth, to at least 9 decimals, as a percentage of the Commitment/Loans
of all Lenders thereunder.
99
[Consented to and]5 Accepted:
[NAME OF ADMINISTRATIVE AGENT], as
Administrative Agent
By
---------------------------------
Title:
[Consented to:]6
[NAME OF RELEVANT PARTY]
By
--------------------------------
Title:
5 To be added only if the consent of the Administrative Agent is required by
the terms of the Credit Agreement
6 To be added only if the consent of the Borrower and/or other parties (e.g.
Swingline Lender, Issuring Bank) is required by the terms of the Credit
Agreement.
100
ANNEX 1
[ ]7
------------------
STANDARD TERMS AND CONDITIONS FOR
ASSIGNMENT AND ASSUMPTION
1. REPRESENTATIONS AND WARRANTIES.
1.1 ASSIGNOR. The Assignor (a) represents and warrants that (i)
it is the legal and beneficial owner of the Assigned Interest, (ii) the
Assigned Interest is free and clear of any lien, encumbrance or other adverse
claim and (iii) it has full power and authority, and has taken all action
necessary, to execute and deliver this Assignment and Assumption and to
consummate the transactions contemplated hereby; and (b) assumes no
responsibility with respect to (i) any statements, warranties or
representations made in or in connection with the Credit Agreement or any
other Loan Document8, (ii) the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Loan Documents or any collateral
thereunder, (iii) the financial condition of the Borrower, any of its
Subsidiaries or Affiliates or any other Person obligated in respect of any
Loan Document or (iv) the performance or observance by the Borrower, any of
its Subsidiaries or Affiliates or any other Person of any of their respective
obligations under any Loan Document.
1.2. ASSIGNEE. The Assignee (a) represents and warrants that (i)
it has full power and authority, and has taken all action necessary, to
execute and deliver this Assignment and Assumption and to consummate the
transactions contemplated hereby and to become a Lender under the Credit
Agreement, (ii) it satisfies the requirements, if any, specified in the Credit
Agreement that are required to be satisfied by it in order to acquire the
Assigned Interest and become a Lender, (iii) from and after the Effective
Date, it shall be bound by the provisions of the Credit Agreement as a Lender
thereunder and, to the extent of the Assigned Interest, shall have the
obligations of a Lender thereunder, (iv) it has received a copy of the Credit
Agreement, together with copies of the most recent financial statements
delivered pursuant to Section ___ thereof, as applicable, and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into this Assignment and Assumption and to
purchase the Assigned Interest on the basis of which it has made such analysis
and decision independently and without reliance on the Administrative Agent or
any other Lender, and (v) if it is a Foreign Lender9, attached to the
Assignment and Assumption is any documentation required to be delivered by it
pursuant to the terms of the Credit Agreement, duly completed and executed by
the Assignee; and (b) agrees that (i) it will, independently and without
reliance on the Administrative Agent, the Assignor or any other Lender, and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under the Loan Documents, and (ii) it will perform in accordance with their
terms all of the obligations which by the terms of the Loan Documents are
required to be performed by it as a Lender.
7 Describe Credit Agreement at option of Administrative Agent.
8 The term "Loan Document" should be conformed to that used in the Credit
Agreement.
9The concept of "Foreign Lender" should be conformed to the section in the
Credit Agreement governing withholding taxes and gross-up.
101
2. PAYMENTS. From and after the Effective Date, the
Administrative Agent shall make all payments in respect of the Assigned
Interest (including payments of principal, interest, fees and other amounts)
to the Assignor for amounts which have accrued to but excluding the Effective
Date and to the Assignee for amounts which have accrued from and after the
Effective Date.
3. GENERAL PROVISIONS. This Assignment and Assumption shall be
binding upon, and inure to the benefit of, the parties hereto and their
respective successors and assigns. This Assignment and Assumption may be
executed in any number of counterparts, which together shall constitute one
instrument. Delivery of an executed counterpart of a signature page of this
Assignment and Assumption by telecopy shall be effective as delivery of a
manually executed counterpart of this Assignment and Assumption. This
Assignment and Assumption shall be governed by, and construed in accordance
with, the law of the State of Illinois.
102
EXHIBIT B
Robert J. Regan
312.258.5606
rregan@schiffhardin.com
September 9, 2004
To the Lenders and the Administrative Agent
Referred to Below
c/o Bank One, NA,
as Administrative Agent
One Summit Square
Fort Wayne, IN 46802
RE: FRANKLIN ELECTRIC CO., INC.
---------------------------
Dear Sirs:
We have acted as special counsel for Franklin Electric Co., Inc.,
an Indiana corporation (the "Company"), in connection with the Credit
Agreement (the "Agreement") dated as of September 9, 2004 among the Company,
the banks and other financial institutions identified therein as Lenders and
Bank One, NA, as Administrative Agent. This opinion letter is being delivered
at the request of the Company pursuant to Section 4.01(b) of the Agreement.
Capitalized terms used in this opinion letter which are defined in the
Agreement and not otherwise defined in this opinion letter shall have the
meanings given to them in the Agreement.
We have examined such documents and matters of law which we have
deemed necessary as the basis for the opinions expressed below. The documents
examined include the following :
(i) an executed copy of the Agreement;
(ii) a copy of the articles of incorporation of the Company and
all amendments thereto, certified by the Secretary of State of Indiana;
(iii) a copy of the by-laws of the Company and all amendments
thereto, certified by the Secretary of the Company;
(iv) a copy of the resolutions of the board of directors of the
Company authorizing the execution and delivery of the Agreement, certified by
the Secretary of the Company;
(v) a certificate of the Secretary of the Company as to the
incumbency and specimen signatures of the officers of the Company executing
the Agreement; and
(vi) a certificate of the Secretary of State of Indiana as to the
corporate existence and good standing of the Company.
In making our examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals,
103
the conformity with the originals of all documents submitted to us as copies
and the legal capacity of all natural persons. As to matters of fact material
to our opinions in this letter, we have relied on certificates of officers of
the Company, public officials and other appropriate persons and on the
representations made in the Agreement. We have not independently investigated
or verified any of the foregoing.
In rendering the opinions in this letter we have assumed, without
independent investigation or verification, that each party to the Agreement,
other than the Company, (a) is validly existing and in good standing under the
laws of its jurisdiction of organization, (b) has full power and authority to
execute the Agreement and to enter into the transactions contemplated therein,
(c) has taken all necessary action to authorize execution of the Agreement on
its behalf by the persons executing same, (d) has properly executed and
delivered the Agreement, and (e) has duly obtained all consents or approvals
of any nature from and made all filings with any Governmental Authorities
necessary for such party to execute, deliver or perform its obligations under
the Agreement. In addition, in rendering such opinions we have assumed,
without independent investigation or verification, that the execution and
delivery of, and performance of their respective agreements under, the
Agreement by each party thereto, other than the Company, do not violate any
agreement or instrument binding upon such party, or, except to the extent
covered by our opinion in paragraph 6 below, any law, rule or regulation
binding upon such party, that the Agreement is the legal, valid and binding
obligation of, and enforceable against, each party thereto other than the
Company, and, except to the extent covered by our opinions in paragraphs 4, 5,
and 6 below, that the execution and delivery by the Company of, and
performance by it of its agreements under, the Agreement do not violate any
law, rule, regulation, agreement or instrument binding upon the Company or
require any consent or approval from or filing with any Governmental
Authority. In rendering our opinions herein we have also assumed, without
independent investigation or verification, that there is no oral or written
agreement, understanding, course of dealing or usage of trade that amends any
term of the Agreement, or any waiver of any such term, that the Agreement is
accurate and complete and that there has been no mutual mistake of fact or
fraud, duress, undue influence or similar inequitable conduct.
For the purpose of this opinion letter, our "knowledge" (or any
similar concept) with respect to any matter means (1) the actual knowledge
regarding such matter of the particular Schiff Hardin LLP attorneys who are
presently employees or partners of Schiff Hardin LLP and who have represented
the Company in connection with the transactions contemplated by the Agreement,
(2) we have not undertaken any review of our files or other independent
investigation with respect to any such matters, and (3) no inference that we
have actual knowledge concerning such matter should be drawn from the mere
fact of our representation of the Company or our expression of any opinion in
this letter.
The opinions contained in this letter are only expressions of
professional judgment regarding the legal matters addressed and are not
guarantees that a court would reach any particular result.
Based on the foregoing and subject to the qualifications set forth below, we
are of the opinion that:
1. The Company is a corporation validly existing and in good
standing under the laws of the State of Indiana.
104
2. The Company has the corporate power and authority to
execute, deliver and perform its obligations under the Agreement, and the
execution, delivery and performance thereof by the Company have been duly
authorized by all necessary corporate action on the part of the Company.
3. The Agreement has been duly executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms.
4. The execution and delivery by the Company of the Agreement
do not, and the performance by the Company of its obligations under the
Agreement will not, (i) violate the articles of incorporation or by-laws of
the Company, (ii) violate any law, rule or regulation applicable to the
Company, (iii) violate any judgment, injunction, order or decree with respect
to the Company which is listed on SCHEDULE I attached to this opinion letter,
or (iv) breach or result in a default under any indenture, mortgage,
instrument or agreement with respect to the Company which is listed on
SCHEDULE I attached to this opinion letter.
5. Neither the execution and delivery by the Company of the
Agreement nor the performance by the Company of its obligations under the
Agreement requires any consent or approval of any nature from or filing with
any Governmental Authority of the State of Indiana, the State of Illinois or
the United States of America.
6. On the basis of the representations made by the Company in
Section 3.12 of the Agreement, the extension, arranging and obtaining of
credit under the Agreement do not result in any violation of Regulation T, U
or X of the Board of Governors of the Federal Reserve System.
7. The Company is not an "investment company" as defined in, or
subject to regulation under, the Investment Company Act of 1940, as amended.
8. The Company is not a "holding company" as defined in, or
subject to regulation under, the Public Utility Holding Company Act of 1935,
as amended.
The opinions set forth above are subject to the following
qualifications:
A. For purposes of our opinion in paragraph 1 above as to the
existence and good standing of the Company, we have relied solely upon the
document described in item (vi) above.
B. The opinion expressed in paragraph 3 above with respect to
the legality, validity, binding nature and enforceability of the Agreement is
subject to (i) applicable laws relating to bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other similar laws
affecting creditors' rights generally, whether now or hereafter in effect,
(ii) general principles of equity, including, without limitation, concepts of
materiality, laches, reasonableness, good faith and fair dealing (regardless
of whether considered in a proceeding at law or in equity), and (iii) the
qualification that certain provisions of the Agreement are or may be
unenforceable in whole or in part, but, subject to the other limitations as to
enforceability expressed in this opinion and any limitations contained in the
Agreement, the inclusion of such provisions does not prevent the practical
105
realization of the benefits intended to be afforded by the Company's principal
obligations under the Agreement except for the economic consequences, if any,
resulting from any delay imposed by applicable laws, rules and regulations,
court decisions or procedures or constitutional requirements.
C. In rendering the opinions set forth above, we have made no
examination of, and we express no opinion with respect to, any accounting
matters. Our opinion in paragraph 4 above covers only violations, breaches or
defaults of present or future obligations which can be definitively determined
as of the date of this opinion letter and does not cover violations, breaches
or defaults the occurrence of which is dependent upon future events or
circumstances. Our opinion in paragraph 5 is not intended to cover consents,
approvals or filings which might be required as a result of the conduct by the
Company of its business or operations.
D. We express no opinion as to the validity, legality, binding
effect or enforceability of any covenant or agreement (i) providing for
release of liability for or the indemnification against any losses, claims,
damages, expenses or liabilities incurred by any person as a result of any
violation of any securities law by such person, as a result of the gross
negligence or willful misconduct of such person, or as a result of the
negligence of such person if a court would find that the intent to indemnify
such person for such person's negligence was not clearly expressed or that
such indemnification violates a public policy of the State of Illinois, (ii)
requiring that any amendment, modification or waiver of the Agreement shall
not be effective unless in writing, (iii) providing for the consent to
jurisdiction of any court, the waiver of objection of venue of any court, the
waiver of or consent to service of process, the waiver of jury trial or the
waiver of counterclaim or cross-claim, (iv) providing that delays will not
operate as waivers, (v) which attempts to modify or waive any requirements of
reasonableness or notice arising under the laws of any jurisdiction to the
extent applicable to the transactions contemplated by the Agreement, (vi)
which requires the payment of interest on overdue but unpaid interest or fixed
late payment charges, (vii) which purports to be an agreement to use "best
efforts," (viii) relating to severability as applied to any portion of the
Agreement deemed by a court to be material, (ix) waiving the benefits of any
statutory provision or common law right where such waiver violates limitations
imposed by statute or is against public policy, or (x) providing for a choice
of any governing law other than the laws of the State of Illinois.
E. Our opinions are limited to only those laws, rules and
regulations that we have, in the exercise of customary professional diligence,
but without any special investigation, recognized as generally applicable to
the transactions contemplated by the Agreement or to business organizations of
the same type as the Company (which are not engaged in regulated business
activities) and exclude all laws, rules and regulations of the type described
in Section 19 of the Legal Opinion Accord of the American Bar Association
Section of Business Law (1991). In addition, we express no opinion as to any
law, rule or regulation (i) the violation of which would not have a material
adverse effect on you or the Company or the Company's ability to perform its
obligations under the Agreement, or (ii) to which the Company may be subject
as a result of your legal or regulatory status.
F. The foregoing opinions are limited to the laws of the State
of Illinois, the Indiana Business Corporation Law, the federal laws of the
106
United States of America, and we express no opinions with respect to the laws
of any other jurisdiction.
The opinions expressed in this opinion letter are as of the date
of this opinion letter only and as the laws covered hereby only as they are in
effect on that date, and we assume no obligation to update or supplement such
opinion to reflect any facts or circumstances that may come to our attention
after that date or any changes in law that may occur or become effective after
that date. The opinions herein are limited to the matters expressly set forth
in this opinion letter, and no opinion is given or may be inferred beyond the
matters expressly set forth in this opinion letter.
This opinion letter is furnished by us as special counsel for the
Company, is solely for your benefit and for the benefit of your successors and
assigns as Lenders, and Persons that acquire participations in your Loans, in
connection with the transactions stated herein, and is not to be given to or
relied on by any other person or entity or for any other purpose without our
prior written consent.
Very truly yours,
SCHIFF HARDIN LLP
By:
-----------------------------------
Robert J. Regan
107
Schedule I
----------
Certificate
of
Franklin Electric Co., Inc.
In connection with the opinion letter (the "OPINION LETTER") of
Schiff Hardin LLP ("SCHIFF HARDIN"), dated the date hereof, as special counsel
to Franklin Electric Co., Inc. (the "COMPANY") in connection with the Credit
Agreement (the "AGREEMENT") dated September 9, 2004 among the Company, the
banks and other financial institutions identified therein as Lenders and Bank
One, NA, as Administrative Agent, the undersigned hereby certifies to Schiff
Hardin and to each of the Lenders and the Administrative Agent that:
1. Except as set forth below, the Company is not bound by any
order, judgment, injunction, decree or writ of any court or other governmental
body that could reasonably be expected to relate to the ability of the Company
to execute, deliver or perform its obligations under the Agreement:
NONE.
2. Set forth below is a list of all agreements, indentures,
mortgages, deeds of trust and other instruments to which the Company is a
party that could reasonably be expected to relate to the ability of the
Company to execute, deliver or perform its obligations under the Agreement:
Amended and Restated Note Purchase and Private Shelf
Agreement dated as of September 9, 2004 among the
Company, Prudential Investment Management, Inc. and
the Purchasers named therein.
IN WITNESS WHEREOF, this Certificate has been duly executed as of
September 9, 2004.
FRANKLIN ELECTRIC CO., INC.
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
108
EXECUTION COPY
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
FRANKLIN ELECTRIC CO., INC.
AMENDED AND RESTATED NOTE PURCHASE
AND PRIVATE SHELF AGREEMENT
$110,000,000 Maximum Aggregate Principal Amount
Private Shelf Facility
Dated as of September 9, 2004
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
109
TABLE OF CONTENTS
(Not Part of Agreement)
Page
----
1. AUTHORIZATION OF ISSUE OF NOTES........................................1
1A. Amendment and Restatement...............................1
1B. Authorization of Issue of Private Shelf Notes............1
2. PURCHASE AND SALE OF NOTES.............................................2
2A. Purchase and Sale of Private Shelf Notes.................2
2A(1). Facility................................................2
2A(2). Issuance Period.........................................3
2A(3). Request for Purchase....................................3
2A(4). Rate Quotes.............................................3
2A(5). Acceptance..............................................4
2A(6). Market Disruption.......................................4
2A(7). Private Shelf Closing...................................5
2A(8). Fees....................................................5
2A(8)(i). Issuance Fee............................................5
2A(8)(ii). Delayed Delivery Fee....................................5
2A(8)(iii). Cancellation Fee........................................6
3. CONDITIONS OF CLOSING..................................................7
3A. Certain Documents......................................7
3B. Representations and Warranties; No Default.............8
3C. Payment of Fees........................................8
3D. Purchase Permitted By Applicable Laws..................8
3E. Legal Matters..........................................9
3F. Proceedings............................................9
4. PREPAYMENTS............................................................9
4A(1). Required Prepayment of Series A Notes...................9
4A(2). Required Prepayment of Private Shelf Notes..............9
4B. Optional Prepayment with Yield-Maintenance Amount.......9
4C. Notice of Optional Prepayment...........................9
4D. Application of Prepayment..............................10
4E. Retirement of Notes....................................10
110
5. AFFIRMATIVE COVENANTS.................................................10
5A. Financial Statements..................................10
5B. Inspection of Property................................12
5C. Covenant to Secure Notes Equally......................12
5D. Maintenance of Insurance..............................12
5E. Compliance with Laws..................................12
5F. Most Favored Lender Status............................13
5G. Leverage Fee..........................................13
6. NEGATIVE COVENANTS....................................................14
6A. [Intentionally Omitted]................................14
6B. Credit and Other Restrictions..........................14
6B(1). Lien Restrictions.....................................14
6B(2). Debt Restriction......................................15
6B(3). Loans, Advances and Investments........................15
6B(4). Disposition of Certain Assets..........................16
6B(5). Sale of Stock and Debt of Subsidiaries.................16
6B(6). Merger and Consolidation...............................16
6B(7). Sale or Discount of Receivables........................17
6B(8). Restricted Transactions................................17
6B(9). Interest Coverage Ratio................................17
6B(10). Debt to EBITDA Ratio...................................17
6B(11). Subsidiary Restrictions................................17
6B(12). Restricted Payments....................................17
7. EVENTS OF DEFAULT......................................................18
7A. Acceleration...........................................18
7B. Rescission of Acceleration.............................21
7C. Notice of Acceleration or Rescission....................21
7D. Other Remedies.........................................21
8. REPRESENTATIONS, COVENANTS AND WARRANTIES..............................21
8A(1). Organization......................................... 20
8A(2). Power and Authority....................................22
8B. Financial Statements...................................22
8C. Actions Pending....................................... 23
8D. Outstanding Debt.......................................23
8E. Title to Properties....................................23
8F. Taxes..................................................23
8G. Conflicting Agreements and Other Matters................23
8H. Offering of Notes......................................24
8I. Use of Proceeds....................................... 24
8J. Compliance with ERISA..................................24
8K. Governmental Consent.................................. 25
8L. Compliance with Laws...................................25
8M. Hostile Tender Offers..................................25
8N. Disclosure.............................................25
8O. Investment Company Status; Holding Company Status.......26
111
9. REPRESENTATIONS OF THE PURCHASERS......................................26
9A. Nature of Purchase.....................................26
9B. Source of Funds.......................................26
10. DEFINITIONS............................................................28
10A. Yield-Maintenance Terms................................28
10B. Other Terms............................................30
10C. Accounting Principles, Terms and Determinations.........41
11. MISCELLANEOUS.........................................42
11A. Note Payments..........................................42
11B. Expenses...............................................42
11C. Consent to Amendments..................................42
11D. Form, Registration, Transfer and
Exchange of Notes; Lost Notes.........................43
11E. Persons Deemed Owners; Participations...................44
11F. Survival of Representations and Warranties;
Entire Agreement.....................................44
11G. Successors and Assigns.................................44
11H. Disclosure to Other Persons............................45
11I. Notices................................................45
11J. Payments Due on Non-Business Days.......................46
11K. Severability...........................................46
11L. Descriptive Headings...................................46
11M. Satisfaction Requirement...............................46
11N. Governing Law..........................................46
11O. Payment Currency.......................................46
11P. Payments Free and Clear of Taxes........................47
11Q. Counterparts...........................................47
11R. Independence of Covenants..............................47
11S. Several Obligations....................................48
11T. Binding Agreement......................................49
112
LIST OF ATTACHMENTS
-------------------
PURCHASER SCHEDULE
EXHIBIT A -- FORM OF PRIVATE SHELF NOTE
EXHIBIT B -- FORM OF REQUEST FOR PURCHASE
EXHIBIT C -- FORM OF CONFIRMATION OF ACCEPTANCE
EXHIBIT D -- FORM OF OPINION OF COMPANY'S SPECIAL COUNSEL
EXHIBIT E -- CERTIFICATE AS TO REPRESENTATIONS, DEFAULTS, ETC.
SCHEDULE 6B(1) -- LIST OF EXISTING LIENS
SCHEDULE 6B(4) -- PERMITTED DISPOSITIONS
SCHEDULE 8A -- LIST OF SUBSIDIARIES
SCHEDULE 8G -- LIST OF AGREEMENTS RESTRICTING DEBT
113
FRANKLIN ELECTRIC CO., INC.
400 East Spring Street
Bluffton, Indiana 46714
As of September 9, 2004
To: Prudential Investment Management, Inc. (herein called "Prudential")
Each Prudential Affiliate which becomes
bound by this Agreement as hereinafter
provided (together with Prudential, the
"PURCHASERS")
c/o Prudential Capital Group
Two Prudential Plaza
Suite 5600
Chicago, Illinois 60601
Ladies and Gentlemen:
The undersigned, Franklin Electric Co., Inc., an Indiana corporation
(herein called the "Company"), hereby agrees with you as set forth below.
Reference is made to paragraph 10 hereof for definitions of capitalized terms
used herein.
1. AUTHORIZATION OF ISSUE OF NOTES.
1A. AMENDMENT AND RESTATEMENT. The Company and The Prudential
Insurance Company of America entered into that certain Note Purchase and
Private Shelf Agreement dated as of November 10, 1993 (the "EXISTING 1993
SHELF AGREEMENT") pursuant to which the Series A Notes were originally issued.
Pursuant to that certain Amended and Restated Note Purchase and Private Shelf
Agreement dated as of March 1, 2002 (as amended from time to time prior to the
date hereof, the "EXISTING 2002 SHELF AGREEMENT") between the Company and The
Prudential Insurance Company of America, the parties thereto amended and
restated the Existing 1993 Shelf Agreement and the Series A Notes became
outstanding thereunder. Effective as of the date hereof, the parties agree
that this agreement amends and restates in its entirety the Existing 2002
Shelf Agreement and the Series A Notes will be outstanding under this
Agreement. After giving effect to the purchase and sale of the Series A
Notes, the Available Facility Amount hereunder is $110,000,000 as described in
greater detail in paragraph 2A(1) below. From and after the effectiveness of
this Agreement, neither the Existing 1993 Shelf Agreement nor the Existing
2002 Shelf Agreement shall be of any force or effect whatsoever except to
evidence the terms pursuant to which the Series A Notes were originally issued
and were outstanding prior to the date hereof.
1B. AUTHORIZATION OF ISSUE OF PRIVATE SHELF NOTES. The Company
will authorize the issue of, but shall not be obligated to issue, its
additional senior promissory notes (herein called the "PRIVATE SHELF NOTES")
in the aggregate principal amount of up to $110,000,000 (including the
equivalent in Available Currencies), to be dated the date of issue thereof, to
mature, in the case of each Private Shelf Note so issued, no less than five
(5) years and no more than fifteen (15) years after the date of original
issuance thereof, to have an average life, in the case of each Private Shelf
Note so issued, no more than twelve (12) years after the date of original
issuance thereof, to bear interest on the unpaid balance thereof from the date
114
thereof at the rate per annum (and to have such other particular terms) as
shall be set forth in the case of each Private Shelf Note so issued in the
Confirmation of Acceptance with respect to such Private Shelf Note delivered
pursuant to paragraph 2A(5), and to be substantially in the form of EXHIBIT A
attached hereto. The terms "PRIVATE SHELF NOTE" and "PRIVATE SHELF NOTES" as
used herein shall include each Private Shelf Note delivered pursuant to any
provision of this Agreement and each Private Shelf Note delivered in
substitution or exchange for any such Private Shelf Note pursuant to any such
provision. The terms "NOTE" or "NOTES" as used herein shall include the
Series A Note and each Private Shelf Note delivered pursuant to any provision
of this Agreement and each Note delivered in substitution or exchange for any
such Note pursuant to any such provision. Notes which have (i) the same final
maturity, (ii) the same principal prepayment dates, (iii) the same principal
prepayment amounts (as a percentage of the original principal amount of each
Note), (iv) the same interest rate, (v) the same interest payment periods,
(vi) the same currency denomination; (vii) the same date of issuance (which,
in the case of a Note issued in exchange for another Note, shall be deemed for
these purposes the date on which such Note's ultimate predecessor Note was
issued), and (viii) which are otherwise designated a "Series" hereunder or in
the Confirmation of Acceptance whether or not the foregoing conditions are
satisfied, are herein called a "Series" of Notes.
2. PURCHASE AND SALE OF NOTES.
2A. PURCHASE AND SALE OF PRIVATE SHELF NOTES.
2A(1). FACILITY. Prudential is willing to consider, in its sole
discretion and within limits which may be authorized for purchase by
Prudential and the Prudential Affiliates from time to time, the purchase of
Private Shelf Notes pursuant to this Agreement. The willingness of Prudential
to consider such purchase of Private Shelf Notes is herein called the
"FACILITY". At any time, the aggregate principal amount of Private Shelf
Notes stated in paragraph 1B, MINUS the aggregate principal amount of Private
Shelf Notes purchased and sold pursuant to this Agreement prior to such time,
MINUS the aggregate principal amount of Accepted Notes (as hereinafter
defined) which have not yet been purchased and sold hereunder prior to such
time is herein called the "AVAILABLE FACILITY AMOUNT" at such time. For
purposes of the preceding sentence, the aggregate principal amount of Private
Shelf Notes and Accepted Notes shall be calculated in Dollars with the
aggregate principal amount of Private Shelf Notes or Accepted Notes
denominated or to be denominated in any Available Currency other than Dollars
being converted to Dollars at the rate of exchange used by Prudential to
calculate the Dollar equivalent at the time of the applicable Acceptance under
paragraph 2A(5). NOTWITHSTANDING THE WILLINGNESS OF PRUDENTIAL TO CONSIDER
PURCHASES OF PRIVATE SHELF NOTES, THIS AGREEMENT IS ENTERED INTO ON THE
EXPRESS UNDERSTANDING THAT NEITHER PRUDENTIAL NOR ANY PRUDENTIAL AFFILIATE
SHALL BE OBLIGATED TO MAKE OR ACCEPT OFFERS TO PURCHASE PRIVATE SHELF NOTES,
OR TO QUOTE RATES, SPREADS OR OTHER TERMS WITH RESPECT TO SPECIFIC PURCHASES
OF PRIVATE SHELF NOTES, AND THE FACILITY SHALL IN NO WAY BE CONSTRUED AS A
CAPITAL COMMITMENT BY PRUDENTIAL OR ANY PRUDENTIAL AFFILIATE.
115
2A(2). ISSUANCE PERIOD. Private Shelf Notes may be issued and sold
pursuant to this Agreement until the earlier of (i) September 9, 2007 and (ii)
the thirtieth day after Prudential shall have given to the Company, or the
Company shall have given to Prudential, a written notice stating that it
elects to terminate the issuance and sale of Private Shelf Notes pursuant to
this Agreement (or if such thirtieth day is not a New York Business Day, the
New York Business Day next preceding such thirtieth day). The period during
which Private Shelf Notes may be issued and sold pursuant to this Agreement is
herein called the "ISSUANCE PERIOD".
2A(3). REQUEST FOR PURCHASE. The Company may from time to time
during the Issuance Period make requests for purchases of Private Shelf Notes
(each such request being herein called a "REQUEST FOR PURCHASE"). Each
Request for Purchase shall be made to Prudential by telecopier and confirmed
by nationwide overnight delivery service, and shall (i) specify the aggregate
principal amount and currency (which shall be an Available Currency) of
Private Shelf Notes covered thereby, which shall not be less than $5,000,000
(or its equivalent in another Available Currency) and shall not be greater
than the Available Facility Amount at the time such Request for Purchase is
made, (ii) specify the principal amounts, final maturities, principal payment
dates and amounts and interest payment periods (quarterly or semi-annual in
arrears) of the Private Shelf Notes covered thereby, (iii) specify the use of
proceeds of such Private Shelf Notes, (iv) specify the proposed day for the
closing of the purchase and sale of such Private Shelf Notes, which shall be a
Business Day during the Issuance Period not less than five (5) Business Days
and not more than forty-two (42) days after the making of such Request for
Purchase, (v) specify the number of the account and the name and address of
the depository institution to which the purchase prices of such Private Shelf
Notes are to be transferred on the Private Shelf Closing Day for such purchase
and sale, (vi) certify that the representations and warranties contained in
paragraph 8 hereof are true on and as of the date of such Request for Purchase
except to the extent of changes caused by the transactions herein contemplated
and that there exists on the date of such Request for Purchase no Event of
Default or Default (and that no Event of Default or Default shall arise as the
result of the purchase and sale of such Private Shelf Notes), and (vii) be
substantially in the form of EXHIBIT B attached hereto. Each Request for
Purchase shall be in writing and shall be deemed made when received by
Prudential.
2A(4). RATE QUOTES. Not later than five (5) Business Days after the
Company shall have given Prudential a Request for Purchase pursuant to
paragraph 2A(3), Prudential may but shall be under no obligation to, provide
to the Company by telephone or telefacsimile, in each case between 9:30 A.M.
and 1:00 P.M. New York City local time (or such other time as Prudential may
elect) interest rate quotes for the several currencies, principal amounts,
maturities, prepayment schedules and interest payment periods of Private Shelf
Notes specified in such Request for Purchase (each such interest rate quote
provided in response to a Request for Purchase herein called a "QUOTATION").
Each Quotation shall represent the interest rate per annum payable on the
outstanding principal balance of such Private Shelf Notes until such balance
shall have become due and payable, at which Prudential or a Prudential
Affiliate would be willing to purchase such Private Shelf Notes at 100% of the
principal amount thereof.
116
2A(5). ACCEPTANCE. Within 30 minutes after Prudential shall have
provided any Quotation pursuant to paragraph 2A(4) or such shorter period as
Prudential may specify to the Company (such period herein called the
"ACCEPTANCE WINDOW"), an Authorized Officer of the Company may, subject to the
terms of paragraph 2A(6), elect to accept on behalf of the Company a Quotation
as to not less than $5,000,000 aggregate principal amount of the Private Shelf
Notes specified in the applicable Request for Purchase (in the Available
Currency specified in the Request for Purchase). Such election shall be made
by an Authorized Officer of the Company notifying Prudential by telephone or
telefacsimile within the Acceptance Window (but not earlier than 9:30 A.M. or
later than 2:00 P.M., New York City local time) that the Company elects to
accept such Quotation (each such Private Shelf Note being herein called an
"ACCEPTED NOTE") as to which such acceptance (herein called an "ACCEPTANCE")
relates. The day the Company notifies Prudential of an Acceptance with
respect to any Accepted Notes is herein called the "ACCEPTANCE DAY" for such
Accepted Notes. Any Quotation as to which Prudential does not receive an
Acceptance within the Acceptance Window shall expire, and no purchase or sale
of Private Shelf Notes hereunder shall be made based on any such expired
Quotation. Subject to paragraph 2A(6) and the other terms and conditions
hereof, the Company agrees to sell to Prudential or a Prudential Affiliate,
and Prudential agrees to purchase, or to cause the purchase by a Prudential
Affiliate of, the Accepted Notes at 100% of the principal amount of such
Notes, which purchase price shall be paid in the currency in which such Notes
are to be denominated. As soon as practicable following the Acceptance Day,
the Company, Prudential and each Prudential Affiliate which is to purchase any
such Accepted Notes will execute a confirmation of such Acceptance
substantially in the form of EXHIBIT C attached hereto (herein called a
"CONFIRMATION OF ACCEPTANCE"). If the Company should fail to execute and
return to Prudential within three Business Days following receipt thereof a
Confirmation of Acceptance with respect to any Accepted Notes, Prudential may
at its election at any time prior to its receipt thereof cancel the closing
with respect to such Accepted Notes by so notifying the Company in writing.
2A(6). MARKET DISRUPTION. Notwithstanding the provisions of
paragraph 2A(5), if Prudential shall have provided a Quotation pursuant to
paragraph 2A(4) and thereafter, prior to the time an Acceptance with respect
to such Quotation shall have been notified to Prudential in accordance with
paragraph 2A(5), (i) the domestic market for U.S. Treasury securities or
derivatives shall have closed or there shall have occurred a general
suspension, material limitation or significant disruption of trading in
securities generally on the New York Stock Exchange or in the domestic market
for U.S. Treasury securities or derivatives or (ii) in the case of Private
Shelf Notes to be denominated in a currency other than Dollars, the markets
for the relevant government securities (which in the case of the Euro, shall
be the current benchmark treasury notes of the German Federal Republic) or the
spot or forward currency market, the financial futures market or the interest
rate swap market shall have closed or there shall have occurred a general
suspension, material limitation or significant disruption of trading, then
such Quotation shall expire, and no purchase or sale of Private Shelf Notes
hereunder shall be made based on such expired interest rate quotes. If the
Company thereafter notifies Prudential of the Acceptance of any such
Quotation, such Acceptance shall be ineffective for all purposes of this
Agreement, and Prudential shall promptly notify the Company that the provi-
sions of this paragraph 2A(6) are applicable with respect to such Acceptance.
117
2A(7). PRIVATE SHELF CLOSING. Not later than 11:30 A.M. (Chicago
time) on the Private Shelf Closing Day for any Accepted Notes, the Company
will deliver to each Purchaser listed in the Confirmation of Acceptance
relating thereto at the offices of Prudential Capital Group, Two Prudential
Plaza, Suite 5600, Chicago, Illinois 60601-6716 Attention: Law Department (or
to such other address pursuant to the instructions of Prudential), the Private
Shelf Notes to be purchased by such Purchaser in the form of one or more Notes
in authorized denominations as such Purchaser may request for each Series of
Accepted Notes to be purchased on the Private Shelf Closing Day, dated the
Private Shelf Closing Day and registered in such Purchaser's name (or in the
name of its nominee), against payment of the purchase price thereof by
transfer of immediately available funds for credit to the Company's account or
accounts specified in the Request for Purchase of such Private Shelf Notes.
If the Company fails to tender to any Purchaser the Accepted Notes to be
purchased by such Purchaser on the scheduled Private Shelf Closing Day for
such Accepted Notes as provided above in this paragraph 2A(7), or any of the
conditions specified in paragraph 3 shall not have been fulfilled by the time
required on such scheduled Private Shelf Closing Day, the Company shall, prior
to 1:00 P.M., New York City local time, on such scheduled Private Shelf
Closing Day notify Prudential in writing (which notification shall be deemed
received by each Purchaser) whether (x) such closing is to be rescheduled
(such rescheduled date to be a Business Day during the Issuance Period not
less than one Business Day and not more than ten Business Days after such
scheduled Private Shelf Closing Day (the "RESCHEDULED CLOSING DAY")) and
certify to Prudential (which certification shall be for the benefit of each
Purchaser) that the Company reasonably believes that it will be able to comply
with the conditions set forth in paragraph 3 on such Rescheduled Closing Day
and that the Company will pay the Delayed Delivery Fee, if any, in accordance
with paragraph 2A(8)(ii) or (y) such closing is to be cancelled. If a
Rescheduled Closing Day is established in respect of Private Shelf Notes
denominated in a currency other than Dollars, the Private Shelf Notes shall
have the same maturity date, principal prepayment dates and amounts and
interest payment dates as originally scheduled. In the event that the Company
shall fail to give such notice referred to in the second preceding sentence,
Prudential (on behalf of each Purchaser) may at its election, at any time
after 1:00 P.M., New York City local time, on such scheduled Private Shelf
Closing Day, notify the Company in writing that such closing is to be
cancelled. Notwithstanding anything to the contrary appearing in this
Agreement, the Company may not elect to reschedule a closing with respect to
any given Accepted Notes on more than one occasion, unless Prudential shall
have otherwise consented in writing.
2A(8). FEES.
2A(8)(i). ISSUANCE FEE. The Company will pay to each Purchaser in
immediately available funds a fee (herein called the "ISSUANCE FEE") on each
Private Shelf Closing Day in an amount equal to 0.10% of the Dollar equivalent
(at the time of the applicable Acceptance) aggregate principal amount of Notes
sold to such Purchaser on such Private Shelf Closing Day. Such fee shall be
payable in Dollars.
118
2A(8)(ii). DELAYED DELIVERY FEE. If the closing of the purchase and
sale of any Accepted Note is delayed for any reason beyond the original
Closing Day for such Accepted Note, the Company will pay to each Purchaser
which shall have agreed to purchase such Accepted Notes:
(a) in the case of an Accepted Note denominated in Dollars,
on the Cancellation Date or actual Closing Day of such purchase and sale,
a fee (herein called the "DOLLAR DELAYED DELIVERY FEE") equal to the
product of (i) the amount determined by Prudential to be the amount by
which the bond equivalent yield per annum of such Accepted Note exceeds
the investment rate per annum on an alternative Dollar investment of the
highest quality selected by Prudential and having a maturity date or dates
the same as, or closest to, the Rescheduled Closing Day or Rescheduled
Closing Days from time to time fixed for the delayed delivery of such
Accepted Note, (ii) the principal amount of such Accepted Note and (iii) a
fraction the numerator of which is equal to the number of actual days
elapsed from and including the original Closing Day for such Accepted Note
to but excluding the date of such payment, and the denominator of which is
360; and
(b) in the case of an Accepted Note denominated in a currency
other than Dollars, on the Cancellation Date or the actual Closing Day of
such purchase and sale, a fee (herein called the "NON-DOLLAR DELAYED
DELIVERY FEE," and, together with the Dollar Delayed Delivery Fee, the
"DELAYED DELIVERY FEE") equal to the sum of (1) the product of (x) the
amount by which the bond equivalent yield per annum of such Accepted Note
exceeds the arithmetic average of Overnight Interest Rate on each day from
and including the original Closing Day for such Accepted Note, (y) the
principal amount of such Accepted Note and (z) a fraction the numerator of
which is equal to the number of actual days elapsed from and including the
original Closing Day for such Accepted Note to but excluding the date of
such payment, and the denominator of which is (A) 360, in the case of
Accepted Notes denominated in Euros or Yen, or (B) 365 (unadjusted for
leap years) in the case of Accepted Notes denominated in Australian
Dollars, and (2) the costs and expenses (if any) incurred by such
Purchaser or its affiliates with respect to any interest rate, currency
exchange agreement or similar agreement entered into by the Purchaser or
any such affiliate in connection with the delayed closing of such Accepted
Notes. In no case shall the Delayed Delivery Fee be less than zero.
Nothing contained herein shall obligate any Purchaser to purchase any
Accepted Note on any day other than the Closing Day for such Accepted
Note, as the same may be rescheduled from time to time in compliance with
paragraph 2A(7).
119
2A(8)(iii). CANCELLATION FEE. If the Company at any time notifies
Prudential in writing that the Company is canceling the closing of the
purchase and sale of any Accepted Note, or if Prudential notifies the Company
in writing under the circumstances set forth in the last sentence of paragraph
2A(5) or the penultimate sentence of paragraph 2A(7) that the closing of the
purchase and sale of such Accepted Note is to be canceled, or if the closing
of the purchase and sale of such Accepted Note is not consummated on or prior
to the last day of the Issuance Period (the date of any such notification, or
the last day of the Issuance Period, as the case may be, being herein called
the "CANCELLATION DATE"), the Company will pay the Purchaser which shall have
agreed to purchase such Accepted Note in immediately available funds on the
Cancellation Date an amount (the "CANCELLATION FEE") equal to:
(a) in the case of an Accepted Note denominated in Dollars,
the product of (A) the principal amount of such Accepted Note TIMES (B)
the quotient (expressed in decimals) obtained by dividing (1) the excess
of the ask price (as determined by Prudential) of the Hedge Treasury
Note(s) on the Cancellation Date over the bid price (as determined by
Prudential) of the Hedge Treasury Note(s) on the Acceptance Day for such
Accepted Note by (2) such bid price, with the foregoing bid and ask prices
as reported on the Bridge\Telerate Service, or if such information ceases
to be available on the Bridge\Telerate Service, any publicly available
source of such market data selected by Prudential and rounded to the
second decimal place (such amount, the "U.S. CANCELLATION FEE"); or
(b) in the case of an Accepted Note denominated in a currency
other than Dollars, the aggregate of all unwinding costs incurred by such
Purchaser or its affiliates on positions executed by or on behalf of such
Purchaser or such affiliates in connection with the proposed lending in
such currency and fixing the coupon in such currency (which costs may
include a U.S. Cancellation Fee), PROVIDED, HOWEVER, that any gain
realized upon either unwinding of any such positions shall be offset
against any unwinding costs incurred in either instance. Such positions
include (without limitation) currency and interest rate swaps, futures,
forwards, government bond (including U.S. Treasury bond) hedges and
currency exchange contracts, all of which may be subject to substantial
price volatility. Such costs may also include (without limitation) losses
incurred by such Purchaser or its affiliates as a result of fluctuations
in exchange rates. All unwinding costs incurred by such Purchaser shall
be determined by Prudential or its affiliate in accordance with generally
accepted financial practice.
In no case shall the Cancellation Fee be less than zero.
120
3. CONDITIONS OF CLOSING. Prudential's and any other
Purchaser's obligation to purchase and pay for any Private Shelf Notes, is
subject in each case to the satisfaction, on or before the applicable Closing
Day for such Notes, of the following conditions (any document required to be
delivered pursuant to this paragraph shall be deemed delivered if delivered to
Prudential Capital Group at the address specified in paragraph 2A):
3A. CERTAIN DOCUMENTS. Such Purchaser shall have received the
following dated the date of the applicable Closing Day:
(i) this Agreement;
(ii) the Notes to be purchased by such Purchaser;
(iii)a favorable opinion of Schiff Hardin LLP, special
counsel to the Company (or such other counsel designated by the Company
and reasonably acceptable to the Purchaser(s)) reasonably satisfactory to
such Purchaser and substantially in the form of EXHIBIT D attached hereto
and as to such other matters as such Purchaser may reasonably request.
The Company hereby directs each such counsel to deliver such opinion,
agrees that the issuance and sale of any Notes will constitute a
reconfirmation of such direction and understands and agrees that each
Purchaser receiving such an opinion will and is hereby authorized to rely
on such opinion;
(iv) certified copies of the resolutions of the Board of
Directors of the Company authorizing the execution and delivery of this
Agreement and the issuance of the Notes, and of all documents evidencing
other necessary corporate action and governmental approvals, if any, with
respect to this Agreement and the Notes;
(v) a certificate of the secretary and one other officer of
the Company certifying the names and true signatures of the officers of
the Company authorized to sign this Agreement and the Notes and the other
documents to be delivered hereunder or thereunder;
(vi) certified copies of the Company's Articles of
Incorporation and Bylaws (or, if not a corporation, similar governing
documents) or, alternatively, certification that no amendments or other
modifications have been made thereto since the date most recently
certified to Prudential or other Purchasers;
(vii) a Certificate of Existence for the Company from the
Secretary of State of the state of Indiana dated as of a recent date and
such other evidence of the status of the Company as such Purchaser may
reasonably request; and
(viii) additional documents or certificates with respect to
legal matters or corporate or other proceedings related to the
transactions contemplated hereby as may be reasonably requested by such
Purchaser.
121
3B. REPRESENTATIONS AND WARRANTIES; NO DEFAULT. The
representations and warranties contained in paragraph 8 hereof shall be true
on and as of the applicable Closing Day, except to the extent of changes
caused by the transactions herein contemplated; there shall exist on the
applicable Closing Day no Event of Default or Default; and the Company shall
have delivered to each Purchaser an Officer's Certificate in substantially the
form of EXHIBIT E attached hereto, dated the applicable Closing Day, to both
such effects.
3C. PAYMENT OF FEES. The Company shall have paid to Prudential
and each Purchaser any fees due it pursuant to or in connection with this
Agreement, including any Issuance Fee due pursuant to paragraph 2A(8)(i) and
any Delayed Delivery Fee pursuant to paragraph 2A(8)(ii).
3D. PURCHASE PERMITTED BY APPLICABLE LAWS. The purchase of and
payment for the Notes to be purchased on the applicable Closing Day on the
terms and conditions herein provided (including the use of the proceeds of
such Notes by the Company) shall not violate any applicable law or
governmental regulation (including, without limitation, Section 5 of the
Securities Act or Regulation T, U or X of the Board of Governors of the
Federal Reserve System) and shall not subject any Purchaser to any tax,
penalty, liability or other onerous condition under or pursuant to any
applicable law or governmental regulation, and such Purchaser shall have
received such certificates or other evidence to establish compliance with this
condition.
3E. LEGAL MATTERS. Counsel for the Purchasers shall be satisfied
as to all legal matters relating to such purchase and sale.
3F. PROCEEDINGS. All corporate and other proceedings taken or to
be taken in connection with the transactions contemplated hereby and all
documents incident thereto shall be reasonably satisfactory in substance and
form to each Purchaser, and each Purchaser shall have received all such
counterpart originals or certified or other copies of such documents as it may
reasonably request.
4. PREPAYMENTS. The Notes shall be subject to required
prepayment as and to the extent provided in paragraphs 4A(1) and 4A(2). The
Notes shall also be subject to prepayment under the circumstances set forth in
paragraph 4B. Any prepayment made by the Company pursuant to any other
provision of this paragraph 4 shall not reduce or otherwise affect its
obligation to make any required prepayment as specified in paragraph 4A.
4A(1). REQUIRED PREPAYMENT OF SERIES A NOTES.
Subject to paragraph 4B, until the Series A Notes shall be paid in full,
the Company shall apply to the prepayment of the Series A Notes, without
Yield-Maintenance Amount, the sum of $1,000,000 annually on November 10 of
each year commencing on November 10, 1998 and continuing to and including
November 10, 2007, and such principal amounts of the Series A Notes, together
with interest accrued thereon to the payment dates shall become due on such
payment dates. The remaining unpaid principal amount of the Series A Notes,
together with interest accrued thereon, shall become due on the maturity date
of the Series A Notes.
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4A(2). REQUIRED PREPAYMENT OF PRIVATE SHELF NOTES. Until each
respective Series of Private Shelf Notes shall be paid in full, each
respective Series of Private Shelf Notes shall be subject to such required
prepayments, if any, set forth in the Private Shelf Notes of such Series. Any
prepayment made by the Company pursuant to any other provision of this
paragraph 4 shall not reduce or otherwise affect its obligation to make any
prepayment as specified in the respective Series of Private Shelf Notes.
4B. OPTIONAL PREPAYMENT WITH YIELD-MAINTENANCE AMOUNT. Subject
to the limitations set forth below, the Notes of each Series shall be subject
to prepayment, in whole at any time or from time to time in part (in $100,000
increments and not less than $1,000,000 per occurrence or, in each case, in
the equivalent of the currency in which the Notes of such Series are
denominated), at the option of the Company, at 100% of the principal amount so
prepaid plus interest thereon to the prepayment date and the Yield-Maintenance
Amount, if any, with respect to each Note so prepaid. Any partial prepayment
of a Series of Notes pursuant to this paragraph 4B shall be applied in
satisfaction of required payments of principal in the inverse order of their
scheduled due dates.
4C. NOTICE OF OPTIONAL PREPAYMENT. The Company shall give to the
holder of each Note of a Series to be prepaid pursuant to paragraph 4B
irrevocable written notice of such prepayment pursuant to paragraph 4B with
respect to such Series not less than ten (10) Business Days prior to the
prepayment date, specifying (i) such prepayment date, (ii) the aggregate
principal amount of the Notes of such Series to be prepaid on such date, (iii)
the principal amount of the Notes of such Series held by such holder to be
prepaid on that date, and (iv) stating that such optional prepayment is to be
made pursuant to paragraph 4B. Notice of optional prepayment having been
given as aforesaid, the principal amount of the Notes specified in such
notice, together with interest thereon to the prepayment date and together
with the Yield-Maintenance Amount, if any, with respect thereto, shall become
due and payable on such prepayment date. The Company shall, on or before the
day on which it gives written notice of any prepayment pursuant to paragraph
4B, give telephonic notice of the principal amount of the Notes to be prepaid
and the prepayment date to each Holder which shall have designated a recipient
for such notices in the PURCHASER SCHEDULE attached hereto or the applicable
Confirmation of Acceptance or by notice in writing to the Company.
4D. APPLICATION OF PREPAYMENT. In the case of each prepayment
pursuant to paragraphs 4A or 4B of less than the entire unpaid principal
amount of all outstanding Notes of any Series (including, for the purpose of
this paragraph 4D only, all Notes prepaid or otherwise retired or purchased or
otherwise acquired by the Company or any of its Subsidiaries or Affiliates
other than by prepayment pursuant to paragraph 4A or 4B), the amount to be
prepaid shall be applied pro rata to all outstanding Notes of such Series
according to the respective unpaid principal amounts thereof.
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4E. RETIREMENT OF NOTES. The Company shall not, and shall not
permit any of its Subsidiaries or Affiliates to, prepay or otherwise retire in
whole or in part prior to their stated final maturity (other than (i) by
prepayment pursuant to paragraphs 4A or 4B or (ii) upon acceleration of such
final maturity pursuant to paragraph 7A), or purchase or otherwise acquire,
directly or indirectly, Notes of any Series held by any holder unless the
Company or such Subsidiary or Affiliate shall have offered to prepay or
otherwise retire or purchase or otherwise acquire, as the case may be, the
same proportion of the aggregate principal amount of Notes of such Series held
by each other holder of Notes of such Series. The Company will promptly
cancel all Notes acquired by the Company or any Subsidiary or any such other
Affiliate pursuant to any payment, prepayment or purchase of Notes pursuant to
any provision of this Agreement, and no Notes may be issued in substitution or
exchange for any such Notes.
5. AFFIRMATIVE COVENANTS.
5A. FINANCIAL STATEMENTS. The Company covenants that it will
deliver to each Significant Holder of any Notes:
(i) as soon as practicable and in any event within sixty (60)
days after the end of each quarterly period (other than the last quarterly
period) in each fiscal year, consolidated statements of income,
stockholders' equity and cash flows of the Company and its Subsidiaries
for the period from the beginning of the current fiscal year to the end of
such quarterly period, and a consolidated balance sheet of the Company and
its Subsidiaries as at the end of such quarterly period, setting forth in
each case in comparative form figures for the corresponding period in the
preceding fiscal year, all in reasonable detail and certified by an
authorized financial officer of the Company, subject to changes resulting
from audit and year-end adjustments; provided, however, that delivery
(within the time period specified above) pursuant to clause (iii) below of
a copy of the Quarterly Report on Form 10-Q of the Company for such
quarterly period filed with the Securities and Exchange Commission shall
be deemed to satisfy the requirements of this clause (i);
(ii) as soon as practicable and in any event within ninety
(90) days after the end of each fiscal year, consolidating and
consolidated statements of income and cash flows and a consolidated
statement of stockholders' equity of the Company and its Subsidiaries for
such year, and a consolidating and consolidated balance sheet of the
Company and its Subsidiaries as at the end of such year, setting forth in
each case in comparative form corresponding consolidated figures from the
preceding annual audit, all in reasonable detail and satisfactory in form
to the Required Holder(s) and, as to the consolidated statements, reported
on by independent public accountants of recognized national standing
selected by the Company (whose report shall be without a "going concern"
or like qualification or exception and without any qualification or
exception as to the scope of such audit) to the effect that such
consolidated financial statements present fairly in all material respects
the financial condition and results of operations of the Company and its
consolidated Subsidiaries on a consolidated basis in accordance with
generally accepted accounting principles consistently applied and, as to
the consolidating statements, certified by an authorized financial officer
of the Company; provided, however, that delivery (within the time period
specified above) pursuant to clause (iii) below of a copy of the Annual
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Report on Form 10-K of the Company for such fiscal year filed with the
Securities and Exchange Commission shall be deemed to satisfy the
requirements of this clause (ii);
(iii) promptly upon transmission thereof, copies of all such
financial statements, proxy statements, notices and reports as it shall
send to its public stockholders and copies of all registration statements
(without exhibits) and all reports which it files with the Securities and
Exchange Commission (or any governmental body or agency succeeding to the
functions of the Securities and Exchange Commission);
(iv) promptly upon request, a copy of each other report
submitted to the Company or any Subsidiary by independent accountants in
connection with any annual, interim or special audit made by them of the
books of the Company or any Subsidiary; and
(v) with reasonable promptness, such other financial data as
such Significant Holder may reasonably request.
Together with each delivery of financial statements required by clauses
(i) and (ii) above, the Company will deliver to each Significant Holder an
Officer's Certificate (signed on behalf of the Company) (A) demonstrating
(with computations in reasonable detail) compliance by the Company and its
Subsidiaries with the provisions of paragraph 6, (B) demonstrating (with
computations in reasonable detail) whether the Leverage Fee is payable for the
most-recently ended Fiscal Quarter pursuant to paragraph 5G and (C) stating
that there exists no Event of Default or Default, or, if any Event of Default
or Default exists, specifying the nature and period of existence thereof and
what action the Company proposes to take with respect thereto.
The Company also covenants that immediately after any Responsible Officer
obtains knowledge of an Event of Default or Default, it will deliver to each
Significant Holder an Officer's Certificate (signed on behalf of the Company)
specifying the nature and period of existence thereof and what action the
Company proposes to take with respect thereto.
5B. INSPECTION OF PROPERTY. The Company covenants that, to the
extent permitted by law, it will permit any Person designated by any
Significant Holder in writing, at such Significant Holder's expense, if no
Default or Event of Default exists and at the Company's expense if a Default
or Event of Default does exist, to (i) visit and inspect any of the properties
of the Company and its Subsidiaries, to examine the corporate books and
financial records of the Company and its Subsidiaries and make copies thereof
or extracts therefrom and to discuss the affairs, finances and accounts of any
of such corporations with the principal officers of the Company and, (ii) upon
reasonable notice to the Company and opportunity for management of the Company
to be present or represented, to discuss the affairs, finances and accounts of
any of such corporations (which such Significant Holder has not been able to
satisfactorily discuss with or obtain from the Company) with the independent
public accountants of the Company and its Subsidiaries, all at such reasonable
times and as often as such Significant Holder may reasonably request.
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5C. COVENANT TO SECURE NOTES EQUALLY. The Company covenants
that, if it or any Subsidiary shall create or assume any Lien upon any of its
property or assets, whether now owned or hereafter acquired, other than Liens
permitted by the provisions of paragraph 6B(1) (unless prior written consent
to the creation or assumption thereof shall have been obtained pursuant to
paragraph 11C), it will make or cause to be made effective provision whereby
the Notes will be secured by such Lien equally and ratably with any and all
other Indebtedness thereby secured so long as any such other Indebtedness
shall be so secured.
5D. MAINTENANCE OF INSURANCE. The Company covenants that it
shall, and shall cause each Subsidiary to, maintain or cause to be maintained,
with financially sound and reputable insurers, insurance with respect to its
properties and business and the properties and business of its Subsidiaries
(which may include a reasonable self-insurance program) as is customarily
maintained by other companies operating similar businesses.
5E. COMPLIANCE WITH LAWS. The Company covenants that it shall,
and shall cause each of its Subsidiaries to, comply with all laws, ordinances
or governmental rules or regulations to which each of them is subject,
including, without limitation, environmental laws, and will obtain and
maintain in effect all licenses, certificates, permits, franchises and other
governmental authorizations necessary to the ownership of their respective
properties or to the conduct of their respective businesses, in each case to
the extent necessary to ensure that non-compliance with such laws, ordinances
or governmental rules or regulations or failure to obtain or maintain in
effect such licenses, certificates, permits, franchises and other governmental
authorizations would not be reasonably expected to result in a material
adverse effect on the business, assets, operations or condition (financial or
otherwise) of the Company and its Subsidiaries taken as a whole. Without
limitation of the foregoing, the Company will, and will cause each of its
Subsidiaries to, not be a Person described in Section 1 of the Anti-Terrorism
Order, and not engage in any dealings or transactions, or otherwise be
associated, with any such Person.
5F. MOST FAVORED LENDER STATUS. In the event that the Company or
any Subsidiary shall enter into, assume or otherwise become bound by or
obligated under, or amend, any agreement evidencing any present or future
Indebtedness in excess of $10,000,000 (collectively, an "OTHER FINANCING
AGREEMENT") which includes one or more Additional Covenants or Additional
Defaults, the terms of this Agreement shall, without any further action on the
part of the Company or any of the holders of the Notes, be deemed to be
amended automatically to include each Additional Covenant and each Additional
Default contained in such agreement. The Company further covenants to
promptly execute and deliver at its expense (including the reasonable fees and
expenses of counsel for the holders of the Notes), an amendment to this
Agreement in form and substance satisfactory to the Required Holder(s)
evidencing the amendment of this Agreement to include such Additional
Covenants and Additional Defaults, PROVIDED that the execution and delivery of
such amendment shall not be a precondition to the effectiveness of such
amendment as provided for in this paragraph 5F, but shall merely be for the
convenience of the parties hereto.
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5G. LEVERAGE FEE. In addition to interest accruing on the Series
A Notes, the Company agrees to pay to the holders of the Series A Notes a fee
(the "LEVERAGE FEE") with respect to each Fiscal Quarter, beginning with the
Fiscal Quarter ending September 30, 2004, during which at any time
Consolidated Total Debt is equal to or greater than forty percent (40%) of
Consolidated Total Capitalization. The Leverage Fee payable with respect to
each Series A Note shall be a dollar amount equal to (a) the product obtained
by MULTIPLYING (i) the Applicable Number (as defined below) for such Fiscal
Quarter TIMES (ii) the Weighted Dollar Average (as defined below) of the
principal balance of such Series A Note during the Fiscal Quarter to which the
Leverage Fee relates and (b) dividing the product thus obtained by four. The
Leverage Fee for each applicable Fiscal Quarter shall be payable in arrears on
the date upon which the financial statements for such Fiscal Quarter are to be
delivered under paragraph 5A(i) (or paragraph 5A(ii), if the applicable Fiscal
Quarter is the last Fiscal Quarter in a fiscal year). If the Company fails to
deliver financial statements under paragraphs 5A(i) or 5A(ii) for any Fiscal
Quarter or fiscal year by the date such delivery is due, then the Company
shall be deemed to owe the Leverage Fee for such Fiscal Quarter (based on an
Applicable Number of .0015) and shall make the payment required for such
Fiscal Quarter on the date due pursuant to the preceding sentence. Payment of
the Leverage Fee shall be made pursuant to the terms of paragraph 11A.
The acceptance of the Leverage Fee by any holder of a Series A Note shall
not constitute a waiver of any Default or Event of Default. The consequences
for the failure to pay the Leverage Fee when due shall be governed by
paragraph 7A(ii) hereof, treating the Leverage Fee, for such purposes and for
the purpose of determining the amount payable upon acceleration of the Series
A Notes, as interest.
As used in this paragraph 5G, (a) "APPLICABLE NUMBER" shall mean (i)
..00075 if during such Fiscal Quarter Consolidated Total Debt was equal to or
greater than 40.0%, but not greater than 50.0%, of Consolidated Total
Capitalization or (ii) .0015 if during such Fiscal Quarter Consolidated Total
Debt was greater than 50.0% of Consolidated Total Capitalization and (b)
"WEIGHTED DOLLAR AVERAGE" shall mean, with respect to any Series A Note,
during any Fiscal Quarter, a dollar amount determined by adding together the
daily outstanding principal balance of such Series A Note during such Fiscal
Quarter and dividing the amount thus obtained by the total number of days in
such Fiscal Quarter.
6. NEGATIVE COVENANTS. During the Issuance Period and so long
thereafter as any Note or other amount due hereunder is outstanding and
unpaid, the Company covenants as follows:
6A. [Intentionally Omitted]
6B. CREDIT AND OTHER RESTRICTIONS. The Company covenants that it
will not and will not permit any Subsidiary to:
6B(1). LIEN RESTRICTIONS. Create, incur, assume or suffer to exist
any Lien upon any of its property or assets, whether now owned or hereafter
acquired (whether or not provision is made for the equal and ratable securing
of Notes in accordance with the provisions of paragraph 5C hereof), except:
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(i) Liens existing on the date hereof encumbering the
property and securing the Indebtedness identified on SCHEDULE 6B(1)
attached hereto and Liens securing the refinancing, renewal or refunding
of any such Indebtedness provided that the principal amount secured is not
increased over the amount of such Indebtedness outstanding immediately
prior to such refinancing, renewal or refunding and such Lien is not
extended to any other property or assets;
(ii) Liens for taxes or other governmental charges not yet
due or which are being actively contested in good faith by appropriate
proceedings;
(iii) Liens incidental to the conduct of its business or the
ownership of its assets which were not incurred in connection with the
borrowing of money or obtaining credit or advances and which do not in the
aggregate materially detract from the value of its property or assets or
materially impair the use thereof in the operation of its business;
(iv) Liens on property or assets of a Subsidiary to secure
obligations of such Subsidiary to the Company or another Subsidiary;
(v) any Lien existing on any asset of any corporation or
other Person at the time such corporation or other Person becomes a
Subsidiary and not created in contemplation of such event;
(vi) any Lien on any asset of any corporation or other Person
existing at the time such corporation or other Person is merged or
consolidated with or into the Company or a Subsidiary and not created in
contemplation of such event;
(vii) any Lien existing on any asset prior to the acquisition
thereof by the Company or a Subsidiary and not created in anticipation of
such acquisition; and
(viii) Liens not otherwise permitted by the foregoing clauses
provided that Priority Debt at no time exceeds twenty percent (20%) of
Consolidated Net Worth (notwithstanding the foregoing, the basket in this
subclause (viii) shall not be used to provide credit enhancements (in any
form, including Liens and Guarantees) to the lender(s) under the Company's
primary bank facility).
6B(2). DEBT RESTRICTION. Create, incur, assume or suffer to exist
any Indebtedness, except:
(i) Indebtedness of the Company or any Subsidiary owing to
the Company or to any Subsidiary; and
(ii)other Indebtedness of the Company or Subsidiaries, so
long as Priority Debt at no time exceeds twenty percent (20%) of
Consolidated Net Worth (notwithstanding the foregoing, the basket in this
subclause (ii) shall not be used to provide credit enhancements (in any
form, including Liens and Guarantees) to the lender(s) under the Company's
primary bank facility).
6B(3). LOANS, ADVANCES AND INVESTMENTS. Make or permit to remain
outstanding loans or advances to, or own, purchase or acquire any stock,
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obligations or securities of, or any other interest in, or make any capital
contributions to, any Person (collectively, "INVESTMENTS"), except that the
Company or any Subsidiary may:
(i) make or permit to remain outstanding loans or advances to
the Company or any Subsidiary;
(ii) own, purchase or acquire stock, obligations or
securities of a Subsidiary or of a corporation or other Person which
immediately after such purchase or acquisition will be a Subsidiary;
(iii) acquire and own stock, obligations or securities
received in settlement of debts (created in the ordinary course of
business) owing to the Company or any Subsidiary, to the extent the
aggregate amount of all such Investments described in this clause (iii)
made after the date of this Agreement does not exceed $1,000,000;
(iv) own, purchase or acquire prime commercial paper,
banker's acceptances and certificates of deposit in commercial banks with
a capital of $100,000,000 or more or whose credit is reasonably
satisfactory to Prudential; repurchase agreements with respect to the
foregoing; fixed income obligations of companies organized under Federal
or state law; obligations of the United States Government (or any State
thereof); obligations fully guaranteed by the United States Government (or
any State thereof); obligations of counties or municipalities located in
the United States or agencies or departments thereof in each case rated
"A" or better by Standard & Poors Corporation or the equivalent thereof by
any nationally recognized rating agency and mutual fund accounts which
exclusively invest in any one or more of the foregoing;
(v) make or permit to remain outstanding loans or advances to
officers and employees in the ordinary course of business reasonably
consistent with the Company's business practices as of the date of this
Agreement;
(vi) make or permit to remain outstanding loans to the
existing employee stock ownership plan of the Company;
(vii) make or permit to remain outstanding loans to any new
employee stock ownership plan of the Company which is approved by the
Company's shareholders;
(viii) make or permit to remain outstanding loans to senior
management of the Company pursuant to the Company's stock purchase plan
not to exceed in the aggregate at any time outstanding $5,000,000;
(ix) make deposits required by government agencies or public
utilities in the ordinary course of business;
(x) make deposits in demand deposit accounts;
(xi) own treasury stock, and so long as no Default or Event
of Default shall be continuing, repurchase from time to time of the
capital stock of the Company as authorized by the Company's board of
directors from time to time; and
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(xii) make other new Investments not to exceed an amount
equal to twenty-five percent (25%) of Consolidated Net Worth.
6B(4). DISPOSITION OF CERTAIN ASSETS. Except for Permitted
Dispositions or except as permitted by paragraphs 6B(3), 6B(5), 6B(6) and
6B(7), sell, lease, transfer or otherwise dispose of any assets of the Company
or any Subsidiary.
6B(5). SALE OF STOCK AND DEBT OF SUBSIDIARIES. Except for Permitted
Dispositions or except as permitted by paragraph 6B(6), sell or otherwise
dispose of, or part with control of, any shares of stock or Indebtedness of
any Subsidiary, except to the Company or any Subsidiary. Notwithstanding the
foregoing, each Significant Subsidiary shall at all times be a Wholly-Owned
Subsidiary of the Company.
6B(6). MERGER AND CONSOLIDATION. Merge with or consolidate into any
other Person, except:
(i) Subsidiaries may be merged into the Company or any other
Subsidiary; and
(ii) so long as no Default or Event of Default would exist
after giving effect thereto or as a result therefrom the Company may merge
with another entity which is organized under the laws of the United States
of America or one of its states provided that the Company is the surviving
corporation.
6B(7). SALE OR DISCOUNT OF RECEIVABLES. Sell with or without
recourse, discount or pledge or otherwise sell any of its notes or accounts
receivable excluding, however, the sale on a non-recourse basis of receivables
in the ordinary course of business owing from foreign account debtors so long
as such sale is not for the exclusive purpose of raising a financing (e.g., a
securitization).
6B(8). RESTRICTED TRANSACTIONS. Deal directly or indirectly with an
Affiliate, any Person related by blood, adoption, or marriage to any Affiliate
or any Person owning 5% or more of the Company's or any Subsidiary's stock,
provided that (i) the Company may deal with such persons in the ordinary
course of business at arm's length, (ii) the Company and its Subsidiaries may
make Investments permitted by paragraph 6B(3), (iii) in addition to the
foregoing, so long as the stock of the Company is publicly held, the Company
may deal with such Persons so long as the aggregate amount of such
transactions does not exceed $125,000 in any fiscal year and (iv) such
prohibition shall not apply to transactions between Subsidiaries or between
the Company and its Subsidiaries, including (without limitation) the right or
ability of any Subsidiary to declare or pay a dividend.
6B(9). INTEREST COVERAGE RATIO. At the end of each Fiscal Quarter,
the ratio of Consolidated EBIT for the period of four consecutive Fiscal
Quarters then ended to Consolidated Interest Expense for the period of four
consecutive Fiscal Quarters then ended shall not be less than 3.00 to 1.00.
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6B(10). DEBT TO EBITDA RATIO. At the end of each Fiscal Quarter,
commencing with the Fiscal Quarter ending on March 31, 2002, the ratio of
Consolidated Total Debt as at the end of such Fiscal Quarter to Consolidated
EBITDA for the period of four consecutive Fiscal Quarters then ended shall not
exceed 3.0 to 1.0.
6B(11). SUBSIDIARY RESTRICTIONS. Enter into, or be otherwise subject
to, any contract, agreement or other binding obligation (including its
charter) that directly or indirectly limits the amount of, or otherwise
restricts (i) the payment by any Subsidiary to the Company of dividends or
other redemptions or distributions with respect to such Subsidiary's capital
stock, (ii) the repayment to the Company by any Subsidiary of intercompany
loans or advances, (iii) the making of loans or advances by any Subsidiary to
the Company or any Wholly-Owned Subsidiary (other than a Significant
Subsidiary) or (iv) other intercompany transfers to the Company of property or
other assets by Subsidiaries.
6B(12). RESTRICTED PAYMENTS. Declare or make any Restricted Payment
if any Default has occurred and is continuing or would result therefrom.
7. EVENTS OF DEFAULT.
7A. ACCELERATION. If any of the following events shall occur and
be continuing for any reason whatsoever (and whether such occurrence shall be
voluntary or involuntary or come about or be effected by operation of law or
otherwise):
(i) the Company defaults in the payment of any principal of,
or Yield-Maintenance Amount payable with respect to, any Note when the
same shall become due, either by the terms thereof or otherwise as herein
provided; or
(ii) the Company defaults in the payment of any interest on
any Note for more than 10 days after the date due; or
(iii) the Company or any Subsidiary defaults (whether as
primary obligor or as guarantor or other surety) in any payment of
principal of or interest on any other Indebtedness (or any Capitalized
Lease Obligation, any obligation under a conditional sale or other title
retention agreement, any obligation issued or assumed as full or partial
payment for property whether or not secured by a purchase money mortgage
or any obligation under notes payable or drafts accepted representing
extensions of credit) beyond any period of grace provided with respect
thereto, or the Company or any Subsidiary fails to perform or observe any
other agreement, term or condition contained in any agreement under which
any such Indebtedness is created (or if any other event thereunder or
under any such agreement shall occur and be continuing) and the effect of
such failure or other event is to cause, or to permit the holder or
holders of such Indebtedness (or a trustee on behalf of such holder or
holders) to cause, such obligation to become due (or to be repurchased by
the Company or any Subsidiary) prior to any stated maturity, provided that
the aggregate amount of all Indebtedness as to which such a payment
default shall occur and be continuing or such a failure or other event
causing or permitting acceleration (or resale to the Company or any
Subsidiary) shall occur and be continuing exceeds $10,000,000; or
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(iv) any representation or warranty made by the Company
herein or by the Company or any of its officers in any writing furnished
in connection with or pursuant to this Agreement shall be false in any
material respect on the date as of which made; or
(v) the Company fails to perform or observe any agreement
contained in paragraph 6; or
(vi) the Company fails to perform or observe any other
agreement, term or condition contained herein and such failure shall not
be remedied within 30 days after any Responsible Officer obtains actual
knowledge thereof; or
(vii) the Company or any Subsidiary (other than an
Unrestricted Subsidiary) makes an assignment for the benefit of creditors
or is generally not paying its debts as such debts become due; or
(viii) any decree or order for relief in respect of the
Company or any Subsidiary (other than an Unrestricted Subsidiary) is
entered under any bankruptcy, reorganization, compromise, arrangement,
insolvency, readjustment of debt, dissolution or liquidation or similar
law, whether now or hereafter in effect (herein called the "BANKRUPTCY
LAW"), of any jurisdiction; or
(ix) the Company or any Subsidiary (other than an
Unrestricted Subsidiary) petitions or applies to any tribunal for, or
consents to, the appointment of, or taking possession by, a trustee,
receiver, custodian, liquidator or similar official of the Company or any
Subsidiary (other than an Unrestricted Subsidiary), or of any substantial
part of the assets of the Company or any Subsidiary (other than an
Unrestricted Subsidiary), or commences a voluntary case under the
Bankruptcy Law of the United States or any proceedings (other than
proceedings for the voluntary liquidation and dissolution of a Subsidiary)
relating to the Company or any Subsidiary (other than an Unrestricted
Subsidiary) under the Bankruptcy Law of any other jurisdiction; or
(x) any such petition or application is filed, or any such
proceedings are commenced, against the Company or any Subsidiary (other
than an Unrestricted Subsidiary) and the Company or such Subsidiary by any
act indicates its approval thereof, consent thereto or acquiescence
therein, or an order, judgment or decree is entered appointing any such
trustee, receiver, custodian, liquidator or similar official, or approving
the petition in any such proceedings, and such order, judgment or decree
remains unstayed and in effect for more than 60 days; or
(xi) any order, judgment or decree is entered in any
proceedings against the Company decreeing the dissolution of the Company
and such order, judgment or decree remains unstayed and in effect for more
than 60 days; or
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(xii) any order, judgment or decree is entered in any
proceedings against the Company or any Subsidiary decreeing a split-up of
the Company or such Subsidiary which requires the divestiture of assets
representing a substantial part, or the divestiture of the stock of a
Subsidiary whose assets represent a substantial part, of the consolidated
assets of the Company and its Subsidiaries (determined in accordance with
generally accepted accounting principles) or which requires the
divestiture of assets, or stock of a Subsidiary, which shall have
contributed a substantial part of the consolidated net income of the
Company and its Subsidiaries (determined in accordance with generally
accepted accounting principles) for any of the three fiscal years then
most recently ended, and such order, judgment or decree remains unstayed
and in effect for more than 60 days; or
(xiii) a final judgment in an amount in excess of $2,000,000
is rendered against the Company or any Subsidiary and, within 60 days
after entry thereof, such judgment is not discharged or execution thereof
stayed pending appeal, or within 60 days after the expiration of any such
stay, such judgment is not discharged; or
(xiv) the Company or any member of the Controlled Group shall
fail to pay when due any material amount which it shall have become liable
to pay to the PBGC or to a Plan under Title IV of ERISA; or notice of
intent to terminate a Plan or Plans shall be filed under Title IV of ERISA
by the Company, any member of the Controlled Group, any plan administrator
or any combination of the foregoing which results in liability of the
Company or any member of the Controlled Group of greater than $2,000,000;
or the PBGC shall institute proceedings under Section 4042 of ERISA to
terminate or to cause a trustee to be appointed to administer any such
Plan or Plans or a proceeding shall be instituted by a fiduciary of any
such Plan or Plans to enforce Section 515 or 4219(c)(5) of ERISA and such
proceeding shall not have been dismissed within 60 days thereafter; or a
condition shall exist by reason of which the PBGC would be entitled to
obtain a decree adjudicating that any such Plan or Plans must be
terminated; or the Company or any other member of the Controlled Group
shall incur any withdrawal liability in excess of $2,000,000 with respect
to a Multiemployer Plan; or
then (a) if such event is an Event of Default specified in clause (i) or (ii)
of this paragraph 7A, the holder of any Note may at its option, by notice in
writing to the Company, declare such Note to be, and such Note shall thereupon
be and become, immediately due and payable together with interest accrued
thereon and together with the Yield-Maintenance Amount, if any, with respect
to each such Note, without presentment, demand, protest or notice of any kind,
all of which are hereby waived by the Company, (b) if such event is an Event
of Default specified in clause (viii), (ix) or (x) of this paragraph 7A with
respect to the Company, all of the Notes at the time outstanding shall
automatically become immediately due and payable at par together with interest
accrued thereon, and together with the Yield-Maintenance Amount, if any, with
respect to each Note, without presentment, demand, protest or notice of any
kind, all of which are hereby waived by the Company, and (c) with respect to
any event constituting an Event of Default, (including any event described in
clause (a) above), the Required Holder(s) of the Notes of any Series may at
their option, by notice in writing to the Company, declare all of the Notes of
such Series to be, and all of the Notes shall thereupon be and become,
immediately due and payable together with interest accrued thereon and
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together with the Yield-Maintenance Amount, if any, with respect to each Note
of such Series, without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by the Company, provided that the Yield-
Maintenance Amount, if any, with respect to each Note shall be due and payable
upon such declaration only if (x) such event is an Event of Default specified
in any of clauses (i) to (vii), inclusive, or clauses (xi) through (xiv),
inclusive, of this paragraph 7A, (y) the Required Holders shall have given to
the Company, at least 10 Business Days before such declaration, written notice
stating its or their intention so to declare the Notes to be immediately due
and payable and identifying one or more such Events of Default whose
occurrence on or before the date of such notice permits such declaration, and
(z) one or more of the Events of Default so identified shall be continuing at
the time of such declaration.
The Company acknowledges and the parties hereto agree, that each holder
of a Note has the right to maintain its investment in the Notes free from
repayment by the Company (except as herein specifically provided for) and that
the provision for payment of the Yield-Maintenance Amount by the Company in
the event that the Notes are pre-paid or are accelerated as a result of an
Event of Default, is intended to provided compensation of such right under
such circumstances.
7B. RESCISSION OF ACCELERATION. At any time after any or all of
the Notes shall have been declared immediately due and payable pursuant to
paragraph 7A, the Required Holder(s) may, by notice in writing to the Company,
rescind and annul such declaration and its consequences if (i) the Company
shall have paid all overdue interest on the Notes, the principal of and Yield-
Maintenance Amount, if any, payable with respect to any Notes which have
become due otherwise than by reason of such declaration, and interest on such
overdue interest and overdue principal and Yield-Maintenance Amount at the
rate specified in the Notes, (ii) the Company shall not have paid any amounts
which have become due solely by reason of such declaration, (iii) all Events
of Default and Defaults, other than non-payment of amounts which have become
due solely by reason of such declaration, shall have been cured or waived
pursuant to paragraph 11C, and (iv) no judgment or decree shall have been
entered for the payment of any amounts due pursuant to the Notes or this
Agreement. No such rescission or annulment shall extend to or affect any
subsequent Event of Default or Default or impair any right arising therefrom.
7C. NOTICE OF ACCELERATION OR RESCISSION. Whenever any Note
shall be declared immediately due and payable pursuant to paragraph 7A or any
such declaration shall be rescinded and annulled pursuant to paragraph 7B, the
Company shall forthwith give written notice thereof to the holder of each Note
at the time outstanding.
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7D. OTHER REMEDIES. If any Event of Default or Default shall
occur and be continuing, the holder of any Note (in the case of a Default or
Event of Default under paragraph 7A(i) or (ii)) or the Required Holder(s) (in
the case of any other Default or Event of Default) may proceed to protect and
enforce their rights under this Agreement and such Note by exercising such
remedies as are available in respect thereof under applicable law, either by
suit in equity or by action at law, or both, whether for specific performance
of any covenant or other agreement contained in this Agreement or in aid of
the exercise of any power granted in this Agreement. No remedy conferred in
this Agreement upon the holder of any Note is intended to be exclusive of any
other remedy, and each and every such remedy shall be cumulative and shall be
in addition to every other remedy conferred herein or now or hereafter
existing at law or in equity or by statute or otherwise.
8. REPRESENTATIONS, COVENANTS AND WARRANTIES. The Company
represents, covenants and warrants as follows:
8A(1). ORGANIZATION. The Company is a corporation duly organized
and existing in good standing under the laws of the State of Indiana and has
the corporate power to own its property and to carry on its business as now
being conducted. Each Subsidiary is duly organized and existing in good
standing under the laws of its jurisdiction of incorporation and has the
corporate power to own its property and to carry on its business as now being
conducted except in such instances where the failure could not be reasonably
expected to result in a material adverse effect on the business, assets,
operations or condition (financial or otherwise) of the Company and its
Subsidiaries taken as a whole. Each of the Company and its Subsidiaries is
qualified to do business in, and is in good standing in, every jurisdiction
where such qualification is required, except where the failure to do so,
individually or in the aggregate, could not reasonably be expected to result
in a material adverse effect on the business, assets, operations or condition
(financial or otherwise) of the Company and its Subsidiaries taken as a whole.
The names and jurisdictions of incorporation of each Subsidiary as of the date
of this Agreement are set forth on SCHEDULE 8A.
8A(2). POWER AND AUTHORITY. The Company has the corporate power and
authority to execute and deliver this Agreement and the Notes and to perform
the provisions hereof and thereof. The execution, delivery and performance of
this Agreement and the Notes has been duly authorized by all requisite
corporate action, and this Agreement and the Notes have been duly executed and
delivered by authorized officers of the Company and are valid obligations of
the Company, legally binding upon and enforceable against the Company in
accordance with their terms, except as such enforceability may be limited by
(i) bankruptcy, insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights generally and (ii) general principles of
equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
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8B. FINANCIAL STATEMENTS. The Company has furnished each
Purchaser of the Series A Notes and any Accepted Notes with the following
financial statements, identified by a principal financial officer of the
Company: (i) a consolidated balance sheet of the Company and its Subsidiaries
as of the last day in each of the five fiscal years of the Company most
recently completed prior to the date as of which this representation is made
or repeated to such Purchaser (other than fiscal years completed within 90
days prior to such date for which audited financial statements have not been
released) and a consolidated statement of income and statement of cash flows
of the Company and its Subsidiaries for each such year, all certified by
Deloitte & Touche (or such other independent accountants of national standing
or such other accounting firm as may be reasonably acceptable to such
Purchaser) and (ii) a consolidated balance sheet of the Company and its
Subsidiaries as at the end of the quarterly period (if any) most recently
completed prior to such date and after the end of such fiscal year (other than
quarterly periods completed within sixty (60) days prior to such date for
which financial statements have not been released) and the comparable
quarterly period in the preceding fiscal year and consolidated statements of
income, stockholders' equity and cash flows of the Company and its
Subsidiaries for the periods from the beginning of the fiscal years in which
such quarterly periods are included to the end of such quarterly periods,
prepared by the Company. Delivery of copies of the Annual Reports filed with
the Securities and Exchange Commission on Form 10-K of the Company for the
fiscal years described in clause (i) of the immediately preceding sentence and
delivery of copies of the Quarterly Reports filed with the Securities and
Exchange Commission on Form 10-Q of the Company for the quarterly periods
described in clauses (ii) and (iii) of the immediately preceding sentence,
shall be deemed to satisfy the requirements of the immediately preceding
sentence. Such financial statements (including any related schedules and/or
notes) are true and correct in all material respects (subject, as to interim
statements, to changes resulting from audits and year-end adjustments), have
been prepared in accordance with generally accepted accounting principles
consistently followed throughout the periods involved and show all
liabilities, direct and contingent, of the Company and its Subsidiaries
required to be shown in accordance with such principles. The balance sheets
fairly present the condition of the Company and its Subsidiaries as at the
dates thereof, and the statements of income and statements of cash flows
fairly present the results of the operations of the Company and its
Subsidiaries for the periods indicated. There has been no material adverse
change in the business, assets, operations or condition (financial or
otherwise) of the Company and its Subsidiaries taken as a whole since the end
of the most recent fiscal year for which such audited financial statements
have been furnished.
8C. ACTIONS PENDING. There is no action, suit, investigation or
proceeding pending or, to the knowledge of the Company, threatened against the
Company or any Subsidiary or any properties or rights of the Company or any
Subsidiary, by or before any court, arbitrator or administrative or
governmental body which could be reasonably expected to result in any material
adverse change in the business, assets, operations or condition (financial or
otherwise) of the Company and its Subsidiaries taken as a whole.
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8D. OUTSTANDING DEBT. Neither the Company nor any Subsidiary has
any outstanding Indebtedness except as permitted by paragraph 6B(2). There
exists no matured default or to the best of the Company's knowledge any
unmatured default under the provisions of any instrument evidencing such
Indebtedness in excess of $1,000,000 or of any agreement relating thereto.
8E. TITLE TO PROPERTIES. The Company has, and each Subsidiary
has, good and indefeasible title to its respective real properties (other than
properties which it leases) and good title to all of its other properties and
assets necessary in any respect for the conduct of their respective
businesses, including the properties and assets reflected in the most recent
audited balance sheet referred to in paragraph 8B (other than properties and
assets disposed of in the ordinary course of business), subject to no Lien of
any kind except Liens permitted by paragraph 6B(1). The Company and each
Subsidiary enjoys peaceful and undisturbed possession of all leases necessary
in any material respect for the conduct of their respective businesses, none
of which contains any unusual or burdensome provisions which could be
reasonably expected to materially affect or impair the business, assets,
operations or condition (financial or otherwise) of the Company and its
Subsidiaries taken as a whole. All such leases are valid and subsisting and
are in full force and effect.
8F. TAXES. The Company has, and each Subsidiary has, filed all
Federal, State, local and other income tax returns (other than non-material
foreign tax returns) which, to the best knowledge of the officers of the
Company, are required to be filed, and each has paid or made adequate
provision for paying all taxes as shown on such returns and on all assessments
received by it to the extent that such taxes have become due, except such
taxes as are being contested in good faith by appropriate proceedings for
which adequate reserves or other appropriate provisions have been established
in accordance with generally accepted accounting principles.
8G. CONFLICTING AGREEMENTS AND OTHER MATTERS. Neither the
Company nor any of its Subsidiaries is a party to any contract or agreement or
subject to any charter or other corporate restriction which materially and
adversely affects its business, property or assets, or financial condition.
Neither the execution nor delivery of this Agreement or the Notes, nor the
offering, issuance and sale of the Notes, nor fulfillment of nor compliance
with the terms and provisions hereof and of the Notes will conflict with, or
result in a breach of the terms, conditions or provisions of, or constitute a
default under, or result in any violation of, or result in the creation of any
Lien upon any of the properties or assets of the Company or any of its
Subsidiaries pursuant to, the charter or by-laws (or comparable governing
documents) of the Company or any of its Subsidiaries, any award of any
arbitrator or any agreement (including any agreement with stockholders),
instrument, order, judgment, decree, statute, law, rule or regulation to which
the Company or any of its Subsidiaries is subject. Neither the Company nor
any of its Subsidiaries is a party to, or otherwise subject to any provision
contained in, any instrument evidencing indebtedness of the Company or any of
its Subsidiaries, any agreement relating thereto or any other contract or
agreement (including its charter or comparable governing documents) which
limits the amount of, or otherwise imposes restrictions on the incurring of,
indebtedness of the Company of the type to be evidenced by the Notes except as
set forth in the agreements listed in SCHEDULE 8G attached hereto.
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8H. OFFERING OF NOTES. Neither the Company nor any agent acting
on its behalf has, directly or indirectly, offered the Notes or any similar
security of the Company for sale to, or solicited any offers to buy the Notes
or any similar security of the Company from, or otherwise approached or
negotiated with respect thereto with, any Person other than Institutional
Investors, and neither the Company nor any agent acting on its behalf has
taken or will take any action which would subject the issuance or sale of the
Notes to the provisions of section 5 of the Securities Act or to the
provisions of any securities or Blue Sky law of any applicable jurisdiction.
8I. USE OF PROCEEDS. Neither the Company nor any Subsidiary owns
or has any present intention of acquiring any "margin stock" as defined in
Regulation U (12 CFR Part 221) of the Board of Governors of the Federal
Reserve System (herein called "MARGIN STOCK"). The proceeds of sale of the
Private Shelf Notes will be used primarily to refinance certain existing bank
indebtedness of the Company, for working capital purposes, capital
expenditures, Investments and other purposes permitted by or not in
contravention of any provision of this Agreement and the proceeds of the sale
of any Private Shelf Notes will be used for the purposes stated in the
relevant Request for Purchase. None of such proceeds will be used, directly
or indirectly, for the purpose, whether immediate, incidental or ultimate, of
purchasing or carrying any margin stock or for the purpose of maintaining,
reducing or retiring any indebtedness which was originally incurred to
purchase or carry any stock that is currently a margin stock or for any other
purpose which might constitute this transaction a "purpose credit" within the
meaning of such Regulation U. Neither the Company nor any agent acting on its
behalf has taken or will take any action which might cause this Agreement or
the Notes to violate Regulation U, Regulation T or any other regulation of the
Board of Governors of the Federal Reserve System or to violate the Securities
Exchange Act of 1934, as amended, in each case as in effect now or as the same
may hereafter be in effect. Neither the Company nor any of its Subsidiaries
is a Person described in Section 1 of the Anti-Terrorism Order and none of the
proceeds from the issuance of the Notes will, directly or indirectly, be
transferred to or used for the benefit of any such Person in violation of the
Anti-Terrorism Order.
8J. COMPLIANCE WITH ERISA. (a) The Company and each member of
the Controlled Group have fulfilled their obligations under the minimum
funding standards of ERISA and the Code with respect to each Plan and are in
compliance in all material respects with the presently applicable provisions
of ERISA and the Code, and have not incurred any liability (other than
liabilities incurred in the ordinary course of business) to the PBGC or a Plan
under Title IV of ERISA.
(b) Either (i) neither the Company nor any member of the
Controlled Group is or within the preceding five (5) years ever has been
obligated to contribute to any Multiemployer Plan, or (ii) if the Company
or any member of the Controlled Group is or within the preceding five (5)
years has been obligated to contribute to any Multiemployer Plan, neither
the Company nor any member of the Controlled Group has incurred any
withdrawal liability in excess of $2,000,000 with respect to any
Multiemployer Plan under Title IV of ERISA.
138
(c)The execution and delivery of this Agreement and the
issuance and sale of the Notes will be exempt from or will not involve any
transaction which is subject to the prohibitions of section 406 of ERISA
and will not involve any transaction in connection with which a penalty
could be imposed under section 502(i) of ERISA or a tax could be imposed
pursuant to section 4975 of the Code. The representation by the Company
in the next preceding sentence is made in reliance upon and subject to the
accuracy of the representation of each Purchaser in paragraph 9B as to the
source of funds to be used by it to purchase any Notes.
8K. GOVERNMENTAL CONSENT. Neither the nature of the Company or
of any Subsidiary, nor any of their respective businesses or properties, nor
any relationship between the Company or any Subsidiary and any other Person,
nor any circumstance in connection with the offering, issuance, sale or
delivery of the Notes is such as to require any authorization, consent,
approval, exemption or other action by or notice to or filing with any court
or administrative or governmental body (other than routine filings after the
date of closing with the Securities and Exchange Commission and/or state Blue
Sky authorities or consents which will be obtained prior to any applicable
closing day) in connection with the execution and delivery of this Agreement,
the offering, issuance, sale or delivery of the Notes or fulfillment of or
compliance with the terms and provisions of this Agreement.
8L. COMPLIANCE WITH LAWS. The Company and its Subsidiaries and
all of their respective properties and facilities have complied at all times
and in all respects with all federal, state, local and regional statutes,
laws, ordinances and judicial or administrative orders, judgments, rulings and
regulations, including those relating to protection of the environment except,
in any such case, where failure to comply could not reasonably be expected to
result in a material adverse effect on the business, assets, operations or
condition (financial or otherwise) of the Company and its Subsidiaries taken
as a whole.
8M. HOSTILE TENDER OFFERS. None of the proceeds of the sale of
any Notes will be used to finance a Hostile Tender Offer.
8N. DISCLOSURE. Neither this Agreement nor any other document,
certificate or statement furnished to any Purchaser by or on behalf of the
Company in connection herewith contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the state-
ments contained herein and therein not misleading. There is no fact peculiar
to the Company or any of its Subsidiaries which materially adversely affects
or in the future may (so far as the Company can now foresee) materially
adversely affect the business, property or assets, or financial condition of
the Company and its Subsidiaries taken as a whole and which has not been set
forth in this Agreement or in the other documents, certificates and statements
furnished to the Purchasers by the Company prior to the date hereof in
connection with the transactions contemplated hereby.
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8O. INVESTMENT COMPANY STATUS; HOLDING COMPANY STATUS. Neither
the Company nor any Subsidiary of the Company is (a) an "investment company"
or a company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended or an "investment adviser" within
the meaning of the Investment Advisors Act of 1940, as amended, or (b) a
"holding company" or a "subsidiary company" of a "holding company" or an
"affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company" or a "public utility", within the meaning of the Public Utility
Holding Company Act of 1935, as amended, or a "public utility" within the
meaning of the Federal Power Act, as amended.
9. REPRESENTATIONS OF THE PURCHASERS.
Each Purchaser represents as follows:
9A. NATURE OF PURCHASE. Such Purchaser is not acquiring the
Notes to be purchased by it hereunder with a view to or for sale in connection
with any distribution thereof within the meaning of the Securities Act,
provided that the disposition of such Purchaser's property shall at all times
be and remain within its control.
9B. SOURCE OF FUNDS. At least one of the following statements
is an accurate representation as to each source of funds (a "SOURCE") to be
used by such Purchaser to pay the purchase price of the Notes to be purchased
by such Purchaser hereunder:
(i) the Source is an "insurance company general account" (as
the term is defined in the United States Department of Labor's Prohibited
Transaction Exemption ("PTE") 95-60) in respect of which the reserves and
liabilities (as defined by the annual statement for life insurance
companies approved by the National Association of Insurance Commissioners
(the "NAIC ANNUAL STATEMENT")) for the general account contract(s) held by
or on behalf of any employee benefit plan together with the amount of the
reserves and liabilities for the general account contract(s) held by or on
behalf of any other employee benefit plans maintained by the same employer
(or affiliate thereof as defined in PTE 95-60) or by the same employee
organization in the general account do not exceed 10% of the total
reserves and liabilities of the general account (exclusive of separate
account liabilities) plus surplus as set forth in the NAIC Annual
Statement filed with such Purchaser's state of domicile; or
(ii) the Source is a separate account that is maintained
solely in connection with such Purchaser's fixed contractual obligations
under which the amounts payable, or credited, to any employee benefit plan
(or its related trust) that has any interest in such separate account (or
to any participant or beneficiary of such plan (including any annuitant))
are not affected in any manner by the investment performance of the
separate account; or
140
(iii) the Source is either (a) an insurance company pooled
separate account, within the meaning of PTE 90-1 or (b) a bank collective
investment fund, within the meaning of the PTE 91-38 and, except as
disclosed by such Purchaser to the Company in writing pursuant to this
clause (iii), no employee benefit plan or group of plans maintained by the
same employer or employee organization beneficially owns more than 10% of
all assets allocated to such pooled separate account or collective
investment fund; or
(iv) the Source constitutes assets of an "investment fund"
(within the meaning of Part V of PTE 84-14 (the "QPAM EXEMPTION")) managed
by a "qualified professional asset manager" or "QPAM" (within the meaning
of Part V of the QPAM Exemption), no employee benefit plan's assets that
are included in such investment fund, when combined with the assets of all
other employee benefit plans established or maintained by the same
employer or by an affiliate (within the meaning of Section V(c)(1) of the
QPAM Exemption) of such employer or by the same employee organization and
managed by such QPAM, exceed 20% of the total client assets managed by
such QPAM, the conditions of Part I(c) and (g) of the QPAM Exemption are
satisfied, neither the QPAM nor a person controlling or controlled by the
QPAM (applying the definition of "control" in Section V(e) of the QPAM
Exemption) owns a 5% or more interest in the Company and (a) the identity
of such QPAM and (b) the names of all employee benefit plans whose assets
are included in such investment fund have been disclosed to the Company in
writing pursuant to this clause (iv); or
(v) the Source constitutes assets of a "plan(s)" (within the
meaning of Section IV of PTE 96-23 (the "INHAM EXEMPTION")) managed by an
"in-house asset manager" or "INHAM" (within the meaning of Part IV of the
INHAM exemption), the conditions of Part I(a), (g) and (h) of the INHAM
Exemption are satisfied, neither the INHAM nor a person controlling or
controlled by the INHAM (applying the definition of "control" in Section
IV(h) of the INHAM Exemption) owns a 5% or more interest in the Company
and (a) the identity of such INHAM and (b) the name(s) of the employee
benefit plan(s) whose assets constitute the Source have been disclosed to
the Company in writing pursuant to this clause (v); or
(vi) the Source is a governmental plan; or
(vii) the Source is one or more employee benefit plans, or a
separate account or trust fund comprised of one or more employee benefit
plans, each of which has been identified to the Company in writing
pursuant to this clause (vii); or
(viii) the Source does not include assets of any employee
benefit plan, other than a plan exempt from the coverage of ERISA.
As used in this paragraph 9B, the terms "EMPLOYEE BENEFIT PLAN",
"GOVERNMENTAL PLAN", and "SEPARATE ACCOUNT" shall have the respective meanings
assigned to such terms in Section 3 of ERISA.
141
10. DEFINITIONS. For the purpose of this Agreement, the terms
defined in paragraphs 1 and 2 shall have the respective meanings specified
therein, and the following terms shall have the meanings specified with
respect thereto below:
10A. YIELD-MAINTENANCE TERMS.
"CALLED PRINCIPAL" shall mean, with respect to any Note, the principal of
such Note that is to be prepaid pursuant to paragraph 4B or has become or is
declared to be immediately due and payable pursuant to paragraph 7A, as the
context requires.
"DISCOUNTED VALUE" shall mean, with respect to the Called Principal of any
Note, the amount obtained by discounting all Remaining Scheduled Payments with
respect to such Called Principal from their respective scheduled due dates to
the Settlement Date with respect to such Called Principal, in accordance with
accepted financial practice and at a discount factor (calculated on the same
periodic basis as that on which interest on such Note is payable) equal to the
Reinvestment Yield with respect to such Called Principal.
"IMPLIED AUSTRALIAN DOLLAR YIELD" shall mean, with respect to the Called
Principal of any Note, the yield to maturity implied by (i) the yields
reported, as of 10:00 a.m. (New York time) on the second Business Day
preceding the Settlement Date with respect to such Called Principal, on the
display designated as "Page 0#AUBMK=" on the Reuters Screen (or such other
display as may replace "Page 0#AUBMK=" on the Reuters Screen) for actively
traded benchmark Australian Government bonds having a maturity equal to the
Remaining Average Life of such Called Principal as of such Settlement Date, or
if such yields are not reported as of such time or the yields reported shall
not be ascertainable, (ii) the average of the yields for such securities as
determined by Recognized Australian Government Bond Market Makers. Such
implied yield will be determined, if necessary, by (a) converting quotations
to bond-equivalent yields in accordance with accepted financial practice and
(b) interpolating linearly between (1) the actively traded benchmark
Australian Government bonds with the maturity closest to and greater than the
Remaining Average Life of such Called Principal and (2) the actively traded
benchmark Australian Government bonds with the maturity closest to and less
than the Remaining Average Life of such Called Principal.
"IMPLIED DOLLAR YIELD" shall mean, with respect to the Called Principal of
any Note, the yield to maturity implied by (i) the yields reported, as of
10:00 a.m. (New York time) on the Business Day next preceding the Settlement
Date with respect to such Called Principal, on the display designated as "Page
PX1" on the Bloomberg Financial Services Screen (or such other display as may
replace Page PX1 on the Bloomberg Financial Services Screen or, if Bloomberg
Financial Services Screen shall cease to report such yields or shall cease to
be Prudential Capital Group's customary source of information for calculating
yield-maintenance amounts on privately placed notes, then such source as is
then Prudential Capital Group's customary source of such information) for
actively traded U.S. Treasury securities having a maturity equal to the
Remaining Average Life of such Called Principal as of such Settlement Date, or
if such yields shall not be reported as of such time or the yields reported as
of such time shall not be ascertainable, (ii) the Treasury Constant Maturity
Series yields reported, for the latest day for which such yields shall have
been so reported as of the Business Day next preceding the Settlement Date
with respect to such Called Principal, in Federal Reserve Statistical Release
142
H.15 (519) (or any comparable successor publication) for actively traded U.S.
Treasury securities having a constant maturity equal to the Remaining Average
Life of such Called Principal as of such Settlement Date. Such implied yield
shall be determined, if necessary, by (a) converting U.S. Treasury bill
quotations to bond-equivalent yields in accordance with accepted financial
practice and (b) interpolating linearly between (1) the actively traded U.S.
Treasury security with the maturity closest to and greater than the Remaining
Average Life of such Called Principal and (2) the actively traded U.S.
Treasury security with the maturity closest to and less than the Remaining
Average Life of such Called Principal.
"IMPLIED EURO YIELD" shall mean, with respect to the Called Principal of
any Note, the yield to maturity implied by (i) the yields reported, as of
10:00 a.m. (New York time) on the second Business Day preceding the Settlement
Date with respect to such Called Principal, on the display designated as "Page
0#DEBMK" on the Reuters Screen (or such other display as may replace "Page
0#DEBMK" on the Reuters Screen) for the actively traded benchmark treasury
notes of the German Federal Republic having a maturity equal to the Remaining
Average Life of such Called Principal as of such Settlement Date, or if such
yields are not reported as of such time or the yields reported shall not be
ascertainable, (ii) the average of the yields for such securities as
determined by Recognized Market Makers of German Government Treasury Notes.
Such implied yield will be determined, if necessary, by (a) converting
quotations to bond-equivalent yields in accordance with accepted financial
practice and (b) interpolating linearly between (1) the actively traded
benchmark German government treasury notes with the maturity closest to and
greater than the Remaining Average Life of such Called Principal and (2) the
actively traded benchmark German government treasury notes with the maturity
closest to and less than the Remaining Average Life of such Called Principal.
"IMPLIED YEN YIELD" shall mean, with respect to the Called Principal of
any Note, the yield to maturity implied by (i) the yields reported, as of
10:00 a.m. (New York time) on the second Business Day preceding the Settlement
Date with respect to such Called Principal, on the display designated as "Page
0#JPBMK" on the Reuters Screen (or such other display as may replace "Page
0#JPBMK" on the Reuters Screen) for the actively traded benchmark Japanese
Government bonds having a maturity equal to the Remaining Average Life of such
Called Principal as of such Settlement Date, or if such yields are not
reported as of such time or the yields reported shall not be ascertainable,
(ii) the average of the yields for such securities as determined by Recognized
Japanese Government Bond Market Makers. Such implied yield will be
determined, if necessary, by (a) converting quotations to bond-equivalent
yields in accordance with accepted financial practice and (b) interpolating
linearly between (1) the actively traded benchmark Japanese Government bonds
with the maturity closest to and greater than the Remaining Average Life of
such Called Principal and (2) the actively traded benchmark Japanese
Government bonds with the maturity closest to and less than the Remaining
Average Life of such Called Principal.
"RECOGNIZED AUSTRALIAN GOVERNMENT BOND MARKET MAKERS" shall mean two
internationally recognized dealers of Australian Government bonds reasonably
selected by Prudential.
"RECOGNIZED MARKET MAKERS OF GERMAN GOVERNMENT TREASURY NOTES" shall mean
two internationally recognized dealers of German government treasury notes
reasonably selected by Prudential.
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"RECOGNIZED JAPANESE GOVERNMENT BOND MARKET MAKERS" shall mean two
internationally recognized dealers of Japanese Government bonds reasonably
selected by Prudential.
"REINVESTMENT YIELD" shall mean, with respect to the Called Principal of
any Note denominated in (i) Dollars, the Implied Dollar Yield, (ii) Euros, the
Implied Euro Yield, (iii) Australian Dollars, the Implied Australian Dollar
Yield, and (iii) Yen, the Implied Yen Yield. The Reinvestment Yield will be
rounded to that number of decimals as appears in the coupon for the applicable
Note.
"REMAINING AVERAGE LIFE" shall mean, with respect to the Called Principal
of any Note, the number of years (calculated to the nearest one-twelfth year)
obtained by dividing (i) such Called Principal into (ii) the sum of the
products obtained by multiplying (a) each Remaining Scheduled Payment of such
Called Principal by (b) the number of years (calculated to the nearest one-
twelfth year) which will elapse between the Settlement Date with respect to
such Called Principal and the scheduled due date of such Remaining Scheduled
Payment.
"REMAINING SCHEDULED PAYMENTS" shall mean, with respect to the Called
Principal of any Note, all payments of such Called Principal and interest
thereon that would be due on or after the Settlement Date with respect to such
Called Principal if no payment of such Called Principal were made prior to its
scheduled due date.
"SETTLEMENT DATE" shall mean, with respect to the Called Principal of any
Note, the date on which such Called Principal is to be prepaid pursuant to
paragraph 4B or has become or is declared to be immediately due and payable
pursuant to paragraph 7A, as the context requires.
"YIELD-MAINTENANCE AMOUNT" shall mean, with respect to any Note, an amount
equal to the excess, if any, of the Discounted Value of the Called Principal
of such Note over the sum of (i) such Called Principal plus (ii) interest
accrued thereon as of (including interest due on) the Settlement Date with
respect to such Called Principal, provided that the Yield-Maintenance Amount
may in no event be less than zero.
10B. Other Terms.
"ACCEPTANCE" shall have the meaning specified in paragraph 2A(5).
"ACCEPTANCE DAY" shall have the meaning specified in paragraph 2A(5).
"ACCEPTANCE WINDOW" shall have the meaning specified in paragraph 2A(5).
"ACCEPTED NOTE" shall have the meaning specified in paragraph 2A(5).
"ADDITIONAL COVENANT" shall mean any affirmative or negative covenant or
similar restriction applicable to the Company or any Subsidiary (regardless of
whether such provision is labeled or otherwise characterized as a covenant)
the subject matter of which either (i) is similar to that of any covenant in
paragraph 5 or 6 of this Agreement, or related definitions in paragraph 10 of
this Agreement, but contains one or more percentages, amounts or formulas that
is more restrictive than those set forth herein or more beneficial to the
holders of the Indebtedness under any Other Financing Agreement (and such
144
covenant or similar restriction shall be deemed an Additional Covenant only to
the extent that it is more restrictive or more beneficial) or (ii) is
different from the subject matter of any covenants in paragraph 5 or 6 of this
Agreement, or related definitions in paragraph 10 of this Agreement.
"ADDITIONAL DEFAULT" shall mean any provision contained in any Other
Financing Agreement which permits the holder or holders of Indebtedness
described in paragraph 5F to accelerate (with the passage of time or giving of
notice or both) the maturity thereof or otherwise requires the Company or any
Subsidiary to purchase the Indebtedness under such agreement prior to the
stated maturity thereof and which either (i) is similar to any Default or
Event of Default contained in paragraph 7 of this Agreement, or related
definitions in paragraph 10 of this Agreement, but contains one or more
percentages, amounts or formulas that is more restrictive or has a shorter
grace period than those set forth herein or is more beneficial to the holders
of such Indebtedness under such agreement (and such provision shall be deemed
an Additional Default only to the extent that it is more restrictive, has a
shorter grace period or is more beneficial) or (ii) is different from the
subject matter of any Default or Event of Default contained in paragraph 7 of
this Agreement, or related definitions in paragraph 10 of this Agreement.
"AFFILIATE" shall mean any Person directly or indirectly controlling,
controlled by, or under direct or indirect common control with, the Company,
except a Subsidiary. A Person shall be deemed to control a corporation if
such Person possesses, directly or indirectly, the power to direct or cause
the direction of the management and policies of such corporation, whether
through the ownership of voting securities, by contract or otherwise.
"ANTI-TERRORISM ORDER" shall mean Executive Order No. 13,224, 66 Fed. Reg.
49,079 (2001) issued by the President of the U.S. (Executive Order Blocking
Property and Prohibiting Transactions with Persons Who Commit, Threaten to
Commit, or Support Terrorism).
"AUSTRALIAN DOLLAR" shall mean the lawful currency of Australia.
"AUTHORIZED OFFICER" shall mean (i) in the case of the Company, its chief
executive officer, its chief financial officer, its Vice President-Finance,
its Treasurer and any vice president of the Company designated as an
"Authorized Officer" of the Company for the purpose of this Agreement in an
Officer's Certificate executed by the Company's chief executive officer or
chief financial officer and delivered to Prudential, and (ii) in the case of
Prudential, P. Scott von Fischer, William Engelking, Mathew Douglass, Julia
Buthman, Marie Fioramonti, Tan Vu, James J. McCrane, Charles J. Senner, any
vice president of Prudential as designated from time to time by Prudential or
any officer of Prudential designated as its "Authorized Officer" for the
purpose of this Agreement in a certificate executed by one of its Authorized
Officers or a member of its law department. Any action taken under this
Agreement on behalf of the Company by any individual who on or after the date
of this Agreement shall have been an Authorized Officer of the Company and
whom Prudential in good faith believes to be an Authorized Officer of the
Company at the time of such action shall be binding on the Company even though
such individual shall have ceased to be an Authorized Officer of the Company,
and any action taken under this Agreement on behalf of Prudential by any
individual who on or after the date of this Agreement shall have been an
Authorized Officer of Prudential and whom the Company in good faith believes
to be an Authorized Officer of Prudential at the time of such action shall be
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binding on Prudential even though such individual shall have ceased to be an
Authorized Officer of Prudential.
"AVAILABLE CURRENCIES" shall mean Australian Dollars, Dollars, Euros and
Yen.
"AVAILABLE FACILITY AMOUNT" shall have the meaning specified in paragraph
2A(1).
"BANKRUPTCY LAW" shall have the meaning specified in clause (viii) of
paragraph 7A.
"BUSINESS DAY" shall mean (i) other than as provided in clauses (ii) and
(iii) below, any day other than a Saturday, a Sunday or a day on which
commercial banks in New York City are authorized or required to be closed,
(ii) for purposes of paragraph 2A(3) only, any day which is both a New York
Business Day and a day on which Prudential is open for business and (iii) for
purposes of paragraph 10A only, (a) if with respect to Notes denominated in
Dollars, a New York Business Day, (b) if with respect to Notes denominated in
Australian Dollars, any day which is both a New York Business Day and a day on
which commercial banks are not required or authorized to be closed in Sydney,
(c) if with respect to Notes denominated in Euros, any day which is both a New
York Business Day and a day on which commercial banks are not required or
authorized to be closed in Frankfurt and Brussels and (d) if with respect to
Notes denominated in Yen, any day which is both a New York Business Day and a
day on which commercial banks are not required or authorized to be closed in
Tokyo.
"CANCELLATION DATE" shall have the meaning specified in paragraph
2A(8)(iii).
"CANCELLATION FEE" shall have the meaning specified in paragraph
2A(8)(iii).
"CAPITALIZED LEASE OBLIGATION" shall mean any rental obligation which,
under generally accepted accounting principles, is or will be required to be
capitalized on the books of the Company or any Subsidiary, taken at the amount
thereof accounted for as indebtedness (net of interest expenses) in accordance
with such principles.
"CLOSING DAY" shall mean a Private Shelf Closing Day, and with respect to
any Accepted Note, the Business Day specified for the closing of the purchase
and sale of such Accepted Note in the Confirmation of Acceptance of such
Accepted Note, PROVIDED that (i) if the Company and the Purchaser which is
obligated to purchase such Accepted Note agree on an earlier Business Day for
such closing, the "CLOSING DAY" for such Accepted Note shall be such earlier
Business Day, and (ii) if the closing of the purchase and sale of such
Accepted Note is rescheduled pursuant to paragraph 2A(7), the Closing Day for
such Accepted Note, for all purposes of this Agreement except references to
"original Closing Day" in paragraph 2A(8)(ii), shall mean the Rescheduled
Closing Day with respect to such Accepted Note.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMPETITOR" shall have the meaning specified in paragraph 11H.
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"CONFIRMATION OF ACCEPTANCE" shall have the meaning specified in paragraph
2A(5).
"CONSOLIDATED EBIT" for any period means the sum of (i) Consolidated Net
Income for such period, (ii) Consolidated Interest Expense for such period and
(iii) taxes on income of the Company and its Consolidated Subsidiaries for
such period to the extent deducted in determining Consolidated Net Income for
such period.
"CONSOLIDATED EBITDA" for any period means the sum of (i) Consolidated
EBIT for such period, (ii) Depreciation for such period, (iii) amortization of
intangible assets of the Company and its Consolidated Subsidiaries for such
period, and (iv) extraordinary or other non-operating losses for such period,
MINUS extraordinary or other non-operating gains for such period, all
determined in accordance with generally accepted accounting principles. In
determining Consolidated EBITDA for any period, (a) any Consolidated
Subsidiary acquired during such period by the Company or any other
Consolidated Subsidiary shall be included on a pro forma, historical basis as
if it had been a Consolidated Subsidiary during such entire period and (b) any
amounts which would be included in a determination of Consolidated EBITDA for
such period with respect to assets acquired during such period by the Company
or any Consolidated Subsidiary shall be included in the determination of
Consolidated EBITDA for such period and the amount thereof shall be calculated
on a pro forma, historical basis as if such assets had been acquired by the
Company or such Consolidated Subsidiary prior to the first day of such period.
"CONSOLIDATED INTEREST EXPENSE" shall mean, for any period, interest,
whether expensed or capitalized, in respect of Indebtedness of the Company or
any of its Consolidated Subsidiaries outstanding during such period,
determined on a consolidated basis as of such date in accordance with
generally accepted accounting principles.
"CONSOLIDATED NET EARNINGS" shall mean with respect to any period:
(i)consolidated gross revenues of the Company and its
Subsidiaries for such period less
(ii)all operating and non-operating expenses of the Company
and its Subsidiaries for such period including all charges of a proper
character (including current and deferred taxes on income, provision for
taxes on unremitted foreign earnings which are included in gross revenues,
and current additions to reserves),
but not including in gross revenues:
(a)any gains (net of expenses and taxes applicable thereto)
in excess of losses resulting from the sale, conversion or other
disposition of capital assets (i.e., assets other than current assets)
other than in the ordinary course of business;
(b)any gains resulting from the write-up of assets;
(c)any equity of the Company or any Subsidiary in the
unremitted earnings of any corporation which is not a Subsidiary;
(d)undistributed earnings of any Subsidiary to the extent
147
that such Subsidiary is not at the time permitted to make or pay dividends
to the Company, repay intercompany indebtedness to the Company, repatriate
earnings to the Company or otherwise transfer property or assets to the
Company whether by the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation
applicable to such Subsidiary; or
(e)any deferred credit representing the excess of equity in
any Subsidiary at the date of acquisition over the cost of the investment
in such Subsidiary;
all determined in accordance with generally accepted accounting principles as
in effect on the date hereof and applied on a consistent basis.
"CONSOLIDATED NET INCOME" shall mean, for any period, the net income,
after taxes, of the Company and its Consolidated Subsidiaries, determined on a
consolidated basis for such period in accordance with generally accepted
accounting principles, but excluding extraordinary and other non-recurring
items.
"CONSOLIDATED NET WORTH" shall mean the sum of (i) the par value (or value
stated on the books of the Company) of the capital stock of all classes of the
Company, plus (or minus in the case of a surplus deficit) and (ii) the amount
of the consolidated surplus, whether capital or earned, of the Company and its
Subsidiaries after subtracting therefrom the aggregate of treasury stock and
any other contra-equity accounts including, without limitation, minority
interests; all determined in accordance with generally accepted accounting
principles.
"CONSOLIDATED SUBSIDIARY" at any date, any Subsidiary or other entity the
accounts of which, in accordance with generally accepted accounting
principles, are consolidated with those of the Company in its consolidated
financial statements as of such date.
"CONSOLIDATED TOTAL ASSETS" means, at any time, the total assets of the
Company and its Consolidated Subsidiaries, determined on a consolidated basis.
"CONSOLIDATED TOTAL CAPITALIZATION" shall mean the sum of Consolidated Net
Worth and Indebtedness.
"CONSOLIDATED TOTAL DEBT" means at any date all Indebtedness of the
Company and its Consolidated Subsidiaries at such date, determined on a
consolidated basis as of such date.
"CONTROLLED GROUP" means all members of a controlled group of corporations
and all trades or businesses (whether or not incorporated) under common
control which, together with the Company, are treated as a single employer
under Section 414 of the Code.
"CREDIT AGREEMENT" means that certain credit agreement dated as of the
date hereof among the Company, the lenders party thereto and Bank One, NA, as
administrative agent.
"DELAYED DELIVERY FEE" shall have the meaning specified in paragraph
2A(8)(ii).
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"DEPRECIATION" shall mean, for any period, the sum of all depreciation and
amortization expenses of the Company and its Consolidated Subsidiaries for
such period, as determined on a consolidated basis in accordance with
generally accepted accounting principles.
"DOLLAR DELAYED DELIVERY FEE" shall have the meaning specified in
paragraph 2A(8)(ii).
"DOLLARS" or "$" shall mean dollars in lawful currency of the United
States of America.
"EMU" shall mean Economic and Monetary Union as contemplated in the Treaty
on European Union.
"EMU LEGISLATION" shall mean legislative measures of the European Council
(including European Council regulations) for the introduction of, changeover
to or operation of a single or unified European currency (whether known as the
Euro or otherwise), being in part the implementation of the third stage of
EMU.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE" shall mean any corporation which is a member of the same
controlled group of corporations as the Company within the meaning of section
414(b) of the Code, or any trade or business which is under common control
with the Company within the meaning of section 414(c) of the Code.
"EURO" shall mean the currency unit of the Euro as defined in the EMU
Legislation.
"EVENT OF DEFAULT" shall mean any of the events specified in paragraph 7A,
provided that there has been satisfied any requirement in connection with such
event for the giving of notice, or the lapse of time, or the happening of any
further condition, event or act, and "Default" shall mean any of such events,
whether or not any such requirement has been satisfied.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended.
"EXISTING 1993 SHELF AGREEMENT" shall have the meaning specified in
paragraph 1A.
"EXISTING 2002 SHELF AGREEMENT" shall have the meaning specified in
paragraph 1A.
"FACILITY" shall have the meaning specified in paragraph 2A(1).
"FISCAL QUARTER" shall mean any fiscal quarter of the Company.
"GUARANTEE" shall mean, with respect to any Person, any direct or indirect
liability, contingent or otherwise, of such Person with respect to any
indebtedness, lease, dividend or other obligation of another, including,
without limitation, any such obligation directly or indirectly guaranteed,
endorsed (otherwise than for collection or deposit in the ordinary course of
business) or discounted or sold with recourse by such Person, or in respect of
which such Person is otherwise directly or indirectly liable, including,
149
without limitation, any such obligation in effect guaranteed by such Person
through any agreement (contingent or otherwise) to purchase, repurchase or
otherwise acquire such obligation or any security therefor, or to provide
funds for the payment or discharge of such obligation (whether in the form of
loans, advances, stock purchases, capital contributions or otherwise), or to
maintain the solvency or any balance sheet or other financial condition of the
obligor of such obligation, or to make payment for any products, materials or
supplies or for any transportation or service, regardless of the non-delivery
or non-furnishing thereof, in any such case if the purpose or intent of such
agreement is to provide assurance that such obligation will be paid or
discharged, or that any agreements relating thereto will be complied with, or
that the holders of such obligation will be protected against loss in respect
thereof. The amount of any Guarantee shall be equal to the outstanding
principal amount of the obligation guaranteed or such lesser amount to which
the maximum exposure of the guarantor shall have been specifically limited.
"HEDGE TREASURY NOTE(S)" shall mean, with respect to any Accepted Note,
the United States Treasury Note or Notes whose duration (as determined by
Prudential) most closely matches the duration of such Accepted Note.
"HOSTILE TENDER OFFER" shall mean, with respect to the use of proceeds of
any Note, any offer to purchase, or any purchase of, shares of capital stock
of any corporation or equity interests in any other entity, or securities
convertible into or representing the beneficial ownership of, or rights to
acquire, any such shares or equity interests, if such shares, equity
interests, securities or rights are of a class which is publicly traded on any
securities exchange or in any over-the-counter market, other than purchases of
such shares, equity interests, securities or rights representing less than 5%
of the equity interests or beneficial ownership of such corporation or other
entity for portfolio investment purposes, and such offer or purchase has not
been duly approved by the board of directors of such corporation or the
equivalent governing body of such other entity prior to the date on which the
Company makes the Request for Purchase of such Note.
"INDEBTEDNESS" of any Person means at any date, without duplication, (i)
all obligations of such Person for borrowed money, (ii) all obligations of
such Person evidenced by bonds, debentures, notes or other similar
instruments, (iii) all obligations of such Person to pay the deferred purchase
price of property or services, except trade accounts payable arising in the
ordinary course of business, (iv) all Capitalized Lease Obligations, (v) all
obligations of such Person to reimburse any bank or other Person in respect of
amounts payable under a banker's acceptance, (vi) all Redeemable Preferred
Stock of such Person (in the event such Person is a corporation), (vii) all
non-contingent obligations of such Person to reimburse any bank or other
Person in respect of amounts paid under a letter of credit or similar
instrument, (viii) all Indebtedness of others secured by a Lien on any asset
of such Person, whether or not such Indebtedness is assumed by such Person,
(ix) all Indebtedness of others Guaranteed by such Person, and (x) for
purposes of paragraph 7A only, all obligations of such Person with respect to
Swap Agreements (valued as the termination value thereof) computed in
accordance with a method approved by the International Swaps and Derivatives
Association, Inc. and agreed to by such Person in the applicable hedging
agreement, if any.
"INSTITUTIONAL INVESTOR" shall mean Prudential, any Prudential Affiliate
or any bank, bank affiliate, financial institution, insurance company, pension
150
fund, endowment or other organization which regularly acquires debt
instruments for investment.
"INVESTMENTS" shall have the meaning specified in paragraph 6B(3).
"ISSUANCE FEE" shall have the meaning specified in paragraph 2A(8)(i).
"ISSUANCE PERIOD" shall have the meaning specified in paragraph 2A(2).
"LIEN" shall mean any mortgage, pledge, security interest, encumbrance,
lien (statutory or otherwise) or charge of any kind (including any agreement
to give 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
give any financing statement under the Uniform Commercial Code of any
jurisdiction) or any other type of preferential arrangement for the purpose,
or having the effect, of protecting a creditor against loss or securing the
payment or performance of an obligation.
"MULTIEMPLOYER PLAN" shall mean any Plan which is a "multiemployer plan"
(as such term is defined in section 4001(a)(3) of ERISA).
"NEW YORK BUSINESS DAY" shall mean any day other than a Saturday, a Sunday
or a day on which commercial banks in New York City are required to be closed.
"NON-DOLLAR DELAYED DELIVERY FEE" shall have the meaning specified in
paragraph 2A(8)(ii).
"NOTES" shall have the meaning specified in paragraph 1B.
"OFFICER'S CERTIFICATE" shall mean a certificate signed in the name of the
Company by an Authorized Officer of the Company.
"OVERNIGHT INTEREST RATE" shall mean, with respect to an Accepted Note
denominated in any currency other than Dollars, the actual rate of interest,
if any, received by the Purchaser which intends to purchase such Accepted Note
on the overnight deposit of the funds intended to be used for the purchase of
such Accepted Note, it being understood that reasonable efforts will be made
by or on behalf of the Purchaser to make any such deposit in an interest-
bearing account.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or any
successor or replacement entity thereto under ERISA.
"PERMITTED DISPOSITIONS" shall mean and include:
(i) a mandatory divestiture of the Company's investment in
South Africa or companies doing business in South Africa required as a
result of applicable law or governmental decree,
(ii) any sale, lease, transfer or other disposition of assets
from (a) a Subsidiary (other than a Significant Subsidiary) to the Company
or to a Wholly-Owned Subsidiary, (b) the Company to a Wholly-Owned
Subsidiary or (c) a Significant Subsidiary to the Company or to the other
Significant Subsidiary,
151
(iii) any sale and leaseback of any assets owned by the
Company or any of its Subsidiaries; provided that the aggregate amount of
assets sold and leased-back under this clause (iii) in the then most
recent twelve (12) month period do not constitute more than five percent
(5%) of Consolidated Total Assets determined as of the end of the most
recently ended fiscal year;
(iv) any sale, lease, transfer or other disposition of assets
in the ordinary course of business, or
(v) any sale, lease, transfer or other disposition of assets
or stock outside of the ordinary course of business so long as the
aggregate amount of assets and stock sold, leased, transferred or
otherwise disposed of outside of the ordinary course of business in the
then most recent twelve (12) month period which were not permitted by
clauses (i), (ii), (iii) or (iv) above together with any assets then
proposed to be sold, leased, transferred or otherwise disposed of outside
of the ordinary course of business which are not permitted by clauses (i),
(ii),(iii) or (iv) above (a) do not constitute more than fifteen percent
(15%) of Consolidated Total Assets determined as of the end of the most
recently ended fiscal year and (b) have not contributed more than fifteen
percent (15%) of Consolidated Net Earnings for the most recently ended
fiscal year of the Company; provided, however, that any sale permitted by
the foregoing of stock and Indebtedness of a Subsidiary at the time owned
by or owed to the Company and all other Subsidiaries may only be sold as
an entirety for fair market value.
"PERSON" shall mean and include an individual, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization and a
government or any department or agency thereof.
"PLAN" shall mean any "employee pension benefit plan" (as such term is
defined in section 3 of ERISA) which is or has been established or maintained,
or to which contributions are or have been made, by the Company or any ERISA
Affiliate.
"PRIORITY DEBT" shall mean the sum of (i) Indebtedness of the Company
which is secured by a Lien under paragraph 6B(1)(viii) and (ii) Indebtedness
of any Subsidiary (including, but not limited to, any Indebtedness of a
Subsidiary which consists of a Guarantee of Indebtedness of the Company),
excluding however Indebtedness of Subsidiaries owing to the Company or any
other Subsidiary.
"PRIVATE SHELF CLOSING DAY" for any Accepted Note shall mean the Business
Day specified for the closing of the purchase and sale of such Private Shelf
Note in the Request for Purchase of such Private Shelf Note, provided that (i)
if the Acceptance Day for such Accepted Note is less than five Business Days
after the Company shall have made such Request for Purchase and the Company
and the Purchaser which is obligated to purchase such Private Shelf Note agree
on an earlier Business Day for such closing, the "Private Shelf Closing Day"
for such Accepted Note shall be such earlier Business Day, and (ii) if the
closing of the purchase and sale of such Accepted Note is rescheduled pursuant
to paragraph 2A(7), the Private Shelf Closing Day for such Accepted Note, for
all purposes of this Agreement except paragraph 2A(8), shall mean the
Rescheduled Closing Day with respect to such Closing.
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"PRIVATE SHELF NOTE" and "PRIVATE SHELF NOTES" shall have the meaning
specified in paragraph 1B.
"PRUDENTIAL" shall mean Prudential Investment Management, Inc.
"PRUDENTIAL AFFILIATE" shall mean (i) any corporation or other entity
controlling, controlled by, or under common control with Prudential and (ii)
any managed account or investment fund which is managed by Prudential or a
Prudential Affiliate described in clause (i) of this definition. For purposes
of this definition, the terms "control", "controlling" and "controlled" shall
mean the ownership, directly or through Subsidiaries, of a majority of a
corporation's or other entity's Voting Stock or equivalent voting securities
or interests.
"PURCHASERS" shall mean, The Prudential Insurance Company of America with
respect to the Series A Notes and, with respect to any Accepted Notes the
Persons, either Prudential or a Prudential Affiliate, who is purchasing such
Accepted Notes.
"QUOTATION" shall have the meaning provided in paragraph 2A(4).
"REDEEMABLE PREFERRED STOCK" of any Person means any preferred stock
issued by such Person which is at any time prior to the maturity date of any
Note either (i) mandatorily redeemable (by sinking fund or similar payments or
otherwise) or (ii) redeemable at the option of the holder thereof.
"REQUEST FOR PURCHASE" shall have the meaning specified in paragraph
2A(3).
"REQUIRED HOLDER(S)" shall mean at any time, the holder or holders of at
least 51% of the aggregate principal amount of the Notes outstanding at such
time.
"RESCHEDULED CLOSING DAY" shall have the meaning specified in paragraph
2A(7).
"RESPONSIBLE OFFICER" shall mean the chief executive officer, chief
operating officer, chief financial officer, chief accounting officer,
treasurer or controller of the Company or any other officer of the Company
appointed by the board of directors of the Company and involved principally in
its financial administration or its controllership function.
"RESTRICTED PAYMENT" means (i) any dividend or other distribution on any
shares of the Company's capital stock (except dividends payable solely in
shares of its capital stock) or (ii) any payment on account of the purchase,
redemption, retirement or acquisition of (a) any shares of the Company's
capital stock (except shares acquired upon the conversion thereof into other
shares of its capital stock) or (b) any option, warrant or other right to
acquire shares of the Company's capital stock.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SERIES" shall have the meaning specified in paragraph 1B.
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"SERIES A NOTES" shall mean the 6.31% $20,000,000 senior note issued by
the Company to Prudential pursuant to the Existing 1993 Shelf Agreement.
"SIGNIFICANT HOLDER" shall mean (i) Prudential or any Prudential
Affiliate, so long as Prudential or any Prudential Affiliate shall hold any
Note or any amount remains available under the Facility or (ii) any other
holder of at least 10% of the aggregate principal amount of the Notes from
time to time outstanding. To the extent that any notice or document is
required to be delivered to the Purchasers or a Significant Holder under this
Agreement, such requirement shall be satisfied (a) with respect to Prudential,
all Prudential Affiliates and accounts managed by Prudential or Prudential
Affiliates by giving notice, or delivery of a copy of any such document, to
Prudential (addressed to Prudential and each such Prudential Affiliate) and
(b) with respect to any entity or group of affiliates whose Notes are managed
by a single entity, by giving notice or making delivery of a copy of any such
document to the managing entity (addressed to each holder of the Notes managed
by such entity).
"SIGNIFICANT SUBSIDIARY" means each of Franklin Electric Sales, Inc., an
Indiana corporation, and Franklin Electric Manufacturing, Inc., an Indiana
corporation.
"SUBSIDIARY" shall mean any corporation of which greater than fifty
percent (50%) of the stock of every class of which, except directors'
qualifying shares, shall, at the time of which any determination is being
made, be owned by the Company directly or through Subsidiaries.
"SWAP AGREEMENT" means any agreement with respect to any swap, forward,
future or derivative transaction or option or similar agreement involving, or
settled by reference to, one or more rates, currencies, commodities, equity or
debt instruments or securities, or economic, financial or pricing indices or
measures of economic, financial or pricing risk or value or any similar
transaction or any combination of these transactions; provided that no phantom
stock or similar plan providing for payments only on account of services
provided by current or former directors, officers, employees or consultants of
the Company or the Subsidiaries shall be a Swap Agreement.
"TRANSFEREE" shall mean any direct or indirect transferee of all or any
part of any Note purchased by any Purchaser under this Agreement.
"UNRESTRICTED SUBSIDIARY" shall mean any Subsidiary (i) whose assets
constitute less than five percent (5%) of the consolidated net assets of the
Company and its Subsidiaries and (ii) which has contributed less than five
percent (5%) of Consolidated Net Earnings for the most recently ended fiscal
year of the Company.
"U.S. CANCELLATION FEE" shall have the meaning specified in paragraph
2A(8)(iii).
"U.S. SUBSIDIARY" shall mean a Subsidiary which has the majority of its
assets located in the United States.
154
"VOTING STOCK" shall mean, with respect to any corporation, any shares of
stock of such corporation whose holders are entitled under ordinary
circumstances to vote for the election of directors of such corporation
(irrespective of whether at the time stock of any other class or classes shall
have or might have voting power by reason of the happening of any
contingency).
"WHOLLY-OWNED SUBSIDIARY" shall mean any Subsidiary of the Company all of
the outstanding capital stock of every class of which is owned by the Company
or another Wholly-Owned Subsidiary of the Company.
"YEN" shall mean the lawful currency of Japan.
10C. Accounting Principles, Terms and Determinations. All references in this
Agreement to "generally accepted accounting principles" shall be deemed to
refer to generally accepted accounting principles in effect in the United
States at the time of application thereof. Unless otherwise specified herein,
all accounting terms used herein shall be interpreted, all determinations with
respect to accounting matters hereunder shall be made, and all unaudited
financial statements and certificates and reports as to financial matters
required to be furnished hereunder shall be prepared, in accordance with
generally accepted accounting principles applied on a basis consistent with
the most recent audited consolidated financial statements of the Company and
its Subsidiaries delivered pursuant to clause (ii) of paragraph 5A or, if no
such statements have been so delivered, the most recent audited financial
statements referred to in clause (i) of paragraph 8B. Any reference herein to
any specific citation, section or form of law, statute, rule or regulation
shall refer to such new, replacement or analogous citation, section or form
should such citation, section or form be modified, amended or replaced.
11. MISCELLANEOUS.
11A. NOTE PAYMENTS. The Company agrees that, so long as any
Purchaser shall hold any Note, it will make payments of principal of, interest
on and any Yield-Maintenance Amount payable with respect to such Note, which
comply with the terms of this Agreement, by wire transfer of immediately
available funds for credit (not later than 12:00 noon, New York City local
time, on the date due) to (i) such Purchaser's account or accounts as
specified in the Purchaser Schedule attached hereto (in the case of the Series
A Notes), (ii) the account or accounts of such Purchaser specified in the
applicable Confirmation of Acceptance (in the case of any Private Shelf Note)
or (iii) such other account or accounts as such Purchaser may designate in
writing, notwithstanding any contrary provision herein or in any Note with
respect to the place of payment. Each Purchaser agrees that, before disposing
of any Note, such Purchaser will make a notation thereon (or on a schedule
attached thereto) of all principal payments previously made thereon and of the
date to which interest thereon has been paid. The Company agrees to afford
the benefits of this paragraph 11A to any Transferee which shall have made the
same agreement as each Purchaser has made in this paragraph 11A.
11B. EXPENSES. The Company agrees, whether or not the
transactions contemplated hereby shall be consummated, to pay, and save
Prudential, each Purchaser and, only to the extent specified below, any
Transferee harmless against liability for the payment of, all out-of-pocket
expenses arising in connection with such transactions, including (i) all
document production and duplication charges and the fees and expenses of any
155
special counsel engaged by the Purchasers in connection with this Agreement,
the transactions contemplated hereby and any subsequent proposed modification
of, or proposed consent under, this Agreement, whether or not such proposed
modification shall be effected or proposed consent granted, (ii) all fees and
expenses of the type referred to in clause (i) of this paragraph incurred by
any special counsel engaged by any Transferee in connection with any proposed
modification of, or proposed consent under, this Agreement, whether or not
such proposed modification shall be effected or proposed consent granted and
(iii) the costs and expenses, including reasonable attorneys' fees, incurred
by any Purchaser or any Transferee in enforcing (or determining whether or how
to enforce) any rights under this Agreement or the Notes or in responding to
any subpoena or other legal process or informal investigative demand issued in
connection with this Agreement or the transactions contemplated hereby,
including without limitation costs and expenses incurred in any bankruptcy
case. The obligations of the Company under this paragraph 11B shall survive
the transfer of any Note or portion thereof or interest therein by any
Purchaser or any Transferee and the payment of any Note.
11C. CONSENT TO AMENDMENTS. This Agreement may be amended, and the
Company may take any action herein prohibited, or omit to perform any act
herein required to be performed by it, if the Company shall obtain the written
consent to such amendment, action or omission to act, of the Required
Holder(s) except that, (i) with the written consent of the holders of all
Notes of a particular Series, and if an Event of Default shall have occurred
and be continuing, of the holders of all Notes of all Series, at the time
outstanding (and not without such written consents), the Notes of such Series
may be amended or the provisions thereof waived to change the maturity
thereof, to change or affect the principal thereof, or to change or affect the
rate or time of payment of interest on or any Yield-Maintenance Amount payable
with respect to the Notes of such Series, (ii) without the written consent of
the holder or holders of all Notes at the time outstanding, no amendment to or
waiver of the provisions of this Agreement shall change or affect the
provisions of paragraph 7A or this paragraph 11C insofar as such provisions
relate to proportions of the principal amount of the Notes of any Series, or
the rights of any individual holder of Notes, required with respect to any
declaration of Notes to be due and payable or with respect to any consent,
amendment, waiver or declaration, (iii) with the written consent of Prudential
(and not without the written consent of Prudential) the provisions of
paragraph 2 may be amended or waived (except insofar as any such amendment or
waiver would affect any rights or obligations with respect to the purchase and
sale of Notes which shall have become Accepted Notes prior to such amendment
or waiver), and (iv) with the written consent of all of the Purchasers which
shall have become obligated to purchase Accepted Notes of any Series (and not
without the written consent of all such Purchasers), any of the provisions of
paragraphs 2 and 3 may be amended or waived insofar as such amendment or
waiver would affect only rights or obligations with respect to the purchase
and sale of the Accepted Notes of such Series or the terms and provisions of
such Accepted Notes. Each holder of any Note at the time or thereafter
outstanding shall be bound by any consent authorized by this paragraph 11C,
whether or not such Note shall have been marked to indicate such consent, but
any Notes issued thereafter may bear a notation referring to any such consent.
No course of dealing between the Company and the holder of any Note nor any
delay in exercising any rights hereunder or under any Note shall operate as a
waiver of any rights of any holder of such Note. As used herein and in the
156
Notes, the term "this Agreement" and references thereto shall mean this
Agreement as it may from time to time be amended or supplemented.
11D. FORM, REGISTRATION, TRANSFER AND EXCHANGE OF NOTES; LOST
NOTES. The Notes are issuable as registered notes without coupons in
denominations of at least $2,000,000 (or its equivalent if denominated in
another currency) except as may be necessary to reflect any principal amount
not evenly divisible by $2,000,000 or as may be necessary to represent the
entire principal amount of a Note being transferred or exchanged the principal
amount of which shall be less than $2,000,000 (or its equivalent if
denominated in another currency) because of prepayments; provided, however,
that no such minimum denomination shall apply to Notes issued to, or issued
upon transfer by any holder of the Notes to, Prudential or one or more
Prudential Affiliates or accounts managed by Prudential or Prudential
Affiliates or to any other entity or group of affiliates so long as the
Company shall have received a certificate from the proposed Transferee(s) in
form and substance reasonably acceptable to the Company stating that the Notes
so issued or transferred shall be managed by a single entity and the aggregate
amount so issued or transferred to all such affiliates is at least $2,000,000.
The Company shall keep at its principal office a register in which the Company
shall provide for the registration of Notes and of transfers of Notes. Upon
surrender for registration of transfer of any Note at the principal office of
the Company, the Company shall, at its expense, execute and deliver one or
more new Notes of like tenor and of a like aggregate principal amount,
registered in the name of such transferee or transferees. At the option of
the holder of any Note, such Note may be exchanged for other Notes of like
tenor and of any authorized denominations, of a like aggregate principal
amount, upon surrender of the Note to be exchanged at the principal office of
the Company. Whenever any Notes are so surrendered for exchange, the Company
shall, at its expense, execute and deliver the Notes which the holder making
the exchange is entitled to receive. Each installment of principal payable on
each installment date upon each new Note issued upon any such transfer or
exchange shall be in the same proportion to the unpaid principal amount of
such new Note as the installment of principal payable on such date on the Note
surrendered for registration of transfer or exchange bore to the unpaid
principal amount of such Note. No reference need be made in any such new Note
to any installment or installments of principal previously due and paid upon
the Note surrendered for registration of transfer or exchange. Every Note
surrendered for registration of transfer or exchange shall be duly endorsed,
or be accompanied by a written instrument of transfer duly executed, by the
holder of such Note or such holder's attorney duly authorized in writing. Any
Note or Notes issued in exchange for any Note or upon transfer thereof shall
carry the rights to unpaid interest and interest to accrue which were carried
by the Note so exchanged or transferred, so that neither gain nor loss of
interest shall result from any such transfer or exchange. Upon receipt of
written notice from the holder of any Note of the loss, theft, destruction or
mutilation of such Note and, in the case of any such loss, theft or
destruction, upon receipt of such holder's unsecured indemnity agreement, or
in the case of any such mutilation upon surrender and cancellation of such
Note, the Company will make and deliver a new Note, of like tenor, in lieu of
the lost, stolen, destroyed or mutilated Note.
157
11E. PERSONS DEEMED OWNERS; PARTICIPATIONS. Prior to due
presentment for registration of transfer, the Company may treat the Person in
whose name any Note is registered as the owner and holder of such Note for the
purpose of receiving payment of principal of and interest on, and any Yield-
Maintenance Amount payable with respect to, such Note and for all other
purposes whatsoever, whether or not such Note shall be overdue, and the
Company shall not be affected by notice to the contrary. Subject to the
preceding sentence, the holder of any Note may from time to time grant
participations in all or any part of such Note to any Person on such terms and
conditions as may be determined by such holder in its sole and absolute
discretion.
11F. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All representations and warranties contained herein or made in writing by or
on behalf of the Company in connection herewith shall survive the execution
and delivery of this Agreement and the Notes, the transfer by any Purchaser of
any Note or portion thereof or interest therein and the payment of any Note,
and may be relied upon by any Transferee, regardless of any investigation made
at any time by or on behalf of any Purchaser or any Transferee. Subject to
the preceding sentence, this Agreement and the Notes embody the entire
agreement and understanding between the parties hereto with respect to the
subject matter hereof and supersede all prior agreements and understandings
relating to such subject matter.
11G. SUCCESSORS AND ASSIGNS. All covenants and other agreements
in this Agreement contained by or on behalf of any of the parties hereto shall
bind and inure to the benefit of the respective successors and assigns of the
parties hereto (including, without limitation, any Transferee) whether so
expressed or not.
11H. DISCLOSURE TO OTHER PERSONS. By its acceptance of any Note,
each Purchaser of a Note and each Transferee agrees to use reasonable efforts
to hold in confidence and not disclose any Information (other than Information
(a) which was publicly known or otherwise known to such Person, at the time of
disclosure (except pursuant to disclosure in connection with this Agreement),
(b) which subsequently becomes publicly known through no act or omission by
such Person, or (c) which otherwise becomes known to such Person, other than
through disclosure by the Company); PROVIDED, HOWEVER, that nothing herein
shall prevent the holder of any Note from disclosing any Information disclosed
to such holder to (i) its directors, officers, employees, agents, attorneys,
and professional consultants, (ii) any Institutional Investor which holds any
Note, (iii) any Institutional Investor which is not a Competitor to which it
offers to sell any Note or any part thereof, (iv) any Institutional Investor
which is not a Competitor to which it sells or offers to sell a participation
in all or any part of any Note, (v) any federal or state regulatory authority
having jurisdiction over it, (vi) the National Association of Insurance
Commissioners or any similar organization, or (vii) any other Person to which
such delivery or disclosure may be reasonably necessary (1) in compliance with
any law, rule, regulation or order applicable to it, (2) in response to any
subpoena or other legal process or informal investigative demand, (3) in
connection with any litigation to which it is a party or (4) in order to
enforce the rights of any holder under this Agreement or in any Note;
PROVIDED, FURTHER, that in the case of sales contemplated by clauses (iii) and
(iv) above, each Purchaser and each Transferee agrees to distribute first to
the potential purchaser the financial statements and audit reports received
pursuant to paragraph 5A(i), (ii), (iii) and (iv) (collectively referred to as
158
the "Public Information") and second after such potential purchaser indicates
that it is still considering consummating a purchase and has agreed in writing
to be bound by this paragraph for the benefit of the Company, such Purchaser
or Transferee may distribute such other Information as it deems necessary in
order for such potential purchaser to independently evaluate the Company's
creditworthiness (collectively referred to as the "Non-Public Information").
Prior to disclosing Non-Public Information to any potential purchaser, each
holder of a Note by its acceptance of the Note agrees to use reasonable
efforts to give the Company written notice of its intention to disclose Non-
Public Information in connection with any proposed sale or transfer to an
Institutional Investor stating in such notice the name of the Institutional
Investor to whom such disclosure is to be made. The term "Information" shall
mean all information received from the Company relating to the Company, any
Subsidiary or their respective businesses, provided that as to any such
information which is communicated to a Purchaser or Transferee after the date
of this Agreement and is not in the form of a writing, such information is
clearly identified as confidential at the time of such communication. The
term "Competitor" shall mean and include each of the companies identified as
competitors in a writing delivered to Prudential on the date of this Agreement
and specifically referring to paragraph 11H hereof as supplemented in writing
from time to time by the Company with the consent of the Required Holder(s)
which consent shall not be unreasonably withheld.
11I. NOTICES. All written communications provided for hereunder
(other than communications provided for under paragraph 2) shall be sent by
first class mail or nationwide overnight delivery service (with charges
prepaid) or by hand delivery and (i) if to any Purchaser, addressed to such
Purchaser at the address specified for such communications in the Purchaser
Schedule attached hereto (in the case of the Series A Notes) or in the
Confirmation of Acceptance (in the case of any Private Shelf Notes), or at
such other address as any Purchaser shall have specified in writing to the
Company, and (ii) if to any other holder of any Note, addressed to such other
holder at such address as such other holder shall have specified in writing to
the Company or, if any such other holder shall not have so specified an
address to the Company, then addressed to such other holder in care of the
last holder of such Note which shall have so specified an address to the
Company, and (iii) if to the Company, addressed to it at Franklin Electric
Co., Inc., 400 East Spring Street, Bluffton, Indiana 46714, Attention:
Secretary, or at such other address as the Company shall have specified to the
holder of each Note in writing.
11J. PAYMENTS DUE ON NON-BUSINESS DAYS. Anything in this
Agreement or the Notes to the contrary notwithstanding, any payment of
principal of or interest on, or Yield-Maintenance Amount payable with respect
to, any Note that is due on a date other than a New York Business Day shall be
made on the next succeeding New York Business Day. If the date for any
payment is extended to the next succeeding New York Business Day by reason of
the preceding sentence, the period of such extension shall be included in the
computation of the interest payable on such New York Business Day.
159
11K. SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.
11L. DESCRIPTIVE HEADINGS. The descriptive headings of the
several paragraphs of this Agreement are inserted for convenience only and do
not constitute a part of this Agreement.
11M. SATISFACTION REQUIREMENT. If any agreement, certificate or
other writing, or any action taken or to be taken, is by the terms of this
Agreement required to be satisfactory to any Purchaser, to any holder of Notes
or to the Required Holder(s), the determination of such satisfaction shall be
made by such Purchaser, such holder or the Required Holder(s), as the case may
be, in the sole and exclusive judgment (exercised in good faith) of the Person
or Persons making such determination.
11N. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED
BY, THE INTERNAL LAWS AND DECISIONS (AS OPPOSED TO THE CONFLICTS OF LAW
PROVISIONS) OF THE STATE OF ILLINOIS.
11O. PAYMENT CURRENCY. All payments on account of the Series A
Notes and any Private Shelf Notes denominated in Dollars (including principal,
interest and Yield-Maintenance Amounts) shall be made in Dollars, and all
payments on account of any Private Shelf Notes denominated in any other
currency (including principal, interest and Yield-Maintenance Amounts) shall
be made in such other currency. The obligation of the Company to make payment
on account of any Notes in the applicable currency specified in the preceding
sentence shall not be discharged or satisfied by any tender, or any recovery
pursuant to any judgment, which is expressed in or converted into any currency
other than such applicable currency, except to the extent the holder of the
applicable Note actually receives the full amount of the currency in which the
underlying obligation is denominated. The obligation of the Company to make
payment in any given currency as required by the first sentence of this
paragraph shall be enforceable as an alternative or additional cause of action
for the purpose of recovery in such currency, of the amount, if any, by which
such actual receipt shall fall short of the full amount of such currency
expressed to be payable in respect of any such obligation, and shall not be
affected by judgment being obtained for any other sums due under the Notes or
this Agreement, as the case may be.
11P. PAYMENTS FREE AND CLEAR OF TAXES. The Company will pay all
amounts of principal of, Yield-Maintenance Amount, if any, and interest on the
Notes, and all other amounts payable hereunder or under the Notes, without
set-off or counterclaim and free and clear of, and without deduction or
withholding for or on account of, all present and future income, stamp,
documentary and other taxes and duties, and all other levies, imposts,
charges, fees, deductions and withholdings, now or hereafter imposed, levied,
collected, withheld or assessed by any governmental authority (except net
income taxes and franchise taxes in lieu of net income taxes imposed on any
holder of any Note by its jurisdiction of incorporation or the jurisdiction in
which its applicable lending office is located) (all such non-excluded taxes,
duties, levies, imposts, duties, charges, fees, deductions and withholdings
160
being hereinafter called "Taxes"). If any Taxes are required to be withheld
from any amounts payable to a holder of any Notes, the amounts so payable to
such holder shall be increased to the extent necessary to yield such holder
(after payment of all Taxes) interest on any such other amounts payable
hereunder at the rates or in the amounts specified in this Agreement and the
Notes. Whenever any Taxes are payable by the Company, as promptly as possible
thereafter, the Company shall send to each holder of the Notes, a certified
copy of an original official receipt received by the Company showing payment
thereof. If the Company fails to pay any Taxes when due to the appropriate
taxing authority or fails to remit to each holder of the Notes the required
receipts or other required documentary evidence, the Company shall indemnify
each holder of the Notes for any Taxes (including interest or penalties) that
may become payable by such holder as a result of any such failure. The
obligations of the Company under this paragraph 11P shall survive the payment
and performance of the Notes and the termination of this Agreement.
11Q. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
11R. INDEPENDENCE OF COVENANTS. All covenants hereunder shall be
given independent effect so that if a particular action or condition is
prohibited by any one of such covenants, the fact that it would be permitted
by an exception to, or otherwise be in compliance within the limitations of,
another covenant shall not (i) avoid the occurrence of a Default or Event of
Default if such action is taken or such condition exists or (ii) in any way
prejudice an attempt by the holder of any Note to prohibit (through equitable
action or otherwise) the taking of any action by the Company or a Subsidiary
which would result in an Event of Default or Default.
11S. SEVERAL OBLIGATIONS. The sales of Notes to the Purchasers
are to be several sales, and the obligations of Prudential and the Purchasers
under this Agreement are several obligations. No failure by Prudential or any
Purchaser to perform its obligations under this Agreement shall relieve any
other Purchaser or the Company of any of its obligations hereunder, and
neither Prudential nor any Purchaser shall be responsible for the obligations
of, or any action taken or omitted by, any other such Person hereunder.
[The remainder of this page is intentionally left blank.]
161
11T. BINDING AGREEMENT. When this Agreement is executed and
delivered by the Company and Prudential and The Prudential Insurance Company
of America, it shall become a binding agreement between the Company and
Prudential and The Prudential Company of America. This Agreement shall also
inure to the benefit of each Purchaser on the Purchaser Schedule and each
Purchaser which shall have executed and delivered a Confirmation of
Acceptance, and each such Purchaser shall be bound by this Agreement to the
extent provided in such Confirmation of Acceptance.
Very truly yours,
FRANKLIN ELECTRIC CO., INC.
By:
-----------------------------
Title
The foregoing Agreement is
hereby accepted as of the
date first above written.
PRUDENTIAL INVESTMENT MANAGEMENT, INC.
By:
-----------------------------
Vice President
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By:
-----------------------------
Vice President
162
Series A Notes
--------------
PURCHASER SCHEDULE
FRANKLIN ELECTRIC CO., INC.
Aggregate
Principal
Amount of
Notes Note
Purchased Denomination(s)
------------ ---------------
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA $20,000,000 $20,000,000
(1) All payments on account of Notes held by such
purchaser shall be made by wire transfer of
immediately available funds for credit to:
Account No. 050-54-526
Morgan Guaranty Trust Company of New York
23 Wall Street
New York, New York 10015
(ABA No.: 021-000-238)
Each such wire transfer shall set forth the name
of the Company, a reference to "6.31% Series A Senior
Notes due November 10, 2008, Security No.
!INV4623!", and the due date and application
(as among principal, interest and Yield-Maintenance
Amount) of the payment being made.
(2) Address for all notices relating to payments:
The Prudential Insurance Company of America
c/o Prudential Capital Group
Four Gateway Center
100 Mulberry Street
Newark, New Jersey 07102
Attention: Investment Administration Unit
Telecopy: (201) 802-7551
163
(3) Address for all other communications and notices:
The Prudential Insurance Company of America
c/o Prudential Capital Group
Two Prudential Plaza
Suite 5600
Chicago, Illinois 60601
Attention: Managing Director
Telecopy: (312) 540-4222
(4) Recipient of telephonic prepayment notices:
Manager, Asset Management Unit
Telephone: (201) 802-6429
Telecopy: (201) 802-7551
(5) Recipient of telephonic prepayment notices:
Manager, Asset Management Unit
(201) 802-6429
(6) Tax Identification No.: 22-1211670
164
EXHIBIT A
---------
[FORM OF PRIVATE SHELF NOTE]
FRANKLIN ELECTRIC CO., INC.
SENIOR NOTE
(Fixed Rate)
SERIES
------
No.
CURRENCY AND ORIGINAL PRINCIPAL AMOUNT:
ORIGINAL ISSUE DATE:
INTEREST RATE:
INTEREST PAYMENT DATES:
FINAL MATURITY DATE:
PRINCIPAL PREPAYMENT DATES AND AMOUNTS:
FOR VALUE RECEIVED, the undersigned, FRANKLIN ELECTRIC CO., INC. (herein
called the "Company"), a corporation organized and existing under the laws of
the State of Indiana, hereby promises to pay to , or
registered assigns, the principal sum of [specify principal
amount and currency] on the Final Maturity Date specified above] [, payable on
the Principal Prepayment Dates and in the amounts specified above, and on the
Final Maturity Date specified above in an amount equal to the unpaid balance
of the principal hereof,] with interest (computed on the basis of a 360-day
year--30-day month) (a) on the unpaid balance thereof at the Interest Rate per
annum specified above, payable on each Interest Payment Date specified above
and on the Final Maturity Date specified above, commencing with the Interest
Payment Date next succeeding the date hereof, until the principal hereof shall
have become due and payable, and (b) on any overdue payment (including any
overdue prepayment) of principal, any overdue payment of interest, and any
overdue payment of any Yield-Maintenance Amount (as defined in the Agreement
referred to below), payable on each Interest Payment Date as aforesaid (or, at
the option of the registered holder hereof, on demand), at a rate per annum
from time to time equal to the greater of (i) 2% plus the Interest Rate
specified above or (ii) 2% over the rate of interest publicly announced by the
Bank of New York from time to time in New York City as its Prime Rate.
Payments of principal of, and interest on, and any Yield-Maintenance
Amount payable with respect to, this Note are to be made at the main office of
the Bank of New York in New York City or at such other place in the United
States as the holder hereof shall designate to the Company in writing, in
lawful money of [the United States of America][specify other applicable
country].
This Note is one of a series of Senior Notes (herein called the "Notes")
issued pursuant to a Second Amended and Restated Note Purchase and Private
Shelf Agreement, dated as of September 9, 2004 (herein called the "Agree-
ment"), between the Company, on the one hand, and Prudential Investment
Management, Inc., The Prudential Insurance Company of America and each other
165
"Prudential Affiliate" (as defined in the Agreement) which becomes a party
thereto, on the other hand, and is entitled to the benefits thereof. As
provided in the Agreement, this Note is subject to prepayment, in whole or
from time to time in part on the terms specified in the Agreement.
This Note is a registered Note and, as provided in the Agreement, upon
surrender of this Note for registration of transfer, duly endorsed, or
accompanied by a written instrument of transfer duly executed, by the
registered holder hereof or such holder's attorney duly authorized in writing,
a new Note for a like principal amount will be issued to, and registered in
the name of, the transferee. Prior to due presentment for registration of
transfer, the Company may treat the person in whose name this Note is
registered as the owner hereof for the purpose of receiving payment and for
all other purposes, and the Company shall not be affected by any notice to the
contrary.
In case an Event of Default, as defined in the Agreement, shall occur and
be continuing, the principal of this Note may be declared or otherwise become
due and payable in the manner and with the effect provided in the Agreement.
Capitalized terms used and not otherwise defined herein shall have the
meanings provided in the Agreement.
THIS NOTE IS INTENDED TO BE PERFORMED IN THE STATE OF ILLINOIS AND SHALL
BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS AND DECISIONS
(AS OPPOSED TO THE CONFLICTS OF LAW PROVISIONS) OF SUCH STATE.
FRANKLIN ELECTRIC CO., INC.
By:
-----------------------------
Title:
---------------------------
166
EXHIBIT B
---------
[FORM OF REQUEST FOR PURCHASE]
FRANKLIN ELECTRIC CO., INC.
Reference is made to the Second Amended and Restated Note Purchase and
Private Shelf Agreement (the "Agreement"), dated as of September 9, 2004,
between Franklin Electric Co., Inc. (the "Company"), and Prudential Investment
Management, Inc., The Prudential Insurance Company of America and each other
Prudential Affiliate which becomes a party thereto. All terms used herein
that are defined in the Agreement have the respective meanings specified in
the Agreement.
Pursuant to Paragraph 2A(3) of the Agreement, the Company hereby makes the
following Request for Purchase:
1. Aggregate principal amount of
the Notes and Available Currency
covered hereby (the "Notes") ................. $ (amount)
---------
$ (currency)
---------
2. Individual specifications of the Notes:
Principal
Final Installment Interest
Principal Maturity Dates and Payment
Amount * Date Amounts Period
--------- -------- ----------- --------
3. Use of proceeds of the Notes:
4. Proposed day for the closing of the purchase and sale of the Notes:
------------------------
* Minimum principal amount of $5,000,000
167
5. The purchase price of the Notes is to be transferred to:
Name, Address Name and
and ABA Routing Number of Telephone No.
Number of Bank Account of Bank Officer
--------------- --------- ---------------
6. The Company certifies (a) that the representations and warranties
contained in paragraph 8 of the Agreement are true on and as of the date of
this Request for Purchase except to the extent of changes caused by the
transactions contemplated in the Agreement and (b) that there exists on the
date of this Request for Purchase no Event of Default or Default.
7. The Issuance Fee to be paid pursuant to paragraph 2A(8)(i) of the
Agreement will be paid by the Company on the closing date.
8. The Company has reviewed the closing conditions set forth in
paragraph 3 of the Agreement and understands that it will be required to
deliver certain documents at closing, including, without limitation, an
opinion of special counsel to the Company.
Dated: FRANKLIN ELECTRIC CO., INC.
By:
----------------------------
Authorized Officer
168
EXHIBIT C
---------
[FORM OF CONFIRMATION OF ACCEPTANCE]
FRANKLIN ELECTRIC CO., INC.
Reference is made to the Second Amended and Restated Note Purchase and
Private Shelf Agreement (the "Agreement"), dated as of September 9, 2004
between Franklin Electric Co., Inc. (the "Company") and Prudential Investment
Management, Inc., The Prudential Insurance Company of America and each other
Prudential Affiliate which becomes a party thereto. All terms used herein
that are defined in the Agreement have the respective meanings specified in
the Agreement.
Prudential or the Prudential Affiliate which is named below as a Purchaser
of Notes hereby confirms the representations as to such Notes set forth in
paragraph 9 of the Agreement, and agrees to be bound by the provisions of
paragraphs 2A(5) and 2A(7) of the Agreement relating to the purchase and sale
of such Notes.
Pursuant to paragraph 2A(5) of the Agreement, an Acceptance with respect
to the following Accepted Notes is hereby confirmed:
I. Accepted Notes: Aggregate principal
amount $
---------------------
(A) (a) Name of Purchaser:
(b) Principal amount:
(c) Designated Currency:
(d) Final maturity date:
(e) Principal prepayment dates and amounts:
(f) Interest rate:
(g) Interest payment period:
(h) Payment and notice instructions: As set forth on attached
Purchaser Schedule
(B) (a) Name of Purchaser:
(b) Principal amount:
(c) Designated Currency:
(d) Final maturity date:
(e) Principal prepayment dates and amounts:
(f) Interest rate:
(g) Interest payment period:
(h) Payment and notice instructions: As set forth on attached
Purchaser Schedule
II. Closing Day:
III. Issuance Fee:
169
Dated: FRANKLIN ELECTRIC CO., INC.
By:
-------------------------------
Title:
[PRUDENTIAL INVESTMENT MANAGEMENT, INC.]
By:
-------------------------------
Vice President
[PRUDENTIAL AFFILIATE]
By:
-------------------------------
Vice President
170
EXHIBIT D
---------
[FORM OF OPINION OF COMPANY'S SPECIAL COUNSEL]
[Date of Closing]
Prudential Investment Management, Inc.
[List other Purchasers]
c/o Prudential Capital Group
Two Prudential Plaza
Suite 5600
Chicago, Illinois 60601
Ladies and Gentlemen:
We have acted as special counsel to Franklin Electric Co., Inc., an
Indiana corporation (the "Company"), in connection with the Second Amended and
Restated Note Purchase and Private Shelf Agreement (the "Agreement") dated as
of September 9, 2004, between the Company and you, providing for the issuance
and delivery to you today of the Company's
Note(s) due , in the aggregate principal amount of $
(the "Note"). This opinion letter is being delivered at the request of the
Company pursuant to paragraph 3A of the Agreement. Capitalized terms used in
this opinion letter which are defined in the Agreement and not otherwise
defined in this opinion letter shall have the meanings given to them in the
Agreement.
We have examined such documents and matters of law which we have deemed
necessary as the basis for the opinions expressed below. The documents
examined include the following (the documents described in (i) and (ii) below
are collectively called the "Transaction Documents"):
(i) An executed copy of the Agreement;
(ii) An executed copy of the Note;
(iii) A copy of the articles of incorporation of the Company and all
amendments thereto, certified by the Secretary of State of Indiana;
(iv) A copy of the by-laws of the Company and all amendments thereto,
certified by the Secretary of the Company;
(v) A copy of the resolutions of the board of directors of the Company
authorizing the execution and delivery of the Transaction Documents, certified
by the Secretary of the Company;
(vi) A certificate of the Secretary of the Company as to the incumbency
and specimen signatures of the officers of the Company executing the
Transaction Documents; and
(vii)A certificate of the Secretary of State of Indiana as to the
corporate existence of the Company.
In making our examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals,
the conformity with the originals of all documents submitted to us as copies
and the legal capacity of all natural persons. As to matters of fact material
to our opinions in this letter, we have relied on certificates of officers of
the Company, public officials and other appropriate persons and on the
171
representations made in the Transaction Documents. We have not independently
investigated or verified any of the foregoing.
In rendering the opinions in this letter we have assumed, without
independent investigation or verification, that each party to each of the
Transaction Documents, other than the Company, (a) is validly existing and in
good standing under the laws of its jurisdiction of organization, (b) has full
power and authority to execute the Transaction Documents to which it is a
party and to enter into the transactions contemplated therein, (c) has taken
all necessary action to authorize execution of the Transaction Documents to
which it is a party on its behalf by the persons executing same, (d) has
properly executed and delivered each of the Transaction Documents to which it
is a party, and (e) has duly obtained all consents or approvals of any nature
from and made all filings with any governmental authorities necessary for such
party to execute, deliver or perform its obligations under the Transaction
Documents to which it is a party. In addition, in rendering such opinions we
have assumed, without independent investigation or verification, that the
execution and delivery of, and performance of their respective agreements
under, the Transaction Documents by each party thereto other than the Company,
do not violate any agreement or instrument binding upon such party or, except
to the extent covered by our opinion in paragraph 6 below, any law, rule or
regulation binding upon such party, that each of the Transaction Documents is
the legal, valid and binding obligation of, and enforceable against, each
party thereto other than the Company, and, except to the extent covered by our
opinions in paragraphs 4, 5, 6 and 7 below, that the execution and delivery by
the Company of, and performance by it of its agreements under, the Transaction
Documents do not violate any law, rule, regulation, agreement or instrument
binding upon the Company or require any consent or approval from or filing
with any governmental authority.
In rendering our opinions herein we have also assumed, without independent
investigation or verification, that there is no oral or written agreement,
understanding, course of dealing or usage of trade that amends any term of any
Transaction Document, or any waiver of any such term, that the Transaction
Documents are accurate and complete and that there has been no mutual mistake
of fact or fraud, duress, undue influence or similar inequitable conduct.
For the purpose of this opinion letter, our "knowledge" (or any similar
concept) with respect to any matter means (1) the actual knowledge regarding
such matter of the particular Schiff Hardin LLP attorneys who are presently
employees or partners of Schiff Hardin LLP and who have represented the
Company in connection with the transactions contemplated by the Transaction
Documents, (2) we have not undertaken any review of our files or other
independent investigation with respect to any such matter and (3) no inference
that we have actual knowledge concerning such matter should be drawn from the
mere fact of our representation of the Company or our expression of any
opinion in this letter.
The opinions contained in this letter are only expressions of professional
judgment regarding the legal matters addressed and are not guarantees that a
court would reach any particular result.
Based on the foregoing and subject to the qualifications set forth below,
we are of the opinion that:
1. The Company is a corporation validly existing under the laws of the
State of Indiana.
172
2. The Company has the corporate power and authority to execute, deliver
and perform its obligations under each of the Transaction Documents, and the
execution, delivery and performance thereof by the Company have been duly
authorized by all necessary corporate action on the part of the Company.
3. Each of the Transaction Documents has been duly executed and
delivered by the Company and constitutes the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms.
4. The execution and delivery by the Company of each of the Transaction
Documents do not, and the performance by the Company of its obligations under
the Transaction Documents will not, (i) violate the articles of incorporation
or the by-laws of the Company, (ii) violate any law, rule or regulation
applicable to the Company, (iii) violate any judgment, injunction, order or
decree which is listed on Schedule I attached to this opinion letter, or (iv)
breach or result in a default under any indenture, mortgage, instrument or
agreement with respect to the Company which is listed on Schedule I attached
to this opinion letter.
5. In view of the circumstances surrounding the sale and delivery of the
Note and on the basis of the representations made by the Company in paragraph
8H of the Agreement and by you in paragraph 9 of the Agreement, it is not
necessary in connection with the offering, issuance and delivery of the Note
under the circumstances contemplated by the Agreement to register the Note
under the Securities Act or to qualify an indenture in respect of the Note
under the Trust Indenture Act of 1939, as amended and now in effect.
6. On the basis of the representations made by the Company in paragraph
8I of the Agreement, the extension, arranging and obtaining of the credit
represented by the Note do not result in any violation of Regulation T, U or X
or the Board of Governors of the Federal Reserve System.
7. No consent, approval, authorization of, or registration or filing
with, any government authority is required to be obtained or made by the
Company in connection with the execution, delivery and performance of any
Transaction Document, or the offering, sale and issuance of the Notes by the
Company under the circumstances contemplated by the Agreement, except such as
have been obtained or made and except for any routine filings after the date
hereof with the Securities and Exchange Commission and/or state blue sky
authorities.
8. The Company is not an "investment company" as defined in, or subject
to regulation under, the Investment Company Act of 1940.
9. The Company is not a "holding company" as defined in, or subject to
regulation under, the Public Utility Holding Company Act of 1935, as amended.
The opinions set forth above are subject to the following qualifications:
A. For purposes of our opinion in paragraph 1 above as to the existence
of the Company, we have relied solely upon the document described in item
(vii) above.
173
B. The opinion expressed in paragraph 3 above with respect to the
legality, validity, binding nature and enforceability of the Transaction
Documents is subject to (i) applicable laws relating to bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or other similar
laws affecting creditors' rights generally, whether now or hereafter in
effect, (ii) general principles of equity, including, without limitation,
concepts of materiality, laches, reasonableness, good faith and fair dealing
and the principles regarding when injunctive or other equitable remedies will
be available (regardless of whether considered in a proceeding at law or in
equity), and (iii) the qualification that certain provisions of the
Transaction Documents are or may be unenforceable in whole or in part, but,
subject to the other limitations as to enforceability expressed in this
opinion and any limitations contained in the Transaction Documents, the
inclusion of such provisions does not prevent the practical realization of the
benefits intended to be afforded by the Company's principal obligations under
the Transaction Documents except for the economic consequences, if any,
resulting from any delay imposed by applicable laws, rules and regulations,
court decisions or procedures or constitutional requirements.
C. In rendering the opinions set forth above, we have made no
examination of, and we express no opinion with respect to, any accounting
matters. Our opinion in paragraph 4 above covers only violations, breaches or
defaults which can be definitively determined as of the date of this opinion
letter and does not cover violations, breaches or defaults the occurrence of
which is dependent upon future events or circumstances. Our opinion in
paragraph 7 is not intended to cover consents, approvals or filings which
might be required as a conduct by the Company of its business or operations.
D. We express no opinion as to the validity, legality, binding effect or
enforceability of any covenant or agreement (i) providing for release of
liability for or the indemnification against any losses, claims, damages,
expenses or liabilities incurred by any person as a result of any violation of
any securities law by such person, as a result of the gross negligence or
willful misconduct of such person, or as a result of the negligence of such
person if a court would find that the intent to indemnify such person for such
person's negligence was not clearly expressed or that such indemnification
violates a public policy of the State of Illinois, (ii) requiring that any
amendment, modification or waiver of any Transaction Document shall not be
effective unless in writing, (iii) providing for the consent to jurisdiction
of any court, the waiver of objection of venue of any court, the waiver of or
consent to service of process in any manner other than provided in the laws of
the State of Illinois, the waiver of jury trial or the waiver of counterclaim
or cross-claim, (iv) providing that delays will not operate as waivers, (v)
which attempts to modify or waive any requirements of reasonableness or notice
arising under the laws of any jurisdiction to the extent applicable to the
transactions contemplated by the Transaction Documents, (vi) which requires
the payment of interest on overdue but unpaid interest or fixed late payment
charges, (vii) which purports to be an agreement to use "best efforts," (viii)
relating to severability as applied to any portion of a Transaction Document
deemed by a court to be material, (ix) waiving the benefits of any statutory
provision or common law right where such waiver violates limitations imposed
by statute or is against public policy, (x) providing for a choice of any
governing law other than the laws of the State of Illinois.
174
E. Our opinions are limited to only those laws, rules and regulations
that we have, in the exercise of customary professional diligence, but without
any special investigation, recognized as generally applicable to the
transactions contemplated by the Transaction Documents or to business
organizations of the same type as the Company (which are not engaged in
regulated business activities) and, except to the extent covered by our
opinions in paragraphs 5 and 6, above, exclude all laws, rules and regulations
of the type described in Section 19 of the Legal Opinion Accord of the
American Bar Association Section of Business Law (1991). In addition, we
express no opinion as to any law, rule or regulation (i) the violation of
which would not have a material adverse effect on you or the Company or the
Company's ability to perform its obligations under the Transaction Documents,
(ii) the violation of which can be cured without significant expense to you,
or (iii) to which the Company may be subject as a result of your legal or
regulatory status.
F. The foregoing opinions are limited to the laws of the State of
Illinois, the Indiana Business Corporation Law and the federal laws of the
United States of America, and we express no opinions with respect to the laws
of any other jurisdiction.
The opinions expressed in this opinion letter are as of the date of this
opinion letter only and as to the laws covered hereby only as they are in
effect on that date, and we assume no obligation to update or supplement such
opinion to reflect any facts or circumstances that may come to our attention
after that date or any changes in law that may occur or become effective after
that date. The opinions herein are limited to the matters expressly set forth
in this opinion letter, and no opinion is given or may be inferred beyond the
matters expressly set forth in this opinion letter.
This opinion letter is furnished by us as special counsel to the Company,
is solely for your benefit and for the benefit of your successors and assigns,
including any transferee of the Note, in connection with the transactions
stated herein, and is not to be relied on by any other person or entity or for
any other purpose without our prior written consent.
Very truly yours,
SCHIFF HARDIN LLP
By:
--------------------------
175
EXHIBIT E
---------
CERTIFICATE AS TO REPRESENTATIONS, DEFAULTS, ETC.
I, , [title] of Franklin Electric Co., Inc. (an Indiana
corporation) (herein called the "Company"), do hereby certify on behalf of the
Company, pursuant to paragraph 3B of the Second Amended and Restated Note
Purchase and Private Shelf Agreement dated as of September 9, 2004 ("Note
Agreement") between the Company and Prudential Investment Management, Inc.,
The Prudential Insurance Company of America and each other Prudential
Affiliate which becomes a party thereto, as follows:
1. The representations and warranties contained in paragraph 8 of the
Note Agreement are true on and as of the date hereof (except to the extent of
changes caused by transactions contemplated by the Note Agreement).
2. There exists on the date hereof no Default or Event of Default as
specified in paragraph 7 of the Note Agreement.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal
of the Company this day of , 20 .
---------------------------------
Title:
176
Schedule I
----------
Certificate
of
Franklin Electric Co., Inc.
In connection with the opinion letter (the "Opinion Letter") of Schiff
Hardin LLP ("SH"), dated the date hereof, as special counsel to Franklin
Electric Co., Inc. (the "Company"), the undersigned hereby certifies on behalf
of the Company to SH and to the Purchasers that:
1. Except as set forth below, the Company is not bound by any order,
judgment, injunction, decree or writ of any court or other governmental body
that could reasonably be expected to relate to the ability of the Company to
execute, deliver or perform its obligations under the Transaction Documents
(as defined in the Opinion Letter):
NONE.
2. Set forth below is a list of all agreements, indentures, mortgages,
deeds of trust and other instruments to which the Company is a party that
could reasonably be expected to relate to the ability of the Company to
execute, deliver or perform its obligations under the Transaction Documents:
$80,000,000 Credit Agreement dated as of September 9, 2004 among the
Company, Bank One, NA, as Administrative Agent and the other Banks named
therein.
IN WITNESS WHEREOF, this Certificate has been duly executed as of
, 2 .
FRANKLIN ELECTRIC CO., INC.
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
177
SCHEDULE 6B(1)
--------------
LIST OF EXISTING LIENS
----------------------
None.
178
SCHEDULE 8A
LIST OF SUBSIDIARIES
State or Percent of
Subsidiaries Country Voting Stock
Consolidated of Incorporation Owned
------------ ---------------- -----------------
Advanced Polymer Technology, Inc. Michigan 100
Coverco S.r.1. Italy 100
EBW, Inc. Michigan 100
FE Petro, Inc. Indiana 100
Franklin Electric B.V. Netherlands 100
Franklin Electric Europa, GmbH Germany 100
Franklin Electric Foreign Sales U.S. Virgin Islands 100
Corporation
Franklin Electric Fueling
Systems GmbH Germany 100
Franklin Electric
International, Inc. Delaware 100
Franklin Electric
Manufacturing, Inc. Indiana 100
Franklin Electric Sales, Inc. Indiana 100
Franklin Electric spol s.r.o. Czech Republic 100
Franklin Electric Subsidiaries, Inc,
(inactive) Indiana 100
Franklin Electric (Australia)
Pty Ltd. Australia 100
Franklin Electric (South Africa)
Pty Limited South Africa 100
Franklin Electric (Suzhou) Co., Ltd. China 100
Intelligent Controls, Inc. Maine 100
Motores Electricos Sumergibles De
Mexico S De RI De Co Mexico 100
Mortores Franklin S.A. de C.V. Mexico 100
Motori Sommersi Riavvolgibili S.r.l. Italy 75
Servicios De Mesmex S De Rl De Co Mexico 100
179
SCHEDULE 8G
-----------
LIST OF AGREEMENTS RESTRICTING DEBT
-----------------------------------
$80,000,000 Credit Agreement dated as of September 9, 2004 among the Company,
Bank One, NA, as Administrative Agent and the other Banks named therein.
180
EXHIBIT 31.1
------------
CERTIFICATIONS
----------------
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
----------------------------------------
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
---------------------------------------------------------
I, R. Scott Trumbull, Chairman and Chief Executive Officer of Franklin
Electric Co., Inc., certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Franklin
Electric Co., Inc.;
2. Based on my knowledge, this Quarterly Report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this Quarterly Report;
3. Based on my knowledge, the financial statements, and other financial
information included in this Quarterly Report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this Quarterly Report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
registrant and we have:
a. designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during
the period in which this Quarterly Report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of end of the period covered by this
Quarterly Report based on such evaluation; and
c. disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrants fourth
quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal controls.
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of
registrant's board of directors or persons performing similar
functions:
181
a. All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: November 8, 2004
----------------
/s/ R. Scott Trumbull
-----------------
R. Scott Trumbull
Chairman and Chief Executive Officer
Franklin Electric Co., Inc.
182
EXHIBIT 31.2
------------
CERTIFICATION OF CHIEF FINANCIAL OFFICER
--------------------------------------------
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
---------------------------------------------------------
I, Gregg C. Sengstack, Senior Vice President, Chief Financial Officer
and Secretary of Franklin Electric Co., Inc., certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Franklin Electric
Co., Inc.;
2. Based on my knowledge, this Quarterly Report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this Quarterly Report;
3. Based on my knowledge, the financial statements, and other financial
information included in this Quarterly Report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this Quarterly Report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
registrant and we have:
a. designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which this Quarterly Report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of
end of the period covered by this Quarterly Report based on such
evaluation; and
c. disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrants fourth
quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal controls.
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of
registrant's board of directors or persons performing similar
functions:
183
a. All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: November 8, 2004
----------------
/s/ Gregg C. Sengstack
----------------------
Gregg C. Sengstack
Senior Vice President, Chief Financial Officer and Secretary
Franklin Electric Co., Inc.
184
EXHIBIT 32.1
------------
CHIEF EXECUTIVE OFFICER CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS
---------------------------------------------------------------------------
ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
-----------------------------------------------------------------
In connection with the Quarterly Report of Franklin Electric Co., Inc.
(the "Company") on Form 10-Q for the period ending October 2, 2004 as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
I, R. Scott Trumbull, Chairman and Chief Executive Officer of the Company,
certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of
the Company.
Date: November 8, 2004 -
----------------
/s/ R. Scott Trumbull
------------------------
R. Scott Trumbull
Chairman and Chief Executive Officer
Franklin Electric Co., Inc.
185
EXHIBIT 32.2
------------
CHIEF FINANCIAL OFFICER CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS
---------------------------------------------------------------------------
ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
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In connection with the Quarterly Report of Franklin Electric Co., Inc.
(the "Company") on Form 10-Q for the period ending October 2, 2004 as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
I, Gregg C. Sengstack, Senior Vice President, Chief Financial Officer and
Secretary of the Company, certify, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of
the Company.
Date: November 8, 2004
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/s/ Gregg C. Sengstack
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Gregg C. Sengstack
Senior Vice President, Chief Financial Officer and Secretary
Franklin Electric Co., Inc.
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