-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ClIGYSd33npF6lo5gISKsCukTgIRxxyquiMjUJrX30elxxWLbZE1lWOLg87Arek4 cySWG9LrDNhC1kOhDpHexw== 0001047469-98-010224.txt : 19980318 0001047469-98-010224.hdr.sgml : 19980318 ACCESSION NUMBER: 0001047469-98-010224 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19971130 FILED AS OF DATE: 19980317 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: BINKS SAMES CORP CENTRAL INDEX KEY: 0000012180 STANDARD INDUSTRIAL CLASSIFICATION: GENERAL INDUSTRIAL MACHINERY & EQUIPMENT [3560] IRS NUMBER: 360808480 STATE OF INCORPORATION: DE FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-01416 FILM NUMBER: 98567557 BUSINESS ADDRESS: STREET 1: 9201 W BELMONT AVE CITY: FRANKLIN PARK STATE: IL ZIP: 60131 BUSINESS PHONE: 7086713000 MAIL ADDRESS: STREET 1: 9201 WEST BELMONT AVENUE CITY: FRANKLIN PARK STATE: IL ZIP: 60131 FORMER COMPANY: FORMER CONFORMED NAME: BINKS MANUFACTURING CO DATE OF NAME CHANGE: 19920703 10-K 1 10-K - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------------------- FORM 10-K /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended November 30, 1997 or / / Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Transition Period from ________ to ________ Commission File Number 1--1416 BINKS SAMES CORPORATION (Exact name of registrant as specified in its charter) DELAWARE (State of incorporation) 36-0808480 (I.R.S. Employer Identification No.) 9201 WEST BELMONT AVENUE FRANKLIN PARK, ILLINOIS (Address of principal executive offices) 60131 (Zip Code) (847) 671-3000 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: TITLE OF EACH CLASS NAME OF EXCHANGE ON WHICH REGISTERED ------------------- ------------------------------------ CAPITAL STOCK, $1.00 AMERICAN STOCK EXCHANGE PAR VALUE PER SHARE CHICAGO STOCK EXCHANGE CAPITAL STOCK AMERICAN STOCK EXCHANGE PURCHASE RIGHTS CHICAGO STOCK EXCHANGE Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------- ------- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. /___/ The aggregate market value of the voting stock of the Registrant held by non-affiliates was approximately $126,073,001 as of March 11, 1998 (based on the closing sale price as reported by the American Stock Exchange as of such date). As of March 11, 1998, the Registrant had outstanding 2,963,837 shares of Capital Stock. DOCUMENTS INCORPORATED BY REFERENCE Selected portions of the definitive Incorporated into Part III Proxy Statement for the Registrant's Annual Meeting of Stockholders to be held on April 28, 1998. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1 PART I ITEM 1. BUSINESS GENERAL Binks Sames Corporation, a Delaware corporation incorporated on January 2, 1929 as a successor to a business founded in 1890, and its subsidiaries (hereinafter referred to collectively as the "Company") are engaged in the manufacture and sale of spray finishing and coating application equipment. The Company sells its products primarily to the automotive industry and general industrial finishing and automotive refinishing markets. The Company serves three primary geographic markets, North and South America, Europe and the Pacific Rim, and presently generates over 56% of its sales outside the United States. The Company divides its products into three general groups: standard products, engineered (industrial) systems and automotive paint systems. Standard products consist of a variety of components used in the spray finishing process such as spray guns, fluid handling equipment and accessories. Engineered (industrial) systems consist of specialty products together with standard components to comprise a finishing system. Automotive products include automatic electrostatic paint application machines as well as paint circulation equipment serving the global automotive market. The Company also manufactures equipment for functional and corrosion control applications. The Company incurred substantial losses in fiscal 1997 and 1996 following the restructuring of the Company's operations beginning in June 1996. As a result of these losses and the related impact on the Company's financial condition, the Board of Directors of the Company determined to seek a sale of the Company. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Significant Developments" included in Item 7 of Part II hereof. PRODUCTS The Company's standard products include over forty different models of spray guns, a wide variety of air and fluid nozzles, a complete line of high and low pressure material handling pumps, pressure tanks ranging in capacity from two to sixty gallons, replacement parts for these components, and accessories such as siphon cups, pressure cups, oil and water extractors, air and fluid regulators, ball valves, hose connections and fittings, air and fluid hoses, air respirators and safety products and paint heaters. Engineered systems includes pre-engineered spray booths for the industrial market, paint circulating systems, air replacement systems, automatic spray coating machines, and liquid and powder manual and automatic electrostatic application equipment. Many industrial equipment installations are custom designed and engineered by the Company to satisfy specific needs of customers and include various standard and industrial equipment items as components. Automotive products include automated systems which circulate, distribute, regulate, and apply coatings used in the painting of automobiles. The Company supplies equipment and systems capable of handling a multitude of liquid and powder coatings, such as primers, base coats (color), clear coats, and mastics. These systems are custom designed to meet the needs of the global automotive market. The Company provides products as well as complete systems for the following six basic coatings application methods: (1) COMPRESSED AIR ATOMIZATION: A conventional method employing compressed air in the spray gun to atomize, disperse and deposit coating materials; (2) AIRLESS SPRAYING: A high speed spray method in which hydraulic pressure developed by a material handling pump is used to atomize the coating material by pumping it at high pressure through the nozzle of the airless spray gun; (3) HIGH VOLUME LOW PRESSURE (HVLP): An adaptation of the conventional air spray method, HVLP utilizes larger than normal volumes of air delivered at lower pressures to produce quality 2 finishes while complying with certain environmental regulations governing the amounts of volatile organic compounds emitted into the atmosphere; (4) ELECTROSTATIC SPRAYING: A method which combines atomization of the coating material by one of the methods described in (1) and (2) above with delivery of an electrical charge of the coating as it leaves the spray gun, thereby attracting it to a grounded product in much the same way as iron filings are attracted to a magnet; (5) POWDER SPRAYING: A method of applying a coating material in powder form, with delivery of an electrical charge to the coating as it leaves the spray gun as with Electrostatic Spraying, and then hardening the coating through the application of heat; and (6) PLURAL COMPONENT SPRAYING: The method used to apply plural component materials such as polyurethane foams, polyesters, gelcoats, epoxies and elastomers, and requiring special equipment for precise metering, mixing and dispensing of the resins, catalysts and accelerators which create such plural component materials. The Company groups its sales revenues into the product categories discussed previously (standard, engineered, and automotive). In fiscal 1995, 42% of total revenues consisted of standard products while 58% of total revenues consisted of engineered and automotive products. In fiscal 1996, 38% of total revenues consisted of standard products while 62% of total revenues consisted of engineered and automotive products. In fiscal 1997, 46% of total revenues consisted of standard products while 54% of total revenues consisted of engineered and automotive products. RESEARCH AND DEVELOPMENT The Company is continually engaged in experimental work on various coating systems. The Company spent approximately $5.0 million, $4.9 million and $4.0 million during fiscal year 1997, 1996, and 1995, respectively, on research activities relating to development of products or services, none of which was customer sponsored. DISTRIBUTION AND MARKETING THE AMERICAS. The Company markets its standard products and engineered systems in the United States through nine branch offices, seven of which have warehouse facilities, and approximately 35 sales offices strategically located throughout the country. In addition, the Company distributes its standard products and engineered systems through numerous distributors and dealers serving the industrial finishing, automotive refinishing, and painting contractor markets throughout the United States, Mexico, Canada, and South America. The Company has exclusive distribution arrangements in South America. Although some engineered systems are sold through distributors, the Company typically sells directly to industrial concerns or manufacturers for larger installations (contracts in excess of $500 thousand). These jobs require highly specialized knowledge and experience in engineering, installation and start up of a finishing system. EUROPE. The Company's standard products and engineered systems products are sold throughout Europe. The Company maintains sales offices in a dozen countries and utilizes agents to establish its presence in other countries. PACIFIC RIM. The Company's products have been sold in Japan for over 30 years and the Company has a wholly-owned subsidiary in Australia. In late 1997, the Company opened an office in China. China is considered a growth area with potential increases in general industry business through exclusive distribution arrangements. Financial information regarding sales, operating income (loss) and identifiable assets attributable to each of the Company's geographic areas is contained in the Notes to Consolidated Financial Statements. THE GLOBAL AUTOMOTIVE MARKET. The Company sells directly to automotive companies as well as to automotive systems integrators and prime contractors. Subsidiaries in France, England, and the United States provide high-end electrostatic application equipment and automatic painting machines, as well as paint circulation and distribution equipment. 3 COMPETITION The Company believes that it is one of the largest manufacturers of a broad line of spray finishing and coating application equipment. There are many other manufacturers of coating application equipment who also engage in other lines of business, principally Graco Incorporated, Illinois Tool Works and Nordson Corporation. The Company also competes in the United States with non-U.S. manufactured products which up to this time have been unsuccessful in obtaining a significant share of the available market. EMPLOYEES As of November 30, 1997, approximately 1,260 persons were employed by the Company in the United States, England, Canada, Australia, Sweden, France, Belgium, Scotland, Germany, Japan and China. CONCENTRATION The amount of business conducted with particular customers varies significantly from year to year. Sales to the automotive industry as a whole (which includes several different manufacturers as well as different divisions or facilities within some manufacturers) generally have accounted for between 25% and 45% of the Company's consolidated net sales in past years. No single customer accounts for more than 10% of the Company's net sales. BACKLOG OF ORDERS The dollar amount of the Company's backlog of orders as of November 30, 1997 was approximately $55 million as compared to approximately $60 million as of November 30, 1996. All of the orders in backlog as of November 30, 1997 are expected to be filled within the year ended November 30, 1998. The dollar amount of backlog at any given time is subject to significant variations depending upon the number of orders received and the degree of completion of pending industrial equipment products which, by their nature, are completed over a period of time pursuant to sizable contracts. The difference in backlog between November 30, 1997 and November 30, 1996 is attributable to these factors. The business of the Company is not materially affected by seasonal factors, and the Company's backlog is not generally a result of such factors. MATERIALS The Company purchases its requirements of aluminum, brass and steel in the form of bar stock, rolls, tubing and sheeting as well as in the form of castings and forgings which are manufactured by suppliers, for the most part from Company-owned dies and patterns. The Company also purchases certain components which it incorporates into its finished products such as electric motors, gasoline engines, switches, gauges, and consumable products. The materials and components purchased by the Company are readily available from a number of suppliers. INTELLECTUAL PROPERTY The Company owns a number of patents in the United States and other countries pertaining to spray equipment, components, control and memory devices, pumps and valves, as well as presently pending applications for patents in the United States and other countries. The Company does not consider its business to be materially dependent on any single patent or group of patents, or any pending applications for patents. The Company has registered its trademark "Binks" in the United States and 39 other countries and has registered fifteen additional trademarks in the United States, including its "Sames" trademark. The "Sames" trademark is registered in numerous other countries as are ten other Sames product trademarks. 4 ENVIRONMENTAL Federal, state, local and international provisions which have been enacted or adopted regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, have not materially affected the Company's capital expenditures, earnings or competitive position. ITEM 2. PROPERTIES The Company closed its manufacturing plant in Franklin Park, Illinois in February, 1997, and sold the facility, subject to a leaseback of 60,000 square feet of office space, in October, 1997. The Company has shifted production conducted at this facility to its leased plant in Longmont, Colorado. The Company leases the Franklin Park office space for its corporate headquarters and Chicago branch office functions. The Company has canceled its plans to relocate its offices to leased facilities in the Chicago area. The Company owns a branch office and warehouse in Dallas, Texas, comprising approximately 25,000 square feet, a branch office and warehouse in Atlanta, Georgia, comprising approximately 25,000 square feet, and the building and land used by the Company's Poly-Craft Systems Division in Cottage Grove, Oregon, comprising approximately 25,000 square feet. The Company's branch and sales offices operate from 35 other locations in the United States, fourteen of which are leased premises and seven of which include warehousing space. An aggregate of approximately 245,000 square feet is leased at such locations. The Company does not regard any such leased premises to be material. The Company's non-U.S. subsidiaries own and occupy manufacturing and office facilities aggregating approximately 307,000 square feet and lease property for such purposes aggregating approximately 130,000 square feet. The Company considers its plants and physical properties to be in good condition. ITEM 3. LEGAL PROCEEDINGS In the case captioned CONTINENTAL PARTNERS GROUP, INC. V. BINKS MANUFACTURING CO., No. 91 L 17815, filed on November 5, 1991 in the Circuit Court of Cook County, Illinois (the "Action"), Continental Partners Group, Inc. ("Continental") seeks recovery from the Company of $902,700 which Continental alleges is due under the terms of a contract between Continental and the Company dated February 20, 1990. The Action also seeks interest and costs. The Company has filed an answer in the Action, denying any liability to Continental under the contract alleged, and asserting that the contract with Continental was terminated by the Company without further liability to Continental. The claims in the Action are being vigorously contested by the Company and the Company believes that it has meritorious defenses to such claims. On September 25, 1997, the Company entered into an agreement with Graco, Inc. to settle a lawsuit initiated in May, 1983 wherein Graco, Inc. asserted that the Company had "willfully" infringed a patent through the sale of certain pumps by the Company prior to expiration of the patent in June, 1993. The settlement agreement called for a cash payment of $640,000 by the Company to Graco, Inc. which was made on September 26, 1997. Behr Systems, Inc. has sued the Company's subsidiaries, Sames Electrostatic, Inc. and Sames, S.A., for patent infringement. The suit was filed on June 9, 1997 in the United States District Court for the Eastern District of Michigan, Southern Division. In this suit, Behr alleges that certain bell cups manufactured in France by Sames, S.A., and sold in the United States by Sames Electrostatic, Inc., infringe on its U.S. Patent No. 4,405,086. These bell cups are used in conjunction with the Company's PPH 605, a high speed rotary atomizer used in automative paint application installations. Behr seeks damages in the form of lost profits or, in the alternative, a reasonable royalty for past infringement. Behr also seeks an injunction on future sales of the PPH 605. Discovery in this case is proceeding. The Court has set a July, 1998 trial date. AJC and ACIR Sunkiss (collectively "ACIR") have sued the Company for false advertising and trademark and copyright infringement. The suit was filed in May, 1997 in the United States District Court for the Northern District of Illinois, Eastern Division. In this suit, ACIR alleges that the Company's advertising for its INFRATHERM -Trademark- thermoreactors infringed on ACIR's trademarks and that this advertising contained false and misleading statements, causing consumers to believe that ACIR's products were actually manufactured and sold by the Company. ACIR also alleges that the Company infringed its copyright by using, without authorization, a photograph of one of ACIR's products in advertising distributed by the Company. The case was settled, in principle, at a voluntary mediation in October 1997. The parties are currently finalizing a draft settlement agreement. This draft settlement agreement requires the Company to place a corrective advertisement in a trade journal and to send a letter to customers correcting the alleged false settlements contained in the Company's advertising. Finally, the draft settlement requires the Company to pay $600,000 to ACIR. Robert Hashima has filed suit alleging that he is entitled to a retirement allowance of $1,600,000.00 under the Binks Japan Limited retirement policy. Binks Japan has responded asserting that Mr. Hashima is not entitled to the allowance because Hashima implemented various benefits without Board approval and was involved in certain "related party transactions" to his benefit that were not reported during audits. A preliminary attachment order was entered on July 30, 1997 as a result of Hashima's claim against Binks Japan freezing its assets held in various banks. On November 26, 1997, upon urging by the Japanese courts, Hashima withdrew his petition and the court lifted the attachment order. This case will proceed to formal litigation. Chester Baranowski brought suit against the Company seeking $2,550,000 claiming wrongful dismissal, breach of contract and breach of certain salary and benefits. The Company has denied all substantive allegations and filed a counterclaim against Baranowski for breach of fiduciary duty and conspiracy to defraud the Company. By letter dated January 5, 1998, the Company gave notice to M&M Supply Incorporated ("M&M") of its termination as a Binks-Sames distributor effective April 10, 1998. By letter dated January 13, 1998, counsel for M&M notified the Company that M&M has acted as a dealer and conducted its business as a dealership as those terms are defined by the Wisconsin Fair Dealership Law and that the Company was prohibited from terminating M&M's dealership arrangement with the Company. The Company's position is that the Wisconsin Fair Dealership Law does not apply because the requisite community of interest between the Company and M&M does not exist. Discussion with M&M's counsel to attempt to resolve this dispute are currently continuing. The Company entered into a build to suit lease dated August 29, 1997 for a planned future headquarters site in Vernon Hills, Illinois. The Company has notified the developer and landlord that the Company wants to terminate the lease. It is anticipated that the Company will incur lease termination costs. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Lease Termination" included in Item 7 of Part II hereof, and Note 10 to the Consolidated Financial Statements. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders during the fourth quarter of the period covered by this report. 5 EXECUTIVE OFFICERS OF THE COMPANY --------------------------------- The executive officers(1) of the Company are listed below. DORAN J. UNSCHULD, age 74, has been President and Chief Executive Officer since June 1996 and a director of the Company since 1982. His present term of office as a director expires at the 1999 Annual Meeting. Mr. Unschuld has been employed by the Company in various positions since 1952 and has been a Senior Vice President from 1995 to 1996, a Vice President from 1971 to 1995 and Secretary of the Company from 1965 to 1996. Mr. Unschuld will retire as President and Chief Executive Officer of the Company at the 1998 Annual Meeting. TERENCE P. ROCHE(2), age 39, has been a director of the Company since 1997, when he was appointed by the Board of Directors to fill the vacancy created by the resignation of Burke B. Roche. His present term of office as a director expires at the 1999 Annual Meeting. Mr. Roche has been an officer of the Company since 1995. Mr. Roche has been employed by the Company since 1986 and is presently Executive Vice President, Assistant Secretary and Assistant Treasurer. Mr. Roche had been the Industrial Sales Manager of the Company from 1990 to 1996. JEFFREY W. LEMAJEUR, age 36, has been an officer of the Company since 1992. Mr. Lemajeur has been employed by the Company since 1991 and is presently Vice President of Finance, Chief Financial Officer and Treasurer of the Company. CARL M. SPRINGER, age 56, has been an officer of the Company since 1995. Mr. Springer has been employed by the Company since 1977 and is presently Vice President - Manufacturing and Engineering, Assistant Secretary and Assistant Treasurer. Mr. Springer had been the Electronics Product Manager of the Company from 1978 to 1996. STEPHEN R. MATHERS, age 48, has been an officer of the Company since June, 1996. Mr. Mathers has been employed by the Company since 1974 and is presently Vice President - Corporate Development. Mr. Mathers has been President and CEO of Sames Electrostatic, Inc., a subsidiary of the Company, since 1990 and is currently serving as President of Sames, S.A., a French subsidiary of the Company. PETER M. GREEN, age 52, has been an officer of the Company since April, 1997. Mr. Green has been employed by the Company since 1971 and is presently Vice President - Europe. W. KENT ANDERSON, age 59, has been an officer of the Company since April, 1997. Mr. Anderson has been employed by the Company since 1959 and is presently Vice President - Americas. RICHARD M. CAMPOBASSO, age 40, has been an officer of the Company since April, 1997. Mr. Campobasso has been employed by the Company since 1982 and is presently Vice President - Standard Products. TODD A. VAUGHN, age 39, has been an officer of the Company since April, 1997. Mr. Vaughn has been employed by the Company since 1992 and is presently Vice President - Global Automotive. G. BRUCE BRYAN, age 42, has been an officer of the Company since April 1997. Mr. Bryan has been employed by the Company since 1993 and is presently Vice President - Engineered Systems. 6 ROBERT B. ROCHE(2), age 56, has been an officer of the Company since April, 1997. Mr. Roche has been employed by the Company since 1964 and is presently Vice President - Global Distribution. - ---------------- Notes: (1) All officers' terms expire in 1998. (2) Terence P. Roche and Robert B. Roche are cousins. 7 PART II ITEM 5. MARKET FOR THE COMPANY'S CAPITAL STOCK AND RELATED SECURITY HOLDER MATTERS The Company's capital stock is traded on the American and Chicago Stock Exchanges. The high and low prices for each quarterly period within the two most recent fiscal years, as reported by such exchanges, and the dividends declared during such periods with respect to the capital stock of the Company are as follows:
Cash Dividend Declared Quarter Ending High Low Per Share -------------- ---- --- ------------------- February 29, 1996 24 1/2 22 --- May 31, 1996 24 5/8 21 3/8 .10 August 31, 1996 29 22 3/4 .20 November 30, 1996 28 21 1/8 .10 February 28, 1997 40 1/2 27 5/8 --- May 31, 1997 43 5/8 38 .10 August 31, 1997 48 1/8 42 1/8 .10 November 30, 1997 44 1/4 41 1/4 .10
On March 11, 1998, the last reported sale price of the Company's capital stock was $45.75 per share. As of March 11, 1998, there were approximately 976 registered holders of the Company's capital stock, which is the only class of equity securities of the Company outstanding. Harris Trust and Savings Bank, Chicago, Illinois, is the transfer agent and registrar of the Company's capital stock. 8 ITEM 6. SELECTED FINANCIAL DATA BINKS SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES Five years ended November 30, 1997 (not covered by Independent Auditors' Reports- in thousands, except per share amounts) - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Year ended November 30, 1997(a) 1996(b) 1995 1994 1993 - ---------------------------------------------------------------------------------------------------------------- Net sales $ 236,998 296,686 266,003 243,599 210,405 - ---------------------------------------------------------------------------------------------------------------- Cost of goods sold 178,420 216,017 178,940 167,261 138,954 Selling, general, and administrative expenses 78,588 83,111 76,517 68,757 66,506 Restructuring costs 9,612 9,043 - - - - ---------------------------------------------------------------------------------------------------------------- Operating income (loss) (29,622) (11,485) 10,546 7,581 4,945 Other expense 2,931 4,672 3,463 2,003 2,923 - ---------------------------------------------------------------------------------------------------------------- Earnings (loss) before income taxes (32,553) (16,157) 7,083 5,578 2,022 Income tax expense (benefit) 7,527 (5,049) 2,777 2,163 641 - ---------------------------------------------------------------------------------------------------------------- Net earnings (loss) $ (40,080) (11,108) 4,306 3,415 1,381 - ---------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------- Net earnings (loss) per share $ (13.07) (3.60) 1.39 1.11 .44 - ---------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------- Cash dividends per share $ .30 .40 .50 .30 .36 - ---------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------- Total assets $ 191,734 230,229 231,101 193,364 179,999 - ---------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------- Long-term debt $ 60,946 44,634 43,202 38,114 34,136 - ---------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------
(a) In fiscal 1997, the Company recorded nonrecurring charges of $21.1 million ($19.8 million after tax, or $6.46 per share), as described in note 16 of the notes to consolidated financial statements. Nonrecurring charges are included in cost of goods sold ($8.7 million); selling, general and administrative expenses ($2.8 million); and restructuring costs ($9.6 million). In addition, the Company recorded a charge of $10.0 million ($3.26 per share) to reduce the balance sheet carrying amounts of deferred tax assets initially recorded in prior years. (b) In fiscal 1996, the Company recorded nonrecurring charges of $18.9 million ($12.6 million after tax, or $4.07 per share), as described in note 16 of the notes to consolidated financial statements. Nonrecurring charges are included in cost of goods sold ($7.1 million); selling, general, and administrative expenses ($2.8 million); and restructuring costs ($9 million). 9 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SIGNIFICANT DEVELOPMENTS Beginning in June 1996, the Company's Board of Directors adopted measures as part of a comprehensive reorganization and restructuring of the Company. These measures included: (i) closing of the Company's manufacturing facility in Franklin Park, Illinois and shifting production to the Company's new Longmont, Colorado manufacturing facility; (ii) reduction of manufacturing capacity with increased outsourcing; (iii) rationalization of the Company's product line to eliminate non-profitable products; (iv) headcount reductions related primarily to manufacturing; and (v) reorganization of the Company's sales and marketing, product management, research and development, manufacturing and distribution functions along geographic and operational lines. In fiscal 1997, the Company recorded a net loss of $40.1 million, which followed a net loss of $11.1 million in fiscal 1996. The Company's net losses included special charges of $21.1 million in 1997 and $18.9 million in 1996 due to impairment and restructuring charges, inventory writedowns and warranty and dispute resolution costs. The fiscal 1997 net loss also includes a charge of $10.0 million to reduce the balance sheet carrying amounts of deferred tax assets initially recorded in prior years. As a result of successive years of losses and the related impact on the Company's financial condition, the Board of Directors of the Company has determined to seek a sale of the Company. The Company has retained financial and other advisors to identify potential purchasers. On February 13, 1998, John J. Schornack, 67, resigned and retired as a Director and Chairman of the Board of Directors of the Company. Dr. Donald G. Meyer, 63, a director of the Company since 1996, and previously from 1990 to 1995, has been elected Chairman of the Board to succeed Mr. Schornack. Doran J. Unschuld, 74, the Company's President and Chief Executive Officer since 1996, and an employee of the Company since 1952, has announced that he will retire as President and Chief Executive Officer at the Company's annual meeting in April 1998. RESULTS OF OPERATIONS FISCAL 1997 COMPARED TO FISCAL 1996 Net sales decreased $60 million, or 20%, to $237 million in fiscal 1997. The decline in net sales occurred principally in North America, where net sales declined by $37 million, to $103 million in fiscal 1997. In part, the decline had been anticipated due to fiscal 1996 rationalization measures that eliminated a large number of slow moving items from the product line. The sales decline was also attributable to problems encountered in transferring production to Longmont from the Franklin Park manufacturing facility which was closed in February 1997. The Company also experienced a $20 million decline in net sales at its French subsidiary, where fiscal 1997 net sales were $56 million. Net sales at its French subsidiary would have been $9 million higher in fiscal 1997 if the average French franc-to-U.S. dollar exchange rate had not changed between years. The balance of the decline in net sales was primarily due to lower worldwide demand for large automotive installations; the decline was also anticipated because fiscal 1996 was a record year for such installations. The Company had a net loss of $40.1 million ($13.07 per share) in fiscal 1997 as compared to a loss of $11.1 million ($3.60 per share) in fiscal 1996. Nonrecurring charges had a substantial impact on both years. The Company recorded $21.1 million of nonrecurring charges in fiscal 1997 comprised of: (a) $9.6 million of impairment and restructuring costs consisting of closing the Franklin Park facility, net of the gain on the sale of the building, start-up costs at the Longmont facility, workforce reductions primarily outside the U.S., the loss on the sale of the Infratherm product line, liquidation of operations in Italy, and the impairment of the Company's Belgian operations; (b) $5.7 million of additional inventory writedowns attributable to product line rationalization; and (c) $5.7 million of warranty and dispute resolution costs. In fiscal 1996, the Company recorded $18.9 million of special charges, including $9 million of impairment and restructuring charges, $7.1 million of inventory writedowns due to product line rationalization, and $2.8 million of warranty and dispute resolution costs. Gross profit declined $22.1 million (27%) in fiscal 1997 as compared to fiscal 1996. This decline was largely due to the decline in sales combined with the cost impact of transferring North American production to Longmont from the Franklin Park plant. Gross profit as a percentage of sales decreased to 25% in fiscal 1997 from 27% in fiscal 1996 for the same reasons. 10 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Selling, general, and administrative expenses decreased $4.5 million (5%) as compared to fiscal 1996 reflecting efficiencies resulting from the fiscal 1996 restructuring. Interest expense increased $675 thousand (15%) in fiscal 1997 as compared to fiscal 1996 due to higher average borrowing levels. Other income and expense, which amounted to $2.1 million of income for fiscal 1997 as compared to an expense of $267 thousand in the prior year, includes interest income, exchange gains and losses, gains on sales of fixed assets, and miscellaneous income and expense. In fiscal 1997, the majority of this income was the result of foreign currency transaction gains and other miscellaneous income in European and Pacific Rim markets. In fiscal 1997, the Company recorded income tax expense of $7.5 million. This was largely attributable to not fully recording income tax benefits relating to the current year pretax loss, combined with a charge of $10 million to reduce the balance sheet carrying amounts of deferred tax assets initially recorded in prior years. In fiscal 1996, the Company recorded income tax benefits of $5.1 million on a pretax loss of $16.2 million. As a result of all of the factors above, the Company recorded a net loss of $40.1 million in fiscal 1997 as compared to a net loss of $11.1 million in fiscal 1996. FISCAL 1996 COMPARED TO FISCAL 1995 Net sales increased $30.7 million, or 12%, to a record $297 million in fiscal 1996. The Company's operations in Europe and the Pacific Rim had net sales of $157 million: an increase of $38.9 million, or 33%, over fiscal 1995. Net sales in Europe and the Pacific Rim would have been $4 million higher in fiscal 1996 if prevailing fiscal 1995 currency exchange rates had remained in effect for fiscal 1996. The Company's operations in the Americas (principally the U.S. and Canada) had net sales of $140 million, a decrease of $8.2 million, or 6%, as compared to the prior year. Net sales in the Americas decreased to 47% of worldwide sales in fiscal 1996 as compared to 56% in the prior year. Worldwide sales growth was largely due to increasing market acceptance, particularly in the automotive industry, of environmentally friendly technologies introduced by the Company in recent years. The Company had a net loss of $11.1 million ($3.60 per share) in fiscal 1996 as compared to net earnings of $4.3 million ($1.39 per share) in fiscal 1995. The Company recorded $18.9 million of pretax nonrecurring charges in fiscal 1996; the after-tax effect of such charges was $12.6 million, or $4.07 per share. The nonrecurring charges recorded in fiscal 1996 are comprised of costs associated with the restructuring of operations and product lines to enhance the Company's competitiveness and improve profitability. The Company has eliminated numerous product lines, reduced employment positions, and substantially reduced its manufacturing capacity in anticipation of increased levels of outsourcing. Gross profit declined $6.4 million in fiscal 1996 largely because of product rationalization and product mix. Included in cost of goods sold is a nonrecurring charge of $7.1 million relating principally to the elimination of product lines. Also, the increase in sales was driven by an increase in large contracts which have inherently lower margins. Gross profit as a percentage of sales decreased to 27% in fiscal 1996 from 33% in fiscal 1995 primarily for the same reasons. Selling, general, and administrative expenses increased $6.6 million, or 9%, from fiscal 1995 to fiscal 1996, primarily to support the increase in sales. Included in selling, general, and administrative expenses in fiscal 1996 is a nonrecurring charge of $2.8 million relating to the resolution of disputes pertaining to the performance of products sold in prior years. Restructuring costs of $9.0 million were recorded in fiscal 1996, principally comprised of employee separation costs of $5.4 million, asset writeoffs of $3.3 million, and consulting fees of $375 thousand. The employee separation costs reflect the reduction of 567 employees in the U.S., England, Mexico, Belgium, France, Italy, and Canada. Asset writeoffs consist of the Company's writeoff of its investment in Binks de Mexico, writeoffs of specific manufacturing assets, and disposition of the corporate jet. Consulting fees were incurred to help shape and implement the new strategic direction of the Company. 11 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) The Company has changed its approach to serving customers in Mexico. Previously, customers were supplied with U.S.-made products by a subsidiary in Mexico. The Company is liquidating this distribution subsidiary and establishing a sales generating operation. The new Mexican operating unit will generate sales orders that will be shipped and billed in U.S. dollars (eliminating currency risk) from the Dallas, Texas warehouse to leverage existing fixed distribution costs. Interest expense increased $373 thousand, or 9%, due to higher average levels of borrowings to support the higher level of sales activity. Other income and expense, which went from income of $569 thousand in fiscal 1995 to $267 thousand of expense in fiscal 1996, includes interest income, exchange gains and losses, and gains on the sales of fixed assets. In fiscal 1995, the Company sold two buildings for pretax gains totaling $258 thousand, and in fiscal 1996, the Company sold a property in the United States for a pretax gain of $289 thousand. Income tax benefits were 31% of pretax losses in fiscal 1996 as compared to an effective income tax rate of 39% on fiscal 1995 pretax income. The Company recorded a net loss of $11.1 million in fiscal 1996 as compared to net earnings of $4.3 million in fiscal 1995, resulting from all of the factors mentioned above. LIQUIDITY AND CAPITAL RESOURCES Revenues generated from operations are the primary source of the Company's liquidity. Short-term funds are also provided for current operations through bank loans. The Company maintains substantial lines of credit for general corporate purposes. The unused lines of credit were approximately $25 million at November 30, 1997. The Company's cash balances decreased $9 million during fiscal 1997. The net decrease was primarily due to cash used in operating activities of $23.2 million largely due to operating losses, partially offset by an increase in accounts payable; $5.3 million generated from investing activities, chiefly proceeds from the sale of fixed assets; and $9.5 million from financing activities, largely due to proceeds from long-term borrowings. Changes in foreign currency translation rates during the year resulted in a decrease of cash in U.S. dollars of $584 thousand. In fiscal 1997, the Company paid cash dividends totaling $914 thousand on its capital stock, compared to $1.2 million in fiscal 1996. On September 23, 1997, the Company entered into a $50 million unsecured five-year credit facility with a syndicate of Chicago area banks. As of November 30, 1997, the Company was not in compliance with several of the financial covenants contained in the credit facility. On March 16, 1998, the Company agreed with the bank group to collateralize the credit facility, pay amendment fees, increase the interest rate to prime plus 1/2% on existing borrowings and prime plus 1% on new borrowings, and shorten the duration of the agreement to two years, in exchange for waiving all existing defaults, amending certain terms, and increasing the total line of credit to $52.5 million to accommodate the projected cash flow needs of the Company. On March 16, 1998, the Company also agreed with the holder of its 7.14% senior notes to pay amendment fees, increase the interest rate to 7.64%, and shorten the maturity to September 30, 1999 in exchange for waiving all existing defaults and amending certain terms of the agreement. 12 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) LEASE TERMINATION In January 1998, the Company notified the developer and landlord of its planned future headquarters site in Vernon Hills, Illinois that the Company wanted to terminate the project. The Company had previously entered into a 20-year lease agreement for the Vernon Hills site. While groundbreaking for the new site has not occured, it is anticipated that the Company will incur lease termination costs. The Company is unable to make a meaningful estimate of the amount or range of loss that could result from an unfavorable resolution of this matter. IMPACT OF NEW ACCOUNTING STANDARDS In June, 1997, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income," which requires the prominent display of comprehensive income and its components in the financial statements. The Company is required to comply with SFAS No. 130 in Fiscal 1999 and estimates its adoption will not have a material effect on the consolidated financial statements. In June, 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information." SFAS No. 131 establishes standards for reporting information about operating segments in annual financial statements. The Company is required to comply with SFAS No. 131 in Fiscal 1999 and estimates its adoption will not have a material effect on the consolidated financial statements. YEAR 2000 COMPLIANCE The Company has upgraded or replaced its computer software applications and systems which the Company believes accommodates the "Year 2000" dating changes necessary to permit correct recording of year dates for 2000 and later years. The Company does not expect that additional costs with regard to year 2000 compliance will be material to its financial condition or results of operations. The Company does not currently anticipate any material disruption in its operations as the result of any failure by the Company to be in compliance. The Company does not currently have any information concerning the compliance status of its suppliers and customers. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable. 13 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA See Index to Financial Information on page F-1. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY (a) Directors. The information required in response to this item regarding directors of the Company will be contained in the Company's definitive Proxy Statement (the "Proxy Statement") for its Annual Meeting of Stockholders to be held on April 28, 1998 under the caption "Election of Directors" and is incorporated herein by reference. (b) Executive Officers of the Company. The information required in response to this item regarding executive officers of the Company is contained in Part I of this report and is incorporated herein by reference. (c) Section 16(a) Compliance. The information concerning compliance with Section 16(a) of the Exchange Act required under this item is incorporated herein by reference to the Proxy Statement under the caption "Section 16 Reporting". ITEM 11. EXECUTIVE COMPENSATION The information required in response to this item will be contained in the Proxy Statement under the captions "Executive Compensation" and "Information Regarding Directors" and is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required in response to this item will be contained in the Proxy Statement under the captions "Election of Directors" and "Securities Ownership of Certain Beneficial Owners and Management" and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required in response to this item will be contained in the Proxy Statement under the caption "Election of Directors" and is incorporated herein by reference. 14 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K (a) Documents filed as part of this report: 1,2 Financial Statements and Schedules See Index to Financial Information on page F-1. 3 Exhibits See Exhibit Index beginning on page i. (b) Reports on Form 8-K 1 On February 17, 1998, the Company filed a Current Report on Form 8-K reporting that the Company had issued a press release regarding the Company's intention to pursue a sale of the Company. 15 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Binks Sames Corporation By: /s/ Doran J. Unschuld ----------------------------------------- Doran J. Unschuld President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature Title Date - --------- ----- ---- /s/ Doran J. Unschuld President, Chief Executive March 16, 1998 - --------------------------- Officer and Director Doran J. Unschuld (Principal Executive Officer) /s/ Jeffrey W. Lemajeur Vice President of Finance and March 16, 1998 - --------------------------- Chief Financial Officer Jeffrey W. Lemajeur (Principal Financial and Accounting Officer) /s/ Terence P. Roche Executive Vice President, March 16, 1998 - --------------------------- Assistant Secretary, Assistant Terence P. Roche Treasurer and Director /s/ William W. Roche Director March 16, 1998 - --------------------------- William W. Roche /s/ Dr. Donald G. Meyer Director March 16, 1998 - --------------------------- Dr. Donald G. Meyer /s/ Clifford J. Vaughan Director March 16, 1998 - --------------------------- Clifford J. Vaughan /s/ Dr. Wayne F. Edwards Director March 16, 1998 - --------------------------- Dr. Wayne F. Edwards
16 BINKS SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES INDEX TO FINANCIAL INFORMATION - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Page(s) ------- Independent Auditors' Reports. . . . . . . . . . . . . . . . . . . F-2, 3 Financial Statements: Consolidated Balance Sheets, November 30, 1997 and 1996. . . . F-4 Consolidated Statements of Operations, years ended November 30, 1997, 1996, and 1995 . . . . . . . . . . . . . F-5 Consolidated Statements of Stockholders' Equity, years ended November 30, 1997, 1996, and 1995 . . . . . . . . . . F-6 Consolidated Statements of Cash Flows, years ended November 30, 1997, 1996, and 1995 . . . . . . . . . . . . . F-7 Notes to Consolidated Financial Statements . . . . . . . . . . F-8 to 20
Financial Statement Schedules: All schedules are omitted as the required information is not applicable, or the information is presented in the accompanying consolidated financial statements or related notes. F-1 INDEPENDENT AUDITORS' REPORT The Board of Directors and Stockholders Binks Sames Corporation: We have audited the accompanying consolidated balance sheets of Binks Sames Corporation (the Company) and consolidated subsidiaries as of November 30, 1997 and 1996, and the related consolidated statements of operations, stockholders' equity, and cash flows for the years ended November 30, 1997 and 1996. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Binks Sames Corporation and consolidated subsidiaries as of November 30, 1997 and 1996, and the results of their operations and their cash flows for the years ended November 30, 1997 and 1996 in conformity with generally accepted accounting principles. /s/ KPMG PEAT MARWICK LLP Chicago, Illinois March 16, 1998 F-2 REPORT OF INDEPENDENT AUDITORS The Board of Directors Binks Sames Corporation (formerly known as Binks Manufacturing Company) Franklin Park, Illinois We have audited the accompanying consolidated statements of operations, stockholders' equity, and cash flows of Binks Sames Corporation (formerly known as Binks Manufacturing Company) for the year ended November 30, 1995. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the 1995 consolidated financial statements referred to above present fairly, in all material respects, the results of operations and cash flows of Binks Sames Corporation for the year ended November 30, 1995 in conformity with generally accepted accounting principles. /s/ Crowe, Chizek and Company LLP Crowe, Chizek and Company LLP Oak Brook, Illinois February 9, 1996 F-3 BINKS SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES Consolidated Balance Sheets November 30, 1997 and 1996 (in thousands, except share amounts)
- ------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------ ASSETS 1997 1996 - ------------------------------------------------------------------------------------------------------------ Current assets: Cash and cash equivalents $ 7,220 16,200 Receivables, net 73,638 79,433 Inventories 78,144 84,737 Income taxes receivable 3,484 99 Deferred income taxes 2,840 8,221 Other current assets 746 1,324 - ------------------------------------------------------------------------------------------------------------ Total current assets 166,072 190,014 - ------------------------------------------------------------------------------------------------------------ Other noncurrent assets: Intangible assets 3,182 3,287 Deferred income taxes 189 4,525 Other assets 2,290 4,435 - ------------------------------------------------------------------------------------------------------------ Total other noncurrent assets 5,661 12,247 - ------------------------------------------------------------------------------------------------------------ Property, plant, and equipment, at cost: Land 1,425 1,762 Buildings 12,004 21,511 Machinery and equipment 29,227 42,177 - ------------------------------------------------------------------------------------------------------------ 42,656 65,450 Less accumulated depreciation 22,655 37,482 - ------------------------------------------------------------------------------------------------------------ Net property, plant, and equipment 20,001 27,968 - ------------------------------------------------------------------------------------------------------------ $ 191,734 230,229 - ------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------ LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------------------------------------------------------------------------------ Current liabilities: Bank overdrafts and notes payable to banks 8,144 8,708 Current maturities of long-term debt 484 676 Accounts payable 58,249 52,987 Accrued expenses: Payrolls, commissions, etc. 8,073 8,989 Taxes, other than income taxes 942 1,919 Other 14,280 17,371 Income taxes payable - 2,794 - ------------------------------------------------------------------------------------------------------------ Total current liabilities 90,172 93,444 Deferred compensation 7,313 9,564 Deferred income taxes 452 540 Long-term debt, less current maturities 60,946 44,634 - ------------------------------------------------------------------------------------------------------------ Total liabilities 158,883 148,182 - ------------------------------------------------------------------------------------------------------------ Stockholders' equity: Capital stock, $1 par value. Authorized 12,000,000 shares; issued and outstanding 2,963,837 shares in 1997 and 3,088,837 shares in 1996 2,964 3,089 Additional paid-in capital 19,629 24,504 Retained earnings 13,333 54,327 Foreign currency translation adjustments (3,075) 127 - ------------------------------------------------------------------------------------------------------------ Total stockholders' equity 29,887 78,958 - ------------------------------------------------------------------------------------------------------------ $ 188,770 227,140 - ------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. F-4 BINKS SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES Consolidated Statements of Operations Years ended November 30, 1997, 1996, and 1995 (in thousands, except per share amounts)
- ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- 1997 1996 1995 - ------------------------------------------------------------------------------------------------- Net sales $ 236,998 296,686 266,003 Cost of goods sold 178,420 216,017 178,940 - ------------------------------------------------------------------------------------------------- Gross profit 58,578 80,669 87,063 Selling, general, and administrative expenses 78,588 83,111 76,517 Restructuring costs 9,612 9,043 - - ------------------------------------------------------------------------------------------------- Operating income (loss) (29,622) (11,485) 10,546 - ------------------------------------------------------------------------------------------------- Other expense (income): Interest expense 5,080 4,405 4,032 Other expense (income), net (2,149) 267 (569) - ------------------------------------------------------------------------------------------------- 2,931 4,672 3,463 - ------------------------------------------------------------------------------------------------- Earnings (loss) before income taxes (32,553) (16,157) 7,083 Income tax expense (benefit) 7,527 (5,049) 2,777 - ------------------------------------------------------------------------------------------------- Net earnings (loss) $ (40,080) (11,108) 4,306 - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- Net earnings (loss) per share $ (13.07) (3.60) 1.39 - ------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. F-5 BINKS SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES Consolidated Statements of Stockholders' Equity Years ended November 30, 1997, 1996, and 1995 (in thousands, except per share amounts)
- ------------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------- Foreign Additional currency Capital paid-in Retained translation stock capital earnings adjustments Total - ------------------------------------------------------------------------------------------------------------------------------- Balance at November 30, 1994 $ 3,089 24,504 63,909 (1,275) 90,227 Net earnings - - 4,306 - 4,306 Foreign currency translation adjustments - - - 1,616 1,616 Cash dividends ($.50 per share) - - (1,544) - (1,544) - ------------------------------------------------------------------------------------------------------------------------------- Balance at November 30, 1995 3,089 24,504 66,671 341 94,605 Net loss - - (11,108) - (11,108) Foreign currency translation adjustments - - - (1,559) (1,559) Liquidation of foreign subsidiary - - - 1,345 1,345 Cash dividends ($.40 per share) - - (1,236) - (1,236) - ------------------------------------------------------------------------------------------------------------------------------- Balance at November 30, 1996 3,089 24,504 54,327 127 82,047 Net loss - - (40,080) - (40,080) Foreign currency translation adjustments - - - (3,202) (3,202) Repurchase and retirement of 125,000 shares of capital stock (125) (4,875) - - (5,000) Cash dividends ($.30 per share) - - (914) - (914) - ------------------------------------------------------------------------------------------------------------------------------- Balance at November 30, 1997 $ 2,964 19,629 13,333 (3,075) 32,851 - ------------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. F-6 BINKS SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES Consolidated Statements of Cash Flows Years ended November 30, 1997, 1996, and 1995 (in thousands)
- ---------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------- 1997 1996 1995 - ---------------------------------------------------------------------------------------------------------- Cash flows from operating activities: Net earnings (loss) $ (40,080) (11,108) 4,306 Adjustments to reconcile net earnings (loss) to net cash provided by (used in) operating activities: Depreciation and amortization: Property, plant, and equipment 5,299 4,285 3,765 Intangible assets 237 146 177 Deferred compensation, net of payments (310) 544 493 Deferred income taxes 9,359 (9,175) (1,295) Other, net (1,222) 339 189 Cash provided by (used in) changes in: Receivables (2,883) 11,879 (18,936) Inventories 4,164 622 (10,341) Other current assets 1,509 1,799 (530) Accounts payable 11,290 (2,927) 17,589 Accrued expenses (4,646) 12,912 2,258 Income taxes (5,923) 518 1,607 - ---------------------------------------------------------------------------------------------------------- Net cash provided by (used in) operating activities (23,206) 9,834 (718) - ---------------------------------------------------------------------------------------------------------- Cash flows from investing activities: Purchases of property, plant, and equipment (4,830) (3,540) (7,664) Proceeds from sale of property, plant, and equipment 7,812 1,738 2,025 (Increase) decrease in other assets 2,353 83 (560) - ---------------------------------------------------------------------------------------------------------- Net cash provided by (used in) investing activities 5,335 (1,719) (6,199) - ---------------------------------------------------------------------------------------------------------- Cash flows from financing activities: Cash dividends paid (914) (1,236) (1,544) Proceeds from long-term borrowings 30,635 2,983 6,069 Net increase (decrease) in short-term borrowings (1,126) (1,061) 3,868 Repurchase and retirement of capital stock (5,000) - - Principal payments on long-term debt (14,120) (921) (1,679) - ---------------------------------------------------------------------------------------------------------- Net cash provided by (used in) financing activities 9,475 (235) 6,714 - ---------------------------------------------------------------------------------------------------------- Effect of exchange rate changes on cash (584) (207) 166 - ---------------------------------------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents (8,980) 7,673 (37) - ---------------------------------------------------------------------------------------------------------- Cash and cash equivalents at beginning of year 16,200 8,527 8,564 - ---------------------------------------------------------------------------------------------------------- Cash and cash equivalents at end of year $ 7,220 16,200 8,527 - ---------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------- Supplemental cash flow disclosures - cash paid for: Interest $ 4,549 4,147 4,350 Income taxes 4,186 3,435 3,422 - ---------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. F-7 BINKS SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements November 30, 1997, 1996, and 1995 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION AND REPORT PREPARATION The consolidated financial statements include the accounts of the Company and consolidated subsidiaries in the U.S., England, Scotland, Sweden, Australia, Canada, Belgium, Italy, Germany, Japan, and France. All material intercompany balances and transactions have been eliminated in consolidation. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make certain estimates and assumptions which affect reported earnings, financial position, and various disclosures. Actual results could differ from those estimates. CURRENCY TRANSLATION The results of operations for non-U.S. subsidiaries are translated from local currencies into U.S. dollars using average exchange rates during each period; assets and liabilities are translated using exchange rates at the end of each period. Adjustments resulting from the translation process are reported in a separate component of stockholders' equity, and are not included in the determination of the results of operations. FORWARD EXCHANGE CONTRACTS The Company enters into forward exchange contracts as hedges against accounts receivable and accounts payable denominated in currencies other than the currency used in preparing the financial statements. Market value gains and losses on the foreign exchange contracts are recognized and offset the foreign exchange gains or losses on the related accounts receivable and accounts payable. CASH AND CASH EQUIVALENTS Cash and cash equivalents include cash on hand and amounts due from banks with original maturities of three months or less. INVENTORIES Inventories are stated at the lower of cost (first-in, first-out) or market (net realizable value). PROPERTY, PLANT, AND EQUIPMENT Depreciation of property, plant, and equipment is computed by the straight-line method. Estimated lives range from 25 to 40 years for buildings and from 4 to 12 years for machinery and equipment. INTANGIBLE ASSETS Intangible assets are comprised of goodwill and patents. Goodwill represents excess costs of acquired companies over the fair values of their net tangible assets. All intangibles are amortized by the straight line method, with goodwill amortized over 40 years, and patents over their respective useful lives. (Continued) F-8 BINKS SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- IMPAIRMENT OF LONG-LIVED ASSETS In the event that facts and circumstances indicate that the cost of long-lived assets may be impaired, an evaluation of recoverability would be performed. If an evaluation is required, the estimated future undiscounted cash flows associated with the asset would be compared to the asset's carrying amount to determine if a writedown is required. FAIR VALUE OF FINANCIAL INSTRUMENTS The fair value approximates the carrying value for all financial instruments, with the exception of long-term debt, for which the fair value is less than the carrying value by an amount which is immaterial to the consolidated financial statements. REVENUE RECOGNITION Profits on long-term equipment production and installation contracts are recorded on the basis of the estimated percentage of completion of individual contracts determined under the cost-to-cost method. Estimated losses on long-term contracts are recognized in the period in which a loss becomes apparent. RESEARCH AND DEVELOPMENT EXPENSES Research and development costs are charged to expense when incurred. Research and development costs were $5.0 million, $4.9 million, and $4.0 million in fiscal 1997, 1996, and 1995, respectively. ADVERTISING EXPENSES Advertising costs are charged to expense when incurred. Advertising costs were $2.2 million, $2.3 million, and $1.8 million in fiscal 1997, 1996, and 1995, respectively. INCOME TAXES The asset and liability method is used in accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for operating loss and tax credit carryforwards and for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. STOCK-BASED COMPENSATION In 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation." The Company has elected to continue to apply the principles of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," as discussed in note 12 to the consolidated financial statements. (Continued) F-9 BINKS SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NET EARNINGS (LOSS) PER SHARE Net earnings (loss) per share are based on the weighted average number of shares of capital stock outstanding (3,065,549 shares in fiscal 1997 and 3,088,837 shares in fiscal 1996 and 1995). Average capital stock equivalent shares (stock options) outstanding have not been included in the computation of earnings per share because they would not have been dilutive. RECLASSIFICATIONS Certain amounts in the fiscal 1996 and fiscal 1995 financial statements, as previously reported, have been reclassified to conform to the fiscal 1997 presentation. (2) RECEIVABLES Net receivables are comprised of the following at November 30 (in thousands):
- ------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------- 1997 1996 - ------------------------------------------------------------------------------------------------------------------- Trade $ 67,646 74,889 Costs and estimated earnings in excess of billings on uncompleted contracts 5,752 4,855 Other 3,177 2,930 - ------------------------------------------------------------------------------------------------------------------- 76,575 82,674 Less allowance for doubtful receivables 2,937 3,241 - ------------------------------------------------------------------------------------------------------------------- $ 73,638 79,433 - ------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------- Comparative information with respect to uncompleted long-term equipment contracts at November 30 follows (in thousands): - ------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------- 1997 1996 - ------------------------------------------------------------------------------------------------------------------- Expenditures and estimated earnings on uncompleted contracts $ 20,619 38,812 Less applicable billings 18,553 39,468 - ------------------------------------------------------------------------------------------------------------------- $ 2,066 (656) - ------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------- Included in the accompanying balance sheets: Costs and estimated earnings in excess of billings on uncompleted contracts (included in receivables) $ 5,752 4,855 Billings in excess of costs and estimated earnings on uncompleted contracts (included in accounts payable) (3,686) (5,511) - ------------------------------------------------------------------------------------------------------------------- $2,066 (656) - ------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------
F-10 BINKS SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (3) INVENTORIES Inventories at November 30 are summarized as follows (in thousands): - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1997 1996 - -------------------------------------------------------------------------------- Finished goods and service parts $ 32,918 41,375 Work in process 43,909 39,673 Raw material 1,317 3,689 - -------------------------------------------------------------------------------- $ 78,144 84,737 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
(4) NON-U.S. SUBSIDIARIES Financial information relating to non-U.S. subsidiaries is summarized as follows (in thousands):
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1997 1996 1995 - -------------------------------------------------------------------------------- Total assets $ 112,963 122,247 120,399 Total liabilities 77,824 79,104 78,975 - -------------------------------------------------------------------------------- Net assets $ 35,139 43,143 41,424 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Net sales $ 140,726 167,324 129,769 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Earnings before income taxes (a) $ (313) 4,465 7,083 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Net earnings (loss) (b) $ (1,812) 2,413 2,213 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
(a) Includes nonrecurring charges of $5.1 million in fiscal 1997 and $3.1 million in fiscal 1996. (b) Includes charges of $1.3 million to reduce the balance sheet carrying amounts of deferred tax assets arising in prior years. (5) CREDIT FACILITIES AND LONG-TERM DEBT Lines of credit and overdraft facilities aggregate $77.4 million at November 30, 1997, against which the Company has overdrafts and notes payable to banks of $7.6 million, bankers' acceptances of $13.5 million, $30.5 million drawn under a revolving credit facility, and letters of credit supporting export activities of $700 thousand. The remaining unused lines of credit are available to support the Company's U.S. operations ($6.0 million) and non-U.S. operations ($19.1 million). (Continued) F-11 BINKS SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Consolidated long-term debt consists of the following at November 30 (in thousands):
- --------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------- 1997 1996 - --------------------------------------------------------------------------------------------------------------- Bankers' acceptances due in various maturities through January 26, 1998 under lines of credit expiring in 1998 (6.31% to 6.44% in 1997 and 6.03% to 6.31% in 1996) $ 13,500 27,000 Borrowings under a revolving credit facility due in various maturities through January 30, 1998 under a line of credit expiring in 2002 (6.75% to 6.875% in 1997) 30,500 - Senior notes maturing through 2008 (7.14%) 15,000 15,000 Obligations under capital leases 349 593 Other loans, maturities at various dates through 2005, weighted average interest rate of 4.8% in 1997 and 1996 2,081 2,717 - --------------------------------------------------------------------------------------------------------------- 61,430 45,310 Less current maturities 484 676 - --------------------------------------------------------------------------------------------------------------- Long-term debt, less current maturities $ 60,946 44,634 - ---------------------------------------------------------------------------------------------------------------
As they mature, the banker's acceptances are refinanced through borrowings under the revolving credit facility and accordingly are classified as long-term debt. The aggregate maturities of long-term debt due in each of the fiscal years 1999 through 2002 are $2.0 million, $1.6 million, $2.2 million, and $45.4 million, respectively. On September 23, 1997, the Company entered into a $50 million unsecured five-year credit facility with a syndicate of Chicago area banks. As of November 30, 1997, the Company was not in compliance with several of the financial covenants contained in the credit facility. On March 16, 1998, the Company agreed with the bank group to collateralize the credit facility, pay amendment fees, increase the interest rate to prime plus 1/2% on existing borrowings and prime plus 1% on new borrowings, and shorten the duration of the agreement to two years, in exchange for waiving all existing defaults, amending certain terms, and increasing the total line of credit to $52.5 million to accommodate the projected cash flow needs of the Company. On March 16, 1998, the Company also agreed with the holder of its 7.14% senior notes to pay amendment fees, increase the interest rate to 7.64%, and shorten the maturity to September 30, 1999 in exchange for waiving all existing defaults and amending certain terms of the agreement. (6) INCOME TAXES The Company files a consolidated Federal income tax return which includes all U.S. subsidiaries. Federal income taxes for each U.S. subsidiary are computed separately and are payable to the Company. No provision is made for U.S. Federal income taxes which would be payable if undistributed earnings of non-U.S. subsidiaries were paid as dividends to the Company. If such earnings, which aggregate $30.0 million at November 30, 1997, were to be distributed, the resulting U.S. Federal income taxes would be largely offset by net operating loss carryforwards. (Continued) F-12 BINKS SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Foreign tax credit carryforwards at November 30, 1997 totaled $2.6 million. Expiration of the foreign tax credit carryforwards is as follows: $870 thousand in fiscal 1998, $528 thousand in fiscal 1999, $316 thousand in fiscal 2000, and $883 thousand in 2002. Income tax expense (benefit) is comprised as follows (in thousands): - --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------- State U.S. and Federal Non-U.S. local Total - ------------------------------------------------------------------------------------------------------------------------------- Fiscal 1997: Current $ (2,775) 747 196 (1,832) Deferred 8,679 680 - 9,359 - ------------------------------------------------------------------------------------------------------------------------------- $ 5,904 1,427 196 7,527 - ------------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------- Fiscal 1996: Current 98 3,670 358 4,126 Deferred (7,412) (1,763) - (9,175) - ------------------------------------------------------------------------------------------------------------------------------- $ (7,314) 1,907 358 (5,049) - ------------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------- Fiscal 1995: Current 1,456 2,306 310 4,072 Deferred (434) (861) - (1,295) - ------------------------------------------------------------------------------------------------------------------------------- $ 1,022 1,445 310 2,777 - ------------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------- Actual income tax expense differed from the amounts computed by applying the U.S. Federal income tax rate of 34% to pretax income (loss) as a result of the following (in thousands): - ------------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------- 1997 1996 1995 - ------------------------------------------------------------------------------------------------------------------------------- Computed "expected" tax expense (benefit) $ (11,068) (5,493) 2,408 Difference between U.S. and non-U.S. tax rates 336 182 277 Nondeductible expenses 206 326 381 State and local income taxes, net of Federal income tax benefit 130 236 205 Research tax credit - (94) (267) Change in the valuation allowance for deferred tax assets 17,127 (1,021) 1,038 Benefit not recorded for non-U.S. net operating loss - - (114) Foreign tax credits less than (in excess of) U.S. taxes on dividends from foreign subsidiaries 833 1,150 (1,209) Restructuring costs - (639) - Other (37) 304 58 - ------------------------------------------------------------------------------------------------------------------------------- Provision for income taxes $ 7,527 (5,049) 2,777 - ------------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------------
(Continued) F-13 BINKS SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at November 30, 1997 and 1996 are presented below (in thousands): - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1997 1996 - -------------------------------------------------------------------------------- Deferred tax assets attributable to: Deferred compensation $ 2,280 2,458 Inventories 1,482 1,117 Allowance for doubtful receivables 499 450 Foreign tax credit carryforwards 2,597 1,714 Accrued expenses 990 1,499 Net operating loss carryforwards 12,197 5,379 Nonrecurring charges 2,337 3,146 Other 213 294 - -------------------------------------------------------------------------------- Total gross deferred tax assets 22,595 16,057 Less valuation allowance 18,013 886 - -------------------------------------------------------------------------------- Total deferred tax assets 4,582 15,171 - -------------------------------------------------------------------------------- Deferred tax liabilities attributable to: Plant and equipment, principally due to differences in depreciation 1,725 2,199 Long-term contracts 39 515 Other 241 252 - -------------------------------------------------------------------------------- Total gross deferred liabilities 2,005 2,966 - -------------------------------------------------------------------------------- Net deferred tax assets $ 2,577 12,205 - --------------------------------------------------------------------------------
The net change in the total valuation allowance for the fiscal years ended 1997, 1996, and 1995 was an increase of $17.1 million, a decrease of $1.0 million, and an increase of $1.0 million, respectively. The valuation allowance for deferred tax assets as of November 30, 1994 was $0.9 million. The fiscal 1997 change in the valuation allowance included a charge of $10.0 million to reduce the carrying amounts of deferred tax assets initially recorded in prior years. The increased allowance is required because the Company no longer has adequate assurance that the deferred tax assets will be realized in future periods. At November 30, 1997, the Company has net operating loss carryforwards of $35.9 million which primarily expire in 2011 and 2012. The Internal Revenue Service has completed its examination of the Company's Federal income tax returns through November 30, 1989. (Continued) F-14 BINKS SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (7) EMPLOYEE BENEFITS Through November 30, 1997, the Company maintained a defined contribution profit sharing plan. The Company contributed to the plan the lesser of 15% of the participants' compensation, 18% of the Company's adjusted net income as defined in the plan, or six times the total of the participants' contributions made for the year. Effective as of December 1, 1997, the Company is no longer required to make contributions to the profit sharing plan, but will make contributions to match certain employee contributions to the Company's 401(k) plan. Additionally, the Company maintains deferred compensation plans for certain officers and key employees. The deferred compensation plan benefits are determined by a formula which considers the employee's average salary and years of service with the Company. The total expense relating to these plans was $1.2 million in 1997, $1.6 million in fiscal 1996, and $1.0 million in fiscal 1995. (8) QUARTERLY FINANCIAL DATA (UNAUDITED) A summary of quarterly financial data for the years ended November 30, 1997 and 1996 follows (in thousands, except per share data):
- ------------------------------------------------------------------------------------------------------- QUARTER ENDED ---------------------------------------------------------- Fiscal 1997 February 28 May 31 August 31 November 30 - ------------------------------------------------------------------------------------------------------- Net sales $ 64,591 52,967 67,506 51,934 - ------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------- Gross profit $ 18,623 15,805 19,684 4,466 - ------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------- Net earnings (loss) $ 142 (1,882) (1,323) (37,017) Net earnings (loss) per share $ .05 (.61) (.43) (12.08) - ------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------- QUARTER ENDED ---------------------------------------------------------- Fiscal 1996 February 29 May 31 August 31 November 30 - ------------------------------------------------------------------------------------------------------- Net sales $ 65,429 62,877 71,535 96,845 - ------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------- Gross profit $ 21,146 20,790 23,828 14,905 - ------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------- Net earnings (loss) $ 1,118 (291) 806 (12,741) Net earnings (loss) per share $ .36 (.09) .26 (4.13) - ------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------
(9) OPERATING LEASES The Company occupies certain offices and uses certain equipment under operating lease arrangements. Rent expense under such arrangements was $3.4 million, $2.9 million, and $2.8 million in fiscal years 1997, 1996, and 1995, respectively. (Continued) F-15 BINKS SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- The future minimum rental payments required under operating leases that have initial or remaining noncancelable lease terms in excess of one year as of November 30, 1997 are $2.4 million, $1.7 million, $1.1 million, $454 thousand, and $274 thousand in 1998 through 2002, respectively. It is expected that in the normal course of business most leases that expire will be renewed or replaced by leases on the same or similar properties; thus, it is anticipated that future annual rent expense will not be materially less than the amount shown for 1997. (10) CONTINGENCIES In January 1998, the Company notified the developer and landlord of its planned future headquarters site in Vernon Hills, Illinois that the Company wanted to terminate the project. The Company had previously entered into a 20-year lease agreement for the Vernon Hills site. While groundbreaking for the new site has not occurred, it is anticipated that the Company will incur lease termination costs. The Company is unable to make a meaningful estimate of the amount or range of loss that could result from an unfavorable resolution of this matter. The Company is the defendant in a lawsuit filed by former financial advisors seeking approximately $900 thousand under terms of a contract. Management believes that all required payments have been made and no further amounts have been provided for. The Company has certain other contingent liabilities resulting from litigation and claims incident to the ordinary course of business. Management believes that the probable resolution of such contingencies will not materially affect the financial position or results of operations of the Company. (11) REPURCHASE AND RETIREMENT OF CAPITAL STOCK In September 1997, the Company repurchased 125,000 shares of its capital stock from the profit sharing plan, at the price of $40.00 per share, or $5.0 million, and retired the shares. (12) STOCK OPTION PLAN During fiscal 1996, the Company established a stock option plan. The plan provides for the granting of stock options to key employees and Directors to purchase a maximum of 300,000 shares of the Company's capital stock. All options are granted at the fair market value at the date of grant and generally vest at the rate of 25% per year. Outstanding options become fully vested upon a change in control as defined in the plan agreement. The maximum option term is 10 years. (Continued) F-16 BINKS SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Changes in options outstanding are summarized as follows: - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
OPTIONS OUTSTANDING ------------------------------------------ Range of Weighted-average Options exercise prices exercise prices - -------------------------------------------------------------------------------- Balance, November 30, 1995 - $ - $ - Granted 93,500 23.375 23.375 Balance, November 30, 1996 93,500 23.375 23.375 Granted 32,550 40.375-43.00 42.52 Forfeited (4,000) 23.375 23.375 Balance, November 30, 1997 122,050 23.375-43.00 28.47 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Of the options outstanding at November 30, 1997, options on 57.625 shares were exercisable at a price of $23.38 per share; none of the options outstanding at November 30, 1996 were exercisable. At November 30, 1997, there were 177,950 shares available for future grants. Using the Black-Scholes model and the following assumptions, the estimated fair value of the options granted in fiscal 1997 and 1996 were $13.57 and $6.87, respectively.
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1997 1996 - -------------------------------------------------------------------------------- Risk-free interest rate 6.2% 6.5 Expected dividend yield 0.9 1.7 Expected volatility 25.25 25.25 Estimated lives of options (in years) 5.0 5.0 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
The Company has adopted the disclosure provisions of SFAS No. 123. Accordingly, no compensation expense has been recognized for the stock option activity. Had compensation expense for the Company's stock option activity been calculated under the provisions of SFAS No. 123, the Company's net loss for fiscal year 1997 would have increased by $782 thousand ($0.26 per share). During the phase-in period of SFAS No. 123, the estimation of compensation costs reflects only a partial vesting of options. In future years, the estimated pro forma compensation costs may be higher depending upon, among other factors, the number of options granted. (13) STOCKHOLDER RIGHTS PLAN On February 2, 1990, the Company declared a dividend distribution of one Right for each outstanding share of Capital Stock of the Company to the stockholders of record on February 13, 1990. Certain terms of the Rights were amended on January 21, 1991. Each Right, when exercisable, entitles the registered holder to purchase from the Company one share of Capital Stock, at a price of $100 per share, subject to adjustment. The Rights become exercisable ten days after the earliest to occur of (i) public announcement that a person or group of associated or affiliated persons acquired, or obtained the right to acquire, (Continued) F-17 BINKS SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- beneficial ownership of 15% or more of the outstanding Capital Stock of the Company (the Stock Acquisition Date); (ii) the commencement of, or an announcement of an intention to make, a tender offer or exchange offer if, upon consummation thereof, any person or group of associated or affiliated persons would be the beneficial owner of 15% or more of the outstanding Capital Stock of the Company; or (iii) the Board of Directors declares any person owning 10% or more of the outstanding Capital Stock of the Company to be an "Adverse Person" pursuant to the criteria set forth in the Rights Agreement. If a person or group of associated or affiliated persons becomes the beneficial owner of 15% or more of the outstanding Capital Stock of the Company, the Company is the surviving corporation in a merger and the Capital Stock remains outstanding, an acquiring person engages in certain self-dealing transactions, or the Board of Directors declares any person to be an "Adverse Person" subject to certain adjustments and other conditions, each Right not owned or transferred by the acquiring person or Adverse Person will entitle the holder to purchase one share of Capital Stock of the Company at a purchase price of 20% of its then-market value. In addition, if the Company is acquired in a merger or other business combination transaction or 50% or more of its consolidated assets or earning power is sold, subject to certain adjustments and other conditions, each Right will entitle the holder to purchase capital stock of the acquiring company having a market value of $200 for a purchase price of $100. The Rights are redeemable by the Company at any time prior to 20 days after the Stock Acquisition Date, at $0.01 per Right, at the Company's option. After the Stock Acquisition Date, the Rights may not be exercised until the Company's right of redemption has expired. The Rights expire on February 2, 2000. Until a Right is exercised, the holder of a Right, as such, will have no rights as a stockholder of the Company, including, without limitation, the right to vote or receive dividends. (14) FORWARD EXCHANGE CONTRACTS The Company operates internationally, with manufacturing and distribution facilities in various locations around the world. The Company's approach to reduce the effects of fluctuations in foreign currency exchange rates includes foreign currency hedging activities. The Company does not use derivative financial instruments for trading or speculative purposes. As of November 30, 1997, the Company had forward exchange contracts maturing in fiscal 1998 to sell $1.6 million U.S. dollars, and to purchase $1.4 million of foreign currency, primarily French francs, at contracted forward rates. (15) GAINS ON SALES OF REAL ESTATE During each of the last three fiscal years, the Company has sold real estate. The $2.9 million gain on the sale of the Franklin Park facility in fiscal 1997 is recorded in "restructuring costs" as described in note 16. Gains of $289 thousand in fiscal 1996 and $258 thousand in fiscal 1995 are included in "other income." (Continued) F-18 BINKS SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (16) NONRECURRING CHARGES During fiscal 1997, the Company continued a strategic restructuring of its operations and product lines and relocated its primary domestic manufacturing facilities from Franklin Park, Illinois to Longmont, Colorado. The Company has reduced the number of products that it offers for sale, and has reduced the number of manufacturing and administrative employment positions. Total nonrecurring charges of $21.1 million were recorded in fiscal 1997, including costs recorded as follows (in thousands): - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Cost of goods sold $ 8,667 Selling, general, and administrative expenses 2,802 Restructuring costs 9,612 - -------------------------------------------------------------------------------- 21,081 Income tax benefits 1,269 - -------------------------------------------------------------------------------- $ 19,812 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Nonrecurring charges in cost of goods sold include a $2.3 million loss on rationalized inventory sold at auction, $1.6 million of noninventoriable manufacturing variances incurred at the Longmont facility, and cost overruns of $4.8 million on certain long-term contracts. Nonrecurring charges in selling, general, and administrative expenses include settlements of litigation, product performance disputes, and workers' compensation claims. Restructuring costs are comprised of the following components: (a) $1.9 million resulting from the closing of the Franklin Park facility, which is net of a $2.9 million gain on the sale of the building; (b) $1.7 million in manufacturing startup costs at the Longmont facility; (c) $4.6 million resulting from workforce reductions primarily outside the U.S., the loss on the sale of the Infratherm product line, liquidation of operations in Italy and the impairment of the Company's Belgian operations; and, (d) $1.4 million of professional service fees and other costs. At November 30, 1997, accrued nonrecurring charges were $4.3 million, substantially all of which will result in cash outflows in fiscal 1998. During fiscal 1996, the Company incurred nonrecurring charges of $18.9 million as a result of the restructuring of its operations and product lines. The nonrecurring charges included the following costs (thousands): - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Cost of goods sold $ 7,086 Selling, general, and administrative expenses 2,780 Restructuring costs 9,043 - -------------------------------------------------------------------------------- 18,909 Income tax benefits 6,334 - -------------------------------------------------------------------------------- $ 12,575 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
(Continued) F-19 BINKS SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Included in cost of goods sold is a nonrecurring charge of $7.1 million resulting from the writedown of inventories related to products that have been eliminated. Included in selling, general, and administrative expenses is a nonrecurring charge of $2.8 million relating to the resolution of disputes pertaining to the performance of products sold in prior years. The principal components of restructuring costs of $9 million are (a) employee separation costs of $5.4 million resulting from the reduction of 567 positions in the U.S., Mexico, Canada, England, Belgium, France, and Italy; (b) writeoffs of $3.3 million relating to specific manufacturing assets, the investment in Binks de Mexico, and disposition of the corporate jet; and (c) other costs of $300 thousand. At November 30, 1996, accrued nonrecurring charges were $7.1 million, substantially all of which resulted in cash outflows in fiscal 1997. (17) SEGMENT AND GEOGRAPHIC INFORMATION The Company operates in one industry, the manufacture and distribution of spray finishing and coating application equipment. The Company's products are sold to customers in North America, South America, Europe, Asia, Africa, and Australia. U.S. exports to third-party customers are less than 10% of U.S. sales. No single customer accounts for more than 10% of the Company's net sales. The table below presents the Company's operations by geographic area: Americas (U.S. and Canada); Europe (France, England, Belgium, Germany, Italy, and Sweden); and the Pacific Rim (Japan and Australia). Sales are presented by originating area. Interarea transfers comprise transactions among the Company and its subsidiaries in different geographic areas; these transfers are eliminated in consolidation.
- ---------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------- 1997 1996 1995 - ---------------------------------------------------------------------------------------------------- Sales to unaffiliated customers (includes exports): Americas $ 102,836 139,721 147,961 Europe 113,376 139,832 105,174 Pacific Rim 20,786 17,133 12,868 Interarea transfers from: Americas 5,557 6,871 5,357 Europe 21,019 22,980 23,221 Eliminations (26,576) (29,851) (28,578) - ---------------------------------------------------------------------------------------------------- Total $ 236,998 296,686 266,003 - ---------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------- Operating income (loss): Americas (28,500) (17,165) 6,695 Europe (1,296) 5,142 3,321 Pacific Rim 174 538 530 - ---------------------------------------------------------------------------------------------------- Total (29,622) (11,485) 10,546 - ---------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------- Identifiable assets at November 30: Americas 87,252 117,293 128,882 Europe 96,869 99,384 90,213 Pacific Rim 7,613 13,552 12,006 - ---------------------------------------------------------------------------------------------------- Total $ 191,734 230,229 231,101 - ---------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------
F-20 EXHIBIT INDEX BINKS SAMES CORPORATION Form 10-K for the fiscal year ended November 30, 1997 EXHIBIT NO. DESCRIPTION - ----------- ----------- 3.1 Restated Certificate of Incorporation.(1) 3.2 Amendment to Restated Certificate of Incorporation.(2) 3.2 Amended and Restated By-laws, as of December 11, 1996.(3) 4.3 Amended and Restated Rights Agreement, dated as of February 2, 1990 and amended and restated as of January 21, 1991, between the Company and Harris Trust and Savings Bank, as successor rights agent.(4) 10.1(a)(*) Form of Executive Retirement Income Contracts between the Company and Doran J. Unschuld and W. Kent Anderson.(5) 10.1(b)(*) Form of Amendment to Executive Retirement Income Contract for Doran J. Unschuld.(1) 10.2(*) Form of Employment Security Agreement between the Company and Doran J. Unschuld and Jeffrey W. Lemajeur.(1) 10.3(*) Forms of Employment Security Agreements between the Company and certain key employees.(1) 10.4(*) Form of Insurance Maintenance Agreement between the Company and each of its directors and officers.(1) i 10.5(*) Binks Sames Corporation Amended and Restated 1996 Stock Option Plan.(6) 10.6 Amended and Restated Credit Agreement dated March 16, 1998 by and among the Company, the Lenders named therein and The First National Bank of Chicago, as agent.(7) 10.7 Note Purchase Agreement, dated as of November 30, 1993, among the Company and the Purchasers named therein.(8) 10.8 Waiver and Second Amendment to Note Purchase Agreement, dated as of March 16, 1998, among the Company and the Purchasers named therein.(7) 21.1 List of subsidiaries.(1) 23.1 Consent of KPMG Peat Marwick LLP.(7) 23.2 Consent of Crowe, Chizek and Company LLP.(7) 27.1 Financial Data Schedule.(7) - ------------------------ (*) Management contract or compensatory plan, contract or arrangement required to be filed as an exhibit to this Form 10-K pursuant to Item 14(c) of Form 10-K. (1) Filed under corresponding exhibit number to the Company's Form 10-K for its fiscal year ended November 30, 1993 and incorporated herein by reference. (2) Filed as Exhibit 4.1 to the Company's registration statement on Form S-8 (File no. 333-30191) and incorporated herein by reference. (3) Filed under corresponding exhibit number to the Company's Form 10-K for its fiscal year ended November 30, 1996 and incorporated herein by reference. (4) Filed under corresponding exhibit number to the Company's Form 10-K for its fiscal year ended November 30, 1993 and incorporated herein by reference. (5) Filed under corresponding exhibit number to the Company's Form 10-K for its fiscal year ended November 30, 1995 and incorporated herein by reference. (6) Filed under corresponding exhibit number to the Company's registration statement on Form S-8 (File no. 333-30191) and incorporated herein by reference. (7) Filed herewith. (8) Filed as Exhibit 4.2 to the Company's Form 10-K for its fiscal year ended November 30, 1993 and incorporated herein by reference.
ii EX-10.6 2 EXHIBIT 10.6 $52,500,000 AMENDED AND RESTATED CREDIT AGREEMENT Originally dated as of September 23, 1997 Amended and Restated as of March 16, 1998 among BINKS SAMES CORPORATION, THE INSTITUTIONS FROM TIME TO TIME PARTIES HERETO AS LENDERS and THE FIRST NATIONAL BANK OF CHICAGO, as Agent TABLE OF CONTENTS SECTION PAGE ARTICLE I: DEFINITIONS 1.1 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . 1 1.2 References. . . . . . . . . . . . . . . . . . . . . . . . . . . . .26 1.3 Supplemental Disclosure . . . . . . . . . . . . . . . . . . . . . .26 1.4 Amendment and Restatement of Original Credit Agreement. . . . . . .27 ARTICLE II: THE EXISTING LOANS AND SUPPLEMENTAL LOAN FACILITY 2.1. Existing Loans. . . . . . . . . . . . . . . . . . . . . . . . . . .27 2.2 Supplemental Loans. . . . . . . . . . . . . . . . . . . . . . . . .27 2.3 [Intentionally Blank] . . . . . . . . . . . . . . . . . . . . . . .28 2.4 [Intentionally Blank].. . . . . . . . . . . . . . . . . . . . . . .28 2.5 Optional Payments; Mandatory Prepayments. . . . . . . . . . . . . .28 2.6 Reduction of Commitments. . . . . . . . . . . . . . . . . . . . . .30 2.7 Method of Borrowing . . . . . . . . . . . . . . . . . . . . . . . .31 2.8 Notice of Borrowing; Floating Rate Applicable to All Obligations. .31 2.9 Minimum Amount of Each Supplemental Advance . . . . . . . . . . . .31 2.10 [Intentionally Blank] . . . . . . . . . . . . . . . . . . . . . . .31 2.11 Default Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . .31 2.12 Method of Payment . . . . . . . . . . . . . . . . . . . . . . . . .31 2.13 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32 2.14 Telephonic Notices. . . . . . . . . . . . . . . . . . . . . . . . .32 2.15 Promise to Pay; Interest; Interest Payment Dates; Interest and Fee Basis; Taxes; Loan and Control Accounts . . . .32 2.16 Notification of Supplemental Advances, Interest Rates, Prepayments and Aggregate Supplemental Loan Commitment Reductions . . . . . . . . . . . . . . . . . . . . . . . . . . .36 2.17 Lending Installations . . . . . . . . . . . . . . . . . . . . . . .36 2.18 Non-Receipt of Funds by the Agent . . . . . . . . . . . . . . . . .36 2.19 Termination Date. . . . . . . . . . . . . . . . . . . . . . . . . .37 2.20 Replacement of Certain Lenders. . . . . . . . . . . . . . . . . . .37 2.21 Collection Account Arrangements . . . . . . . . . . . . . . . . . .38 ARTICLE III: THE LETTER OF CREDIT FACILITY 3.1 Obligation to Issue Letters of Credit . . . . . . . . . . . . . . .39 3.2 Types and Amounts of Letters of Credit. . . . . . . . . . . . . . .39 3.3 Conditions with respect to Letters of Credit. . . . . . . . . . . .39 3.4 Procedure for Issuance of Letters of Credit . . . . . . . . . . . .40 3.5 Participation in Letters of Credit. . . . . . . . . . . . . . . . .40 3.6 Reimbursement Obligation. . . . . . . . . . . . . . . . . . . . . .41 3.7 Letter of Credit Fees. . . . . . . . . . . . . . . . . . . . . . .41 3.8 Issuing Bank Reporting Requirements.. . . . . . . . . . . . . . . .41 3.9 Indemnification; Exoneration. . . . . . . . . . . . . . . . . . . .42 3.10 Cash Collateral . . . . . . . . . . . . . . . . . . . . . . . . . .43 i ARTICLE IV: CHANGE IN CIRCUMSTANCES 4.1 Yield Protection. . . . . . . . . . . . . . . . . . . . . . . . . .43 4.2 Changes in Capital Adequacy Regulations . . . . . . . . . . . . . .44 4.3 [Intentionally Blank] . . . . . . . . . . . . . . . . . . . . . . .45 4.4 [Intentionally Blank].. . . . . . . . . . . . . . . . . . . . . . .45 4.5 Lender Statements; Survival of Indemnity. . . . . . . . . . . . . .45 ARTICLE V: CONDITIONS PRECEDENT 5.1 Initial Supplemental Advances and Letters of Credit . . . . . . . .45 5.2 Each Supplemental Advance and Letter of Credit. . . . . . . . . . .47 ARTICLE VI: REPRESENTATIONS AND WARRANTIES 6.1 Organization; Corporate Powers. . . . . . . . . . . . . . . . . . .47 6.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48 6.3 No Conflict; Governmental Consents. . . . . . . . . . . . . . . . .48 6.4 Financial Statements. . . . . . . . . . . . . . . . . . . . . . . .49 6.5 No Material Adverse Change. . . . . . . . . . . . . . . . . . . . .49 6.6 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49 6.7 Litigation; Loss Contingencies and Violations . . . . . . . . . . .50 6.8 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . .50 6.9 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50 6.10 Accuracy of Information . . . . . . . . . . . . . . . . . . . . . .51 6.11 Securities Activities . . . . . . . . . . . . . . . . . . . . . . .52 6.12 Material Agreements . . . . . . . . . . . . . . . . . . . . . . . .52 6.13 Compliance with Laws. . . . . . . . . . . . . . . . . . . . . . . .52 6.14 Assets and Properties . . . . . . . . . . . . . . . . . . . . . . .52 6.15 Statutory Indebtedness Restrictions . . . . . . . . . . . . . . . .52 6.16 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . .52 6.17 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . .53 6.18 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . .53 6.19 Solvency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .54 ARTICLE VII : COVENANTS 7.1 Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . .54 7.2 Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . .59 7.3 Negative Covenants. . . . . . . . . . . . . . . . . . . . . . . . .63 7.4 Financial Covenants . . . . . . . . . . . . . . . . . . . . . . . .71 7.5 Sale Initiative . . . . . . . . . . . . . . . . . . . . . . . . . .73 ARTICLE VIII: DEFAULTS 8.1 Defaults. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .75 ii ARTICLE IX: ACCELERATION, DEFAULTING LENDERS; WAIVERS, AMENDMENTS AND REMEDIES 9.1 Termination of Commitments; Acceleration . . . . . . . . . . . . .79 9.2 Defaulting Lender. . . . . . . . . . . . . . . . . . . . . . . . .79 9.3 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . .81 9.4 Preservation of Rights . . . . . . . . . . . . . . . . . . . . . .82 ARTICLE X: GENERAL PROVISIONS 10.1 Survival of Representations. . . . . . . . . . . . . . . . . . . .83 10.2 Governmental Regulation. . . . . . . . . . . . . . . . . . . . . .83 10.3 Performance of Obligations . . . . . . . . . . . . . . . . . . . .83 10.4 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . .84 10.5 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . .84 10.6 Several Obligations; Benefits of this Agreement. . . . . . . . . .84 10.7 Expenses; Indemnification. . . . . . . . . . . . . . . . . . . . .84 10.8 Numbers of Documents . . . . . . . . . . . . . . . . . . . . . . .87 10.9 Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . .87 10.10 Severability of Provisions . . . . . . . . . . . . . . . . . . . .87 10.11 Nonliability of Lenders. . . . . . . . . . . . . . . . . . . . . .87 10.12 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . .88 10.13 CONSENT TO JURISDICTION; SERVICE OF PROCESS; JURY TRIAL. . . . . .88 10.14 No Strict Construction . . . . . . . . . . . . . . . . . . . . . .89 ARTICLE XI: THE AGENT 11.1 Appointment; Nature of Relationship. . . . . . . . . . . . . . . .89 11.2 Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .90 11.3 General Immunity . . . . . . . . . . . . . . . . . . . . . . . . .90 11.4 No Responsibility for Loans, Creditworthiness, Collateral, Recitals, Etc. . . . . . . . . .90 11.5 Action on Instructions of Required Creditors . . . . . . . . . . .91 11.6 Employment of Agents and Counsel . . . . . . . . . . . . . . . . .91 11.7 Reliance on Documents; Counsel . . . . . . . . . . . . . . . . . .91 11.8 The Agent's Reimbursement and Indemnification. . . . . . . . . . .91 11.9 Rights as a Lender . . . . . . . . . . . . . . . . . . . . . . . .92 11.10 Lender Credit Decision . . . . . . . . . . . . . . . . . . . . . .92 11.11 Successor Agent. . . . . . . . . . . . . . . . . . . . . . . . . .92 11.12 Collateral Documents . . . . . . . . . . . . . . . . . . . . . . .93 ARTICLE XII: SETOFF; RATABLE PAYMENTS 12.1 Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .93 12.2 Ratable Payments . . . . . . . . . . . . . . . . . . . . . . . . .93 12.3 Application of Payments. . . . . . . . . . . . . . . . . . . . . .93 12.4 Relations Among Lenders. . . . . . . . . . . . . . . . . . . . . .94 iii ARTICLE XIII: BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS 13.1 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . .95 13.2 Participations. . . . . . . . . . . . . . . . . . . . . . . . . . .95 13.3 Assignments . . . . . . . . . . . . . . . . . . . . . . . . . . . .96 13.4 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . .97 13.5 Dissemination of Information. . . . . . . . . . . . . . . . . . . .99 13.6 Guaranty Terminations and Pledge Releases . . . . . . . . . . . . .99 ARTICLE XIV: NOTICES 14.1 Giving Notice . . . . . . . . . . . . . . . . . . . . . . . . . . .99 14.2 Change of Address . . . . . . . . . . . . . . . . . . . . . . . . .99 ARTICLE XV: WAIVERS ARTICLE XVI: COUNTERPARTS iv EXHIBITS AND SCHEDULES EXHIBITS EXHIBIT A -- Existing Obligations and Supplemental Commitments (Definitions) EXHIBIT B -- Form of Supplemental Note (Definitions) EXHIBIT C -- Form of Borrowing Notice (Section 2.8) EXHIBIT D -- Form of Request for Letter of Credit (Section 3.3) EXHIBIT E -- Form of Assignment and Acceptance Agreement (Sections 2.20 and 13.3) EXHIBIT F -- Form of Borrower's Counsel's Opinion (Section 5.1) EXHIBIT G -- List of Closing Documents (Section 5.1) EXHIBIT H -- Form of Officer's Certificate (Sections 5.2 and 7.1(A)(iv)) EXHIBIT I -- Form of Compliance Certificate (Sections 5.2 and 7.1(A)(iv)) EXHIBIT J -- Form of Borrowing Base Certificate (Definitions) EXHIBIT K -- Form of Waiver and Second Amendment to Note Purchase Agreement (Section 7.3(N)) DISCLOSURE -- Disclosure Letter (Definitions) LETTER v SCHEDULES Schedule 1.1.1 -- Permitted Existing Contingent Obligations (Definitions) Schedule 1.1.2 -- Permitted Existing Indebtedness (Definitions) Schedule 1.1.3 -- Permitted Existing Investments (Definitions) Schedule 1.1.4 -- Permitted Existing Liens (Definitions) Schedule 1.1.5 -- Mortgages (Definitions) Schedule 6.3 -- Conflicts; Governmental Consents (Section 6.3) Schedule 6.7 -- Litigation; Loss Contingencies (Section 6.7) Schedule 6.8 -- Subsidiaries (Section 6.8) Schedule 6.9 -- ERISA (Section 6.9) Schedule 6.16 -- Insurance (Section 6.16) Schedule 6.18 -- Environmental Matters (Section 6.18) vi AMENDED AND RESTATED CREDIT AGREEMENT This Amended and Restated Credit Agreement dated as of March 16, 1998 is entered into among Binks Sames Corporation, a Delaware corporation, the institutions from time to time parties hereto as Lenders, whether by execution of this Agreement or an Assignment Agreement pursuant to SECTION 13.3, and The First National Bank of Chicago, in its capacity as contractual representative for itself and the other Lenders. The parties hereto agree as follows: ARTICLE I: DEFINITIONS 1.1 CERTAIN DEFINED TERMS. In addition to the terms defined above, the following terms used in this Agreement shall have the following meanings, applicable both to the singular and the plural forms of the terms defined. As used in this Agreement: "ACCOUNT DEBTOR" means the account debtor or obligor with respect to any of the Receivables and/or the prospective purchaser with respect to any contract right, and/or any party who enters into or proposes to enter into any contract or other arrangement with the Borrower or SEI. "ACQUISITION" means any transaction, or any series of related transactions, consummated on or after the date of this Agreement, by which the Borrower or any of its Subsidiaries (i) acquires any going business or all or substantially all of the assets of any firm, corporation or division thereof, whether through purchase of assets, merger or otherwise or (ii) directly or indirectly acquires (in one transaction or as the most recent transaction in a series of transactions) at least a majority (in number of votes) of the securities of a corporation which have ordinary voting power for the election of directors (other than securities having such power only by reason of the happening of a contingency) or a majority (by percentage of voting power) of the outstanding equity interests of another Person. "AFFECTED LENDER" is defined in SECTION 2.20 hereof. "AFFILIATE" of any Person means any other Person directly or indirectly controlling, controlled by or under common control with such Person. A Person shall be deemed to control another Person if the controlling Person is the "beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act of 1934) of greater than ten percent (10%) or more of any class of voting securities (or other voting interests) of the controlled Person or possesses, directly or indirectly, the power to direct or cause the direction of the management or policies of the controlled Person, whether through ownership of Capital Stock, by contract or otherwise. "AGENT" means First Chicago in its capacity as contractual representative for itself and the Lenders pursuant to ARTICLE XI hereof and any successor Agent appointed pursuant to ARTICLE XI hereof. "AGGREGATE SUPPLEMENTAL LOAN COMMITMENT" means the aggregate of the Supplemental Loan Commitments of all the Lenders, as reduced from time to time pursuant to the terms hereof. The initial Aggregate Supplemental Loan Commitment is Seven Million and 00/100 Dollars ($7,000,000.00). "AGREEMENT" means this Amended and Restated Credit Agreement, as it may be amended, restated or otherwise modified and in effect from time to time. "AGREEMENT ACCOUNTING PRINCIPLES" means generally accepted accounting principles as in effect as of the Original Closing Date, applied in a manner consistent with that used in preparing the financial statements referred to in SECTION 6.4(B)(1) of the Original Credit Agreement, PROVIDED, HOWEVER, that with respect to the calculation of financial ratios and other financial tests required by this Agreement, "Agreement Accounting Principles" means generally accepted accounting principles as in effect as of the date of this Agreement, applied in a manner consistent with that used in preparing the financial statements referred to in SECTION 6.4(A) hereof. "ALTERNATE BASE RATE" means, for any day, a fluctuating rate of interest per annum equal to the higher of (i) the Corporate Base Rate for such day and (ii) the sum of (a) the Federal Funds Effective Rate for such day and (b) one- half of one percent (0.5%) per annum. "APPLICABLE FLOATING RATE MARGIN" means (a) with respect to the Supplemental Loans and Reimbursement Obligations, one percent (1.00%) per annum; and (b) with respect to all other Obligations, one-half of one-percent (0.50%) per annum. "ARRANGER"means First Chicago Capital Markets, Inc., in its capacity as the arranger for the loan transaction evidenced by this Agreement. "ASSET SALE" means, with respect to any Person, the sale, lease, conveyance, disposition or other transfer by such Person of any of its assets (including by way of a sale-leaseback transaction, and including the sale or other transfer of any of the Equity Interests of any Subsidiary of such Person). "ASSET SALE PREPAYMENT" is defined in SECTION 2.5(B)(i)(a) hereof. "ASSIGNMENT AGREEMENT" means an assignment and acceptance agreement entered into in connection with an assignment pursuant to SECTION 13.3 hereof in substantially the form of EXHIBIT E. "AUTHORIZED OFFICER" means any of the President or Chief Financial Officer of the Borrower, acting singly. 2 "BENEFIT PLAN" means a defined benefit plan as defined in SECTION 3(35) of ERISA (other than a Multiemployer Plan) in respect of which the Borrower or any other member of the Controlled Group is, or within the immediately preceding six (6) years was, an "employer" as defined in SECTION 3(5) of ERISA. "BLAIR" is defined in SECTION 7.5 hereof. "BORROWER" means Binks Sames Corporation, a Delaware corporation, together with its successors and assigns, including a debtor-in-possession on behalf of the Borrower. "BORROWING BASE" means, as of any date of calculation, an amount, as set forth on the most current Borrowing Base Certificate delivered to the Agent, equal to: (i) one hundred percent (100%) of the Gross Amount of Eligible Receivables; PLUS (ii) one hundred percent (100%) of the Gross Amount of Eligible Inventory; PLUS (iii) (a) solely for the period from the Effective Date through March 31, 1998, $18,000,000 and (b) thereafter, $20,000,000 MINUS (iv) the aggregate amount of the Rental Reserve, if any, at such time. "BORROWING BASE CERTIFICATE" means a certificate, in substantially the form of EXHIBIT J attached hereto and made a part hereof, setting forth the Borrowing Base and the component calculations thereof (with Inventory reports being updated monthly on an actual basis not later than twenty (20) days after the close of each calendar month and weekly on a cost-of-goods sold basis). "BORROWING DATE" means a date on which a Supplemental Advance is made hereunder. "BORROWING NOTICE" is defined in SECTION 2.8 hereof. "BUSINESS ACTIVITY REPORT" means (A) a Notice of Business Activities Report from the State of Minnesota, Department of Revenue, (B) a Notice of Business Activities Report from the State of New Jersey, Division of Taxation, or (C) any similar report required by any other State relating to the ability of the Borrower or its Subsidiaries to enforce their accounts receivable claims against account debtors located in any such state. "BUSINESS DAY" means a day (other than a Saturday or Sunday) on which banks are open for business in Chicago, Illinois and New York, New York. "CAPITAL EXPENDITURES" means, for any period, the aggregate of all expenditures (whether paid in cash or accrued as liabilities and including Capitalized Leases and Permitted Purchase Money Indebtedness) by the Borrower and its Subsidiaries during that period that, in conformity with Agreement Accounting Principles, are required to be included in or reflected by the property, plant, equipment or similar fixed asset accounts reflected in the consolidated balance sheet of the Borrower and its Subsidiaries. "CAPITAL STOCK" means (i) in the case of a corporation, corporate stock, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other 3 equivalents (however designated) of corporate stock, (iii) in the case of a partnership, partnership -interests (whether general or limited) and (iv) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. "CAPITALIZED LEASE" of a Person means any lease of property by such Person as lessee which would be capitalized on a balance sheet of such Person prepared in accordance with Agreement Accounting Principles. "CAPITALIZED LEASE OBLIGATIONS" of a Person means the amount of the obligations of such Person under Capitalized Leases which would be capitalized on a balance sheet of such Person prepared in accordance with Agreement Accounting Principles. "CASH EQUIVALENTS" means (i) marketable direct obligations issued or unconditionally guaranteed by the United States government and backed by the full faith and credit of the United States government; (ii) domestic and Eurodollar certificates of deposit and time deposits, bankers' acceptances and floating rate certificates of deposit issued by any commercial bank organized under the laws of the United States, any state thereof, the District of Columbia, any foreign bank, or its branches or agencies (fully protected against currency fluctuations for any such deposits with a term of more than ninety (90) days); (iii) shares of money market, mutual or similar funds having assets in excess of $100,000,000 and the investments of which are limited to investment grade securities (i.e., securities rated at least Baa by Moody's Investors Service, Inc. or at least BBB by Standard & Poor's Ratings Group); and (iv) commercial paper of United States and foreign banks and bank holding companies and their subsidiaries and United States and foreign finance, commercial industrial or utility companies which, at the time of acquisition, are rated A-1 (or better) by Standard & Poor's Ratings Group or P-1 (or better) by Moody's Investors Services, Inc.; PROVIDED that the maturities of such Cash Equivalents shall not exceed 365 days. "CHANGE" is defined in SECTION 4.2 hereof. "CHANGE OF CONTROL" means an event or series of events by which: (a) any "person" or "group" (as such terms are used in SECTIONS 13(d) and 14(d) of the Exchange Act), becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a person shall be deemed to have "beneficial ownership" of all securities that such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of 50% or more of the combined voting power of the Borrower's Capital Stock ordinarily having the right to vote at an election of directors; or (b) during any period of twelve (12) consecutive calendar months, individuals: (i) who were directors of the Borrower on the first day of such period, or (ii) whose election or nomination for election to the board of directors of the Borrower was recommended or approved by at least a majority of the directors then still in office who were directors of the Borrower on the first day of such period, or whose election or nomination for election 4 was so approved, shall cease to constitute a majority of the board of directors of the Borrower; or (c) the Borrower consolidates with or merges into another corporation or conveys, transfers or leases all or substantially all of its property to any Person, or any corporation consolidates with or merges into the Borrower, in either event pursuant to a transaction in which the outstanding Capital Stock of the Borrower is reclassified or changed into or exchanged for cash, securities or other property. "CLAIMS" is defined in Section 10.7(D) hereof. "CLOSING DATE" means the date on which this Amended and Restated Credit Agreement is executed by the parties hereto. "CODE" means the Internal Revenue Code of 1986, as amended, reformed or otherwise modified from time to time. "COLLATERAL" means all property and interests in property now owned or hereafter acquired by the Borrower or any of its Subsidiaries in or upon which a security interest, lien or mortgage is granted to the Agent, for the benefit of the Holders of Secured Obligations, or to the Agent, for the benefit of the Lenders, whether under the Security Agreements, the Mortgages, the Intellectual Property Security Agreements, the Pledge Agreements, under any of the other Collateral Documents or under any of the other Loan Documents. "COLLATERAL AGENT" has the meaning ascribed to that term in the Collateral Sharing Agreement. "COLLATERAL DOCUMENTS" means all agreements, instruments and documents executed in connection with this Agreement, including, without limitation, the Security Agreements, the Mortgages, the Collection Account Agreements, the Intellectual Property Security Agreements, the Pledge Agreements, the Collateral Sharing Agreement and all other security agreements, subordination agreements, pledges, powers of attorney, assignments, contracts, financing statements and all other written matter whether heretofore, now, or hereafter executed by or on behalf of the Borrower or any of its Subsidiaries and delivered to the Agent or any of the Lenders, together with all agreements and documents referred to therein or contemplated thereby. "COLLATERAL SHARING AGREEMENT" means that certain Amended and Restated Collateral Sharing Agreement dated of even date herewith among the Agent, the Lenders and the Noteholder, as the same may from time to time be further amended, modified, supplemented and or restated. "COLLECTION ACCOUNT" means each lock-box and blocked depository account maintained by the Borrower and each Subsidiary which has executed a Subsidiary Security Agreement, 5 subject to a Collection Account Agreement, for the collection of Receivables and other proceeds of Collateral. "COLLECTION ACCOUNT AGREEMENT" means a written agreement among the Borrower, any of its Subsidiaries, the Collateral Agent, and, as applicable, each of the banks at which the Borrower or such Subsidiary maintains a Collection Account. "COLLECTION ACCOUNT BLOCKAGE DATE" means the date, following the occurrence of a Default on which the Collateral Agent or the Required Lenders, in the Collateral Agent's or the Required Lenders' sole discretion, instruct(s) any financial institution party to a Collection Account Agreement as described in the applicable Collection Account Agreement to remit, during the continuance of such Default, all amounts deposited in the Collection Account to the Collateral Agent or as the Collateral Agent shall direct. "COMMISSION" means the Securities and Exchange Commission and any Person succeeding to the functions thereof. "COMMITMENT" means, for each Lender, collectively, such Lender's Supplemental Loan Commitment. "CONFIDENTIAL INFORMATION" is defined in SECTION 13.4 hereof. "CONSOLIDATED TANGIBLE ASSETS" means the total assets of the Borrower and its Subsidiaries on a consolidated basis, but excluding therefrom all items that are treated as intangibles under Agreement Accounting Principles. "CONSOLIDATED NET WORTH" is defined in SECTION 7.4(A) hereof. "CONTAMINANT" means any waste, pollutant, hazardous substance, toxic substance, hazardous waste, special waste, petroleum or petroleum-derived substance or waste, asbestos, polychlorinated biphenyls ("PCBS"), or any constituent of any such substance or waste, and includes but is not limited to these terms as defined in Environmental, Health or Safety Requirements of Law. "CONTINGENT OBLIGATION", as applied to any Person, means any Contractual Obligation, contingent or otherwise, of that Person with respect to any Indebtedness of another or other obligation or liability of another, including, without limitation, any such Indebtedness, obligation or liability of another directly or indirectly guaranteed, endorsed (otherwise than for collection or deposit in the ordinary course of business), co-made or discounted or sold with recourse by that Person, or in respect of which that Person is otherwise directly or indirectly liable, including Contractual Obligations (contingent or otherwise) arising through any agreement to purchase, repurchase, or otherwise acquire such Indebtedness, obligation or liability or any security therefor, or to provide funds for the payment or discharge thereof (whether in the form of loans, advances, stock purchases, capital contributions or otherwise), or to maintain solvency, assets, level of income, or other financial condition, or to make payment other than for value received. 6 "CONTRACTUAL OBLIGATION", as applied to any Person, means any material provision of any equity or debt securities issued by that Person or any indenture, mortgage, deed of trust, security agreement, pledge agreement, guaranty, contract, undertaking, agreement or instrument, in any case in writing, to which that Person is a party or by which it or any of its properties is bound, or to which it or any of its properties is subject, with obligations in excess of $1,000,000. "CONTROLLED GROUP" means the group consisting of (i) any corporation which is a member of the same controlled group of corporations (within the meaning of SECTION 414(b) of the Code) as the Borrower; (ii) a partnership or other trade or business (whether or not incorporated) which is under common control (within the meaning of SECTION 414(c) of the Code) with the Borrower; and (iii) a member of the same affiliated service group (within the meaning of SECTION 414(m) of the Code) as the Borrower, any corporation described in CLAUSE (i) above or any partnership or trade or business described in CLAUSE (ii) above. "CONTROLLED SUBSIDIARY" of any Person means a Subsidiary of such Person (i) 90% or more of the total Equity Interests or other ownership interests of which (other than directors' qualifying shares) shall at the time be owned by such Person or by one or more wholly-owned Subsidiaries of such Person and (ii) of which such Person possesses, directly or indirectly, the power to direct or cause the direction of the management or policies, whether through the ownership of voting securities, by agreement or otherwise. "CORPORATE BASE RATE" means the corporate base rate of interest announced by First Chicago from time to time, changing when and as said corporate base rate changes. "CURE LOAN" is defined in SECTION 9.2(iii) hereof. "CUSTOMARY PERMITTED LIENS" means: (i) Liens (other than Environmental Liens and Liens in favor of the IRS or the PBGC) with respect to the payment of taxes, assessments or governmental charges in all cases which are not yet due or (if foreclosure, distraint, sale or other similar proceedings shall not have been commenced) which are being contested in good faith by appropriate proceedings properly instituted and diligently conducted and with respect to which adequate reserves or other appropriate provisions are being maintained in accordance with Agreement Accounting Principles; (ii) statutory Liens of landlords and Liens of suppliers, mechanics, carriers, materialmen, warehousemen or workmen and other similar Liens imposed by law created in the ordinary course of business for amounts not yet due or which are being contested in good faith by appropriate proceedings properly instituted and diligently conducted and with respect to which adequate reserves or other appropriate provisions are being maintained in accordance with Agreement Accounting Principles; (iii) Liens (other than Environmental Liens and Liens in favor of the IRS or the PBGC) incurred or deposits made in the ordinary course of business in connection with 7 workers' compensation, unemployment insurance or other types of social security benefits or to secure the performance of bids, tenders, sales, contracts (other than for the repayment of borrowed money), surety, appeal and performance bonds; PROVIDED that (A) all such Liens do not in the aggregate materially detract from the value of the Borrower's or such Subsidiary's assets or property taken as a whole or materially impair the use thereof in the operation of the businesses taken as a whole, and (B) all Liens securing bonds to stay judgments or in connection with appeals do not secure at any time an aggregate amount exceeding $1,000,000; (iv) Liens arising with respect to zoning restrictions, easements, licenses, reservations, covenants, rights-of-way, utility easements, building restrictions and other similar charges or encumbrances on the use of real property which do not in any case materially detract from the value of the property subject thereto or interfere with the ordinary conduct of the business of the Borrower or any of its Subsidiaries; (v) Liens of attachment or judgment with respect to judgments, writs or warrants of attachment, or similar process against the Borrower or any of its Subsidiaries which do not constitute a Default under SECTION 8.1(H) hereof; and (vi) any interest or title of the lessor in the property subject to any operating lease entered into by the Borrower or any of its Subsidiaries in the ordinary course of business. "DEFAULT" means an event described in ARTICLE VIII hereof. "DESIGNATED PREPAYMENT" is defined in SECTION 2.5(B)(i)(f) hereof. "DISCLOSED DISPUTES" has the meaning given that term in SECTION 1(a) of the Disclosure Letter. "DISCLOSURE LETTER" means that certain disclosure letter dated of even date herewith issued by the Borrower and acknowledged and consented to by the Agent, the Lenders and the Noteholder, as the same may from time to time be amended, modified, supplemented or restated with the consent of the Required Creditors. "DISPUTE RESOLUTION COSTS" has the meaning given than term in SECTION 1(a) of the Disclosure Letter. "DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder thereof, in whole or in part, on or prior to the date that is 91 days after the Existing Loan Termination Date. "DOL" means the United States Department of Labor and any Person succeeding to the functions thereof. 8 "DOLLAR" and "$" means dollars in the lawful currency of the United States. "EBITDA" is defined in SECTION 7.4(A) hereof. "EFFECTIVE DATE" means the date on which all conditions to effectiveness of this Agreement in accordance with the terms of SECTION 5.1 have been satisfied or waived in accordance with the terms hereof. "ELIGIBLE ASSIGNEE" means (a) a commercial bank organized under the laws of the United States or any State thereof, and having total assets in excess of $5,000,000,000, or an Affiliate thereof; (b) a savings and loan association or savings bank organized under the laws of the United States or any State thereof, and having total assets in excess of $5,000,000,000; (c) a commercial bank organized under the laws of any other country that is a member of the OECD or has concluded special lending arrangements with the International Monetary Fund associated with its General Arrangements to Borrow or of the Cayman Islands or a political subdivision of any of such country, and having total assets in excess of $20,000,000,000, so long as such bank is acting through a branch or agency located in the United States; (d) an insurance company (as defined in Section 2(13) of the Securities Act) that in the aggregate owns and invests on a discretionary basis, at least $100,000,000 in securities of issuers that are not affiliated with such insurance company; or (e) any broker or dealer acquiring such interest as a Transferee for its own account that agrees in writing (for the benefit of the Borrower) that it shall not, directly or indirectly, act to effect a Change of Control or acquire all or substantially all of the assets of the Borrower or any Subsidiary; PROVIDED, HOWEVER, that the foregoing shall not adversely affect the rights of such acquiring entity to exercise any remedies under this Agreement or the other Loan Documents available to the holders of Obligations generally. "ELIGIBLE INVENTORY" means Inventory of the Borrower or SEI which is held for sale or lease or furnished under any contract of service by the Borrower or SEI which shall not at any time be rendered ineligible as a result of the criteria set forth below. The following Inventory is not Eligible Inventory: (i) (to the extent not provided for by reserves described in the definition of the Gross Amount of Eligible Inventory) Inventory which is (a) obsolete, not in good condition or not either usable or saleable in the ordinary course of the Borrower's or SEI's business or (b) does not meet all material standards imposed by any Governmental Authority having regulatory authority over such item of Inventory, its use or its sale but only to the extent such standards materially adversely affect the use or sale of such Inventory and only while such Inventory fails to meet such standards; (ii) Inventory consisting of packaging material, supplies or demonstration goods; (iii) Inventory which (a) is consigned to a third party for sale or (b) is on consignment from a third party to the Borrower or SEI for sale; (iv) Inventory which consists of goods in transit; 9 (v) Inventory which is subject to a Lien (to the extent of the obligation secured by such Lien) in favor of any Person other than the Collateral Agent unless such Lien is permitted under the terms of this Agreement, is subordinate to the Lien of the Collateral Agent and only for so long as the holder of such Lien has not begun any judicial or non- judicial enforcement of its rights or remedies with respect thereto; (vi) Inventory with respect to which the Collateral Agent does not have a first and valid fully-perfected security interest other than solely as a result of an action or failure to act on the part of the Collateral Agent; (vii) Inventory which is not located either (a) on the Borrower's or SEI's owned premises in the United States listed on Schedule 2 to the Security Agreement or (b) in other owned or leased premises, warehouses or with bailees or consignees in the United States not listed on Schedule 2 to the Security Agreement or permitted to be established under the Security Agreement, in each case in connection with which the Collateral Agent shall have received landlord, mortgagee, consignee, bailee and/or warehousemen's access and lien waiver agreements, as applicable, in each case in form and substance reasonably acceptable to the Agent; (viii) Inventory which is evidenced by a Receivable; and (ix) Inventory which is not materially in conformity with the representations and warranties made by the Borrower or SEI to the Agent with respect thereto whether contained in this Agreement or the Security Agreements; PROVIDED, HOWEVER, Inventory at leased premises which would be rendered ineligible solely by virtue of the landlord's lien and failure to enter into a landlord's agreement shall be treated as Eligible Inventory so long as there has been reserved against the Borrowing Base an amount equal to three (3) month's rent for such location (the "RENTAL RESERVE"); PROVIDED, it shall be the Borrower's option whether to establish the Rental Reserve with respect to any location or to treat the Inventory at such location in its entirety as ineligible.. "ELIGIBLE RECEIVABLES" means Receivables created by the Borrower or SEI in the ordinary course of its business arising out of the sale of goods or rendition of services by the Borrower or SEI, which Receivables are not rendered ineligible by the criteria set forth below. The following Receivables are not Eligible Receivables: (i) Receivables which remain unpaid 120 days after the date of the original applicable invoice; (ii) all Receivables owing by a single Account Debtor (including a Receivable which remains unpaid fewer than 120 days after the date of the original applicable invoice) if 50% of the balance owing by such Account Debtor to the Borrower and SEI, calculated without taking into account any credit balances of such Account Debtor, remains unpaid 10 120 days after the date of the original applicable invoice or has otherwise become ineligible; (iii) Receivables with respect to which the Account Debtor is a director, officer, employee, Subsidiary or Affiliate of the Borrower or SEI; (iv) Receivables with respect to which the Account Debtor is any federal Governmental Authority, the United States of America, or, in each case, any department, agency or instrumentality thereof, unless with respect to any such Account, the Borrower or SEI, as applicable, has complied to the Agent's reasonable satisfaction with the provisions of the Federal Assignment of Claims Act or other applicable statutes, including, without limitation, executing and delivering to Agent all statements of assignment and/or notification which are in form and substance reasonably acceptable to Agent and which are deemed reasonably necessary by Agent to effectuate the assignment to the Collateral Agent of such Accounts on behalf of the Holders of Secured Obligations; (v) Receivables with respect to which the Account Debtor is any state or municipal Governmental Authority or any agency or instrumentality thereof; (vi) Receivables not denominated in U.S. Dollars or with respect to which the Account Debtor is not a resident of the United States unless the Account Debtor has supplied the Borrower or SEI, as applicable, with an irrevocable letter of credit, issued by a financial institution reasonably satisfactory to the Agent, sufficient to cover such Receivable in form and substance reasonably satisfactory to the Agent; (vii) Receivables with respect to which the Account Debtor has (a) asserted a counterclaim, (b) a right of setoff or (c) a receivable owing from the Borrower or SEI but only to the extent of such counterclaim, setoff or receivable; (viii) Receivables with respect to which the Collateral Agent does not have a first and valid fully perfected and enforceable security interest other than solely as a result of an action or failure to act on the part of the Collateral Agent; (ix) Receivables with respect to which the Account Debtor is the subject of bankruptcy or a similar insolvency proceeding or has made an assignment for the benefit of creditors or whose assets have been conveyed to a receiver, trustee or assignee for the benefit of creditors; (x) Receivables with respect to which the Account Debtor's obligation to pay the Receivable is conditional upon the Account Debtor's approval or is otherwise subject to any repurchase obligation or return right, as with sales made on a bill-and-hold, guaranteed sale, sale-and-return, sale on approval (except with respect to Receivables in connection with which Account Debtors are entitled to return Inventory on the basis of the quality of such Inventory) or consignment basis; 11 (xi) Receivables with respect to which the Account Debtor is located in New Jersey or Minnesota (or any other jurisdiction which adopts a statute or other requirement with respect to which any Person that obtains business from within such jurisdiction or is otherwise subject to such jurisdiction's tax law requiring such Person to file a Business Activity Report or make any other required filings in a timely manner in order to enforce its claims in such jurisdiction's courts or arising under such jurisdiction's laws); PROVIDED, HOWEVER, such Receivables shall nonetheless be eligible if the Borrower or SEI, as applicable, has filed a Business Activity Report (or other applicable report) with the applicable state office or is qualified to do business in such jurisdiction and, at the time the Receivable was created, was qualified to do business in such jurisdiction or had on file with the applicable state office a current Business Activity Report (or other applicable report); (xii) Receivables with respect to which the Account Debtor's obligation does not constitute its legal, valid and binding obligation, enforceable against it in accordance with its terms, but only to the extent such Receivable is not legal, valid, binding and enforceable; (xiii) Receivables with respect to which the Borrower or SEI has not yet shipped the applicable goods, performed the applicable service or issued the applicable invoice, including, without limitation, Receivables consisting of progress billings; (xiv) any Receivable which is not materially in conformity with the representations and warranties made by the Borrower or SEI, as applicable, to the Agent with respect thereto whether contained in this Agreement or the Security Agreements; and (xv) Receivables in connection with which the Borrower or SEI, as applicable, has not complied with all material requirements contained in the charter and by-laws or other organizational or governing documents of the Borrower or SEI, and any law, rule or regulation, or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon the Borrower or SEI or any of its property or to which the Borrower or SEI or any of its property is subject, including, without limitation, all laws, rules, regulations and orders of any Governmental Authority or judicial authority relating to truth in lending, billing practices, fair credit reporting, equal credit opportunity, debt collection practices and consumer debtor protection, applicable to such Receivable (or any related contracts) but only to the extent such non- compliance materially adversely affects the collectibility of such Receivables. "ENVIRONMENTAL, HEALTH OR SAFETY REQUIREMENTS OF LAW" means all Requirements of Law derived from or relating to foreign, federal, state and local laws or regulations relating to or addressing pollution or protection of the environment, or protection of worker health or safety, including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601 ET SEQ., the Occupational Safety and Health Act of 1970, 29 U.S.C. Section 651 ET SEQ., and the Resource Conservation and Recovery Act of 1976, 42 U.S.C. Section 12 6901 ET SEQ., in each case including any amendments thereto, any successor statutes, and any regulations or guidance promulgated thereunder, and any state or local equivalent thereof. "ENVIRONMENTAL LIEN" means a lien in favor of any Governmental Authority for (a) any liability under Environmental, Health or Safety Requirements of Law, or (b) damages arising from, or costs incurred by such Governmental Authority in response to, a Release or threatened Release of a Contaminant into the environment. "ENVIRONMENTAL PROPERTY TRANSFER ACT" means any applicable requirement of law that conditions, restricts, prohibits or requires any notification or disclosure triggered by the closure of any property or the transfer, sale or lease of any property or deed or title for any property for environmental reasons, including, but not limited to, any so-called "Industrial Site Recovery Act" or "Responsible Property Transfer Act." "EQUITY INTERESTS" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time including (unless the context otherwise requires) any rules or regulations promulgated thereunder. "EXCLUDED ASSET SALES" means Asset Sales consisting of any of the following: (a) sales of Receivables sold by the Borrower's foreign Subsidiaries in the ordinary course of such Subsidiary's business and consistent with its past practices, (b) those Asset Sales permitted pursuant to Section 7.3(B)(i) and (ii) and (c) Asset Sales involving the assets of one or more of the Borrower's Subsidiaries in Belgium, Mexico and Italy to the extent the aggregate Net Cash Proceeds thereof do not exceed the approximated amounts set forth with respect thereto in the projections attached as EXHIBIT A to the Disclosure Letter. "EXISTING LOANS" means all outstanding Term Loans, Revolving Loans and Swing Line Loans made under the Original Credit Agreement and outstanding on the Effective Date. "EXISTING LOAN TERMINATION DATE" means the earlier of (a) September 30, 1999 and (b) the date of acceleration of the Existing Loans pursuant to SECTION 9.1 hereof. "EXISTING OBLIGATIONS" means, at any particular time, the outstanding principal amount of the Existing Loans at such time. "FEDERAL FUNDS EFFECTIVE RATE" means, for any day, an interest rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published for such day (or, if such day is not a Business Day, for the immediately preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations at approximately 10:00 a.m. (Chicago time) on such day on 13 such transactions received by the Agent from three Federal funds brokers of recognized standing selected by the Agent in its sole discretion. "FINANCING" means, with respect to any Person, the issuance or sale by such Person of any Equity Interests of such Person or any Indebtedness consisting of debt securities of such Person. "FIRST CHICAGO" means The First National Bank of Chicago, in its individual capacity, and its successors. "FLOATING RATE" means, for any day for all Obligations, a rate per annum equal to the Alternate Base Rate for such day, changing when and as the Alternate Base Rate changes, PLUS the Applicable Floating Rate Margin. "GOVERNMENTAL ACTS" is defined in SECTION 3.9(A) hereof. "GOVERNMENTAL AUTHORITY" means any nation or government, any federal, state, local or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "GROSS AMOUNT OF ELIGIBLE INVENTORY" means Eligible Inventory valued at the lower of cost determined on a first-in-first-out basis (determined in accordance with Agreement Accounting Principles, consistently applied) or market value less the value of reserves which have been recorded by the Borrower or SEI with respect to obsolete, slow-moving or excess Inventory or are otherwise established by the Borrower or SEI in accordance with Agreement Accounting Principles. "GROSS AMOUNT OF ELIGIBLE RECEIVABLES" means the outstanding face amount of Eligible Receivables, determined in accordance with Agreement Accounting Principles, consistently applied, less (i) all finance charges, late fees and other fees that are unearned, (ii) the value of any accrual which has been recorded by the Borrower with respect to downward price adjustments, and (iii) any other reserves established by the Borrower or SEI in accordance with Agreement Accounting Principles. "GROSS NEGLIGENCE" means recklessness, or actions taken or omitted with conscious indifference to or the complete disregard of consequences. Gross Negligence does not mean the absence of ordinary care or diligence, or an inadvertent act or inadvertent failure to act. If the term "gross negligence" is used with respect to the Agent or any Lender or any indemnitee in any of the other Loan Documents, it shall have the meaning set forth herein. "GUARANTY" means that certain Guaranty dated as of the Original Closing Date and reaffirmed of even date herewith executed by SEI in favor of the Agent, for the ratable benefit of the Lenders, as it may be amended, modified, supplemented and/or restated (including to add new Guarantors), and as in effect from time to time. 14 "HEDGING AGREEMENTS" is defined in SECTION 7.3(Q) hereof. "HEDGING OBLIGATIONS" of a Person means any and all obligations of such Person, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor), under (i) any and all agreements, devices or arrangements designed to protect at least one of the parties thereto from the fluctuations of interest rates, commodity prices, exchange rates or forward rates applicable to such party's assets, liabilities or exchange transactions, including, but not limited to, dollar-denominated or cross-currency interest rate exchange agreements, forward currency exchange agreements, interest rate cap or collar protection agreements, forward rate currency or interest rate options, puts and warrants, and (ii) any and all cancellations, buy backs, reversals, terminations or assignments of any of the foregoing. "HOLDERS OF SECURED OBLIGATIONS" has the meaning given that term in the Collateral Sharing Agreement. "INDEBTEDNESS" of any Person means, without duplication, such Person's (a) obligations for borrowed money, (b) obligations representing the deferred purchase price of property or services (other than accounts payable arising in the ordinary course of such Person's business payable on terms customary in the trade), (c) obligations, whether or not assumed, secured by Liens or payable out of the proceeds or production from property or assets now or hereafter owned or acquired by such Person, (d) obligations which are evidenced by notes, acceptances or other instruments, (e) Capitalized Lease Obligations, (f) Contingent Obligations, (g) obligations with respect to letters of credit, (h) Hedging Obligations and (i) Off Balance Sheet Liabilities. The amount of Indebtedness of any Person at any date shall be without duplication (i) the outstanding balance at such date of all unconditional obligations as described above and the maximum liability of any such Contingent Obligations at such date and (ii) in the case of Indebtedness of others secured by a Lien to which the property or assets owned or held by such Person is subject, the lesser of the fair market value at such date of any asset subject to a Lien securing the Indebtedness of others and the amount of the Indebtedness secured. "INDEMNIFIED MATTERS" is defined in SECTION 10.7(B) hereof. "INDEMNITEES" is defined in SECTION 10.7(B) hereof. "INTELLECTUAL PROPERTY SECURITY AGREEMENTS" means those certain Patent Security Agreements and/or Trademark Security Agreements of even date herewith executed by the Borrower and SEI, respectively, in favor of the Collateral Agent for the benefit of the Holders of Secured Obligations as amended, restated or otherwise modified from time to time. "INTEREST EXPENSE" is defined in SECTION 7.4(A) hereof. "INVENTORY" means, with respect to any Person, any and all goods, including, without limitation, goods in transit, wheresoever located, whether now owned or hereafter acquired by such Person, which are held for sale or lease, furnished under any contract of service or held as raw 15 materials, work in process or supplies, and all materials used or consumed in such Person's business, and shall include all rights, title and interest of such Person on any property the sale or other disposition of which has given rise to Receivables and which has been returned to or repossessed or stopped in transit by such Person. "INVESTMENT" means, with respect to any Person, (i) any purchase or other acquisition by that Person of any Indebtedness, Equity Interests or other securities, or of a beneficial interest in any Indebtedness, Equity Interests or other securities, issued by any other Person, (ii) any purchase by that Person of all or substantially all of the assets of a business conducted by another Person, and (iii) any loan, advance (other than deposits with financial institutions available for withdrawal on demand, prepaid expenses, accounts receivable, advances to employees and similar items made or incurred in the ordinary course of business) or capital contribution by that Person to any other Person, including all Indebtedness to such Person arising from a sale of property by such Person other than in the ordinary course of its business. "IRS" means the Internal Revenue Service and any Person succeeding to the functions thereof. "ISSUANCE PREPAYMENTS" is defined in Section 2.5(B)(i)(b) hereof. "ISSUING BANKS" means First Chicago, LaSalle National Bank and any other Lender which, at the Borrower's request, agrees, in each such Lender's sole discretion, to become an Issuing Bank for the purpose of issuing Letters of Credit, and their respective successors and assigns, in each case in such Lender's separate capacity as an issuer of Letters of Credit pursuant to SECTION 3.1. The designation of any Lender as an Issuing Bank after the date hereof shall be subject to the prior written consent of the Agent. "L/C DRAFT" means a draft drawn on an Issuing Bank pursuant to a Letter of Credit. "L/C INTEREST" shall have the meaning ascribed to such term in SECTION 3.5 hereof. "L/C OBLIGATIONS" means, without duplication, an amount equal to the sum of (i) the aggregate of the amount then available for drawing under each of the Letters of Credit, (ii) the face amount of all outstanding L/C Drafts corresponding to the Letters of Credit, which L/C Drafts have been accepted by the applicable Issuing Bank, (iii) the aggregate outstanding amount of all Reimbursement Obligations at such time and (iv) the aggregate face amount of all Letters of Credit requested by the Borrower but not yet issued (unless the request for an unissued Letter of Credit has been denied). "LENDERS" means the lending institutions listed on the signature pages of this Agreement and their respective successors and assigns. "LENDING INSTALLATION" means, with respect to a Lender or the Agent, any office, branch, subsidiary or affiliate of such Lender or the Agent. 16 "LETTER OF CREDIT" means the letters of credit to be issued by the Issuing Banks pursuant to SECTION 3.1 hereof. "LIEN" means any lien (statutory or other), mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance or preference, priority or security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, the interest of a vendor or lessor under any conditional sale, Capitalized Lease or other title retention agreement). "LOAN(S)" means, with respect to a Lender, (a) such Lender's Existing Loans and (b) such Lender's portion of any Supplemental Advance made pursuant to SECTION 2.2 hereof, as applicable, and collectively all Existing Loans and Supplemental Loans. "LOAN ACCOUNT" is defined in SECTION 2.15(F) hereof. "LOAN DOCUMENTS" means this Agreement, the Notes, the Guaranty, the Collateral Documents and all other documents, instruments and agreements executed in connection therewith or contemplated thereby, as the same may be amended, restated or otherwise modified and in effect from time to time. "MARGIN STOCK" shall have the meaning ascribed to such term in Regulation U. "MASTER NOTE AGREEMENT" means that certain Master Note Agreement dated as of November 30, 1993 pursuant to which the Borrower issued the Senior Notes, as amended by the Waiver and First Amendment dated September 22, 1997 and by the Waiver and Second Amendment dated as of the date hereof, as the same may from time to time be further amended, modified, supplemented or restated in compliance with the terms of this Agreement. "MATERIAL ADVERSE EFFECT" means a material adverse effect upon (a) the business, condition (financial or otherwise), operations, performance, properties or prospects of the Borrower and its Subsidiaries, taken as a whole, (b) the ability of the Borrower or any of its Subsidiaries to perform their respective obligations under the Loan Documents in any material respect, (c) the ability of the Lenders or the Agent to enforce in any material respect the Obligations or (d) the ability of the Lenders, or the Agent to enforce in any material respect the Obligations or their rights with respect to a material amount of the Collateral. "MATERIAL SUBSIDIARIES" means, on the date of any determination thereof, each Subsidiary having (i) assets as of the immediately preceding "Subsidiary Test Date" (as defined herein) with a book value equal to or greater than $15,000,000 or (ii) gross revenues for the period of 12 consecutive months ended as of the immediately preceding Subsidiary Test Date equal to or greater than $15,000,000. "Subsidiary Test Date" means the last day of each fiscal quarter and the last day of each fiscal year, calculated as of the date of delivery of the financial statements required to be delivered pursuant to SECTION 7.1(A)(ii) and SECTION 7.1(A)(iii). "MAXIMUM AMOUNT" means (i) $67,500,000 minus (ii) the sum of Designated Prepayments (other than Tax Prepayments). 17 "MORTGAGES" means collectively the fee mortgages and leasehold mortgages granted to the Collateral Agent with respect to certain real estate of the Borrower, as further identified in SCHEDULE 1.1.5 to this Agreement, together with any additional fee or leasehold mortgages executed and delivered pursuant to the terms of this Agreement or the Security Agreements. "MULTIEMPLOYER PLAN" means a "Multiemployer Plan" as defined in SECTION 4001(a)(3) of ERISA which is, or within the immediately preceding six (6) years was, contributed to by either the Borrower or any member of the Controlled Group. "NET CASH PROCEEDS" means, with respect to any Asset Sale by any Person, (a) cash (freely convertible into United States dollars) received by such Person or any Subsidiary of such Person from such Asset Sale (including cash received as consideration for the assumption or incurrence of liabilities incurred in connection with or in anticipation of such Asset Sale), after (i) provision for all income or other taxes measured by or resulting from such Asset Sale which such Person pays in cash or reasonably estimates to be payable in cash during the applicable tax year (after taking into account the entire tax filing posture of the recipient of the proceeds from such Asset Sale), (ii) payment of all brokerage commissions and other fees and expenses related to such Asset Sale, (iii) repayment of Indebtedness secured by a Lien on any asset disposed of in such Asset Sale or which is or may be required (by the express terms of the instrument governing such Indebtedness or by applicable law) to be repaid in connection with such Asset Sale (including payments made to obtain or avoid the need for the consent of any holder of such Indebtedness), and (iv) deduction of appropriate amounts to be provided by such Person or a Subsidiary of such Person as a reserve, in accordance with Agreement Accounting Principles, against any liabilities associated with the assets sold or disposed of in such Asset Sale and retained by such Person or a Subsidiary of such Person after such Asset Sale, including, without limitation, pension and other post-employment benefit liabilities and liabilities related to environmental matters or against any indemnification obligations associated with the assets sold or disposed of in such Asset Sale; and (b) cash payments in respect of any other consideration received by such Person or any Subsidiary of such Person from such Asset Sale upon receipt of such cash payments by such Person or such Subsidiary. "NET INCOME" is defined in SECTION 7.4(A) hereof. "NON PRO RATA LOAN" is defined in SECTION 9.2 hereof. "NOTEHOLDER" means Equitable Life Assurance Society of the United States, as the signatory to the Master Note Agreement, and its successors and assigns. "NOTES" means (a) the Revolving Notes and Term Notes issued pursuant to the Original Credit Agreement and (b) the Supplemental Loan Notes issued pursuant to this Agreement, in each case as the same may from time to time be amended, modified, supplemented or restated. "NOTICE OF ASSIGNMENT" is defined in SECTION 13.3(B) hereof. 18 "OBLIGATIONS" means all Loans, L/C Obligations, advances, debts, liabilities, obligations, covenants and duties owing by the Borrower to the Agent, any Lender, the Arranger, any Affiliate of the Agent or any Lender, or any Indemnitee, of any kind or nature, present or future, arising under this Agreement, the Notes or any other Loan Document, whether or not evidenced by any note, guaranty or other instrument, whether or not for the payment of money, whether arising by reason of an extension of credit, loan, guaranty, indemnification, or in any other manner, whether direct or indirect (including those acquired by assignment), absolute or contingent, due or to become due, now existing or hereafter arising and however acquired. The term includes, without limitation, all interest, charges, expenses, fees, attorneys' fees and disbursements, paralegals' fees (in each case whether or not allowed), and any other sum chargeable to the Borrower under this Agreement or any other Loan Document. "OFF BALANCE SHEET LIABILITIES" of a Person means (a) any repurchase obligation or liability of such Person or any of its Subsidiaries with respect to accounts or notes receivable sold by such Person or any of its Subsidiaries, (b) any liability under any sale and leaseback transactions which do not create a liability on the consolidated balance sheet of such Person, (c) any liability under any financing lease or so-called "synthetic" lease transaction, or (d) any obligations arising with respect to any other transaction which is the functional equivalent of or takes the place of borrowing but which does not constitute a liability on the consolidated balance sheets of such Person and its Subsidiaries. "ORIGINAL CLOSING DATE" means September 23, 1997. "ORIGINAL CREDIT AGREEMENT" means the Credit Agreement dated as of September 23, 1997 among the Borrower, the financial institutions parties thereto and the Agent. "OTHER TAXES" is defined in SECTION 2.15(E)(ii) hereof. "PARTICIPANTS" is defined in SECTION 13.2(A) hereof. "PAYMENT DATE" means the 15th day of each month. "PBGC" means the Pension Benefit Guaranty Corporation, or any successor thereto. "PERMITTED EXISTING CONTINGENT OBLIGATIONS" means the Contingent Obligations of the Borrower and its Subsidiaries identified as such on SCHEDULE 1.1.1. "PERMITTED EXISTING INDEBTEDNESS" means the Indebtedness of the Borrower and its Subsidiaries identified as such on SCHEDULE 1.1.2 to this Agreement. "PERMITTED EXISTING INVESTMENTS" means the Investments of the Borrower and its Subsidiaries identified as such on SCHEDULE 1.1.3 to this Agreement. "PERMITTED EXISTING LIENS" means the Liens on assets of the Borrower and its Subsidiaries identified as such on SCHEDULE 1.1.4 to this Agreement. 19 "PERMITTED PURCHASE MONEY INDEBTEDNESS" is defined in SECTION 7.3(A)(viii) hereof. "PERMITTED REFINANCING INDEBTEDNESS" means any replacement, renewal, refinancing or extension of any Indebtedness permitted by this Agreement that (i) does not exceed the aggregate principal amount (plus accrued interest and any applicable premium and associated fees and expenses) of the Indebtedness being replaced, renewed, refinanced or extended, (ii) does not have a Weighted Average Life to Maturity at the time of such replacement, renewal, refinancing or extension that is less than the Weighted Average Life to Maturity of the Indebtedness being replaced, renewed, refinanced or extended, (iii) does not rank at the time of such replacement, renewal, refinancing or extension senior to the Indebtedness being replaced, renewed, refinanced or extended, and (iv) does not contain terms (including, without limitation, terms relating to security, amortization, interest rate, premiums, fees, covenants, event of default and remedies) materially less favorable to the Borrower or to the Lenders than those applicable to the Indebtedness being replaced, renewed, refinanced or extended. "PERSON" means any individual, corporation, firm, enterprise, partnership, trust, incorporated or unincorporated association, joint venture, joint stock company, limited liability company or other entity of any kind, or any government or political subdivision or any agency, department or instrumentality thereof. "PLAN" means an employee benefit plan defined in SECTION 3(3) of ERISA in respect of which the Borrower or any member of the Controlled Group is, or within the immediately preceding six (6) years was, an "employer" as defined in SECTION 3(5) of ERISA. "PLEDGE AGREEMENTS" means (a) the Shares Accounts Pledge Agreement dated as of November 21, 1997 executed by the Borrower in favor of the Collateral Agent, with respect to 65% of the outstanding Capital Stock of Sames, S.A., (b) the Equitable Share Charge dated as of November 21, 1997 executed by the Borrower in favor of the Collateral Agent, with respect to 65% of the outstanding Capital Stock of Binks-Sames Limited, (c) the Pledge Agreement dated the date hereof executed by the Borrower in favor of the Collateral Agent with respect to 65% of the outstanding Capital Stock of Binks Sames Canada, Ltd. and (d) the Pledge Agreement dated the date hereof executed by the Borrower in favor of the Collateral Agent with respect to 100% of the outstanding Capital Stock of Sames Electrostatic, Inc., in each case as the same may from time to time be amended, modified, supplemented or restated. "PRIORITY OBLIGATIONS" is defined in the Collateral Sharing Agreement. "PRO RATA SHARE" means, with respect to any Lender, the percentage obtained by dividing (A) the sum of such Lender's Existing Loans and Supplemental Loan Commitment at such time (in each case, as adjusted from time to time in accordance with the provisions of this Agreement) by (B) the sum of the aggregate amount of all of the Existing Loans and the Aggregate Supplemental Loan Commitment at such time; PROVIDED, HOWEVER, if all of the Commitments are terminated pursuant to the terms of this Agreement, then "Pro Rata Share" means the percentage obtained by dividing (x) the sum of such Lender's Loans and L/C Obligations, by (y) the aggregate amount of all Loans and L/C Obligations. 20 "PURCHASERS" is defined in SECTION 13.3(A) hereof. "RATABLE OBLIGATIONS" is defined in the Collateral Sharing Agreement. "RECEIVABLE(S)" means, with respect to any Person, all of such Person's presently existing and hereafter arising or acquired accounts, accounts receivable, and all present and future rights of such Person to payment for goods sold or leased or for services rendered (except those evidenced by instruments or chattel paper), whether or not they have been earned by performance, and all rights in any merchandise or goods which any of the same may represent, and all rights, title, security and guaranties with respect to each of the foregoing, including, without limitation, any right of stoppage in transit. "REGISTER" is defined in SECTION 13.3(C) hereof. "REGULATION G" means Regulation G of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor or other regulation or official interpretation of said Board of Governors relating to the extension of credit by nonbank, nonbroker lenders for the purpose of purchasing or carrying margin stock (as defined therein). "REGULATION T" means Regulation T of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor or other regulation or official interpretation of said Board of Governors relating to the extension of credit by and to brokers and dealers of securities for the purpose of purchasing or carrying margin stock (as defined therein). "REGULATION U" means Regulation U of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor or other regulation or official interpretation of said Board of Governors relating to the extension of credit by banks for the purpose of purchasing or carrying Margin Stock applicable to member banks of the Federal Reserve System. "REGULATION X" means Regulation X of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor or other regulation or official interpretation of said Board of Governors relating to the extension of credit by foreign lenders for the purpose of purchasing or carrying margin stock (as defined therein). "REIMBURSEMENT OBLIGATION" is defined in SECTION 3.6 hereof. "RELEASE" means any release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migration into the indoor or outdoor environment, including the movement of Contaminants through or in the air, soil, surface water or groundwater. "RELEASEES" is defined in SECTION 10.7(D) hereof. "RELEASORS" is defined in SECTION 10.7(D) hereof. 21 "RENTAL RESERVE" is defined in the definition of Eligible Inventory above. "REPLACEMENT LENDER" is defined in SECTION 2.20 hereof. "REPORTABLE EVENT" means a reportable event as defined in SECTION 4043 of ERISA and the regulations issued under such section, with respect to a Plan, excluding, however, such events as to which the PBGC by regulation waived the requirement of SECTION 4043(a) of ERISA that it be notified within 30 days after such event occurs, PROVIDED, HOWEVER, that a failure to meet the minimum funding standards of SECTION 412 of the Code and of SECTION 302 of ERISA shall be a Reportable Event regardless of the issuance of any such waiver of the notice requirement in accordance with either SECTION 4043(a) of ERISA or SECTION 412(d) of the Code. "REQUIRED CREDITORS" has the meaning given that term in the Collateral Sharing Agreement. "REQUIRED LENDERS" means Lenders whose Pro Rata Shares, in the aggregate, are greater than fifty percent (50%); PROVIDED, HOWEVER, that, if any of the Lenders shall have failed to fund its Pro Rata Share of (i) any Supplemental Loan requested by the Borrower or (ii) any Supplemental Loan required to be made in connection with reimbursement for any L/C Obligations and any such failure has not been cured, then for so long as such failure continues, "REQUIRED LENDERS" means Lenders (excluding all Lenders whose failure to fund their respective Pro Rata Shares of such Supplemental Loans has not been so cured) whose Pro Rata Shares represent greater than fifty percent (50%) of the aggregate Pro Rata Shares of such Lenders; PROVIDED FURTHER, HOWEVER, that, if the Commitments have been terminated pursuant to the terms of this Agreement, "REQUIRED LENDERS" means Lenders (without regard to such Lenders' performance of their respective obligations hereunder) whose aggregate Pro Rata Shares are greater than fifty percent (50%). "REQUIREMENTS OF LAW" means, as to any Person, the charter and by-laws or other organizational or governing documents of such Person, and any law, rule or regulation, or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject including, without limitation, the Securities Act of 1933, the Securities Exchange Act of 1934, Regulations G, T, U and X, ERISA, the Fair Labor Standards Act, the Worker Adjustment and Retraining Notification Act, Americans with Disabilities Act of 1990, and any certificate of occupancy, zoning ordinance, building, environmental or land use requirement or permit or environmental, labor, employment, occupational safety or health law, rule or regulation, including Environmental, Health or Safety Requirements of Law. "RESTRICTED PAYMENT" means (i) any dividend or other distribution, direct or indirect, on account of any Equity Interests of the Borrower now or hereafter outstanding, except a dividend payable solely in the Borrower's Capital Stock (other than Disqualified Stock) or in options, warrants or other rights to purchase such Capital Stock, (ii) any redemption, retirement, purchase or other acquisition for value, direct or indirect, of any Equity Interests of the Borrower or any of its Subsidiaries now or hereafter outstanding, other than in exchange for, or out of the proceeds 22 of, the substantially concurrent sale (other than to a Subsidiary of the Borrower) of other Equity Interests of the Borrower (other than Disqualified Stock), (iii) any redemption, purchase, retirement, defeasance, prepayment or other acquisition for value, direct or indirect, of any Indebtedness other than the Obligations, and (iv) any payment of a claim for the rescission of the purchase or sale of, or for material damages arising from the purchase or sale of, any Indebtedness (other than the Obligations) or any Equity Interests of the Borrower or any of the Borrower's Subsidiaries, or of a claim for reimbursement, indemnification or contribution arising out of or related to any such claim for damages or rescission. "RESTRUCTURING EXPENSES" is defined in SECTION 7.4(A) hereof. "RISK-BASED CAPITAL GUIDELINES" is defined in SECTION 4.2 hereof. "SALE INITIATIVE" is defined in SECTION 7.5 hereof. "SALE INITIATIVE PREPAYMENT" is defined in SECTION 2.5(B)(i)(a) hereof. "SECURED OBLIGATIONS" is defined in the Credit Agreement. "SECURITY AGREEMENTS" means those certain Security Agreements of even date herewith executed by the Borrower and SEI, respectively, in favor of the Collateral Agent for the benefit of the Holders of Secured Obligations as amended, restated or otherwise modified from time to time. "SEI" means Sames Electrostatic, Inc., a Connecticut corporation, together with its successors and assigns, including a debtor-in-possession on behalf of Sames Electrostatic, Inc. "SENIOR NOTES" means those certain Senior Notes due December 6, 2008, issued by the Borrower in the aggregate principal amount of $15,000,000 pursuant to the Master Note Agreement. "SHARING PERIOD" means the period from the Effective Date until the first date on which the aggregate amount of "Asset Sale Prepayments", "Subsidiary Prepayments" and "Issuance Prepayments" (each as defined in SECTION 2.5) equals or exceeds $1,000,000 "SINGLE EMPLOYER PLAN" means a Plan maintained by the Borrower or any member of the Controlled Group for employees of the Borrower or any member of the Controlled Group. "SOLVENT" means, when used with respect to any Person, that at the time of determination: (i) the fair value of its assets (both at fair valuation and at present fair saleable value) is equal to or in excess of the total amount of its liabilities, including, without limitation, contingent liabilities; and (ii) it is then able and expects to be able to pay its debts as they mature; and 23 (iii) it has capital sufficient to carry on its business as conducted and as proposed to be conducted. With respect to contingent liabilities (such as litigation, guarantees and pension plan liabilities), such liabilities shall be computed at the amount which, in light of all the facts and circumstances existing at the time, represent the amount which can be reasonably be expected to become an actual or matured liability. "SPECIFIED DEFAULTS" is defined in ARTICLE XV hereof. "SUBSIDIARY" of a Person means (i) any corporation more than 50% of the outstanding securities having ordinary voting power of which shall at the time be owned or controlled, directly or indirectly, by such Person or by one or more of its Subsidiaries or by such Person and one or more of its Subsidiaries, or (ii) any partnership, association, joint venture or similar business organization more than 50% of the ownership interests having ordinary voting power of which shall at the time be so owned or controlled. Unless otherwise expressly provided, all references herein to a "Subsidiary" means a Subsidiary of the Borrower. "SUBSIDIARY PREPAYMENTS" is defined in SECTION 2.5(B)(i)(c) hereof. "SUPPLEMENTAL ADVANCE" means a borrowing hereunder consisting of the aggregate amount of the several Supplemental Loans made by the Lenders to the Borrower. "SUPPLEMENTAL CREDIT AVAILABILITY" means, at any particular time, the least of (A) the amount by which the Aggregate Supplemental Loan Commitment at such time exceeds the Supplemental Credit Obligations at such time; (B) the amount by which the Borrowing Base at such time exceeds the sum of (i) the Supplemental Credit Obligations at such time, (ii) the Existing Obligations at such time and (iii) the outstanding principal amount of the Senior Notes at such time and (C) the amount by which the Maximum Amount at such time exceeds the sum of (i) the Supplemental Credit Obligations at such time, (ii) the outstanding principal balance of the Existing Loans at such time and (iii) the outstanding principal amount of the Senior Notes at such time. "SUPPLEMENTAL CREDIT OBLIGATIONS" means, at any particular time, the sum of (i) the outstanding principal amount of the Supplemental Loans at such time, PLUS (ii) the outstanding L/C Obligations at such time. "SUPPLEMENTAL LOAN" is defined in SECTION 2.2 hereof. "SUPPLEMENTAL LOAN COMMITMENT" means, for each Lender, the obligation of such Lender to make Supplemental Loans and to purchase participations in Letters of Credit not exceeding the amount set forth on EXHIBIT A to this Agreement opposite its name thereon under the heading "Supplemental Loan Commitment" or the signature page of the assignment and acceptance by which it became a Lender, as such amount may be modified from time to time 24 pursuant to the terms of this Agreement or to give effect to any applicable assignment and acceptance. "SUPPLEMENTAL LOAN TERMINATION DATE" means the earlier of (a) September 30, 1999 and (b) the date of termination of the Aggregate Supplemental Loan Commitment pursuant to SECTION 2.6 hereof or pursuant to SECTION 9.1 hereof. "SUPPLEMENTAL NOTE" means a promissory note, in substantially the form of EXHIBIT B hereto, duly executed by the Borrower and payable to the order of a Lender in the amount of its Supplemental Loan Commitment, including any amendment, restatement, modification, renewal or replacement of such Supplemental Note. "TAX PREPAYMENT" is defined in SECTION 2.5(B)(i)(d) hereof. "TAXES" is defined in Section 2.15(E)(i) hereof. "TERMINATION EVENT" means (i) a Reportable Event with respect to any Benefit Plan; (ii) the withdrawal of the Borrower or any member of the Controlled Group from a Benefit Plan during a plan year in which the Borrower or such Controlled Group member was a "substantial employer" as defined in SECTION 4001(a)(2) of ERISA or the cessation of operations which results in the termination of employment of twenty percent (20%) of Benefit Plan participants who are employees of the Borrower or any member of the Controlled Group; (iii) the imposition of an obligation on the Borrower or any member of the Controlled Group under SECTION 4041 of ERISA to provide affected parties written notice of intent to terminate a Benefit Plan in a distress termination described in SECTION 4041(c) of ERISA; (iv) the institution by the PBGC of proceedings to terminate a Benefit Plan; (v) any event or condition which might constitute grounds under SECTION 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Benefit Plan; or (vi) the partial or complete withdrawal of the Borrower or any member of the Controlled Group from a Multiemployer Plan. "TRANSFER DEFAULT" means: (a) the occurrence of any Default under any of clauses (A) or (E) through (K) of SECTION 8.1; (b) the occurrence of any Default under SECTION 8.1(B)(ii) as a result of the Borrower's breach of SECTION 7.1(I) and such breach shall continue unremedied for ten (10) Business Days after notice thereof is given to the Borrower by the Agent or any Lender (such 10-day period ending on the 10th day following the giving of such notice whether or not such notice was given prior to the expiration of the two Business Day grace period contained in SECTION 8.1(B)(ii)); (c) the occurrence of any Default under SECTION 8.1(B)(iii); (d) the occurrence of any Default under SECTION 8.1(C) arising out of any breach of the representations and warranties made under SECTION 6.4 or SECTION 6.10; or 25 (e) the occurrence of any Default under SECTION 8.1(D) arising out of any breach of the provisions of SECTION 7.1(A) and such breach shall continue unremedied for thirty (30) days after notice thereof is given to the Borrower by the Agent or any Lender (such 30-day period ending on the 30th day following the giving of such notice whether or not such notice was given prior to the expiration of the 30-day grace period contained in SECTION 8.1(D)). "TRANSFEREE" is defined in SECTION 13.5 hereof. "UNFUNDED LIABILITIES" means (i) in the case of Single Employer Plans, the amount (if any) by which the present value of all vested nonforfeitable benefits under all Single Employer Plans exceeds the fair market value of all such Plan assets allocable to such benefits, all determined as of the then most recent valuation date for such Plans, and (ii) in the case of Multiemployer Plans, the withdrawal liability that would be incurred by the Controlled Group if all members of the Controlled Group completely withdrew from all Multiemployer Plans. "UNMATURED DEFAULT" means an event which, but for the lapse of time or the giving of notice, or both, would constitute a Default. "WEIGHTED AVERAGE LIFE TO MATURITY" means when applied to any Indebtedness at any date, the number of years obtained by dividing (i) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment, by (ii) the then outstanding principal amount of such Indebtedness. The foregoing definitions shall be equally applicable to both the singular and plural forms of the defined terms. Any accounting terms used in this Agreement which are not specifically defined herein shall have the meanings customarily given them in accordance with generally accepted accounting principles in existence as of the date hereof. 1.2 REFERENCES. The existence throughout the Agreement of references to the Borrower's Subsidiaries is for a matter of convenience only. Any references to Subsidiaries of the Borrower set forth herein shall not in any way be construed as consent by the Agent or any Lender to the establishment, maintenance or acquisition of any Subsidiary, except as may otherwise be permitted hereunder. 1.3 SUPPLEMENTAL DISCLOSURE. At any time at the request of the Agent and at such additional times as the Borrower determines, the Borrower shall supplement each schedule or representation herein or in the other Loan Documents with respect to any matter hereafter arising which, if existing or occurring at the date of this Agreement, would have been required to be set forth or described in such schedule or as an exception to such representation or which is necessary to correct any information in such schedule or representation which has been rendered inaccurate thereby. Unless any such supplement to such schedule or representation discloses the existence or occurrence of events, facts or circumstances which are not prohibited by the terms of this Agreement or any other Loan Documents, such supplement to such schedule or representation 26 shall not be deemed an amendment thereof unless expressly consented to in writing by Agent and the Required Lenders, and no such amendments, except as the same may be consented to in a writing which expressly includes a waiver, shall be or be deemed a waiver by the Agent or any Lender of any Default disclosed therein. 1.4 AMENDMENT AND RESTATEMENT OF ORIGINAL CREDIT AGREEMENT. The Borrower, the Lenders, the Agent and the Issuing Banks agree that, upon (i) the execution and delivery of this Agreement by each of the parties hereto and (ii) satisfaction (or waiver by the Agent and all of the Lenders) of the conditions precedent set forth in SECTION 5.1, the terms and provisions of the Original Credit Agreement shall be and hereby are amended, superseded and restated in their entirety by the terms and provisions of this Agreement. This Agreement is not intended to and shall not constitute a novation of the Original Credit Agreement or the indebtedness created thereunder. All outstanding Letters of Credit shall continue as Letters of Credit under (and shall be governed by the terms of) this Agreement. All Existing Loans made to the Borrower under the Original Credit Agreement which remain outstanding on the Effective Date shall constitute and shall continue as Loans under (and shall be governed by the terms of) this Agreement. The commitments of each Lender that is a party to the Original Credit Agreement shall, on the Effective Date, automatically be deemed amended to constitute such Lender's Commitment hereunder. ARTICLE II: THE EXISTING LOANS AND SUPPLEMENTAL LOAN FACILITY 2.1. EXISTING LOANS. Pursuant to the terms of the Original Credit Agreement each Lender made Loans to the Borrower, which Loans remain outstanding as of the date of this Agreement in the amount for each Lender as set forth the amount set forth on EXHIBIT A to this Agreement opposite its name thereon under the heading "Existing Loans". On the Existing Loan Termination Date, the Borrower shall repay in full the outstanding principal balance of the Existing Loans. In addition to the scheduled payment of the Existing Loans on the Existing Loan Termination Date, the Borrower (a) may make the voluntary prepayments described in SECTION 2.5(A) for credit against the Existing Loans pursuant to SECTION 2.5(A) and (b) shall make the mandatory prepayments prescribed in SECTION 2.5(B) for credit against the Existing Loans, if applicable, pursuant to SECTION 2.5(B). No repayment or prepayments of any Existing Loan shall be reborrowed once repaid. 2.2 SUPPLEMENTAL LOANS. Upon the satisfaction of the conditions precedent set forth in SECTIONS 5.1 and 5.2, from and including the date of this Agreement and prior to the Supplemental Loan Termination Date, each Lender severally and not jointly agrees, on the terms and conditions set forth in this Agreement, to make revolving loans to the Borrower from time to time, in Dollars, in an amount not to exceed such Lender's Pro Rata Share of Supplemental Credit Availability at such time (each individually, a "SUPPLEMENTAL LOAN" and, collectively, the "SUPPLEMENTAL LOANS"); PROVIDED, HOWEVER, (a) at no time shall the Supplemental Credit Obligations exceed the Aggregate Supplemental Commitment; (b) at no time shall the sum of (i) the Existing Obligations, (ii) the Supplemental Credit Obligations and (iii) the outstanding principal balance of the Senior Notes exceed the Borrowing Base at such time and (c) at no time 27 shall the sum of (i) the Existing Obligations, (ii) the Supplemental Credit Obligations and (iii) the outstanding principal balance of the Senior Notes exceed the Maximum Amount at such time. Subject to the terms of this Agreement, the Borrower may borrow, repay and reborrow Supplemental Loans at any time prior to the Supplemental Loan Termination Date. On the Supplemental Loan Termination Date, the Borrower shall repay in full the outstanding principal balance of the Supplemental Loans. Each Supplemental Advance under this SECTION 2.2 shall consist of Supplemental Loans made by each Lender ratably in proportion to such Lender's respective Pro Rata Share. 2.3 [Intentionally Blank] 2.4 [Intentionally Blank]. 2.5 OPTIONAL PAYMENTS; MANDATORY PREPAYMENTS. (A) OPTIONAL PAYMENTS. The Borrower may from time to time repay or prepay, without penalty or premium all or any part of outstanding Supplemental Loans and Existing Loans; PROVIDED, that any prepayment of the Existing Loans shall constitute a permanent reduction and may not be reborrowed. (B) MANDATORY PREPAYMENTS. (i) MANDATORY PREPAYMENTS OF SECURED OBLIGATIONS. (a) Upon the consummation of any Asset Sale, other than Excluded Asset Sales, by the Borrower or any Subsidiary of the Borrower where such Asset Sale results in Net Cash Proceeds individually for such transaction equal to or greater than $50,000 or where all such Asset Sales results in Net Cash Proceeds in the aggregate for all such transactions since the date hereof equal to or greater than $150,000, except as provided in the second sentence of this SECTION 2.5(B)(i)(a), within five (5) Business Days after the Borrower's or any of its Subsidiaries' (i) receipt of any Net Cash Proceeds from any such Asset Sale, or (ii) conversion to cash or Cash Equivalents of non-cash proceeds (whether principal or interest and including securities, release of escrow arrangements or lease payments) received from any Asset Sale, the Borrower shall make a mandatory prepayment of the Secured Obligations ("ASSET SALE PREPAYMENTS") in an amount equal to (1) fifty percent (50%) of such Net Cash Proceeds or such proceeds converted from non-cash to cash or Cash Equivalents received during the Sharing Period and (2) ninety percent (90%) of such Net Cash Proceeds or such proceeds converted from non-cash to cash or Cash Equivalents received after the Sharing Period. Net Cash Proceeds of Asset Sales of equipment with respect to which the Borrower or any Subsidiary shall have given the Agent written notice of its intention to replace the equipment sold within four (4) months following such sale shall not be subject to the prepayment requirements of the first sentence of this SECTION 2.5(B)(i)(a) unless and to the extent that such applicable period shall have expired without such equipment replacement having been made or unless prior to such time a Default shall have occurred and is continuing. The provisions of this clause 28 (a) shall govern only those asset sales of a type and magnitude currently permitted under the terms of this Agreement. To the extent that the Borrower shall seek and obtain the consent of the Required Creditors pursuant to SECTION 7.5(g) permitting any other sale, transfer or other disposition of any Subsidiary of the Borrower, or any business line of the Borrower or other material transaction in connection with the Sale Initiative, the Borrower shall make a mandatory prepayment of the Secured Obligations in an amount equal to one-hundred percent (100%) of the Net Cash Proceeds from such sale, transfer or other disposition or such lesser amount as shall be required to pay the Secured Obligations in full ("SALE INITIATIVE PREPAYMENTS"). (b) Upon the consummation of any Financing by the Borrower or SEI, within five (5)Business Days after the Borrower's or SEI's receipt of any Net Cash Proceeds from such Financing, the Borrower shall make a mandatory prepayment ("ISSUANCE PREPAYMENTS") of the Secured Obligations in an amount equal to (1) fifty percent (50%) of such Net Cash Proceeds received during the Sharing Period and (2) ninety percent (90%) of such Net Cash Proceeds received after the Sharing Period. (c) Except as set forth in clauses (i) through (v) below, upon the receipt by the Borrower of any funds from any repatriation or other payment of monies from any of the Borrower's foreign subsidiaries (whether as a dividend, loan, return of capital or otherwise), within five (5) Business Days after the Borrower's receipt of such funds, the Borrower shall make a mandatory prepayment ("SUBSIDIARY PREPAYMENT") of the Secured Obligations in an amount equal to (1) fifty percent (50%) of such amounts received during the Sharing Period and (2) ninety percent (90%) of such amounts received after the Sharing Period; PROVIDED, no such mandatory prepayment of the Secured Obligations shall be required out of (i) the approximately $4,250,000 which the Borrower has previously received or which the Borrower anticipates will be received from Sames S.A., (ii) amounts received by the Borrower as a reimbursement for expenses incurred by the Borrower on behalf of a Subsidiary, (iii) payments received from a Subsidiary as a result of its repayment, in the ordinary course, of intercompany Receivables incurred in the ordinary course of its business; (iv) amounts received from intercompany management or guaranty fees in amounts not in excess of the amount set forth in the financial information attached as EXHIBIT A to the Disclosure Letter; and (v) amounts received from the liquidation of Binks International (Italia) S.r.l. in the amount of approximately $500,000. (d) Upon the receipt by the Borrower or SEI of the proceeds of any federal, state or local tax refunds, the Borrower shall make a mandatory prepayment of the Secured Obligations in an amount equal to one-hundred (100%) of the amount so received ("TAX PREPAYMENTS"). (e) Nothing in this SECTION 2.5(B)(i) shall be construed to constitute the Lenders' consent to any transaction referred to in CLAUSES (a) through (c) above which is not expressly permitted by the terms of this Agreement. 29 (f) Each mandatory prepayment required by CLAUSES (a) through (d) of this SECTION 2.5(B) shall be referred to herein as a "DESIGNATED PREPAYMENT". Designated Prepayments shall be paid to the Collateral Agent for application in accordance with the terms of the Collateral Sharing Agreement. Proceeds from Designated Prepayments paid by the Collateral Agent to the Agent shall be allocated and applied in the following order of priority so long as (1) no Default has occurred hereunder, (2) no Event of Default (as defined in the Master Note Agreement) has occurred under the Master Note Agreement and (3) no "Agreement Default" (as defined in the Collateral Sharing Agreement) has occurred under the terms of any agreement governing any other Priority Obligations: (I) ratably to the accrued and unpaid interest on the Supplemental Loans, interest on the Reimbursement Obligations and to accrued and unpaid fees on account of Letters of Credit; (II) ratably to the unpaid principal amount of the Supplemental Loans and to principal on the Reimbursement Obligations (which prepayment, other than as a result of a Tax Prepayment, shall result in a permanent reduction by such amount in the Aggregate Supplemental Loan Commitment and ratably to each Lender's Supplemental Loan Commitment); (III) to the extent any L/C Obligations are contingent, deposited with the Agent as cash collateral in respect of such L/C Obligations; and (IV) to the other Secured Obligations in the order set forth in the Collateral Sharing Agreement; PROVIDED, if such Designated Prepayment is made after the occurrence and during the continuance of any such Default, Event of Default or other "Agreement Default" (as defined in the Collateral Sharing Agreement), such Designated Prepayment shall be applied in accordance with the terms of the Collateral Sharing Agreement. (ii) MANDATORY PREPAYMENTS OF SUPPLEMENTAL LOANS. In addition to repayments under SECTION 2.5(B)(i), if at any time and for any reason the (a) the Supplemental Credit Obligations exceed the Aggregate Supplemental Commitment or (b) the sum of (i) the Existing Obligations, (ii) the Supplemental Credit Obligations and (iii) the outstanding principal balance of the Senior Notes exceed either the Borrowing Base or the Maximum Amount, the Borrower shall immediately make a mandatory prepayment of the Supplemental Credit Obligations (or if the Supplemental Obligations have been paid in full, the other Secured Obligations) in an amount equal to such excess. In addition, if Supplemental Credit Availability is at any time less than the amount of contingent L/C Obligations outstanding at any time, the Borrower shall deposit cash collateral with the Agent in an amount equal to the amount by which such L/C Obligations exceed such Supplemental Credit Availability. 2.6 REDUCTION OF COMMITMENTS. The Borrower may permanently reduce the Aggregate Supplemental Loan Commitment in whole, or in part ratably among the Lenders, in an aggregate minimum amount of $500,000 and integral multiples of $100,000 in excess of that amount (unless 30 the Aggregate Supplemental Loan Commitment is reduced in whole), upon at least one Business Day's written notice to the Agent, which notice shall specify the amount of any such reduction; PROVIDED, HOWEVER, that the amount of the Aggregate Supplemental Loan Commitment may not be reduced below the aggregate principal amount of the outstanding Supplemental Credit Obligations. In addition, the Aggregate Supplemental Loan Commitment shall be automatically reduced in connection with Designated Prepayments on the terms set forth in SECTION 2.5 above. 2.7 METHOD OF BORROWING. Not later than 2:00 p.m. (Chicago time) on each Borrowing Date, each Lender shall make available its Supplemental Loan, in funds immediately available in Chicago to the Agent at its address specified pursuant to ARTICLE XIV. The Agent will promptly make the funds so received from the Lenders available to the Borrower at the Agent's aforesaid address. 2.8 NOTICE OF BORROWING; FLOATING RATE APPLICABLE TO ALL OBLIGATIONS. The Borrower shall give the Agent irrevocable notice in substantially the form of EXHIBIT C hereto (a "BORROWING NOTICE") not later than 12:00 noon (Chicago time) on the Borrowing Date of each Supplemental Advance specifying: (i) the Borrowing Date (which shall be a Business Day) of such Supplemental Advance and (ii) the aggregate amount of such Supplemental Advance. From and after the Effective Date, all Obligations shall bear interest from and including the date of the making of the applicable Supplemental Advance (or from the Effective Date for the Existing Obligations) or incurrence of the Obligation to (but not including) the date of repayment thereof at the Floating Rate, changing when and as such Floating Rate changes. Changes in the rate of interest on the Obligations will take effect simultaneously with each change in the Alternate Base Rate. 2.9 MINIMUM AMOUNT OF EACH SUPPLEMENTAL ADVANCE. Each Supplemental Advance (other than a Supplemental Advance to repay a Reimbursement Obligation) shall be in the minimum amount of $250,000 (and in multiples of $100,000 if in excess thereof), PROVIDED, HOWEVER, that any Supplemental Advance may be in the amount of the remaining Supplemental Credit Availability. 2.10 [Intentionally Blank] 2.11 DEFAULT RATE. After the occurrence and during the continuance of a Default, at the option of the Agent or at the direction of the Required Lenders, the interest rate(s) applicable to the Obligations and the fees payable under SECTION 3.7 with respect to Letters of Credit shall be increased by two percent (2.0%) per annum above the Floating Rate, as applicable. 2.12 METHOD OF PAYMENT. All payments of principal, interest, fees, commissions and L/C Obligations hereunder shall be made, without setoff, deduction or counterclaim, in immediately available funds to the Agent at the Agent's address specified pursuant to ARTICLE XIV, or at any other Lending Installation of the Agent specified in writing by the Agent tothe Borrower, by 2:00 p.m. (Chicago time) on the date when due and shall be made ratably among the Lenders (unless such amount is not to be shared ratably in accordance with the terms hereof). Each payment delivered to the Agent for the account of any Lender shall be delivered promptly by the Agent to 31 such Lender in the same type of funds which the Agent received at its address specified pursuant to ARTICLE XIV or at any Lending Installation specified in a notice received by the Agent from such Lender. The Borrower authorizes the Agent to charge the account of the Borrower maintained with First Chicago for each payment of principal, interest, fees, commissions and L/C Obligations as it becomes due hereunder. 2.13 NOTES. Each Lender is authorized to record the principal amount of each of its Loans and each repayment with respect to its Loans on the schedule attached to its respective Notes; PROVIDED, HOWEVER, that the failure to so record shall not affect the Borrower's obligations under any such Note. 2.14 TELEPHONIC NOTICES. The Borrower authorizes the Lenders and the Agent to extend Supplemental Advances and to transfer funds based on telephonic notices made by any person or persons the Agent or any Lender in good faith believes to be acting on behalf of the Borrower. The Borrower agrees to deliver promptly to the Agent a written confirmation, signed by an Authorized Officer, if such confirmation is requested by the Agent or any Lender, of each telephonic notice. If the written confirmation differs in any material respect from the action taken by the Agent and the Lenders, (i) the telephonic notice shall govern absent manifest error and (ii) the Agent or the Lender, as applicable, shall promptly notify the Authorized Officer who provided such confirmation of such difference. 2.15 PROMISE TO PAY; INTEREST; INTEREST PAYMENT DATES; INTEREST AND FEE BASIS; TAXES; LOAN AND CONTROL ACCOUNTS. (A) PROMISE TO PAY. The Borrower unconditionally promises to pay when due the principal amount of each Loan and all other Obligations incurred by it, and to pay all unpaid interest accrued thereon, in accordance with the terms of this Agreement and the Notes. (B) INTEREST PAYMENT DATES. Interest accrued on each Loan shall be payable on each Payment Date, commencing with April 15, 1998 and at maturity (whether by acceleration or otherwise). Interest accrued on the principal balance of all other Obligations shall be payable in arrears (i) on the last day of each calendar month, commencing on the first such day following the incurrence of such Obligation, (ii) upon repayment thereof in full or in part, and (iii) if not theretofore paid in full, at the time such other Obligation becomes due and payable (whether by acceleration or otherwise). (C) FEES. (i) CLOSING FEE. On the Effective Date, the Borrower shall pay to the Agent, for the account of the Lenders in accordance with their Pro Rata Shares, a closing fee in the amount set forth in SECTION 1 of SCHEDULE 2.15 to the Disclosure Letter. 32 (ii) DEFERRED CLOSING FEE. In addition, the Borrower shall pay to the Agent, for the account of the Lenders in accordance with their Pro Rata Shares, a deferred closing fee at the times and in the amounts set forth in SECTION 2 of SCHEDULE 2.15 to the Disclosure Letter. (iii) DEFERRED FACILITY FEE. In addition, the Borrower shall pay to the Agent, for the account of the Lenders in accordance with their Pro Rata Shares, a deferred facility fee at the times and in the amounts set forth in SECTION 3 of SCHEDULE 2.15 to the Disclosure Letter. (iv) The Borrower agrees to pay to the Agent for the sole account of the Agent and the Arranger (unless otherwise agreed between the Agent and the Arranger and any Lender) the fees set forth in the letter agreement between the Agent and the Borrower dated July 23, 1997, payable at the times and in the amounts set forth therein. (D) INTEREST AND FEE BASIS. Interest and fees shall be calculated for actual days elapsed on the basis of a 360-day year. Interest shall be payable for the day an Obligation is incurred but not for the day of any payment on the amount paid if payment is received prior to 2:00 p.m. (Chicago time) at the place of payment. If any payment of principal of or interest on a Loan or any payment of any other Obligations shall become due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and, in the case of a principal payment, such extension of time shall be included in computing interest, fees and commissions. (E) TAXES. (i) Any and all payments by the Borrower hereunder shall be made free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings or any liabilities with respect thereto including those arising after the date hereof as a result of the adoption of or any change in any law, treaty, rule, regulation, guideline or determination of a Governmental Authority or any change in the interpretation or application thereof by a Governmental Authority but excluding, in the case of each Lender and the Agent, such taxes (including income taxes, franchise taxes and branch profit taxes) as are imposed on or measured by such Lender's or Agent's, as the case may be, income by the United States of America or any Governmental Authority of the jurisdiction under the laws of which such Lender or Agent, as the case may be, is organized or maintains a Lending Installation (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings, and liabilities which the Agent or a Lender determines to be applicable to this Agreement, the other Loan Documents, the Supplemental Loan Commitments, the Loans or the Letters of Credit being hereinafter referred to as "TAXES"). If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under the other Loan Documents to any Lender or the Agent, (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this SECTION 2.15(E)) such Lender or the Agent (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 taxation authority or other authority in accordance with applicable law. If a withholding tax of the United States of America or any other Governmental Authority shall be or become applicable (y) after 33 the date of this Agreement, to such payments by the Borrower made to the Lending Installation or any other office that a Lender may claim as its Lending Installation, or (z) after such Lender's selection and designation of any other Lending Installation, to such payments made to such other Lending Installation, such Lender shall use reasonable efforts to make, fund and maintain its Loans through another Lending Installation of such Lender in another jurisdiction so as to reduce the Borrower's liability hereunder, if the making, funding or maintenance of such Loans through such other Lending Installation of such Lender does not, in the judgment of such Lender, otherwise adversely affect such Loans, or obligations under the Supplemental Loan Commitments or such Lender. (ii) In addition, the Borrower agrees to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges, or similar levies which arise from any payment made hereunder, from the issuance of Letters of Credit hereunder, or from the execution, delivery or registration of, or otherwise with respect to, this Agreement, the other Loan Documents, the Supplemental Loan Commitments, the Loans or the Letters of Credit (hereinafter referred to as "OTHER TAXES"). (iii) The Borrower indemnifies each Lender and the Agent for the full amount of Taxes and Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by any Governmental Authority on amounts payable under this SECTION 2.15(E)) paid by such Lender or the Agent (as the case may be) and any liability (including penalties, interest, and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. This indemnification shall be made within thirty (30) days after the date such Lender or the Agent (as the case may be) makes written demand therefor. A certificate as to any additional amount payable to any Lender or the Agent under this SECTION 2.15(E) submitted to the Borrower and the Agent (if a Lender is so submitting) by such Lender or the Agent shall show in reasonable detail the amount payable and the calculations used to determine such amount and shall, absent manifest error, be final, conclusive and binding upon all parties hereto. With respect to such deduction or withholding for or on account of any Taxes and to confirm that all such Taxes have been paid to the appropriate Governmental Authorities, the Borrower shall promptly (and in any event not later than thirty (30) days after receipt) furnish to each Lender and the Agent such certificates, receipts and other documents as may be required (in the judgment of such Lender or the Agent) to establish any tax credit to which such Lender or the Agent may be entitled. (iv) Within thirty (30) days after the date of any payment of Taxes or Other Taxes by the Borrower, the Borrower shall furnish to the Agent the original or a certified copy of a receipt evidencing payment thereof. (v) Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower contained in this SECTION 2.15(E) shall survive the payment in full of principal and interest hereunder, the termination of the Letters of Credit and the termination of this Agreement. 34 (vi) Without limiting the obligations of the Borrower under this SECTION 2.15(E), each Lender that is not created or organized under the laws of the United States of America or a political subdivision thereof shall deliver to the Borrower and the Agent on or before the Effective Date, or, if later, the date on which such Lender becomes a Lender pursuant to SECTION 13.3, a true and accurate certificate executed in duplicate by a duly authorized officer of such Lender, in a form satisfactory to the Borrower and the Agent, to the effect that such Lender is capable under the provisions of an applicable tax treaty concluded by the United States of America (in which case the certificate shall be accompanied by two executed copies of Form 1001 of the IRS) or under SECTION 1442 of the Code (in which case the certificate shall be accompanied by two copies of Form 4224 of the IRS) of receiving payments of interest hereunder without deduction or withholding of United States federal income tax. Each such Lender further agrees to deliver to the Borrower and the Agent from time to time a true and accurate certificate executed in duplicate by a duly authorized officer of such Lender substantially in a form satisfactory to the Borrower and the Agent, before or promptly upon the occurrence of any event requiring a change in the most recent certificate previously delivered by it to the Borrower and the Agent pursuant to this SECTION 2.15(E)(vi). Further, each Lender which delivers a certificate accompanied by Form 1001 of the IRS covenants and agrees to deliver to the Borrower and the Agent within fifteen (15) days prior to January 1, 1998, and every third (3rd) anniversary of such date thereafter on which this Agreement is still in effect, another such certificate and two accurate and complete original signed copies of Form 1001 (or any successor form or forms required under the Code or the applicable regulations promulgated thereunder), and each Lender that delivers a certificate accompanied by Form 4224 of the IRS covenants and agrees to deliver to the Borrower and the Agent within fifteen (15) days prior to the beginning of each subsequent taxable year of such Lender during which this Agreement is still in effect, another such certificate and two accurate and complete original signed copies of IRS Form 4224 (or any successor form or forms required under the Code or the applicable regulations promulgated thereunder). Each such certificate shall certify as to one of the following: (a) that such Lender is capable of receiving payments of interest hereunder without deduction or withholding of United States of America federal income tax; (b) that such Lender is not capable of receiving payments of interest hereunder without deduction or withholding of United States of America federal income tax as specified therein but is capable of recovering the full amount of any such deduction or withholding from a source other than the Borrower and will not seek any such recovery from the Borrower; or (c) that, as a result of the adoption of or any change in any law, treaty, rule, regulation, guideline or determination of a Governmental Authority or any change in the interpretation or application thereof by a Governmental Authority after the date such Lender became a party hereto, such Lender is not capable of receiving payments of interest hereunder without deduction or withholding of United States of America federal income tax as specified therein and that it is not capable of recovering the full amount of the same from a source other than the Borrower. 35 Each Lender shall promptly furnish to the Borrower and the Agent such additional documents as may be reasonably required by the Borrower or the Agent to establish any exemption from or reduction of any Taxes or Other Taxes required to be deducted or withheld and which may be obtained without undue expense to such Lender. (F) LOAN ACCOUNT. Each Lender shall maintain in accordance with its usual practice an account or accounts (a "LOAN ACCOUNT") evidencing the Obligations of the Borrower to such Lender owing to such Lender from time to time, including the amount of principal and interest payable and paid to such Lender from time to time hereunder and under the Notes. (G) CONTROL ACCOUNT. The Register maintained by the Agent pursuant to SECTION 13.3(C) shall include a control account, and a subsidiary account for each Lender, in which accounts (taken together) shall be recorded (i) the date and amount of each Supplemental Advance, (ii) the effective date and amount of each Assignment Agreement delivered to and accepted by it and the parties thereto pursuant to SECTION 13.3, (iii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder or under the Notes, (iv) the amount of any sum received by the Agent from the Borrower hereunder and each Lender's share thereof, and (v) all other appropriate debits and credits as provided in this Agreement, including, without limitation, all fees, charges, expenses and interest. (H) ENTRIES BINDING. The entries made in the Register and each Loan Account shall be presumptive evidence, absent manifest error, unless the Borrower objects in writing to information contained in the Register and each Loan Account within sixty (60) days of the Borrower's receipt of such information in written form. 2.16 NOTIFICATION OF SUPPLEMENTAL ADVANCES, INTEREST RATES, PREPAYMENTS AND AGGREGATE SUPPLEMENTAL LOAN COMMITMENT REDUCTIONS. Promptly after receipt thereof, the Agent will notify each Lender of the contents of each Aggregate Supplemental Loan Commitment reduction notice, Borrowing Notice, and repayment notice received by it hereunder. The Agent will give each Lender prompt notice of each change in the Alternate Base Rate. 2.17 LENDING INSTALLATIONS. Each Lender may book its Loans or Letters of Credit at any Lending Installation selected by such Lender and may change its Lending Installation from time to time. All terms of this Agreement shall apply to any such Lending Installation and the Notes shall be deemed held by each Lender for the benefit of such Lending Installation. Each Lender may, by written or facsimile notice to the Agent and the Borrower, designate a Lending Installation through which Loans will be made by it and for whose account Loan payments and/or payments of L/C Obligations are to be made. 2.18 NON-RECEIPT OF FUNDS BY THE AGENT. Unless the Borrower or a Lender, as the case may be, notifies the Agent prior to the date on which it is scheduled to make payment to the Agent of (i) in the case of a Lender, the proceeds of a Loan or (ii) in the case of the Borrower, a payment of principal, interest or fees to the Agent for the account of the Lenders, that it does not intend to make such payment, the Agent may assume that such payment has been made. The Agent may, but shall not be obligated to, make the amount of such payment available to the 36 intended recipient in reliance upon such assumption. If such Lender or the Borrower, as the case may be, has not in fact made such payment to the Agent, the recipient of such payment shall, on demand by the Agent, repay to the Agent the amount so made available together with interest thereon in respect of each day during the period commencing on the date such amount was so made available by the Agent until the date the Agent recovers such amount at a rate per annum equal to (i) in the case of payment by a Lender, the Federal Funds Effective Rate for such day or (ii) in the case of payment by the Borrower, the Floating Rate. 2.19 TERMINATION DATE. This Agreement shall be effective until the later to occur of the Existing Loan Termination Date and the Supplemental Loan Termination Date. Notwithstanding the termination of this Agreement, until all of the Obligations (other than contingent indemnity obligations) shall have been fully and indefeasibly paid and satisfied, all financing arrangements among the Borrower and the Lenders shall have been terminated and all of the Letters of Credit shall have expired, been canceled or terminated, all of the rights and remedies under this Agreement and the other Loan Documents shall survive and the Agent and/or Collateral Agent shall be entitled to retain its security interest in and to all existing and future Collateral for the benefit of itself and the Holders of Secured Obligations. 2.20 REPLACEMENT OF CERTAIN LENDERS. In the event a Lender ("AFFECTED LENDER") shall have: (i) failed to fund its Pro Rata Share of any Supplemental Advance requested by the Borrower, or to fund a Supplemental Advance in order to repay Reimbursement Obligations, which such Lender is obligated to fund under the terms of this Agreement and which failure has not been cured, (ii) requested compensation from the Borrower under SECTIONS 2.15(E), 4.1 or 4.2 to recover Taxes, Other Taxes or other additional costs incurred by such Lender which are not being incurred generally by the other Lenders or (iii) has invoked SECTION 10.2, then, in any such case, the Borrower or the Agent may make written demand on such Affected Lender (with a copy to the Agent in the case of a demand by the Borrower and a copy to the Borrower in the case of a demand by the Agent) for the Affected Lender to assign, and such Affected Lender shall use its best efforts to assign pursuant to one or more duly executed Assignments Agreements five (5) Business Days after the date of such demand, to one or more financial institutions that comply with the provisions of SECTION 13.3(A) which the Borrower or the Agent, as the case may be, shall have engaged for such purpose ("REPLACEMENT LENDER"), all of such Affected Lender's rights and obligations under this Agreement and the other Loan Documents (including, without limitation, its Supplemental Loan Commitment, all Loans owing to it, all of its participation interests in existing Letters of Credit, and its obligation to participate in additional Letters of Credit hereunder) in accordance with SECTION 13.3. The Agent agrees, upon the occurrence of such events with respect to an Affected Lender and upon the written request of the Borrower, to use its reasonable efforts to obtain the commitments from one or more financial institutions to act as a Replacement Lender. The Agent is authorized to execute one or more of such assignment agreements as attorney-in-fact for any Affected Lender failing to execute and deliver the same within five (5) Business Days after the date of such demand. Further, with respect to such assignment the Affected Lender shall have concurrently received, in cash, all amounts due and owing to the Affected Lender hereunder or under any other Loan Document, including, without limitation, the aggregate outstanding principal amount of the Loans owed to such Lender, together with accrued interest thereon through the date of such assignment, amounts payable under SECTIONS 2.15(E), 37 4.1, and 4.2 with respect to such Affected Lender and compensation payable under SECTION 2.15(C) in the event of any replacement of any Affected Lender under CLAUSE (ii) of this SECTION 2.20; PROVIDED that upon such Affected Lender's replacement, such Affected Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of SECTIONS 2.15(E), 4.1, 4.2, 4.4, and 10.7, as well as to any fees accrued for its account hereunder and not yet paid, and shall continue to be obligated under SECTION 11.8. Upon the replacement of any Affected Lender pursuant to this SECTION 2.20, the provisions of SECTION 9.2 shall continue to apply with respect to Loans which are then outstanding with respect to which the Affected Lender failed to fund its Pro Rata Share and which failure has not been cured. 2.21 COLLECTION ACCOUNT ARRANGEMENTS. (a) All collections of Receivables included in the Collateral and other proceeds of Collateral shall be deposited in (i) a deposit account with the Agent over which the Collateral Agent has dominion and control following a Collection Account Blockage Date or (b) a Collection Account with any other financial institution which is subject to a Collection Account Agreement or pursuant to another similar arrangement for the collection of such amounts established by the Borrower or SEI, as applicable, and the Collateral Agent, and all amounts in such accounts shall be transferred in accordance with the provisions of the respective Collection Account Agreements. The Borrower and SEI shall at all times maintain lock-box services agreements with the Collateral Agent or banks which are parties to Collection Account Agreements and to which lock-boxes Account Debtors with respect to the Borrower's or SEI's Receivables shall directly remit all payments on Receivables. Any of the foregoing collections received by the Borrower or SEI and not so deposited, shall be deemed to have been received by the Borrower or SEI, as applicable, as the Collateral Agent's trustee and, upon such entity's receipt thereof, the Borrower shall or shall cause SEI to immediately transfer all such amounts into a Collection Account in their original form. Such deposits in the Collection Accounts shall be remitted to the Collateral Agent, the Borrower or its Subsidiaries or as the Collateral Agent may direct, all in accordance with the provisions of the Collection Account Agreements. (b) Following the Collection Account Blockage Date and during the continuance of a Default giving rise thereto, (i) all payments received by the Collateral Agent, all collections of Receivables included in the Collateral received by the Collateral Agent, and all proceeds of other Collateral received by the Collateral Agent, whether through payment or otherwise, will be the sole property of the Collateral Agent for the benefit of the Holders of Secured Obligations and will be deemed received by the Collateral Agent for application to the Secured Obligations in accordance with the terms of the Collateral Sharing Agreement, and amounts received by the Agent pursuant to the terms of the Collateral Sharing Agreement for application to the Obligations will be deemed received by the Agent for application to the Obligations in accordance with the terms of this Agreement and the Collateral Sharing Agreement. (c) Notwithstanding anything herein or in the Security Agreement to the contrary, the Borrower shall have a period of 30 days following the date hereof to (i) enter into a Collection Account Agreement with Centennial Bank, 625 East Gibbs Avenue, Cottage 38 Grove, Oregon 97424 or transfer the collections and collection account arrangements with respect thereto from such bank to another which is party to a Collection Account Agreement. ARTICLE III: THE LETTER OF CREDIT FACILITY 3.1 OBLIGATION TO ISSUE LETTERS OF CREDIT. Subject to the terms and conditions of this Agreement and in reliance upon the representations, warranties and covenants of the Borrower herein set forth, each Issuing Bank hereby agrees to issue for the account of the Borrower through such Issuing Bank's branches as it and the Borrower may jointly agree, one or more Letters of Credit denominated in Dollars in accordance with this ARTICLE III, from time to time after the date hereof. 3.2 TYPES AND AMOUNTS OF LETTERS OF CREDIT. No Issuing Bank shall have any obligation to and no Issuing Bank shall: (i) issue any Letter of Credit if on the date of issuance, before or after giving effect to the Letter of Credit requested hereunder, (a) the Supplemental Credit Obligations at such time would exceed the Aggregate Supplemental Commitment; (b) the sum of (i) the Existing Obligations, (ii) the Supplemental Credit Obligations and (iii) the outstanding principal balance of the Senior Notes at such time would exceed the Borrowing Base at such time, (c) the sum of (i) the Existing Obligations, (ii) the Supplemental Credit Obligations and (iii) the outstanding principal balance of the Senior Notes at such time would exceed the Maximum Amount at such time, or (d) the aggregate outstanding amount of the L/C Obligations would exceed $5,000,000; or (ii) issue any Letter of Credit which has an expiration date later than the date which is the earlier of one (1) year after the date of issuance thereof or five (5) Business Days immediately preceding the Supplemental Loan Termination Date. 3.3 CONDITIONS WITH RESPECT TO LETTERS OF CREDIT. In addition to being subject to the satisfaction of the conditions contained in SECTIONS 5.1 and 5.2, the obligation of an Issuing Bank to issue any Letter of Credit is subject to the satisfaction in full of the following conditions: (i) the Borrower shall have delivered to the applicable Issuing Bank at such times and in such manner as such Issuing Bank may reasonably prescribe, a request for issuance of such Letter of Credit in substantially the form of EXHIBIT D hereto, duly executed applications for such Letter of Credit, and such other documents, instructions and agreements as may be required pursuant to the terms thereof, and the proposed Letter of Credit shall be reasonably satisfactory to such Issuing Bank as to form and content; and 39 (ii) as of the date of issuance no order, judgment or decree of any court, arbitrator or Governmental Authority shall purport by its terms to enjoin or restrain the applicable Issuing Bank from issuing such Letter of Credit and no law, rule or regulation applicable to such Issuing Bank and no request or directive (whether or not having the force of law) from a Governmental Authority with jurisdiction over such Issuing Bank shall prohibit or request that such Issuing Bank refrain from the issuance of Letters of Credit generally or the issuance of that Letter of Credit. 3.4 PROCEDURE FOR ISSUANCE OF LETTERS OF CREDIT. (a) Subject to the terms and conditions of this ARTICLE III and provided that the applicable conditions set forth in SECTIONS 5.1 and 5.2 hereof have been satisfied, the applicable Issuing Bank shall, on the requested date, issue a Letter of Credit on behalf of the Borrower in accordance with such Issuing Bank's usual and customary business practices and, in this connection, such Issuing Bank may assume that the applicable conditions set forth in SECTION 5.2 hereof have been satisfied unless it shall have received notice to the contrary from the Agent or a Lender or has knowledge that the applicable conditions have not been met. (b) The applicable Issuing Bank shall give the Agent written or telex notice, or telephonic notice confirmed promptly thereafter in writing, of the issuance of a Letter of Credit, PROVIDED, HOWEVER, that the failure to provide such notice shall not result in any liability on the part of such Issuing Bank. (c) No Issuing Bank shall extend or amend any Letter of Credit unless the requirements of this SECTION 3.4 are met as though a new Letter of Credit was being requested and issued. 3.5 PARTICIPATION IN LETTERS OF CREDIT. Immediately upon the issuance of each Letter of Credit hereunder, each Lender shall be deemed to have automatically, irrevocably and unconditionally purchased and received from the applicable Issuing Bank an undivided interest and participation in and to each such Letter of Credit, the obligations of the Borrower in respect thereof, and the liability of such Issuing Bank thereunder ( a "L/C INTEREST") in an amount equal to the amount available for drawing under such Letter of Credit multiplied by such Lender's Pro Rata Share. The applicable Issuing Bank shall give to each Lender notice in the event that the Borrower fails to reimburse the applicable Issuing Bank with respect to any L/C Draft or any other draw on a Letter of Credit pursuant to the provisions SECTION 3.6, and each Lender shall promptly and unconditionally pay to the Agent for the account of the applicable Issuing Bank, in immediately available funds, an amount equal to such Lender's Pro Rata Share of the amount of such payment or draw. The obligation of each Lender to reimburse the Issuing Banks under this SECTION 3.5 shall be unconditional, continuing, irrevocable and absolute. In the event that any Lender fails to make payment to the Agent of any amount due under this SECTION 3.5, the Agent shall be entitled to receive, retain and apply against such obligation the principal and interest otherwise payable to such Lender hereunder until the Agent receives such payment from such Lender or such obligation is otherwise fully satisfied; PROVIDED, HOWEVER, that nothing contained in this sentence shall relieve such Lender of its obligation to reimburse the applicable Issuing Bank for such amount in accordance with this SECTION 3.5. 40 3.6 REIMBURSEMENT OBLIGATION. The Borrower agrees unconditionally, irrevocably and absolutely to pay immediately to reimburse the applicable Issuing Bank for the amount of each drawing under or pursuant to a Letter of Credit or an L/C Draft related thereto (such obligation of the Borrower to reimburse the Agent for an advance made under a Letter of Credit or L/C Draft being hereinafter referred to as a "REIMBURSEMENT OBLIGATION" with respect to such Letter of Credit or L/C Draft), each such reimbursement to be made by the Borrower no later than the Business Day on which the applicable Issuing Bank makes payment of each such L/C Draft or, in the case of any other draw on a Letter of Credit, the date specified in the demand of such Issuing Bank. If the Borrower at any time fails to repay a Reimbursement Obligation pursuant to this SECTION 3.6, the Borrower shall be deemed to have elected to borrow Supplemental Loans from the Lenders, as of the date of the advance giving rise to the Reimbursement Obligation, equal in amount to the amount of the unpaid Reimbursement Obligation. Such Supplemental Loans shall be made as of the date of the payment giving rise to such Reimbursement Obligation, automatically, without notice and without any requirement to satisfy the conditions precedent otherwise applicable to a Supplemental Advance. The proceeds of such Supplemental Loans shall be used to repay such Reimbursement Obligation. If, for any reason, the Borrower fails to repay a Reimbursement Obligation on the day such Reimbursement Obligation arises and, for any reason, the Lenders are unable to make or have no obligation to make Supplemental Loans, then such Reimbursement Obligation shall bear interest from and after such day, until paid in full, at the Floating Rate applicable to Supplemental Loans. 3.7 LETTER OF CREDIT FEES. The Borrower agrees to pay: (i) monthly, in arrears, to the Agent for the ratable benefit of the Lenders, except as set forth in SECTION 9.2, a letter of credit fee at a rate per annum equal to one and three-quarters percent (1.75%) on the average daily outstanding face amount available for drawing under all Letters of Credit; (ii) monthly, in arrears, to the Agent for the sole account of each Issuing Bank, a letter of credit fronting fee at such percentage rate as may be agreed between the Borrower and each Issuing Bank on the average daily outstanding face amount available for drawing under all Letters of Credit issued by such Issuing Bank; and (iii) to the Agent for the benefit of each Issuing Bank, all customary fees and other issuance, amendment, document examination, negotiation and presentment expenses and related charges in connection with the issuance, amendment, presentation of L/C Drafts, and the like customarily charged by such Issuing Banks with respect to standby and commercial Letters of Credit, including, without limitation, standard commissions with respect to commercial Letters of Credit, payable at the time of invoice of such amounts. 3.8 ISSUING BANK REPORTING REQUIREMENTS. In addition to the notices required by SECTION 3.4(b), each Issuing Bank shall, no later than the tenth Business Day following the last day of each month, provide to the Agent, upon the Agent's request, schedules, in form and substance reasonably satisfactory to the Agent, showing the date of issue, account party, amount, expiration date and the reference number of each Letter of Credit issued by it outstanding at any time during 41 such month and the aggregate amount payable by the Borrower during such month. In addition, upon the request of the Agent, each Issuing Bank shall furnish to the Agent copies of any Letter of Credit and any application for or reimbursement agreement with respect to a Letter of Credit to which the Issuing Bank is party and such other documentation as may reasonably be requested by the Agent. Upon the request of any Lender, the Agent will provide to such Lender information concerning such Letters of Credit. 3.9 INDEMNIFICATION; EXONERATION. (A) In addition to amounts payable as elsewhere provided in this ARTICLE III, the Borrower hereby agrees to protect, indemnify, pay and save harmless the Agent, each Issuing Bank and each Lender from and against any and all liabilities and costs which the Agent, such Issuing Bank or such Lender may incur or be subject to as a consequence, direct or indirect, of (i) the issuance of any Letter of Credit other than, in the case of the applicable Issuing Bank, as a result of its Gross Negligence or willful misconduct, as determined by the final judgment of a court of competent jurisdiction, or (ii) the failure of the applicable Issuing Bank to honor a drawing under a Letter of Credit as a result of any act or omission, whether rightful or wrongful, of any present or future DE JURE or DE FACTO Governmental Authority (all such acts or omissions herein called "GOVERNMENTAL ACTS"). (B) As among the Borrower, the Lenders, the Agent and the Issuing Banks, the Borrower assumes all risks of the acts and omissions of, or misuse of such Letter of Credit by, the beneficiary of any Letters of Credit. In furtherance and not in limitation of the foregoing, subject to the provisions of the Letter of Credit applications and Letter of Credit reimbursement agreements executed by the Borrower at the time of request for any Letter of Credit, neither the Agent, any Issuing Bank nor any Lender shall be responsible (in the absence of Gross Negligence or willful misconduct in connection therewith, as determined by the final judgment of a court of competent jurisdiction): (i) for the form, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connection with the application for and issuance of the Letters of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason; (iii) for failure of the beneficiary of a Letter of Credit to comply duly with conditions required in order to draw upon such Letter of Credit; (iv) for errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex, or other similar form of teletransmission or otherwise; (v) for errors in interpretation of technical trade terms; (vi) for any loss or delay in the transmission or otherwise of any document required in order to make a drawing under any Letter of Credit or of the proceeds thereof; (vii) for the misapplication by the beneficiary of a Letter of Credit of the proceeds of any drawing under such Letter of Credit; and (viii) for any consequences arising from causes beyond the control of the Agent, the Issuing Banks and the Lenders, including, without limitation, any Governmental Acts. None of the above shall affect, impair, or prevent the vesting of any Issuing Bank's rights or powers under this SECTION 3.9. (C) In furtherance and extension and not in limitation of the specific provisions hereinabove set forth, any action taken or omitted by any Issuing Bank under or in connection 42 with the Letters of Credit or any related certificates shall not, in the absence of Gross Negligence or willful misconduct, as determined by the final judgment of a court of competent jurisdiction, put the applicable Issuing Bank, the Agent or any Lender under any resulting liability to the Borrower or relieve the Borrower of any of its obligations hereunder to any such Person. (D) Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower contained in this SECTION 3.9 shall survive the payment in full of principal and interest hereunder, the termination of the Letters of Credit and the termination of this Agreement. 3.10 CASH COLLATERAL. Notwithstanding anything to the contrary herein or in any application for a Letter of Credit, after the occurrence and during the continuance of a Default, the Borrower shall, upon the Agent's demand, deliver to the Agent for the benefit of the Lenders and the Issuing Banks, cash, or other collateral of a type satisfactory to the Required Lenders, having a value, as reasonably determined by such Lenders, equal to the aggregate outstanding L/C Obligations. In addition, if the Supplemental Credit Availability is at any time less than the amount of contingent L/C Obligations outstanding at any time, the Borrower shall deposit cash collateral with the Agent in an amount equal to the amount by which such L/C Obligations exceed such Supplemental Credit Availability. Any such collateral shall be held by the Agent in a separate account appropriately designated as a cash collateral account in relation to this Agreement and the Letters of Credit and retained by the Agent for the benefit of the Lenders and the Issuing Banks as collateral security for the Borrower's obligations in respect of this Agreement and each of the Letters of Credit and L/C Drafts. Such amounts shall be applied to reimburse the Issuing Banks for drawings or payments under or pursuant to Letters of Credit or L/C Drafts or if no such reimbursement is required, to payment of such of the other Secured Obligations as the Agent shall determine in accordance with the terms of the Collateral Sharing Agreement. If no Default shall be continuing, amounts remaining in any cash collateral account established pursuant to this SECTION 3.10 which are not to be applied to reimburse an Issuing Bank for amounts actually paid or to be paid by such Issuing Bank in respect of a Letter of Credit or L/C Draft, shall be returned to the Borrower (after deduction of the Agent's expenses incurred in connection with such cash collateral account). ARTICLE IV: CHANGE IN CIRCUMSTANCES 4.1 YIELD PROTECTION. If any law or any governmental or quasi- governmental rule, regulation, policy, guideline or directive (whether or not having the force of law) adopted after the date of this Agreement and having general applicability to all banks within the jurisdiction in which such Lender operates (excluding, for the avoidance of doubt, the effect of and phasing in of capital requirements or other regulations or guidelines passed prior to the date of this Agreement), or any interpretation or application thereof by any Governmental Authority charged with the interpretation or application thereof, or the compliance of any Lender therewith, (i) subjects any Lender or any applicable Lending Installation to any tax, duty, charge or withholding on or from payments due from the Borrower (excluding federal 43 taxation of the overall net income of any Lender or applicable Lending Installation), or changes the basis of taxation of payments to any Lender in respect of its Loans, its L/C Interests, the Letters of Credit or other amounts due it hereunder, or (ii) imposes or increases or deems applicable any reserve, assessment, insurance charge, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender or any applicable Lending Installation with respect to its Loans, L/C Interests or the Letters of Credit, or (iii) imposes any other condition the result of which is to increase the cost to any Lender or any applicable Lending Installation of making, funding or maintaining the Loans, the L/C Interests or the Letters of Credit or reduces any amount received by any Lender or any applicable Lending Installation in connection with Loans or Letters of Credit, or requires any Lender or any applicable Lending Installation to make any payment calculated by reference to the amount of Loans or L/C Interests held or interest received by it or by reference to the Letters of Credit, by an amount deemed material by such Lender; and the result of any of the foregoing is to increase the cost to that Lender of making, renewing or maintaining its Loans, L/C Interests or Letters of Credit or to reduce any amount received under this Agreement, then, within thirty (30) days after receipt by the Borrower of written demand by such Lender pursuant to SECTION 4.5, the Borrower shall, upon receipt of a written statement setting forth the basis for calculating such additional amounts, pay such Lender that portion of such increased expense incurred or reduction in an amount received which such Lender determines is attributable to making, funding and maintaining its Loans, L/C Interests, Letters of Credit and its Supplemental Loan Commitment. 4.2 CHANGES IN CAPITAL ADEQUACY REGULATIONS. If a Lender determines (i) the amount of capital required or expected to be maintained by such Lender, any Lending Installation of such Lender or any corporation controlling such Lender is increased as a result of a "Change" (as defined below), and (ii) such increase in capital will result in an increase in the cost to such Lender of maintaining its Loans, L/C Interests, the Letters of Credit or its obligation to make Loans hereunder, then, within 15 days after receipt by the Borrower of written demand by such Lender pursuant to SECTION 4.5, the Borrower shall pay such Lender the amount necessary to compensate for any shortfall in the rate of return on the portion of such increased capital which such Lender reasonably determines is attributable to this Agreement, its Loans, its L/C Interests, the Letters of Credit or its obligation to make Loans hereunder (after taking into account such Lender's policies as to capital adequacy). "CHANGE" means (i) any change after the date of this Agreement in the "Risk-Based Capital Guidelines" (as defined below) excluding, for the avoidance of doubt, the effect of any phasing in of such Risk-Based Capital Guidelines or any other capital requirements passed prior to the date hereof, 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 and having general applicability to all banks and financial institutions within the jurisdiction in which such Lender operates which affects the amount of capital required or expected to be maintained by any Lender or any Lending 44 Installation or any corporation controlling any Lender. "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. 4.3 [Intentionally Blank]. 4.4 [Intentionally Blank]. 4.5 LENDER STATEMENTS; SURVIVAL OF INDEMNITY. Each Lender requiring compensation pursuant to SECTION 2.15(E) or to this ARTICLE IV shall use its reasonable efforts to notify the Borrower and the Agent in writing of any Change, law, policy, rule, guideline or directive giving rise to such demand for compensation not later than ninety (90) days following the date upon which the responsible account officer of such Lender knows or should have known of such Change, law, policy, rule, guideline or directive. Any demand for compensation pursuant to this ARTICLE IV shall be in writing and shall state the amount due, if any, under SECTION 4.1 or 4.2 and shall set forth in reasonable detail the calculations upon which such Lender determined such amount. Such written demand shall be rebuttably presumed correct for all purposes. The obligations of the Borrower under SECTIONS 4.1 and 4.2 shall survive payment of the Obligations and termination of this Agreement. ARTICLE V: CONDITIONS PRECEDENT 5.1 INITIAL SUPPLEMENTAL ADVANCES AND LETTERS OF CREDIT. The Lenders shall not be required to make the initial Supplemental Loans or issue any Letters of Credit unless the Borrower has furnished to the Agent each of the following, with sufficient copies for the Lenders, all in form and substance satisfactory to the Agent and the Lenders: (1) Copies of the Articles of Incorporation of the Borrower, together with all amendments and a certificate of good standing, both certified by the appropriate governmental officer in its jurisdiction of incorporation; (2) Copies, certified by the Secretary or Assistant Secretary of the Borrower, of its By-Laws and of its Board of Directors' resolutions (and resolutions of other bodies, if any are deemed necessary by counsel for any Lender) authorizing the execution of the Loan Documents; (3) An incumbency certificate, executed by the Secretary or Assistant Secretary of the Borrower, which shall identify by name and title and bear the signature of the officers of the Borrower authorized to sign the Loan Documents and to make loans hereunder, 45 upon which certificate the Lenders shall be entitled to rely until informed of any change in writing by the Borrower; (4) A certificate, in form and substance satisfactory to the Agent, signed by the chief financial officer of the Borrower, stating that on Effective Date, after taking into account the waivers set forth herein, no Default or Unmatured Default has occurred and is continuing; (5) A written opinion of the Borrower's and SEI's counsel, addressed to the Agent and the Lenders, in form and substance reasonably satisfactory to the Agent and the Lenders (which shall cover, among other things, authority, legality, validity, binding effect and enforceability of the documents and perfection of the liens) together with such corporate resolutions, certificates and other documents as the Agent shall reasonably require; (6) Supplemental Notes payable to the order of each of the applicable Lenders; (7) The Waiver and Second Amendment to the Master Note Agreement, in form and substance reasonably satisfactory to the Agent and the Lenders; (8) Payment of all accrued interest and fees under the Original Credit Agreement as of the date hereof on the Existing Loans; (9) Payment of all fees payable to the Agent on behalf of the Lenders as of the Effective Date; (10) Reimbursement of all expenses incurred prior to the Effective Date payable by the Borrower to the Agent and the Lenders; (11) Fully executed copies of the Collateral Sharing Agreement on terms acceptable to the Agent and the Lenders; (12) Satisfactory evidence that the Collateral Agent holds a perfected, first priority lien in substantially all of the Collateral which may be perfected by filing a UCC financing statement, by possession, by recording the fee Mortgages or by obtaining a certificate of insurance and loss payable endorsement, subject to no other liens except for liens permitted under the Credit Agreement and Note Purchase Agreement. (13) Documentation pursuant to which the Master Factoring Agreement entered into on February 11, 1998 between Reservoir Capital Corporation and the Borrower is terminated, all "Assigned Accounts" are reassigned to the Borrower and all liens on any assets of the Borrower by Reservoir Capital Corporation are released (it being understood that the initial Supplemental Loans shall be used to repay amounts owing to Reservoir Capital Corporation). 46 (14) Evidence that Binks Sames Ltd. shall have further amended its Articles of Association in the manner contemplated by Section 4.1 of the Equitable Share Charge between Borrower and the Agent dated as of November 21, 1997. (15) A Borrowing Base Certificate for the week ended March 6, 1998. (16) The monthly financial statements of the Borrower and its consolidated Subsidiaries for the month ended January 31, 1998. (17) Such other documents as the Agent or any Lender or its counsel may have reasonably requested, including, without limitation all of the documents reflected on the List of Closing Documents attached as EXHIBIT G to this Agreement. 5.2 EACH SUPPLEMENTAL ADVANCE AND LETTER OF CREDIT. The Lenders shall not be required to make any Supplemental Advance or issue any Letter of Credit, unless on the applicable Borrowing Date, or in the case of a Letter of Credit, the date on which the Letter of Credit is to be issued, after taking into account the waivers set forth in ARTICLE XV hereof: (i) There exists no Default or Unmatured Default; and (ii) The representations and warranties contained in ARTICLE VI are true and correct as of such Borrowing Date except for changes in the Schedules to this Agreement reflecting transactions permitted by this Agreement. Each Borrowing Notice with respect to each such Supplemental Advance and the letter of credit application with respect to a Letter of Credit shall constitute a representation and warranty by the Borrower that the conditions contained in SECTIONS 5.2(i) and (ii) have been satisfied. Any Lender may require a duly completed officer's certificate in substantially the form of EXHIBIT H hereto and/or a duly completed compliance certificate in substantially the form of EXHIBIT I hereto as a condition to making a Supplemental Advance. ARTICLE VI: REPRESENTATIONS AND WARRANTIES In order to induce the Agent and the Lenders to enter into this Agreement and to make the Loans and the other financial accommodations to the Borrower and to issue the Letters of Credit described herein, the Borrower represents and warrants as follows to each Lender and the Agent as of the Closing Date, and thereafter on each date as required by SECTION 5.2: 6.1 ORGANIZATION; CORPORATE POWERS. The Borrower, SEI and each of their respective Material Subsidiaries (i) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (ii) is duly qualified to do business as a foreign corporation and is in good standing under the laws of each jurisdiction in which failure to be so qualified and in good standing could not reasonably be expected to have a Material Adverse Effect, and (iii) has all requisite corporate power and authority to own, operate and encumber its 47 property and to conduct its business as presently conducted and as proposed to be conducted other than any failure under CLAUSE (i) or (iii) the effect of which is not reasonably likely to impair in any material respect the conduct of the Borrower's business, or the business of the Borrower and its Subsidiaries taken as a whole or the ability of the Borrower's or its Subsidiaries' ability to perform their obligations under the Loan Documents. 6.2 AUTHORITY. (A) The Borrower and each of its Subsidiaries that is a party thereto has the requisite corporate power and authority to execute, deliver and perform each of the Loan Documents. (B) The execution, delivery and performance of each of the Loan Documents and the consummation of the transactions contemplated thereby, have been duly approved by the respective boards of directors and, if necessary, the shareholders of the Borrower and each of its Subsidiaries that is a party thereto, and such approvals have not been rescinded. No other corporate action or proceedings on the part of the Borrower or such Subsidiaries are necessary to consummate such transactions. (C) Each of the Loan Documents to which the Borrower or any of its Subsidiaries is a party has been duly executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms (except as enforceability may be limited by bankruptcy, insolvency, or similar laws affecting the enforcement of creditors' rights generally), and no unmatured default, default or breach of any covenant by any such party exists thereunder. 6.3 NO CONFLICT; GOVERNMENTAL CONSENTS. The execution, delivery and performance of each of the Loan Documents to which the Borrower or any of its Subsidiaries is a party do not and will not (i) conflict with the certificate or articles of incorporation or by-laws of the Borrower or any such Subsidiary, (ii) constitute a tortious interference with any Contractual Obligation of any Person or conflict with, result in a breach of or constitute (with or without notice or lapse of time or both) a default under any Requirement of Law (including, without limitation, any Environmental Property Transfer Act) or Contractual Obligation of the Borrower or any such Subsidiary, or require termination of any Contractual Obligation, except such interference, breach, default or termination which individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect, (iii) with respect to the Loan Documents, constitute a tortious interference with any Contractual Obligation of any Person or conflict with, result in a breach of or constitute (with or without notice or lapse of time or both) a default under any Requirement of Law (including, without limitation, any Environmental Property Transfer Act) or Contractual Obligation of the Borrower or any such Subsidiary, or require termination of any Contractual Obligation, except such interference, breach, default or termination which individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect, (iv) result in or require the creation or imposition of any Lien whatsoever upon any of the property or assets of the Borrower or any such Subsidiary, other than Liens permitted or created by the Loan Documents, or (v) require any approval of the Borrower's or any such Subsidiary's Board of Directors or shareholders except such as have been obtained. Except as set forth on SCHEDULE 6.3 48 to this Agreement, the execution, delivery and performance of each of the Transaction Documents to which the Borrower or any of its Subsidiaries is a party do not and will not require any registration with, consent or approval of, or notice to, or other action to, with or by any Governmental Authority, including under any Environmental Property Transfer Act, except filings, consents or notices which have been made, obtained or given, or which, if not made, obtained or given, individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect. 6.4 FINANCIAL STATEMENTS. (A) Attached as EXHIBIT B to the Disclosure Letter are the Borrower's consolidated unaudited financial statements for the Borrower's fiscal year ended November 30, 1997. Such historical financial statements were prepared in accordance with generally accepted accounting principles consistently applied and fairly present the financial condition of the Borrower and its Subsidiaries as of the dates thereof and the results of operations for the periods covered thereby. (B) The projections and assumptions expressed in the projections attached as EXHIBIT A to the Disclosure Letter were prepared in good faith and represent management's opinion based on the information available to the Borrower at the time so furnished. 6.5 NO MATERIAL ADVERSE CHANGE. Since the Closing Date, there has occurred no change in the business, properties, condition (financial or otherwise) or results of operations of the Borrower or the Borrower and its Subsidiaries taken as a whole or any other event which has had or could reasonably be expected to have a Material Adverse Effect. 6.6 TAXES. (A) TAX EXAMINATIONS. Except as described in SECTION 4 of the Disclosure Letter, all material deficiencies which have been asserted against the Borrower or any of the Borrower's Subsidiaries as a result of any federal, state, local or foreign tax examination for each taxable year in respect of which an examination has been conducted have been fully paid or finally settled or are being contested in good faith, and as of the Closing Date no issue has been raised by any taxing authority in any such examination which, by application of similar principles, reasonably can be expected to result in assertion by such taxing authority of a material deficiency for any other year not so examined which has not been reserved for in the Borrower's consolidated financial statements to the extent, if any, required by Agreement Accounting Principles. Except as permitted pursuant to SECTION 7.2(D), neither the Borrower nor any of the Borrower's Subsidiaries anticipates any material tax liability with respect to the years which have not been closed pursuant to applicable law. (B) PAYMENT OF TAXES. All tax returns and reports of the Borrower and its Subsidiaries required to be filed have been timely filed, and all material taxes, assessments, fees and other governmental charges thereupon and upon their respective property, assets, income and franchises which are shown in such returns or reports to be due and payable have been paid except those items which are being contested in good faith and have been reserved for in accordance with 49 Agreement Accounting Principles. The Borrower has no knowledge of any proposed tax assessment against the Borrower or any of its Subsidiaries that will have or could reasonably be expected to have a Material Adverse Effect. (C) For purposes of this SECTION 6.6, "material" means any noncompliance or basis for liability which could reasonably be likely to subject the Borrower or the Borrower's Subsidiaries to liability, individually or in the aggregate for the Borrower and its Subsidiaries in excess of $1,000,000. 6.7 LITIGATION; LOSS CONTINGENCIES AND VIOLATIONS. Except as set forth in SCHEDULE 6.7 to this Agreement, there is no action, suit, proceeding, arbitration or (to the Borrower's knowledge) investigation before or by any Governmental Authority or private arbitrator pending or, to the Borrower's knowledge, threatened against the Borrower or any of its Subsidiaries or any property of any of them which will have or could reasonably be expected to have a Material Adverse Effect. Except as set forth in SCHEDULE 6.7, there is no material loss contingency within the meaning of Agreement Accounting Principles which has not been reflected in the consolidated financial statements of the Borrower prepared and delivered pursuant to SECTION 6.4(A) or SECTION 7.1(A) for the fiscal period during which such material loss contingency was incurred. Neither the Borrower nor any of its Subsidiaries is (A) in violation of any applicable Requirements of Law which violation will have or could reasonably be expected to have a Material Adverse Effect, or (B) subject to or in default with respect to any final judgment, writ, injunction, restraining order or order of any nature, decree, rule or regulation of any court or Governmental Authority which will have or could reasonably be expected to have a Material Adverse Effect. 6.8 SUBSIDIARIES. SCHEDULE 6.8 to this Agreement (i) contains a description of the corporate structure of the Borrower, its Subsidiaries and any other Person in which the Borrower or any of its Subsidiaries holds an Equity Interest; and (ii) accurately sets forth (A) the correct legal name, the jurisdiction of incorporation and the jurisdictions in which each of the Borrower and the direct and indirect domestic Subsidiaries and Material Subsidiaries which are foreign Subsidiaries of the Borrower is qualified to transact business as a foreign corporation, (B) for every domestic Subsidiary and for each foreign Subsidiary which is a Material Subsidiary, the authorized, issued and outstanding shares of each class of Capital Stock of each of such Subsidiaries and the owners of such shares (both as of the Closing Date and on a fully-diluted basis), (C) for each foreign Subsidiary which is not a Material Subsidiary, the percentage of ownership by the Borrower of such Subsidiary's Capital Stock, and (D) a summary of the direct and indirect partnership, joint venture, or other Equity Interests, if any, of the Borrower and each Subsidiary of the Borrower in any Person that is not a corporation. The outstanding Capital Stock of the Borrower and each of the Borrower's Material Subsidiaries is duly authorized, validly issued, fully paid and nonassessable. 6.9 ERISA. Except as disclosed on SCHEDULE 6.9, no Benefit Plan has incurred any accumulated funding deficiency (as defined in SECTIONS 302(a)(2) of ERISA and 412(a) of the Code) whether or not waived. Neither the Borrower nor any member of the Controlled Group has incurred any liability to the PBGC which remains outstanding other than the payment of premiums, and there are no premium payments which have become due which are unpaid. 50 SCHEDULE B to the most recent annual report filed with the IRS with respect to each Benefit Plan is complete and accurate. Since the date of each such SCHEDULE B, there has been no material adverse change in the funding status or financial condition of the Benefit Plan relating to such SCHEDULE B. Neither the Borrower nor any member of the Controlled Group has (i) failed to make a required contribution or payment to a Multiemployer Plan or (ii) made a complete or partial withdrawal under SECTIONS 4203 or 4205 of ERISA from a Multiemployer Plan. Neither the Borrower nor any member of the Controlled Group has failed to make a required installment or any other required payment under Section 412 of the Code on or before the due date for such installment or other payment. Neither the Borrower nor any member of the Controlled Group is required to provide security to a Benefit Plan under SECTION 401(a)(29) of the Code due to a Plan amendment that results in an increase in current liability for the plan year. Except for benefits provided to a select group of management employees which in any event are not material, neither the Borrower nor any of its Subsidiaries maintains or contributes to any employee welfare benefit plan within the meaning of SECTION 3(1) of ERISA which provides benefits to employees after termination of employment other than as required by Section 601 of ERISA. Each Plan which is intended to be qualified under Section 401(a) of the Code as currently in effect is so qualified, and each trust related to any such Plan is exempt from federal income tax under Section 501(a) of the Code as currently in effect. The Borrower and all Subsidiaries are in compliance in all material respects with the responsibilities, obligations and duties imposed on them by ERISA and the Code with respect to all Plans. Neither the Borrower nor any of its Subsidiaries nor any fiduciary of any Plan has engaged in a nonexempt prohibited transaction described in SECTIONS 406 of ERISA or 4975 of the Code which could reasonably be expected to subject the Borrower to liability in excess of $1,000,000. Neither the Borrower nor any member of the Controlled Group has taken or failed to take any action which would constitute or result in a Termination Event, which action or inaction could reasonably be expected to subject the Borrower and its Subsidiaries to liability, individually or in the aggregate, in excess of $1,000,000. Neither the Borrower nor any Subsidiary is subject to any liability under SECTIONS 4063, 4064, 4069, 4204 or 4212(c) of ERISA and no other member of the Controlled Group is subject to any liability under SECTIONS 4063, 4064, 4069, 4204 or 4212(c) of ERISA which could reasonably be expected to subject the Borrower and its Subsidiaries to liability, individually or in the aggregate, in excess of $1,000,000. Neither the Borrower nor any of its Subsidiaries has, by reason of the transactions contemplated hereby, any obligation to make any payment to any employee pursuant to any Plan or existing contract or arrangement. 6.10 ACCURACY OF INFORMATION. The information, exhibits and reports (other than those marked "Draft" "Subject to Review" or words of similar intent or meaning) furnished by or on behalf of the Borrower and any of its Subsidiaries to the Agent or to any Lender in connection with the negotiation of, or compliance with, the Loan Documents, the representations and warranties of the Borrower and its Subsidiaries contained in the Loan Documents, and all certificates and documents delivered to the Agent and the Lenders pursuant to the terms thereof, taken as a whole, do not contain as of the date furnished any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained herein or therein, in light of the circumstances under which they were made, not materially misleading. 51 6.11 SECURITIES ACTIVITIES. Neither the Borrower nor any of its Subsidiaries is engaged in the business of extending credit for the purpose of purchasing or carrying Margin Stock. 6.12 MATERIAL AGREEMENTS. Neither the Borrower nor any Subsidiary is a party to any Contractual Obligation or subject to any charter or other corporate restriction which individually or in the aggregate will have or could reasonably be expected to have a Material Adverse Effect. Except as set forth in SCHEDULE 6.7, has received notice or has knowledge that (i) it is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any Contractual Obligation applicable to it, or (ii) any condition exists which, with the giving of notice or the lapse of time or both, would constitute a default with respect to any such Contractual Obligation, in each case, except where such default or defaults, if any, individually or in the aggregate will not have or could not reasonably be expected to have a Material Adverse Effect. 6.13 COMPLIANCE WITH LAWS. The Borrower and its Subsidiaries are in compliance with all Requirements of Law applicable to them and their respective businesses, in each case where the failure to so comply individually or in the aggregate could reasonably be expected to have a Material Adverse Effect. 6.14 ASSETS AND PROPERTIES. The Borrower and each of its Subsidiaries has good and marketable title to substantially all of its assets and properties (tangible and intangible, real or personal) owned by it or a valid leasehold interest in substantially all of its leased assets (except insofar as marketability may be limited by any laws or regulations of any Governmental Authority affecting such assets), and all such assets and property are free and clear of all Liens, except Liens permitted under SECTION 7.3(C). Substantially all of the assets and properties owned by, leased to or used by the Borrower and/or each such Subsidiary of the Borrower are in adequate operating condition and repair, ordinary wear and tear excepted. Neither this Agreement nor any other Transaction Document, nor any transaction contemplated under any such agreement, will affect any right, title or interest of the Borrower or such Subsidiary in and to any of such assets in a manner that would have or could reasonably be expected to have a Material Adverse Effect. 6.15 STATUTORY INDEBTEDNESS RESTRICTIONS. Neither the Borrower nor any of its Subsidiaries is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act, or the Investment Company Act of 1940, or any other federal or state statute or regulation which limits its ability to incur indebtedness or its ability to consummate the transactions contemplated hereby. 6.16 INSURANCE. SCHEDULE 6.16 to this Agreement accurately sets forth as of the date hereof all insurance policies and programs currently in effect with respect to the respective properties and assets and business of the Borrower and SEI, specifying for each such policy and program, (i) the amount thereof, (ii) the risks insured against thereby, (iii) the name of the insurer and each insured party thereunder, (iv) the policy or other identification number thereof, (v) the expiration date thereof, (vi) the annual premium with respect thereto and (vii) describes any reserves, relating to any self-insurance program that is in effect. Such insurance policies and 52 programs and the other policies and programs maintained with respect to the Borrower's other Subsidiaries reflect coverage that is reasonably consistent with prudent industry practice. 6.17 LABOR MATTERS. As of the Closing Date, no attempt to organize the employees of the Borrower, and no labor disputes, strikes or walkouts affecting the operations of the Borrower or any of its Subsidiaries, is pending, or, to the Borrower's knowledge, threatened, planned or contemplated. 6.18 ENVIRONMENTAL MATTERS. (A) Except as disclosed on SCHEDULE 6.18 to this Agreement and except to the limited extent set forth in SECTION 3 of the Disclosure Letter: (i) the operations of the Borrower and its Subsidiaries comply in all material respects with Environmental, Health or Safety Requirements of Law; (ii) the Borrower and its Subsidiaries have all permits, licenses or other authorizations required under Environmental, Health or Safety Requirements of Law and are in material compliance with such permits; (iii) neither the Borrower, any of its Subsidiaries nor any of their respective present property or operations, or, to the best of, the Borrower's or any of its Subsidiaries' knowledge, any of their respective past property or operations, are subject to or the subject of, any investigation known to the Borrower or any of its Subsidiaries, any judicial or administrative proceeding, order, judgment, decree, settlement or other agreement respecting: (A) any material violation of Environmental, Health or Safety Requirements of Law; (B) any material remedial action; or (C) any material claims or liabilities arising from the Release or threatened Release of a Contaminant into the environment; (iv) there is not now, nor to the best of the Borrower's or any of its Subsidiaries' knowledge has there ever been on or in the property of the Borrower or any of its Subsidiaries, in material violation of Environmental, Health or Safety Requirements of Law, any landfill, waste pile, underground storage tanks, aboveground storage tanks, surface impoundment or hazardous waste storage facility of any kind, any polychlorinated biphenyls (PCBs) used in hydraulic oils, electric transformers or other equipment, or any asbestos containing material which in any such instance or all such instances in the aggregate is in material violation of Environmental, Health or Safety Requirements of Law; and (v) neither the Borrower nor any of its Subsidiaries has any material liability in connection with any Release or threatened Release of a Contaminant into the environment. (B) For purposes of this SECTION 6.18 "material" means any noncompliance or basis for liability which could reasonably be likely to subject the Borrower or the Borrower's Subsidiaries to liability, individually or in the aggregate, in excess of $5,000,000. 53 6.19 SOLVENCY. After giving effect to (i) the Loans to be made on the Closing Date or such other date as Loans requested hereunder are made, (ii) the other transactions contemplated by this Agreement and (iii) the payment and accrual of all transaction costs with respect to the foregoing, the Borrower and its Subsidiaries taken as a whole are Solvent. ARTICLE VII : COVENANTS The Borrower covenants and agrees that so long as any Commitments are outstanding and thereafter until payment in full of all of the Obligations (other than contingent indemnity obligations) and termination of all Letters of Credit, unless the Required Lenders shall otherwise give prior written consent: 7.1 REPORTING. The Borrower shall: (A) FINANCIAL REPORTING. Furnish to the Lenders: (i) MONTHLY REPORTS. As soon as practicable and in any event within thirty (30) days after the end of each month (other than the months ending February 28, May 31, August 31 and November 30), the consolidated and consolidating balance sheet of the Borrower and its Subsidiaries as at the end of such month and the related consolidated and consolidating statements of income and cash flows of the Borrower and its Subsidiaries for such fiscal month and for the period from the beginning of the then current fiscal year to the end of such fiscal month, certified by the chief financial officer of the Borrower on behalf of the Borrower as fairly presenting the consolidated and consolidating financial position of the Borrower and its Subsidiaries as at the dates indicated and the results of their operations and cash flows for the periods indicated in accordance with Agreement Accounting Principles, subject to normal year-end adjustments. (ii) QUARTERLY REPORTS. As soon as practicable, and in any event within forty-five (45) days after the end of each of the first three fiscal quarters in each fiscal year, the consolidated and consolidating balance sheet of the Borrower and its Subsidiaries as at the end of such period and the related consolidated and consolidating statements of income and cash flows of the Borrower and its Subsidiaries for such fiscal quarter and for the period from the beginning of the then current fiscal year to the end of such fiscal quarter, certified by the chief financial officer of the Borrower on behalf of the Borrower as fairly presenting the consolidated and consolidating financial position of the Borrower and its Subsidiaries as at the dates indicated and the results of their operations and cash flows for the periods indicated in accordance with Agreement Accounting Principles, subject to normal year-end adjustments. (iii) ANNUAL REPORTS. As soon as practicable, and in any event within (i) five (5) Business Days of the date hereof with respect to the fiscal year ended November 30, 1997 and (ii) for each other fiscal year, within ninety (90) days after the end of each such fiscal year, (a) the consolidated balance sheet of the Borrower and its Subsidiaries as at the end 54 end of such fiscal year and the related consolidated statements of income, stockholders' equity and cash flows of the Borrower and its Subsidiaries for such fiscal year, and in comparative form the corresponding figures for the previous fiscal year along with consolidating schedules in form and substance sufficient to calculate the financial covenants set forth in SECTION 7.4 and (b) an audit report on the items listed in CLAUSE (a) hereof (other than the consolidating schedules) of independent certified public accountants of recognized national standing, which audit report shall be unqualified and shall state that such financial statements fairly present the consolidated financial position of the Borrower and its Subsidiaries as at the dates indicated and the results of their operations and cash flows for the periods indicated in conformity with Agreement Accounting Principles and that the examination by such accountants in connection with such consolidated financial statements has been made in accordance with generally accepted auditing standards. The deliveries made pursuant to this CLAUSE (iii) shall be accompanied by (x) any management letter identifying material weaknesses in internal accounting controls prepared by the above-referenced accountants and available at the time of delivery of the financial statements delivered under this CLAUSE (iii), (y) a certificate of such accountants that, in the course of their examination necessary for their certification of the foregoing, they have obtained no knowledge of any Default or Unmatured Default, or if, in the opinion of such accountants, any Default or Unmatured Default shall exist, stating the nature and status thereof; PROVIDED, notwithstanding the foregoing, the certificate required under clause (y) with respect to the fiscal year ended November 30, 1997 shall be required to be made within five (5) Business Days of the date hereof. In the event any management letter identifying material weaknesses in internal accounting controls prepared by the above- referenced accountants is delivered to the Borrower at any other time, the Borrower shall promptly, but in any event within ten (10) Business Days of the delivery thereof to the Borrower, deliver a copy thereof to the Agent and the Lenders. (iv) OFFICER'S CERTIFICATE. Together with each delivery of any financial statement (a) pursuant to CLAUSES (i), (ii) and (iii) of this SECTION 7.1(A), an Officer's Certificate of the Borrower, substantially in the form of EXHIBIT H attached hereto and made a part hereof, stating that no Default or Unmatured Default exists, or if any Default or Unmatured Default exists, stating the nature and status thereof and (b) a compliance certificate, substantially in the form of EXHIBIT I attached hereto and made a part hereof, signed by the Borrower's Chief Financial Officer or Treasurer, setting forth calculations for the period then ended for SECTION 2.5(B), if applicable, which demonstrate compliance with the provisions of SECTION 7.3(B) and SECTION 7.4. (v) BUDGETS; BUSINESS PLANS; FINANCIAL PROJECTIONS. As soon as practicable and in any event not later than thirty (30) days after the beginning of each fiscal year commencing with the fiscal year beginning December 1, 1998, a copy of the plan and forecast (including a projected balance sheet, income statement and a statement of cash flow) of the Borrower and its Subsidiaries for the upcoming fiscal year. (B) NOTICE OF DEFAULT. Promptly upon any of the chief executive officer, chief operating officer, chief financial officer, treasurer or controller of the Borrower obtaining knowledge (i) of 55 any condition or event which constitutes a Default or Unmatured Default, or becoming aware that any Lender or Agent has given any written notice with respect to a claimed Default or Unmatured Default under this Agreement, or (ii) that any Person has given any written notice to the Borrower or any Subsidiary of the Borrower or taken any other action with respect to a claimed default or event or condition of the type referred to in SECTION 8.1(E), deliver to the Agent and the Lenders an Officer's Certificate specifying (a) the nature and period of existence of any such claimed default, Default, Unmatured Default, condition or event, (b) the notice given or action taken by such Person in connection therewith, and (c) what action the Borrower has taken, is taking and proposes to take with respect thereto. (C) LAWSUITS. (i) Promptly upon the Borrower obtaining knowledge of the institution of, or written threat of, any action, suit, proceeding, governmental investigation or arbitration against or affecting the Borrower or any of its Subsidiaries or any property of the Borrower or any of its Subsidiaries not previously disclosed pursuant to SECTION 6.7, which action, suit, proceeding, governmental investigation or arbitration exposes, or in the case of multiple actions, suits, proceedings, governmental investigations or arbitrations arising out of the same general allegations or circumstances which expose, in the Borrower's reasonable judgment, the Borrower or any of its Subsidiaries to liability in an amount aggregating $1,000,000 or more (exclusive of claims covered by insurance policies of the Borrower or any of its Subsidiaries unless the insurers of such claims have disclaimed coverage or reserved the right to disclaim coverage on such claims and exclusive of claims covered by the indemnity of a financially responsible indemnitor in favor of the Borrower or any of its Subsidiaries unless the indemnitor has disclaimed or reserved the right to disclaim coverage thereof), give written notice thereof to the Agent and the Lenders and provide such other information as may be reasonably available to enable each Lender and the Agent and its counsel to evaluate such matters; (ii) promptly upon obtaining knowledge thereof, advise the Agent and the Lenders of any material developments in any such actions, suits, proceedings, governmental investigations, arbitrations or threatened actions covered by a report delivered pursuant to clause (i) (provided such disclosure would not jeopardize any attorney-client privilege) and (iii) in addition to the requirements set forth in CLAUSE (i) and CLAUSE (ii) of this SECTION 7.1(C), upon request of the Agent or the Required Lenders, promptly give written notice of the status of any action, suit, proceeding, governmental investigation or arbitration covered by a report delivered pursuant to CLAUSE (i) above and provide such other information as may be reasonably available to it that would not jeopardize any attorney-client privilege by disclosure to the Lenders to enable each Lender and the Agent and its counsel to evaluate such matters. (D) ERISA NOTICES. Deliver or cause to be delivered to the Agent and the Lenders, at the Borrower's expense, the following information and notices as soon as reasonably possible, and in any event: (i) (a) within fifteen (15) Business Days after the Borrower obtains knowledge that a Termination Event has occurred, a written statement of the chief financial officer of the Borrower describing such Termination Event and the action, if any, which the Borrower has taken, is taking or proposes to take with respect thereto, and when known, any action taken or threatened by the IRS, DOL or PBGC with respect thereto and (b) 56 within fifteen (15) Business Days after any member of the Controlled Group obtains knowledge that a Termination Event has occurred which could reasonably be expected to subject the Borrower to liability in excess of $1,000,000, a written statement of the chief financial officer of the Borrower describing such Termination Event and the action, if any, which the member of the Controlled Group has taken, is taking or proposes to take with respect thereto, and when known, any action taken or threatened by the IRS, DOL or PBGC with respect thereto; (ii) within fifteen (15) Business Days after the Borrower or any of its Subsidiaries obtains knowledge that a prohibited transaction (defined in SECTIONS 406 of ERISA and SECTION 4975 of the Code) has occurred, a statement of the chief financial officer of the Borrower describing such transaction and the action which the Borrower or such Subsidiary has taken, is taking or proposes to take with respect thereto; (iii) within fifteen (15) Business Days after the material increase in the benefits of any existing Plan or the establishment of any new Benefit Plan or the commencement of, or obligation to commence, contributions to any Benefit Plan or Multiemployer Plan to which the Borrower or any member of the Controlled Group was not previously contributing, notification of such increase, establishment, commencement or obligation to commence and the amount of such contributions; (iv) within fifteen (15) Business Days after the Borrower or any of its Subsidiaries receives notice of any unfavorable determination letter from the IRS regarding the qualification of a Plan under SECTION 401(a) of the Code, copies of each such letter; (v) within fifteen (15) Business Days after the establishment of any foreign employee benefit plan or the commencement of, or obligation to commence, contributions to any foreign employee benefit plan to which the Borrower or any Subsidiary was not previously contributing, notification of such establishment, commencement or obligation to commence and the amount of such contributions; (vi) within fifteen (15) Business Days of request of any Lender, copies of each annual report (form 5500 series), including SCHEDULE B thereto, filed with respect to each Benefit Plan; (vii) within fifteen (15) Business Days of request of any Lender, each actuarial report for any Benefit Plan or Multiemployer Plan and each annual report for any Multiemployer Plan, copies of each such report; (viii) within fifteen (15) Business Days after the filing thereof with the IRS, a copy of each funding waiver request filed with respect to any Benefit Plan and all communications received by the Borrower or a member of the Controlled Group with respect to such request; 57 (ix) within fifteen (15) Business Days after receipt by the Borrower or any member of the Controlled Group of the PBGC's intention to terminate a Benefit Plan or to have a trustee appointed to administer a Benefit Plan, copies of each such notice; (x) within fifteen (15) Business Days after receipt by the Borrower or any member of the Controlled Group of a notice from a Multiemployer Plan regarding the imposition of withdrawal liability, copies of each such notice; (xi) within fifteen (15) Business Days after the Borrower or any member of the Controlled Group fails to make a required installment or any other required payment under SECTION 412 of the Code on or before the due date for such installment or payment, a notification of such failure; and (xii) within fifteen (15) Business Days after the Borrower or any member of the Controlled Group knows or has reason to know that (a) a Multiemployer Plan has been terminated, (b) the administrator or plan sponsor of a Multiemployer Plan intends to terminate a Multiemployer Plan, or (c) the PBGC has instituted or will institute proceedings under SECTION 4042 of ERISA to terminate a Multiemployer Plan. (E) LABOR MATTERS. Notify the Agent and the Lenders in writing, promptly upon the Borrower's learning thereof, of (i) any material labor dispute to which the Borrower or any of its Material Subsidiaries may become a party, including, without limitation, any strikes, lockouts or other disputes relating to such Persons' plants and other facilities and (ii) any Worker Adjustment and Retraining Notification Act liability incurred with respect to the closing of any plant or other facility of the Borrower or any of its Material Subsidiaries. (F) OTHER INDEBTEDNESS. Deliver to the Agent (i) a copy of each regular report, notice or communication regarding potential or actual defaults (including any accompanying officer's certificate) delivered by or on behalf of the Borrower or any of its Subsidiaries to the holders of funded Indebtedness which has an outstanding principal balance of $5,000,000 or more pursuant to the terms of the agreements governing such Indebtedness, such delivery to be made at the same time and by the same means as such notice or other communication is delivered to such holders, and (ii) a copy of each notice received by the Borrower or any of its Subsidiaries from the holders of funded Indebtedness pursuant to the terms of such Indebtedness, such delivery to be made promptly after such notice or other communication is received by the Borrower or Subsidiary, as applicable. (G) OTHER REPORTS. Deliver or cause to be delivered to the Agent and the Lenders copies of all financial statements, reports and notices, if any, sent or made available generally by the Borrower to its securities holders or filed with the Commission by the Borrower, all press releases made available generally by the Borrower or any of the Borrower's Subsidiaries to the public concerning material developments in the business of the Borrower or any such Subsidiary and all notifications received from the Commission by the Borrower or its Subsidiaries pursuant to the Securities Exchange Act of 1934 and the rules promulgated thereunder. 58 (H) ENVIRONMENTAL NOTICES. As soon as possible and in any event within ten (10) days after receipt by the Borrower, deliver to the Agent and the Lenders a copy of (i) any notice or claim to the effect that the Borrower or any of its Subsidiaries is or may be liable to any Person as a result of the Release by the Borrower, any of its Subsidiaries, or any other Person of any Contaminant into the environment, and (ii) any notice alleging any violation of any Environmental, Health or Safety Requirements of Law by the Borrower or any of its Subsidiaries if, in either case, such notice or claim relates to an event which could reasonably be expected to subject the Borrower and its Subsidiaries to liability individually or in the aggregate in excess of $1,000,000. (I) BORROWING BASE CERTIFICATE. As soon as practicable, and in any event within three (3) Business Days after the close of each calendar week, the Borrower shall provide the Agent and the Lenders with a Borrowing Base Certificate, together with such supporting documents as the Agent reasonably deems desirable, all certified as being true and correct by the chief financial officer or treasurer of the Borrower. (J) OTHER INFORMATION. Other than in connection with the Sale Initiative which shall be governed exclusively by the provisions of SECTION 7.5 below, promptly upon receiving a request therefor from the Agent, prepare and deliver to the Agent and the Lenders such other information with respect to the Borrower, any of its Subsidiaries, or the Collateral, including, without limitation, schedules identifying and describing the Collateral and any dispositions thereof or any Asset Sale or Financing (and the use of the Net Cash Proceeds thereof), as from time to time may be reasonably requested by the Agent. 7.2 AFFIRMATIVE COVENANTS. (A) CORPORATE EXISTENCE, ETC. Except as permitted pursuant to SECTION 7.3(I), the Borrower shall, and shall cause each of its Subsidiaries to, at all times maintain its corporate existence and preserve and keep, or cause to be preserved and kept, in full force and effect its rights and franchises material to its businesses; PROVIDED HOWEVER, that nothing in this SECTION 7.2(A) shall prevent the Borrower from discontinuing the operation and corporate existence of, and liquidating its Subsidiaries in Italy and Mexico. (B) CORPORATE POWERS; CONDUCT OF BUSINESS. The Borrower shall, and shall cause each of its Subsidiaries to, qualify and remain qualified to do business in each jurisdiction in which the nature of its business requires it to be so qualified and where the failure to be so qualified will have or could reasonably be expected to have a Material Adverse Effect. The Borrower will, and will cause each Subsidiary to, carry on and conduct its business in substantially the same manner and in substantially the same fields of enterprise as it is presently conducted; PROVIDED HOWEVER, that nothing in this SECTION 7.2(B) shall prevent the Borrower from discontinuing the operation and corporate existence of, and liquidating its Subsidiaries in Italy and Mexico. (C) COMPLIANCE WITH LAWS, ETC. The Borrower shall, and shall cause its Subsidiaries to, (a) comply with all Requirements of Law and all restrictive covenants affecting such Person or the business, properties, assets or operations of such Person unless failure to comply could not reasonably be expected to have a Material Adverse Effect and (b) obtain as needed all permits 59 necessary for its operations and maintain such permits in good standing unless failure to obtain such permits could not reasonably be expected to have a Material Adverse Effect. (D) PAYMENT OF TAXES AND CLAIMS; TAX CONSOLIDATION. The Borrower shall pay, and cause each of its Subsidiaries to pay, (i) all taxes, assessments and other governmental charges imposed upon it or on any of its properties or assets or in respect of any of its franchises, business, income or property before any penalty or interest accrues thereon, and (ii) all material claims (including, without limitation, claims for labor, services, materials and supplies, but excluding claims in connection with the Disclosed Disputes which shall be governed by the terms of the Disclosure Letter) for sums which have become due and payable and which by law have or may become a Lien (other than a Lien permitted by SECTION 7.3(C)) upon any of the Borrower's or such Subsidiary's property or assets, prior to the time when any penalty or fine shall be incurred with respect thereto; PROVIDED, HOWEVER, that no such taxes, assessments and governmental charges referred to in CLAUSE (i) above or claims referred to in CLAUSE (ii) above (and interest, penalties or fines relating thereto) need be paid if being contested in good faith by appropriate proceedings diligently instituted and conducted and if such reserve or other appropriate provision, if any, as shall be required in conformity with Agreement Accounting Principles shall have been made therefor. (E) INSURANCE. The Borrower shall maintain for itself and its Subsidiaries, or shall cause each of its Subsidiaries to maintain in full force and effect, the insurance policies and programs required by SECTION 6.16 of this Agreement as reflect coverage that is reasonably consistent with prudent industry practice. (F) INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS. The Borrower shall permit and cause each of the Borrower's Subsidiaries to permit, any authorized representative(s) designated by either the Agent or any Lender to visit and inspect any of the properties of the Borrower or any of its Subsidiaries, to examine, audit, check and make copies of their respective financial and accounting records, books, journals, orders, receipts and any correspondence and other data relating to their respective businesses or the transactions contemplated hereby (including, without limitation, in connection with environmental compliance, hazard or liability), and to discuss their affairs, finances and accounts with their officers and upon prior written notice to Borrower, independent certified public accountants, all upon reasonable notice (provided no prior notice shall be required if the Agent or any of the Lenders has a good faith reason to believe that the books and records of the Borrower or its Subsidiaries are not being maintained in accordance with the requirements of this Agreement) and at such reasonable times during normal business hours, as often as may be reasonably requested; PROVIDED, HOWEVER, the terms of this CLAUSE (F) shall not be applicable to information regarding the Sale Initiative, which shall be governed exclusively by the provisions of SECTION 7.5. The Borrower shall keep and maintain, and cause each of the Borrower's Subsidiaries to keep and maintain, in all material respects, proper books of record and account in which entries in conformity with Agreement Accounting Principles shall be made of all dealings and transactions in relation to their respective businesses and activities. If a Default has occurred and is continuing, the Borrower, upon the Agent's request, shall turn over copies of any such records to the Agent or its representatives and, upon 60 any Lender's request, the Agent shall turn over copies of any such records to such Lender or its representatives. (G) ERISA COMPLIANCE. The Borrower shall, and shall cause each of the Borrower's Subsidiaries to, establish, maintain and operate all Plans to comply in all material respects with the provisions of ERISA, the Code, all other applicable laws, and the regulations and interpretations thereunder and the respective requirements of the governing documents for such Plans. (H) MAINTENANCE OF PROPERTY. The Borrower shall cause all property used or useful in the conduct of its business or the business of any Subsidiary to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and shall cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Borrower may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; PROVIDED, HOWEVER, that nothing in this SECTION 7.2(H) shall prevent the Borrower from discontinuing the operation or maintenance of any of such property if such discontinuance is, in the judgment of the Borrower, desirable in the conduct of its business or the business of any Subsidiary and not disadvantageous in any material respect to the Agent or the Lenders. (I) ENVIRONMENTAL COMPLIANCE. Except as set forth on SCHEDULE 6.18 the Borrower and its Subsidiaries shall comply with all Environmental, Health or Safety Requirements of Law, except where noncompliance will not have or is not reasonably likely to subject the Borrower or any of its Subsidiaries to liability, individually or in the aggregate, in excess of $5,000,000. (J) USE OF PROCEEDS. The Borrower shall use the proceeds of the Supplemental Loans and Letters of Credit to (i) repay indebtedness to Reservoir Capital Corporation, (ii) for the ordinary course working capital and other ordinary course business needs of the Borrower and SEI, (iii) for Capital Expenditures to the extent permitted under this Agreement; (iv) for the Borrower's and SEI's ordinary course spot F/X needs and (v) for the payment of Dispute Resolution Costs in an aggregate amount for all Disclosed Disputes not to exceed the amount specified in SECTION 1(a) of the Disclosure Letter. The Borrower will not, nor will it permit any Subsidiary to, use any of the proceeds of the Loans to purchase or carry any Margin Stock or to consummate any Acquisition. (K) INSURANCE MATTERS (i) INSURANCE AND CONDEMNATION PROCEEDS. The Borrower directs (and shall cause SEI to direct) all insurers under policies of property damage, boiler and machinery and business interruption insurance and payors of any condemnation claim or award relating to its property to pay all proceeds payable under such policies or with respect to such claim or award for any loss with respect to the Collateral directly to the Collateral Agent, for the benefit of the Collateral Agent and the Holders of the Secured Obligations. Each such policy shall contain a long-form loss-payable endorsement naming the Collateral Agent as loss payee, which endorsement shall be in form and substance reasonably acceptable to the Agent. The Collateral Agent shall, upon receipt of such proceeds apply such proceeds in accordance with the terms of the Collateral 61 Sharing Agreement and upon receipt from the Collateral Agent the Agent shall apply any amounts received by it as though it was a Designated Prepayment in the order indicated in SECTION 2.5(B) provided the amount thereof shall not reduce the Aggregate Supplemental Loan Commitment; PROVIDED, that the Collateral Agent shall pay to the Borrower or SEI, as applicable, such portion of the proceeds (up to an aggregate amount not to exceed $500,000) as may be reasonably necessary to restore or repair the affected business or property which may be used by the Borrower or SEI for such purposes; PROVIDED FURTHER, however, that (i) the Collateral Agent shall not pay over such proceeds if a Default has occurred and (ii) if, after receiving any of such proceeds but prior to restoring or repairing such affected property or business a Default shall occur, the Borrower shall pay over (or cause SEI to pay over) such proceeds to the Collateral Agent for application as though a Designated Prepayment was received. (ii) INSURANCE REPORTING. Presently the Borrower and SEI maintain their property insurance programs on a contract year commencing July of each year. Not later than August of each year (or such other date that is one-month after the beginning of the applicable insurance contract year) commencing August 1998, deliver to the Agent and the Lenders (i) a report in form and substance reasonably satisfactory to the Agent and the Lenders outlining all material property, business interruption and liability insurance coverage maintained as of the date of such report by the Borrower and its Subsidiaries and the duration of such coverage and (ii) a certificate of the chief financial officer or treasurer of the Borrower that all premiums with respect to such coverage have been paid when due. (iii) The Borrower shall maintain for itself and its Subsidiaries, or shall cause each of its Subsidiaries to maintain in full force and effect the insurance policies and programs listed on SCHEDULE 6.16 to this Agreement or substantially similar policies and programs or other policies and programs as reflect coverage that is reasonably consistent with prudent industry practice. The Borrower shall deliver to the Agent endorsements (y) to all "All Risk" physical damage insurance policies on all of the tangible real and personal property and assets constituting part of the Collateral and business interruption insurance policies naming the Collateral Agent loss payee, and (z) to all general liability and other liability policies naming the Collateral Agent an additional insured. In the event the Borrower or any of its Subsidiaries, at any time or times hereafter shall fail to obtain or maintain any of the policies or insurance required herein or to pay any premium in whole or in part relating thereto, then the Agent, without waiving or releasing any obligations or resulting Default hereunder, may at any time or times thereafter (but shall be under no obligation to do so) obtain and maintain such policies of insurance and pay such premiums and take any other action with respect thereto which the Agent deems advisable. All sums so disbursed by the Agent shall constitute part of the Secured Obligations, payable as provided in this Agreement and the Collateral Sharing Agreement. (L) POST-CLOSING EFFORTS. The Borrower and SEI shall use their reasonable best efforts during the period from the date hereof through the date that is 30 days hereafter to attempt to obtain the landlord consents to the leasehold Mortgages and the landlord waivers, bailee waivers and consignee waivers for the Borrower's and SEI's collateral locations from the third parties which have been sent such agreements prior to the date hereof. 62 7.3 NEGATIVE COVENANTS. (A) INDEBTEDNESS. Neither the Borrower nor any of its Subsidiaries shall directly or indirectly create, incur, assume or otherwise become or remain directly or indirectly liable with respect to any Indebtedness, except: (i) the Obligations; (ii) Indebtedness evidenced by the Senior Notes; (iii) Permitted Existing Indebtedness and Permitted Refinancing Indebtedness; (iv) Indebtedness in respect of obligations secured by Customary Permitted Liens; (v) Indebtedness constituting Contingent Obligations permitted by SECTION 7.3(E); (vi) Indebtedness arising from intercompany loans (a) from any Subsidiary to the Borrower or any wholly-owned Subsidiary and (b) intercompany loans from the Borrower to its Subsidiaries permitted under SECTION 7.3(S); (vii) Indebtedness in respect of Hedging Obligations permitted under SECTION 7.3(Q); (viii) secured or unsecured purchase money Indebtedness (including Capitalized Leases) incurred by the Borrower or any of its Subsidiaries after the Original Closing Date to finance the acquisition of fixed assets, if (1) at the time of such incurrence, no Default or Unmatured Default has occurred and is continuing or would result from such incurrence, (2) such Indebtedness has a scheduled maturity and is not due on demand, (3) such Indebtedness does not exceed the lower of the fair market value or the cost of the applicable fixed assets on the date acquired, (4) such Indebtedness does not exceed (a) $500,000 in the aggregate outstanding at any time for the Borrower and SEI and (b) $3,500,000 in the aggregate outstanding at any time for the Borrower's Subsidiaries other than SEI, and (5) any Lien securing such Indebtedness is permitted under SECTION 7.3(C) (such Indebtedness being referred to herein as "PERMITTED PURCHASE MONEY INDEBTEDNESS"); (ix) Indebtedness with respect to surety, appeal and performance bonds obtained by the Borrower or any of its Subsidiaries in the ordinary course of business; (x) (a) Indebtedness in respect of judgments or awards other than in connection with the Disclosed Disputes which have been in force for less than the applicable appeal period so long as execution is not levied thereunder (or in respect of which the Borrower or its Subsidiary, as applicable, shall at the time in good faith be prosecuting an appeal or proceedings for review and in respect of which a stay of execution shall have been obtained pending such appeal or review) and which does not, in the aggregate, exceed 63 $1,000,000 and (b) Indebtedness in respect of judgments or awards in connection with the Disclosed Disputes to the extent permitted in SECTION 1(b) of the Disclosure Letter; and (xi) Indebtedness incurred by the Borrower's foreign Subsidiaries in addition to that referred to elsewhere in this SECTION 7.3(A) in an outstanding principal amount not to exceed $5,000,000 in the aggregate at any time for the Borrowers' foreign Subsidiaries. (B) SALES OF ASSETS. Neither the Borrower nor any of its Subsidiaries shall sell, assign, transfer, lease, convey or otherwise dispose of any property, whether now owned or hereafter acquired, or any income or profits therefrom, or enter into any agreement to do so, except: (i) sales of Inventory and other assets in the ordinary course of business; (ii) the disposition in the ordinary course of business of equipment that is obsolete, excess or no longer useful in the Borrower's or its Subsidiaries' business; (iii) the sale of Binks de Mexico, S.A. de C.V.'s Mexico City facility; (iv) the disposition of assets of Binks International (Italia) S.r.l. in connection with its liquidation; (v) the sale of the real property of the Borrower's Belgian Subsidiary; (vi) sales of Inventory which consists of obsolete Inventory, excess Inventory or Inventory relating to discontinued lines of business; (vii) sales, assignments or other transfers of Receivables by one or more of the Borrower's foreign Subsidiaries in the ordinary course of its business consistent with past practice; (viii) sales, assignments, transfers, leases, conveyances or other dispositions of other assets (other than Receivables by Borrower or SEI or the stock or substantially all of the assets of Sames S.A.) to Persons which are not Affiliates of the Borrower if the value of such assets (which, for these purposes, shall mean the greater of such assets' book value at the time of sale or other disposition or the proceeds realized by the Borrower or its Subsidiaries from the sale or disposition of such assets), when added to the value of all other assets sold or disposed of by the Company and its Subsidiaries under this CLAUSE (viii) (or clause (v) of this Section under the Original Credit Agreement) after the Original Date, does not exceed ten percent (10%) of the Borrower's Consolidated Tangible Assets determined at the end of the fiscal year immediately preceding that in which such transaction is proposed to be entered into; and (ix) sales of a portion of the Borrower's business or assets and/or one or more of the Borrower's Subsidiaries or their assets consented to by the Required Creditors in connection with the Sale Initiative pursuant to the terms of SECTION 7.5(g) and permitted under the terms of the Note Purchase Agreement. 64 (C) LIENS. Neither the Borrower nor any of its Subsidiaries shall directly or indirectly create, incur, assume or permit to exist any Lien on or with respect to any of their respective property or assets except: (i) Liens in favor of the Collateral Agent to secure the Secured Obligations; (ii) Permitted Existing Liens; (iii) Customary Permitted Liens; (iv) purchase money Liens (including the interest of a lessor under a Capitalized Lease and Liens to which any property is subject at the time of the Borrower's acquisition thereof) securing Permitted Purchase Money Indebtedness; PROVIDED that such Liens shall not apply to any property of the Borrower or its Subsidiaries other than that purchased or subject to such Capitalized Lease; (v) mortgages, pledges or security interests on the properties or assets of a Subsidiary in favor of the Borrower or in favor of any other Subsidiary; (vi) Liens created pursuant to applications or reimbursement arrangements pertaining to Letters of Credit which encumber only the goods, or documents of title covering the goods, which are sold or shipped in the transaction for which such Letters of Credit were issued; (vii) any attachment or judgment Liens (a) with respect to a judgments other than in connection with the Disclosed Disputes not exceeding $1,000,000 in the aggregate, unless the judgment(s) it secures shall not, within 30 days after the entry thereof, have been discharged or execution thereof stayed pending appeal, or shall not have been discharged within 30 days after the expiration of any such stay and (b) with respect to attachment or judgment Liens in connection with the Disclosed Disputes in an amount not to exceed in the aggregate the amount set forth in SECTION 1(b)of the Disclosure Letter provided such judgments are stayed or not being enforced and any judgment or attachment Lien in connection therewith is subordinate to the Lien of the Collateral Agent and is stay and not being enforced; and (viii) other Liens securing Indebtedness not to exceed $500,000 in the aggregate. In addition, neither the Borrower nor any of its Subsidiaries shall become a party to any agreement, note, indenture or other instrument, or take any other action, which would prohibit the creation of a Lien on any of its properties or other assets with an aggregate fair market value of $1,000,000 or more in favor of the Collateral Agent for the benefit of itself and the Holders of Secured Obligations, as collateral for the Obligations; PROVIDED that any agreement, note, indenture or other instrument in connection with Permitted Purchase Money Indebtedness (including Capitalized Leases) may prohibit the creation of a Lien in favor of the Collateral Agent 65 for the benefit of itself and the Holders of Secured Obligations on the items of property obtained with the proceeds of such Permitted Purchase Money Indebtedness. (D) INVESTMENTS. Except to the extent permitted pursuant to PARAGRAPH (G) below, neither the Borrower nor any of its Subsidiaries shall directly or indirectly make or own any Investment except: (i) Investments in Cash Equivalents; (ii) Permitted Existing Investments in an amount not greater than the amount thereof on the Original Closing Date; (iii) Investments in trade receivables or received in connection with the bankruptcy or reorganization of suppliers and customers or in settlement of delinquent obligations of, and other disputes with, customers and suppliers arising in the ordinary course of business; (iv) Investments consisting of deposit accounts maintained by the Borrower; (v) Investments consisting of non-cash consideration from a sale, assignment, transfer, lease, conveyance or other disposition of property permitted by SECTION 7.3(B); (vi) Investments consisting of (a) intercompany loans from any Subsidiary to the Borrower or any other Subsidiary permitted by SECTION 7.3(A)(vi) and (b) intercompany loans from the Borrower to its Subsidiaries permitted under SECTION 7.3(S); (vii) Investments resulting from the conversion by the Borrower of intercompany loans made by it to its Belgian Subsidiary and previously reserved for on the Borrower's financial statements to equity in an aggregate amount not to exceed $2,000,000; (viii) Investments resulting from leasehold improvements not to exceed an aggregate amount of $1,000,000; (ix) Investments resulting from advances to employees made in the ordinary course of business which are (a) outstanding as of the date hereof and shown on SCHEDULE 1.1.3 (but not any relending of such amounts once repaid) and (b) additional advances, not to exceed an aggregate of $100,000, made from time to time after the date hereof; and (x) Investments in addition to those referred to elsewhere in this SECTION 7.3(D) in an amount not to exceed $1,000,000 in the aggregate at any time outstanding; PROVIDED, HOWEVER, that the Investments described in CLAUSES (vi)(b), (vii), (ix) and (x) above shall not be permitted to be made at a time when either a Default or an Unmatured Default shall have occurred and be continuing or would result therefrom. 66 (E) CONTINGENT OBLIGATIONS. Neither the Borrower nor any of its Subsidiaries shall directly or indirectly create or become or be liable with respect to any Contingent Obligation, except: (i) recourse obligations resulting from endorsement of negotiable instruments for collection in the ordinary course of business; (ii) Permitted Existing Contingent Obligations; (iii) obligations, warranties, and indemnities, not relating to Indebtedness of any Person, which have been or are undertaken or made in the ordinary course of business and, except for product warranties extended to Subsidiaries or Affiliates of the Borrower in the ordinary course of business and consistent with warranties given to non-Affiliated parties, not for the benefit of or in favor of an Affiliate of the Borrower or such Subsidiary; (iv) additional Contingent Obligations which do not exceed $1,000,000 in the aggregate at any time; (v) Contingent Obligations with respect to surety, appeal and performance bonds obtained by the Borrower or any Subsidiary in the ordinary course of business; (vi) Contingent Obligations of Borrower in respect of any Subsidiary; and (vii) contingent obligations arising from any guaranty executed by a Subsidiary of the indebtedness evidenced by the Senior Notes if such Subsidiary has also executed a Guaranty in connection with the Obligations and provided the obligations under such guaranty shall be governed by the terms of the Collateral Sharing Agreement. (F) RESTRICTED PAYMENTS. Neither the Borrower nor any of its Subsidiaries shall declare or make any Restricted Payment, except: (i) Restricted Payments made in connection with the defeasance, redemption or repurchase of any Indebtedness with the Net Cash Proceeds of Permitted Refinancing Indebtedness; (ii) mandatory payments of interest, principal or premium, if any, due on the Senior Notes in accordance with repayment provisions in effect with respect to such Indebtedness as of the Closing Date; (iii) Restricted Payments made in connection with the Disclosed Disputes in an amount which when aggregated with all other Dispute Resolution Costs paid do not, in the aggregate, exceed the amount set forth in Section 1(a) of the Disclosure Letter provided no Default or Unmatured Default has occurred and is continuing at the date of declaration or payment thereof or would result therefrom; (iv) Restricted Payments of any Subsidiary of the Borrower to the Borrower or to another Subsidiary of the Borrower; and (v) Restricted Payments with respect to Indebtedness of any foreign Subsidiary of the Borrower consisting of regularly scheduled payments and mandatory prepayments. (G) CONDUCT OF BUSINESS; SUBSIDIARIES. Neither the Borrower nor any of its Subsidiaries shall engage in any business other than the businesses engaged in by the Borrower on the date hereof and any business or activities which are substantially similar, related or incidental thereto. Except as permitted pursuant to SECTION 7.3(D)(viii), the Borrower shall not create, acquire or 67 capitalize any Subsidiary after the date hereof. The Borrower shall not and shall not permit any Subsidiaries to enter into or make any Acquisitions. (H) TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES. Neither the Borrower nor any of its Subsidiaries shall directly or indirectly enter into or permit to exist any transaction (including, without limitation, the purchase, sale, lease or exchange of any property or the rendering of any service) with any holder or holders of any of the Equity Interests of the Borrower holding in excess of 5.0% of the fully-diluted aggregate amount of Equity Interests outstanding, or with any Affiliate of the Borrower which is not its Subsidiary, on terms that are less favorable to the Borrower or any of its Subsidiaries, as applicable, than those that might be obtained in an arm's length transaction at the time from Persons who are not such a holder or Affiliate, except for Restricted Payments permitted by SECTION 7.3(F) and Investments permitted by SECTION 7.3(D). (I) RESTRICTION ON FUNDAMENTAL CHANGES. Except as set forth in SECTION 4 of the Disclosure Letter and except as permitted pursuant to a transaction approved by the Required Creditors under SECTION 7.5(g), neither the Borrower nor any of its Subsidiaries shall enter into any merger or consolidation, or liquidate, wind-up or dissolve (or suffer any liquidation or dissolution), or convey, lease, sell, transfer or otherwise dispose of, in one transaction or series of transactions, all or substantially all of the Borrower's or any such Subsidiary's business or property, whether now or hereafter acquired, except (i) transactions permitted under SECTIONS 7.3(B) or 7.3(G), (ii) mergers, consolidations, or amalgamations of a Subsidiary of the Borrower with and into the Borrower (with the Borrower as the surviving corporation) or with another Subsidiary of the Borrower, (iii) any liquidation of any Subsidiary of the Borrower into the Borrower or another Subsidiary of the Borrower and (iv) the liquidation of Binks International (Italia) S.r.l. (J) SALES AND LEASEBACKS. Neither the Borrower nor any of its Subsidiaries shall become liable, directly, by assumption or by Contingent Obligation, with respect to any lease, whether an operating lease or a Capitalized Lease, of any property (whether real or personal or mixed) (i) which it or one of its Subsidiaries sold or transferred or is to sell or transfer to any other Person, or (ii) which it or one of its Subsidiaries intends to use for substantially the same purposes as any other property which has been or is to be sold or transferred by it or one of its Subsidiaries to any other Person in connection with such lease, unless in either case the sale involved is not prohibited under SECTION 7.3(B) and the lease involved is not prohibited under SECTION 7.3(A). (K) MARGIN REGULATIONS. Neither the Borrower nor any of its Subsidiaries, shall use all or any portion of the proceeds of any credit extended under this Agreement to purchase or carry Margin Stock. (L) ERISA. The Borrower shall not (i) engage, or permit any of its Subsidiaries to engage, in any prohibited transaction described in SECTIONS 406 of ERISA or 4975 of the Code for which a statutory 68 or class exemption is not available or a private exemption has not been previously obtained from the DOL; (ii) permit to exist any accumulated funding deficiency (as defined in SECTIONS 302 of ERISA and 412 of the Code), with respect to any Benefit Plan, whether or not waived; (iii) fail, or permit any Controlled Group member to fail, to pay timely required contributions or annual installments due with respect to any waived funding deficiency to any Benefit Plan; (iv) terminate, or permit any Controlled Group member to terminate, any Benefit Plan which would result in any liability of the Borrower or any Controlled Group member under Title IV of ERISA which liability could reasonably be expected to have a Material Adverse Effect; (v) fail to make any contribution or payment to any Multiemployer Plan which the Borrower or any Controlled Group member may be required to make under any agreement relating to such Multiemployer Plan, or any law pertaining thereto; (vi) fail, or permit any Controlled Group member to fail, to pay any required installment or any other payment required under SECTION 412 of the Code on or before the due date for such installment or other payment; or (vii) amend, or permit any Controlled Group member to amend, a Plan resulting in an increase in current liability for the plan year such that the Borrower or any Controlled Group member is required to provide security to such Plan under SECTION 401(a)(29) of the Code. (M) CORPORATE DOCUMENTS. Neither the Borrower nor any of its Material Subsidiaries shall amend, modify or otherwise change any of the terms or provisions in any of their respective constituent documents as in effect on the date hereof in any manner adverse to the interests of the Lenders, without the prior written consent of the Required Creditors, which consent shall not be unreasonably withheld or delayed. (N) OTHER INDEBTEDNESS. The Borrower shall not amend, supplement or otherwise modify the terms of the Senior Notes or the Master Note Agreement in any way that would be materially less advantageous to the Borrower or materially adverse to the Lenders, including, without limitation, with respect to amount, maturity, amortization, interest rate, premiums, fees, covenants, events of default, remedies and dividend provisions, except for the Waiver and Second Amendment to the Master Note Agreement substantially in the form of EXHIBIT K to be entered into as of the Closing Date. (O) FISCAL YEAR. The Borrower shall not change its fiscal year for accounting or tax purposes from a period consisting of the 12-month period ending on the last day of November of each year. 69 (P) SUBSIDIARY COVENANTS. The Borrower will not, and will not permit any Subsidiary to, create or otherwise cause to become effective any material consensual encumbrance or material restriction of any kind on the ability of any Subsidiary to pay dividends or make any other distribution on its stock, or make any other Restricted Payment, pay any Indebtedness or other Obligation owed to the Borrower or any other Subsidiary, make loans or advances or other Investments in the Borrower or any other Subsidiary, or sell, transfer or otherwise convey any of its property to the Borrower or any other Subsidiary; PROVIDED nothing herein shall restrict the ability of any foreign Subsidiary to capitalize retained earnings in the ordinary course of business if required in connection with the incurrence of Indebtedness provided the maximum amount of retained earnings capitalized from and after the Original Closing Date shall not exceed $7,500,000 in the aggregate for all of the Borrower's foreign Subsidiaries.. (Q) HEDGING OBLIGATIONS. The Borrower shall not and shall not permit any of its Subsidiaries to enter into any interest rate, commodity or foreign currency exchange, swap, collar, cap or similar agreements evidencing Hedging Obligations, other than interest rate, foreign currency or commodity exchange, swap, collar, cap or similar agreements entered into by the Borrower or its Subsidiaries pursuant to which the Borrower or such Subsidiary has hedged its actual interest rate, foreign currency or commodity exposure. Such permitted hedging agreements entered into by the Borrower and its Subsidiaries and any Lender or any affiliate of any Lender are sometimes referred to herein as "HEDGING AGREEMENTS." In the event a Lender or any of its Affiliates elects to enter into any Hedging Agreement with the Borrower or any of its Subsidiaries, the obligations of the Borrower and such Subsidiaries with respect to such Hedging Agreement shall be Secured Obligations secured by the Collateral. (R) CHANGE OF DEPOSIT ACCOUNTS. The Borrower shall not, and shall not permit SEI to, establish or maintain any deposit account with any bank or other financial institution other than (i) the Agent and its Affiliates, (ii) those which have entered into a Collection Account Agreement in form and substance acceptable to the Agent, (iii) for the first 30 days following the date hereof, the account maintained with Centennial Bank, 625 East Gibbs Avenue, Cottage Grove, Oregon 97424, and (iv) other disbursement accounts maintained by the Borrower or SEI PROVIDED the maximum amount of any individual account shall not exceed [$100,000] and the maximum amount of all such accounts shall not exceed [$300,000]. (S) INTERCOMPANY LOANS FROM THE BORROWER TO ITS SUBSIDIARIES. The Borrower shall not and shall not permit SEI to make any loans to or Investments in any of its Subsidiaries other than (i) loans by the Borrower to SEI or by SEI to the Borrower; (ii) intercompany loans by the Borrower or SEI to any other Subsidiary of the Borrower in the amount outstanding as of the date hereof and set forth on SCHEDULE 6.3(S). Other than the loans outstanding on the date hereof from the Borrower to its Belgian Subsidiary, all loans by the Borrower to its Subsidiaries or by SEI to the Borrower or any other Subsidiary shall be evidenced by promissory notes pledged to the Collateral Agent pursuant to the terms of the Security Agreement executed by the Borrower which provide that (i) a Default under this Agreement shall constitute a default under such promissory note entitling the Borrower to accelerate the payment thereof and (ii) if any acceleration of the Obligations under this Agreement shall occur, the obligations under such 70 promissory note shall immediately become due and payable without any election or action on the part of the Borrower or SEI, as applicable. 7.4 FINANCIAL COVENANTS. The Borrower shall comply with the following: (A) DEFINED TERMS FOR FINANCIAL COVENANTS. The following terms used in this Agreement shall have the following meanings (such meanings to be applicable, except to the extent otherwise indicated in a definition of a particular term, both to the singular and the plural forms of the terms defined): "CONSOLIDATED NET WORTH" means, at a particular date, for any Person, (a) all amounts which would be included under shareholders' equity for such Person and its consolidated Subsidiaries, calculated without giving effect to any foreign currency translation adjustments, PLUS (b) [the sum of (i)] the liabilities recognized relating to the Dispute Resolution Costs to the extent permitted under SECTION 1 of the Disclosure Letter but only to the extent such amounts exceed the projected amounts therefor contained in the projections attached as EXHIBIT A to the Disclosure Letter, and (ii) Restructuring Expenses incurred during the period from December 1, 1997 through September 30, 1999 in a maximum amount not to exceed $7,750,000 to the extent such amount exceeds $6,420,000 and to the extent deducted in computing Net Income, in each case determined in accordance with Agreement Accounting Principles "EBITDA" means, for any period, on a consolidated basis for the Borrower and its Subsidiaries, the sum of the amounts for such period, WITHOUT DUPLICATION, of (i) Net Income, PLUS (ii) Interest Expense, PLUS (iii) charges against income for foreign, federal, state and local taxes to the extent deducted in computing Net Income, PLUS (iv) depreciation expense to the extent deducted in computing Net Income, PLUS (v) amortization expense, including, without limitation, amortization of goodwill and other intangible assets to the extent deducted in computing Net Income, PLUS (vi) other non-cash charges classified as long-term deferrals in accordance with Agreement Accounting Principles to the extent deducted in computing Net Income, PLUS (vii) other extraordinary non-cash charges to the extent deducted in computing Net Income MINUS (viii) extraordinary non-cash gains to the extent included in computing Net Income, PLUS (ix) Restructuring Expenses incurred during the period from December 1, 1997 through September 30, 1999 in a maximum amount not to exceed $7,750,000 to the extent deducted in computing Net Income, PLUS (x) the non-cash charges relating to the Dispute Resolution Costs, to the extent permitted under the terms of SECTION 1 of the Disclosure Letter and to the extent deducted in computing Net Income. "INTEREST EXPENSE" means, for any period, the total interest expense of the Borrower and its consolidated Subsidiaries, whether paid or accrued (including the interest component of Capitalized Leases, commitment and letter of credit fees), but excluding interest expense not payable in cash (including amortization of discount), all as determined in conformity with Agreement Accounting Principles. 71 "NET INCOME" means, for any period, the net earnings (or loss) after taxes of the Borrower and its Subsidiaries on a consolidated basis for such period taken as a single accounting period determined in conformity with Agreement Accounting Principles. "RESTRUCTURING EXPENSES" means the expenses of the types and in the amounts not to exceed those set forth in EXHIBIT E to the Disclosure Letter. (B) MINIMUM CUMULATIVE EBITDA. Borrower shall maintain EBITDA, as determined as of the last day of each fiscal quarter of the Borrower set forth below for the cumulative period beginning December 1, 1997 and ending on such date, of at least the amount set forth below opposite the date in which such quarter ends: Applicable Period Minimum EBITDA ------------------------------------------------------------------------------ December 1, 1997 through February 28, 1998 ($1,500,000) ------------------------------------------------------------------------------ December 1, 1997 through May 31, 1998 $0 ------------------------------------------------------------------------------ December 1, 1997 through August 31, 1998 $2,000,000 ------------------------------------------------------------------------------ December 1, 1997 through November 31, 1998 $8,500,000 ------------------------------------------------------------------------------ December 1, 1997 through February 28, 1999 $9,000,000 ------------------------------------------------------------------------------ December 1, 1997 through May 31, 1999 $11,000,000 ------------------------------------------------------------------------------ December 1, 1997 through August 31, 1999 $14,500,000 (C) MINIMUM BORROWER CONSOLIDATED NET WORTH. The Borrower shall not permit the Consolidated Net Worth of the Borrower and its consolidated Subsidiaries at any time during any of the applicable months set forth below to be less than the amount set forth opposite such month below: ------------------------------------------------------------------------------ Applicable Month Minimum Consolidated Net Worth ------------------------------------------------------------------------------ February 1998 $27,100,000 ------------------------------------------------------------------------------ March 1998 $25,600,000 ------------------------------------------------------------------------------ April 1998 $23,000,000 ------------------------------------------------------------------------------ May 1998 $21,800,000 ------------------------------------------------------------------------------ June 1998 $21,300,000 ------------------------------------------------------------------------------ July 1998 $21,100,000 ------------------------------------------------------------------------------ 72 ------------------------------------------------------------------------------ Applicable Month Minimum Consolidated Net Worth ------------------------------------------------------------------------------ August 1998 $21,300,000 ------------------------------------------------------------------------------ September 1998 $20,975,000 ------------------------------------------------------------------------------ October 1998 $21,930,000 ------------------------------------------------------------------------------ November 1998 $23,750,000 ------------------------------------------------------------------------------ December 1998 $22,800,000 ------------------------------------------------------------------------------ January 1999 $22,600,000 ------------------------------------------------------------------------------ February 1999 $22,500,000 ------------------------------------------------------------------------------ March 1999 $22,300,000 ------------------------------------------------------------------------------ April 1999 $22,800,000 ------------------------------------------------------------------------------ May 1999 $23,500,000 ------------------------------------------------------------------------------ June 1999 $23,850,000 ------------------------------------------------------------------------------ July 1999 $24,500,000 ------------------------------------------------------------------------------ August 1999 $25,500,000 ------------------------------------------------------------------------------ September 1999 $26,900,000 ------------------------------------------------------------------------------ (D) MINIMUM SAMES S.A. NET WORTH. The Borrower shall not permit the Consolidated Net Worth of Sames S.A. and its consolidated Subsidiaries at any time during any of the applicable period set forth below to be less than the amount set forth opposite such period below: ------------------------------------------------------------------------------ Applicable Months Minimum Consolidated Net Worth ------------------------------------------------------------------------------ February 1, 1998 through November 30, 1998 $12,750,000 ------------------------------------------------------------------------------ December 1, 1998 and thereafter $14,150,000 ------------------------------------------------------------------------------ (E) CAPITAL EXPENDITURES. The Borrower will not, nor will it permit SEI to, expend, or be committed to expend, for Capital Expenditures at any time from the date hereof through the Existing Loan Termination Date on a cumulative basis in excess of $1,000,000. 7.5 SALE INITIATIVE. The Borrower has prior to the Effective Date engaged William Blair & Co., L.L.P. ("BLAIR") to pursue a sale of the Borrower and its Subsidiaries (the "SALE ------------------------------------------------------------------------------ 73 INITIATIVE"). A true and accurate copy of the engagement letter between the Borrower and Blair is attached as EXHIBIT C to the Disclosure Letter. In connection therewith: (a) The Borrower shall at all times hereafter maintain the Blair engagement (or an engagement with another reputable investment bank reasonably acceptable to the Required Creditors (in which event all references herein to Blair shall be to such replacement investment bank)) as an active engagement to pursue a sale of the Borrower and its Subsidiaries. (b) The Borrower and Blair shall, prior to April 6, 1998, prepare a customary offering memorandum (a copy of which shall be promptly provided to the Lenders and the Agent on or prior to such date) and a list of potential buyers (to be provided to the Borrower only) to be contacted in connection with the Sale Initiative. (c) Subject to the fiduciary duties of the Board of Directors of the Borrower, the Borrower and Blair shall conduct negotiations with potential buyers and bidders selected for definitive purchase agreements and closing to occur in an expedited manner. (d) The Borrower and Blair shall provide periodic reporting to the Agent and the Lenders on a frequency and in a form and scope mutually acceptable to the Borrower, Blair, the Lenders and the Agent setting forth the efforts Since the last periodic report to accomplish the Sale Initiative. Without limiting the foregoing, the Borrower and Blair shall be required to promptly advise the Agent, the Lenders and the Noteholder of any material delay from the time line attached as EXHIBIT D to the Disclosure Letter and an explanation of the reasons for such delay. Notwithstanding any of the foregoing, neither the Borrower nor Blair shall be required to disclose the identities of any potential purchasers until the Board of Directors of the Borrower shall have approved execution of a letter of intent or understanding or a definitive purchase agreement with such potential purchaser. Without otherwise limiting the provisions of SECTION 13.4, Confidential Information received by the Agent and the Lenders in connection herewith shall be governed by the confidentiality terms set forth in SECTION 13.4 below. (e) On or prior to November 30, 1998, (i) the Board of Directors of the Borrower shall have approved a sale or series of sale transactions in connection with the Sale Initiative, the aggregate net cash proceeds of which sale or series of sale transactions shall be sufficient to repay all of the Secured Obligations (calculated with respect to the Senior Notes at the estimated redemption price) in full and (ii) shall have delivered to the Agent and the Lenders a copy of the binding letter of intent, commitment, purchase agreement or similar document or agreement with respect to such transaction or series of transactions. (f) Borrower and its Subsidiaries and their respective Board of Directors and officers shall at all times fully cooperate with the process identified by Blair to accomplish the Sale Initiative in an effort to consummate the Sale Initiative in an expeditious manner and on a basis consistent with the fiduciary duties of the Board of Directors of the Borrower. (g) Upon request by the Borrower in connection with the Sale Initiative, the Required Creditors may consent (which consent shall not be unreasonably withheld or delayed) to allow the 74 Borrower to enter into one or more transactions involving the sale, transfer or other disposition of a Subsidiary of the Borrower, or a business line of the Borrower or to make some other material asset disposition or transaction in connection with the Sale Initiative which is not expressly permitted under CLAUSES (i) through (viii) of SECTION 7.3(B); PROVIDED that (i) each of the Lenders have been provided, sufficiently in advance of such transaction in order to make a reasonably informed decision in respect thereof, with such information regarding the transaction and the impact thereof on the Borrower and the Sale Initiative as shall be reasonably requested by the Lenders in connection therewith, (ii) the Net Cash Proceeds thereof are applied to the repayment of the Secured Obligations in accordance with SECTION 2.5. Any of the Lenders will have the right to require, as a condition to its consent to such transaction, that the Borrower obtain from Blair a fairness opinion reasonably acceptable to the Required Lenders with respect to such transaction evidencing the fairness of such transaction to the Borrower's shareholders, a copy of which shall be provided to each of the Lenders. In addition, it is expressly understood and agreed that any Lender may withhold its consent to any such transaction if (i) any portion of the consideration (other than assumption of liabilities (other than the Secured Obligations which may not be assumed)) for such transaction is non-cash or (ii) the transaction involves the Borrower or a Subsidiary on the one hand and an Affiliate of the Borrower or a Subsidiary on the other. ARTICLE VIII: DEFAULTS 8.1 DEFAULTS. Each of the following occurrences shall constitute a Default under this Agreement: (A) FAILURE TO MAKE PAYMENTS WHEN DUE. The Borrower shall (i) fail to pay when due any Reimbursement Obligation or any of the Obligations consisting of principal with respect to the Loans or (ii) shall fail to pay within five (5) Business Days of the date when due any of the other Obligations under this Agreement or the other Loan Documents. (B) BREACH OF CERTAIN COVENANTS. The Borrower shall fail duly and punctually to perform or observe any agreement, covenant or obligation binding on the Borrower under: (i) SECTIONS 7.2(F), SECTION 7.2(J), 7.2(K)(i), or 7.2(K)(iii) and such failure shall continue unremedied for ten (10) Business Days; (ii) SECTION 7.1(I) and such failure shall continue unremedied for two (2) Business Days; or (iii) SECTIONS 7.3, 7.4, or 7.5 . (C) BREACH OF REPRESENTATION OR WARRANTY. Any representation or warranty made or deemed made by the Borrower to the Agent or any Lender herein or by the Borrower or any of its Subsidiaries in any of the other Loan Documents or in any statement or certificate at any time given by any such Person pursuant to any of the Loan Documents shall be false or misleading in any material respect on the date as of which made (or deemed made). 75 (D) OTHER DEFAULTS. The Borrower shall default in the performance of or compliance with any term contained in this Agreement (other than as covered by PARAGRAPHS (A), (B) or (C) of this SECTION 8.1), or the Borrower or any of its Subsidiaries shall default in the performance of or compliance with any term contained in any of the other Loan Documents, and such default shall continue for thirty (30) days after the earlier of (1) written notice thereof has been given to the Borrower; and (2) any member of senior executive management of the Borrower has "Knowledge" (as hereinafter defined) of such Default. For purposes hereof and CLAUSE (Q) below, "Knowledge" means with respect to any Person, the actual knowledge, after due inquiry, of any fact or circumstance or any fact or circumstance of which such Person should have known, with respect to any of the (A) chairman of the board of directors, chief executive officer, chief financial officer, chief operating officer, executive vice president for operations, treasurer and/or controller of the Borrower (or persons performing the functions typically performed by persons with such titles) and (B) the senior corporate executive officers and chairman of the board of each Material Subsidiary of the Borrower; provided, however, with respect to Requirements of Law and other matters regulated by any Governmental Authority the list of Persons in CLAUSES (A) and (B) shall include the persons primarily responsible for monitoring and ensuring compliance with such Requirements of Law and other regulatory matters or Persons succeeding to their respective duties as employees of such Person as of the Closing Date. (E) DEFAULT AS TO OTHER INDEBTEDNESS. (i) SENIOR NOTE DEFAULTS. The Borrower or any of its Subsidiaries shall fail to pay any part of the principal of, the premium, if any, or the interest on, or any other payment of money due under the Senior Notes beyond any period of grace provided with respect thereto; or any breach, default or event of default shall occur, or any other condition shall exist under any instrument, agreement or indenture pertaining to the Senior Notes, beyond any period of grace, if any, provided with respect thereto, if the effect thereof is to cause an acceleration, mandatory redemption, a requirement that the Borrower offer to purchase the Indebtedness evidenced by the Senior Notes or other required repurchase of such Indebtedness, or permit the Noteholder to accelerate the maturity of any such Indebtedness or require a redemption or other repurchase of such Indebtedness; or any such Indebtedness evidenced by the Senior Notes shall be otherwise declared to be due and payable (by acceleration or otherwise) or required to be prepaid, redeemed or otherwise repurchased by the Borrower or any of its Subsidiaries (other than by a regularly scheduled required prepayment and other than any prepayment required under Section 3.1(a) of the Master Note Agreement) prior to the stated maturity thereof. (ii) OTHER INDEBTEDNESS. The Borrower or any of its Subsidiaries shall fail to pay any part of the principal of, the premium, if any, or the interest on, or any other payment of money due under any Indebtedness (other than Indebtedness hereunder), beyond any period of grace provided with respect thereto, which individually or together with other such Indebtedness as to which any such failure exists has an aggregate outstanding principal amount in excess of $1,000,000; or any breach, default or event of default shall occur, or any other condition shall exist under any instrument, agreement or indenture pertaining to any such Indebtedness having such aggregate outstanding principal amount, 76 beyond any period of grace, if any, provided with respect thereto, if the effect thereof is to cause an acceleration, mandatory redemption, a requirement that the Borrower offer to purchase such Indebtedness or other required repurchase of such Indebtedness, or permit the holder(s) of such Indebtedness to accelerate the maturity of any such Indebtedness or require a redemption or other repurchase of such Indebtedness; or any such Indebtedness shall be otherwise declared to be due and payable (by acceleration or otherwise) or required to be prepaid, redeemed or otherwise repurchased by the Borrower or any of its Subsidiaries (other than by a regularly scheduled required prepayment) prior to the stated maturity thereof. (F) INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. (i) An involuntary case shall be commenced against the Borrower or any of the Borrower's Material Subsidiaries and the petition shall not be dismissed, stayed, bonded or discharged within sixty (60) days after commencement of the case; or a court having jurisdiction in the premises shall enter a decree or order for relief in respect of the Borrower or any of the Borrower's Material Subsidiaries in an involuntary case, under any applicable bankruptcy, insolvency or other similar law now or hereinafter in effect; or any other similar relief shall be granted under any applicable federal, state, local or foreign law. (ii) A decree or order of a court having jurisdiction in the premises for the appointment of a receiver, liquidator, sequestrator, trustee, custodian or other officer having similar powers over the Borrower or any of the Borrower's Material Subsidiaries or over all or a substantial part of the property of the Borrower or any of the Borrower's Material Subsidiaries shall be entered; or an interim receiver, trustee or other custodian of the Borrower or any of the Borrower's Material Subsidiaries or of all or a substantial part of the property of the Borrower or any of the Borrower's Material Subsidiaries shall be appointed or a warrant of attachment, execution or similar process against any substantial part of the property of the Borrower or any of the Borrower's Material Subsidiaries shall be issued and any such event shall not be stayed, dismissed, bonded or discharged within sixty (60) days after entry, appointment or issuance. (G) VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. The Borrower or any of the Borrower's Material Subsidiaries shall (i) commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, (ii) consent to the entry of an order for relief in an involuntary case, or to the conversion of an involuntary case to a voluntary case, under any such law, (iii) consent to the appointment of or taking possession by a receiver, trustee or other custodian for all or a substantial part of its property, (iv) make any assignment for the benefit of creditors or (v) take any corporate action to authorize any of the foregoing. (H) JUDGMENTS AND ATTACHMENTS. Any money judgment(s) (other than a money judgment covered by insurance as to which the insurance company has not disclaimed or reserved the right to disclaim coverage), writ or warrant of attachment, or similar process against the Borrower or any of its Material Subsidiaries or any of their respective assets, involving in any single case or in 77 the aggregate an amount in excess of (i) $1,000,000 with respect to matters other than the Disclosed Disputes or (ii) with respect to the Disclosed Disputes, the amounts set forth in the SECTION 1(b) of the Disclosure Letter, is or are entered and shall remain undischarged, unvacated, unbonded or unstayed for a period of sixty (60) days or in any event later than fifteen (15) days prior to the date of any proposed sale thereunder. (I) DISSOLUTION. Any order, judgment or decree shall be entered against the Borrower decreeing its involuntary dissolution and such order shall remain undischarged and unstayed for a period in excess of sixty (60) days; or the Borrower shall otherwise dissolve or cease to exist except as specifically permitted by this Agreement. (J) LOAN DOCUMENTS; FAILURE OF SECURITY. At any time, for any reason, (i) any Loan Document as a whole that materially affects the ability of the Agent, the Collateral Agent or any of the Lenders to enforce the Obligations or enforce their rights against the Collateral ceases to be in full force and effect and Borrower fails to cure any defect within ten (10) Business Days of written notice thereof by Agent to Borrower; (ii) the Borrower or any of the Borrower's Material Subsidiaries which is a party to any Loan Document seeks to repudiate its obligations under any Loan Document; (iii) Liens with respect to any material portion of the Collateral intended to be created by the Collateral Documents are invalid or unperfected other than solely as a result of an action or failure to act on the part of the Collateral Agent, (iv) the Borrower or any such Subsidiary seeks to render any Liens on the Collateral, invalid and unperfected, or (v) Liens on any material portion of the Collateral shall not have the priority contemplated by this Agreement or the Loan Documents other than solely as a result of an action or failure to act on the part of the Collateral Agent. When the phrase "priority contemplated by this Agreement or the Loan Documents" is used, it is meant by the parties to provide that (a) any failure on the part of the Borrower or SEI to obtain lien waiver agreements from landlords, bailees, consignees, or warehousemen with respect to such third parties as are in existence as of the date hereof shall not constitute a Default under this clause (J) and (b) so long as the Borrower and SEI are in compliance with any baskets provided in this Agreement and the other Loan Documents it shall not constitute a Default under this clause (J). (K) TERMINATION EVENT. Any Termination Event occurs which the Required Lenders believe is reasonably likely to subject the Borrower to liability in excess of $1,000,000. (L) WAIVER OF MINIMUM FUNDING STANDARD. If the plan administrator of any Plan applies under Section 412(d) of the Code for a waiver of the minimum funding standards of Section 412(a) of the Code and the Agent reasonably believes the substantial business hardship upon which the application for the waiver is based could reasonably be expected to subject either the Borrower or any Controlled Group member to liability in excess of $1,000,000 . (M) CHANGE OF CONTROL. A Change of Control shall occur. (N) HEDGING AGREEMENTS. Nonpayment by the Borrower or any Subsidiary of the Borrower of any obligation under any Hedging Agreement or the declared default by the 78 Borrower or any Subsidiary of the Borrower of any material term, provision or condition contained in any such Hedging Agreement. (O) ENVIRONMENTAL MATTERS. Except as set forth in SCHEDULE 6.18, the Borrower or any of its Material Subsidiaries shall be the subject of any proceeding or investigation pertaining to (i) the Release by the Borrower or any of its Material Subsidiaries of any Contaminant into the environment, (ii) the liability of the Borrower or any of its Material Subsidiaries arising from the Release by any other Person of any Contaminant into the environment, or (iii) any violation of any Environmental, Health or Safety Requirements of Law which by the Borrower or any of its Material Subsidiaries, which, in any case, has or is reasonably likely to subject the Borrower to liability in excess of $5,000,000. (P) GUARANTOR REVOCATION. Any guarantor of the Obligations shall terminate or revoke any of its obligations under the applicable guarantee agreement or breach any of the material terms of such guarantee agreement. (Q) TERMINATION OF ADVISORS' ENGAGEMENTS. The engagement by the Borrower of Blair to sell the company shall have been terminated by any Person without the prompt engagement of a replacement investment bank reasonably acceptable to the Agent and the Lenders or the engagement by the Borrower of Dratt-Campbell without the prompt engagement of another reputable financial consultant reasonably acceptable to the Agent and the Lenders shall have occurred. A Default shall be deemed "continuing" until cured or until waived in writing in accordance with SECTION 9.3. ARTICLE IX: ACCELERATION, DEFAULTING LENDERS; WAIVERS, AMENDMENTS AND REMEDIES 9.1 TERMINATION OF COMMITMENTS; ACCELERATION. If any Default described in SECTION 8.1(F) or 8.1(G) occurs with respect to the Borrower, the obligations of the Lenders to make Loans hereunder and the obligation of any Issuing Banks to issue Letters of Credit hereunder shall automatically terminate and the Obligations shall immediately become due and payable without any election or action on the part of the Agent or any Lender. If any other Default occurs, the Required Lenders may terminate or suspend the obligations of the Lenders to make Loans hereunder and the obligation of the Issuing Banks to issue Letters of Credit hereunder, or declare the Obligations to be due and payable, or both, whereupon the Obligations shall become immediately due and payable, without presentment, demand, protest or notice of any kind, all of which the Borrower expressly waives. 9.2 DEFAULTING LENDER. In the event that any Lender fails to fund its Pro Rata Share of any Supplemental Advance requested or deemed requested by the Borrower, which such Lender is obligated to fund under the terms of this Agreement (the funded portion of such Supplemental Advance being hereinafter referred to as a "NON PRO RATA LOAN"), until the earlier of such 79 Lender's cure of such failure and the termination of the Supplemental Loan Commitments, the proceeds of all amounts thereafter repaid to the Agent by the Borrower and otherwise required to be applied to such Lender's share of all other Obligations pursuant to the terms of this Agreement shall be advanced to the Borrower by the Agent on behalf of such Lender to cure, in full or in part, such failure by such Lender, but shall nevertheless be deemed to have been paid to such Lender in satisfaction of such other Obligations. Notwithstanding anything in this Agreement to the contrary: (i) the foregoing provisions of this SECTION 9.2 shall apply only with respect to the proceeds of payments of Obligations; (ii) any such Lender shall be deemed to have cured its failure to fund its Pro Rata Share of any Supplemental Advance at such time as an amount equal to such Lender's original Pro Rata Share of the requested principal portion of such Supplemental Advance is fully funded to the Borrower, whether made by such Lender itself or by operation of the terms of this SECTION 9.2, and whether or not the Non Pro Rata Loan with respect thereto has been repaid, converted or continued; (iii) amounts advanced to the Borrower to cure, in full or in part, any such Lender's failure to fund its Pro Rata Share of any Supplemental Advance ("CURE LOANS") shall bear interest at the rate applicable to the Supplemental Loans and for all other purposes of this Agreement shall be treated as if they were Supplemental Loans; (iv) regardless of whether or not a Default has occurred or is continuing, and notwithstanding the instructions of the Borrower as to its desired application, all repayments of principal of the Obligations shall be applied FIRST, ratably to all Non Pro Rata Loans, SECOND, ratably to Supplemental other than those constituting Non Pro Rata Loans or Cure Loans and, THIRD, ratably to Cure Loans; (v) for so long as and until the earlier of any such Lender's cure of the failure to fund its Pro Rata Share of any Supplemental Advance and the termination of the Supplemental Loan Commitments, the term "Required Lenders" for purposes of this Agreement shall mean Lenders (excluding all Lenders whose failure to fund their respective Pro Rata Shares of such Supplemental Advance have not been so cured) whose Pro Rata Shares represent greater than fifty percent (50%) of the aggregate Pro Rata Shares of such Lenders; and (vi) for so long as and until any such Lender's failure to fund its Pro Rata Share of any Supplemental Advance is cured in accordance with SECTION 9.2(ii), (A) such Lender shall not be entitled to, and Borrower shall not be obligated to pay, any commitment fees with respect to its Supplemental Loan Commitment and (B) such Lender shall not be entitled to any letter of credit fees. 80 9.3 AMENDMENTS. Any term, covenant, agreement or condition of this Agreement or of the Notes relating to administrative or other miscellaneous, non-remunerative matters particular to this Agreement (as to which the Noteholder could not reasonably be expected to wish to request a similar amendment or waiver under the Master Note Agreement) may, with the consent of the Borrower, be amended or compliance therewith may be waived (either generally or in a particular instance and either retroactively or prospectively), by one or more substantially concurrent written instruments signed by the Required Lenders; PROVIDED that only with the consent of the Required Creditors and the Borrower, and only if the Borrower shall concurrently enter into a substantially similar amendment or waiver with respect to the Master Note Agreement, a waiver or amendment may be affected for the purpose of (1) adding terms or provisions favorable to the Lenders under this Agreement and the Noteholder under the Master Note Agreement or (2) (A) modifying any affirmative covenants, negative covenants or financial covenants set forth in Article VII of this Agreement, Article 7 of the Master Note Agreement or in the Collateral Documents (so long as such modification does not involve one of the Unanimous Voting Matters), (B) modifying any of the representations and warranties contained in this Agreement, the Master Note Agreement or any of the Collateral Documents (so long as such modification does not involve one of the Unanimous Voting Matters), (C) waiving any Default under this Agreement or any "Event of Default" under and as defined in the Master Note Agreement relating solely to such affirmative covenants, negative covenants, financial covenants, representations or warranties or (D) waiving any other Default under this Agreement or any "Event of Default" under and as defined in the Master Note Agreement (so long as such Default or Event of Default does not involve one of the Unanimous Voting Matters); PROVIDED, FURTHER, HOWEVER, in no event shall any such amendments or waivers of this Agreement or the Master Note Agreement including, without limitation, the Disclosure Letter provisions applicable thereto, involving any of the items in clauses (i) through (xiii) below be effective without the consent of each Lender or, if applicable, the Noteholder affected thereby: (i) change any maturity date or any other date fixed for any payment of principal of, or interest on, the Secured Obligations or any fees or other amounts payable to such Lender or Noteholder; (ii) reduce the principal amount of any Secured Obligations or the rate of interest thereon or any fees, prepayment charges or other amounts payable to such Lender or the Noteholder; (iii) change the definition of "Required Lenders", "Required Creditors" or "Majority Holders" (as defined in the Master Note Agreement) or any other term used to designate the applicable percentage in this Agreement, the Master Note Agreement or any Collateral Documents, as applicable to act on specified matters; (iv) increase the amount of the Supplemental Loan Commitment of any Lender or otherwise increase the principal amount which may be borrowed under this Agreement (other than as a result of a change of the Borrowing Base or the components thereof which is not covered by the terms of clause (ix) below); 81 (v) permit the Borrower to assign its rights with respect to the Secured Obligations; (vi) amend this SECTION 9.3, the provisions of SECTION 30 of the Collateral Sharing Agreement or SECTION 15.2 of the Master Note Agreement; (vii) other than in connection with a transaction permitted by the terms of the Credit Agreement (including, without limitation SECTION 7.3(B) or SECTION 7.5(g)) and the Master Note Agreement, release any Collateral. (viii) change the definition of "Make Whole Premium" (as defined in the Master Note Agreement) or "Priority Obligations", "Ratable Obligations" or "Secured Obligations" (each as defined in the Collateral Sharing Agreement) or change the order of priority of payments as among the Priority Obligations, the Ratable Obligations and the Make Whole Premium, if any, with respect to the Senior Notes or among the Ratable Obligations; (ix) change (a) the dollar amount set forth in clause (iii) of the definition of Borrowing Base, (b) either of the percentages used in clauses (i) or (ii) in determining the Borrowing Base, (c) the definition of the Maximum Amount, or (d) the types of assets which are included in the Borrowing Base (i.e., expand the Borrowing Base to permit any assets other than Receivables and Inventory to have loan value); provided this clause (ix)(d) shall not apply to the eligibility criteria applied to Receivables and Inventory. (x) amend SECTION 7.3(F)(ii), SECTION 7.3(N) or the terms of any of CLAUSES (a), (b) or (e) of SECTION 7.5. (xi) amend any indemnity provision of the Credit Agreement, Loan Documents, Master Note Agreement or other related documents, instruments or agreements. (xii) amend SECTION 6.4 or 6.10 of this Agreement or consent to any waiver of any Default as a result of a material misrepresentation under such Sections or any "Event of Default" under the Master Note Agreement as a result of a material misrepresentation under SECTION 2.4 or SECTION 2.5 of the Master Note Agreement; or (xiii) waive any Default occurring under CLAUSES (F), (G) or (I) of SECTION 8.1 of this Agreement or CLAUSES (f), (g), or (i) of SECTION 12.1. No amendment of any provision of this Agreement relating to (a) the Agent shall be effective without the written consent of the Agent or (b) the Issuing Banks shall be effective without the written consent of the Issuing Banks. The Agent may waive payment of the fee required under SECTION 13.3(B) without obtaining the consent of any of the Lenders. 9.4 PRESERVATION OF RIGHTS. No delay or omission of the Lenders or the Agent to exercise any right under the Loan Documents shall impair such right or be construed to be a waiver of any 82 Default or an acquiescence therein, and the making of a Loan or the issuance of a Letter of Credit notwithstanding the existence of a Default or the inability of the Borrower to satisfy the conditions precedent to such Loan or issuance of such Letter of Credit shall not constitute any waiver or acquiescence. Any single or partial exercise of any such right shall not preclude other or further exercise thereof or the exercise of any other right, and no waiver, amendment or other variation of the terms, conditions or provisions of the Loan Documents whatsoever shall be valid unless in writing signed by the Required Creditors required pursuant to SECTION 9.3, and then only to the extent in such writing specifically set forth. All remedies contained in the Loan Documents or by law afforded shall be cumulative and all shall be available to the Agent and the Lenders until the Obligations have been paid in full. ARTICLE X: GENERAL PROVISIONS 10.1 SURVIVAL OF REPRESENTATIONS. All representations and warranties of the Borrower contained in this Agreement shall survive delivery of the Notes and the making of the Loans herein contemplated. 10.2 GOVERNMENTAL REGULATION. Anything contained in this Agreement to the contrary notwithstanding, no Lender shall be obligated to extend credit to the Borrower in violation of any limitation or prohibition provided by any applicable statute or regulation. 10.3 PERFORMANCE OF OBLIGATIONS. The Borrower agrees that the Agent or Collateral Agent may, but shall have no obligation to (i) at any time, pay or discharge taxes, liens, security interests or other encumbrances levied or placed on or threatened against any Collateral and (ii) after the occurrence and during the continuance of a Default make any other payment or perform any act required of the Borrower or any of its Subsidiaries under any Loan Document or take any other action which the Agent in its discretion deems necessary or desirable to protect or preserve the Collateral, including, without limitation, any action to (y) effect any repairs or obtain any insurance called for by the terms of any of the Loan Documents and to pay all or any part of the premiums therefor and the costs thereof and (z) pay any rents payable by the Borrower which are more than 30 days past due, or as to which the landlord has given notice of termination, under any lease. The Agent shall use its reasonable efforts to give the Borrower notice of any action taken under this SECTION 10.3 prior to the taking of such action or promptly thereafter provided the failure to give such notice shall not affect the Borrower's obligations in respect thereof. The Agent shall use its reasonable efforts to give the Lenders notice of any action taken under this SECTION 10.3 prior to the taking of such action or promptly thereafter and shall obtain the consent of the Required Lenders to any such action which involves amounts in excess of $50,000; provided the failure to give such notice shall not affect the Lenders' obligations in respect thereof for amounts under $50,000 for which the Lenders have not received such notice or shall not have provided consent. The Borrower agrees to pay the Agent, upon demand, the principal amount of all funds advanced by the Agent (in its capacity as Agent or Collateral Agent) under this SECTION 10.3, together with interest thereon at the rate from time to time applicable to the Supplemental Loans from the date of such advance until the outstanding principal balance thereof is paid in full. If the Borrower fails to make payment in respect of any such advance under this SECTION 10.3 83 within three (3) Business Days after the date the Borrower receives written demand therefor from the Agent, the Agent shall promptly notify each Lender and each Lender agrees, subject to the third sentence of this SECTION 10.3, that it shall thereupon make available to the Agent, in Dollars in immediately available funds, the amount equal to such Lender's Pro Rata Share of such advance. If such funds are not made available to the Agent by such Lender within one (1) Business Day after the Agent's demand therefor, the Agent will be entitled to recover any such amount from such Lender together with interest thereon at the Federal Funds Effective Rate for each day during the period commencing on the date of such demand and ending on the date such amount is received. The failure of any Lender to make available to the Agent its Pro Rata Share of any such unreimbursed advance under this SECTION 10.3 shall neither relieve any other Lender of its obligation hereunder to make available to the Agent such other Lender's Pro Rata Share of such advance on the date such payment is to be made nor increase the obligation of any other Lender to make such payment to the Agent. All outstanding principal of, and interest on, advances made under this SECTION 10.3 shall constitute Obligations secured by the Collateral until paid in full by the Borrower. 10.4 HEADINGS. Section headings in the Loan Documents are for convenience of reference only, and shall not govern the interpretation of any of the provisions of the Loan Documents. 10.5 ENTIRE AGREEMENT. The Loan Documents embody the entire agreement and understanding among the Borrower, the Agent and the Lenders and supersede all prior agreements and understandings among the Borrower, the Agent and the Lenders relating to the subject matter thereof. 10.6 SEVERAL OBLIGATIONS; BENEFITS OF THIS AGREEMENT. The respective obligations of the Lenders hereunder are several and not joint and no Lender shall be the partner or agent of any other Lender (except to the extent to which the Agent or Collateral Agent is authorized to act as such). The failure of any Lender to perform any of its obligations hereunder shall not relieve any other Lender from any of its obligations hereunder. This Agreement shall not be construed so as to confer any right or benefit upon any Person other than the parties to this Agreement and their respective successors and assigns. 10.7 EXPENSES; INDEMNIFICATION. (A) EXPENSES. The Borrower shall reimburse the Agent, Collateral Agent, the Arranger and the Lenders for any reasonable costs, internal charges and out- of-pocket expenses (including reasonable attorneys' and paralegals' fees and time charges of attorneys and paralegals, which attorneys and paralegals may be employees of the Agent, Collateral Agent, Arranger or Lender) paid or incurred by the Agent, Collateral Agent, Arranger or the Lenders in connection with the preparation, negotiation, execution and delivery of the Loan Documents. The Borrower shall reimburse the Agent, Collateral Agent and the Arranger (but not the Lenders) for any reasonable costs, internal charges and out-of-pocket expenses (including reasonable attorneys' and paralegals' fee and time charges of attorneys and paralegals fees, which attorneys and paralegal's may be the employees of the Agent, Collateral Agent or Arranger) paid or incurred by the Agent, Collateral 84 Agent or Arranger in connection with the syndication, review, amendment, modification, and administration of the Loan Documents. The Borrower also agrees to reimburse the Agent, Collateral Agent, the Arranger and the Lenders for any reasonable costs, internal charges and out-of-pocket expenses (including reasonable attorneys' and paralegals' fees and time charges of attorneys and paralegals for the Agent, the Collateral Agent, the Arranger and the Lenders, which attorneys and paralegals may be employees of the Agent, Collateral Agent, the Arranger or the Lenders) paid or incurred by the Agent, Collateral Agent, the Arranger or any Lender in connection with matters relating to the Sale Initiative, in connection with any restructuring or workout relating to this Agreement and the Obligations, and in connection with the collection of the Obligations and enforcement of the Loan Documents. In addition to expenses set forth above, the Borrower agrees to reimburse the Agent or Collateral Agent, promptly after request therefor, for each audit, or other business analysis performed by or for the benefit of the Lenders in connection with this Agreement or the other Loan Documents in an amount equal to the Agent's or Collateral Agent's then reasonable customary charges for each person employed to perform such audit or analysis (which charges may be based upon internal charges if employees of the Agent or its Affiliates are utilized or which may be based upon the amount charges to the Agent or Collateral Agent if an third party performs the work) (provided, the Borrower shall not be required to reimburse the Agent in an amount in excess of $25,000 in connection with reviews conducted during any consecutive twelve-month period which are conducted at a time when no Default has occurred under the Credit Agreement), PLUS all reasonable costs and expenses (including without limitation, reasonable travel expenses) incurred by the Agent or Collateral Agent (or their agents) in the performance of such audit or analysis. The Agent, Collateral Agent, Arranger or Lender requesting reimbursement under this SECTION 10.7(A) shall provide the Borrower (with a copy to the Agent) with a detailed statement of all reimbursements requested under this SECTION 10.7(A). (B) INDEMNITY. The Borrower further agrees to defend, protect, indemnify, and hold harmless the Agent, the Collateral Agent, the Arranger and each and all of the Lenders and each of their respective Affiliates, and each of such Agent's, Collateral Agent's, Arranger's, Lender's, or Affiliate's respective officers, directors, employees, attorneys and agents (including, without limitation, those retained in connection with the satisfaction or attempted satisfaction of any of the conditions set forth in ARTICLE V) (collectively, the "INDEMNITEES") from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, reasonable costs and expenses of any kind or nature whatsoever (including, without limitation, the reasonable fees and disbursements of counsel for such Indemnitees in connection with any investigative, administrative or judicial proceeding, whether or not such Indemnitees shall be designated a party thereto), imposed on, incurred by, or asserted against such Indemnitees in any manner relating to or arising out of: (i) this Agreement, the other Loan Documents, or any act, event or transaction related or attendant thereto or to the making of the Loans, and the issuance of and participation in Letters of Credit hereunder, the management of such Loans or Letters of Credit, the use or intended use of the proceeds of the Loans or Letters of Credit hereunder, or any of the other transactions contemplated by the Loan Documents; or 85 (ii) any liabilities, obligations, responsibilities, losses, damages, personal injury, death, punitive damages, economic damages, consequential damages, treble damages, intentional, willful or wanton injury, damage or threat to the environment, natural resources or public health or welfare, costs and expenses (including, without limitation, reasonable attorney, expert and consulting fees and costs of investigation, feasibility or remedial action studies), fines, penalties and monetary sanctions, interest, direct or indirect, known or unknown, absolute or contingent, past, present or future relating to violation of any Environmental, Health or Safety Requirements of Law arising from or in connection with the past, present or future operations of the Borrower, its Subsidiaries or any of their respective predecessors in interest, or, the past, present or future environmental, health or safety condition of any respective property of the Borrower or its Subsidiaries, the presence of asbestos-containing materials at any respective property of the Borrower or its Subsidiaries or the Release or threatened Release of any Contaminant into the environment (collectively, the "INDEMNIFIED MATTERS"); PROVIDED, HOWEVER, the Borrower shall have no obligation to an Indemnitee hereunder with respect to Indemnified Matters arising from and to the extent caused by or resulting from the willful misconduct or Gross Negligence of such Indemnitee or breach of contract by such Indemnitee with respect to the Loan Documents, in each case, as determined by the final non-appealed judgment of a court of competent jurisdiction. If the undertaking to indemnify, pay and hold harmless set forth in the preceding sentence may be unenforceable because it is violative of any law or public policy, the Borrower shall contribute the maximum portion which it is permitted to pay and satisfy under applicable law, to the payment and satisfaction of all Indemnified Matters incurred by the Indemnitees. (C) WAIVER OF CERTAIN CLAIMS; SETTLEMENT OF CLAIMS. The Borrower further agrees to assert no claim against any of the Indemnitees on any theory of liability seeking consequential, special, indirect, exemplary or punitive damages in an amount which exceeds $100,000. No settlement shall be entered into by the Borrower or any if its Subsidiaries with respect to any claim, litigation, arbitration or other proceeding relating to or arising out of the transactions evidenced by this Agreement or the other Loan Documents (whether or not the Agent or any Lender or any Indemnitee is a party thereto) unless such settlement releases all Indemnitees from any and all liability with respect thereto. (D) TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN CONSIDERATION OF THE AGENT'S AND THE LENDERS' EXECUTION OF THIS AGREEMENT, THE BORROWER, AND BY ITS REAFFIRMATION, SEI, ON BEHALF OF THEMSELVES AND EACH OF THEIR SUCCESSORS AND ASSIGNS (COLLECTIVELY, THE "RELEASORS"), DO HEREBY FOREVER RELEASE, DISCHARGE AND ACQUIT THE AGENT, THE COLLATERAL AGENT, THE ARRANGER, EACH LENDER, EACH ISSUING BANK AND EACH OF THEIR RESPECTIVE PARENTS, SUBSIDIARIES AND AFFILIATE CORPORATIONS OR PARTNERSHIPS, AND THEIR RESPECTIVE OFFICERS, DIRECTORS, PARTNERS, TRUSTEES, SHAREHOLDERS, AGENTS, ATTORNEYS AND EMPLOYEES, AND THEIR RESPECTIVE SUCCESSORS, HEIRS AND ASSIGNS (COLLECTIVELY, THE "RELEASEES") OF AND FROM ANY AND ALL CLAIMS, DEMANDS, LIABILITIES, RESPONSIBILITIES, DISPUTES, CAUSES OF ACTION (WHETHER AT LAW OR EQUITY), 86 INDEBTEDNESS AND OBLIGATIONS (COLLECTIVELY, "CLAIMS"), OF EVERY TYPE, KIND, NATURE, DESCRIPTION OR CHARACTER, INCLUDING, WITHOUT LIMITATION, ANY SO-CALLED "LENDER LIABILITY" CLAIMS OR DEFENSES, AND IRRESPECTIVE OF HOW, WHY OR BY REASON OF WHAT FACTS, WHETHER SUCH CLAIMS HAVE HERETOFORE ARISEN, ARE NOW EXISTING OR HEREAFTER ARISE, OR WHICH COULD, MIGHT, OR MAY BE CLAIMED TO EXIST, OF WHATEVER KIND OR NAME, WHETHER KNOWN OR UNKNOWN, SUSPECTED OR UNSUSPECTED, LIQUIDATED OR UNLIQUIDATED, EACH AS THOUGH FULLY SET FORTH HEREIN AT LENGTH, WHICH IN ANY WAY ARISE OUT OF, ARE CONNECTED WITH OR IN ANY WAY RELATE TO ACTIONS OR OMISSIONS WHICH OCCURRED ON OR PRIOR TO THE DATE HEREOF WITH RESPECT TO THE BORROWER, THE OBLIGATIONS, THIS AGREEMENT, THE ORIGINAL CREDIT AGREEMENT, ANY LOAN DOCUMENT OR ANY THIRD PARTIES LIABLE IN WHOLE OR IN PART FOR THE OBLIGATIONS. EACH OF THE RELEASORS FURTHER AGREES TO INDEMNIFY THE RELEASEES AND HOLD EACH OF THE RELEASEES HARMLESS FROM AND AGAINST ANY AND ALL SUCH CLAIMS WHICH MIGHT BE BROUGHT AGAINST ANY OF THE RELEASEES ON BEHALF OF ANY PERSON OR ENTITY, INCLUDING, WITHOUT LIMITATION, OFFICERS, DIRECTORS, AGENTS, TRUSTEES, CREDITORS OR SHAREHOLDERS OF ANY OF THE RELEASORS. FOR PURPOSES OF THE RELEASE CONTAINED IN THIS PARAGRAPH, ANY REFERENCE TO ANY RELEASOR SHALL MEAN AND INCLUDE, AS APPLICABLE, SUCH PERSON'S OR PERSONS' SUCCESSORS AND ASSIGNS, INCLUDING, WITHOUT LIMITATION, ANY RECEIVER, TRUSTEE OR DEBTOR-IN-POSSESSION, ACTING ON BEHALF OF SUCH PARTIES. (E) SURVIVAL OF AGREEMENTS. The obligations and agreements of the Borrower under this SECTION 10.7 shall survive the termination of this Agreement. 10.8 NUMBERS OF DOCUMENTS. All statements, notices, closing documents, and requests hereunder shall be furnished to the Agent with sufficient counterparts so that the Agent may furnish one to each of the Lenders. 10.9 ACCOUNTING. Except as provided to the contrary herein, all accounting terms used herein shall be interpreted and all accounting determinations hereunder shall be made in accordance with Agreement Accounting Principles. 10.10 SEVERABILITY OF PROVISIONS. Any provision in any Loan Document that is held to be inoperative, unenforceable, or invalid in any jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable, or invalid without affecting the remaining provisions in that jurisdiction or the operation, enforceability, or validity of that provision in any other jurisdiction, and to this end the provisions of all Loan Documents are declared to be severable. 10.11 NONLIABILITY OF LENDERS. The relationship between the Borrower and the Lenders, the Agent and Collateral Agent shall be solely that of borrower and lender. Neither the Agent, the Collateral Agent nor any Lender shall have any fiduciary responsibilities to the Borrower. Neither the Agent, the Collateral Agent nor any Lender undertakes any responsibility to the Borrower to review or inform the Borrower of any matter in connection with any phase of the Borrower's business or operations. 87 10.12 GOVERNING LAW. THE AGENT ACCEPTS THIS AGREEMENT, ON BEHALF OF ITSELF AND THE LENDERS, AT CHICAGO, ILLINOIS BY ACKNOWLEDGING AND AGREEING TO IT THERE. ANY DISPUTE BETWEEN THE BORROWER AND THE AGENT OR ANY LENDER ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE INTERNAL LAWS (WITHOUT REGARD TO THE CONFLICTS OF LAWS PROVISIONS) OF THE STATE OF ILLINOIS. 10.13 CONSENT TO JURISDICTION; SERVICE OF PROCESS; JURY TRIAL. (A) EXCLUSIVE JURISDICTION. EXCEPT AS PROVIDED IN SUBSECTION (B), EACH OF THE PARTIES HERETO AGREES THAT ALL DISPUTES AMONG THEM ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE RESOLVED EXCLUSIVELY BY STATE OR FEDERAL COURTS LOCATED IN CHICAGO, ILLINOIS, BUT THE PARTIES HERETO ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF CHICAGO, ILLINOIS. EACH OF THE PARTIES HERETO WAIVES IN ALL DISPUTES BROUGHT PURSUANT TO THIS SUBSECTION (A) ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT CONSIDERING THE DISPUTE. (B) OTHER JURISDICTIONS. THE BORROWER AGREES THAT THE AGENT, OR ANY LENDER SHALL HAVE THE RIGHT TO PROCEED AGAINST THE BORROWER OR ITS PROPERTY IN A COURT IN ANY LOCATION TO ENABLE SUCH PERSON (1) TO OBTAIN PERSONAL JURISDICTION OVER THE BORROWER, (2) TO REALIZE ON THE COLLATERAL OR (3) IN ORDER TO ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF SUCH PERSON. THE BORROWER AGREES THAT OTHER THAN IN A PROCEEDING BROUGHT PURSUANT TO SUBSECTION (A) ABOVE, IT WILL NOT ASSERT ANY PERMISSIVE COUNTERCLAIMS IN ANY PROCEEDING BROUGHT BY SUCH PERSON PURSUANT TO THIS SUBSECTION (B) TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF SUCH PERSON. THE BORROWER WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN WHICH SUCH PERSON HAS COMMENCED A PROCEEDING DESCRIBED IN THIS SUBSECTION (B). (C) VENUE. THE BORROWER IRREVOCABLY WAIVES ANY OBJECTION (INCLUDING, WITHOUT LIMITATION, ANY OBJECTION OF THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS) WHICH IT MAY NOW 88 OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH IN ANY JURISDICTION SET FORTH ABOVE. (D) WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, ARISING OUT OF, CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH. EACH OF THE PARTIES HERETO AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. (E) ADVICE OF COUNSEL. EACH OF THE PARTIES REPRESENTS TO EACH OTHER PARTY HERETO THAT IT HAS DISCUSSED THIS AGREEMENT AND, SPECIFICALLY, THE PROVISIONS OF SECTION 10.7 AND THIS SECTION 10.13, WITH ITS COUNSEL. 10.14 NO STRICT CONSTRUCTION. The parties hereto have participated jointly in the negotiation and drafting of this Agreement and the other Loan Documents. In the event an ambiguity or question of intent or interpretation arises, this Agreement and each of the other Loan Documents shall be construed as if drafted jointly by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement. ARTICLE XI: THE AGENT 11.1 APPOINTMENT; NATURE OF RELATIONSHIP. The First National Bank of Chicago is appointed by the Lenders as the Agent hereunder, the Collateral Agent under the Collateral Documents and the Agent and/or Collateral Agent, as applicable, under each other Loan Document. References to the Agent in this ARTICLE XI shall include references to the Agent in its capacity as Collateral Agent. Each of the Lenders irrevocably authorizes the Agent to act as the contractual representative of such Lender with the rights and duties expressly set forth herein and in the other Loan Documents. The Agent agrees to act as such contractual representative upon the express conditions contained in this ARTICLE XI. Notwithstanding the use of the defined term "Agent" or "Collateral Agent'" it is expressly understood and agreed that the Agent shall not have any fiduciary responsibilities to any Lender by reason of this Agreement and that the Agent is merely acting as the representative of the Lenders with only those duties as are expressly set forth 89 in this Agreement and the other Loan Documents. In its capacity as the Lenders' contractual representative, the Agent (i) does not assume any fiduciary duties to any of the Lenders, (ii) is a "representative" of the Lenders within the meaning of SECTION 9-105 of the Uniform Commercial Code and (iii) is acting as an independent contractor, the rights and duties of which are limited to those expressly set forth in this Agreement and the other Loan Documents. Each of the Lenders agrees to assert no claim against the Agent on any agency theory or any other theory of liability for breach of fiduciary duty, all of which claims each Lender waives. 11.2 POWERS. The Agent shall have and may exercise such powers under the Loan Documents as are specifically delegated to the Agent by the terms of each thereof, together with such powers as are reasonably incidental thereto. The Agent shall have no implied duties or fiduciary duties to the Lenders, or any obligation to the Lenders to take any action hereunder or under any of the other Loan Documents except any action specifically provided by the Loan Documents required to be taken by the Agent. Without limiting the foregoing, the Agent is hereby authorized to execute and deliver the Collateral Documents and the Collateral Sharing Agreement, in each case, in substantially the same form as last distributed to the Lenders prior to the Closing Date and shall be authorized to enter into amendments thereto on behalf of each of the Lenders upon the direction of or with the consent of the Required Creditors. Each Lender authorizes the Agent to enter, as Collateral Agent, into each of the Collateral Documents to which it is a party and to take all action contemplated by such documents. Each Lender agrees that no Lender shall have the right individually to seek to realize upon the security granted by any Collateral Document, it being understood and agreed that such rights and remedies may be exercised solely by the Collateral Agent for the benefit of the Holders of Secured Obligations upon the terms of the Collateral Documents. 11.3 GENERAL IMMUNITY. Neither the Agent nor any of its directors, officers, agents or employees shall be liable to the Borrower, the Lenders or any Lender for any action taken or omitted to be taken by it or them hereunder or under any other Loan Document or in connection herewith or therewith except to the extent such action or inaction is found in a final judgment by a court of competent jurisdiction to have arisen from and to the extent of the Gross Negligence, willful misconduct or breach of this Agreement or any other Loan Documents by such Person. 11.4 NO RESPONSIBILITY FOR LOANS, CREDITWORTHINESS, COLLATERAL, RECITALS, ETC. Neither the Agent nor any of its directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into, or verify (i) any statement, warranty or representation made in connection with any Loan Document or any borrowing hereunder; (ii) the performance or observance of any of the covenants or agreements of any obligor under any Loan Document; (iii) the satisfaction of any condition specified in ARTICLE V, except receipt of items required to be delivered solely to the Agent; (iv) the existence or possible existence of any Default or Unmatured Default or (v) the validity, effectiveness or genuineness of any Loan Document or any other instrument or writing furnished in connection therewith. The Agent shall not be responsible to any Lender for any recitals, statements, representations or warranties herein or in any of the other Loan Documents, for the perfection or priority of any of the Liens on any of the Collateral, or for the execution, effectiveness, genuineness, validity, legality, enforceability, collectibility, or sufficiency of this Agreement or any of the other Loan Documents or the transactions 90 contemplated thereby, or for the financial condition of any guarantor of any or all of the Obligations, the Borrower or any of its Subsidiaries. 11.5 ACTION ON INSTRUCTIONS OF REQUIRED CREDITORS. The Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder and under any other Loan Document in accordance with written instructions signed by the Required Creditors, and such instructions and any action taken or failure to act pursuant thereto shall be binding on all of the Lenders. The Agent shall be fully justified in failing or refusing to take any action hereunder and under any other Loan Document unless it shall first be indemnified to its satisfaction by the Lenders (and, if applicable the Noteholder) pro rata against any and all liability, cost and expense that it may incur by reason of taking or continuing to take any such action. 11.6 EMPLOYMENT OF AGENTS AND COUNSEL. The Agent may execute any of its duties as the Agent hereunder and under any other Loan Document by or through employees, agents, and attorneys-in-fact and shall not be answerable to the Lenders, except as to money or securities received by it or its authorized agents, for the default or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care. The Agent shall be entitled to advice of counsel concerning the contractual arrangement between the Agent and the Lenders and all matters pertaining to the Agent's duties hereunder and under any other Loan Document; PROVIDED, HOWEVER, it is expressly understood and agreed that the expense reimbursement provisions of SECTION 10.7(A) shall not be applicable to the expenses for such counsel to the extent such expenses do not arise out of any action or omission on the part of the Borrower or any of its Subsidiaries or any request of the Borrower or its Subsidiaries hereunder or under any of the Loan Documents. 11.7 RELIANCE ON DOCUMENTS; COUNSEL. The Agent shall be entitled to rely upon any Note, notice, consent, certificate, affidavit, letter, telegram, statement, paper or document believed by it to be genuine and correct and to have been signed or sent by the proper person or persons, and, in respect to legal matters, upon the opinion of counsel selected by the Agent, which counsel may be employees of the Agent; PROVIDED, HOWEVER, it is expressly understood and agreed that the expense reimbursement provisions of SECTION 10.7(A) shall not be applicable to the expenses for counsel rendering such opinion to the extent it relates to matters other than resulting from any action or omission on the part of the Borrower or any of its Subsidiaries or any request of the Borrower or its Subsidiaries hereunder or under any of the Loan Documents. 11.8 THE AGENT'S REIMBURSEMENT AND INDEMNIFICATION. The Lenders agree to reimburse and indemnify the Agent ratably in proportion to their respective Pro Rata Shares (i) for any amounts not reimbursed by the Borrower for which the Agent is entitled to reimbursement by the Borrower under the Loan Documents, (ii) for any other expenses incurred by the Agent on behalf of the Lenders, in connection with the preparation, execution, delivery, administration and enforcement of the Loan Documents and (iii) for any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Agent in any way relating to or arising out of the Loan Documents or any other document delivered in connection therewith or the transactions contemplated thereby, or the enforcement of any of the terms thereof 91 or of any such other documents, provided that no Lender shall be liable for any of the foregoing to the extent any of the foregoing is found in a final non- appealable judgment by a court of competent jurisdiction to have arisen from the Gross Negligence or willful misconduct of the Agent. 11.9 RIGHTS AS A LENDER. With respect to its Supplemental Loan Commitment, Loans made by it, Letters of Credit issued by it and the Notes issued to it, the Agent shall have the same rights and powers hereunder and under any other Loan Document as any Lender or Issuing Bank and may exercise the same as through it were not the Agent, and the term "Lender" or "Lenders," "Issuing Bank" or "Issuing Banks" shall, unless the context otherwise indicates, include the Agent in its individual capacity. The Agent may accept deposits from, lend money to, and generally engage in any kind of trust, debt, equity or other transaction, in addition to those contemplated by this Agreement or any other Loan Document, with the Borrower or any of its Subsidiaries in which such Person is not prohibited hereby from engaging with any other Person. 11.10 LENDER CREDIT DECISION. Each Lender acknowledges that it has, independently and without reliance upon the Agent, the Collateral Agent, the Arranger or any other Lender and based on the financial statements prepared by the Borrower and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and the other Loan Documents. Each Lender also acknowledges that it will, independently and without reliance upon the Agent, the Collateral Agent, the Arranger 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 this Agreement and the other Loan Documents. 11.11 SUCCESSOR AGENT. The Agent may resign at any time by giving written notice thereof to the Lenders and the Borrower. Upon any such resignation, the Required Lenders shall have the right to appoint, on behalf of the Borrower and the Lenders, a successor Agent (which successor Agent shall also succeed to the position of Collateral Agent). If no successor Agent shall have been so appointed by the Required Lenders and shall have accepted such appointment within thirty days after the retiring Agent's giving notice of resignation, then the retiring Agent may appoint, on behalf of the Borrower and the Lenders, a successor Agent and Collateral Agent. Notwithstanding anything herein to the contrary, so long as no Default has occurred and is continuing, each such successor Agent shall be subject to approval by the Borrower, which approval shall not be unreasonably withheld or delayed. Such successor Agent shall be a commercial bank having capital and retained earnings of at least $500,000,000. Upon the acceptance of any appointment as the Agent hereunder (and Collateral Agent under the other Loan Documents) by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent and Collateral Agent, and the retiring Agent and Collateral Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents. After any retiring Agent's resignation hereunder as Agent, the provisions of this Article XI shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as the Agent and/or Collateral Agent hereunder and under the other Loan Documents. 92 11.12 Collateral Documents. Each Lender authorizes the Agent as Collateral Agent to enter into each of the Collateral Documents to which it is a party and to take all action contemplated by such documents. Each Lender agrees that no Lender shall have the right individually to seek to realize upon the security granted by any Collateral Document, it being understood and agreed that such rights and remedies may be exercised solely by the Collateral Agent for the benefit of the Holders of Secured Obligations upon the terms of the Collateral Documents. ARTICLE XII: SETOFF; RATABLE PAYMENTS 12.1 SETOFF. In addition to, and without limitation of, any rights of the Lenders under applicable law, if any Default occurs and is continuing, any indebtedness from any Lender to the Borrower (including all account balances, whether provisional or final and whether or not collected or available) may be offset and applied toward the payment of the Obligations owing to such Lender, whether or not the Obligations, or any part hereof, shall then be due. 12.2 RATABLE PAYMENTS. If any Lender, whether by setoff or otherwise, has payment made to it upon its Loans (other than payments received pursuant to SECTIONS 4.1, 4.2 or 4.4) in a greater proportion than that received by any other Lender, such Lender agrees, promptly upon demand, to purchase a portion of the Loans held by the other Lenders so that after such purchase each Lender will hold its ratable proportion of Loans. If any Lender, whether in connection with setoff or amounts which might be subject to setoff or otherwise, receives collateral or other protection for its Obligation or such amounts which may be subject to setoff, such Lender agrees, promptly upon demand, to take such action necessary such that all Holders of Secured Obligations share in the benefits of such collateral ratably in proportion to the obligations owing to them. In case any such payment is disturbed by legal process, or otherwise, appropriate further adjustments shall be made. 12.3 APPLICATION OF PAYMENTS. Subject to the provisions of SECTION 9.2, the Agent shall, unless otherwise specified at the direction of the Required Lenders which direction shall be consistent with the last sentence of this SECTION 12.3, apply all payments and prepayments in respect of any Obligations and all proceeds of Collateral in respect of the Obligations in the following order: (A) first, to pay interest on and then principal of any portion of the Loans which the Agent may have advanced on behalf of any Lender for which the Agent has not then been reimbursed by such Lender or the Borrower; (B) second, to pay interest on and then principal of any advance made under SECTION 10.3 for which the Agent has not then been paid by the Borrower or reimbursed by the Lenders; (C) third, to pay Obligations in respect of any fees, expense reimbursements or indemnities then due to the Agent or Collateral Agent; 93 (D) fourth, to pay Obligations in respect of any fees, expenses, reimbursements or indemnities then due to the Lenders and the issuer(s) of Letters of Credit; (E) fifth, to pay interest and fees in respect of Supplemental Loans, Credit Support Obligations, Letters of Credit and other Priority Obligations; (F) sixth, to the ratable payment or prepayment of principal outstanding on the Priority Obligations; (G) seventh, to provide required cash collateral, if required pursuant to SECTION 3.10 and (H) eighth, to the ratable payment of all Ratable Obligations as provided in the Collateral Sharing Agreement. The order of priority set forth in this SECTION 12.3 and the related provisions of this Agreement and the Collateral Sharing Agreement are set forth solely to determine the rights and priorities of the Agent, the Lenders, the issuer(s) of Letters of Credit as among themselves or between such parties and the Noteholder. The order of priority set forth in CLAUSES (D) through (H) of this SECTION 12.3 may at any time and from time to time be changed by the Required Creditors without necessity of notice to or consent of or approval by the Borrower, or any other Person. The order of priority set forth in CLAUSES (A) through (C) of this SECTION 12.3 may be changed only with the prior written consent of the Agent. 12.4 RELATIONS AMONG LENDERS. (A) Except with respect to the exercise of set-off rights of any Lender in accordance with SECTION 12.1, the proceeds of which are applied in accordance with this Agreement and the Collateral Sharing Agreement, and except as set forth in the following sentence, each Lender agrees that it will not take any action, nor institute any actions or proceedings, against the Borrower or any other obligor hereunder or with respect to any Collateral or any Loan Document, including, without limitation, under the Collateral Documents or the Collateral Sharing Agreement, without the prior written consent of the Required Creditors or, as may be provided in this Agreement or the other Loan Documents, at the direction of the Agent. (B) The Lenders are not partners or co-venturers, and no Lender shall be liable for the acts or omissions of, or (except as otherwise set forth herein in case of the Agent or Collateral Agent) authorized to act for, any other Lender. The Agent shall have the exclusive right on behalf of the Lenders to enforce on the payment of the principal of and interest on any Loan after the date such principal or interest has become due and payable pursuant to the terms of this Agreement. ARTICLE XIII: BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS 94 13.1 SUCCESSORS AND ASSIGNS. The terms and provisions of the Loan Documents shall be binding upon and inure to the benefit of the Borrower, the Agent, the Collateral Agent, the Arranger, the Issuing Banks and the Lenders and their respective successors and assigns, except that (i) the Borrower shall not have the right to assign its rights or obligations under the Loan Documents and (ii) any assignment by any Lender must be made in compliance with Section 13.3 hereof. Notwithstanding CLAUSE (ii) of this SECTION 13.1, any Lender may at any time, without the consent of the Borrower or the Agent, assign all or any portion of its rights under this Agreement and its Notes to a Federal Reserve Bank; PROVIDED, HOWEVER, that no such assignment shall release the transferor Lender from its obligations hereunder. The Agent may treat the payee of any Note as the owner thereof for all purposes hereof unless and until such payee complies with SECTION 13.3 hereof in the case of an assignment thereof or, in the case of any other transfer, a written notice of the transfer is filed with the Agent. Any assignee or transferee of a Note agrees by acceptance thereof to be bound by all the terms and provisions of the Loan Documents. Any request, authority or consent of any Person, who at the time of making such request or giving such authority or consent is the holder of any Note, shall be conclusive and binding on any subsequent holder, transferee or assignee of such Note or of any Note or Notes issued in exchange therefor. 13.2 PARTICIPATIONS. (A) PERMITTED PARTICIPANTS; EFFECT. Subject to the terms set forth in this SECTION 13.2, any Lender (including any Lender which becomes a party hereto in connection with an assignment permitted pursuant to SECTION 13.3) may, in the ordinary course of its business and in accordance with applicable law, at any time sell to one or more banks or other entities (collectively, "PARTICIPANTS") participating interests in any Loan owing to such Lender, any Note held by such Lender, any Supplemental Loan Commitment of such Lender, any L/C Interest of such Lender or any other interest of such Lender under the Loan Documents on a pro rata or non-pro rata basis. Notice of such participation to the Borrower and the Agent shall be required prior to any participation becoming effective with respect to a Participant which is not a Holder of Secured Obligations or an Affiliate thereof. In the event of any such sale by a Lender of participating interests to a Participant, such Lender's obligations under the Loan Documents shall remain unchanged, such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, such Lender shall remain the holder of any such Note for all purposes under the Loan Documents, all amounts payable by the Borrower under this Agreement shall be determined as if such Lender had not sold such participating interests, and the Borrower and the Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under the Loan Documents except that, for purposes of ARTICLE IV hereof, the Participants shall be entitled to the same rights as if they were Lenders. (B) VOTING RIGHTS. Each Lender shall retain the sole right to approve, without the consent of any Participant, any amendment, modification or waiver of any provision of the Loan Documents other than any amendment, modification or waiver with respect to any Loan, Letter of Credit or Supplemental Loan Commitment in which such Participant has an interest which forgives principal, interest or fees or reduces the interest rate or fees payable pursuant to the terms of this Agreement with respect to any such Loan, Letter of Credit or Supplemental Loan 95 Commitment, postpones any date fixed for any regularly-scheduled payment of principal of, or interest or fees on, any such Loan, Letter of Credit or Supplemental Loan Commitment, or releases all or substantially all of the Collateral, if any, securing any such Loan or Letter of Credit. In the event any Lender desires to sell a participation and grant to the Participant any greater voting rights than set forth above, it shall not be permitted to do so without the prior written consent of the Borrower, which consent shall not be unreasonably withheld or delayed. (C) BENEFIT OF SETOFF. The Borrower agrees that each Participant shall be deemed to have the right of setoff provided in SECTION 12.1 hereof in respect to its participating interest in amounts owing under the Loan Documents to the same extent as if the amount of its participating interest were owing directly to it as a Lender under the Loan Documents, PROVIDED that each Lender shall retain the right of setoff provided in SECTION 12.1 hereof with respect to the amount of participating interests sold to each Participant except to the extent such Participant exercises its right of setoff. The Lenders agree to share with each Participant, and each Participant, by exercising the right of setoff provided in SECTION 12.1 hereof, agrees to share with each Lender (and, if applicable under the Collateral Sharing Agreement, the Noteholder), any amount received pursuant to the exercise of its right of setoff, such amounts to be shared in accordance with SECTION 12.2 hereof and SECTION 8 of the Collateral Sharing Agreement as if each Participant were a Lender. 13.3 ASSIGNMENTS. (A) PERMITTED ASSIGNMENTS. Any Lender may, in the ordinary course of its business and in accordance with applicable law and the provisions of this SECTION 13.3, assign all or a portion of its rights and obligations under this Agreement (including, without limitation, its Supplemental Loan Commitment, all Loans owing to it, all of its participation interests in existing Letters of Credit and its obligation to participate in additional Letters of Credit hereunder) as follows: (i) at any time to one or more of the Holders of Secured Obligations (or an Affiliate thereof) or one or more Eligible Assignees; (ii) at any time to one or more Persons consented to by the Borrower (which consent shall not be unreasonably withheld or delayed); (iii) following the occurrence of a Transfer Default or at any time after November 30, 1998, to any other banks or other entities (the purchasing entities under clauses (i) through (iii) being herein collectively, the "PURCHASERS"). Each assignment shall be of a constant, and not a varying, ratable percentage of all of the assigning Lender's rights and obligations under this Agreement. Such assignment shall be substantially in the form of EXHIBIT E hereto and shall not be permitted hereunder unless such assignment is either for all of such Lender's rights and obligations under the Loan Documents or, without the prior written consent of the Agent, involves loans and commitments in an aggregate amount of at least $5,000,000 (which minimum amount may be waived by the Required Lenders). 96 The consent of the Agent shall be required prior to an assignment becoming effective with respect to a Purchaser which is not a Lender or an Affiliate thereof. (B) EFFECT; EFFECTIVE DATE. Upon (i) delivery to the Agent of a notice of assignment, substantially in the form attached as APPENDIX I to EXHIBIT E hereto (a "NOTICE OF ASSIGNMENT"), together with any consent required by SECTION 13.3(A) hereof, and (ii) payment of a $3,500 fee to the Agent for processing such assignment, such assignment shall become effective on the effective date specified in such Notice of Assignment. The Notice of Assignment shall contain a representation by the Purchaser to the effect that none of the consideration used to make the purchase of the Commitment, Loans and L/C Obligations under the applicable assignment agreement are "plan assets" as defined under ERISA and that the rights and interests of the Purchaser in and under the Loan Documents will not be "plan assets" under ERISA. On and after the effective date of such assignment, such Purchaser, if not already a Lender, shall for all purposes be a Lender party to this Agreement and any other Loan Documents executed by the Lenders and shall have all the rights and obligations of a Lender under the Loan Documents, to the same extent as if it were an original party hereto, and no further consent or action by the Borrower, the Lenders or the Agent shall be required to release the transferor Lender with respect to the percentage of the Aggregate Supplemental Loan Commitment, Loans and Letter of Credit participations assigned to such Purchaser. Upon the consummation of any assignment to a Purchaser pursuant to this SECTION 13.3(B), the transferor Lender, the Agent and the Borrower shall make appropriate arrangements so that replacement Notes are issued to such transferor Lender and new Notes or, as appropriate, replacement Notes, are issued to such Purchaser, in each case in principal amounts reflecting their Supplemental Loan Commitment and their Existing Loans, as adjusted pursuant to such assignment. (C) THE REGISTER. The Agent shall maintain at its address referred to in SECTION 14.1 a copy of each assignment delivered to and accepted by it pursuant to this SECTION 13.3 and a register (the "REGISTER") for the recordation of the names and addresses of the Lenders and the Supplemental Loan Commitment of and principal amount of the Loans owing to, each Lender from time to time and whether such Lender is an original Lender or the assignee of another Lender pursuant to an assignment under this SECTION 13.3. The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Borrower and each of its Subsidiaries, the Agent and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice. 13.4 CONFIDENTIALITY. For purposes of this SECTION 13.4, "Confidential Information" means information delivered or presented to the Agent or the Lenders by or on behalf of the Borrower or its Subsidiaries in connection with the transactions contemplated by or otherwise pursuant to this Agreement and the other Loan Documents that is proprietary in nature and that was either (a) delivered or presented in connection with the Sale Initiative or (b) clearly marked or labeled or otherwise adequately identified when received as being confidential information of the Borrower or such Subsidiary; PROVIDED that such term does not include information that: 97 (i) was publicly known or otherwise known to the Agent or any of the Lenders, as applicable, prior to the time of such disclosure; (ii) subsequently becomes publicly known to the Agent or any of the Lenders other than through disclosure by or on behalf of the Borrower or any of its Subsidiaries; (iii) otherwise becomes known to the Agent or any of the Lenders other than through a disclosure by or on behalf of the Borrower or its Subsidiaries; or (iv) constitutes financial statements delivered to the Agent or any of the Lenders under SECTION 7.1 that are otherwise publicly available. Subject to SECTION 13.5, the Agent and the Lenders shall hold all Confidential Information in accordance with such Person's customary procedures adopted by such Person in good faith to protect confidential information of third parties delivered to it and in accordance with safe and sound banking practices; PROVIDED that the Agent and the Lenders, in any event may deliver or disclose the Confidential Information to: (1) the Agent, any other Lender or the Noteholder; (2) a prospective Transferee in connection with the contemplated participation or assignment permitted under the terms hereof to the extent reasonably required in connection therewith if such prospective Transferee has agreed in writing prior to its receipt of such Confidential Information to be bound by the terms of this SECTION 13.4; (3) the Agent's or any Lender's officers, trustees, employees, agents, attorneys and affiliates (to the extent such disclosure reasonably relates to the administration of the Loans); (4) the Agent's or any Lender's financial advisors and other professional advisors who agree to hold confidential the Confidential Information substantially in accordance with the terms of this SECTION 13.4; (5) as required or requested by any Governmental Authority or representative thereof having jurisdiction over the Agent or any of the Lenders or which requires access to information about the Agent's or the Lender's loan portfolios; or (6) any other Person to which such delivery or disclosure may be necessary or appropriate (A) to effect compliance with any law, rule, regulation or order applicable to the Agent or the Lenders; (B) in response to subpoena or other legal process; (C) in connection with any litigation to which the Agent or any Lender is a party; or (D) if any Default has occurred and is continuing, to the extent the Agent or any Lender may reasonably determine such delivery and disclosure may be necessary or appropriate in the enforcement or for the protection of the rights and remedies under this Agreement and the other Loan Documents. 98 In no event shall the Agent or any Lender be obligated or required to return any materials furnished by the Borrower; PROVIDED, HOWEVER, each prospective Transferee shall be required to agree that if it does not become a participant or assignee it shall return all materials furnished to it by or on behalf of the Borrower in connection with this Agreement; PROVIDED, FURTHER, however if any such disclosure is to be made pursuant to legal process, the Agent or Lender, as applicable, which may make such disclosure shall use its reasonable efforts to notify the Borrower of such legal process prior to making such disclosure, provided the failure to provide such notice shall not result in any liability on the part of such Person. 13.5 DISSEMINATION OF INFORMATION. The Borrower authorizes each Lender to disclose to any permitted Participant or Purchaser or any other Person acquiring an interest in the Loan Documents by operation of law (each a "TRANSFEREE") and any prospective Transferee any and all information in such Lender's possession concerning the Borrower and its Subsidiaries; PROVIDED that prior to any such disclosure, such prospective Transferee shall agree to preserve in accordance with SECTION 13.4 the confidentiality of any confidential information described therein. 13.6 GUARANTY TERMINATIONS AND PLEDGE RELEASES. Each of the Lenders, Issuing Banks and the Agent agrees that upon the consummation of any transaction involving the sale of all or substantially all of the assets or stock of a Material Subsidiary, which sale is permitted pursuant to the terms of SECTION 7.3(B), the Agent, for itself and on behalf of the Lenders and the Issuing Banks, shall release and terminate the Guaranty with respect to such Material Subsidiary which is the subject of such transaction or, as applicable, release the stock of such Material Subsidiary from the pledge to the Agent. ARTICLE XIV: NOTICES 14.1 GIVING NOTICE. Except as otherwise permitted by SECTION 2.14 with respect to borrowing notices, all notices and other communications provided to any party hereto under this Agreement or any other Loan Documents shall be in writing or by telex or by facsimile and addressed or delivered to such party at its address set forth below its signature hereto or at such other address as may be designated by such party in a notice to the other parties. Any notice, if mailed and properly addressed with postage prepaid, shall be deemed given when received; any notice, if transmitted by telex or facsimile, shall be deemed given when transmitted (answerback confirmed in the case of telexes). 14.2 CHANGE OF ADDRESS. The Borrower, the Agent and any Lender may each change the address for service of notice upon it by a notice in writing to the other parties hereto. ARTICLE XV: WAIVERS Effective as of the Effective Date, the Borrower's non-compliance with the following provisions of the Original Credit Agreement for the periods specified (the "SPECIFIED DEFAULTS") is hereby waived: 99 (a) Noncompliance with the provisions of SECTION 7.1(A) of the Credit Agreement requiring, without limitation, delivery of the Borrower's unaudited consolidating and consolidated financial information for the fiscal quarter ended November 30, 1997, together with an Officer's Certificate and compliance certificate on or prior to January 15, 1998 and plan and forecast for the fiscal year ending November 30, 1998; (b) Noncompliance with the provisions of SECTION 7.1(A) of the Original Credit Agreement requiring, without limitation, delivery of the Borrower's audited consolidating and consolidated financial information for the year ended November 30, 1997, together with an Officer's Certificate, compliance certificate, audit report, management letters (if any) and accountant's certificate on or prior to March 2, 1998; PROVIDED, HOWEVER, such waiver shall remain effective only if such items are delivered on or prior to the date that is five (5) Business Days after the date hereof; (c) Noncompliance with the provisions of SECTION 7.3(F)(vi) (Restricted Payments) of the Original Credit Agreement as a result of the Borrower's payment of a dividend on December 24, 1997 after the occurrence and during the continuance of an Unmatured Default; (d) Noncompliance with the provisions of SECTION 7.3(M) of the Original Credit Agreement resulting from the amendment by Binks Sames Ltd. of its Articles of Association; (e) Noncompliance with the provisions of SECTION 7.3(S) of the Original Credit Agreement prior to the date hereof resulting from the failure to evidence intercompany indebtedness with the promissory note(s) required thereunder; (f) Noncompliance as of November 30, 1997 and February 28, 1998 with the provisions of SECTION 7.4(A) of the Original Credit Agreement; (g) Noncompliance as of November 30, 1997 and February 28, 1998 with the provisions of SECTION 7.4(B) (Maximum Leverage Ratio) of the Original Credit Agreement; (h) Noncompliance as of November 30, 1997 and February 28, 1998 with the provisions of SECTION 7.4(C) (Minimum Consolidated Tangible Net Worth) of the Original Credit Agreement; (i) Noncompliance for the periods ending November 30, 1997 and February 28, 1998 with the provisions of SECTION 7.4(D) (Minimum Interest Expense Coverage Ratio) of the Credit Agreement; (j) Noncompliance prior to the date hereof with the provisions of SECTION 7.1(B) of the Original Credit Agreement requiring, without limitation, the delivery of an Officer's Certificate concerning Defaults or Unmatured Defaults; 100 (k) Noncompliance prior to the date hereof with the provisions of SECTION 7.1(C) of the Original Credit Agreement requiring, without limitation, written notice of certain lawsuits or actions not previously disclosed and which are disclosed on SCHEDULE 6.7; (l) Noncompliance prior to the date hereof with the provisions of SECTION 7.1(G) of the Original Credit Agreement requiring, without limitation, delivery to the Lenders of certain press releases; (m) Noncompliance prior to the date hereof with the provisions of SECTION 7.2(A) requiring each Subsidiary to maintain its corporate existence with respect to the Borrower's Subsidiaries in Mexico and Italy. (n) Noncompliance prior to the date hereof with the provisions of SECTION 7.2(C) of the Original Credit Agreement requiring, without limitation, payment of taxes as a result of the Borrower's failure to pay its real estate taxes for its property in Oregon which have been paid prior to the date hereof and material claims with respect to the Disclosed Disputes; (o) Default under SECTION 8.1(E)(i) of the Original Credit Agreement resulting from the defaults under the Note Purchase Agreement which are being waived as of the date of this Agreement pursuant to the Waiver and Second Amendment thereto; and (p) Other Defaults which may have resulted prior to the date hereof from the facts and matters which are within the actual knowledge of each of the Lenders, where "actual knowledge" means facts known to the Lenders' loan officers which had significant involvement in credit decisions involving the Borrower provided neither the Agent nor any Lenders shall have any duty of inquiry with respect thereto. Each of the Agent and the Lenders represents that it does not have "actual knowledge" (as defined above) as of the date hereof of any Defaults or Unmatured Defaults other than those set forth above. ARTICLE XVI: COUNTERPARTS This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one agreement, and any of the parties hereto may execute this Agreement by signing any such counterpart. This Agreement shall be effective when it has been executed by the Borrower, the Agent and the Lenders and each party has notified the Agent by telex or telephone, that it has taken such action. [Remainder of This Page Intentionally Blank] 101 IN WITNESS WHEREOF, the Borrower, the Lenders and the Agent have executed this Agreement as of the date first above written. BINKS SAMES CORPORATION, as the Borrower By: /s/ Jeffrey W. Lemajeur ------------------------------ Jeffrey W. Lemajeur Vice President, Chief Financial Officer Address: 9201 Belmont Avenue Franklin Park, IL 60131-2887 Attention: Jeffrey W. Lemajeur Telephone No.: 847/671-3000 Facsimile No.: 847/671-5690 THE FIRST NATIONAL BANK OF CHICAGO, as Agent and as a Lender By: /s/ Linda M. Thompson ------------------------------ Name: Linda M. Thompson ------------------------- Title: ----------------------- Address: One First National Plaza Suite 0061 Chicago, Illinois 60670-0061 Attention: Linda M. Thompson Telephone No.: 312/732-6423 Facsimile No.: 312/732-1775 LASALLE NATIONAL BANK, as a Lender By: /s/ Rob McMahon ------------------------------ Name: Rob McMahon Title: Address: 135 South LaSalle Street Chicago, Illinois 60603 Attention: Rob McMahon Telephone No.: 312/904-8618 Facsimile No.: 312/904-8169 COMERICA BANK, as a Lender By: /s/ Cynthia B. Jones ------------------------------ Name: Cynthia B. Jones Title: Address: 500 Woodward Avenue 3rd Floor Detroit, Michigan 48226-3205 Attention: Cynthia B. Jones Telephone No.: 313/222-3780 Facsimile No.: 313/222-5706 HARRIS TRUST AND SAVINGS BANK, as a Lender By: /s/ Sandra J. Sanders ------------------------------ Name: Sandra J. Sanders Title: Vice President Address: 200 West Monroe Street 17th Floor Chicago, Illinois 60606 Attention: Sandra J. Sanders Telephone No.: 312/461-7729 Facsimile No.: 312/765-1724 EX-10.8 3 EXHIBIT 10.8 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- BINKS SAMES CORPORATION _______________________ WAIVER AND SECOND AMENDMENT TO NOTE PURCHASE AGREEMENT _______________________ Re: Note Purchase Agreement Dated as of November 30, 1993 and $15,000,000 Original Principal Amount of 7.14% Series A Senior Notes Due December 6, 2008 DATED MARCH 16, 1998 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TABLE OF CONTENTS
PAGE 1. AMENDMENTS AND WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . 2 1.1 Amendment of Existing Note Purchase Agreement. . . . . . . . . . . 2 1.2 Amendment and Restatement of Existing Notes. . . . . . . . . . . . 2 1.3 Waivers of Existing Events of Default. . . . . . . . . . . . . . . 2 2. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . 2 2.1 Corporate Existence and Power. . . . . . . . . . . . . . . . . . . 2 2.2 Corporate Authority. . . . . . . . . . . . . . . . . . . . . . . . 2 2.3 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.4 Full Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.5 Financial Information. . . . . . . . . . . . . . . . . . . . . . . 3 2.6 Outstanding Debt and Liens . . . . . . . . . . . . . . . . . . . . 3 2.7 Litigation; No Violation of Governmental Orders or Laws. . . . . . 4 2.8 No Conflicts with Agreements, Etc. . . . . . . . . . . . . . . . . 4 2.9 Consents, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.10 No Defaults. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.11 Compliance with Law. . . . . . . . . . . . . . . . . . . . . . . . 5 2.12 Title to Property; Leases. . . . . . . . . . . . . . . . . . . . . 5 2.13 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . 5 2.14 Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.15 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 3. CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . . . . . . . . . 7 3.1 Officer Certificates . . . . . . . . . . . . . . . . . . . . . . . 7 3.2 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . 8 3.3 Reaffirmation of Guaranty Agreement. . . . . . . . . . . . . . . . 8 3.4 Amended and Restated Credit Agreement. . . . . . . . . . . . . . . 8 3.5 Collateral Sharing Agreement . . . . . . . . . . . . . . . . . . . 8 3.6 Collateral Documents . . . . . . . . . . . . . . . . . . . . . . . 8 3.7 Lien Searches. . . . . . . . . . . . . . . . . . . . . . . . . . . 9 3.8 Cash Management Agreement. . . . . . . . . . . . . . . . . . . . . 9 3.9 Termination Of Factoring Agreement . . . . . . . . . . . . . . . . 10 3.10 Binks Sames Ltd. Charter Amendment . . . . . . . . . . . . . . . . 10 3.11 Accrued Interest on Existing Notes . . . . . . . . . . . . . . . . 10 3.12 Exchange of Existing Notes . . . . . . . . . . . . . . . . . . . . 10 3.13 Closing Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.14 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.15 Proceedings Satisfactory . . . . . . . . . . . . . . . . . . . . . 10 4. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.1 Effect of Amendment and Waiver . . . . . . . . . . . . . . . . . . 11 4.2 No Legend Required . . . . . . . . . . . . . . . . . . . . . . . . 11 4.3 Fees and Expenses. . . . . . . . . . . . . . . . . . . . . . . . . 11 4.4 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.5 Duplicate Originals; Execution in Counterpart. . . . . . . . . . . 12 4.6 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
i TABLE OF CONTENTS
PAGE Schedule A -- Noteholder Information Schedule 1 -- Waivers of Existing Events of Default Schedule 2.6 -- Outstanding Debt and Liens Schedule 2.7 -- Pending Litigation Schedule 2.9 -- Consents Schedule 2.14(i) -- Recording Information Exhibit 1.1 -- Amendment of Existing Note Purchase Agreement Exhibit 1.2 -- Amendment and Restatement of Existing Notes Exhibit 3.6(a) -- Form of Mortgage Exhibit 3.6(b) -- Form of Security Agreement Exhibit 3.6(c) -- Form of Patent Security Agreement Exhibit 3.6(d) -- Form of Pledge Agreement
ii BINKS SAMES CORPORATION WAIVER AND SECOND AMENDMENT TO NOTE PURCHASE AGREEMENT Re: Note Purchase Agreement Dated as of November 30, 1993 and $15,000,000 Original Principal Amount of 7.14% Series A Senior Notes Due December 6, 2008 Dated March 16, 1998 The Equitable Life Assurance Society of the United States c/o Alliance Corporate Finance Group Incorporated 1345 Avenue of the Americas, 39th Floor New York, New York 10105 Ladies and Gentlemen: Reference is made to the Note Purchase Agreement dated as of November 30, 1993, as amended by a Waiver and First Amendment to the Note Purchase Agreement dated September 23, 1997 (such Note Purchase Agreement, as so amended, herein referred to as the "EXISTING NOTE PURCHASE AGREEMENT"), between Binks Sames Corporation (formerly Binks Manufacturing Company), a Delaware corporation (the "COMPANY"), and each of the institutions named in Schedule I thereto, under and pursuant to which Fifteen Million Dollars ($15,000,000) aggregate principal amount of 7.14% Series A Senior Notes due December 6, 2008 (the "EXISTING NOTES") were originally issued. All capitalized terms used but not specifically defined in this Amendment have the respective meanings assigned to them in, or pursuant to the provisions of, the Existing Note Purchase Agreement, as amended by this Amendment (the Existing Note Purchase Agreement, as so amended, is herein referred to as the "AMENDED NOTE PURCHASE AGREEMENT"). The Company requests the amendment of certain provisions of the Existing Note Purchase Agreement and the waiver of the existing Defaults and Events of Default specified herein, and, in exchange therefor, the Company agrees to amend and restate the Existing Notes to, among other things, increase the interest rate and shorten the maturity applicable thereto (the Existing Notes, as amended and restated pursuant to this Amendment, are herein referred to as the "AMENDED NOTES"), to grant, and to cause one or more of its Subsidiaries to grant, the security interests described in the Collateral Documents, and to amend such other terms and provisions of the Existing Note Purchase Agreement, in the manner herein provided. In consideration of the foregoing and for other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the Company and you (subject to satisfaction of the conditions set forth below in Section 3) hereby agree as follows: 1. AMENDMENTS AND WAIVERS 1.1 AMENDMENT OF EXISTING NOTE PURCHASE AGREEMENT. The Existing Note Purchase Agreement is hereby amended in the manner specified in Exhibit 1.1 hereto. 1.2 AMENDMENT AND RESTATEMENT OF EXISTING NOTES. The Existing Notes are hereby amended and restated in the manner specified in Exhibit 1.2 hereto. 1.3 WAIVERS OF EXISTING EVENTS OF DEFAULT. Each existing Event of Default under the Existing Note Purchase Agreement set forth in Schedule 1 hereto is hereby waived. 2. REPRESENTATIONS AND WARRANTIES To induce you to enter into this Amendment, the Company makes the representations and warranties set forth in this Section 2. The Company agrees and acknowledges that for purposes of Section 12.1(c) of the Amended Note Purchase Agreement, its representations and warranties, as set forth in this Amendment, are and constitute representations and warranties furnished in connection with the Amended Note Purchase Agreement. 2.1 CORPORATE EXISTENCE AND POWER. Each of the Company, SEI and each other Material Subsidiary of the Company is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation, is duly qualified to do business in each additional jurisdiction where the failure to so qualify would have a Material Adverse Effect, and has all requisite corporate power to own its Properties and to carry on its business as now being conducted and as proposed to be conducted. Each of the Company and each Subsidiary has all requisite corporate power and authority to execute, deliver and perform its obligations under each Financing Document to which it is a party. 2.2 CORPORATE AUTHORITY. The execution, delivery and performance by the Company and each Subsidiary of each Financing Document to which the Company or such Subsidiary is a party is within the corporate powers of the Company or such Subsidiary, as the case may be, and has been duly authorized by all necessary corporate action on the part of the board of directors (no action on the part of the stockholders of the Company or any such Subsidiary being required by law) of the Company or such Subsidiary. 2.3 BINDING EFFECT. Each Financing Document to which the Company or any Subsidiary is a party has been duly executed by the Company or such Subsidiary and is a legal, valid and binding obligation of the Company or such Subsidiary, as the case may be, enforceable against the Company or such Subsidiary in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally, or by general principles of equity. 2 2.4 FULL DISCLOSURE. The written statements and materials furnished by or on behalf of the Company (other than those marked "Draft," "subject to review" or words of similar intent or meaning) to you in connection with this Amendment and the transactions contemplated hereby do not contain any untrue statement of a material fact or omit a material fact necessary to make the statements contained therein or herein not misleading in light of the circumstances in which they were made. There is no fact known to the Company which the Company has not disclosed to you in writing which materially affects adversely or, so far as the Company can now reasonably foresee, will materially affect adversely the business, prospects, profits, Properties or condition (financial or otherwise) of the Company and its Subsidiaries, taken as a whole, or the ability of the Company and each Subsidiary to perform its obligations set forth in the Financing Documents to which it is a party. 2.5 FINANCIAL INFORMATION. (a) FINANCIAL STATEMENTS. The Company has delivered to you true and complete copies of its consolidated unaudited financial statements for the fiscal year ended November 30, 1997. Such historical financial statements were prepared in accordance with GAAP consistently applied and fairly present the financial condition of the Company and its Subsidiaries as of the date thereof and the results of operations for the period covered thereby. (b) PROJECTIONS. The Company has delivered to you projected financial statements of the Company and the Subsidiaries listed in Exhibit A to the Disclosure Letter (collectively, the "PROJECTIONS"). The assumptions used in the preparation of the Projections were reasonable when made and continue to be reasonable. The Projections have been prepared by the financial personnel of the Company with the assistance of its advisors in light of the business of the Company and its Subsidiaries. The Projections have been prepared in good faith, have a reasonable basis and represent the good faith opinion of the Company as to the projected results of the operations of the Company and its Subsidiaries. No material facts or events known to the Company have occurred since the preparation of the Projections that would cause the Projections, taken as a whole, not to be reasonably attainable. 2.6 OUTSTANDING DEBT AND LIENS. Schedule 2.6 hereto sets forth a correct and complete schedule and brief description of all Debt of the Company and its Subsidiaries outstanding on the Effective Date and all consensual Liens securing such Debt. There are no Liens on any of the Property of the Company or any of its Subsidiaries except Liens permitted by Section 7.3(C) of the Amended Note Purchase Agreement. 2.7 LITIGATION; NO VIOLATION OF GOVERNMENTAL ORDERS OR LAWS. (a) Except as set forth on Schedule 2.7 hereto, there are no actions, suits or proceedings pending, or, to the knowledge of the Company after due inquiry, threatened against or affecting the Company or any of its Subsidiaries or any Properties or rights of any of them which individually or in the aggregate could reasonably be expected to have a Material Adverse Effect. (b) There are no actions, suits or proceedings pending, or, to the knowledge of the Company after due inquiry, threatened against or affecting the Company or any of its 3 Subsidiaries which seek to enjoin, or otherwise prevent the consummation of, the transactions contemplated herein or to recover any damages or obtain any relief as a result of any of the transactions contemplated herein in any court or before any arbitrator of any kind or before or by any Governmental Body. (c) Neither the Company nor any Subsidiary is now, or will be after or as a result of giving effect to the transactions contemplated herein, in default under, or in violation of, any Order of any court, arbitrator or Governmental Body or of any federal, state, local or foreign statute, ordinance or law or of any rule or regulation of any Governmental Body, which default or violation has or could reasonably be expected to have a Material Adverse Effect; and, except as set forth in Schedule 2.7 hereto, neither the Company nor any Subsidiary is subject to any Order of any court or Governmental Body arising out of any action, suit or proceeding under any statute, law, rule or regulation respecting antitrust, monopoly, restraint of trade or unfair competition. 2.8 NO CONFLICTS WITH AGREEMENTS, ETC. Neither the execution and delivery by the Company or any Subsidiary of any Financing Document to which it is a party, nor the fulfillment of, or compliance with, the terms and provisions hereof or thereof, will conflict with, or result in a breach or violation of any term, condition or provision of, or constitute a default under, or result in the creation of any Lien on any Property of the Company or such Subsidiary pursuant to its charter or by-laws, or any contract, agreement, mortgage, indenture, lease or instrument to which it is a party or by which it is bound or to which it or any of its Property is subject, or any Order, statute, law, rule or regulation to which it or any of its Property is subject, which individually or in the aggregate could reasonably be expected to have a Material Adverse Effect. 2.9 CONSENTS, ETC. No consent, approval or authorization of, or declaration, registration or filing (except as contemplated under Section 3.7) with, any Governmental Body or any nongovernmental Person, including, without limitation, any creditor or stockholder of the Company or any Subsidiary, is required in connection with the execution or delivery by the Company or any Subsidiary of any Financing Document to which it is a party or the performance by the Company or such Subsidiary of its obligations thereunder, or as a condition to the legality, validity or enforceability of any such Financing Document, except for such consents, approvals, authorizations, declarations, registrations or filings of the Lenders or the Agent or as are listed in Schedule 2.9, all of which have been or will on or prior to the date hereof be obtained and are or will then be in full force and effect. 2.10 NO DEFAULTS. No event has occurred and is continuing and no condition exists which, upon execution and delivery of this Amendment (and giving effect to Section 1.3), would constitute a Default or Event of Default. Neither the Company nor any Subsidiary is in default in the payment of principal or interest on any Debt or in default under any instrument or instruments or agreements under and subject to which any Debt has been issued and no event has occurred and is continuing under the provisions of any such instrument or agreement which with the lapse of time or the giving of notice, or both, would constitute a default or an event of default thereunder, which individually or in the aggregate could reasonably be expected to have a Material Adverse Effect. 4 2.11 COMPLIANCE WITH LAW. Except as disclosed in Schedule 6.18 to the Credit Agreement, the Company and each Subsidiary is in compliance with all laws, ordinances, governmental rules and regulations to which it is subject, including, without limitation, the Occupational Safety and Health Act of 1970, ERISA and all Environmental Laws, except for any noncompliance that individually or in the aggregate could reasonably be expected to have a Material Adverse Effect. 2.12 TITLE TO PROPERTY; LEASES. The Company and its Subsidiaries have good title to their respective Properties that individually or in the aggregate are material, in each case free and clear of Liens prohibited by Section 7.3(C) of the Amended Note Purchase Agreement. All leases that individually or in the aggregate are material are valid and subsisting and are in full force and effect in all material respects. 2.13 ENVIRONMENTAL MATTERS. Except as disclosed in Schedule 6.18 of the Credit Agreement, the Company does not have knowledge of any claim, has not received any notice of any claim, and no proceeding has been instituted raising any claim against the Company or any of its Subsidiaries or any of their respective real properties now or formerly owned, leased or operated by the Company or any Subsidiary or other Property, alleging any damage to the environment or violation of any Environmental Laws, except, in each case, such as could not reasonably be expected to have a Material Adverse Effect. Except as otherwise disclosed to you in writing: (a) the Company does not have knowledge of any facts which would give rise to any claim, public or private, of violation of any Environmental Law or damage to the environment emanating from, occurring on or in any way related to real property now or formerly owned, leased or operated by the Company or any Subsidiary or to other Property or its use, except, in each case, such as could not reasonably be expected to have a Material Adverse Effect; (b) neither the Company nor any Subsidiary has stored any Hazardous Materials on real property now or formerly owned, leased or operated by the Company or any such Subsidiary or disposed of any Hazardous Materials in a manner contrary to any Environmental Laws, in each case in any manner that could reasonably be expected to have a Material Adverse Effect; and (c) all buildings on all real properties now owned, leased or operated by the Company or any of its Subsidiaries are in compliance with applicable Environmental Laws, except where failure to comply could not reasonably be expected to have a Material Adverse Effect. 2.14 COLLATERAL. (a) COLLATERAL DOCUMENTS. (i) MORTGAGES. Each Mortgage creates a valid Lien upon the real property and interests described therein in favor of the Collateral Agent, and when such document has been recorded as indicated on Schedule 2.14(i) and all appropriate recording fees and taxes have been paid, such Lien shall be a perfected 5 first priority Lien subject to no other Liens except to the extent permitted by Section 7.3(C) of the Amended Note Purchase Agreement. (ii) SECURITY AGREEMENTS. Each of the Security Agreements creates a valid Lien in and to the Collateral (as defined in such Security Agreement) in favor of the Collateral Agent, and when all UCC-1 financing statements required by such Security Agreement to be filed with public recording offices have been so filed, and all taxes, recording fees and other fees and charges required by applicable law to be paid in connection therewith have been duly paid in full, such Lien shall be a perfected, first priority Lien on the Collateral of a type which may be perfected by the filing of a UCC financing statement or by possession, subject to no Liens except to the extent permitted by Section 7.3(C) of the Amended Note Purchase Agreement. (iii) PATENT SECURITY AGREEMENT. The Patent Security Agreement of the Company dated the Effective Date creates a valid Lien in and to the Patents and Licenses (as such terms are defined in the Patent Security Agreement) in favor of the Collateral Agent, and upon the filing thereof with the United States Patent and Trademark Office and the filing of UCC-1 financing statements as therein provided for, such Lien will be a perfected first priority Lien in and to the Patents and Licenses in which a Lien may be perfected by the filing of a UCC financing statement or filing with the United States Patent and Trademark Office, subject to no Liens except to the extent permitted by Section 7.3(C) of the Amended Note Purchase Agreement; (iv) TRADEMARK SECURITY AGREEMENT. The Trademark Security Agreement of the Company dated the Effective Date creates a valid Lien in and to the Trademarks and Licenses (as such terms are defined in the Trademark Security Agreement) in favor of the Collateral Agent, and upon the filing thereof with the United States Patent and Trademark Office and the filing of UCC-1 financing statements as therein provided for, such Lien will be a perfected first priority Lien in and to the Trademarks and Licenses in which a Lien may be perfected by the filing of a UCC financing statement or filing with the United States Patent and Trademark Office, subject to no Liens except to the extent permitted by Section 7.3(C) of the Amended Note Purchase Agreement; and (v) PLEDGE AGREEMENTS. Each of the Pledge Agreements creates a valid Lien in and to the Pledged Collateral (as defined in such Pledge Agreement) in favor of the Collateral Agent, and upon delivery of such Pledged Collateral to the Collateral Agent such Lien will be a perfected first priority Lien in and to such of the Pledged Collateral as to which a Lien may be perfected by delivery, subject to no Liens except to the extent permitted by Section 7.3(C) of the Amended Note Purchase Agreement. (b) Warranties and Representations True. All warranties and representations made by the Company and SEI in each of the Collateral Documents are true and correct as of the date hereof. 2.15 Solvency. The fair value of the business and assets of the Company and each SEI is in excess of the amount that will be required to pay its liabilities (including, without limitation, contingent, subordinated, unmatured and unliquidated liabilities on existing debts, as such liabilities may become absolute and matured), in each case both prior to and after giving effect to the transactions contemplated by the Financing Documents and the Credit Agreement. After giving effect to the 6 transactions contemplated by the Financing Documents and the Credit Agreement, neither the Company nor SEI will be engaged in any business or transaction, or about to engage in any business or transaction, for which such Person has unreasonably small capital, and neither the Company nor SEI has or had any intent to hinder, delay or defraud any entity to which it is, or will become, on or after the Effective Date, indebted or to incur debts that would be beyond its ability to pay as such debts mature. 3. CONDITIONS PRECEDENT The amendments and the waivers set forth in Sections 1.1 and 1.2 shall become effective upon the satisfaction of the following conditions (the date of such effectiveness is herein referred to as the "EFFECTIVE DATE"): 3.1 OFFICER CERTIFICATES. (a) Company Secretary's Certificate. The Company shall have delivered to you a certificate, dated the Effective Date, certifying as to the resolutions attached thereto and other corporate proceedings relating to the authorization, execution and delivery of each of the Financing Documents to which the Company is a party. (b) Subsidiary Secretary's Certificates. Each Subsidiary shall have delivered to you a certificate, dated the Effective Date, certifying as to the resolutions attached thereto and other corporate proceedings relating to the authorization, execution and delivery of the Financing Documents to which such Subsidiary is a party. 3.2 OPINION OF COUNSEL. You shall have received from Vedder, Price, Kaufman & Kammholz, counsel for the Company and its Subsidiaries, an opinion, dated the Effective Date, in form and substance satisfactory to you and your special counsel. 3.3 REAFFIRMATION OF GUARANTY AGREEMENT. You shall have received from SEI a reaffirmation of the Guaranty Agreement, in form and substance satisfactory to you and your special counsel. 3.4 AMENDED AND RESTATED CREDIT AGREEMENT. The Company, the Lenders and the Agent shall have executed and delivered to you a copy of the Credit Agreement, which shall provide for at least $7,000,000 in new financing and otherwise be in form and substance satisfactory to you and your special counsel. 3.5 COLLATERAL SHARING AGREEMENT. Each of the Lenders, the Collateral Agent, the Company and SEI shall have delivered to you a fully executed counterpart of the Collateral Sharing Agreement, in form and substance satisfactory to you and your special counsel. 7 3.6 COLLATERAL DOCUMENTS. (a) MORTGAGES. Separate Mortgages relating to the Company's real properties located in the States of Georgia, Oregon and Texas, substantially in the form of Exhibit 3.6(a) hereto shall be duly executed and delivered by the Company and the Collateral Agent, and a copy of each thereof evidencing such due execution and delivery shall be delivered to you, certified as true and correct by an officer of the Company. (b) SECURITY AGREEMENTS. Separate Security Agreements, substantially in the form of Exhibit 3.6(b) hereto, shall be duly executed and delivered by the Collateral Agent and each of the Company and SEI, respectively, and a copy of each thereof evidencing such due execution and delivery shall be delivered to you, certified as true and correct by an officer of the Company. (c) PATENT SECURITY AGREEMENT. A Patent Security Agreement, substantially in the form of Exhibit 3.6(c) hereto, shall be duly executed and delivered by the Company and the Collateral Agent, and a copy thereof evidencing such due execution and delivery shall be delivered to you, certified as true and correct by an officer of the Company. (d) TRADEMARK SECURITY AGREEMENT. A Trademark Security Agreement substantially in the form of Exhibit 3.6(d) hereto, shall be duly executed and delivered by the Company and the Collateral Agent, and a copy thereof evidencing such due execution and delivery shall be delivered to you, certified as true and correct by the Company. (e) PLEDGE AGREEMENTS. Separate Pledge Agreements of the Company pledging 65% of the Capital Stock of Sames, S.A., Binks-Sames Limited and Binks Sames Canada, Ltd., and 100% of the Capital Stock of SEI shall be duly executed and delivered by the Company, and a copy of each thereof evidencing such due execution and delivery shall be delivered to you, certified as true and correct by the Company. All stock certificates and undated stock powers executed in blank required to be executed and delivered by the Company to the Collateral Agent by the terms of each of the Pledge Agreements shall have been so delivered, and the Company shall provide you with copies thereof, certified as true and correct by the Company. (f) PERFECTION OF LIENS. The Company shall have executed and delivered to the Collateral Agent all UCC-1 financing statements necessary to perfect the Liens of the Collateral Agent in the Collateral which may be perfected by the filing thereof and shall have delivered to the Collateral Agent all appropriate stock certificates (together with undated stock powers executed in blank to the Collateral Agent). (g) TERMINATION OR ASSIGNMENT OF EXISTING LIENS. All actions necessary to terminate, release or assign to the Collateral Agent any and all Liens (including all mortgages) on all properties of the Company and its Subsidiaries, other than Liens permitted under Section 7.3(C) of the Amended Note Purchase Agreement, shall have been taken in accordance with the provisions of the Collateral Documents. (h) LANDLORD AGREEMENTS. The Company shall have delivered to you copies of certain agreements entered into by the Company with lessors of certain premises leased by the Company, relating to the Collateral located on such premises, in form and substance reasonably satisfactory to you and your special counsel, and will use its best efforts for the thirty-day period following the Effective Date to deliver similar agreements with its other lessors that shall not have been delivered as of the Effective Date. 8 (i) TITLE MATTERS. The Company shall have delivered or caused to be delivered to you one or more loan policies of title insurance, satisfactory to you and showing no exceptions to title except as acceptable to you. (j) CERTIFICATES OF INSURANCE. The Company shall have delivered to you certificates of insurance evidencing the insurance required by the Credit Agreement, showing the Collateral Agent as loss payee (as its interest may appear) thereunder. 3.7 LIEN SEARCHES. The Company shall have delivered to you Lien searches showing that the Collateral (as defined in the Security Agreement) of the Company and its Subsidiaries is subject to no Liens other that Liens permitted under Section 7.3(C) of the Amended Note Purchase Agreement. 3.8 TERMINATION OF FACTORING AGREEMENT. The Company shall have delivered to you documentation evidencing that the Master Factoring Agreement entered into on February 11, 1998 between Reservoir Capital Corporation and the Company, has been terminated, all "Assigned Accounts" have been reassigned to the Company, and all Liens on any assets of the Company in favor of Reservoir Capital Corporation have been released. 3.9 BINKS SAMES LTD. CHARTER AMENDMENT. You shall have received a copy of an amendment to the Articles of Association of Binks Sames Ltd., amending such Articles of Association in the manner contemplated by Section 4.1 of the Equitable Share Charge between Company and the Agent dated as of November 21, 1997. 3.10 ACCRUED INTEREST ON EXISTING NOTES. The Company shall have paid to you accrued interest on the Existing Notes up to but not including the Effective Date. 3.11 EXCHANGE OF EXISTING NOTES. You shall have received, in exchange for the Existing Notes, one or more Amended Notes in the form of Exhibit 1.2 hereto, dated the Effective Date, in the aggregate principal amount of Fifteen Million Dollars ($15,000,000), duly executed by the Company. 3.12 CLOSING FEE. The Company shall have paid to you or on your behalf, in either case, by wire transfer of immediately available funds as set forth on Annex 1, the first instalment of the Closing Fee in the amount of Thirty-Seven Thousand Five Hundred Dollars ($37,500). 3.13 EXPENSES. All fees and disbursements required to be paid pursuant to Section 4.3 shall have been paid in full. 9 3.14 PROCEEDINGS SATISFACTORY. All proceedings taken in connection with the execution and delivery of this Amendment and the transactions contemplated hereby shall be reasonably satisfactory to you and your special counsel; and you and your special counsel shall have received copies of such documents and papers as may be reasonably requested in connection therewith. 4. MISCELLANEOUS 4.1 EFFECT OF AMENDMENT AND WAIVER. If the foregoing is acceptable to you, please note your acceptance in the space provided below. Upon the execution and delivery by you and the Company, the Existing Note Purchase Agreement shall be deemed to be amended as set forth above and the waivers as set forth above shall be deemed to be effective. This Amendment shall be binding upon, and shall inure to the benefit of, the permitted successors and assigns of the parties hereto and the holders from time to time of the Amended Notes. Except as expressly provided herein, (i) no terms or provisions of any agreement are modified or changed by this Amendment, (ii) the terms of this Amendment shall not operate as a waiver by you of, or otherwise prejudice your rights, remedies or powers under, the Existing Note Purchase Agreement or under any applicable law and (iii) the terms and provisions of the Existing Note Purchase Agreement shall continue in full force and effect, as amended by this Amendment. 4.2 NO LEGEND REQUIRED. Any and all notices, requests, certificates and other instruments including, without limitation, the Amended Notes, may refer to the Note Purchase Agreement or the Note Purchase Agreement dated as of November 30, 1993 without making specific reference to this Waiver and Second Amendment to Note Purchase Agreement, but nevertheless all such references shall be deemed to include this Waiver and Second Amendment to Note Purchase Agreement unless the context shall otherwise require. 4.3 FEES AND EXPENSES. Whether or not the transactions herein contemplated shall be consummated, the Company agrees to pay directly all of your reasonable out-of-pocket expenses in connection with the preparation, negotiation, execution and delivery of this Amendment, the Collateral Documents and the other Financing Documents, and the transactions contemplated hereby and thereby, including, but not limited to, the fees and disbursements of Hebb & Gitlin, your special counsel, and Coopers & Lybrand L.L.P., financial advisor to you and the Lenders, photocopying costs, and charges for shipping the Amended Notes, adequately insured, to you at your home office or at such other place as you may designate, and so long as you shall hold any of the Amended Notes, all such expenses relating to any amendments, waivers or consents pursuant to the provisions hereof, including, without limitation, any amendments, waivers or consents resulting from any work-out, restructuring or similar events relating to the performance by the Company and its Subsidiaries of their respective obligations under this Amendment and the other Financing Documents. The Company also agrees that it will pay and save you harmless against any and all liability with respect to stamp and other taxes, if any, which may be payable or which may be determined to be payable in connection with the execution and delivery of this Amendment or any of the other Financing Documents, whether or not any Amended Notes are then outstanding. The Company agrees to protect and indemnify you against any liability for any and all brokerage fees and commissions payable or claimed to be payable to any Person in connection with the transactions contemplated by this Amendment. Without limiting 10 the foregoing, the Company agrees to pay your costs of obtaining a private placement number for the Amended Notes, and authorizes the submission of such information as may be required by the CUSIP Service Bureau of Standard & Poor's for the purpose of obtaining such number. 4.4 SURVIVAL. All warranties, representations, certifications and covenants made by the Company in this Amendment or in any certificate or other instrument delivered by it or on its behalf under this Amendment shall be considered to have been relied upon by you and shall survive the execution of this Amendment, regardless of any investigation made by or on your behalf. All statements in any such certificate or other instrument shall constitute warranties and representations of the Company under this Amendment. 4.5 DUPLICATE ORIGINALS; EXECUTION IN COUNTERPART. Two or more duplicate originals of this Amendment may be signed by the parties, each of which shall be an original but all of which together shall constitute one and the same instrument. This Amendment may be executed in one or more counterparts and shall be effective when at least one counterpart shall have been executed by each party to this Amendment, and each set of counterparts which, collectively, show execution by each such party to this Amendment shall constitute one duplicate original. 4.6 GOVERNING LAW. THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; NEXT PAGE IS SIGNATURE PAGE.] 11 If you are in agreement with the foregoing, please sign the form of acceptance in the space provided below, whereupon the foregoing shall become a binding agreement between you and the Company as of the date first above written. BINKS SAMES CORPORATION By: /s/ Jeffrey W. Lemajeur ------------------------------------- Name: Jeffrey W. Lemajeur Title: Vice President, Chief Financial Officer THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES By: /s/ Joel Serbransky ------------------------------------- Name: Joel Serbransky Title: SCHEDULE A NOTEHOLDER INFORMATION
- --------------------------------------------------------------------------------------------------------------------------------- Noteholder Name THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES - --------------------------------------------------------------------------------------------------------------------------------- Name in Which Note is Registered THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES - --------------------------------------------------------------------------------------------------------------------------------- Note Registration Number; Principal Amount R-4; $15,000,000 - --------------------------------------------------------------------------------------------------------------------------------- Payment on Account of Note Method Federal Funds Wire Transfer Account Information The Chase Manhattan Bank, N.A. 1251 Avenue of the Americas New York, New York 10020 ABA # 021-00-0021 Account of: The Equitable Life Assurance Society of the United States Account No. #037-2-409417 Re: See "Accompanying Information" below. - --------------------------------------------------------------------------------------------------------------------------------- Accompanying Information Name of Company: BINKS SAMES CORPORATION Description of Security: 7.64% Series A Senior Secured Note Due September 30, 1999 PPN: 090527 A@ 1 Due Date and Application (as among principal and interest) of the payment being made: - --------------------------------------------------------------------------------------------------------------------------------- Address for Notices Related to Payments The Equitable Life Assurance Society of the United States c/o Alliance Capital Management, L.P. 135 West 50th Street - 5th Floor New York, NY 10020 Attention: Treasury Services - --------------------------------------------------------------------------------------------------------------------------------- Address for all other Notices The Equitable Life Assurance Society of the United States c/o Alliance Capital Management, L.P. 1345 Avenue of the Americas New York, NY 10105 Attention: Fixed Income Credit Research Division - 38th Floor (212) 969-1488 - TEL (212) 969-1466 - FAX - --------------------------------------------------------------------------------------------------------------------------------- Tax Identification Number 13-5570651 - ---------------------------------------------------------------------------------------------------------------------------------
Schedule A-1 SCHEDULE 1 WAIVERS OF EXISTING EVENTS OF DEFAULT EVENTS OF DEFAULT 1. SECTION 12.1(c) OF THE EXISTING NOTE PURCHASE AGREEMENT. The Events of Default which have occurred and are continuing under Section 12.1(c) of the Existing Note Purchase Agreement resulting from the Company's breach of Sections 7.1(h), 7.1(j), 7.1(k), 10.1(c), 10.10 and 10.11 of the Existing Note Purchase Agreement. 2. SECTION 12.1(d) OF THE EXISTING NOTE PURCHASE AGREEMENT. The Events of Default which have occurred and are continuing under Section 12.1(d) of the Existing Note Purchase Agreement resulting from the Company's breach of (a) the delivery requirements of Section 7.1(a), (b), (c) and (d) with respect to the quarterly and annual fiscal periods of the Company ended November 30, 1997, (b) the notice requirements of Sections 7.1(h) and 7.1(j) with respect to the other events described in this Schedule 1, (c) the notice requirements of Section 7.1(k) with respect to certain matters described in the Disclosure Letter, (d) the requirement under Section 9.2 to make timely payment of real estate taxes relating to its Oregon property (which taxes have bee paid in full prior to the Effective Date), and (e) the requirements under Section 9.3(c) with respect to three Subsidiaries changing their fiscal years to November 30. 3. SECTION 12.1(e) OF THE EXISTING NOTE PURCHASE AGREEMENT. The Event of Default which has occurred and are continuing under Section 12.1(e) of the Existing Note Purchase Agreement resulting from the Company's "Defaults" under the Credit Agreement and the expiration of the 90-day grace period with respect to one or more of such Defaults. The holder of the Notes on the Effective Date represents that, as of the Effective Date, it does not have "actual knowledge" of any Defaults or Events of Default other than those set forth above. Schedule 1-1 SCHEDULE 2.6 OUTSTANDING DEBT AND LIENS [To be provided by the Company.] Schedule 2.6-1 SCHEDULE 2.7 PENDING LITIGATION [To be provided by the Company.] Schedule 2.7-1 SCHEDULE 2.9 CONSENTS [To be provided by the Company.] Schedule 2.9-1 SCHEDULE 2.14(i) RECORDING INFORMATION [To be provided by the Company.] Schedule 2.14(i)-1 EXHIBIT 1.1 AMENDMENT OF EXISTING NOTE PURCHASE AGREEMENT 1. AMENDMENT OF ARTICLE I OF THE EXISTING NOTE PURCHASE AGREEMENT. The first paragraph of Article I of the Existing Note Purchase Agreement is amended and restated in its entirety as follows: The Company has authorized, and (subject to the effectiveness of the Second Amendment) agrees and consents to, the amendment and restatement in their entirety of the Existing Notes, as provided for in this Agreement. The Existing Notes as so amended and restated (including each note delivered pursuant to any provision of this Agreement and any note delivered in substitution for any such note pursuant to any such provisions) are hereinafter sometimes referred to, collectively, as the "Notes." The Notes shall (i) be substituted in the place of the Existing Notes (which shall be surrendered to the Company for cancellation), (ii) be dated and bear interest from March 16, 1998, (iii) have the terms and conditions herein and therein provided, and (iv) be substantially in the form of Exhibit A hereto attached. 2. AMENDMENT OF SECTION 3.1 OF THE EXISTING NOTE PURCHASE AGREEMENT. Section 3.1 of the Existing Note Purchase Agreement is amended and restated in its entirety as follows: 3.1 MANDATORY PAYMENTS OF SECURED OBLIGATIONS; LIMITATION ON SECURED OBLIGATIONS. (a) MANDATORY PAYMENTS OF SECURED OBLIGATIONS. The Secured Obligations shall be payable upon the occurrence of any of the following: (i) ASSET SALE OR SALE INITIATIVE PREPAYMENTS. Upon the consummation of any Asset Sale, other than any Excluded Asset Sale, by the Company or any of its Subsidiaries, where such Asset Sale results in Net Cash Proceeds individually for such transaction equal to or greater than $50,000 or collectively with all prior Asset Sales results in Net Cash Proceeds in the aggregate for all such transactions since the date hereof equal to or greater than $150,000, except as provided in the second sentence of this subsection (a)(i), within five Business Days after the Company's or any of its Subsidiary's (A) receipt of any Net Cash Proceeds from any such Asset Sale, or (B) conversion to cash or Cash Equivalents of non-cash proceeds (whether principal or interest and including securities, release of escrow arrangements or lease payments) received from any such Asset Sale, the Company shall make a mandatory prepayment (an "Asset Sale Prepayment") of the Secured Obligations in an amount equal to (1) 50% of such Net Cash Proceeds or such proceeds converted from non-cash to cash or Cash Equivalents received during the Sharing Period and (2) 90% of such Net Cash Proceeds or such proceeds converted from non-cash to cash or Cash Equivalents received after the Sharing Period. Net Cash Proceeds of Asset Sales of equipment with respect to which the Company or any Subsidiary shall have given the Collateral Agent written notice of its intention to replace the equipment sold within four months following such sale shall not be subject to the prepayment requirements of the first sentence of this subsection (a)(i) unless and to the extent that such four-month period shall have expired without such equipment replacement having been made or unless prior to such replacement an Event of Default shall have occurred and be continuing. The provisions of this subsection Exhibit 1.1-1 (a)(i) shall govern only those asset sales of a type and magnitude currently permitted under the terms of this Agreement. To the extent that the Company shall seek and obtain the requisite consent of the Required Creditors pursuant to Section 7.5(g) permitting any other sale, transfer or other disposition of any of the Company's Subsidiaries, or any business line of the Company or its Subsidiaries or other material transaction in connection with the Sale Initiative, the Company shall make a mandatory prepayment (a "Sale Initiative Prepayment") of the Secured Obligations in an amount equal to 100% of the Net Cash Proceeds (or such proceeds converted from non-cash to cash or Cash Equivalents) from such sale, transfer or other disposition or such lesser amount as shall be required to pay the Secured Obligations in full. (ii) ISSUANCE PREPAYMENTS. Upon the consummation of any Financing by the Company or SEI, within five Business Days after the Company's or SEI's receipt of the Net Cash Proceeds from such Financing, the Company shall make a mandatory prepayment (an "Issuance Prepayment") of the Secured Obligations in an amount equal to (1) 50% of such Net Cash Proceeds received during the Sharing Period and (2) 90% of such Net Cash Proceeds received after the Sharing Period. (iii) SUBSIDIARY PREPAYMENTS. Except as set forth in clauses (A) through (E) below, upon the receipt by the Company of any funds from any repatriation or other payment of monies from any of the Company's foreign subsidiaries (whether as a dividend, loan, return of capital or otherwise), within 5 Business Days after the Company's receipt of such funds, the Company shall make a mandatory prepayment (a "Subsidiary Prepayment") of the Secured Obligations in an amount equal to (1) 50% of such amounts received during the Sharing Period and (2) 90% of such amounts received after the Sharing Period; PROVIDED, no such mandatory prepayment of the Secured Obligations shall be required out of (A) the approximately $4,250,000 which the Company has received from Sames S.A.; (B) amounts received by the Company as a reimbursement for expenses incurred by the Company on behalf of a Subsidiary; (C) payments received from a Subsidiary as a result of its repayment, in the ordinary course, of intercompany Receivables incurred in the ordinary course of its business; (D) amounts received from intercompany management or guaranty fees in amounts not in excess of the amounts set forth in the financial information attached to the Disclosure Letter; and (E) amounts received from the liquidation of Binks International (Italia) S.r.l. and aggregating approximately $500,000. (iv) TAX PREPAYMENTS. Upon the receipt by the Company or SEI of the proceeds of any federal, state or local tax refunds, the Company shall make a mandatory prepayment (a "Tax Prepayment") of the Secured Obligations in an amount equal to 100% of the amount so refunded. (v) AT MATURITY. The Company will pay all of the principal amount of the Notes outstanding, if any, on September 30, 1999. (vi) CONSTRUCTION. Nothing in this Section 3.1(a) shall be construed to constitute the consent by any holder of Notes to any transaction referred to in subsections (i) through (iii) above which is not expressly permitted by the terms of this Agreement. (vii) APPLICATION OF PREPAYMENTS. Each mandatory prepayment required by subsections (i) through (iv), inclusive, of this Section 3.1(a) shall be referred to Exhibit 1.1-2 herein as a "Designated Prepayment." Designated Prepayments shall be paid to the Collateral Agent for application in accordance with the terms of the Collateral Sharing Agreement. Proceeds from Designated Prepayments paid by the Collateral Agent shall be allocated and applied in the following order of priority so long as (1) no Event of Default has occurred hereunder, (2) no Default (as defined in the Credit Agreement) has occurred under the Credit Agreement and (3) no Agreement Default (as defined in the Collateral Sharing Agreement) has occurred under the terms of any agreement governing any other Priority Obligation: (A) as provided in Section 2.5(B)(i)(f)(I) through (III) of the Credit Agreement, as in effect on the Effective Date; and (B) to the Secured Obligations in the order set forth in Section 8 of the Collateral Sharing Agreement; PROVIDED, if such Designated Prepayment is made after the occurrence and during the continuance of any such Event of Default, Default or other Agreement Default (as defined in the Collateral Sharing Agreement), such Designated Prepayment shall be applied in accordance with the terms of the Collateral Sharing Agreement. (viii) PREPAYMENTS OF NOTES AT PAR. Each Designated Prepayment, any prepayment pursuant to one or more transactions relating to the Sale Initiative and the payment at maturity of the principal amount of the Notes pursuant to this Section 3.1(a) shall be made together with accrued but unpaid interest on the principal amount being prepaid to the date of such prepayment, but without the Make Whole Premium. (b) LIMIT ON SECURED OBLIGATIONS. If the sum of (i) the Existing Obligations, PLUS (ii) the Supplemental Credit Obligations, PLUS (iii) the outstanding principal amount of the Notes, in each case measured as of the date of each Borrowing Base Certificate, exceeds either (A) the Borrowing Base at such time or (B) the difference of (1) $67,500,000 MINUS (2) the sum of the Designated Prepayments (other than Tax Prepayments) and any other prepayments of the Existing Obligations or the Notes made at or prior to such time, then such excess shall be repaid immediately in accordance with the provisions of the Credit Agreement. 3. AMENDMENT OF ARTICLE III OF THE EXISTING NOTE PURCHASE AGREEMENT. Article III of the Existing Note Purchase Agreement is amended by adding a new Section to read as follows: 3.8. FEES. (a) DEFERRED CLOSING FEE. The Company agrees to pay, to the holder of Notes on the Effective Date, a closing fee and the deferred closing fees at the times and in the amounts set forth in paragraph (a) of Schedule 3.8 to the Disclosure Letter. (b) DEFERRED FACILITY FEE. The Company agrees to pay to the holders of the Notes a deferred closing fee at the times and in the amounts set forth in paragraph (b) of Schedule 3.8 to the Disclosure Letter. Exhibit 1.1-3 4. AMENDMENT OF ARTICLE VII OF THE EXISTING NOTE PURCHASE AGREEMENT. Article VII of the Existing Note Purchase Agreement is amended and restated in its entirety as follows: Article VII. COVENANTS. 7.1. REPORTING. The Company shall: (A) FINANCIAL REPORTING. Furnish to each holder of Notes: (i) MONTHLY REPORTS. As soon as practicable and in any event within 30 days after the end of each calendar month (other than the calendar months ending February 28, May 31, August 31 and November 30 of each fiscal year), the consolidated and consolidating balance sheets of the Company and its Subsidiaries as at the end of such period and the related consolidated and consolidating statements of income and cash flows of the Company and its Subsidiaries for such monthly period and for the period from the beginning of the then current fiscal year to the end of such monthly period, certified by the chief financial officer of the Company on behalf of the Company as fairly presenting the consolidated and consolidating financial position of the Company and its Subsidiaries as at the dates indicated and the results of their operations and cash flows for the periods indicated in accordance with GAAP, subject to normal year-end adjustments. (ii) QUARTERLY REPORTS. As soon as practicable, and in any event within 45 days after the end of each of the first three fiscal quarters of the Company in each fiscal year, the consolidated and consolidating balance sheets of the Company and its Subsidiaries as at the end of such period and the related consolidated and consolidating statements of income and cash flows of the Company and its Subsidiaries for such fiscal quarter and for the period from the beginning of the then current fiscal year to the end of such fiscal quarter, certified by the chief financial officer of the Company on behalf of the Company as fairly presenting the consolidated and consolidating financial position of the Company and its Subsidiaries as at the dates indicated and the results of their operations and cash flows for the periods indicated in accordance with GAAP, subject to normal year-end adjustments. (iii) ANNUAL REPORTS. As soon as practicable, and in any event within (a) five Business Days of the Effective Date with respect to the fiscal year ended November 30, 1997 and (b) for each other fiscal year, within 90 days after the end of each such fiscal year, (1) the consolidated balance sheet of the Company and its Subsidiaries as at the end of such fiscal year and the related consolidated statements of income, stockholders' equity and cash flows of the Company and its Subsidiaries for such fiscal year, and in comparative form the corresponding figures for the previous fiscal year along with consolidating schedules in form and substance sufficient to calculate the financial covenants set forth in Section 7.4 and (2) an audit report on the items listed in clause (1) hereof (other than the consolidating schedules) of independent certified public accountants of recognized national standing, which audit report shall be unqualified and shall state that such financial statements fairly present the consolidated financial position of the Company and its Subsidiaries as at the dates indicated and the results of their operations and cash flows for the periods indicated in conformity with GAAP and that the examination by such accountants in connection with such consolidated financial statements has been made in accordance with generally accepted auditing standards. The deliveries made pursuant to this clause (iii) shall be accompanied by (x) any management letter Exhibit 1.1-4 identifying material weaknesses in internal accounting controls prepared by the above-referenced accountants, (y) a certificate of such accountants that, in the course of their examination necessary for their certification of the foregoing, they have obtained no knowledge of any Default or Event of Default, or if, in the opinion of such accountants, any Default or Event of Default shall exist, stating the nature and status thereof; PROVIDED, notwithstanding the foregoing, the certificate required under clause (y) with respect to the fiscal year ended November 30, 1997 shall be required to be delivered within five Business Days of the Effective Date. In the event any management letter identifying material weaknesses in internal accounting controls prepared by the above-referenced accountants is delivered to the Company at any other time, the Company shall promptly, but in any event within 10 Business Days of the delivery thereof to the Company, deliver a copy thereof to the holders of the Notes. (iv) OFFICER'S CERTIFICATE. Together with each delivery of any financial statement (a) pursuant to clauses (i), (ii) and (iii) of this Section 7.1(A), an Officer's Certificate of the Company, substantially in the form delivered to the Lenders, stating that no Default or Event of Default exists, or if any Default or Event of Default exists, stating the nature and status thereof and (b) a compliance certificate, substantially in the form delivered to the Lenders, signed by the Company's Chief Financial Officer or Treasurer, setting forth calculations for the period then ended for Section 3.1(a), if applicable, and demonstrating compliance by the Company and its Subsidiaries with the provisions of Section 3.1(b), Section 7.3(B) and Section 7.4. (v) BUDGETS; BUSINESS PLANS; FINANCIAL PROJECTIONS. As soon as practicable and in any event not later than 30 days after the beginning of each fiscal year of the Company commencing with the fiscal year beginning December 1, 1998, a copy of the plan and forecast (including a projected balance sheet, income statement and a statement of cash flow) of the Company and its Subsidiaries for the upcoming fiscal year. (B) NOTICE OF DEFAULT. Promptly upon any of the chief executive officer, chief operating officer, chief financial officer, treasurer or controller of the Company obtaining knowledge (i) of any condition or event which constitutes a Default or Event of Default, or becoming aware that any holder of Notes has given any written notice with respect to a claimed Default or Event of Default, or (ii) that any Person has given any written notice to the Company or any of its Subsidiaries or taken any other action with respect to a claimed default or event or condition of the type referred to in Section 12.1(e), deliver to each holder of Notes an Officer's Certificate specifying (a) the nature and period of existence of any such claimed default, Default, Event of Default, condition or event, (b) the notice given or action taken by such Person in connection therewith, and (c) what action the Company has taken, is taking and proposes to take with respect thereto. (C) LAWSUITS. (i) Promptly upon the Company obtaining knowledge of the institution of, or written threat of, any action, suit, proceeding, governmental investigation or arbitration against or affecting the Company or any of its Subsidiaries or any property of the Company or any of its Subsidiaries not previously disclosed pursuant to Section 2.7 of the Second Amendment, which action, suit, proceeding, governmental investigation or arbitration exposes, or in the case of multiple actions, suits, proceedings, governmental investigations or arbitrations arising out of the same general allegations or circumstances which expose, in the Company's reasonable judgment, the Company or any of its Subsidiaries to liability in an amount aggregating $1,000,000 or more (exclusive of claims covered by insurance Exhibit 1.1-5 policies of the Company or any of its Subsidiaries unless the insurers of such claims have disclaimed coverage or reserved the right to disclaim coverage on such claims and exclusive of claims covered by the indemnity of a financially responsible indemnitor in favor of the Company or any of its Subsidiaries unless the indemnitor has disclaimed or reserved the right to disclaim coverage thereof), give written notice thereof to each holder of Notes and provide such other information as may be reasonably available to enable such holder and its counsel to evaluate such matters; (ii) promptly upon obtaining knowledge thereof, advise each holder of Notes of any material developments in any such actions, suits, proceedings, governmental investigations, arbitrations or threatened actions covered by a report delivered pursuant to clause (i) (PROVIDED such disclosure would not jeopardize any attorney-client privilege); and (iii) in addition to the requirements set forth in clause (i) and clause (ii) of this Section 7.1(C), upon request of the Majority Holders, promptly give written notice of the status of any action, suit, proceeding, governmental investigation or arbitration covered by a report delivered pursuant to clause (i) above and provide such other information as may be reasonably available to it that would not jeopardize any attorney-client privilege by disclosure to the holders of the Notes to enable each holder and its counsel to evaluate such matters. (D) ERISA NOTICES. Deliver or cause to be delivered to each holder of Notes, at the Company's expense, the following information and notices as soon as reasonably possible, and in any event: (i) (a) within 15 Business Days after the Company obtains knowledge that a Termination Event has occurred, a written statement of the chief financial officer of the Company describing such Termination Event and the action, if any, which the Company has taken, is taking or proposes to take with respect thereto, and when known, any action taken or threatened by the IRS, DOL or PBGC with respect thereto and (b) within 15 Business Days after any member of the Controlled Group obtains knowledge that a Termination Event has occurred which could reasonably be expected to subject the Company to liability in excess of $1,000,000, a written statement of the chief financial officer of the Company describing such Termination Event and the action, if any, which the member of the Controlled Group has taken, is taking or proposes to take with respect thereto, and when known, any action taken or threatened by the IRS, DOL or PBGC with respect thereto; (ii) within 15 Business Days after the Company or any of its Subsidiaries obtains knowledge that a prohibited transaction (as defined in Section 406 of ERISA and Section 4975 of the Code) has occurred, a statement of the chief financial officer of the Company describing such transaction and the action which the Company or such Subsidiary has taken, is taking or proposes to take with respect thereto; (iii) within 15 Business Days after the material increase in the benefits of any existing Plan or the establishment of any new Benefit Plan or the commencement of, or obligation to commence, contributions to any Benefit Plan or Multiemployer Plan to which the Company or any member of the Controlled Group was not previously contributing, notification of such increase, establishment, commencement or obligation to commence and the amount of such contributions; (iv) within 15 Business Days after the Company or any of its Subsidiaries receives notice of any unfavorable determination letter from the IRS regarding the qualification of a Plan under Section 401(a) of the Code, copies of each such letter; Exhibit 1.1-6 (v) within 15 Business Days after the establishment of any foreign employee benefit plan or the commencement of, or obligation to commence, contributions to any foreign employee benefit plan to which the Company or any Subsidiary was not previously contributing, notification of such establishment, commencement or obligation to commence and the amount of such contributions; (vi) within 15 Business Days of request of any Lender, copies of each annual report (form 5500 series), including Schedule B thereto, filed with respect to each Benefit Plan; (vii) within 15 Business Days of request of any Lender, each actuarial report for any Benefit Plan or Multiemployer Plan and each annual report for any Multiemployer Plan, copies of each such report; (viii) within 15 Business Days after the filing thereof with the IRS, a copy of each funding waiver request filed with respect to any Benefit Plan and all communications received by the Company or a member of the Controlled Group with respect to such request; (ix) within 15 Business Days after receipt by the Company or any member of the Controlled Group of the PBGC's intention to terminate a Benefit Plan or to have a trustee appointed to administer a Benefit Plan, copies of each such notice; (x) within 15 Business Days after receipt by the Company or any member of the Controlled Group of a notice from a Multiemployer Plan regarding the imposition of withdrawal liability, copies of each such notice; (xi) within 15 Business Days after the Company or any member of the Controlled Group fails to make a required installment or any other required payment under Section 412 of the Code on or before the due date for such installment or payment, a notification of such failure; and (xii) within 15 Business Days after the Company or any member of the Controlled Group knows or has reason to know that (a) a Multiemployer Plan has been terminated, (b) the administrator or plan sponsor of a Multiemployer Plan intends to terminate a Multiemployer Plan, or (c) the PBGC has instituted or will institute proceedings under Section 4042 of ERISA to terminate a Multiemployer Plan. (E) LABOR MATTERS. Notify each holder of Notes in writing, promptly upon the Company's learning thereof, of (i) any material labor dispute to which the Company or any of its Material Subsidiaries may become a party, including, without limitation, any strikes, lockouts or other disputes relating to such Persons' plants and other facilities and (ii) any Worker Adjustment and Retraining Notification Act liability incurred with respect to the closing of any plant or other facility of the Company or any of its Material Subsidiaries. (F) OTHER INDEBTEDNESS. Deliver to each holder of Notes (i) a copy of each regular report, notice or communication regarding potential or actual defaults (including any accompanying officer's certificate) delivered by or on behalf of the Company or any of its Subsidiaries to the Lenders or the Agent pursuant to the terms of the Credit Agreement or any related document, such delivery to be made at the same time and by the same means as such notice or other communication is delivered to the Lenders or the Agent, and (ii) a Exhibit 1.1-7 copy of each notice received by the Company or any of its Subsidiaries from any Lender or the Agent pursuant to the terms of the Credit Agreement or any related document, such delivery to be made promptly after such notice or other communication is received by the Company or such Subsidiary, as applicable. (G) OTHER REPORTS. Deliver or cause to be delivered to each holder of Notes copies of all financial statements, reports and notices, if any, sent or made available generally by the Company to its securities holders or filed with the SEC by the Company, all press releases made available generally by the Company or any of its Subsidiaries to the public concerning material developments in the business of the Company or any such Subsidiary and all notifications received from the SEC by the Company or any of its Subsidiaries pursuant to the Exchange Act and the rules promulgated thereunder. (H) ENVIRONMENTAL NOTICES. As soon as possible and in any event within 10 days after receipt thereof by the Company, deliver to each holder of Notes a copy of (i) any notice or claim to the effect that the Company or any of its Subsidiaries is or may be liable to any Person as a result of the Release by the Company, any of its Subsidiaries, or any other Person of any Contaminant into the environment, and (ii) any notice alleging any violation of any Environmental, Health or Safety Requirements of Law by the Company or any of its Subsidiaries if, in either case, such notice or claim relates to an event which could reasonably be expected to subject the Company or any such Subsidiary to liability individually or in the aggregate in excess of $1,000,000. (I) BORROWING BASE CERTIFICATE. As soon as practicable, and in any event within three Business Days after the close of each calendar week, the Company shall provide each holder of Notes with a Borrowing Base Certificate, together with such supporting documents as such holder reasonably deems desirable, all certified as being true and correct by the chief financial officer or treasurer of the Company. (J) OTHER INFORMATION. Other than in connection with the Sale Initiative which shall be governed exclusively by the provisions of Section 7.5, promptly upon receiving a request therefor from the Majority Holders, prepare and deliver to each holder of Notes such other information with respect to the Company, any of its Subsidiaries, or the Collateral, including, without limitation, schedules identifying and describing the Collateral and any dispositions thereof or any Asset Sale or Financing (and the use of the Net Cash Proceeds thereof), as from time to time may be reasonably requested by the Agent. 7.2. AFFIRMATIVE COVENANTS. (A) CORPORATE EXISTENCE, ETC. Except as permitted pursuant to Section 7.3(I), the Company shall, and shall cause each of its Subsidiaries to, at all times maintain its corporate existence and preserve and keep, or cause to be preserved and kept, in full force and effect its rights and franchises material to its businesses; PROVIDED, HOWEVER, that nothing in this Section 7.2(A) shall prevent the Company from discontinuing the operation and corporate existence of, and liquidating, its Subsidiaries in Italy and Mexico. (B) CORPORATE POWERS; CONDUCT OF BUSINESS. The Company shall, and shall cause each of its Subsidiaries to, qualify and remain qualified to do business in each jurisdiction in which the nature of its business requires it to be so qualified and where the failure to be so qualified will have or could reasonably be expected to have a Material Adverse Effect. The Company will, and will cause each of its Subsidiaries to, carry on and conduct its business in substantially the same manner and in substantially the same fields Exhibit 1.1-8 of enterprise as it is presently conducted; PROVIDED, HOWEVER, that nothing in this Section 7.2(B) shall prevent the Company from discontinuing the operation and corporate existence of, and liquidating, its Subsidiaries in Italy and Mexico. (C) COMPLIANCE WITH LAWS, ETC. The Company shall, and shall cause each of its Subsidiaries to, (i) comply with all Requirements of Law and all restrictive covenants affecting such Person or the business, properties, assets or operations of such Person unless failure to comply could not reasonably be expected to have a Material Adverse Effect and (ii) obtain as needed all permits necessary for its operations and maintain such permits in good standing unless failure to obtain such permits could not reasonably be expected to have a Material Adverse Effect. (D) PAYMENT OF TAXES AND CLAIMS; TAX CONSOLIDATION. The Company shall pay, and cause each of its Subsidiaries to pay, (i) all taxes, assessments and other governmental charges imposed upon it or on any of its properties or assets or in respect of any of its franchises, business, income or property before any penalty or interest accrues thereon, and (ii) all material claims (including, without limitation, claims for labor, services, materials and supplies, but excluding claims in connection with the Disclosed Disputes which shall be governed by the terms of the Disclosure Letter) for sums which have become due and payable and which by law have or may become a Lien (other than a Lien permitted by Section 7.3(C)) upon any of the Company's or such Subsidiary's property or assets, prior to the time when any penalty or fine shall be incurred with respect thereto; PROVIDED, HOWEVER, that no such taxes, assessments and governmental charges referred to in clause (i) above or claims referred to in clause (ii) above (and interest, penalties or fines relating thereto) need be paid if being contested in good faith by appropriate proceedings diligently instituted and conducted and if such reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor. (E) INSURANCE. The Company shall maintain for itself and its Subsidiaries, or shall cause each of its Subsidiaries to maintain in full force and effect, the insurance policies and programs required by Section 6.16 of the Credit Agreement which reflect coverage that is reasonably consistent with prudent industry practice. (F) INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS. The Company shall permit and cause each of its Subsidiaries to permit, any authorized representative(s) designated by the Majority Holders to visit and inspect any of the properties of the Company or any of its Subsidiaries, to examine, audit, check and make copies of their respective financial and accounting records, books, journals, orders, receipts and any correspondence and other data relating to their respective businesses or the transactions contemplated hereby (including, without limitation, in connection with environmental compliance, hazard or liability), and to discuss their affairs, finances and accounts with their officers and upon prior written notice to Company, independent certified public accountants, all upon reasonable notice (PROVIDED no prior notice shall be required if the Majority Holders have a good faith reason to believe that the books and records of the Company or its Subsidiaries are not being maintained in accordance with the requirements of this Agreement) and at such reasonable times during normal business hours, as often as may be reasonably requested; PROVIDED, HOWEVER, the terms of this clause (F) shall not be applicable to information regarding the Sale Initiative, which shall be governed exclusively by the provisions of Section 7.5. The Company shall keep and maintain, and cause each of its Subsidiaries to keep and maintain, in all material respects, proper books of record and account in which entries in conformity with GAAP shall be made of all dealings and transactions in relation to their respective businesses and activities. If an Event of Default Exhibit 1.1-9 has occurred and is continuing, the Company, upon request of the Majority Holders, shall turn over copies of any such records to the Majority Holders. (G) ERISA COMPLIANCE. The Company shall, and shall cause each of its Subsidiaries to, establish, maintain and operate all Plans to comply in all material respects with the provisions of ERISA, the Code, all other applicable laws, and the regulations and interpretations thereunder and the respective requirements of the governing documents for such Plans. (H) MAINTENANCE OF PROPERTY. The Company shall cause all property used or useful in the conduct of its business or the business of any Subsidiary to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and shall cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; PROVIDED, HOWEVER, that nothing in this Section 7.2(H) shall prevent the Company from discontinuing the operation or maintenance of any of such property if such discontinuance is, in the judgment of the Company, desirable in the conduct of its business or the business of any Subsidiary and not disadvantageous in any material respect to the holders of the Notes. (I) ENVIRONMENTAL COMPLIANCE. Except as disclosed in Schedule 6.18 to the Credit Agreement, the Company and its Subsidiaries shall comply with all Environmental, Health or Safety Requirements of Law, except where noncompliance will not have or is not reasonably likely to subject the Company or any of its Subsidiaries to liability, individually or in the aggregate, in excess of $5,000,000. (J) USE OF PROCEEDS. [Intentionally Omitted]. (K) INSURANCE MATTERS. (i) INSURANCE AND CONDEMNATION PROCEEDS. The Company directs (and shall cause SEI to direct) all insurers under policies of property damage, boiler and machinery and business interruption insurance and payors of any condemnation claim or award relating to its property to pay all proceeds payable under such policies or with respect to such claim or award for any loss with respect to the Collateral directly to the Collateral Agent, for the benefit of the Collateral Agent and the Holders of the Secured Obligations. Each such policy shall contain a long-form loss-payable endorsement naming the Collateral Agent as loss payee, which endorsement shall be in form and substance reasonably acceptable to the holders of the Notes. The Company agrees that the Collateral Agent shall, upon receipt of such proceeds, apply such proceeds in accordance with the terms of the Collateral Sharing Agreement as if such proceeds constituted a Designated Prepayment PROVIDED the amount thereof shall not reduce the Aggregate Supplemental Loan Commitment; PROVIDED, that the Collateral Agent shall pay to the Company or SEI, as applicable, such portion of the proceeds (up to an aggregate amount not to exceed $500,000) as may be reasonably necessary to restore or repair the affected business or property which may be used by the Company or SEI for such purposes; PROVIDED, FURTHER, HOWEVER, that (a) the Collateral Agent shall not pay over such proceeds if an Event of Default has occurred and (b) if, after receiving any of such proceeds but prior to restoring or repairing such affected property or business an Event of Default shall occur, the Company shall pay over (or cause SEI to pay over) such proceeds to the Collateral Agent for application as though a Designated Prepayment was received. Exhibit 1.1-10 (ii) INSURANCE REPORTING. Presently the Company maintains its property insurance programs on a contract year commencing in July of each year. Not later than 30 days after the beginning of the applicable insurance contract year commencing August 1998, the Company agrees to deliver to each holder of Notes (1) a report in form and substance reasonably satisfactory to the holders of the Notes outlining all material property, business interruption and liability insurance coverage maintained as of the date of such report by the Company and its Subsidiaries and the duration of such coverage and (2) a certificate of the chief financial officer or treasurer of the Company that all premiums with respect to such coverage have been paid when due. (iii) The Company shall maintain for itself and its Subsidiaries, or shall cause each of its Subsidiaries to maintain in full force and effect, the insurance policies and programs listed on Schedule 6.16 to the Credit Agreement or substantially similar policies and programs or other policies and programs as reflect coverage that is reasonably consistent with prudent industry practice. The Company shall deliver to each holder of Notes endorsements (y) to all "All Risk" physical damage insurance policies on all of the tangible real and personal property and assets constituting part of the Collateral and business interruption insurance policies naming the Collateral Agent loss payee, and (z) to all general liability and other liability policies naming the Collateral Agent an additional insured. In the event the Company or any of its Subsidiaries at any time or times hereafter shall fail to obtain or maintain any of the policies or insurance required herein or to pay any premium in whole or in part relating thereto, then the Majority Holders, without waiving or releasing any obligations or resulting Event of Default hereunder, may at any time or times thereafter (but shall be under no obligation to do so) obtain and maintain such policies of insurance and pay such premiums and take any other action with respect thereto which the Majority Holders deem advisable. All sums so disbursed by the holders of the Notes shall constitute part of the Secured Obligations, payable as provided in this Agreement and the Collateral Sharing Agreement. 7.3. NEGATIVE COVENANTS. (A) INDEBTEDNESS. Neither the Company nor any of its Subsidiaries shall directly or indirectly create, incur, assume or otherwise become or remain directly or indirectly liable with respect to any Indebtedness, except: (i) the Obligations; (ii) Indebtedness evidenced by the Notes; (iii) Permitted Existing Indebtedness and Permitted Refinancing Indebtedness; (iv) Indebtedness in respect of obligations secured by Customary Permitted Liens; (v) Indebtedness constituting Contingent Obligations permitted by Section 7.3(E); (vi) Indebtedness arising from intercompany loans (a) from any Subsidiary to the Company or any Wholly-owned Subsidiary and (b) intercompany loans from the Company to its Subsidiaries permitted under Section 7.3(S); Exhibit 1.1-11 (vii) Indebtedness in respect of Hedging Obligations permitted under Section 7.3(Q); (viii) secured or unsecured purchase money Indebtedness (including Capitalized Leases) incurred by the Company or any of its Subsidiaries to finance the acquisition of fixed assets, if (1) at the time of such incurrence, no Default or Event of Default has occurred and is continuing or would result from such incurrence, (2) such Indebtedness has a scheduled maturity and is not due on demand, (3) such Indebtedness does not exceed the lower of the fair market value or the cost of the applicable fixed assets on the date acquired, (4) such Indebtedness does not exceed (a) $500,000 in the aggregate outstanding at any time for the Company and SEI and (b) $3,500,000 in the aggregate outstanding at any time for the Company's Subsidiaries other than SEI, and (5) any Lien securing such Indebtedness is permitted under Section 7.3(C) (such Indebtedness being referred to herein as "Permitted Purchase Money Indebtedness"); (ix) Indebtedness with respect to surety, appeal and performance bonds obtained by the Company or any of its Subsidiaries in the ordinary course of business; (x) (a) Indebtedness in respect of judgments or awards other than in connection with the Disclosed Disputes which have been in force for less than the applicable appeal period so long as execution is not levied thereunder (or in respect of which the Company or its Subsidiary, as applicable, shall at the time in good faith be prosecuting an appeal or proceedings for review and in respect of which a stay of execution shall have been obtained pending such appeal or review) and which does not, in the aggregate, exceed $1,000,000 and (b) Indebtedness in respect of judgments or awards in connection with the Disclosed Disputes to the extent permitted in Section 1(b) of the Disclosure Letter; and (xi) Indebtedness incurred by the Company's foreign Subsidiaries in addition to that referred to elsewhere in this Section 7.3(A) in an outstanding principal amount not to exceed $5,000,000 in the aggregate at any time for the Company's foreign Subsidiaries. (B) SALES OF ASSETS. Neither the Company nor any of its Subsidiaries shall sell, assign, transfer, lease, convey or otherwise dispose of any property, whether now owned or hereafter acquired, or any income or profits therefrom, or enter into any agreement to do so, except: (i) sales of Inventory and other assets in the ordinary course of business; (ii) the disposition in the ordinary course of business of equipment that is obsolete, excess or no longer useful in the Company's or any Subsidiary's business; (iii) the sale of Binks de Mexico, S.A. de C.V.'s Mexico City facility; (iv) the disposition of assets of Binks International (Italia) S.r.l. in connection with its liquidation; (v) the sale of the real property of the Company's Belgian Subsidiary; Exhibit 1.1-12 (vi) sales of Inventory which consist of obsolete Inventory, excess Inventory or Inventory relating to discontinued lines of business; (vii) sales, assignments or other transfers of Receivables by one or more of the Company's foreign Subsidiaries in the ordinary course of its business consistent with past practice; (viii) sales, assignments, transfers, leases, conveyances or other dispositions of other assets (other than Receivables of the Company or SEI, or the stock or substantially all of the assets of Sames S.A.) to Persons which are not Affiliates of the Company if the value of such assets (which, for these purposes, shall mean the greater of such assets' book value at the time of sale or other disposition or the proceeds realized by the Company or its Subsidiaries from the sale or disposition of such assets), when added to the value of all other assets sold or disposed of by the Company and its Subsidiaries under this clause (viii) (or of the type described in this clause (viii)) after September 23, 1997, does not exceed 10% of Consolidated Tangible Assets determined at the end of the fiscal year immediately preceding that in which such transaction is proposed to be entered into; and (ix) sales of a portion of the Company's business or assets and/or one or more of the Company's Subsidiaries or their assets consented to by the Required Creditors in connection with the Sale Initiative pursuant to the terms of Section 7.5(g) and permitted under the terms of the Credit Agreement. (C) LIENS. Neither the Company nor any of its Subsidiaries shall directly or indirectly create, incur, assume or permit to exist any Lien on or with respect to any of their respective property or assets except: (i) Liens in favor of the Collateral Agent to secure the Secured Obligations; (ii) Permitted Existing Liens; (iii) Customary Permitted Liens; (iv) purchase money Liens (including the interest of a lessor under a Capitalized Lease and Liens to which any property is subject at the time of the Company's acquisition thereof) securing Permitted Purchase Money Indebtedness; PROVIDED that such Liens shall not apply to any property of the Company or its Subsidiaries other than that purchased or subject to such Capitalized Lease; (v) mortgages, pledges or security interests on the properties or assets of a Subsidiary in favor of the Company or in favor of any other Subsidiary; (vi) Liens created pursuant to applications or reimbursement arrangements pertaining to Letters of Credit which encumber only the goods, or documents of title covering the goods, which are sold or shipped in the transaction for which such Letters of Credit were issued; (vii) any attachment or judgment Liens (a) with respect to a judgments other than in connection with the Disclosed Disputes not exceeding $1,000,000 in the aggregate, unless the judgment(s) it secures shall not, within 30 days after the entry Exhibit 1.1-13 thereof, have been discharged or execution thereof stayed pending appeal, or shall not have been discharged within 30 days after the expiration of any such stay and (b) with respect to attachment or judgment Liens in connection with the Disclosed Disputes in an amount not to exceed in the aggregate the amount set forth in Section 1(b) of the Disclosure Letter PROVIDED such judgments are stayed or not being enforced and any judgment or attachment Lien in connection therewith is subordinate to the Lien of the Collateral Agent and is stayed and not being enforced; and (viii) other Liens securing Indebtedness not to exceed $500,000 in the aggregate. In addition, neither the Company nor any of its Subsidiaries shall become a party to any agreement, note, indenture or other instrument, or take any other action, which would prohibit the creation of a Lien on any of its properties or other assets with an aggregate fair market value of $1,000,000 or more in favor of the Collateral Agent for the benefit of the Holders of Secured Obligations, as collateral for the Secured Obligations; PROVIDED that any agreement, note, indenture or other instrument in connection with Permitted Purchase Money Indebtedness (including Capitalized Leases) may prohibit the creation of a Lien in favor of the Collateral Agent for the benefit of itself and the Holders of Secured Obligations on the items of property obtained with the proceeds of such Permitted Purchase Money Indebtedness. (D) INVESTMENTS. Except to the extent permitted pursuant to subsection (G) below, neither the Company nor any of its Subsidiaries shall directly or indirectly make or own any Investment except: (i) Investments in Cash Equivalents; (ii) Permitted Existing Investments; (iii) Investments in trade receivables or received in connection with the bankruptcy or reorganization of suppliers and customers or in settlement of delinquent obligations of, and other disputes with, customers and suppliers arising in the ordinary course of business; (iv) Investments consisting of deposit accounts maintained by the Company; (v) Investments consisting of non-cash consideration from a sale, assignment, transfer, lease, conveyance or other disposition of property permitted by Section 7.3(B); (vi) Investments consisting of (a) intercompany loans from any Subsidiary to the Company or any other Subsidiary permitted by Section 7.3(A)(vi) and (b) intercompany loans from the Company to its Subsidiaries permitted under Section 7.3(S); (vii) Investments resulting from the conversion by the Company of intercompany loans made by it to its Belgian Subsidiary and previously reserved for on the Company's financial statements to equity in an aggregate amount not to exceed $2,000,000; Exhibit 1.1-14 (viii) Investments resulting from leasehold improvements not to exceed an aggregate amount of $1,000,000; (ix) Investments resulting from advances to employees made in the ordinary course of business which are (a) outstanding as of the Effective Date and shown on Schedule 1.1.3 to the Credit Agreement (but not any relending of such amounts once repaid) and (b) additional advances, not to exceed an aggregate of $100,000, made from time to time after the date hereof; and (x) Investments in addition to those referred to elsewhere in this Section 7.3(D) in an amount not to exceed $1,000,000 in the aggregate at any time outstanding; PROVIDED, HOWEVER, that the Investments described in clauses (vi)(b), (vii), (ix) and (x) above shall not be permitted to be made at a time when either a Default or an Event of Default shall have occurred and be continuing or would result therefrom. (E) CONTINGENT OBLIGATIONS. Neither the Company nor any of its Subsidiaries shall directly or indirectly create or become or be liable with respect to any Contingent Obligation, except: (i) recourse obligations resulting from endorsement of negotiable instruments for collection in the ordinary course of business; (ii) Permitted Existing Contingent Obligations; (iii) obligations, warranties, and indemnities, not relating to Indebtedness of any Person, which have been or are undertaken or made in the ordinary course of business and, except for product warranties extended to Subsidiaries or Affiliates of the Company in the ordinary course of business and consistent with warranties given to non-Affiliated parties, not for the benefit of or in favor of an Affiliate of the Company or such Subsidiary; (iv) additional Contingent Obligations which do not exceed $1,000,000 in the aggregate at any time; (v) Contingent Obligations with respect to surety, appeal and performance bonds obtained by the Company or any Subsidiary in the ordinary course of business; (vi) Contingent Obligations of the Company in respect of any Subsidiary; and (vii) contingent obligations arising from any guaranty executed by a Subsidiary of the Secured Obligations owing to the Lenders if such Subsidiary has also executed a guaranty of the Secured Obligations owing to the holders of the Notes and provided the obligations under such guaranty shall be governed by the terms of the Collateral Sharing Agreement. (F) RESTRICTED PAYMENTS. Neither the Company nor any of its Subsidiaries shall declare or make any Restricted Payment, except: (i) Restricted Payments made in connection with the defeasance, redemption or repurchase of any Indebtedness with the Net Cash Proceeds of Permitted Refinancing Indebtedness; (ii) mandatory payments of interest, principal or premium, if any, due on the Secured Obligations in accordance with repayment provisions in effect with respect thereto as of the Effective Date; (iii) Restricted Payments made in connection with the Disclosed Disputes in an amount which when aggregated with all other Dispute Resolution Costs paid do not, in the aggregate, exceed the amount set forth in Section 1(a) of the Disclosure Letter, PROVIDED no Default or Event of Default has occurred and is continuing at the date of declaration or payment thereof or would result therefrom; Exhibit 1.1-15 (iv) Restricted Payments of any Subsidiary of the Company to the Company or to another Subsidiary of the Company; and (v) Restricted Payments with respect to Indebtedness of any foreign Subsidiary of the Company consisting of regularly scheduled payments and mandatory prepayments. (G) CONDUCT OF BUSINESS; SUBSIDIARIES. Neither the Company nor any of its Subsidiaries shall engage in any business other than the businesses engaged in by the Company on the Effective Date and any business or activities which are substantially similar, related or incidental thereto. Except as permitted pursuant to Section 7.3(D)(viii), the Company shall not create, acquire or capitalize any Subsidiary after the date hereof. The Company shall not and shall not permit any Subsidiaries to enter into or make any Acquisitions. (H) TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES. Neither the Company nor any of its Subsidiaries shall directly or indirectly enter into or permit to exist any transaction (including, without limitation, the purchase, sale, lease or exchange of any property or the rendering of any service) with any holder or holders of any of the Equity Interests of the Company holding in excess of 5% of the fully-diluted Equity Interests of the Company, or with any Affiliate of the Company which is not its Subsidiary, on terms that are less favorable to the Company or any of its Subsidiaries, as applicable, than those that might be obtained in an arm's-length transaction at the time from Persons who are not such a holder or Affiliate, except for Restricted Payments permitted by Section 7.3(F) and Investments permitted by Section 7.3(D). (I) RESTRICTION ON FUNDAMENTAL CHANGES. Except as set forth in Section 4 of the Disclosure Letter and except as permitted pursuant to a transaction approved by the Required Creditors under Section 7.5(g), neither the Company nor any of its Subsidiaries shall enter into any merger or consolidation, or liquidate, wind-up or dissolve (or suffer any liquidation or dissolution), or convey, lease, sell, transfer or otherwise dispose of, in one transaction or series of transactions, all or substantially all of the Company's or any such Subsidiary's business or property, whether now or hereafter acquired, except (i) transactions permitted under Section 7.3(B) or Section 7.3(G), (ii) mergers, consolidations, or amalgamations of a Subsidiary of the Company with and into the Company (with the Company as the surviving corporation) or with another Subsidiary of the Company, (iii) any liquidation of any Subsidiary of the Company into the Company or another Subsidiary of the Company and (iv) the liquidation of Binks International (Italia) S.r.l. (J) SALES AND LEASEBACKS. Neither the Company nor any of its Subsidiaries shall become liable, directly, by assumption or by Contingent Obligation, with respect to any lease, whether an operating lease or a Capitalized Lease, of any property (whether real or personal or mixed) (i) which it or one of its Subsidiaries sold or transferred or is to sell or transfer to any other Person, or (ii) which it or one of its Subsidiaries intends to use for substantially the same purposes as any other property which has been or is to be sold or transferred by it or one of its Subsidiaries to any other Person in connection with such lease, unless in either case the sale involved is not prohibited under Section 7.3(B) and the lease involved is not prohibited under Section 7.3(A). (K) [Intentionally Omitted.] Exhibit 1.1-16 (L) ERISA. The Company shall not (i) engage, or permit any of its Subsidiaries to engage, in any prohibited transaction described in Section 406 of ERISA or Section 4975 of the Code for which a statutory or class exemption is not available or a private exemption has not been previously obtained from the DOL; (ii) permit to exist any accumulated funding deficiency (as defined in Section 302 of ERISA and Section 412 of the Code), with respect to any Benefit Plan, whether or not waived; (iii) fail, or permit any Controlled Group member to fail, to pay timely required contributions or annual installments due with respect to any waived funding deficiency to any Benefit Plan; (iv) terminate, or permit any Controlled Group member to terminate, any Benefit Plan which would result in any liability of the Company or any Controlled Group member under Title IV of ERISA which liability could reasonably be expected to have a Material Adverse Effect; (v) fail to make any contribution or payment to any Multiemployer Plan which the Company or any Controlled Group member may be required to make under any agreement relating to such Multiemployer Plan, or any law pertaining thereto; (vi) fail, or permit any Controlled Group member to fail, to pay any required installment or any other payment required under Section 412 of the Code on or before the due date for such installment or other payment; or (vii) amend, or permit any Controlled Group member to amend, a Plan resulting in an increase in current liability for the plan year such that the Company or any Controlled Group member is required to provide security to such Plan under Section 401(a)(29) of the Code. (M) CORPORATE DOCUMENTS. Neither the Company nor any of its Material Subsidiaries shall amend, modify or otherwise change any of the terms or provisions in any of their respective constituent documents as in effect on the date hereof in any manner adverse to the interests of the holders of Notes, without the prior written consent of the Required Creditors, which consent shall not be unreasonably withheld or delayed. (N) OTHER INDEBTEDNESS. The Company shall not amend, supplement or otherwise modify the terms of the Credit Agreement (as in effect on the Effective Date) in any way that would be materially less advantageous to the Company or materially adverse to the holders of the Notes, including, without limitation, with respect to amount, maturity, amortization, interest rate, premiums, fees, covenants, events of default, remedies and dividend provisions. (O) FISCAL YEAR. The Company shall not change its fiscal year for accounting or tax purposes from a period consisting of the 12-month period ending on the last day of November of each year. (P) SUBSIDIARY COVENANTS. The Company will not, and will not permit any Subsidiary to, create or otherwise cause to become effective any material consensual Exhibit 1.1-17 encumbrance or material restriction of any kind on the ability of any Subsidiary to pay dividends or make any other distribution on its stock, or make any other Restricted Payment, pay any Indebtedness or other obligation owed to the Company or any other Subsidiary, make loans or advances or other Investments in the Company or any other Subsidiary, or sell, transfer or otherwise convey any of its property to the Company or any other Subsidiary; PROVIDED nothing herein shall restrict the ability of any foreign Subsidiary to capitalize retained earnings in the ordinary course of business if required in connection with the incurrence of Indebtedness, PROVIDED, FURTHER the maximum amount of retained earnings capitalized from and after September 23, 1997 shall not exceed $7,500,000 in the aggregate for all of the Company's foreign Subsidiaries. (Q) HEDGING OBLIGATIONS. The Company shall not and shall not permit any of its Subsidiaries to enter into any interest rate, commodity or foreign currency exchange, swap, collar, cap or similar agreements evidencing Hedging Obligations, other than interest rate, foreign currency or commodity exchange, swap, collar, cap or similar agreements entered into by the Company or its Subsidiaries pursuant to which the Company or such Subsidiary has hedged its actual interest rate, foreign currency or commodity exposure. Such permitted hedging agreements entered into by the Company and its Subsidiaries and any Lender or any affiliate of any Lender are sometimes referred to herein as "Hedging Agreements." (R) CHANGE OF DEPOSIT ACCOUNTS. The Company shall not, and shall not permit SEI to, establish or maintain any deposit account with any bank or other financial institution other than the (i) the Agent and its affiliates, (ii) those which have entered into a Collection Account Agreement in form and substance acceptable to the Agent, (iii) for the first 30 days following the date hereof, the account maintained with Centennial Bank, 625 East Gibbs Ave., Cottage Grove, Oregon 97424, and (iv) other disbursement accounts maintained by the Company or SEI, PROVIDED the maximum amount of deposits in any individual account maintained pursuant to this clause (iv) shall not exceed $100,000 and the maximum amount of deposits in all such accounts maintained pursuant to this clause (iv) shall not exceed $300,000. (S) INTERCOMPANY LOANS FROM THE COMPANY TO ITS SUBSIDIARIES. The Company shall not and shall not permit SEI to make any loans to or Investments in any of its Subsidiaries other than (i) loans by the Company to SEI, or by SEI to the Company, (ii) intercompany loans by the Company or SEI to any other Subsidiary of the Company in the amount outstanding as of the date hereof and set forth on Schedule 6.3(S) to the Credit Agreement. Other than the loans outstanding on the date hereof from the Company to its Belgian Subsidiary, all loans by the Company to its Subsidiaries or by SEI to the Company or any other Subsidiary shall be evidenced by promissory notes pledged to the Collateral Agent pursuant to the terms of the Security Agreement executed by the Company which provide that (i) a Default under this Agreement shall constitute a default under such promissory note entitling the Company to accelerate the payment thereof and (ii) if any acceleration of the Notes shall occur, the obligations under such promissory note shall immediately become due and payable without any election or action on the part of the Company or SEI, as applicable. 7.4. FINANCIAL COVENANTS. The Company shall comply with the following: (A) DEFINED TERMS FOR FINANCIAL COVENANTS. The following terms as used in this Agreement shall have the following meanings (such meanings to be applicable, except to the extent otherwise indicated in a definition of a particular term, both to the singular and the plural forms of the terms defined): Exhibit 1.1-18 "Consolidated Net Worth" means, at a particular date, for any Person, (a) all amounts which would be included in shareholders' equity for such Person and its consolidated Subsidiaries, calculated without giving effect to any foreign currency translation adjustments, PLUS (b) the sum of (i) the liabilities recognized relating to the Dispute Resolution Costs to the extent permitted under Section 1 of the Disclosure Letter but only to the extent such amounts exceed the projected amounts therefor contained in the projections attached as Exhibit A to the Disclosure Letter, and (ii) Restructuring Expenses incurred during the period from December 1, 1997 through September 30, 1999 in a maximum amount not to exceed $7,750,000 to the extent such amount exceeds $6,420,000 and to the extent deducted in computing Net Income, in each case determined in accordance with GAAP. "EBITDA" means, for any period, on a consolidated basis for the Company and its Subsidiaries, the sum of the amounts for such period, without duplication, of (i) Net Income, PLUS (ii) Interest Expense, PLUS (iii) charges against income for foreign, federal, state and local taxes to the extent deducted in computing Net Income, PLUS (iv) depreciation expense to the extent deducted in computing Net Income, PLUS (v) amortization expense, including, without limitation, amortization of goodwill and other intangible assets to the extent deducted in computing Net Income, PLUS (vi) other non-cash charges classified as long-term deferrals in accordance with GAAP, to the extent deducted in computing Net Income, PLUS (vii) other extraordinary non-cash charges to the extent deducted in computing Net Income, MINUS (viii) extraordinary non-cash gains to the extent included in computing Net Income, PLUS (ix) Restructuring Expenses incurred during the period from December 1, 1997 through September 30, 1999, in a maximum amount not to exceed $7,750,000, to the extent deducted in computing Net Income, PLUS (x) the non-cash charges relating to the Dispute Resolution Costs, incurred to the extent permitted under the terms of Section 1 of the Disclosure Letter and to the extent deducted in computing Net Income. "Interest Expense" means, for any period, the total interest expense of the Company and its consolidated Subsidiaries, whether paid or accrued (including the interest component of Capitalized Leases, commitment and letter of credit fees), but excluding interest expense not payable in cash (including amortization of discount), all as determined in conformity with GAAP. "Net Income" means, for any period, the net earnings (or loss) after taxes of the Company and its Subsidiaries on a consolidated basis for such period taken as a single accounting period determined in conformity with GAAP. "Restructuring Expenses" means the expenses of the types and in the amounts not to exceed those set forth in Exhibit E to the Disclosure Letter. (B) MINIMUM CUMULATIVE EBITDA. The Company shall maintain EBITDA, as determined as of the last day of each fiscal quarter of the Company set forth below, for the cumulative period beginning December 1, 1997 and ending on such date, of at least the amount set forth below opposite such date in which such quarter ends:
Fiscal Quarter Ending: Minimum EBITDA: February 28, 1998 ($1,500,000) May 31, 1998 $0
Exhibit 1.1-19
Fiscal Quarter Ending: Minimum EBITDA: August 31, 1998 $2,000,000 November 31, 1998 $8,500,000 February 28, 1999 $9,000,000 May 31, 1999 $11,000,000 August 31, 1999 $14,500,000
(C) MINIMUM COMPANY CONSOLIDATED NET WORTH. The Company shall not permit Consolidated Net Worth of the Company and its consolidated Subsidiaries at any time during any of the applicable months set forth below to be less than the amount set forth opposite such month below:
Applicable Month Minimum Consolidated Net Worth February 1998 $27,100,000 March 1998 $25,600,000 April 1998 $23,000,000 May 1998 $21,800,000 June 1998 $21,300,000 July 1998 $21,100,000 August 1998 $21,300,000 September 1998 $20,975,000 October 1998 $21,930,000 November 1998 $23,750,000 December 1998 $22,800,000 January 1999 $22,600,000 February 1999 $22,500,000 March 1999 $22,300,000 April 1999 $22,800,000 May 1999 $23,500,000 June 1999 $23,850,000 July 1999 $24,500,000 August 1999 $25,500,000
Exhibit 1.1-21
Applicable Month Minimum Consolidated Net Worth September 1999 $26,900,000
(D) MINIMUM SAMES S.A. CONSOLIDATED NET WORTH. The Company shall not permit Consolidated Net Worth of Sames S.A. and its consolidated Subsidiaries at any time during any of the applicable period set forth below to be less than the amount set forth opposite such period below:
Applicable Month Minimum Consolidated Net Worth February 1, 1998 up to and $12,750,000 including November 30, 1998 December 1, 1998 and thereafter $14,150,000
(E) CAPITAL EXPENDITURES. The Company will not permit the aggregate amount of Capital Expenditures of the Company and SEI made or committed for the period commencing on the Effective Date through the Existing Loan Termination Date to exceed $1,000,000 in the aggregate. 7.5. SALE INITIATIVE. The Company has prior to the Effective Date engaged William Blair & Co., L.L.P. ("Blair") to pursue a sale of the Company and its Subsidiaries (the "Sale Initiative"). A true and accurate copy of the engagement letter between the Company and Blair is attached as Exhibit C to the Disclosure Letter. In connection therewith: (a) The Company shall at all times maintain the Blair engagement (or an engagement with another reputable investment bank reasonably acceptable to the Required Creditors (in which event all references herein to Blair shall be to such replacement investment bank)) as an active engagement to pursue a sale of the Company and its Subsidiaries. (b) The Company and Blair shall, on or prior to April 6, 1998, prepare a customary offering memorandum (a copy of which shall be promptly provided to each holder of Notes on or prior to such date) and a list of potential buyers (to be provided to the Company only) to be contacted in connection with the Sale Initiative. (c) Subject to the fiduciary duties of the board of directors of the Company, the Company and Blair shall conduct negotiations with potential buyers and bidders selected for definitive purchase agreements and closing to occur in an expedited manner. (d) The Company and Blair shall provide periodic reporting to the holders of the Notes on a frequency and in a form and scope mutually acceptable to the Company, Blair and such holders, setting forth the efforts since the last periodic report to accomplish the Sale Initiative. Without limiting the foregoing, the Company and Blair shall be required to promptly advise each holder of Notes of any material delay from the time line attached as Exhibit D to the Disclosure Letter and an explanation of the reasons for such delay. Notwithstanding any of the foregoing, neither the Company nor Blair shall be required to disclose the identities of any Exhibit 1.1-21 potential purchasers until the board of directors of the Company shall have approved execution of a letter of intent or understanding or a definitive purchase agreement with such potential purchaser. Without otherwise limiting the provisions of Section 13.4, Confidential Information received by any holder of Notes in connection herewith shall be governed by the confidentiality terms set forth in Section 15.14 below. (e) On or prior to November 30, 1998, (i) the board of directors of the Company shall have approved a sale or series of sale transactions in connection with the Sale Initiative, the aggregate net cash proceeds of which sale or series of sale transactions shall be sufficient to repay all of the Secured Obligations in full, and (ii) shall have delivered to each holder of Notes a copy of the binding letter of intent, commitment, purchase agreement or similar document or agreement with respect to such transaction or series of transactions. (f) The Company and its Subsidiaries and their respective Boards of Directors and officers shall at all times fully cooperate with the process identified by Blair to accomplish the Sale Initiative in an effort to consummate the Sale Initiative in an expeditious manner and on a basis consistent with the fiduciary duties of the board of directors of the Company. (g) Upon request by the Company in connection with the Sale Initiative, the Required Creditors may consent (which consent shall not be unreasonably withheld or delayed) to allow the Company to enter into one or more transactions involving the sale, transfer or other disposition of a Subsidiary of the Company, or a business line of the Company, or to make some other material asset disposition or transaction in connection with the Sale Initiative which is not expressly permitted under clauses (i) through (viii) of Section 7.3(B); PROVIDED that (i) each holder of the Notes has been provided, sufficiently in advance of such transaction in order to make a reasonably informed decision in respect thereof, with such information regarding any such transaction and the impact thereof on the Company and the Sale Initiative as it shall reasonably request, and (ii) the Net Cash Proceeds thereof are applied to the repayment of the Secured Obligations in accordance with Section 3.1(a)(i). Any holder of Notes shall have the right to require, as a condition to its consent to such transaction, that the Company obtain from Blair a fairness opinion reasonably acceptable to the Majority Holders with respect to such transaction evidencing the fairness of such transaction to the Company's shareholders, a copy of which shall be provided to each holder of Notes. In addition, it is expressly understood and agreed that any holder of Notes may withhold its consent to any such transaction if (i) any portion of the consideration (other than the assumption of liabilities (other than the Secured Obligations which may not be assumed)) for such sale or other disposition is non-cash or (ii) the transaction involves the Company or a Subsidiary with an Affiliate of the Company or any Subsidiary. 5. AMENDMENT OF ARTICLE IX OF THE EXISTING NOTE PURCHASE AGREEMENT. Article IX of the Existing Note Purchase Agreement is hereby amended in its entirety to read as follows: [Intentionally Omitted]. 6. AMENDMENT OF ARTICLE X OF THE EXISTING NOTE PURCHASE AGREEMENT. Article X of the Existing Note Purchase Agreement is amended in its entirety as follows: Exhibit 1.1-22 [Intentionally Omitted]. 7. AMENDMENT OF SECTION 11.1 OF THE EXISTING NOTE PURCHASE AGREEMENT. (a) AMENDMENT OF EXISTING DEFINITIONS. The definitions of "Affiliate," "Capital Expenditures," "Capital Stock," "Cash Equivalents," "Inventory," "Investment," "Lien" and "Make Whole Premium" in Section 11.1 of the Existing Note Purchase Agreement are hereby amended and restated in their entirety to read as follows: "Affiliate" of any Person means any other Person directly or indirectly controlling, controlled by or under common control with such Person. A Person shall be deemed to control another Person if the controlling Person is the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of greater than 10% or more of any class of voting securities (or other voting interests) of the controlled Person or possesses, directly or indirectly, the power to direct or cause the direction of the management or policies of the controlled Person, whether through ownership of Capital Stock, by contract or otherwise. "Capital Expenditures" means, for any period, the aggregate of all expenditures (whether paid in cash or accrued as liabilities and including Capitalized Leases and Permitted Purchase Money Indebtedness) by the Company and its Subsidiaries during that period that, in conformity with GAAP, are required to be included in or reflected by the property, plant, equipment or similar fixed asset accounts reflected in the consolidated balance sheet of the Company and its Subsidiaries. "Capital Stock" means (i) in the case of a corporation, corporate stock, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, (iii) in the case of a partnership, partnership interests (whether general or limited) and (iv) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. "Cash Equivalents" means (i) marketable direct obligations issued or unconditionally guaranteed by the United States government and backed by the full faith and credit of the United States government; (ii) domestic and Eurodollar certificates of deposit and time deposits, bankers' acceptances and floating rate certificates of deposit issued by any commercial bank organized under the laws of the United States, any state thereof, the District of Columbia, any foreign bank, or its branches or agencies (fully protected against currency fluctuations for any such deposits with a term of more than 90 days); (iii) shares of money market, mutual or similar funds having assets in excess of $100,000,000 and the investments of which are limited to investment grade securities (i.e., securities rated at least Baa by Moody's Investors Service, Inc. or at least BBB by Standard & Poor's Ratings Group); and (iv) commercial paper of United States and foreign banks and bank holding companies and their subsidiaries and United States and foreign finance, commercial industrial or utility companies which, at the time of acquisition, are rated A-1 (or better) by Standard & Poor's Ratings Group or P-1 (or better) by Moody's Investors Services, Inc.; PROVIDED that the maturities of such Cash Equivalents shall not exceed 365 days. "Inventory" means, with respect to any Person, any and all goods, including, without limitation, goods in transit, wheresoever located, whether now owned or hereafter acquired by such Person, which are held for sale or lease, furnished under any contract of service or held as raw materials, work in process or supplies, and all materials used or consumed in Exhibit 1.1-23 such Person's business, and shall include all rights, title and interest of such Person on any property the sale or other disposition of which has given rise to Receivables and which has been returned to or repossessed or stopped in transit by such Person. "Investment" means, with respect to any Person, (i) any purchase or other acquisition by that Person of any Indebtedness, Equity Interests or other securities, or of a beneficial interest in any Indebtedness, Equity Interests or other securities, issued by any other Person, (ii) any purchase by that Person of all or substantially all of the assets of a business conducted by another Person, and (iii) any loan, advance (other than deposits with financial institutions available for withdrawal on demand, prepaid expenses, accounts receivable, advances to employees and similar items made or incurred in the ordinary course of business) or capital contribution by that Person to any other Person, including all Indebtedness to such Person arising from a sale of property by such Person other than in the ordinary course of its business. "Lien" means any lien (statutory or other), mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance or preference, priority or security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, the interest of a vendor or lessor under any conditional sale, Capitalized Lease or other title retention agreement). "Make Whole Premium" means at any time with respect to any Notes being prepaid in whole or in part pursuant to Section 3.2 (other than in connection with one or more transactions relating to the Sale Initiative) or being declared or becoming due and payable pursuant to Section 12.1(A) or (B), the amount (but not less than zero) obtained by subtracting (X) the aggregate amount of the principal of such Notes being prepaid or paid or being declared or becoming due and payable on such date (as the case may be) together with unpaid interest accrued thereon to the date of such prepayment or payment (other than interest that would have been due and payable on or prior to the date of such prepayment or payment in the absence of such prepayment or payment), from (Y) the sum of the Present Values of (A) the aggregate amount of such principal being so prepaid or paid or being declared or becoming due and payable (assuming such principal were paid as scheduled in Section 3.1 of the Existing Note Purchase Agreement) PLUS (B) each amount of interest which would have been payable on the amount of such principal being prepaid or paid or being declared or becoming due and payable (assuming all principal were paid as specified in the foregoing clause (A) and all interest thereon were paid when due pursuant to the terms of such Notes, in each case on the basis of the interest rate applicable to the Existing Notes (7.14%) and the mandatory principal payments applicable to the Existing Notes as set forth in the Existing Note Purchase Agreement). "Present Value," for any amount of principal or interest, shall be computed in accordance with GAAP on a semiannual basis at a discount rate equal to one-half of one percent (1/2%) in excess of the Treasury Yield. The "Treasury Yield" shall be determined by reference to the interest rate per annum displayed on Telerate page 500 (or such other page as may subsequently replace page 500 for such rates) two days prior to the date of prepayment or payment or the date as of which such principal becomes or is declared due and payables as the case may be (or, if Telerate is not available, then to Bloomberg or any publicly available, generally accepted source of similar market data acceptable to the Majority Holders), and shall be the most recent yield on actively traded United States Treasury securities adjusted to a constant maturity equal to the then remaining Weighted Average Life to Maturity of the principal being prepaid or paid or becoming or being declared due and payable, as the case may be. If the Weighted Average Life to Maturity (so computed) is not equal to the constant maturity of a United States Treasury security for which a yield is given, the Treasury Yield shall be obtained by linear interpolation (calculated Exhibit 1.1-24 to the nearest one-twelfth of a year) from the yields of United States Treasury securities for which such yields are given, except that if the Weighted Average Life to Maturity (so computed) is less than one year, the yield on actively traded United States Treasury securities adjusted to a constant maturity of one year shall be used. (b) NEW DEFINITIONS. Section 11.1 of the Existing Note Purchase Agreement is hereby amended to add the following definitions in appropriate alphabetical order: "Acquisition" means any transaction, or any series of related transactions, consummated on or after the date of this Agreement, by which the Company or any of its Subsidiaries (i) acquires any going business or all or substantially all of the assets of any firm, corporation or division thereof, whether through purchase of assets, merger or otherwise or (ii) directly or indirectly acquires (in one transaction or as the most recent transaction in a series of transactions) at least a majority (in number of votes) of the securities of a corporation which has ordinary voting power for the election of directors (other than securities having such power only by reason of the happening of a contingency) or a majority (by percentage of voting power) of the outstanding equity interests of another Person. "Agent" means The First National Bank of Chicago, in its capacity as contractual representative for itself and the Lenders pursuant to Article XI of the Credit Agreement, and any successor Agent appointed pursuant to Article XI thereof. "Aggregate Supplemental Loan Commitment" has the meaning specified in the Credit Agreement. "Asset Sale" means, with respect to any Person, the sale, lease, conveyance, disposition or other transfer by such Person of any of its assets (including by way of a sale-leaseback transaction, and including the sale or other transfer of any of the Equity Interests of any Subsidiary of such Person). "Asset Sale Prepayment" has the meaning specified in Section 3.1(a)(i). "Benefit Plan" means a defined benefit plan as defined in Section 3(35) of ERISA (other than a Multiemployer Plan) in respect of which the Company or any other member of the Controlled Group is, or within the immediately preceding six years was, an "employer" as defined in Section 3(5) of ERISA. "Blair" has the meaning specified in Section 7.5. "Borrowing Base" has the meaning specified in the Credit Agreement as of the Effective Date, as such term in amended or modified in accordance with the terms of this Agreement. "Borrowing Base Certificate" has the meaning specified from time to time in the Credit Agreement. "Claims" has the meaning specified in Section 15.3(d). "Collateral" means all property and interests in property now owned or hereafter acquired by the Company or any of its Subsidiaries in or upon which a security interest, lien or mortgage is granted to the Collateral Agent, for the benefit of the Holders of Secured Exhibit 1.1-25 Obligations, or to the holders of the Notes, whether under the Security Agreements, the Mortgages, the Intellectual Property Security Agreements, the Pledge Agreements, or any of the other Collateral Documents. "Collateral Agent" has the meaning specified in the Collateral Sharing Agreement. "Collateral Documents" means all agreements, instruments and documents executed in connection with this Agreement, including, without limitation, the Security Agreements, the Mortgages, the Collection Account Agreements, the Intellectual Property Security Agreements, the Pledge Agreements, the Collateral Sharing Agreement and all other security agreements, subordination agreements, pledges, powers of attorney, assignments, contracts, financing statements and all other written matter whether heretofore, now, or hereafter executed by or on behalf of the Company or any of its Subsidiaries for the direct or indirect benefit of the holders of the Notes, together with all agreements and documents referred to therein or contemplated thereby. "Collateral Sharing Agreement" means that certain Amended and Restated Collateral Sharing Agreement dated as of March 16, 1998, among the Agent, the Lenders and The Equitable Life Assurance Company of the United States, as the same may from time to time be further amended, modified, supplemented and or restated. "Collection Account" means each lock-box and blocked depository account maintained by the Company and each of its Subsidiaries which has executed a Subsidiary Security Agreement, subject to a Collection Account Agreement, for the collection of Receivables and other proceeds of Collateral. "Collection Account Agreement" means a written agreement among the Company, any of its Subsidiaries, the Collateral Agent, and, as applicable, each of the banks at which the Company or such Subsidiary maintains a Collection Account. "Confidential Information" has the meaning specified in Section 15.14. "Consolidated Tangible Assets" means the total assets of the Company and its Subsidiaries on a consolidated basis, but excluding therefrom all items that are treated as intangibles under GAAP. "Consolidated Net Worth" has the meaning specified in Section 7.4(A). "Contaminant" means any waste, pollutant, hazardous substance, toxic substance, hazardous waste, special waste, petroleum or petroleum-derived substance or waste, asbestos, polychlorinated biphenyls ("PCBs"), or any constituent of any such substance or waste, and includes but is not limited to these terms as defined in Environmental, Health or Safety Requirements of Law. "Contingent Obligation" means, as applied to any Person, any Contractual Obligation, contingent or otherwise, of that Person with respect to any Indebtedness of another or other obligation or liability of another, including, without limitation, any such Indebtedness, obligation or liability of another directly or indirectly guaranteed, endorsed (otherwise than for collection or deposit in the ordinary course of business), co-made or discounted or sold with recourse by that Person, or in respect of which that Person is otherwise directly or indirectly liable, including Contractual Obligations (contingent or otherwise) arising through any agreement to purchase, repurchase, or otherwise acquire such Indebtedness, obligation or Exhibit 1.1-26 liability or any security therefor, or to provide funds for the payment or discharge thereof (whether in the form of loans, advances, stock purchases, capital contributions or otherwise), or to maintain solvency, assets, level of income, or other financial condition, or to make payment other than for value received. "Contractual Obligation" means, as applied to any Person, any material provision of any equity or debt securities issued by that Person or any indenture, mortgage, deed of trust, security agreement, pledge agreement, guaranty, contract, undertaking, agreement or instrument, in any case in writing, to which that Person is a party or by which it or any of its properties is bound, or to which it or any of its properties is subject, with obligations in excess of $1,000,000. "Controlled Group" means the group consisting of (i) any corporation which is a member of the same controlled group of corporations (within the meaning of Section 414(b) of the Code) as the Company; (ii) a partnership or other trade or business (whether or not incorporated) which is under common control (within the meaning of Section 414(c) of the Code) with the Company; and (iii) a member of the same affiliated service group (within the meaning of Section 414(m) of the Code) as the Company, any corporation described in clause (i) above or any partnership or trade or business described in clause (ii) above. "Credit Agreement" means the Amended and Restated Credit Agreement, dated the Effective Date, among the Company, the Lenders and the Agent, as the same may from time to time be further amended, modified, supplemented or restated in compliance with the terms of this Agreement. "Customary Permitted Liens" means: (i) Liens (other than Environmental Liens and Liens in favor of the IRS or the PBGC) with respect to the payment of taxes, assessments or governmental charges in all cases which are not yet due or (if foreclosure, distraint, sale or other similar proceedings shall not have been commenced) which are being contested in good faith by appropriate proceedings properly instituted and diligently conducted and with respect to which adequate reserves or other appropriate provisions are being maintained in accordance with GAAP; (ii) statutory Liens of landlords and Liens of suppliers, mechanics, carriers, materialmen, warehousemen or workmen and other similar Liens imposed by law created in the ordinary course of business for amounts not yet due or which are being contested in good faith by appropriate proceedings properly instituted and diligently conducted and with respect to which adequate reserves or other appropriate provisions are being maintained in accordance with GAAP; (iii) Liens (other than Environmental Liens and Liens in favor of the IRS or the PBGC) incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance or other types of social security benefits or to secure the performance of bids, tenders, sales, contracts (other than for the repayment of borrowed money), surety, appeal and performance bonds; PROVIDED that (A) such Liens do not in the aggregate materially detract from the value of the Company's or such Subsidiary's assets or property taken as a whole or materially impair the use thereof in the operation of the businesses taken as a whole, and (B) all Liens securing bonds to stay judgments or Exhibit 1.1-27 in connection with appeals do not secure at any time an aggregate amount exceeding $1,000,000; (iv) Liens arising with respect to zoning restrictions, easements, licenses, reservations, covenants, rights-of-way, utility easements, building restrictions and other similar charges or encumbrances on the use of real property which do not in any case materially detract from the value of the property subject thereto or interfere with the ordinary conduct of the business of the Company or any of its Subsidiaries; (v) Liens of attachment or judgment with respect to judgments, writs or warrants of attachment, or similar process against the Company or any of its Subsidiaries which do not constitute an Event of Default under Section 12.1(h); and (vi) any interest or title of the lessor in the property subject to any operating lease entered into by the Company or any of its Subsidiaries in the ordinary course of business. "Designated Prepayment" is defined in Section 3.1(a)(vii). "Disclosed Disputes" has the meaning given that term in Section 1(a) of the Disclosure Letter. "Disclosure Letter" means that certain disclosure letter, dated the Effective Date, issued by the Company and acknowledged and consented to by the Agent, the Lenders and the holder of the Notes on the Effective Date, as the same may from time to time be amended, modified, supplemented or restated with the consent of the Required Creditors. "Dispute Resolution Costs" has the meaning specified in Section 1(a) of the Disclosure Letter. "Disqualified Stock" has the meaning specified in the Credit Agreement. "DOL" means the United States Department of Labor and any Person succeeding to the functions thereof. "EBIDTA" has the meaning specified in Section 7.4(A). "Effective Date" has the meaning specified in Section 3 of the Second Amendment. "Eligible Inventory" shall have the meaning specified in the Credit Agreement. "Eligible Receivables" shall have the meaning specified in the Credit Agreement. "Eligible Transferee" means: (a) a commercial bank organized under the laws of the United States or any state thereof, and having total assets in excess of $5,000,000,000, or an Affiliate thereof; (b) a savings and loan association or savings bank organized under the laws of the United States or any state thereof, and having total assets in excess of $5,000,000,000; Exhibit 1.1-28 (c) a commercial bank organized under the laws of any other country that is a member of the OECD or has concluded special lending arrangements with the International Monetary Fund associated with its General Arrangements to Borrow or of the Cayman Islands or a political subdivision of any of such country, and having total assets in excess of $20,000,000,000, so long as such bank is acting through a branch or agency located in the United States; (d) an insurance company (as defined in Section 2(13) of the Securities Act) that in the aggregate owns and invests, on a discretionary basis, at least $100,000,000 in securities of issuers that are not affiliated with such insurance company; or (e) any broker or dealer acquiring such Note for its own account that agrees in writing (for the benefit of the Company) that it shall not, directly or indirectly, act to effect a Change of Control or acquire all or substantially all of the assets of the Company or any Subsidiary, PROVIDED, HOWEVER, that the foregoing shall not adversely affect the rights of such acquiring entity to exercise any remedies under this Agreement or the other Financing Documents available to the holders of Notes generally. "Environmental, Health or Safety Requirements of Law" means all Requirements of Law derived from or relating to foreign, federal, state and local laws or regulations relating to or addressing pollution or protection of the environment, or protection of worker health or safety, including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601 ET SEQ., the Occupational Safety and Health Act of 1970, 29 U.S.C. Section 651 ET SEQ., and the Resource Conservation and Recovery Act of 1976, 42 U.S.C. section 6901 ET SEQ., in each case including any amendments thereto, any successor statutes, and any regulations or guidance promulgated thereunder, and any state or local equivalent thereof. "Environmental Lien" means a Lien in favor of any Governmental Body for (a) any liability under Environmental, Health or Safety Requirements of Law, or (b) damages arising from, or costs incurred by such Governmental Body in response to, a Release or threatened Release of a Contaminant into the environment. "Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "Excluded Asset Sales" means Asset Sales consisting of any of the following: (a) sales of Receivables sold by any of the Company's foreign Subsidiaries in the ordinary course of such Subsidiary's business and consistent with its past practices, (b) those Asset Sales permitted pursuant to Section 7.3(B)(i) and (ii) and (c) Asset Sales involving the assets of one or more of the Company's Subsidiaries in Belgium, Mexico and Italy to the extent the aggregate Net Cash Proceeds thereof do not exceed the approximate amounts set forth with respect thereto in the projections attached as Exhibit A to the Disclosure Letter. "Existing Loan Termination Date" shall have the meaning specified in the Credit Agreement. "Existing Note Purchase Agreement" means this Agreement, as amended up to but not including the Effective Date. Exhibit 1.1-29 "Existing Notes" means the Notes issued pursuant to the Existing Note Purchase Agreement. "Existing Obligations" has the meaning specified in the Credit Agreement as of the Effective Date. "Financing" means, with respect to any Person, the issuance or sale by such Person of any Equity Interests of such Person or any Indebtedness consisting of debt securities of such Person. "Financing Documents" means this Agreement, the Notes, the Guaranty Agreement, the Collateral Documents and all other documents, instruments and agreements executed in connection therewith or contemplated thereby, as the same may be amended, restated or otherwise modified and in effect from time to time. "Gross Negligence" means recklessness, or actions taken or omitted with conscious indifference to or the complete disregard of consequences. Gross Negligence does not mean the absence of ordinary care or diligence, or an inadvertent act or inadvertent failure to act. If the term "gross negligence" is used with respect to any holder of Notes or any indemnitee in any of the other Financing Documents, it shall have the meaning set forth herein. "Guaranty Agreement" means that certain Guaranty of SEI dated as of the September 22, 1997, in favor of the holders of the Notes, as it may be amended, modified, supplemented and/or restated (including to add new Guarantors), and as in effect from time to time. "Hedging Agreements" has the meaning specified in Section 7.3(Q). "Hedging Obligations" of a Person means any and all obligations of such Person, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor), under (i) any and all agreements, devices or arrangements designed to protect at least one of the parties thereto from the fluctuations of interest rates, commodity prices, exchange rates or forward rates applicable to such party's assets, liabilities or exchange transactions, including, but not limited to, dollar-denominated or cross-currency interest rate exchange agreements, forward currency exchange agreements, interest rate cap or collar protection agreements, forward rate currency or interest rate options, puts and warrants, and (ii) any and all cancellations, buy backs, reversals, terminations or assignments of any of the foregoing. "Holders of Secured Obligations" has the meaning specified in the Collateral Sharing Agreement. "Indebtedness" of any Person means, without duplication, such Person's (a) obligations for borrowed money, (b) obligations representing the deferred purchase price of property or services (other than accounts payable arising in the ordinary course of such Person's business payable on terms customary in the trade), (c) obligations, whether or not assumed, secured by Liens or payable out of the proceeds or production from property or assets now or hereafter owned or acquired by such Person, (d) obligations which are evidenced by notes, acceptances or other instruments, (e) Capitalized Lease Obligations, (f) Contingent Obligations, (g) obligations with respect to letters of credit, (h) Hedging Exhibit 1.1-30 Obligations and (i) Off Balance Sheet Liabilities. The amount of Indebtedness of any Person at any date shall be without duplication (i) the outstanding balance at such date of all unconditional obligations as described above and the maximum liability of any such Contingent Obligations at such date and (ii) in the case of Indebtedness of others secured by a Lien to which the property or assets owned or held by such Person is subject, the lesser of the fair market value at such date of any asset subject to a Lien securing the Indebtedness of others and the amount of the Indebtedness secured. "Indemnified Matters" has the meaning specified in Section 15.3(b)(ii). "Indemnitees" has the meaning specified in Section 15.3(b). "Institutional Investor" means (a) any original purchaser of a Note, (b) any holder of a Note holding more than 5% of the aggregate principal amount of the Notes then outstanding, and (c) any bank, trust company, savings and loan association or other financial institution, any pension plan, any investment company, any insurance company, any broker or dealer, or any other similar financial institution or entity, regardless of legal form. "Intellectual Property Security Agreements" means those certain Patent Security Agreements and/or Trademark Security Agreements, dated the Effective Date, executed by the Company and SEI, respectively, in favor of the Collateral Agent for the benefit of the Holders of Secured Obligations as amended, restated or otherwise modified from time to time. "Interest Expense" has the meaning specified in Section 7.4(A). "IRS" means the Internal Revenue Service and any Person succeeding to the functions thereof. "Issuance Prepayments" is defined in Section 3.1(a)(ii). "Knowledge" has the meaning specified in Section 12.1(d). "Lenders" means the lending institutions listed on the signature pages of the Credit Agreement and their respective successors and assigns. "Letter of Credit" has the meaning specified in the Credit Agreement. "Material Subsidiaries" means, on the date of any determination thereof, each Subsidiary having (i) assets, as of the immediately preceding Subsidiary Test Date, with a book value equal to or greater than $15,000,000 or (ii) gross revenues, for the period of twelve consecutive months ended as of the immediately preceding Subsidiary Test Date, equal to or greater than $15,000,000. As used in this definition, "Subsidiary Test Date" means the last day of each fiscal quarter of the Company and the last day of each fiscal year of the Company, calculated as of the date of delivery of the financial statements required to be delivered pursuant to Section 7.1(A)(ii) and Section 7.1(A)(iii). "Mortgages" means, collectively, the fee mortgages and leasehold mortgages granted to the Collateral Agent with respect to certain real estate of the Company, as further identified in Schedule 1.1.5 to the Credit Agreement, together with any additional fee or leasehold mortgages executed and delivered pursuant to the terms of this Agreement or the Security Agreements. Exhibit 1.1-31 "Net Cash Proceeds" means, with respect to any Asset Sale by any Person, (a) cash (freely convertible into United States dollars) received by such Person or any Subsidiary of such Person from such Asset Sale (including cash received as consideration for the assumption or incurrence of liabilities incurred in connection with or in anticipation of such Asset Sale), after (i) provision for all income or other taxes measured by or resulting from such Asset Sale which such Person pays in cash or reasonably estimates to be payable in cash during the applicable tax year (after taking into account the entire tax filing posture of the recipient of the proceeds from such Asset Sale), (ii) payment of all brokerage commissions and other fees and expenses related to such Asset Sale, (iii) repayment of Indebtedness secured by a Lien on any asset disposed of in such Asset Sale or which is or may be required (by the express terms of the instrument governing such Indebtedness or by applicable law) to be repaid in connection with such Asset Sale (including payments made to obtain or avoid the need for the consent of any holder of such Indebtedness), and (iv) deduction of appropriate amounts to be provided by such Person or a Subsidiary of such Person as a reserve, in accordance with GAAP, against any liabilities associated with the assets sold or disposed of in such Asset Sale and retained by such Person or a Subsidiary of such Person after such Asset Sale, including, without limitation, pension and other post-employment benefit liabilities and liabilities related to environmental matters or against any indemnification obligations associated with the assets sold or disposed of in such Asset Sale; and (b) cash payments in respect of any other consideration received by such Person or any Subsidiary of such Person from such Asset Sale upon receipt of such cash payments by such Person or such Subsidiary. "Net Income" has the meaning specified in Section 7.4(A). "Obligations" has the meaning specified in the Credit Agreement. "Off Balance Sheet Liabilities" has the meaning specified in the Credit Agreement. "Permitted Existing Contingent Obligations" means the Contingent Obligations of the Company and its Subsidiaries identified as such on Schedule 1.1.1 of the Credit Agreement as of the Effective Date. "Permitted Existing Indebtedness" means the Indebtedness of the Company and its Subsidiaries identified as such on Schedule 1.1.2 of the Credit Agreement as of the Effective Date. "Permitted Existing Investments" means the Investments of the Company and its Subsidiaries identified as such on Schedule 1.1.3 of the Credit Agreement as of the Effective Date. "Permitted Existing Liens" means the Liens on assets of the Company and its Subsidiaries identified as such on Schedule 1.1.4 of the Credit Agreement as of the Effective Date. "Permitted Purchase Money Indebtedness" has the meaning specified in Section 7.3(A)(viii). "Permitted Refinancing Indebtedness" means any replacement, renewal, refinancing or extension of any Indebtedness permitted by this Agreement that (i) does not exceed the aggregate principal amount (PLUS accrued interest and any applicable premium and associated fees and expenses) of the Indebtedness being replaced, renewed, refinanced or Exhibit 1.1-32 extended, (ii) does not have a weighted average life to maturity at the time of such replacement, renewal, refinancing or extension that is less than the weighted average life to maturity of the Indebtedness being replaced, renewed, refinanced or extended, (iii) does not rank at the time of such replacement, renewal, refinancing or extension senior to the Indebtedness being replaced, renewed, refinanced or extended, and (iv) does not contain terms (including, without limitation, terms relating to security, amortization, interest rate, premiums, fees, covenants, event of default and remedies) materially less favorable to the Company or to the holders of the Notes than those applicable to the Indebtedness being replaced, renewed, refinanced or extended. "Pledge Agreements" means, collectively, (a) the Shares Accounts Pledge Agreement dated as of November 21, 1997 executed by the Company in favor of the Collateral Agent, with respect to 65% of the outstanding Capital Stock of Sames, S.A., (b) the Equitable Share Charge dated as of November 21, 1997 executed by the Company in favor of the Collateral Agent, with respect to 65% of the outstanding Capital Stock of Binks-Sames Limited, (c) the Pledge Agreement dated the Effective Date, executed by the Company in favor of the Collateral Agent with respect to 65% of the outstanding Capital Stock of Binks Sames Canada, Ltd. and (d) the Pledge Agreement dated the Effective Date, executed by the Company in favor of the Collateral Agent with respect to 100% of the outstanding Capital Stock of Sames Electrostatic, Inc., in each case as the same may from time to time be amended, modified, supplemented or restated. "Receivable(s)" means, with respect to any Person, all of such Person's presently existing and hereafter arising or acquired accounts, accounts receivable, and all present and future rights of such Person to payment for goods sold or leased or for services rendered (except those evidenced by instruments or chattel paper), whether or not they have been earned by performance, and all rights in any merchandise or goods which any of the same may represent, and all rights, title, security and guaranties with respect to each of the foregoing, including, without limitation, any right of stoppage in transit. "Release" means any release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migration into the indoor or outdoor environment, including the movement of Contaminants through or in the air, soil, surface water or groundwater. "Releasee" has the meaning specified in Section 15.3(d). "Releasors" has the meaning specified in Section 15.3(d). "Reportable Event" means a reportable event as defined in Section 4043 of ERISA and the regulations issued under such section, with respect to a Plan, excluding, however, such events as to which the PBGC by regulation waived the requirement of Section 4043(a) of ERISA that it be notified within 30 days after such event occurs, PROVIDED, HOWEVER, that a failure to meet the minimum funding standards of Section 412 of the Code and of Section 302 of ERISA shall be a Reportable Event regardless of the issuance of any such waiver of the notice requirement in accordance with either Section 4043(a) of ERISA or Section 412(d) of the Code. "Required Creditors" has the meaning given that term in the Collateral Sharing Agreement. Exhibit 1.1-33 "Requirements of Law" means, as to any Person, the charter and by-laws or other organizational or governing documents of such Person, and any law, rule or regulation, or determination of an arbitrator or a court or other Governmental Body, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject including, without limitation, the Securities Act, the Exchange Act, Regulations G, T, U and X of the Board of Governors of the Federal Reserve System, ERISA, the Fair Labor Standards Act, the Worker Adjustment and Retraining Notification Act, Americans with Disabilities Act of 1990, and any certificate of occupancy, zoning ordinance, building, environmental or land use requirement or permit or environmental, labor, employment, occupational safety or health law, rule or regulation, including Environmental, Health or Safety Requirements of Law. "Restricted Payment" means (i) any dividend or other distribution, direct or indirect, on account of any Equity Interests of the Company now or hereafter outstanding, except a dividend payable solely in the Company's Capital Stock (other than Disqualified Stock) or in options, warrants or other rights to purchase such Capital Stock, (ii) any redemption, retirement, purchase or other acquisition for value, direct or indirect, of any Equity Interests of the Company or any of its Subsidiaries now or hereafter outstanding, other than in exchange for, or out of the proceeds of, the substantially concurrent sale (other than to a Subsidiary of the Company) of other Equity Interests of the Company (other than Disqualified Stock), (iii) any redemption, purchase, retirement, defeasance, prepayment or other acquisition for value, direct or indirect, of any Indebtedness other than the Notes, and (iv) any payment of a claim for the rescission of the purchase or sale of, or for material damages arising from the purchase or sale of, any Indebtedness (other than the Notes) or any Equity Interests of the Company or any of the Company's Subsidiaries, or of a claim for reimbursement, indemnification or contribution arising out of or related to any such claim for damages or rescission. "Restructuring Expenses" has the meaning specified in Section 7.4(A). "Sale Initiative" has the meaning specified in Section 7.5. "Sale Initiative Prepayment" has the meaning specified in Section 3.1(a)(i). "Second Amendment" means the Waiver and Second Amendment to Note Purchase Agreement, dated the Effective Date, between the Company and The Equitable Life Assurance Society of the United States. "Secured Obligations" has the meaning specified in the Collateral Sharing Agreement. "Security Agreements" means those certain Security Agreements, dated the Effective Date, executed by the Company and SEI, respectively, in favor of the Collateral Agent for the benefit of the Holders of Secured Obligations, as amended, restated or otherwise modified from time to time. "SEI" means Sames Electrostatic, Inc., a Connecticut corporation. "Sharing Period" means the period from the Effective Date until the first date on which the aggregate amount of "Asset Sale Prepayments", "Subsidiary Prepayments" and "Issuance Prepayments" equals or exceeds $1,000,000. Exhibit 1.1-34 "Subsidiary Prepayments" has the meaning specified in Section 3.1(a)(iii). "Supplemental Credit Obligations" means, at any particular time, the sum of (i) the outstanding principal amount of the Supplemental Loans (as defined in the Credit Agreement) at such time, PLUS (ii) the outstanding L/C Obligations (as defined in the Credit Agreement) at such time. "Tax Prepayment" has the meaning specified in Section 3.1(a)(iv). "Termination Event" means (i) a Reportable Event with respect to any Benefit Plan; (ii) the withdrawal of the Company or any member of the Controlled Group from a Benefit Plan during a plan year in which the Company or such Controlled Group member was a "substantial employer" as defined in Section 4001(a)(2) of ERISA or the cessation of operations which results in the termination of employment of 20% of Benefit Plan participants who are employees of the Company or any member of the Controlled Group; (iii) the imposition of an obligation on the Company or any member of the Controlled Group under Section 4041 of ERISA to provide affected parties written notice of intent to terminate a Benefit Plan in a distress termination described in Section 4041(c) of ERISA; (iv) the institution by the PBGC of proceedings to terminate a Benefit Plan; (v) any event or condition which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Benefit Plan; or (vi) the partial or complete withdrawal of the Company or any member of the Controlled Group from a Multiemployer Plan. "Transfer Event of Default" means: (a) the occurrence of any Event of Default under any of clauses (a) or (e) through (k) of Section 12.1; (b) the occurrence of any Default under Section 12.1(b)(ii) as a result of the Company's breach of Section 7.1(I) and such breach shall continue unremedied for 10 Business Days after notice thereof is given to the Company by any holder of Notes (such 10-day period ending on the 10th day following the giving of such notice whether or not such notice was given prior to the expiration of the two Business Day grace period contained in Section 12.1(b)(ii)); (c) the occurrence of any Event of Default under Section 12.1(b)(iii); (d) the occurrence of any Default under Section 12.1(c) arising out of any breach of the representations and warranties made under Section 2.4 or Section 2.5; or (e) the occurrence of any Default under Section 12.1(d) arising out of any breach of the provisions of Section 7.1(A) and such breach shall continue unremedied for 30 days after notice thereof is given to the Company by any holder of Notes (such 30-day period ending on the 30th day following the giving of such notice whether or not such notice was given prior to the expiration of the 30-day grace period contained in Section 12.1(d)). 8. AMENDMENT OF SECTION 12.1 OF THE EXISTING NOTE PURCHASE AGREEMENT. Section 12.1 of the Existing Note Purchase Agreement is amended and restated in its entirety as follows: Exhibit 1.1-35 12.1. EVENTS OF DEFAULT; REMEDIES. If any of the following events (herein called "Events of Default") shall have occurred and be continuing (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or by operation of law or otherwise): (a) FAILURE TO MAKE PAYMENTS WHEN DUE. The Company shall: (i) default in the due and punctual payment or prepayment of all or any part of the principal of, or prepayment charge (if any) on, any Note when and as the same shall become due and payable, whether at stated maturity, by acceleration, by notice of prepayment or otherwise; or (ii) default in the due and punctual payment or prepayment of any interest on any Note when and as such interest shall become due and payable, and such default shall continue for a period of five Business Days; (b) BREACH OF CERTAIN COVENANTS. The Company shall fail duly and punctually to perform or observe any agreement, covenant or obligation binding on the Company under any of: (i) Sections 7.2(F), 7.2(K)(i), or 7.2(K)(iii) and such failure shall continue unremedied for ten Business Days; or (ii) Sections 3.1(b) or 7.1(I) and such failure shall continue unremedied for two Business Days; or (iii) Sections 7.3, 7.4, or 7.5; (c) BREACH OF REPRESENTATION OR WARRANTY. Any representation, warranty or statement made by or on behalf of the Company or any Subsidiary or any officer of the Company or any Subsidiary in any Financing Document or in any financial statement, certificate or other instrument or document now or hereafter delivered pursuant to or in connection with any provision of any Financing Document shall prove to be false or misleading in any material respect on the date as of which made; (d) OTHER DEFAULTS. The Company shall default in the performance of or compliance with any term contained in this Agreement (other than as covered by paragraphs (a), (b) or (c) of this Section 12.1), or the Company or any of its Subsidiaries shall default in the performance of or compliance with any term contained in any of the other Financing Documents, and such default shall continue for 30 days after the earlier of (1) written notice thereof has been given to the Company; and (2) any member of senior executive management of the Company has "Knowledge" (as hereinafter defined) of such Default. For purposes hereof and paragraph (Q) below, "Knowledge" means with respect to any Person, the actual knowledge, after due inquiry, of any fact or circumstance or any fact or circumstance of which such Person should have known, with respect to any of (A) the chairman of the board of directors, chief executive officer, chief financial officer, chief operating officer, executive vice president for operations, treasurer and/or controller of the Company (or persons performing the functions typically performed by persons with such titles) and (B) the senior corporate executive officers and chairman of the board of each Material Subsidiary of the Company; PROVIDED, HOWEVER, with respect to Requirements of Law and other matters regulated by any Governmental Body the list Exhibit 1.1-36 of Persons in clauses (A) and (B) shall include the persons primarily responsible for monitoring and ensuring compliance with such Requirements of Law and other regulatory matters or Persons succeeding to their respective duties as employees of such Person as of the Effective Date; (e) DEFAULT AS TO OTHER INDEBTEDNESS. (i) CREDIT AGREEMENT DEFAULTS. The Company or any of its Subsidiaries shall fail to pay any part of the Obligations beyond any period of grace provided with respect thereto; or any breach, default or event of default shall occur, or any other condition shall exist under the Credit Agreement or any other instrument, agreement or indenture pertaining to the Obligations, beyond any period of grace, if any, provided with respect thereto, if the effect thereof is to cause an acceleration, mandatory redemption, a requirement that the Company offer to purchase the Indebtedness evidenced by the Obligations or other required repurchase or repayment thereof, or permit the Lenders (or the Collateral Agent) to accelerate the maturity of any the Obligations (or any portion thereof) or require a redemption or other repurchase of the Obligations (or any portion thereof); or the Obligations (or any portion thereof) shall be otherwise declared to be due and payable (by acceleration or otherwise) or required to be prepaid, redeemed or otherwise repurchased by the Company or any of its Subsidiaries (other than by a regularly scheduled required prepayment or any prepayment required under Section 2.5 of the Credit Agreement) prior to the stated maturity thereof; or (ii) OTHER INDEBTEDNESS. The Company or any of its Subsidiaries shall fail to pay any part of the principal of, the premium, if any, or the interest on, or any other payment of money due under any Indebtedness (other than the Notes), beyond any period of grace provided with respect thereto, which individually or together with other such Indebtedness as to which any such failure exists has an aggregate outstanding principal amount in excess of $1,000,000; or any breach, default or event of default shall occur, or any other condition shall exist under any instrument, agreement or indenture pertaining to any such Indebtedness having such aggregate outstanding principal amount, beyond any period of grace, if any, provided with respect thereto, if the effect thereof is to cause an acceleration, mandatory redemption, a requirement that the Company offer to purchase such Indebtedness or other required repurchase of such Indebtedness, or permit the holder(s) of such Indebtedness to accelerate the maturity of any such Indebtedness or require a redemption or other repurchase of such Indebtedness; or any such Indebtedness shall be otherwise declared to be due and payable (by acceleration or otherwise) or required to be prepaid, redeemed or otherwise repurchased by the Company or any of its Subsidiaries (other than by a regularly scheduled required prepayment) prior to the stated maturity thereof; (f) INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. (i) An involuntary case shall be commenced against the Company or any of its Material Subsidiaries and the petition shall not be dismissed, stayed, bonded or discharged within 60 days after commencement of the case; or a court having jurisdiction in the premises Exhibit 1.1-37 shall enter a decree or order for relief in respect of the Company or any of its Material Subsidiaries in an involuntary case, under any applicable bankruptcy, insolvency or other similar law now or hereinafter in effect; or any other similar relief shall be granted under any applicable federal, state, local or foreign law; or (ii) A decree or order of a court having jurisdiction in the premises for the appointment of a receiver, liquidator, sequestrator, trustee, custodian or other officer having similar powers over the Company or any of its Material Subsidiaries or over all or a substantial part of the property of the Company or any of its Material Subsidiaries shall be entered; or an interim receiver, trustee or other custodian of the Company or any of its Material Subsidiaries or of all or a substantial part of the property of the Company or any of its Material Subsidiaries shall be appointed or a warrant of attachment, execution or similar process against any substantial part of the property of the Company or any of its Material Subsidiaries shall be issued and any such event shall not be stayed, dismissed, bonded or discharged within 60 days after entry, appointment or issuance; (g) VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. The Company or any of its Material Subsidiaries shall (i) commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, (ii) consent to the entry of an order for relief in an involuntary case, or to the conversion of an involuntary case to a voluntary case, under any such law, (iii) consent to the appointment of or taking possession by a receiver, trustee or other custodian for all or a substantial part of its property, (iv) make any assignment for the benefit of creditors or (v) take any corporate action to authorize any of the foregoing; (h) JUDGMENTS AND ATTACHMENTS. Any money judgment(s) (other than a money judgment covered by insurance as to which the insurance company has not disclaimed or reserved the right to disclaim coverage), writ or warrant of attachment, or similar process against the Company or any of its Material Subsidiaries or any of their respective assets, involving in any single case or in the aggregate an amount in excess of (i) $1,000,000 with respect to matters other than the Disclosed Disputes or (ii) with respect to the Disclosed Disputes, the amounts set forth in the Disclosure Letter, is or are entered and shall remain undischarged, unvacated, unbonded or unstayed for a period of 60 days or in any event later than 15 days prior to the date of any proposed sale thereunder; (i) DISSOLUTION. Any order, judgment or decree shall be entered against the Company decreeing its involuntary dissolution and such order shall remain undischarged and unstayed for a period in excess of 60 days; or the Company shall otherwise dissolve or cease to exist; (j) FINANCING DOCUMENTS; FAILURE OF SECURITY. At any time, for any reason, (i) any Financing Document as a whole that materially affects the ability of the Collateral Agent or any holder of Notes to enforce the Notes or enforce its rights against the Collateral ceases to be in full force and effect and the Company fails to cure any defect within 10 Business Days of written notice thereof by any holder of Notes to the Company; (ii) the Company or any of its Material Subsidiaries which is a party to any Financing Document seeks to repudiate its obligations under any such Financing Document; (iii) Liens with respect to any material portion of the Collateral Exhibit 1.1-38 intended to be created by the Collateral Documents are invalid or unperfected other than solely as a result of an action or failure to act on the part of the Collateral Agent; (iv) the Company or any such Subsidiary seeks to render any Liens on the Collateral invalid and unperfected, or (v) Liens on any material portion of the Collateral shall not have the priority contemplated by this Agreement or the Collateral Documents other than solely as a result of an action or failure to act on the part of the Collateral Agent; (k) TERMINATION EVENT. Any Termination Event occurs which the Majority Holders believe is reasonably likely to subject the Company and/or any Subsidiary to liability in excess of $1,000,000; (l) WAIVER OF MINIMUM FUNDING STANDARD. If the plan administrator of any Plan applies under Section 412(d) of the Code for a waiver of the minimum funding standards of Section 412(a) of the Code and the Majority Holders reasonably believe the substantial business hardship upon which the application for the waiver is based could reasonably be expected to subject either the Company or any Controlled Group member to liability in excess of $1,000,000; (m) [Intentionally Omitted]; (n) HEDGING AGREEMENTS. Nonpayment by the Company or any of its Subsidiaries of any obligation under any Hedging Agreement or the declared default by the Company or any such Subsidiary of any material term, provision or condition contained in any such Hedging Agreement; (o) ENVIRONMENTAL MATTERS. Except as disclosed in Schedule 6.18 of the Credit Agreement, the Company or any of its Material Subsidiaries shall be the subject of any proceeding or investigation pertaining to (i) the Release by the Company or any of its Material Subsidiaries of any Contaminant into the environment, (ii) the liability of the Company or any of its Material Subsidiaries arising from the Release by any other Person of any Contaminant into the environment, or (iii) any violation of any Environmental, Health or Safety Requirements of Law which by the Company or any of its Material Subsidiaries, which, in any case, has or is reasonably likely to subject the Company to liability in excess of $5,000,000; (p) GUARANTOR REVOCATION. (i) the Guaranty Agreement shall cease to be in full force and effect or shall be declared by a court or governmental authority of competent jurisdiction to be void, voidable or unenforceable against SEI, (ii) the validity or enforceability of the Guaranty Agreement against SEI shall be contested by SEI, the Company or any Affiliate, or (iii) SEI, the Company or any Affiliate shall deny that SEI has any further liability or obligation under the Guaranty Agreement; or (q) TERMINATION OF ADVISORS' ENGAGEMENTS. The engagement by the Company of Blair to sell the Company shall have been terminated by any Person without the prompt engagement of a replacement investment bank reasonably acceptable to the Majority Holders or the engagement by the Company of Dratt- Exhibit 1.1-31 Campbell without the prompt engagement of another reputable financial consultant reasonably acceptable to the Majority Holders shall have occurred; then (A) upon the occurrence of any Event of Default described in subsection (f) or (g), the unpaid principal amount of all Notes together with the interest accrued thereon, and, to the extent lawful, an amount equal to the applicable Additional Amount, shall automatically become immediately due and payable, without presentment, demand, notice, declaration, protest or other requirements of any kind, all of which are hereby expressly waived, or (B) upon the occurrence of any other Event of Default, the holders of at least a majority of the unpaid principal amount of the Notes at the time outstanding may, by written notice to the Company, declare the unpaid principal amount of all Notes to be, and the same shall forthwith become, immediately due and payable, together with the interest accrued thereon and, to the extent lawful, the applicable Additional Amount, if any, all without presentment, demand, notice, protest or other requirements of any kind, all of which are hereby expressly waived. As used herein, the term "Additional Amount" means, with respect to any acceleration under Section 12.1(A) or (B) of the maturity of any Note or Notes referred to in the preceding paragraph, an amount equal to the applicable Make Whole Premium. The provisions of this Section 12.1 are subject, however, to the condition that if, at any time after any Note shall have so become due and payable, the Company shall pay all arrears of interest on the Notes and all payments on account of the principal of and, to the extent permitted by law, prepayment charge (if any) on the Notes which shall have become due otherwise than by acceleration (with interest on all such overdue principal and prepayment charge, if any, and, to the extent permitted by law, on overdue payments of interest, at the applicable rate per annum provided for in the Notes or this Agreement in respect of overdue amounts of principal, prepayment charge and interest), and all Events of Default (other than nonpayment of principal of, prepayment charge (if any) and accrued interest on the Notes, due and payable solely by virtue of acceleration) shall be remedied or waived pursuant to Section 15.2, then, and in every such case, the Majority Holders, by written notice to the Company, may rescind and annul any such acceleration and its consequences with respect to the Notes; but no such action shall affect any subsequent Default or Event of Default or impair any right consequent thereon. 9. AMENDMENT OF ARTICLE XIII OF THE EXISTING NOTE PURCHASE AGREEMENT. Article XIII of the Existing Note Purchase Agreement is hereby amended by adding the following paragraph: Any holder of any Note may transfer such Note as follows: (a) at any time to one or more of the Holders of Secured Obligations (or an Affiliate thereof) or one or more Eligible Transferees; (b) at any time to one or more Persons consented to by the Company (which consent shall not be unreasonably withheld or delayed); and (iii) following the occurrence of a Transfer Event of Default or at any time after November 30, 1998, to any other Person. 10. AMENDMENT OF SECTION 15.2 OF THE EXISTING NOTE PURCHASE AGREEMENT. Section 15.2(a) of the Existing Note Purchase Agreement is amended and restated in its entirety as follows: Exhibit 1.1-40 15.2. AMENDMENT AND WAIVER. (a) Any term, covenant, agreement or condition of this Agreement or of the Notes relating to administrative or other miscellaneous, non-remunerative matters particular to this Agreement (as to which the Lenders could not reasonably be expected to wish to request a similar amendment or waiver under the Credit Agreement) may, with the consent of the Company, be amended, or compliance therewith may be waived (either generally or in a particular instance and either retroactively or prospectively), by one or more substantially concurrent written instruments signed by the Majority Holders, PROVIDED that only with the consent of the Required Creditors and the Company, and only if the Company shall concurrently enter into a substantially similar amendment or waiver with respect to the Credit Agreement, a waiver or amendment may be effected for the purpose of (1) adding terms or provisions favorable to the holders of the Notes under this Agreement and favorable to the Lenders under the Credit Agreement, or (2)(A) modifying any affirmative covenants, negative covenants or financial covenants set forth in Article 7 of this Agreement and Article VII of the Credit Agreement, (B) modifying any of the representations and warranties contained in this Agreement, the Credit Agreement or any of the Collateral Documents (so long as such modification does not involve one of the Unanimous Voting Matters), (C) waiving any Event of Default under this Agreement and waiving any "Default" under the Credit Agreement relating solely to such affirmative covenants, negative covenants, financial covenants, representations or warranties, or (D) waiving any other Event of Default under this Agreement or any "Default" under and as defined in the Credit Agreement (so long as such Event of Default or Default does not involve one of the Unanimous Voting Matters); PROVIDED, FURTHER, HOWEVER, in no event shall any such amendments or waivers of this Agreement or the Credit Agreement (including, without limitation, the applicable provisions of the Disclosure Letter) involving any of the items in clauses (i) through (xiii) below be effective without the consent of each holder of Notes or if applicable the Lender affected thereby: (i) change any maturity date or any other date fixed for any payment of principal of, or interest on, the Secured Obligations or any fees or other amounts payable to the holders of Notes or the Lenders; (ii) reduce the principal amount of any Secured Obligations or the rate of interest thereon or any fees, prepayment charges or other amounts payable to the holders of Notes or the Lenders; (iii) change the definition of "Required Creditors," "Majority Holders" or "Required Lenders" (as defined in the Credit Agreement) or any other defined term used to designate the applicable percentage in this Agreement, the Credit Agreement or any Collateral Document as applicable to act on specified matters; (iv) increase the Aggregate Supplemental Loan Commitment or otherwise increase the principal amount which may be borrowed under the Credit Agreement (other than as a result of a change in the Borrowing Base or the components thereof which is not covered by the terms of clause (ix) below); (v) permit the Company to assign its rights with respect to the Secured Obligations; (vi) amend this Section 15.2, Section 9.3 of the Credit Agreement, or Section 30 of the Collateral Sharing Agreement; Exhibit 1.1-41 (vii) other than in connection with a transaction expressly permitted by the terms of this Agreement (including, without limitation, Sections 3.1(a)(I), 7.3(B) and 7.5(g) hereof) and the Credit Agreement, release any Collateral; (viii) change the definition of "Make Whole Premium;" (ix) change (A) any of the dollar amounts specified in clause (iii) of the definition of "Borrowing Base" set forth in the Credit Agreement, (B) either of the percentages used in clauses (i) or (ii) of such definition of "Borrowing Base" in determining the Borrowing Base, (C) the definition of the "Maximum Amount" set forth in the Credit Agreement or (D) the types of assets which are included in the Borrowing Base (I.E., expand the Borrowing Base to permit any assets other than Receivables and Inventory to have loan value); PROVIDED this clause (ix)(D) shall not apply to the eligibility criteria applied to Receivables and Inventory; (x) amend Section 7.3(F)(ii), Section 7.3(N), Section 7.5(a), Section 7.5(b) or Section 7.5(e), of this Agreement or the Credit Agreement or consent to the waiver of any Default or Event of Default hereunder, or any "Unmatured Default" or "Default" under the Credit Agreement, relating thereto; (xi) amend any indemnity provision set forth in this Agreement, the Credit Agreement or any Financing Document; (xii) amend Section 2.4 or Section 2.5 of this Agreement or consent to any waiver of any Event of Default as a result of a material misrepresentation under such Sections or any "Unmatured Default" under the Credit Agreement as a result of a material misrepresentation under Section 6.4 or Section 6.10 of the Credit Agreement; or (xiii) waive any Event of Default occurring under any of clauses (f), (g) or (i) of Section 12.1 of this Agreement or any of "Default" under any of clauses (F), (G) or (I) of Section 8.1 of the Credit Agreement. 11. AMENDMENT OF SECTION 15.3 OF THE EXISTING NOTE PURCHASE AGREEMENT. Section 15.3 of the Existing Note Purchase Agreement is amended and restated in its entirety as follows: 15.3 EXPENSES; INDEMNIFICATION. (a) EXPENSES. Whether or not the transactions contemplated hereby are consummated, the Company will pay all costs and expenses (including reasonable attorneys' fees of a special counsel and, if reasonably required, local or other counsel) incurred by you and each other holder of a Note in connection with such transactions and in connection with any amendments, waivers or consents under or in respect of this Agreement or the Notes (whether or not such amendment, waiver or consent becomes effective), including, without limitation: (a) the reasonable costs and expenses incurred in enforcing or defending (or determining whether or how to enforce or defend) any rights under this Agreement, the Notes or any other Financing Document or in responding to any subpoena or other legal process or informal investigative demand issued in connection with this Agreement, the Notes or any other Financing Document, or by reason of being a holder of any Note, (b) the reasonable fees, costs and expenses, including reasonable attorneys' and reasonable financial advisors' fees and costs and expenses, incurred in connection with the insolvency or bankruptcy of the Company or any Subsidiary or in connection with any work-out or restructuring of the Exhibit 1.1-42 transactions contemplated hereby and by the Notes and (c) the reasonable costs and expenses (including travel expenses) incurred in connection with the review, evaluation, negotiation, analysis, due diligence investigation or other activity related to any of the Financing Documents and the holders' and the Collateral Agent's rights and remedies thereunder (including any such activity occurring during any work-out or restructuring of the transactions contemplated hereby and by the Notes or during a bankruptcy, insolvency, reorganization or similar proceeding). The Company will pay, and will save you and each other holder of a Note harmless from, all claims in respect of any fees, costs or expenses if any, of brokers and finders. (b) INDEMNITY. The Company further agrees to defend, protect, indemnify, and hold harmless the Collateral Agent, each holder of Notes and each of their respective Affiliates, and each of such Collateral Agent's, holder's, or Affiliate's respective officers, directors, employees, attorneys and agents (including, without limitation, those retained in connection with the satisfaction or attempted satisfaction of any of the conditions set forth in Section 4 of the Second Amendment) (collectively, the "Indemnitees") from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, reasonable costs and expenses of any kind or nature whatsoever (including, without limitation, the reasonable fees and disbursements of counsel for such Indemnitees in connection with any investigative, administrative or judicial proceeding, whether or not such Indemnitees shall be designated a party thereto), imposed on, incurred by, or asserted against such Indemnitees in any manner relating to or arising out of: (i) this Agreement, the other Financing Documents, or any act, event or transaction related or attendant thereto, and the issuance of the Notes, or any of the other transactions contemplated by the Financing Documents; or (ii) any liabilities, obligations, responsibilities, losses, damages, personal injury, death, punitive damages, economic damages, consequential damages, treble damages, intentional, willful or wanton injury, damage or threat to the environment, natural resources or public health or welfare, costs and expenses (including, without limitation, reasonable attorney, expert and consulting fees and costs of investigation, feasibility or remedial action studies), fines, penalties and monetary sanctions, interest, direct or indirect, known or unknown, absolute or contingent, past, present or future relating to violation of any Environmental, Health or Safety Requirements of Law arising from or in connection with the past, present or future operations of the Company, its Subsidiaries or any of their respective predecessors in interest, or, the past, present or future environmental, health or safety condition of any respective property of the Company or its Subsidiaries, the presence of asbestos-containing materials at any respective property of the Company or its Subsidiaries or the Release or threatened Release of any Contaminant into the environment (collectively, the "Indemnified Matters"); PROVIDED, HOWEVER, the Company shall have no obligation to an Indemnitee hereunder with respect to Indemnified Matters arising from and to the extent caused by or resulting from the willful misconduct or Gross Negligence of such Indemnitee or breach of contract by such Indemnitee with respect to the Financing Documents, in each case, as determined by the final non-appealed judgment of a court of competent jurisdiction. If the undertaking to indemnify, pay and hold harmless set forth in the preceding sentence may be unenforceable because it is violative of any law or public policy, the Company shall contribute the maximum portion which it is permitted to pay and satisfy under applicable law, to the payment and satisfaction of all Indemnified Matters incurred by the Indemnitees. Exhibit 1.1-43 (c) WAIVER OF CERTAIN CLAIMS; SETTLEMENT OF CLAIMS. The Company further agrees to assert no claim against any of the Indemnitees on any theory of liability seeking consequential, special, indirect, exemplary or punitive damages in an amount which exceeds $100,000. No settlement shall be entered into by the Company or any of its Subsidiaries with respect to any claim, litigation, arbitration or other proceeding relating to or arising out of the transactions evidenced by this Agreement or the other Financing Documents (whether or not any holder of Notes or any Indemnitee is a party thereto) unless such settlement releases all Indemnitees from any and all liability with respect thereto. (d) RELEASE. To the fullest extent permitted by applicable law, in consideration of your execution of this Agreement, the Company, and by its reaffirmation of the Guaranty Agreement, SEI, on behalf of themselves and each of their successors and assigns (collectively, the "Releasors"), do hereby forever release, discharge and acquit you and each other holder of Notes, and each of your and their respective parents, subsidiaries and affiliate corporations or partnerships, and your and their respective officers, directors, partners, trustees, shareholders, agents, attorneys and employees, and your and their respective successors, heirs and assigns (collectively, the "Releasees") of and from any and all claims, demands, liabilities, responsibilities, disputes, causes of action (whether at law or equity), indebtedness and obligations (collectively, "Claims"), of every type, kind, nature, description or character, including, without limitation, any so-called "lender liability" claims or defenses, and irrespective of how, why or by reason of what facts, whether such Claims have heretofore arisen, are now existing or hereafter arise, or which could, might, or may be claimed to exist, of whatever kind or name, whether known or unknown, suspected or unsuspected, liquidated or unliquidated, each as though fully set forth herein at length, which in any way arise out of, are connected with or in any way relate to actions or omissions which occurred on or prior to the date hereof with respect to the Company, the Notes, this Agreement, the Existing Note Purchase Agreement, any Financing Document or any third parties liable in whole or in part for the obligations in respect of the Notes. Each of the Releasors further agrees to indemnify the Releasees and hold each of the Releasees harmless from and against any and all such Claims which might be brought against any of the Releasees on behalf of any person or entity, including, without limitation, officers, directors, agents, trustees, creditors or shareholders of any of the Releasors. For purposes of the release contained in this paragraph, any reference to any Releasor shall mean and include, as applicable, such Person's or Persons' successors and assigns, including, without limitation, any receiver, trustee or debtor-in-possession, acting on behalf of such parties. (e) SURVIVAL. The obligations of the Company under this Section 15.3 will survive the payment or transfer of any Note, the enforcement, amendment or waiver of any provision of this Agreement or the Notes, and the termination of this Agreement. 12. AMENDMENT OF SECTION 15.6 OF THE EXISTING NOTE PURCHASE AGREEMENT. Clause (c) of Section 15.6 of the Existing Note Purchase Agreement is amended and restated in its entirety as follows: Exhibit 1.1-44 (c) if to the Company, to: Binks Sames Corporation 9201 Belmont Avenue Franklin Park, Illinois 60131-2887 Attention: Jeffrey W. Lemajeur Telephone: (847) 671-3000 Facsimile: (847) 671-5690 13. AMENDMENT OF ARTICLE XV OF THE EXISTING NOTE PURCHASE AGREEMENT. Article XV of the Existing Note Purchase Agreement is hereby amended by adding the following new Section 15.14: 15.14. CONFIDENTIAL INFORMATION. For the purposes of this Section 15.14, "Confidential Information" means information delivered to you by or on behalf of the Company or any Subsidiary in connection with the transactions contemplated by or otherwise pursuant to this Agreement that is proprietary in nature and that was either (a) delivered or presented in connection with the Sale Initiative or (b) clearly marked or labeled or otherwise adequately identified when received by you as being confidential information of the Company or such Subsidiary, PROVIDED that such term does not include information that (a) was publicly known or otherwise known to you prior to the time of such disclosure, (b) subsequently becomes publicly known through no act or omission by you or any person acting on your behalf, (c) otherwise becomes known to you other than through disclosure by the Company or any Subsidiary, or (d) constitutes financial statements delivered to you under Section 7.1 that are otherwise publicly available. You will maintain the confidentiality of such Confidential Information in accordance with procedures adopted by you in good faith to protect confidential information of third parties delivered to you, PROVIDED that you may deliver or disclose Confidential Information to: (i) your directors, officers, employees, agents, attorneys and affiliates (to the extent such disclosure reasonably relates to the administration of the investment represented by your Notes), (ii) your financial advisors and other professional advisors who agree to hold confidential the Confidential Information substantially in accordance with the terms of this Section 15.14, (iii) any other holder of any Note, (iv) any Institutional Investor to which you sell or offer to sell such Note or any part thereof or any participation therein (if such Person has agreed in writing prior to its receipt of such Confidential Information to be bound by the provisions of this Section 15.14), Exhibit 1.1-45 (v) any Person from which you offer to purchase any Security of the Company (if such Person has agreed in writing prior to its receipt of such Confidential Information to be bound by the provisions of this Section 15.14), (vi) any federal or state regulatory authority having jurisdiction over you, (vii) the National Association of Insurance Commissioners or any similar organization, or any nationally recognized rating agency that requires access to information about your investment portfolio or (viii) any other Person to which such delivery or disclosure may be necessary or appropriate (A) to effect compliance with any law, rule, regulation or order applicable to you, (B) in response to any subpoena or other legal process, (C) in connection with any litigation to which you are a party, or (D) if an Event of Default has occurred and is continuing, to the extent you may reasonably determine such delivery and disclosure to be necessary or appropriate in the enforcement or for the protection of the rights and remedies under the Financing Documents. Each holder of a Note, by its acceptance of a Note, will be deemed to have agreed to be bound by and to be entitled to the benefits of this Section 15.14 as though it were a party to this Agreement. On reasonable request by the Company in connection with the delivery to any holder of a Note of information required to be delivered to such holder under this Agreement or requested by such holder (other than a holder that is a party to this Agreement or its nominee), such holder will enter into an agreement with the Company embodying the provisions of this Section 15.14. 14. SCHEDULE I. Schedule I of the Existing Note Purchase Agreement is hereby amended and restated in its entirety to be in the form of Schedule A of the Second Amendment. 15. EXHIBIT A. Exhibit A of the Existing Note Purchase Agreement is hereby amended and restated in its entirety to be in the form of Exhibit 1.2 of the Second Amendment. Exhibit 1.1-46 EXHIBIT 1.2 AMENDMENT AND RESTATEMENT OF EXISTING NOTES FORM OF NOTE BINKS SAMES CORPORATION 7.64% SERIES A SENIOR NOTE DUE SEPTEMBER 30, 1999 No. R-___ Chicago, Illinois $___________________ __________, 199__ PPN: 090527 A@ 1 Binks Sames Corporation, a Delaware corporation (the "Company"), for value received, hereby promises to pay to [NAME OF HOLDER] or registered assigns on the 30th day of September, 1999 the principal amount of ________________________ DOLLARS ($______________) and to pay interest (computed on the basis of a 360-day year and actual days elapsed) on the principal amount from time to time remaining unpaid hereon at the rate of 7.64% PER ANNUM from the date hereof until maturity, payable monthly on the fifteenth (15th) day of each calendar month in each year commencing April 15, 1998, and at maturity. The Company further agrees to pay interest (so computed) at the rate of 9.64% PER ANNUM on any overdue principal and Make Whole Premium and, to the extent permitted by applicable law, on any overdue interest, until the same shall be paid. Payments of principal, prepayment charges (if any) hereof and interest hereon and all other amounts payable hereunder or under the Note Purchase Agreements referred to below shall be made in currency of the United States of America in immediately available funds, at the principal office of the Company (subject to the provisions of Section 15.1 and Schedule I of such Note Purchase Agreements), without deduction, set-off or counterclaim, not later than 1:00 p.m. New York time on the date on which such payment shall become due (each such payment made after such time on such due date to be deemed to have been made on the next succeeding Business Day). This Note is one of the 7.64% Series A Senior Notes due 1999 of the Company in the aggregate principal amount of $15,000,000 issued or to be issued under and pursuant to the terms and provisions of the separate and several Note Purchase Agreements, each dated as of November 30, 1993, entered into by the Company with the original Purchasers therein referred to, as amended by a Waiver and First Amendment to Note Purchase Agreement dated September 23, 1997 and a Waiver and Second Amendment to Note Purchase Agreement dated March 16, 1998 (as may be further amended, restated or otherwise modified from time to time, the "Note Purchase Agreements"), and this Note and the holder hereof are entitled equally and ratably with the holders Exhibit 1.2-1 of all other Notes outstanding under the Note Purchase Agreements to all the benefits provided for thereby or referred to therein, to which Note Purchase Agreements reference is hereby made for a statement thereof. Capitalized terms used herein without definition shall have the respective meanings ascribed to them in the Note Purchase Agreements. This Note and the other Notes outstanding under the Note Purchase Agreements may be declared or otherwise become due prior to their expressed maturity dates, and a Make Whole Premium is required to be paid thereon, all in the events, on the terms and in the manner and amounts provided in the Note Purchase Agreements. The Notes are not subject to prepayment or redemption at the option of the Company prior to their expressed maturity dates, except on the terms and conditions and in the amounts set forth in the Note Purchase Agreements. This Note is registered on the books of the Company and is transferable only by surrender thereof at the principal executive office of the Company accompanied (if so required by the Company) by a written instrument of transfer duly executed by the registered holder of this Note or its attorney duly authorized in writing. Payment of or on account of principal, Make Whole Premium, if any, and interest on this Note shall be made only to or upon the order in writing of the registered holder. THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK. BINKS SAMES CORPORATION By: --------------------------------------- Exhibit 1.2-2 EXHIBIT 3.6(a) FORM OF MORTGAGE Exhibit 3.6(a)-1 EXHIBIT 3.6(b) FORM OF SECURITY AGREEMENT Exhibit 3.6(b)-1 EXHIBIT 3.6(c) FORM OF PATENT SECURITY AGREEMENT Exhibit 3.6(c)-1 EXHIBIT 3.6(d) FORM OF PLEDGE AGREEMENT Exhibit 3.6(d)-1 EX-23.1 4 EXHIBIT 23.1 EXHIBIT 23.1 Binks Sames Corporation: We consent to incorporation by reference in the registration statement (No. 333-30191) on Form S-8 of Binks Sames Corporation of our report dated March 16, 1998 relating to the consolidated balance sheets of Binks Sames Corporation and consolidated subsidiaries as of November 30, 1997 and 1996, and the related consolidated statements of operations, stockholders' equity, and cash flows for the years ended November 30, 1997 and 1996, which report appears on page F-2 in the November 30, 1997 annual report on Form 10-K of Binks Sames Corporation. /s/ KPMG Peat Marwick LLP Chicago, Illinois KPMG PEAT MARWICK LLP March 16, 1998 EX-23.2 5 EXHIBIT 23.2 EXHIBIT 23.2 CONSENT OF CROWE, CHIZEK AND COMPANY LLP To Binks Sames Corporation: We consent to the inclusion in the Company's Registration Statement on Form S-8 of our report dated February 9, 1996 of our audit of the consolidated financial statements of Binks Sames Corporation and Consolidated Subsidiaries as of November 30, 1995 and the related consolidated statements of income, stockholders' equity, and cash flows for the year ended November 30, 1995, appearing on page F-3 of the Binks Sames Corporation Annual Report on Form 10-K for the year ended November 30, 1997. /s/ Crowe, Chizek and Company LLP Crowe, Chizek and Company LLP Oak Brook, Illinois March 16, 1998 EX-27 6 EXHIBIT 27
5 1,000 12-MOS NOV-30-1997 DEC-01-1996 NOV-30-1997 7,220 0 73,638 0 78,144 166,072 42,656 22,655 191,734 90,172 60,946 2,964 0 0 29,887 191,734 236,998 236,998 178,420 178,420 0 0 5,080 (32,553) 7,527 (40,080) 0 0 0 (40,080) (13.07) (13.07)
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