-----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, Q0gOxiYMijNh1ZkYASnMmZmz0/mSxs1t+s3RUwz0rJRMUzcZsHh746drsGqHeAWT 2Bd9W1NIPGWiQ1Zw/UTznA== 0001045969-99-000603.txt : 19990816 0001045969-99-000603.hdr.sgml : 19990816 ACCESSION NUMBER: 0001045969-99-000603 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19990703 FILED AS OF DATE: 19990813 FILER: COMPANY DATA: COMPANY CONFORMED NAME: JOSTENS INC CENTRAL INDEX KEY: 0000054050 STANDARD INDUSTRIAL CLASSIFICATION: JEWELRY, PRECIOUS METAL [3911] IRS NUMBER: 410343440 STATE OF INCORPORATION: MN FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-05064 FILM NUMBER: 99687489 BUSINESS ADDRESS: STREET 1: 5501 NORMAN CTR DR CITY: MINNEAPOLIS STATE: MN ZIP: 55437 BUSINESS PHONE: 6128303300 MAIL ADDRESS: STREET 1: 5501 NORMAN CENTER DRIVE CITY: MINNEAPOLIS STATE: MN ZIP: 55437 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended July 3, 1999 OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 1-5064 Jostens, Inc. - -------------------------------------------------------------------------------- (Exact name of Registrant as specified in its charter) Minnesota 41-0343440 - ------------------------------------------------------------------ ------------------------------------------ (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification number) 5501 Norman Center Drive, Minneapolis, Minnesota 55437 - ------------------------------------------------------------------ ------------------------------------------ (Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (612-830-3300) 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 [_] On August 2, 1999, there were 33,937,577 shares of the Registrant's common stock outstanding. Jostens, Inc.
Part I. Financial Information Page - ------------------------------ ---- Item 1. Financial Statements Condensed Consolidated Statements of Operations for the Three and Six Months Ended July 3, 1999 and July 4, 1998 3 Condensed Consolidated Balance Sheets as of July 3, 1999, July 4, 1998 and January 2, 1999 4 Condensed Consolidated Statements of Cash Flows for the Six Months Ended July 3, 1999 and July 4, 1998 5 Notes to Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Item 3 Quantitative and Qualitative Disclosures about Market Risk 12 Part II. Other Information - ------------------------------- Item 1. Legal Proceedings 13 Item 6. Exhibits and Reports on Form 8-K 13 Signatures 14 Exhibit Index 15
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- ------------------------------------------------------------------------------------------------------------------------ Condensed Consolidated Statements of Operations Jostens Inc. and Subsidiaries - ------------------------------------------------------------------------------------------------------------------------ Three months ended Six months ended - ------------------------------------------------------------------------------------------------------------------------ (unaudited) (unaudited) July 3 July 4 July 3 July 4 In thousands, except per-share data 1999 1998 1999 1998 - ------------------------------------------------------------------------------------------------------------------------ Net sales $ 303,161 $ 298,879 $ 469,519 $ 467,156 Cost of products sold 140,744 142,559 209,243 211,232 - ------------------------------------------------------------------------------------------------------------------------ Gross margin 162,417 156,320 260,276 255,924 Selling and administrative expenses 95,334 91,743 178,636 172,268 - ------------------------------------------------------------------------------------------------------------------------ Operating income 67,083 64,577 81,640 83,656 Net interest expense 1,459 1,331 2,498 2,622 - ------------------------------------------------------------------------------------------------------------------------ Income before income taxes 65,624 63,246 79,142 81,034 Income taxes 26,578 25,614 32,053 32,906 - ------------------------------------------------------------------------------------------------------------------------ Net income $ 39,046 $ 37,632 $ 47,089 $ 48,128 ======================================================================================================================== Earnings per common share Basic $ 1.14 $ 1.02 $ 1.37 $ 1.29 Diluted $ 1.14 $ 1.01 $ 1.36 $ 1.28 ======================================================================================================================== Weighted average common shares outstanding Basic 34,128 37,002 34,488 37,368 Diluted 34,208 37,202 34,590 37,551 ======================================================================================================================== Cash dividends declared per common share $ 0.22 $ 0.22 $ 0.44 $ 0.44 ======================================================================================================================== See notes to condensed consolidated financial statements - ------------------------------------------------------------------------------------------------------------------------
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- ------------------------------------------------------------------------------------------------------------------------ Condensed Consolidated Balance Sheets Jostens Inc. and Subsidiaries - ------------------------------------------------------------------------------------------------------------------------ (unaudited) -------------------------- July 3 July 4 January 2 In thousands 1999 1998 1999 - ------------------------------------------------------------------------------------------------------------------------ ASSETS CURRENT ASSETS Short-term investments $ 8,405 $ 11,415 $ 2,595 Accounts receivable, net of allowance of $6,234, $7,667 and $7,308, respectively 129,379 119,947 106,347 Inventories 77,783 82,547 90,494 Deferred income taxes 14,682 15,543 14,682 Other receivables, net of allowance of $7,157, $6,975 and $7,061, respectively 11,934 13,841 20,689 Prepaid expenses and other current assets 4,382 4,133 5,737 - ------------------------------------------------------------------------------------------------------------------------ Total current assets 246,565 247,426 240,544 - ------------------------------------------------------------------------------------------------------------------------ OTHER ASSETS Intangibles, net 27,638 29,498 28,165 Notes receivable, net - 12,925 - Noncurrent deferred income taxes - 7,743 - Other 14,163 12,453 8,811 - ------------------------------------------------------------------------------------------------------------------------ Total other assets 41,801 62,619 36,976 - ------------------------------------------------------------------------------------------------------------------------ Property and equipment 268,654 248,801 256,165 Less accumulated depreciation (179,583) (168,439) (167,518) - ------------------------------------------------------------------------------------------------------------------------ Property and equipment, net 89,071 80,362 88,647 - ------------------------------------------------------------------------------------------------------------------------ $ 377,437 $ 390,407 $ 366,167 ======================================================================================================================== LIABILITIES AND SHAREHOLDERS' INVESTMENT CURRENT LIABILITIES Notes payable $ 93,690 $ 69,920 $ 93,922 Accounts payable 16,002 22,256 23,682 Employee compensation 23,160 17,492 27,560 Commissions payable 51,641 42,083 22,131 Customer deposits 53,576 51,417 92,092 Income taxes 30,953 24,416 4,713 Other accrued liabilities 21,092 19,473 23,679 - ------------------------------------------------------------------------------------------------------------------------ Total current liabilities 290,114 247,057 287,779 - ------------------------------------------------------------------------------------------------------------------------ Other noncurrent liabilities 19,298 17,784 19,836 - ------------------------------------------------------------------------------------------------------------------------ Total liabilities 309,412 264,841 307,615 - ------------------------------------------------------------------------------------------------------------------------ COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' INVESTMENT Preferred shares, $1.00 par value: authorized 4,000 shares, none issued - - - Common shares, $.33 1/3 par value: authorized 100,000 shares, issued July 3, 1999 - 34,049; July 4, 1998 - 37,007; January 2, 1999 - 35,071 11,350 12,382 11,690 Retained earnings 63,672 118,879 54,627 Accumulated other comprehensive loss (6,997) (5,695) (7,765) - ------------------------------------------------------------------------------------------------------------------------ Total shareholders' investment 68,025 125,566 58,552 - ------------------------------------------------------------------------------------------------------------------------ $ 377,437 $ 390,407 $ 366,167 ======================================================================================================================== See notes to condensed consolidated financial statements - ------------------------------------------------------------------------------------------------------------------------
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- ---------------------------------------------------------------------------------------------------------------------------- Condensed Consolidated Statements of Cash Flows Jostens Inc. and Subsidiaries - ---------------------------------------------------------------------------------------------------------------------------- Six months ended - ---------------------------------------------------------------------------------------------------------------------------- (unaudited) July 3 July 4 In thousands 1999 1998 - ---------------------------------------------------------------------------------------------------------------------------- OPERATING ACTIVITIES Net income $ 47,089 $ 48,128 Depreciation 11,663 11,111 Amortization 1,131 1,203 Changes in assets and liabilities: Accounts receivable (23,032) (11,250) Inventories 12,711 9,515 Other receivables 8,755 11,654 Prepaid expenses and other current assets 1,355 546 Accounts payable (2,497) (6,727) Employee compensation (4,400) (1,954) Commissions payable 29,510 22,861 Customer deposits (38,516) (47,242) Income taxes 26,240 13,318 Other (2,715) 3,140 - ---------------------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 67,294 54,303 - ---------------------------------------------------------------------------------------------------------------------------- INVESTING ACTIVITIES Purchases of property and equipment (13,339) (17,576) Equity investment (5,000) - Other 654 - - ---------------------------------------------------------------------------------------------------------------------------- Net cash used for investing activities (17,685) (17,576) - ---------------------------------------------------------------------------------------------------------------------------- FINANCING ACTIVITIES Net short-term borrowings (repayments) (5,415) 18,376 Principle payments on long-term debt - (11) Dividends paid (15,231) (16,565) Proceeds from exercise of stock options 1,854 1,534 Repurchases of common stock (25,007) (34,714) - ---------------------------------------------------------------------------------------------------------------------------- Net cash used for financing activities (43,799) (31,380) - ---------------------------------------------------------------------------------------------------------------------------- CHANGE IN SHORT-TERM INVESTMENTS 5,810 5,347 SHORT-TERM INVESTMENTS, BEGINNING OF PERIOD 2,595 6,068 - ---------------------------------------------------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS, END OF PERIOD $ 8,405 $ 11,415 ============================================================================================================================ See notes to condensed consolidated financial statements - ----------------------------------------------------------------------------------------------------------------------------
5 Jostens Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (unaudited) (1) BASIS OF PRESENTATION The accompanying interim financial statements are unaudited but, in the opinion of management, reflect all adjustments necessary for a fair presentation of financial position, results of operations and cash flows for the periods presented. These adjustments consist of normal, recurring items. Because of the seasonal nature of our business, the results of operations for any interim period are not necessarily indicative of results for the full year. The condensed consolidated financial statements and notes are presented as permitted by the requirements for Form 10-Q and do not contain certain information included in our annual consolidated financial statements and notes. This Form 10-Q should be read in conjunction with our consolidated financial statements and notes included in our 1998 Annual Report to Shareholders. Certain balances have been reclassified to conform to the July 3, 1999 presentation. Cash and Short-term Investments Negative cash balances of $3.2 million and $12.5 million at July 3, 1999 and July 4, 1998, respectively, have been reclassified to "accounts payable" on the condensed consolidated balance sheets. (2) EARNINGS PER COMMON SHARE Basic earnings per share are computed by dividing net income by the weighted average number of common shares outstanding. Diluted earnings per share are computed by dividing net income by the average number of common shares outstanding, including the dilutive effects of options, restricted stock and contingently issuable shares. Unless otherwise noted, references are to diluted earnings per share. The following table sets forth the computation of basic and diluted earnings per share for the three month and six month periods:
- --------------------------------------------------------------------------------------------------------------------------- Three months ended Six months ended - --------------------------------------------------------------------------------------------------------------------------- July 3 July 4 July 3 July 4 In thousands, except per-share data 1999 1998 1999 1998 - --------------------------------------------------------------------------------------------------------------------------- EARNINGS PER SHARE - BASIC Net income $ 39,046 $ 37,632 $ 47,089 $ 48,128 Weighted average common shares outstanding - basic 34,128 37,002 34,488 37,368 - --------------------------------------------------------------------------------------------------------------------------- Net income per share - basic $ 1.14 $ 1.02 $ 1.37 $ 1.29 =========================================================================================================================== EARNINGS PER SHARE - DILUTED Net income $ 39,046 $ 37,632 $ 47,089 $ 48,128 Weighted average common shares outstanding - basic 34,128 37,002 34,488 37,368 Effect of dilutive securities: Stock options and awards 80 200 102 183 - --------------------------------------------------------------------------------------------------------------------------- Weighted average common shares outstanding - diluted 34,208 37,202 34,590 37,551 - --------------------------------------------------------------------------------------------------------------------------- Net income per share - diluted $ 1.14 $ 1.01 $ 1.36 $ 1.28 =========================================================================================================================== - ---------------------------------------------------------------------------------------------------------------------------
6 (3) SUPPLEMENTAL BALANCE SHEET INFORMATION --------------------------------------------------------------------------- July 3 July 4 January 2 In thousands 1999 1998 1999 --------------------------------------------------------------------------- INVENTORIES Finished goods $ 24,465 $ 22,252 $ 38,141 Work-in-process 27,089 31,462 29,735 Raw materials and supplies 26,229 28,833 22,618 --------------------------------------------------------------------------- Total inventories $ 77,783 $ 82,547 $ 90,494 =========================================================================== --------------------------------------------------------------------------- (4) COMPREHENSIVE INCOME Comprehensive income and its components, net of tax, are as follows:
---------------------------------------------------------------------------------------------------- Three months ended Six months ended ---------------------------------------------------------------------------------------------------- July 3 July 4 July 3 July 4 In thousands 1999 1998 1999 1998 ---------------------------------------------------------------------------------------------------- Net income $ 39,046 $ 37,632 $ 47,089 $ 48,128 Change in cumulative translation adjustment 517 (829) 768 (557) ---------------------------------------------------------------------------------------------------- Comprehensive income $ 39,563 $ 36,803 $ 47,857 $ 47,571 ==================================================================================================== ----------------------------------------------------------------------------------------------------
(5) BUSINESS SEGMENTS Financial information by reportable business segment is included in the following summary:
--------------------------------------------------------------------------------------------- Three months ended Six months ended --------------------------------------------------------------------------------------------- (unaudited) (unaudited) July 3 July 4 July 3 July 4 In thousands 1999 1998 1999 1998 --------------------------------------------------------------------------------------------- NET SALES FROM EXTERNAL CUSTOMERS School Products $ 266,135 $ 264,598 $ 408,923 $ 402,658 Recognition 31,938 28,768 53,536 55,445 Other 5,088 5,513 7,060 9,053 --------------------------------------------------------------------------------------------- CONSOLIDATED $ 303,161 $ 298,879 $ 469,519 $ 467,156 ============================================================================================= OPERATING INCOME School Products $ 76,484 $ 70,741 $ 100,942 $ 94,297 Recognition 2,033 3,602 2,162 5,625 Other (11,434) (9,766) (21,464) (16,266) --------------------------------------------------------------------------------------------- Consolidated 67,083 64,577 81,640 83,656 Net interest expense (1,459) (1,331) (2,498) (2,622) --------------------------------------------------------------------------------------------- INCOME BEFORE INCOME TAXES $ 65,624 $ 63,246 $ 79,142 $ 81,034 ============================================================================================= ---------------------------------------------------------------------------------------------
(6) SUBSEQUENT EVENT On July 23, 1999, we filed a debt shelf registration statement with the Securities and Exchange Commission for the possible sale of up to $150 million of debt securities. In addition, we have up to $50 million of debt securities available for issuance under a prior shelf registration. 7 Management's Discussion and Analysis of Financial Condition and Results of Operations We occasionally may make statements regarding our business and markets, such as projections of future performance, statements of management's plans and objectives, forecasts of market trends and other matters. To the extent such statements are not historical fact, they may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements containing the words or phrases "will likely result," "are expected to," "expects," "will continue," "anticipates," "believes," "estimates," "projected," or similar expressions are intended to identify forward-looking statements. Forward-looking statements may appear in this document or other documents, reports, press releases and written or oral presentations made by our officers to shareholders, analysts, news organizations or others. All forward-looking statements speak only as of the date on which the statements are made. Actual results could be affected by one or more factors, which could cause the results to differ materially. Therefore, all forward-looking statements are qualified in their entirety by such factors, including the factors listed below. Such factors may be more fully discussed periodically in our subsequent filings with the Securities and Exchange Commission (SEC). Any change in the following factors may impact the achievement of results in forward-looking statements: our access to students and consumers in schools; the seasonality of our business; our ability to ship backlog; our relationship with our sales force; fashion and demographic trends; the general economy, especially during peak buying seasons for our products and services; our ability to respond to customer change orders and delivery schedules; our ability to maintain our customer base; competitive pricing and program changes; our ability to successfully execute new programs; the price of gold; our ability to continue improving operating efficiencies; the impact of year 2000 compliance on our computer-based systems and our external relationships; and the costs and impact of our information systems implementations. The foregoing factors are not exhaustive, and new factors may emerge or changes to the foregoing factors may occur that would impact our business. RESULTS OF OPERATIONS The following table sets forth selected information from our Condensed Consolidated Statements of Operations, expressed as a percentage of net sales.
- --------------------------------------------------------------------------------------------------------------------------- Three months ended Six months ended - --------------------------------------------------------------------------------------------------------------------------- (unaudited) Percent (unaudited) Percent July 3 July 4 increase July 3 July 4 increase 1999 1998 (decrease) 1999 1998 (decrease) - --------------------------------------------------------------------------------------------------------------------------- Net sales 100.0% 100.0% 1.4% 100.0% 100.0% 0.5% Cost of products sold 46.4% 47.7% (1.3%) 44.6% 45.2% (0.9%) - --------------------------------------------------------------------------------------------------------------------------- Gross margin 53.6% 52.3% 3.9% 55.4% 54.8% 1.7% Selling and administrative expenses 31.4% 30.7% 3.9% 38.0% 36.9% 3.7% - --------------------------------------------------------------------------------------------------------------------------- Operating income 22.2% 21.6% 3.9% 17.4% 17.9% (2.4%) Net interest expense 0.5% 0.4% 9.6% 0.5% 0.6% (4.7%) - --------------------------------------------------------------------------------------------------------------------------- Income before income taxes 21.7% 21.2% 3.8% 16.9% 17.3% (2.3%) Income taxes 8.8% 8.6% 3.8% 6.8% 7.0% (2.6%) - --------------------------------------------------------------------------------------------------------------------------- Net income 12.9% 12.6% 3.8% 10.0% 10.3% (2.2%) =========================================================================================================================== - ---------------------------------------------------------------------------------------------------------------------------
8 Net sales Net sales for the three and six months ended July 3, 1999 were higher than net sales for the comparable periods in 1998 by $4.3 million and $2.4 million or 1.4 percent and 0.5 percent. The $4.3 million increase in second-quarter sales was driven primarily by clearing excess order backlog in Recognition, which was built due to the first-quarter conversion to new information systems. The $2.4 million increase in sales on a year-to-date basis compared with last year was the result of a $6.3 million increase in School Products, offset by sales declines of $1.9 million in Recognition and $2 million in the Other segment. The increase in School Products sales was driven by price increases mainly in Printing & Publishing and Graduation Products and higher sales of add-on features in the Printing & Publishing product lines. These increases were impacted by the loss of about $8 million in Jewelry and Graduation Products sales volume due to a sales group leaving in mid-1998. The $1.9 million sales decline in Recognition was due to lower volume, which resulted from issues related to the first-quarter implementation of new information systems. We anticipate full-year 1999 sales for Recognition to be lower than 1998 levels. Other segment sales declined $2 million due to lower volume in our direct marketing program to college alumni. Gross Margin Gross margin for the three and six months ended July 3, 1999 was 53.6 percent and 55.4 percent, compared with 52.3 percent and 54.8 percent for the comparable periods in 1998. The 3.9 percent and 1.7 percent increase in gross margin for the three and six month periods are the result of improved manufacturing efficiencies in School Products and sales of higher margin add-on features in the Printing & Publishing product lines. This was offset by higher costs associated with the first-quarter implementation of new information systems in our Recognition segment. Selling and Administrative Expenses Selling and administrative expenses for the three and six months ended July 3, 1999 were $95.3 million and $178.6 million, compared with $91.7 million and $172.3 million for the comparable periods in 1998. The 3.9 percent and 3.7 percent increases over the prior-year periods are the result of higher costs related to investments in information systems and higher costs associated with market development activities, including new products and processes to decrease field administrative costs. Net Interest Expense Net interest expense for the three and six months ended July 3, 1999 was $1.5 million and $2.5 million, compared with $1.3 million and $2.6 million for comparable periods in 1998. The year-over-year changes in net interest expense reflected lower average interest rates on higher average short-term borrowings in 1999 versus 1998. Income Taxes Income taxes have been accrued at an overall effective rate of 40.5 percent for the three and six months ended July 3, 1999, compared with 40.5 percent and 40.6 percent for the comparable periods last year. School Products Segment School Products segment sales increased 0.6 percent from last year to $266.1 million in the second quarter of 1999 and year-to-date sales were up 1.6 percent from last year to $408.9 million. The year-over-year changes were driven by price increases mainly in Printing & Publishing and Graduation Products and higher sales of add-on features in the Printing & Publishing product lines. These increases were impacted by the loss of about $8 million in Jewelry and Graduation Products sales volume due to a sales group leaving in mid-1998. Operating income for School Products for the three and six months ended July 3, 1999 was $76.5 million and $100.9 million, as compared with $70.7 million and $94.3 million for the comparable periods in 1998. The year-over-year increases were primarily the result of improved manufacturing efficiencies and sales of higher margin add-on features in the Printing & Publishing product lines. 9 Recognition Segment Recognition segment sales for the three and six months ended July 3, 1999 were $31.9 million and $53.5 million, compared with $28.8 million and $55.4 million for the comparable periods in 1998. The 11 percent increase in second-quarter sales was driven by clearing excess order backlog that was built in the first-quarter of 1999. The year-to-date sales decline of 3.4 percent over the prior-year period was due to lower volume. The changes resulted from issues related to the conversion of new information systems in the first-quarter of 1999. We anticipate full-year 1999 sales and operating income for Recognition to be lower than 1998 levels. Operating income for the three and six months ended July 3, 1999 was $2 million and $2.2 million, compared with $3.6 million and $5.6 million for comparable periods in 1998. The year-over-year decreases were the result of lower sales volume and higher costs associated with the first-quarter implementation of a new information system. Other Segment The Other segment comprises primarily unallocated corporate expenses, as well as results from direct marketing, international and new product sales channels. Sales for the three- and six-month periods ended July 3, 1999 were $5.1 million and 7.1 million, compared with $5.5 million and $9.1 million for the comparable periods in 1998. The $2 million year-to-date decrease over the prior-year period was due to lower sales volume resulting from decreased response rates in our direct marketing channel to college alumni. Operating losses for the three- and six-month periods ended July 3, 1999 were $11.4 million and $21.5 million, compared with $9.8 million and $16.3 million for the comparable periods in 1998. The $1.6 million second-quarter increase and $5.2 million year-to-date increase were primarily the result of higher costs related to investments in information systems and higher costs associated with market development activities, including new products and processes to decrease field administrative costs. LIQUIDITY AND CAPITAL RESOURCES Cash generated from operating activities was our principal source of funds during the six-month ended July 3, 1999 and was used primarily to pay down short-term borrowings, repurchase common stock, pay dividends, and fund capital expenditures and equity investments. Operating activities generated cash of $67.3 million in the first-half of 1999, compared with $54.3 million for the same period in 1998. The increase of $13 million was due to a variety of favorable factors, including a change in the timing of customer deposit collections, a decrease in inventories due to decreased cycle times and the timing of income tax payments. This was offset by an increase in accounts receivable due to customer invoicing issues in Recognition related to the implementation of new information systems. Capital expenditures for the first-half of 1999 were $13.3 million compared with $17.6 million for the same period in 1998. The $4.3 million decrease reflected higher investments in the first-half of 1998 primarily related to Photography plant consolidation efforts and other manufacturing equipment. In the first-half of 1999, we invested $5 million to take an ownership position of about 4 percent in the FamilyEducation Network, a privately held company, which creates web sites for schools to link school districts with students and their families. In December 1998, the Board of Directors authorized the repurchase of up to $100 million in shares of our common stock. For the six months ended July 3, 1999, we repurchased 1.1 million shares for $25 million, including 464,000 shares for $10 million in the second quarter. YEAR 2000 We have developed programs to address the impact of the year 2000 on our computer systems. Key financial, information and operational systems, including equipment with embedded microprocessors, have been inventoried and assessed, and detailed programs are in place for the required systems modifications or replacements. Progress against these programs is monitored and reported to management and to the Audit Committee of the Board of 10 Directors on a regular basis. Both internal and external resources are being utilized to implement the programs. Systems that will not be replaced before 2000 are being modified to achieve year 2000 functionality. The total year 2000 program cost is estimated at $51 million. Approximately $36 million of the $51 million will be used to license and implement new software that will be capitalized as part of a companywide systems replacement program, and $15 million will be expensed as incurred. The estimated program cost includes internally allocated expenses such as salaries, benefits and contractor costs. Spending on the project since inception in 1997 has been $46.1 million, of which $34.2 million has been capitalized. In the six months ended July 3, 1999, we spent $9.9 million, including $6.9 million in capital spending. We have divided the year 2000 program into eight planks covering the following areas: 1) mainframe infrastructure; 2) central legacy applications; 3) shared technical infrastructure; 4) distributed systems and manufacturing technology by product line; 5) distributed systems and manufacturing technology by plant; 6) external agents; 7) legal and audit; and 8) conversions to new software systems. Each plank is separated into three categories based on the potential impact on our operations: mission critical, high impact and low impact. Mission critical inventory items (computer hardware, software, embedded equipment, machinery and devices, and to external suppliers of products and services).are those where loss or interruption of functionality, support or delivery would have a catastrophic impact on customers, operations or earnings. High impact inventory items are those where loss or interruption of functionality, support or delivery would have a serious impact on internal productivity with minor impact to customers. Low impact inventory items are those where loss or interruption of functionality, support or delivery would have a nominal impact on internal productivity with no impact to customers. We have completed most mission critical activities. Outstanding critical tasks include upgrading the Oracle-based software used in the Cap & Gown manufacturing facility, which is scheduled for completion in the third quarter of 1999. All mission critical activities are scheduled to be completed by September 1999 and are subject to ongoing integration testing throughout 1999. For external agents, the testing phase that began after critical activities were completed in March 1999 will consist primarily of confirming third-party readiness and our alternatives for ensuring continuity of the products and services they provide. For legal and audit, the monitoring phase that began after critical activities were completed in March 1999 will continue throughout 1999. As of July 26, 1999, the completion status of the mission critical planks was: Year 2000 project completion percentage
Actual Estimated July 26 September 30 Mission critical activities by plank 1999 1999 - ------------------------------------------------------------------------------------------------------------------- 1. Mainframe infrastructure 100% 100% 2. Central legacy applications 99% 100% 3. Shared technical infrastructure 98% 100% 4. Distributed systems and manufacturing technology, by product line 100% 100% 5. Distributed systems and manufacturing technology, by plant 97% 100% 6. External agents due diligence and contingency planning 94% 100% 7. Legal and audit 93% 100% 8. Conversions to new software systems 87% 100%
We believe that modifications to existing software and conversions to new software for mission critical activities are sufficiently on schedule so the year 2000 issue will not pose significant operational problems. Activities on all high impact categories are scheduled to be completed by September 1999 and low impact activities are scheduled to be completed by June 2000. 11 As part of the external agents plank, we are in contact with suppliers and customers to assess the potential impact on operations if key third parties do not convert their systems in a timely manner. Risk assessment, readiness evaluation, action plans and contingency plans related to these third parties were completed in March 1999. We believe that critical suppliers are either year 2000 ready or have adequate plans in place to address the year 2000 issue. We have substantially completed a comprehensive analysis of and contingency planning process for operational problems and costs (including the loss of revenues) that could most likely result from a potential failure by us or certain third parties to achieve year 2000 compliance on a timely basis. In planning for the most reasonably likely worst case scenarios, we believe the information technology systems and manufacturing systems will be ready for the year 2000, but we may experience isolated incidents of noncompliance. We plan to allocate resources to be ready to take action if these events occur. We also recognize the risks to us if other key suppliers in areas such as utilities, communications, transportation, banking and government are not ready for the year 2000, and we have developed plans to minimize the potential adverse impacts of these risks. The costs of the program and the dates when we believe the year 2000 modifications will be completed are based on best estimates. Estimates were derived utilizing numerous assumptions of future events, including the continued availability of certain resources and other factors. There can be no guarantee that we will achieve these estimates, and actual results could differ materially from those anticipated. Specific factors that might cause such material differences include, but are not limited to, the availability and cost of personnel trained in this area, the ability to locate and correct all relevant computer codes, the impact of year 2000 compliance on computer-based systems of our suppliers and customers, and similar uncertainties. SUBSEQUENT EVENT On July 23, 1999, we filed a debt shelf registration statement with the Securities and Exchange Commission for the possible sale of up to $150 million of debt securities. In addition, we have up to $50 million of debt securities available for issuance under a prior shelf registration. Quantitative and Qualitative Disclosures about Market Risk There have been no material changes in our market risk during the six months ended July 3, 1999. For additional information, refer to page 20 of our 1998 Annual Report to Shareholders. 12 Part II. Other Information Item 1. Legal Proceedings In January 1999, a federal judge in Texas overturned a jury's $25.3 million verdict against Jostens in an antitrust lawsuit. The judge, acting on Jostens' post-trial motions, set aside the jury's verdict and dismissed all claims against Jostens in the case. Yearbook competitor Taylor Publishing, a unit of Insilco Holding Corp. and the plaintiff in the case has appealed the decision and will seek to have the jury verdict reinstated. Briefs have been filed and the parties are awaiting a date for oral argument. No costs were accrued related to the lawsuit, because management determined a potential loss was unlikely. There are no other material pending or threatened legal, governmental, administrative or other proceedings to which the company or any subsidiary as a defendant or plaintiff is subject. Item 6. Exhibits and reports on Form 8-K (a) Exhibits 3.1 Articles of Incorporation (incorporated by reference to Exhibit 3(a) contained in the Annual Report on Form 10-K for 1993 and to Exhibit 1 of Form 8-A filed on August 5, 1998) 3.2 By-laws 4.1 Rights Agreement, dated July 23, 1998, between Jostens, Inc. and Norwest Bank Minnesota, N.A. (incorporated by reference to the company's Form 8-A filed on August 5, 1998) 4.2 Form of Indenture, dated May 1, 1991, between Jostens, Inc. and Norwest Bank Minnesota, N.A., as Trustee (incorporated by reference to Exhibit 4.1 contained in the company's Registration Statement on Form S-3, File No. 33-40233) 10.1 Credit Agreement, dated December 20, 1995, between Jostens, Inc. and The First National Bank of Chicago 10.2 Amendment to Credit Agreement, dated July 14, 1997, between Jostens, Inc. and The First National Bank of Chicago 12 Computation of Ratio of Earnings to Fixed Charges 27 Financial Data Schedule (b) Reports on Form 8-K Form 8-K dated July 21, 1999, announcing earnings for the three and six months ended July 3, 1999 13 SIGNATURES Pursuant to the requirements 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. JOSTENS, INC. Registrant Date: August 13, 1999 By /s/ Robert C. Buhrmaster --------------------------------------- Robert C. Buhrmaster Chairman of the Board, President and Chief Executive Officer Date: August 13, 1999 By /s/ William N. Priesmeyer --------------------------------------- William N. Priesmeyer Senior Vice President and Chief Financial Officer 14 EXHIBIT INDEX Exhibit Description - ------- ----------- 3.2 By-laws 10.1 Credit Agreement, dated December 20, 1995, between Jostens, Inc. and The First National Bank of Chicago 10.2 Amendment to Credit Agreement, dated July 14, 1997, between Jostens, Inc. and The First National Bank of Chicago 12 Computation of Ratio of Earnings to Fixed Charges 27 Financial Data Schedule EX-3.2 2 BYLAWS OF JOSTENS Exhibit 3.2 BYLAWS OF JOSTENS, INC. ----------------------- (As adopted at a Board of Directors Meeting held on December 18, 1973) and further amended on: December 16, 1975 October 18, 1976 October 17, 1977 January 24, 1978 August 10, 1982 October 15, 1984 October 22, 1986 October 27, 1994 June 7, 1996 ARTICLE I --------- Offices, Corporate Seal Section 1. The registered office of the Corporation shall be 5501 Norman Center Drive, Bloomington, Minnesota, and the Corporation may have offices at such other places as the Board of Directors shall from time to time determine. Section 2. The corporate seal shall be circular in form and have inscribed thereon on a circle the name of the Corporation, the State in which it is incorporated and the words "Corporate Seal" within the circle. ARTICLE II ---------- Meetings of Shareholders "Section 1. Unless otherwise designated by the Board of Directors, an annual meeting of the shareholders of the Corporation entitled to vote for the election of directors shall be held at its registered office or at such other place as the Board of Directors may designate, at 10:00 a.m. on the fourth Thursday in April of each year, or if that date shall fall upon a holiday, then the next succeeding business day, at which time the shareholders, voting as provided in the Articles of Incorporation, shall elect members to the Board of Directors and shall transact such other business as shall properly come before them. The holders of a majority of shares outstanding entitled to vote for the election of directors at said meeting, represented either in person or by proxy, shall constitute a quorum for the transaction of business. In case a quorum is not present at the annual meeting, those present may adjourn to such day as they shall agree upon. A notice of such adjournment shall be mailed to each shareholder entitled to vote at least five (5) days before such adjourned meeting, but if a quorum is present, they may adjourn from day to day as they see fit and no notice need be given." 1 Section 2. Except as may otherwise be provided by the Board of Directors, from time to time, only common shareholders of record at the close of business on a date fifty (50) days prior to the date of the annual meeting shall be entitled to vote at such meeting. Section 3. Special meetings of the shareholders may be called by the Secretary at any time upon request of the Chairman of the Board, the President or a majority of the members of the Board of Directors, or upon request by shareholders as provided by law. Section 4. There shall be mailed to each person shown by the books of the Corporation to be, on the record date for determining shareholders entitled to vote, a holder of record of voting shares, at his address as shown by the books of the Corporation, a notice setting out the time and place of the annual meeting. There shall be mailed to each person shown by the books of the Corporation to be a shareholder of record at the time of mailing such notice and entitled to receive such notice, at his address as shown by the books of the Corporation, a notice setting out the time, place and object of each special meeting. The Transfer Agent is to be instructed by the Secretary or Assistant Secretary of the Company as to the exact date on which the notice is to be mailed, which date must be at least five (5) days prior to the meeting. ARTICLE III ----------- Directors Section 1. The business and property of the Corporation shall be managed by its Board of Directors, which shall not be less than five (5) nor more the fifteen (15) in number. The term of each director shall be for three years expiring at the third annual meeting following election or until his/her successor is elected and qualifies. Section 2. A majority of the Board of Directors shall constitute a quorum for the transaction of business, provided, however, that if any vacancies exist by reason of death, resignation or otherwise, a majority of the remaining directors shall constitute a quorum for the filling of such vacancies. Newly created directorships resulting from an increase in the authorized number of directors by action of the Board of Directors may be filled by a two-thirds vote of the directors serving at the time of such increase. Section 3. The directors shall meet annually immediately after the election of directors by the shareholders, or as soon thereafter as is practicable, at the registered office of the Corporation or at such other time and place as may be fixed by the consent of all of the directors. Regular meetings of the Board of Directors shall be held from time to time at such time and place as may from time to time be fixed by resolution adopted by a majority of the whole Board of Directors. No notice need be given of any regular meeting. 2 Special meetings of the Board of Directors may be held at such time and place as may from time to time be designated in the notice or waiver of notice of the meeting. Special meetings of the Board of Directors may be called by the Chairman of the Board, the President or by any two (2) directors. Notice of such special meetings shall be given by the secretary who shall give at least twenty-four (24) hours' notice thereof to each director by mail, telephone, facsimile transmission, telegraph or in person, provided that no notice of any meeting need be given to any director while he/she is in the Armed Forces of the United States. Section 4. Directors need not be shareholders of the Corporation. Section 5. For purposes of Board or committee membership contemplated by these Bylaws, the term "Independent Director" shall mean any director of the Corporation who is not (i) a former Chief Executive Officer of the Corporation (ii) currently or within the last two (2) years an officer or employee of the Corporation, its subsidiaries or affiliates; (iii) an individual or representative of an organization serving as a professional advisor, legal counsel or consultant to the company's management whose relationship is material to the company, the organization represented or the director; or (iv) a member of the immediate family or representative of a person in category (i), (ii) or (iii) above. The Board shall determine the independence of each director before appointing him or her to a committee that requires independent directors. Section 6. Directors and members of any committee of the Board of Directors contemplated by these Bylaws or otherwise provided for by resolution of the Board of Directors, who are independent, shall receive such fixed sum per meeting attended, or such fixed annual sum as shall be determined from time to time by resolution of the Board of Directors. All directors and members of any such committee shall receive their expenses, if any, for attending meetings of the Board of Directors or any committee. Nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and receiving proper compensation therefore. Section 7. By a vote of the majority of the whole Board, the Directors may from time to time appoint directors to an Executive Committee which shall consist of not less than four (4) members. Such Executive Committee shall be empowered to take any action which might be taken by the Board of Directors in the interim between meetings of the Board, but shall at all times remain subject to the control of the Board; provided, however, that the Executive Committee shall not have the power to amend the Bylaws of the Corporation or to fill vacancies of the Board of Directors. Without thereby limiting the general grant of authority to the Executive Committee set forth above, the Executive Committee shall be especially charged with the development and establishment of major long-range planning and related policy decisions. ARTICLE IV ---------- Officers Section 1. The officers of this Corporation (if any one is elected by the 3 Board), shall consist of a Chairman of the Board, a Vice Chairman of the Board, a Chief Executive Officer, a Chief Operating Officer, a President and one or more Vice Presidents, a Secretary and a Treasurer, and such other officers and agents as may from time to time by chosen. Any two offices, except those of President and Vice President, may be held by one (1) person. Section 2. At the annual meeting or at any regular meeting of the Board of Directors, the Board shall elect from the Corporation a President and shall also elect one or more Vice Presidents, a Secretary and a Treasurer, and such other officers as the Board may deem advisable. Such officers shall hold office until the next annual meeting or until their successors are elected and qualify; provided, however, that any officer may be removed with or without cause by the affirmative vote of a majority of the whole Board of Directors. Section 3. The Chairman of the Board, if one is elected by the Board, shall be elected from the Board of Directors. He shall preside at all meetings of the Directors. The Chairman of the Board may also hold the position of Chief Executive Officer of the Corporation. He/she shall have such other authority and duties as may be prescribed from time to time by the Board of Directors. Section 4. Any person who was formerly Chairman of the Board may be elected Chairman Emeritus. He/she shall have such authorities and duties as the Board of Directors may prescribe. Section 5. The Vice Chairman of the Board, if one is elected, shall be elected from the Board of Directors and need not be an employee of the Company. He/she shall have such other authority and duties as the Board of Directors may prescribe. Section 6. The Chief Executive Officer (if one is elected by the Board) can be either the Chairman of the Board or the President of the Corporation. He/she shall be responsible for the general management and direction of the Corporation. He/she shall preside at all meetings of the shareholders. All employees of the Corporation shall report and be responsible to the Chief Executive Officer. He/she shall have such other authority and duties as the Board of Directors may prescribe. The Chief Executive Officer shall report and be responsible to the Board of Directors. Section 7. The Chief Operating Officer (if one is elected by the Board) can be the Chairman of the Board, the President or any Vice President of the Corporation. He/she shall be responsible for the daily operations of the Corporation's business and shall have such other authority and duties as the Board of Directors or the Chief Executive Officer may prescribe. He/she shall report to the Chief Executive Officer of the Corporation. Section 8. The President shall be either the Chief Executive Officer or the Chief Operating Officer of the Corporation. In the event the President is not also the Chief Executive Officer of the Corporation, he/she shall report to the Chief Executive Officer and shall have such powers and perform such duties as may be specified by the Board of Directors or the 4 Chief Executive Officer. Section 9. Each Vice President shall have such powers and shall perform such duties as may be specified by the Bylaws or prescribed by the Board of Directors, the President, or the Chief Executive Officer of the Corporation. Section 10. The Secretary shall be secretary of and attend all meetings of the shareholders, Board of Directors and the Board Committees. He/she shall act as clerk thereof and shall record all the proceedings of such meetings in the minute book of the Corporation. He/she shall give proper notice of meetings to shareholders and directors. He/she shall keep the seal of the Corporation and shall affix the same to any instrument requiring it, and shall attest the seal by his signature. He/she shall, with either the Chairman, President, and/or the Chief Executive Officer, sign all certificates for shares of the Corporation and affix the corporate seal thereto, and shall perform such other duties as may be prescribed from time to time by the Board of Directors. Section 11. The Treasurer shall keep accurate accounts of all moneys of the Corporation received or disbursed. He/she shall deposit all moneys, drafts and checks in the name of and to the credit of the Corporation in such banks and depositories as a majority of the whole Board of Directors shall designate from time to time. He/she shall have power to endorse for deposit all notes, checks and drafts received by the Corporation. He/she shall disburse the funds of the Corporation as ordered by the Board of Directors, taking proper vouchers therefore and shall render to the President, the Chairman and Directors, whenever required, an account of all his/her transactions as Treasurer and of the financial condition of the Corporation and shall perform such duties as may be prescribed by the Board of Directors from time to time. Section 12. If there be a vacancy in the officers of the Corporation by reason of death, resignation or otherwise, such vacancy shall be filled for the unexpired term by the Board of Directors. 5 ARTICLE V --------- Amendment of Bylaws Section 1. These Bylaws may be amended or altered by the vote of a majority of the whole Board of Directors either by a consent resolution or at any meeting, providing that notice of such proposed amendment shall have been given to the Directors prior to such meeting. Such authority in the Board of Directors is subject to the power of the shareholders to change or repeal such Bylaws by a majority vote of the shareholders present and represented at any annual meeting or any special meeting called for such purpose. ARTICLE VI ---------- Indemnification of Directors and Officers Section 1. The Corporation shall indemnify all directors and officers for such expenses and liabilities, in such manner, under such circumstances, and to such extent as permitted by Section 302A.521 of the Minnesota Statutes, as now enacted or hereafter amended. 6 EX-10.1 3 CREDIT AGREEMENT Exhibit 10.1 ================================================================================ CREDIT AGREEMENT dated as of December 20, 1995 among JOSTENS, INC. THE LENDERS NAMED HEREIN and THE FIRST NATIONAL BANK OF CHICAGO, as Agent ================================================================================ TABLE OF CONTENTS ARTICLE I DEFINITIONS........................................................................... 1 ARTICLE II THE CREDITS........................................................................... 14 2.1. Description of Facility............................................................... 14 2.2. Availability of Facility.............................................................. 14 2.3. Committed Advances.................................................................... 15 2.3.1. Commitment................................................................... 15 2.3.2. Ratable Loans; Types of Advances............................................. 15 2.3.3. Minimum Amount of Each Committed Advance..................................... 15 2.3.4. Applicable Margin............................................................ 15 2.3.5. Method of Selecting Types and Interest Periods for New Committed Advances.................................................. 17 2.3.6. Conversion and Continuation of Outstanding Advances.......................... 18 2.4. Competitive Bid Advances.............................................................. 19 2.4.1. Competitive Bid Option; Repayment of Competitive Bid Advances....................................... 19 2.4.2. Competitive Bid Quote Request................................................ 19 2.4.3. Invitation for Competitive Bid Quotes........................................ 20 2.4.4. Submission and Contents of Competitive Bid Quotes............................ 20 2.4.5. Notice to Borrower........................................................... 22 2.4.6. Acceptance and Notice by Borrower............................................ 23 2.4.7. Allocation by the Agent...................................................... 23 2.4.8. Administration Fee........................................................... 24 2.5. Method of Borrowing................................................................... 24 2.6. Fees ............................................................................. 24 2.6.1. Facility Fee................................................................. 24 2.6.2. Agent's Fees................................................................. 24 2.7. Reductions in Aggregate Commitment; Principal Payments................................ 24 2.7.1. Reductions in Aggregate Commitment........................................... 24 2.7.2. Principal Payments........................................................... 25 2.8. Changes in Interest Rate, etc......................................................... 25 2.9. Rates Applicable After Default........................................................ 26 2.10. Method of Payment..................................................................... 26 2.10.1. General...................................................................... 26 2.10.2. Currency of Payment.......................................................... 26 2.11. Notes; Telephonic Notices............................................................. 27 2.12. Interest Payment Dates; Interest and Fee Basis........................................ 27 2.13. Notification of Advances, Interest Rates, Prepayments and Commitment Reductions....... 28 2.14. Lending Installations................................................................. 28
Page i 2.15. Non-Receipt of Funds by the Agent..................................................... 28 2.16. Withholding Tax Exemption............................................................. 29 2.17. Increases in Aggregate Commitment..................................................... 29 ARTICLE III CHANGE IN CIRCUMSTANCES............................................................... 31 3.1. Taxes ............................................................................. 31 3.1.1. Payments to be Free and Clear................................................ 31 3.1.2. Grossing-up of Payments...................................................... 31 3.2. Yield Protection...................................................................... 32 3.3. Changes in Capital Adequacy Regulations............................................... 33 3.4. Availability of Types of Advances..................................................... 34 3.5. Funding Indemnification............................................................... 34 3.6. Mitigation of Additional Costs or Adverse Circumstances............................... 34 3.7. Lender Statements; Survival of Indemnity.............................................. 35 3.8. Market Disruption..................................................................... 36 ARTICLE IV CONDITIONS PRECEDENT.................................................................. 36 4.1. Initial Advance....................................................................... 36 4.2. Each Advance.......................................................................... 37 ARTICLE V REPRESENTATIONS AND WARRANTIES........................................................ 38 5.1. Corporate Existence and Standing...................................................... 38 5.2. Authorization and Validity............................................................ 38 5.3. No Conflict; Government Consent....................................................... 38 5.4. Financial Statements.................................................................. 39 5.5. Material Adverse Change............................................................... 39 5.6. Taxes ............................................................................. 39 5.7. Litigation and Contingent Obligations................................................. 39 5.8. Subsidiaries.......................................................................... 39 5.9. ERISA ............................................................................. 39 5.10. Accuracy of Information............................................................... 40 5.11. Regulation U.......................................................................... 40 5.12. Material Agreements................................................................... 40 5.13. Compliance With Laws.................................................................. 40 5.14. Investment Company Act................................................................ 41 5.15. Public Utility Holding Company Act.................................................... 41 ARTICLE VI COVENANTS............................................................................. 41 6.1. Financial Reporting................................................................... 41 6.2. Use of Proceeds....................................................................... 43 6.3. Notice of Default..................................................................... 43 6.4. Conduct of Business................................................................... 43
Page ii 6.5. Taxes ............................................................................. 43 6.6. Insurance............................................................................. 43 6.7. Compliance with Laws.................................................................. 43 6.8. Maintenance of Properties............................................................. 44 6.9. Inspection............................................................................ 44 6.10. Merger ............................................................................. 44 6.11. Sale of Assets........................................................................ 44 6.12. Investments and Acquisitions.......................................................... 45 6.13. Subsidiary Indebtedness............................................................... 46 6.14. Contingent Obligations................................................................ 46 6.15. Liens ............................................................................. 46 6.16. Interest Coverage Ratio............................................................... 48 6.17. Net Worth............................................................................. 49 6.18. Affiliates............................................................................ 49 ARTICLE VII DEFAULTS ............................................................................. 49 ARTICLE VIII ACCELERATION, WAIVERS, AMENDMENTS AND EMEDIES......................................... 51 8.1. Acceleration.......................................................................... 51 8.2. Amendments............................................................................ 52 8.3. Preservation of Rights................................................................ 52 ARTICLE IX GENERAL PROVISIONS.................................................................... 53 9.1. Survival of Representations........................................................... 53 9.2. Governmental Regulation............................................................... 53 9.3. Taxes................................................................................. 53 9.4. Headings.............................................................................. 53 9.5. Entire Agreement...................................................................... 53 9.6. Several Obligations; Benefits of this Agreement....................................... 53 9.7. Expenses; Indemnification............................................................. 54 9.8. Numbers of Documents.................................................................. 55 9.9. Accounting............................................................................ 55 9.10. Severability of Provisions............................................................ 55 9.11. Nonliability of Lenders............................................................... 55 9.12. CHOICE OF LAW......................................................................... 55 9.13. CONSENT TO JURISDICTION............................................................... 56 9.14. WAIVER OF JURY TRIAL.................................................................. 56 9.15. Confidentiality....................................................................... 56 ARTICLE X THE AGENT............................................................................. 56 10.1. Appointment........................................................................... 56 10.2. Powers ............................................................................. 56 10.3. General Immunity...................................................................... 57
Page iii 10.4. No Responsibility for Loans, Recitals, etc............................................ 57 10.5. Action on Instructions of Lenders..................................................... 57 10.6. Employment of Agents and Counsel...................................................... 57 10.7. Reliance on Documents; Counsel........................................................ 58 10.8. Agent's Reimbursement and Indemnification............................................. 58 10.9. Rights as a Lender.................................................................... 58 10.10. Lender Credit Decision................................................................ 58 10.11. Successor Agent....................................................................... 59 ARTICLE XI SETOFF; RATABLE PAYMENTS.............................................................. 60 11.1. Setoff ............................................................................. 60 11.2. Ratable Payments...................................................................... 60 ARTICLE XII BENEFIT OF AGREEMENT; ASSIGNMENTS;PARTICIPATIONS...................................... 60 12.1. Successors and Assigns................................................................ 60 12.2. Participations........................................................................ 61 12.2.1 Permitted Participants; Effect............................................... 61 12.2.2. Voting Rights................................................................ 61 12.3. Assignments........................................................................... 61 12.3.1. Permitted Assignments........................................................ 61 12.3.2. Effect; Effective Date....................................................... 61 12.4. Dissemination of Information.......................................................... 62 12.5. Tax Treatment......................................................................... 62 ARTICLE XIII NOTICES............................................................................... 62 13.1. Giving Notice......................................................................... 62 13.2. Change of Address..................................................................... 63 ARTICLE XIV COUNTERPARTS.......................................................................... 63
Page iv CREDIT AGREEMENT This Agreement, dated as of December 20, 1995, is among Jostens, Inc., the Lenders and The First National Bank of Chicago, as Agent. The parties hereto agree as follows: ARTICLE I DEFINITIONS ----------- As used in this Agreement: "Absolute Rate" means, with respect to a Loan made by a given Lender for the relevant Absolute Rate Interest Period, the rate of interest per annum (rounded to the nearest 1/100 of 1%) offered by such Lender and accepted by the Borrower pursuant to Section 2.4.6. "Absolute Rate Advance" means a borrowing hereunder consisting of the aggregate amount of the several Absolute Rate Loans made by some or all of the Lenders to the Borrower at the same time and for the same Absolute Rate Interest Period. "Absolute Rate Auction" means a solicitation of Competitive Bid Quotes setting forth Absolute Rates pursuant to Section 2.4. "Absolute Rate Interest Period" means, with respect to an Absolute Rate Advance or an Absolute Rate Loan, a period of not less than 7 and not more than 180 days commencing on a Business Day selected by the Borrower pursuant to this Agreement, but in no event extending beyond the Termination Date. If such Absolute Rate Interest Period would end on a day which is not a Business Day, such Absolute Rate Interest Period shall end on the next succeeding Business Day. "Absolute Rate Loan" means a Loan, denominated in Dollars, which bears interest at an Absolute Rate. "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 any 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 or voting power) of the outstanding ownership interests of any partnership, association, joint venture or similar business organization. "Adjustment Date" is defined in Section 2.3.4. Page 1 "Advance" means a borrowing hereunder consisting of the aggregate amount of the several Loans made by some or all of the Lenders to the Borrower of the same Type (or on the same interest basis in the case of Competitive Bid Advances) and, in the case of Eurocurrency Advances, denominated in the same Eurocurrency and, in the case of Fixed Rate Advances, for the same Interest Period and includes both a Committed Advance and a Competitive Bid Advance. "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 owns 10% or more of any class of voting securities (or other ownership 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 stock, by contract or otherwise. "Agent" means The First National Bank of Chicago in its capacity as agent for the Lenders pursuant to Article X, and not in its individual capacity as a Lender, and any successor Agent appointed pursuant to Article X. "Aggregate Commitment" means $150,000,000 as it may be increased from time to time pursuant to Section 2.17 and as it may be reduced from time to time pursuant to the other terms hereof. "Agreement" means this credit agreement, as it may be amended or modified and in effect from time to time. "Agreement Accounting Principles" means generally accepted accounting principles as in effect from time to time, applied in a manner consistent with that used in preparing the financial statements referred to in Section 5.4. "Alternate Base Rate" means, for any day, a rate of interest per annum equal to the higher of (i) the Corporate Base Rate for such day and (ii) the sum of Federal Funds Effective Rate for such day plus 1/2% per annum. "Alternate Base Rate Advance" means an Advance, denominated in Dollars, which bears interest at the Alternate Base Rate. "Alternate Base Rate Loan" means a Loan, denominated in Dollars, which bears interest at the Alternate Base Rate. "Applicable Margin" means, at any date of determination thereof with respect to any Eurocurrency Committed Advance and the facility fees payable pursuant to Section 2.6.1, the respective rates per annum for such Eurocurrency Committed Advance and facility fees calculated in accordance with the terms of Section 2.3.4. Page 2 "Article" means an article of this Agreement unless another document is specifically referenced. "Authorized Officer" means any of the Chief Financial Officer, Treasurer or Assistant Treasurer of the Borrower, acting singly. "Borrower" means Jostens, Inc., a Minnesota corporation, and its successors and assigns. "Borrowing Date" means a date on which an Advance is made hereunder. "Business Day" means (i) with respect to any borrowing, payment or rate selection of Eurocurrency Advances, a day (other than a Saturday or Sunday) on which banks generally are open in Chicago and New York for the conduct of substantially all of their commercial lending activities and on which dealings in the relevant Eurocurrency are carried on in the London interbank market and (ii) for all other purposes, a day (other than a Saturday or Sunday) on which banks generally are open in Chicago and New York for the conduct of substantially all of their commercial lending activities. "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 shown as a liability on a balance sheet of such Person prepared in accordance with Agreement Accounting Principles. "Change in Control" means the acquisition by any Person, or two or more Persons acting in concert, of beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934) of 35% or more of the outstanding shares of voting stock of the Borrower. "Closing Date" means the date upon which all of the conditions set forth in Section 4.1 have been satisfied or waived. "Code" means the Internal Revenue Code of 1986, as amended, reformed or otherwise modified from time to time. "Commercial Paper Rating" is defined in Section 2.3.4. "Commitment" means, for each Lender, the obligation of such Lender to make Loans not exceeding the amount set forth (i) opposite its signature below, (ii) as set forth in any Notice of Assignment relating to any assignment that has become effective pursuant to Section 12.3.2, or (iii) as set forth in any Commitment Page 3 Increase Letter that has become effective pursuant to Section 2.17, in each case as such amount may be modified from time to time pursuant to the terms hereof. "Commitment Increase Date" is defined in Section 2.17. "Commitment Increase Letter" is defined in Section 2.17. "Committed Advance" means a borrowing hereunder consisting of the aggregate amount of the several Committed Loans made by the Lenders to the Borrower at the same time, of the same Type and, in the case of Eurocurrency Committed Advances, denominated in the same Eurocurrency and for the same Interest Period. "Committed Borrowing Notice" is defined in Section 2.3.5. "Committed Loan" means a Loan made by a Lender pursuant to Section 2.3. "Committed Note" means a promissory note in substantially the form of Exhibit "A-1" hereto, with appropriate insertions, duly executed and delivered to the Agent by the Borrower for the account of a Lender and payable to the order of such Lender in the amount of its Commitment, including any amendment, modification, renewal or replacement of such promissory note. "Competitive Bid Acceptance Notice" is defined in Section 2.4.6. "Competitive Bid Advance" means a Eurocurrency Bid Rate Advance or an Absolute Rate Advance. "Competitive Bid Auction" means an Absolute Rate Auction or a Eurocurrency Auction. "Competitive Bid Loan" means a Eurocurrency Bid Rate Loan or an Absolute Rate Loan. "Competitive Bid Margin" means the margin above or below the applicable Eurocurrency Base Rate offered for a Eurocurrency Bid Rate Loan, expressed as a percentage (rounded to the nearest 1/100 of 1%) to be added or subtracted from such Eurocurrency Base Rate. "Competitive Bid Note" means a promissory note in substantially the form of Exhibit "A-2" hereto, with appropriate insertions, duly executed and delivered to the Agent by the Borrower for the account of a Lender and payable to the order of such Lender, including any amendment, modification, renewal or replacement of such promissory note. "Competitive Bid Quote" means a Competitive Bid Quote substantially in the form of Exhibit "D" hereto completed and Page 4 delivered by a Lender to the Agent in accordance with Section 2.4.4. "Competitive Bid Quote Request" means a Competitive Bid Quote Request substantially in the form of Exhibit "B" hereto completed and delivered by the Borrower to the Agent in accordance with Section 2.4.2. "Condemnation" is defined in Section 7.8. "Consolidated Assets" means the total assets of the Borrower and its Subsidiaries, as determined on a consolidated basis in accordance with Agreement Accounting Principles consistently applied. "Contingent Obligation" of a Person means any agreement, undertaking or arrangement by which such Person assumes, guarantees, endorses, contingently agrees to purchase or provide funds for the payment of, or otherwise becomes or is contingently liable upon, the obligation or liability of any other Person, or agrees to maintain the net worth or working capital or other financial condition of any other Person, or otherwise assures any creditor of such other Person against loss, including, without limitation, any comfort letter, operating agreement, take-or-pay contract or application for a Letter of Credit. "Controlled Group" means all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower or any of its Subsidiaries, are treated as a single employer under Section 414 of the Code. "Conversion/Continuation Notice" is defined in Section 2.3.6. "Corporate Base Rate" means a rate per annum equal to the corporate base rate of interest announced by First Chicago from time to time, changing when and as said corporate base rate changes. "Default" means an event described in Article VII. "Dollar" or "$" means United States Dollars. "Dollar Equivalent" of (i) any Loan denominated in Dollars means the amount of such Loan, and (ii) any Foreign Currency Loan means the Dollar equivalent of the amount of such Foreign Currency Loan, calculated on the basis of the arithmetical mean of the buy and sell spot rates of exchange of the Agent for such Foreign Currency on the London market at 11:00 a.m. London time, two Business Days prior to the date on which such amount is to be determined. Page 5 "Entitled Person" is defined in Section 2.10.2. "ERISA" means the Employee Retirement Income Security Act of l974, as amended from time to time, and any rule or regulation issued thereunder. "Eurocurrency" means, subject to Section 3.8, (i) Dollars, and (ii) any other currency (a) which is freely transferable and convertible into Dollars, (b) in which deposits are customarily offered to banks in the London interbank market, (c) which the Borrower requests the Agent to include as a Eurocurrency hereunder and (d) which is reasonably available to each Lender. "Eurocurrency Advance" means a Eurocurrency Committed Advance or a Eurocurrency Bid Rate Advance, as applicable. "Eurocurrency Auction" means a solicitation of Competitive Bid Quotes setting forth Competitive Bid Margins pursuant to Section 2.4. "Eurocurrency Base Rate" means with respect to any Eurocurrency Advance for the relevant Eurocurrency Interest Period, the rate determined by the Agent to be the rate at which deposits in the applicable Eurocurrency are offered by First Chicago to first-class banks in the London interbank market at approximately 11 a.m. (London time) two Business Days prior to the first day of such Eurocurrency Interest Period, in the approximate amount of First Chicago's relevant Eurocurrency Loan, or, in the case of a Eurocurrency Bid Rate Advance, the amount of the Eurocurrency Bid Rate Advance requested by the Borrower, and having a maturity approximately equal to such Eurocurrency Interest Period. "Eurocurrency Bid Rate" means, with respect to a Loan made by a given Lender for the relevant Eurocurrency Interest Period, the sum of (i) the Eurocurrency Base Rate and (ii) the Competitive Bid Margin offered by such Lender and accepted by the Borrower pursuant to Section 2.4.6. "Eurocurrency Bid Rate Advance" means a borrowing hereunder consisting of the aggregate amount of the several Eurocurrency Bid Rate Loans made by some or all of the Lenders to the Borrower at the same time and for the same Eurocurrency Interest Period, including, but not limited to, a Eurodollar Bid Rate Advance. "Eurocurrency Bid Rate Loan" means a Competitive Bid Loan, denominated in a Eurocurrency, which bears interest at a Eurocurrency Bid Rate. "Eurocurrency Committed Advance" means a Committed Advance, requested by the Borrower pursuant to Section 2.3, which bears interest at a Eurocurrency Rate, including, but not limited to, a Eurodollar Committed Advance. Page 6 "Eurocurrency Committed Loan" means a Committed Loan, requested by the Borrower pursuant to Section 2.3, which bears interest at a Eurocurrency Rate, including but not limited to, a Eurodollar Committed Loan. "Eurocurrency Interest Period" means, with respect to a Eurocurrency Advance, a period of one, two, three or six months commencing on a Business Day selected by the Borrower pursuant to this Agreement. Such Eurocurrency Interest Period shall end on (but exclude) the day which corresponds numerically to such date one, two, three or six months thereafter; provided, however, that if there is no such numerically corresponding day in such next, second, third or sixth succeeding month, such Eurocurrency Interest Period shall end on the last Business Day of such next, second, third or sixth succeeding month. If a Eurocurrency Interest Period would otherwise end on a day which is not a Business Day, such Eurocurrency Interest Period shall end on the next succeeding Business Day; provided, however, that if said next succeeding Business Day falls in a new calendar month, such Eurocurrency Interest Period shall end on the immediately preceding Business Day. "Eurocurrency Loan" means a Eurocurrency Committed Loan or a Eurocurrency Bid Rate Loan, as applicable. "Eurocurrency Rate" means, with respect to a Eurocurrency Committed Advance for the relevant Eurocurrency Interest Period, the sum of (i) the percentage indicated as the Applicable Margin for Eurocurrency Committed Advances plus (ii) the quotient of (a) the Eurocurrency Base Rate applicable to such Eurocurrency Interest Period, divided by (b) either (1) for any Eurodollar Committed Advance, a number equal to one minus the Reserve Requirement (expressed as a decimal) applicable to such Eurocurrency Interest Period or (2) for any other Eurocurrency Committed Advance, the number one. The Eurocurrency Rate shall be rounded to the next higher multiple of 1/16 of 1% if the rate is not such a multiple. "Eurodollar Advance" means a Eurodollar Committed Advance or a Eurodollar Bid Rate Advance. "Eurodollar Bid Rate Advance" means a borrowing hereunder consisting of the aggregate amount of the several Eurodollar Bid Rate Loans made by some or all of the Lenders to the Borrower at the same time and for the same Eurocurrency Interest Period. "Eurodollar Bid Rate Loan" means a Competitive Bid Loan, denominated in Dollars, which bears interest at a Eurocurrency Bid Rate. "Eurodollar Committed Advance" means a Committed Advance, denominated in Dollars, which bears interest at the Eurocurrency Rate. Page 7 "Eurodollar Committed Loan" means a Committed Loan, denominated in Dollars, which bears interest at the Eurocurrency Rate. "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 a.m. (Chicago time) on such day on such transactions received by the Agent from three Federal funds brokers of recognized standing selected by the Agent in its sole discretion. "First Chicago" means The First National Bank of Chicago in its individual capacity, and its successors. "Fixed Rate" means the Eurocurrency Rate, the Eurocurrency Bid Rate or the Absolute Rate. "Fixed Rate Advance" means an Advance which bears interest at a Fixed Rate. "Fixed Rate Loan" means a Loan which bears interest at a Fixed Rate. "Foreign Currency" means any Eurocurrency other than Dollars. "Foreign Currency Advance" means any Advance in a Foreign Currency. "Foreign Currency Loan" means any Loan in a Foreign Currency. "Governmental Agency" means any government, foreign or domestic, or any state, department or other political subdivision thereof, or governmental body, agency, authority, department or commission (including without limitation any taxing authority or political subdivision) or instrumentality (including without limitation any court or tribunal) exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government and any corporation, partnership or other entity, directly or indirectly owned by or subject to the control of any of the foregoing. "Indebtedness" of a Person means such Person's (i) obligations for borrowed money, (ii) 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), (iii) obligations, whether or not assumed, secured by Liens or payable out of the proceeds or Page 8 production from Property now or hereafter owned or acquired by such Person, (iv) obligations which are evidenced by notes, acceptances, or other instruments, (v) Capitalized Lease Obligations, (vi) net liabilities with respect to Rate Hedging Obligations, (vii) Contingent Obligations (without duplication when determining the Indebtedness of the Borrower and its Subsidiaries in the aggregate), and (viii) obligations for which such Person is obligated pursuant to a Letter of Credit. "Interest Coverage Ratio" means, for any period of determination, the ratio of (i) earnings before Interest Expense and taxes, to (ii) Interest Expense, all as determined for the Borrower and its Subsidiaries on a consolidated basis in accordance with Agreement Accounting Principles consistently applied. "Interest Expense" means, for any period of determination, total interest expense, whether paid in cash or accrued as a liability, during such period (including imputed interest on Capitalized Lease Obligations), net of cash interest income, all as determined for the Borrower and its Subsidiaries on a consolidated basis in accordance with Agreement Accounting Principles consistently applied. "Interest Period" means a Eurocurrency Interest Period or an Absolute Rate Interest Period. "Investment" of a Person means any loan, advance, extension of credit (other than accounts receivable arising in the ordinary course of business on terms customary in the trade), deposit account or contribution of capital by such Person to any other Person or any investment in, or purchase or other acquisition of, the stock, partnership interests, notes, debentures or other securities of any other Person made by such Person. "Investment Guidelines" means the guidelines for investment of funds of the Borrower and its Subsidiaries, as reviewed by the Board of Directors of the Borrower or an authorized executive committee thereof and as in effect on the Closing Date, a copy of which has been furnished to the Lenders, as modified from time to time and reviewed by the Board of Directors of the Borrower or an authorized executive committee thereof. "Invitation for Competitive Bid Quotes" means an Invitation for Competitive Bid Quotes substantially in the form of Exhibit "C" hereto, completed and delivered by the Agent to the Lenders in accordance with Section 2.4.3. "Judgment Currency" is defined in Section 2.10.2. "Lender Affiliate" 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 Page 9 the controlling Person owns 51% or more of any class of voting securities (or other ownership 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 stock, by contract or otherwise. "Lenders" means the lending institutions listed on the signature pages of this Agreement and that become a party to this Agreement pursuant to Section 2.17, 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. "Letter of Credit" of a Person means a letter of credit or similar instrument which is issued upon the application of such Person or upon which such Person is an account party or for which such Person is in any way liable. "Level" is defined in Section 2.3.4. "Level A" is defined in Section 2.3.4. "Level B" is defined in Section 2.3.4. "Level C" is defined in Section 2.3.4. "Level I" is defined in Section 2.3.4. "Level II" is defined in Section 2.3.4. "Level III" is defined in Section 2.3.4. "Level IV" is defined in Section 2.3.4. "Lien" means any lien (statutory or other), mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance or preference, priority or other 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" means, with respect to a Lender, such Lender's portion of any Advance. "Loan Documents" means this Agreement and the Notes. "Long Term Debt Rating" is defined in Section 2.3.4. Page 10 "Material Adverse Effect" means a material adverse effect on (i) the business, Property, condition (financial or otherwise), results of operations, or prospects of the Borrower and its Subsidiaries taken as a whole, (ii) the ability of the Borrower to perform its material obligations under the Loan Documents, or (iii) the validity or enforceability of any of the Loan Documents or the rights or remedies of the Agent or the Lenders thereunder. "Moody's" means Moody's Investors Service Inc. or any successor corporation thereto. "Multiemployer Plan" means a Plan maintained pursuant to a collective bargaining agreement or any other arrangement to which the Borrower or any member of the Controlled Group is a party to which more than one employer is obligated to make contributions. "Net Worth" means, for any period of determination, stockholders' equity, as determined for the Borrower and its Subsidiaries on a consolidated basis in accordance with Agreement Accounting Principles consistently applied. "Notes" means, collectively, the Committed Notes and the Competitive Bid Notes; and "Note" means any one of such Notes. "Notice of Assignment" is defined in Section 12.3.2. "Obligations" means all unpaid principal of and accrued and unpaid interest on the Notes, all accrued and unpaid fees and all expenses, reimbursements, indemnities and other obligations of the Borrower to the Lenders or to any Lender, the Agent or any indemnified party arising under the Loan Documents. "Participants" is defined in Section 12.2.1. "Payment Date" means the last day of each March, June, September and December. "PBGC" means the Pension Benefit Guaranty Corporation, or any successor thereto. "Person" means any natural person, corporation, firm, joint venture, partnership, association, enterprise, trust or other entity or organization, or any government or political subdivision or any agency, department or instrumentality thereof. "Plan" means an employee pension benefit plan which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code as to which the Borrower or any member of the Controlled Group may have any liability. Page 11 "Property" of a Person means any and all property, whether real, personal, tangible, intangible, or mixed, of such Person, or other assets owned, leased or operated by such Person. "Purchasers" is defined in Section 12.3.1. "Rate 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, 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. "Regulation D" means Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor thereto or other regulation or official interpretation of said Board of Governors relating to reserve requirements applicable to member banks of the Federal Reserve System. "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 stocks applicable to member banks of the Federal Reserve System. "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 of the occurrence of such event, provided, however, that a failure to meet the minimum funding standard 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 Lenders" means Lenders in the aggregate having at least 66 2/3% of the Aggregate Commitment or, if the Aggregate Commitment has been terminated, Lenders in the aggregate holding at least 66 2/3% of the aggregate unpaid principal amount of the outstanding Advances. Page 12 "Reserve Requirement" means, with respect to a Eurocurrency Interest Period, the maximum aggregate reserve requirement (including all basic, supplemental, marginal and other reserves) which is imposed under Regulation D on Eurocurrency liabilities. "Section" means a numbered section of this Agreement, unless another document is specifically referenced. "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. "Specified Currency" is defined in Section 2.10.2. "Specified Place" is defined in Section 2.10.2. "Standard & Poor's" means Standard & Poor's Ratings Services or any successor thereto. "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" shall mean a Subsidiary of the Borrower. "Substantial Portion" means, with respect to the Property of the Borrower and its Subsidiaries, Property which (i) represents more than 20% of the consolidated assets of the Borrower and its Subsidiaries as would be shown in the consolidated financial statements of the Borrower and its Subsidiaries as at the beginning of the twelve-month period ending with the month in which such determination is made, or (ii) is responsible for more than 20% of the consolidated net sales or of the consolidated net income (excluding all nonrecurring or extraordinary gains and losses) of the Borrower and its Subsidiaries as reflected in the financial statements referred to in clause (i) above. "Termination Date" means the earlier of (i) December 20, 2000, and (ii) the date on which the Commitments shall have been reduced to zero or terminated pursuant to Section 2.7.1 or 8.1. "Transferee" is defined in Section 12.4. "Type" means, with respect to any Advance or Loan, its nature as an Alternate Base Rate Advance or Loan, Eurocurrency Committed Advance or Loan, Eurocurrency Bid Rate Advance or Loan or Absolute Rate Advance or Loan. Page 13 "Unfunded Liabilities" means 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. Such Unfunded Liabilities shall be determined based upon the actuarial assumptions used to determine vested nonforfeitable benefits for purposes of preparing the Borrower's annual audited financial statements delivered to the Agent pursuant to Section 6.1(i) hereof. "Unmatured Default" means an event which but for the lapse of time or the giving of notice, or both, would constitute a Default. "Wholly-Owned Subsidiary" of a Person means (i) any Subsidiary all of the outstanding voting securities of which (other than directors' qualifying shares) shall at the time be owned or controlled, directly or indirectly, by such Person or one or more Wholly-Owned Subsidiaries of such Person, or by such Person and one or more Wholly-Owned Subsidiaries of such Person, or (ii) any partnership, association, joint venture or similar business organization 100% of the ownership interests having ordinary voting power of which shall at the time be so owned or controlled. The foregoing definitions shall be equally applicable to both the singular and plural forms of the defined terms. ARTICLE II THE CREDITS ----------- 2.1. Description of Facility. Upon the terms and subject to the conditions ----------------------- set forth in this Agreement, the Lenders hereby grant to the Borrower a revolving credit facility pursuant to which: (i) each Lender severally agrees to make Committed Loans to the Borrower in accordance with Section 2.3; and (ii) each Lender may, in its sole discretion, make bids to make Competitive Bid Loans to the Borrower in accordance with Section 2.4; provided, however, that in no event may the aggregate principal amount of all outstanding Advances (including both Committed Advances and Competitive Bid Advances) exceed the Aggregate Commitment. 2.2. Availability of Facility. Subject to all of the terms and conditions ------------------------ of this Agreement, the facility is available from the Closing Date to the Termination Date, and the Borrower may borrow, repay and reborrow at any time prior to the Termination Date. Page 14 2.3. Committed Advances. ------------------- 2.3.1. Commitment. From and including the Closing Date and prior to ---------- the Termination Date, each Lender severally agrees, on the terms and conditions set forth in this Agreement, to make Committed Loans to the Borrower from time to time in amounts having a Dollar Equivalent not to exceed in the aggregate at any one time outstanding the amount of its Commitment; provided, however, that, subject to Section 2.17, the Foreign Currency Loans shall not exceed a Dollar Equivalent of $25,000,000 in the aggregate at any one time outstanding. The Commitments to lend hereunder shall expire on the Termination Date. 2.3.2. Ratable Loans; Types of Advances. Each Committed Advance -------------------------------- hereunder shall consist of Loans made from the several Lenders ratably in proportion to the ratio that their respective Commitments bear to the Aggregate Commitment. The Committed Advances may be Alternate Base Rate Advances or Eurocurrency Committed Advances, or a combination thereof, selected by the Borrower in accordance with Sections 2.3.5 and 2.3.6; provided, however, that (i) Eurocurrency Committed Advances denominated in a Foreign Currency may be outstanding in not more than five Foreign Currencies at any one time and (ii) there shall not be more than twelve Eurocurrency Committed Advances denominated in a Foreign Currency outstanding at any one time. The Committed Advances shall be evidenced by the Committed Notes. 2.3.3. Minimum Amount of Each Committed Advance. Each Eurocurrency ---------------------------------------- Committed Advance shall be in a minimum amount, having a Dollar Equivalent, of not less than $5,000,000 (and in multiples of $1,000,000 if in excess thereof), and each Alternate Base Rate Advance shall be in a minimum amount of $500,000 (and in multiples of $100,000 if in excess thereof); provided, however, that any Alternate Base Rate Advance may be in the amount of the unused Aggregate Commitment. 2.3.4. Applicable Margin ----------------- (a) Long Term Debt Rating. --------------------- (i) So long as the Borrower has a Long Term Debt Rating, the Applicable Margin for Eurocurrency Committed Advances and for facility fees payable pursuant to Section 2.6.1 hereunder, shall be subject to adjustment (upwards or downwards, as appropriate) based on the applicable Level and shall be determined in accordance with the table set forth below in this subsection (a)(i). The Level shall be based on the applicable Long Term Debt Rating. The Applicable Margin shall be adjusted on the earlier of the date of announcement or the date of publication by the respective rating agencies of a change in the Long Term Debt Rating or, in the absence of such announcement or publication, on the effective date of such Page 15 changed Long Term Debt Rating (the "Adjustment Date"), and shall apply to all outstanding Eurocurrency Committed Advances and the facility fees from and after such Adjustment Date to the next Adjustment Date. In the event that the Borrower shall at any time cease to have a Long Term Debt Rating or a Commercial Paper Rating, Level IV shall apply.
Applicable Margin (basis points per annum) ------------------------ Eurocurrency Committed Rating Advances Facility Fees ------ -------- ------------- Level I 12.5 b.p. 7.5 b.p. Level II 17.0 b.p. 8.0 b.p. Level III 20.0 b.p. 10.0 b.p Level IV 25.0 b.p 15.0 b.p.
(ii) For purposes of Section 2.3.4(a) of this Agreement, the applicable Level shall be determined in accordance with the following definitions: "Level I" means the level applicable at any time when the Borrower's Long Term Debt Rating is at least A+ or better from Standard & Poor's or at least A1 or better from Moody's. -- "Level II" means the level applicable at any time when Level I is not applicable, and the Borrower's Long Term Debt Rating is at least A- or better from Standard & Poor's or at least A3 or better from Moody's. -- "Level III" means the level applicable at any time when the Borrower's Long Term Debt Rating is BBB+ from Standard & Poor's or Baa1 from Moody's. -- "Level IV" means the level applicable at any time when the Borrower's Long Term Debt Rating is BBB or below from Standard & Poor's or Baa2 or -- below from Moody's. "Long Term Debt Rating" means the then most recent rating assigned by Standard & Poor's or Moody's to the Borrower's senior unsecured long term debt; provided, however, that if (i) such rating is received from one such rating agency, then that rating will be the Long Term Debt Rating, (ii) such rating is received from both rating agencies, then the higher rating will be the Long Term Debt Rating, and (iii) if there is a difference of two or more Levels between such ratings, then the rating which is one below the higher rating will be the Long Term Debt Rating. Page 16 (b) Commercial Paper Rating. ----------------------- (i) If the Borrower ceases, at any time, to have a Long Term Debt Rating, the Applicable Margin for Eurocurrency Committed Advances and for facility fees payable pursuant to Section 2.6.1 hereunder, shall be subject to adjustment (upwards or downwards, as appropriate) based on the applicable Level and shall be determined in accordance with the table set forth below in this subsection (b)(i). The Level shall be based on the applicable Commercial Paper Rating. The Applicable Margin shall be adjusted on the earlier of the date of announcement or the date of publication by the respective rating agencies of a change in the Commercial Paper Rating or, in the absence of such announcement or publication, on the effective date of such changed Commercial Paper Rating (the "Adjustment Date"), and shall apply to all outstanding Eurocurrency Committed Advances and the facility fees from and after such Adjustment Date to the next Adjustment Date.
Applicable Margin (basis points per annum) ------------------------ Eurocurrency Committed Rating Advances Facility Fees ------ -------- ------------- Level A 12.5 b.p. 7.5 b.p. Level B 20.0 b.p. 10.0 b.p. Level C 25.0 b.p. 15.0 b.p
(ii) For purposes of Section 2.3.4(b) of this Agreement, the applicable Level shall be determined in accordance with the following definitions: "Commercial Paper Rating" means the then most recent rating assigned by Standard & Poor's or Moody's to the Borrower's commercial paper. "Level A" means the level applicable at any time when the Borrower's Commercial Paper Rating is at least A1 or better from Standard & Poor's or -- at least P1 from Moody's. "Level B" means the level applicable at any time when the Borrower's Commercial Paper Rating is A2 from Standard & Poor's and P2 from Moody's. --- "Level C" means the level applicable at any time when Level B does not apply and the Borrower's Commercial Paper Rating is A2 or below from Standard & Poor's or P2 or below from Moody's. -- 2.3.5. Method of Selecting Types and Interest Periods for New Committed ---------------------------------------------------------------- Advances. The Borrower shall select the Type of - -------- Page 17 Committed Advance and, in the case of each Eurocurrency Committed Advance, the Eurocurrency and the Eurocurrency Interest Period applicable thereto, for each such Committed Advance. The Borrower shall give the Agent irrevocable notice (a "Committed Borrowing Notice") not later than 11:00 a.m. (Chicago time) on the Borrowing Date of each Alternate Base Rate Advance and not later than 10:00 a.m. (Chicago time) at least three Business Days before the Borrowing Date for each Eurocurrency Committed Advance, specifying: (i) the Borrowing Date, which shall be a Business Day, of such Committed Advance, (ii) the aggregate amount of such Committed Advance, (iii) the Type of Committed Advance selected, (iv) in the case of each Eurocurrency Committed Advance, the Eurocurrency applicable thereto, and (v) in the case of each Eurocurrency Committed Advance, the Interest Period applicable thereto. 2.3.6. Conversion and Continuation of Outstanding Advances. --------------------------------------------------- (a) Dollar Advances. Alternate Base Rate Advances shall continue --------------- as Alternate Base Rate Advances unless and until such Alternate Base Rate Advances are converted into Eurodollar Committed Advances. Each Eurodollar Committed Advance shall continue as a Eurodollar Committed Advance until the end of the then applicable Interest Period therefor, at which time such Eurodollar Committed Advance shall be automatically converted into an Alternate Base Rate Advance unless repaid or unless the Borrower shall have given the Agent a Conversion/Continuation Notice in accordance with Section 2.3.6(c) requesting that, at the end of such Interest Period, such Eurodollar Committed Advance continue as a Eurodollar Committed Advance for the same or another Interest Period. Subject to the terms of Section 2.3.3, the Borrower may elect from time to time to convert all or any part of an Alternate Base Rate Advance into a Eurodollar Committed Advance. (b) Foreign Currency Advances. Each Foreign Currency Advance shall ------------------------- continue as such until the end of the then applicable Interest Period therefor, at which time such Foreign Currency Advance shall automatically be deemed to be continued as a Foreign Currency Advance in the same amount and the same Foreign Currency with a Eurocurrency Interest Period of one month (commencing on the last day of the expiring Interest Period), unless repaid or unless the Borrower shall have given the Agent a Conversion/Continuation Notice in accordance with Section 2.3.6(c) requesting that, at the end of such Interest Period, such Foreign Currency Advance continue Page 18 as a Foreign Currency Advance in the same Foreign Currency for the same or another Eurocurrency Interest Period. (c) General Provisions. The Borrower shall give the Agent irrevocable ------------------ notice (a "Conversion/Continuation Notice") of each conversion of an Alternate Base Rate Advance to a Eurocurrency Committed Advance or continuation of a Eurocurrency Committed Advance (as permitted by the provisions of Sections 2.3.6(a) and (b)) not later than 10:00 a.m. (Chicago time) at least three Business Days prior to the date of the requested conversion or continuation, specifying: (i) the requested date, which shall be a Business Day, of such conversion or continuation; (ii) the aggregate amount, Eurocurrency and Type of the Committed Advance which is to be converted or continued; and (iii) the amount and Type(s) of Committed Advance(s) into which such Committed Advance is to be converted or continued and, in the case of a conversion into or continuation of a Eurocurrency Committed Advance, the duration of the Interest Period applicable thereto. Notwithstanding the provisions of Sections 2.3.6(a) and (b), no Eurocurrency Committed Advance shall be continued as or converted into a Eurocurrency Committed Advance for a new Interest Period if the Dollar Equivalent of the aggregate principal amount of Advances to be outstanding after giving effect to such continuation or conversion would exceed 102% of the Aggregate Commitment. 2.4. Competitive Bid Advances. ------------------------ 2.4.1. Competitive Bid Option; Repayment of Competitive Bid Advances. ------------------------------------------------------------- In addition to Committed Advances pursuant to Section 2.3, but subject to all of the terms and conditions of this Agreement (including, without limitation, the limitation set forth in Section 2.1 as to the maximum aggregate principal amount of all outstanding Advances hereunder), the Borrower may, as set forth in this Section 2.4, request the Lenders, prior to the Termination Date, to make offers to make Competitive Bid Advances to the Borrower. Each Lender may, but shall have no obligation to, make such offers and the Borrower may, but shall have no obligation to, accept any such offers in the manner set forth in this Section 2.4. The Competitive Bid Advances shall be evidenced by the Competitive Bid Notes. Each Competitive Bid Advance shall be repaid in full by the Borrower on the last day of the Interest Period applicable thereto. 2.4.2. Competitive Bid Quote Request. When the Borrower wishes to ----------------------------- request offers to make Competitive Bid Loans Page 19 under this Section 2.4, the Borrower shall transmit to the Agent by telecopy a Competitive Bid Quote Request so as to be received no later than (x) 10:00 a.m. (Chicago time) at least five Business Days prior to the Borrowing Date proposed therein, in the case of a Eurocurrency Auction, or (y) 10:00 a.m. (Chicago time) at least one Business Day prior to the Borrowing Date proposed therein, in the case of an Absolute Rate Auction, specifying in accordance with all of the terms of this Agreement: (i) the proposed Borrowing Date, which shall be a Business Day, for the proposed Competitive Bid Advance; (ii) the aggregate principal amount of such Competitive Bid Advance; (iii) whether the Competitive Bid Quotes requested are to set forth a Competitive Bid Margin or an Absolute Rate, or both; (iv) in the case of each Eurocurrency Bid Rate Advance, the Eurocurrency applicable thereto; and (v) the Interest Period applicable thereto. The Borrower may request offers to make Competitive Bid Loans for more than one Interest Period and for a Eurocurrency Auction and an Absolute Rate Auction in a single Competitive Bid Quote Request. No Competitive Bid Quote Request shall be given within five Business Days (or upon reasonable prior notice to the Lenders, such other number of days as the Borrower and the Agent may agree) of any other Competitive Bid Quote Request. Each Competitive Bid Quote Request shall be in a minimum amount of $5,000,000 (and in multiples of $1,000,000 in excess thereof). A Competitive Bid Quote Request that does not conform substantially to the format of Exhibit "B" hereto shall be rejected, and the Agent shall promptly notify the Borrower of such rejection by telecopy and telephone. 2.4.3. Invitation for Competitive Bid Quotes. Promptly upon ------------------------------------- receipt of a Competitive Bid Quote Request that is not rejected pursuant to Section 2.4.2, the Agent shall send to each of the Lenders by telecopy an Invitation for Competitive Bid Quotes which shall constitute an invitation by the Borrower to each Lender to submit Competitive Bid Quotes offering to make the Competitive Bid Loans to which such Competitive Bid Quote Request relates in accordance with this Section 2.4. 2.4.4. Submission and Contents of Competitive Bid Quotes. ------------------------------------------------- (a) Each Lender may, in its sole discretion, submit a Competitive Bid Quote containing an offer or offers to make Competitive Bid Loans in response to any Invitation Page 20 for Competitive Bid Quotes. Each Competitive Bid Quote must comply with the requirements of this Section 2.4.4 and must be submitted to the Agent by telecopy at its offices specified in or pursuant to Article XIII not later than (i) (A) 12:45 p.m. (Chicago time) in the case of First Chicago and (B) 1:00 p.m. (Chicago time) in the case of each other Lender, at least four Business Days prior to the proposed Borrowing Date in the case of a Eurocurrency Auction, or (ii) (A) 8:45 a.m. (Chicago time) in the case of First Chicago and (B) 9:00 a.m. (Chicago time) in the case of each other Lender, on the proposed Borrowing Date in the case of an Absolute Rate Auction (or, in either such case upon reasonable prior notice to the Lenders, such other time and date as the Borrower and the Agent may agree; provided that First Chicago shall always be required to submit its Competitive Bid Quotes not less than fifteen minutes prior to the other Lenders). Subject to Articles IV and VIII, any Competitive Bid Quote so made shall be irrevocable except with the written consent of the Agent given on the instructions of the Borrower. (b) Each Competitive Bid Quote shall in any case specify: (i) the proposed Borrowing Date, which shall be the same as that set forth in the applicable Invitation for Competitive Bid Quotes; (ii) the principal amount of the Competitive Bid Loan for which each such offer is being made, (1) which principal amount may be greater than, less than or equal to the Commitment of the quoting Lender, but in no case greater than the unutilized Aggregate Commitment, (2) which principal amount must be at least $5,000,000 (and in multiples of $1,000,000 in excess thereof) and (3) which principal amount may not exceed the principal amount of Competitive Bid Loans for which offers were requested; (iii) in the case of a Eurocurrency Auction, the Competitive Bid Margin offered for each such Competitive Bid Loan; (iv) the minimum or maximum amount, if any, of the Competitive Bid Loan which may be accepted by the Borrower and/or the limit, if any, as to the aggregate principal amount of the Competitive Bid Loans from such Lender which may be accepted by the Borrower; Page 21 (v) in the case of an Absolute Rate Auction, the Absolute Rate offered for each such Competitive Bid Loan; (vi) in the case of a Eurocurrency Auction, the Eurocurrency applicable thereto, which shall be the same as that set forth in the applicable Invitation for Competitive Bid Quotes; (vii) the applicable Interest Period, which shall be the same as that set forth in the applicable Invitation for Competitive Bid Quotes; and (viii) the identity of the quoting Lender. (c) The Agent shall reject any Competitive Bid Quote that: (i) is not substantially in the form of Exhibit "D" hereto or does not specify all of the information required by Section 2.4.4(b); (ii) contains qualifying, conditional or similar language, other than any such language contained in Exhibit "D" hereto; (iii) proposes terms other than or in addition to those set forth in the applicable Invitation for Competitive Bid Quotes; or (iv) arrives after the time set forth in Section 2.4.4(a). (d) If any Competitive Bid Quote shall be rejected pursuant to Section 2.4.4(c), then the Agent shall notify the relevant Lender of such rejection as soon as practicable. 2.4.5. Notice to Borrower. The Agent shall promptly notify the ------------------ Borrower of the terms (i) of any Competitive Bid Quote submitted by a Lender that is in accordance with Section 2.4.4 and (ii) of any Competitive Bid Quote that is in accordance with Section 2.4.4 and amends, modifies or is otherwise inconsistent with a previous Competitive Bid Quote submitted by such Lender with respect to the same Competitive Bid Quote Request. Any such subsequent Competitive Bid Quote shall be disregarded by the Agent unless such subsequent Competitive Bid Quote specifically states that it is submitted solely to correct a manifest error in such former Competitive Bid Quote. The Agent's notice to the Borrower shall specify the aggregate principal amount of Competitive Bid Loans for which offers have been received for each Interest Period specified in the related Competitive Bid Quote Request and the Page 22 respective principal amounts and Competitive Bid Margins or Absolute Rates, as the case may be, so offered. 2.4.6. Acceptance and Notice by Borrower. Subject to the receipt of --------------------------------- the notice from the Agent referred to in Section 2.4.5, not later than (i) 10:00 a.m. (Chicago time) at least three Business Days prior to the proposed Borrowing Date, in the case of a Eurocurrency Auction or (ii) 11:00 a.m. (Chicago time) on the proposed Borrowing Date, in the case of an Absolute Rate Auction, the Borrower shall notify the Agent of the Borrower's acceptance or rejection of the offers so notified to it pursuant to Section 2.4.5; provided, however, that the failure by the Borrower to give such notice to the Agent shall be deemed to be a rejection by the Borrower of all such offers. In the case of acceptance, such notice (a "Competitive Bid Acceptance Notice") shall specify the aggregate principal amount of offers for each Interest Period that are accepted. The Borrower may accept or reject any Competitive Bid Quote in whole or in part (subject to the terms of Section 2.4.4(b)(iv)); provided that: (i) the aggregate principal amount of each Competitive Bid Advance may not exceed the applicable amount set forth in the related Competitive Bid Quote Request; (ii) acceptance of offers may only be made on the basis of ascending Competitive Bid Margins or Absolute Rates, as the case may be; and (iii) the Borrower may not accept any offer of the type described in Section 2.4.4(c) or that otherwise fails to comply with the requirements of this Agreement for the purpose of obtaining a Competitive Bid Loan under this Agreement. 2.4.7. Allocation by the Agent. Subject to Section 2.4.6, if offers ----------------------- are made by two or more Lenders with the same Competitive Bid Margins or Absolute Rates, as the case may be, for a greater aggregate principal amount than the amount in respect of which offers are permitted to be accepted for the related Interest Period, the principal amount of Competitive Bid Loans in respect of which such offers are accepted shall be allocated by the Agent among such Lenders as nearly as possible (in such multiples as the Agent may deem appropriate) in proportion to the aggregate principal amount of such offers; provided, however, that no Lender shall be allocated a portion of any Competitive Bid Advance which is less than the minimum amount which such Lender has indicated that it is willing to accept. Allocations by the Agent of the amounts of Competitive Bid Loans shall be conclusive in the absence of manifest error. On the same Business Day as the Agent receives the Competitive Bid Acceptance Notice from the Borrower pursuant to Section 2.4.6, the Agent shall promptly, but in any event by 11:00 a.m. (Chicago time) on such day in the case of Eurocurrency Bid Page 23 Rate Advances, and by noon (Chicago time) on such day in the case of Absolute Rate Advances, notify each Lender of its receipt of a Competitive Bid Acceptance Notice and the aggregate principal amount of each Competitive Bid Advance allocated to each participating Lender. 2.4.8. Administration Fee. The Borrower hereby agrees to pay to the ------------------ Agent, for its sole account, an administration fee of $1,000 per Competitive Bid Quote Request transmitted by the Borrower to the Agent pursuant to Section 2.4.2. Such administration fee shall be payable in arrears on each Payment Date and on the Termination Date (or such earlier date on which the Aggregate Commitment shall terminate or be cancelled) for any period then ending for which such fee, if any, shall not have been theretofore paid. 2.5. Method of Borrowing: Not later than 12:00 noon (Chicago time) on each ------------------- Borrowing Date, each Lender shall make available its Loan or Loans, if any, in funds immediately available to the Agent, in Chicago, Illinois at its address specified pursuant to Article XIII. The Agent will make the funds so received from the Lenders available to the Borrower at the Agent's aforesaid address. Notwithstanding the foregoing provisions of this Section 2.5, to the extent that a Loan made by a Lender matures on the Borrowing Date of a requested Loan in the same Eurocurrency, such Lender shall apply the proceeds of the Loan it is then making to the repayment of principal of the maturing Loan to such extent. 2.6. Fees. The Borrower agrees to pay the following fees: ---- 2.6.1. Facility Fee. The Borrower agrees to pay to the Agent for ------------ the account of each Lender, for the period from the Closing Date to and including the Termination Date, a facility fee equal to the product of (i) such Lender's Commitment (whether used or unused), and (ii) the percentage specified as the Applicable Margin for facility fees pursuant to Section 2.3.4, payable in arrears on each Payment Date and on the Termination Date. 2.6.2. Agent's Fees. The Borrower agrees to pay to the Agent, for ------------ its own account, the fees agreed to by the Borrower and the Agent pursuant to that certain Letter Agreement dated November 16, 1995. 2.7. Reductions in Aggregate Commitment; Principal Payments. ------------------------------------------------------- 2.7.1. Reductions in Aggregate Commitment. Subject to Section 2.17, ---------------------------------- the Borrower may permanently reduce the Aggregate Commitment in whole, or in part ratably among the Lenders in a minimum aggregate amount of $5,000,000 (and multiples of $1,000,000 in excess thereof), upon at least three Business Days' written Page 24 notice to the Agent, which notice shall specify the amount of any such reduction; provided, however, that the amount of the Aggregate Commitment may not be reduced below the Dollar Equivalent of the aggregate principal amount of the then outstanding Advances. 2.7.2. Principal Payments. ------------------ (a) Optional Payments. The Borrower may from time to time pay, ----------------- without penalty or premium, all outstanding Alternate Base Rate Advances, or, in a minimum aggregate amount of $5,000,000 (and multiples of $1,000,000 in excess thereof), any portion of the outstanding Alternate Base Rate Advances upon three Business Days' prior notice to the Agent. Subject to Section 3.5, a Fixed Rate Advance may be paid prior to the last day of the applicable Interest Period. (b) Currency Fluctuations. If at any time the Agent shall --------------------- determine that the Dollar Equivalent (and the Agent shall calculate the Dollar Equivalent on each Borrowing Date and upon the request of any Lender) of the aggregate principal amount of outstanding Advances is greater than 102% of the Aggregate Commitment then in effect, the Borrower shall (i) promptly upon receiving notice from the Agent on such Borrowing Date (and in any event on such Borrowing Date), and (ii) at all other times, upon one (1) Business Day's written notice to the Borrower from the Agent, prepay an aggregate principal amount of Advances such that the Dollar Equivalent of the aggregate principal amount of outstanding Advances does not exceed the Aggregate Commitment then in effect. (c) Termination. Any outstanding Advances and all other unpaid ----------- Obligations shall be paid in full by the Borrower on the Termination Date. 2.8. Changes in Interest Rate, etc. Each Alternate Base Rate Advance ------------------------------ shall bear interest on the outstanding principal amount thereof, for each day from and including the date such Advance is made or is converted from a Eurodollar Committed Advance into an Alternate Base Rate Advance pursuant to Section 2.3.6 to but excluding the date it becomes due or is converted into a Eurodollar Committed Advance pursuant to Section 2.3.6 hereof, at a rate per annum equal to the Alternate Base Rate for such day. Changes in the rate of interest on that portion of any Advance maintained as an Alternate Base Rate Advance will take effect simultaneously with each change in the Alternate Base Rate. Each Fixed Rate Advance shall bear interest from and including the first day of the Interest Period applicable thereto to (but not including) the last day of such Interest Period at the interest rate determined as applicable to such Fixed Rate Advance. No Interest Period may end after the Termination Date. Page 25 2.9. Rates Applicable After Default. Notwithstanding anything to the ------------------------------ contrary contained in Section 2.3.5 or 2.3.6, during the continuance of a Default or Unmatured Default, the Required Lenders may, at their option, by notice to the Borrower (which notice may be revoked at the option of the Required Lenders notwithstanding any provision of Section 8.2 requiring unanimous consent of the Lenders to changes in interest rates), declare that no Advance may be made as, converted into or continued as a Fixed Rate Advance. During the continuance of a Default, the Required Lenders may, at their option, by notice to the Borrower (which notice may be revoked at the option of the Required Lenders notwithstanding any provision of Section 8.2 requiring unanimous consent of the Lenders to changes in interest rates), declare that (i) each Fixed Rate Advance shall bear interest for the remainder of the applicable Interest Period at the rate otherwise applicable to such Interest Period plus 2% per annum and (ii) each Alternate Base Rate Advance shall bear interest at a rate per annum equal to the Alternate Base Rate plus 2% per annum. 2.10. Method of Payment ----------------- 2.10.1. General. Subject to the last sentence of Section 2.5, all ------- payments of the 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 XIII, or at any other Lending Installation of the Agent specified in writing by the Agent to the Borrower at least two (2) Business Days prior to any such payment, by noon (local time) on the date when due and shall be applied ratably by the Agent among all Lenders in the case of fees and payments in respect of Committed Advances and ratably among the applicable Lenders in respect of Competitive Bid Advances. Each payment delivered to the Agent for the account of any Lender shall be delivered promptly by the Agent to such Lender in the same type of funds that the Agent received at its address specified pursuant to Article XIII or at any Lending Installation specified in a notice received by the Agent from such Lender. 2.10.2. Currency of Payment. All payments of principal of and ------------------- interest on any Advance or any other Obligations hereunder shall be made by the Borrower in the currency borrowed (the "Specified Currency") in the manner and at the address (the "Specified Place") specified in Section 2.10.1. Payment of the Obligations shall not be discharged by an amount paid in another currency or in another place, whether pursuant to a judgment or otherwise, to the extent that the amount so paid on conversion to the Specified Currency and transfer to the Specified Place under normal banking procedures does not yield the amount of the Specified Currency at the Specified Place due hereunder. If, for the purpose of obtaining judgment in any court, it is necessary to convert a sum due hereunder in the Specified Currency into another currency (the "Judgment Currency"), the rate of exchange which Page 26 shall be applied shall be that at which in accordance with normal banking procedures the Agent could purchase the Specified Currency with that amount of the Judgment Currency on the Business Day next preceding that on which such judgment is rendered. The obligation of the Borrower in respect of any such sum due from it to the Agent or any Lender hereunder (an "Entitled Person") shall, notwithstanding the rate of exchange actually applied in rendering such judgment, be discharged only to the extent that on the Business Day following receipt by such Entitled Person of any sum adjudged to be due hereunder or under the Notes in the Judgment Currency, such Entitled Person may in accordance with normal banking procedures purchase and transfer to the Specified Place the Specified Currency with the amount of the Judgment Currency so adjudged to be due; and the Borrower hereby, as a separate Obligation and notwithstanding any such judgment, agrees to indemnify such Entitled Person against, and to pay such Entitled Person on demand, in the Specified Currency, any difference between the sum originally due to such Entitled Person in the Specified Currency and the amount of the Specified Currency so purchased and transferred. 2.11. Notes; Telephonic Notices. Each Lender is hereby authorized to ------------------------- record the principal amount of each of its Loans and each repayment on the schedule attached to its Notes; provided, however, that the failure to so record shall not affect the Borrower's obligations under any Loan Document. The Borrower hereby authorizes the Lenders and the Agent to extend, convert or continue Advances, effect selections of Types of Advances, transfer funds and submit Competitive Bid Quotes, in each case 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, if such confirmation is requested by the Agent or any Lender, of each telephonic notice signed by an Authorized Officer. If the written confirmation differs in any material respect from the action taken by the Agent and the Lenders, the records of the Agent and the Lenders shall govern absent manifest error. 2.12. Interest Payment Dates; Interest and Fee Basis. Interest accrued on ---------------------------------------------- each Alternate Base Rate Advance shall be payable on each Payment Date, commencing with the first such date to occur after the date hereof, on any date on which the Alternate Base Rate Advance is prepaid, whether due to acceleration or otherwise, and at maturity. Interest accrued on each Fixed Rate Advance shall be payable on the last day of its applicable Interest Period, on any date on which the Fixed Rate Advance is prepaid, whether due to acceleration or otherwise, and at maturity. Interest accrued on each Fixed Rate Advance having an Interest Period longer than three months or 90 days, as the case may be, shall also be payable on the last day of each three-month interval (in the case of Eurocurrency Committed Advances or Eurodollar Bid Page 27 Rate Advances) or 90-day interval (in the case of Absolute Rate Advances) during such Interest Period. 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 Advance is made but not for the day of any payment on the amount paid if payment is received prior to noon (local time) at the place of payment. If any payment of principal of or interest on an Advance 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 in connection with such payment. 2.13. Notification of Advances, Interest Rates, Prepayments and Commitment -------------------------------------------------------------------- Reductions. Promptly after receipt thereof, the Agent will notify each Lender - ---------- of the contents of each Aggregate Commitment reduction notice, Committed Borrowing Notice, Competitive Bid Acceptance Notice, Conversion/Continuation Notice, and repayment notice received by it hereunder. The Agent will notify each Lender of the interest rate applicable to each Fixed Rate Advance promptly upon determination of such interest rate and will give each Lender prompt notice of each change in the Alternate Base Rate. 2.14. Lending Installations. Each Lender may book its Loans at any one or --------------------- more Lending Installations selected by such Lender and may change such Lending Installation or Lending Installations from time to time. All terms of this Agreement shall apply to any such Lending Installation or Lending Installations and the Notes shall be deemed held by each Lender for the benefit of such Lending Installation or Lending Installations. Each Lender may, by written or telex notice to the Agent and the Borrower, designate one or more Lending Installations through which Loans will be made by it and for whose account Loan payments are to be made. 2.15. 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 (or in the case of same day notice Alternate Base Advances, at the time such Lender receives notice from the Agent of a Committed Borrowing Notice requesting Alternate Base Rate Advances), 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 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 Page 28 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 interest rate applicable to the relevant Loan. 2.16. Withholding Tax Exemption. At least five Business Days prior to the ------------------------- first date on which interest or fees are payable hereunder for the account of any Lender, each Lender that is not incorporated under the laws of the United States of America, or a state thereof, agrees that it will deliver to each of the Borrower and the Agent two duly completed copies of United States Internal Revenue Service Form 1001 or 4224 (or a successor form), certifying in either case that such Lender is entitled to receive payments under this Agreement and the Notes without deduction or withholding of any United States federal income taxes. Each Lender which so delivers a Form 1001 or 4224 further undertakes to deliver to each of the Borrower and the Agent two additional copies of such form (or a successor form) on or before the date that such form expires (currently, three successive calendar years for Form 1001 and one calendar year for Form 4224) or becomes obsolete or after the occurrence of any event requiring a change in the most recent forms so delivered by it, and such amendments thereto or extensions or renewals thereof as may be reasonably requested by the Borrower or the Agent, in each case certifying that such Lender is entitled to receive payments under this Agreement and the Notes without deduction or withholding of any United States federal income taxes, unless an event (including without limitation any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Lender from duly completing and delivering any such form with respect to it and such Lender advises the Borrower and the Agent that it is not capable of receiving payments without any deduction or withholding of United States federal income tax. 2.17. Increases in Aggregate Commitment. --------------------------------- (a) During the period from and after the Closing Date to the Termination Date, the Borrower shall have the right to request that the Aggregate Commitment be increased to an amount not to exceed $250,000,000; provided, however, that (i) Foreign Currency Loans shall not exceed a Dollar Equivalent at any one time outstanding equal to 20% of such increased Aggregate Commitment, (ii) the Borrower may exercise such right not more than once every six (6) months during such period, and (iii) the Borrower may reduce the Aggregate Commitment pursuant to Section 2.7.1 hereof and then increase the Aggregate Commitment pursuant to the terms of this Section 2.17 not more than three (3) times during such period and thereafter any reductions in the Aggregate Commitment shall be permanent. Any such increase of the Aggregate Commitment shall be in a minimum amount of $25,000,000 (and multiples of $5,000,000 if in excess thereof). Page 29 (b) In the event of any such requested increase in the Aggregate Commitment, (i) each of the Lenders shall be given the opportunity to participate in the increased Aggregate Commitment (x) initially ratably in the proportions that their respective Commitments bear to the Aggregate Commitment and (y) to the extent that the requested increase of the Aggregate Commitment is not fulfilled pursuant to the preceding clause (x), ratably in the proportion that the respective Commitments of the Lenders desiring to participate in any such increase bear to the total Commitments of the Lenders desiring to so participate, and (ii) to the extent that the Lenders do not elect so to participate in such increased Aggregate Commitment to the full extent thereof after being afforded an opportunity to do so, then the Borrower shall consult with the Agent as to the number, identity and requested Commitments of additional financial institutions which the Borrower may invite to participate in the Aggregate Commitment. (c) No Lender shall at any time have any obligation to increase its Commitment pursuant to a request by the Borrower under this Section 2.17. (d) In no event shall any Lender's Commitment, immediately after giving effect to any increase pursuant to this Section 2.17, exceed 33% of the increased Aggregate Commitment. (e) Any increase in the Aggregate Commitment pursuant to this Section 2.17 shall be effective only upon the execution and delivery to the Borrower and the Agent of a commitment increase letter in substantially the form of Exhibit "I" hereto (a "Commitment Increase Letter"), which Commitment Increase Letter shall be delivered to the Agent not less than five Business Days prior to the date of any such increase and shall specify (i) the amount of the Commitment of any other financial institution becoming a Lender party to this Agreement or of any increase in the amount of the Commitment of any Lender already party to this Agreement and (ii) the date such increase is to become effective (the "Commitment Increase Date"). (f) In addition, any increase in the Aggregate Commitment pursuant to this Section 2.17 shall not become effective unless: (i) on the Commitment Increase Date, the Borrower's Long Term Debt Rating from Standard & Poor's is at least A- or better or at least A3 or better from Moody's; (ii) no Default or Unmatured Default shall have occurred and be continuing on the Commitment Increase Date; (iii) each of the representations and warranties set forth in Article V of this Agreement shall be true, correct and complete on the Commitment Increase Date as if Page 30 made on and as of such date, except as such representations and warranties by their terms are made solely as of a prior date; and (iv) the Borrower shall have furnished to the Agent (with sufficient copies for each of the Lenders) a certificate of the Secretary or Assistant Secretary of the Borrower as to the taking of any corporate action necessary in connection with any such increase and any other documents (including legal opinions and certificates) as the Agent may reasonably request in connection with any such increase. ARTICLE III CHANGE IN CIRCUMSTANCES ----------------------- 3.1. Taxes. ----- 3.1.1. Payments to be Free and Clear. Subject to compliance with Section ----------------------------- 2.16 by all Lenders required to do so, all sums payable by the Borrower whether in respect of principal, interest, fees or any other Obligations shall be paid without deduction for any present and future taxes, levies, imposts, deductions, charges or withholdings imposed by any country, any Governmental Agency thereof or therein, any jurisdiction from which any or all such payments are made and any political subdivision or taxing authority thereof or therein (collectively, "Taxes"), which amounts shall be paid by the Borrower as provided in Section 3.1.2(b). The Borrower will pay each Lender the amounts necessary such that the net amount of the principal, interest, fees or other sums received and retained by each Lender is not less than the amount payable under this Agreement. 3.1.2. Grossing-up of Payments. If: (a) the Borrower or any other Person ----------------------- is required by law to make any deduction or withholding on account of any such Tax or other amount from any sum paid or expressed to be payable by the Borrower to any Lender under this Agreement (other than on account of tax on the overall net income of any Lender); or (b) any party to this Agreement (or any Person on its behalf) other than the Borrower is required by law to make any deduction or withholding from, or (other than on account of tax on the overall net income of that party) any payment on or calculated by reference to the amount of, any such sum received or receivable by any Lender under this Agreement: (i) the Borrower shall notify the Agent of any such requirement or any change in any such requirement as soon as the Borrower becomes aware of it; Page 31 (ii) the Borrower shall pay any such Tax or other amount before the date on which penalties attached thereto become due and payable, such payment to be made (if the liability to pay is imposed on the Borrower) for its own account or (if that liability is imposed on any party to this Agreement) on behalf of and in the name of that party; (iii) the sum payable by the Borrower in respect of which the relevant deduction, withholding or payment is required shall (except, in the case of any such payment, to the extent that the amount thereof is not ascertainable when that sum is paid) be increased to the extent necessary to ensure that, after the making of that deduction, withholding or payment, that party receives on the due date and retains (free from any liability in respect of any such deduction, withholding or payment) a sum equal to that which it would have received and so retained had no such deduction, withholding or payment been required or made; and (iv) within thirty (30) days after payment of any sum from which the Borrower is required by law to make any deduction or withholding, and within thirty (30) days after the due date of payment of any Tax or other amount which it is required by Section 3.1.2(b)(ii) to pay, it shall deliver to the Agent all such certified documents and other evidence as to the making of such deduction, withholding or payment as (a) are reasonably satisfactory to other affected parties as proof of such deduction, withholding or payment and of the remittance thereof to the relevant taxing or other authority and (b) are reasonably required by any such party to enable it to claim a tax credit with respect to such deduction, withholding or payment. 3.2. 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), or any interpretation 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 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 or other amounts due it hereunder, or Page 32 (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 (other than reserves and assessments taken into account in determining the interest rate applicable to Fixed Rate Advances), 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 loans or reduces any amount receivable by any Lender or any applicable Lending Installation in connection with loans, or requires any Lender or any applicable Lending Installation to make any payment calculated by reference to the amount of loans held or interest received by it, by an amount deemed material by such Lender, then, within 15 days of demand by such Lender, the Borrower shall pay such Lender that portion of such increased expense incurred or reduction in an amount received which such Lender reasonably determines is attributable to making, funding and maintaining its Loans and its Commitment. 3.3. Changes in Capital Adequacy Regulations. If a Lender reasonably --------------------------------------- determines 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, then, within 15 days of demand by such Lender, 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 or its obligation to make Loans hereunder (after taking into account such Lender's policies as to capital adequacy). Each Lender shall notify the Borrower of any event occurring after the date of this Agreement entitling such Lender to compensation under this Section 3.3 as promptly as practicable, but in any event within 120 days after such Lender obtains actual knowledge thereof; provided that if any Lender fails to give such notice within 120 days after it obtains actual knowledge of such an event, such Lender shall, with respect to compensation payable pursuant to this Section 3.3 in respect of any costs resulting from such event, only be entitled to payment under this Section 3.3 for costs incurred from and after the date 120 days prior to the date that such Lender does give such notice. "Change" means (i) any change after the date of this Agreement in the Risk-Based Capital Guidelines, or (ii) any adoption of or change in any other law, governmental or quasi- governmental rule, regulation, policy, guideline, interpretation, or directive (whether or not having the force of Page 33 law) after the date of this Agreement which affects the amount of capital required or expected to be maintained by any Lender or any Lending 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. 3.4. Availability of Types of Advances. If any Lender reasonably --------------------------------- determines that maintenance of its Fixed Rate Loans at a suitable Lending Installation would violate any applicable law, rule, regulation, or directive, whether or not having the force of law, then the Agent shall suspend the availability of the affected Type of Advance and require any Fixed Rate Advances of the affected Type to be repaid unless another Lender or other Lenders are willing to make Competitive Bid Loans to the Borrower in substitution for the affected Fixed Rate Loans. If the Required Lenders reasonably determine that (i) deposits of a type and maturity appropriate to match fund Fixed Rate Advances are not available or (ii) the interest rate applicable to a Type of Advance does not accurately reflect the cost of making or maintaining such Advance, then the Agent shall suspend the availability of the affected Type of Advance and require any Fixed Rate Advances of the affected Type to be repaid. 3.5. Funding Indemnification. If any payment of a Fixed Rate Advance ----------------------- occurs on a date which is not the last day of the applicable Interest Period, whether because of acceleration, prepayment or otherwise, or a Fixed Rate Advance is not made on the date specified by the Borrower for any reason other than default by the Lenders, the Borrower will indemnify each Lender for any loss or cost such Lender reasonably determines to have been incurred by such Lender resulting therefrom, including, without limitation, any loss or cost in liquidating or employing deposits acquired to fund or maintain the Fixed Rate Advance. 3.6 Mitigation of Additional Costs or Adverse Circumstances. If, in ------------------------------------------------------- respect of any Lender, circumstances arise which would or would upon the giving of notice result in: (i) an increase in the liability of the Borrower to such Lender under Section 3.1, 3.2 or 3.3, (ii) the unavailability of a Type of Committed Advance under Section 3.4, or Page 34 (iii) a Lender being incapable of receiving payments without deduction or withholding of United States federal income tax, then, without in any way limiting, reducing or otherwise qualifying the Borrower's obligations under Section 3.1, 3.2, 3.3 or 3.4, such Lender shall promptly, upon becoming aware of the same, notify the Agent and the Borrower thereof and shall, in consultation with the Agent and the Borrower and to the extent that it can do so without, in its reasonable judgment, disadvantaging itself, take such reasonable steps as may be available to it to mitigate the effects of such circumstances (including, without limitation, the designation of an alternate Lending Installation or the transfer of its Loans to another Lending Installation). If and so long as a Lender has been unable to take, or has not taken, steps reasonably acceptable to the Borrower to mitigate the effect of the circumstances in question, such Lender shall be obliged, at the request of the Borrower, to assign all its rights and obligations hereunder to another Person designated by the Borrower with the approval of the Agent (which shall not be unreasonably withheld) and willing to participate in the facility in place of such Lender; provided that such Person satisfies all of the requirements of this Agreement, including, but not limited to, providing the forms and documents required by Sections 2.16 and 12.3.2. Notwithstanding any such assignment, the obligations of the Borrower under Sections 3.1, 3.2, 3.3 and 9.7 shall survive any such assignment and be enforceable by such Lender. 3.7. Lender Statements; Survival of Indemnity. To the extent reasonalby ---------------------------------------- possible, each Lender shall designate an alternate Lending Installation with respect to its Fixed Rate Loans to reduce any liability of the Borrower to such Lender under Sections 3.1, 3.2 or 3.3 or to avoid the unavailability of a Type of Advance under Section 3.4, so long as such designation is not, in such Lender's reasonable judgment, disadvantageous to such Lender. Each Lender shall deliver a written statement of such Lender as to the amount due, if any, under Sections 3.1, 3.2, 3.3 or 3.5. Such written statement shall set forth in reasonable detail the calculations upon which such Lender determined such amount and shall be final, conclusive and binding on the Borrower in the absence of manifest error. Determination of amounts payable under such Sections in connection with a Fixed Rate Loan shall be calculated as though each Lender funded its Fixed Rate Loan through the purchase of a deposit of the type and maturity corresponding to the deposit used as a reference in determining the Fixed Rate applicable to such Loan, whether in fact that is the case or not. Unless otherwise provided herein, the amount specified in the written statement shall be payable on demand after receipt by the Borrower of the written statement. The obligations of the Borrower under Sections 3.1, 3.2, 3.3 and 3.5 shall survive payment of the Obligations and termination of this Agreement. Page 35 3.8. Market Disruption. Notwithstanding the satisfaction of all ----------------- conditions referred to in Article IV with respect to any Foreign Currency Advance, if there shall occur on or prior to the date of such Advance any change in national or international financial, political or economic conditions or currency exchange rates or exchange controls which would in the reasonable opinion of the Agent or the Required Lenders make it impracticable for the Foreign Currency Loans comprising such Advance to be denominated in the Eurocurrency specified by the Borrower, then the Agent shall forthwith give notice thereof to the Borrower and the Lenders, and such Loans shall not be denominated in such Eurocurrency but shall be made on such Borrowing Date in Dollars, in an aggregate principal amount equal to the Dollar Equivalent of the aggregate principal amount specified in the related Committed Borrowing Notice as Alternate Base Rate Loans, unless the Borrower notifies the Agent at least one Business Day before such date that it elects not to borrow such Loans on such date. ARTICLE IV CONDITIONS PRECEDENT -------------------- 4.1. Initial Advance. The Lenders shall not be required to make the --------------- initial Advance hereunder and this Agreement shall not become effective unless the Borrower has furnished to the Agent with sufficient copies for the Lenders: (i) 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. (ii) 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. (iii) 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 borrowings hereunder, upon which certificate the Agent and the Lenders shall be entitled to rely until informed of any change in writing by the Borrower. Page 36 (iv) A certificate, signed by the chief financial officer of the Borrower, stating that on the initial Borrowing Date no Default or Unmatured Default has occurred and is continuing. (v) A written opinion of the Borrower's counsel, addressed to the Agent and the Lenders in substantially the form of Exhibit "E" hereto. (vi) Notes payable to the order of each of the Lenders. (vii) Written money transfer instructions, in substantially the form of Exhibit "G" hereto, addressed to the Agent and signed by an Authorized Officer, together with such other related money transfer authorizations as the Agent may have reasonably requested. (viii) Such other documents as any Lender or its counsel may have reasonably requested. 4.2. Each Advance. No Lender shall be required to make any Advance ------------ (other than a Committed Advance that, after giving effect thereto and to the application of the proceeds thereof, does not increase the aggregate amount of outstanding Committed Advances), unless on the applicable Borrowing Date: (i) There exists no Default or Unmatured Default. (ii) The representations and warranties contained in Article V are true and correct as of such Borrowing Date except to the extent any such representation or warranty is stated to relate solely to an earlier date, in which case such representation or warranty shall be true and correct on and as of such earlier date. (iii) All legal matters incident to the making of such Advance shall be satisfactory to the Lenders and their counsel. Each Committed Borrowing Notice, Competitive Bid Quote Request and Competitive Bid Acceptance Notice with respect to each such Advance shall constitute a representation and warranty by the Borrower that the conditions contained in Sections 4.2(i) and (ii) have been satisfied. Page 37 ARTICLE V REPRESENTATIONS AND WARRANTIES ------------------------------ The Borrower represents and warrants to the Lenders that: 5.1. Corporate Existence and Standing. Each of the Borrower and its --------------------------------- Subsidiaries is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation and has all requisite authority to conduct its business in each jurisdiction in which its business is conducted, except where such failure to obtain all requisite authority would not, with respect to any individual failure or any failures in the aggregate, have a Material Adverse Effect. 5.2. Authorization and Validity. The Borrower has the corporate power and --------------------------- authority and legal right to execute and deliver the Loan Documents and to perform its obligations thereunder. The execution and delivery by the Borrower of the Loan Documents and the performance of its obligations thereunder have been duly authorized by proper corporate proceedings, and the Loan Documents constitute legal, valid and binding obligations of the Borrower enforceable against the Borrower in accordance with their terms, except as enforceability may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally and equitable limitations upon enforcement, whether by action for specific performance, injunctive relief or otherwise, of remedies or obligations enforceable in a court of equity and the discretion of the courts in granting or withholding equitable relief with respect to such enforcement. 5.3. No Conflict; Government Consent. Neither the execution and delivery -------------------------------- by the Borrower of the Loan Documents, nor the consummation of the transactions therein contemplated, nor compliance with the provisions thereof will violate any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on the Borrower or any of its Subsidiaries or the Borrower's or any Subsidiary's articles of incorporation or by-laws or the provisions of any material indenture, instrument or agreement to which the Borrower or any of its Subsidiaries is a party or is subject, or by which it, or its Property, is bound, or conflict with or constitute a default thereunder, or result in the creation or imposition of any Lien in, of or on the Property of the Borrower or a Subsidiary pursuant to the terms of any such indenture, instrument or agreement. No order, consent, approval, license, authorization, or validation of, or filing, recording or registration with, or exemption by, any Governmental Agency is required to authorize, or is required in connection with the execution, delivery and performance of, or the legality, validity, binding effect or enforceability of, any of the Loan Documents. Page 38 5.4. Financial Statements. The June 30, 1995 consolidated financial --------------------- statements of the Borrower and its Subsidiaries heretofore delivered to the Lenders were prepared in accordance with generally accepted accounting principles in effect on the date such statements were prepared and fairly present the consolidated financial condition and operations of the Borrower and its Subsidiaries at such date and the consolidated results of their operations for the period then ended. 5.5. Material Adverse Change. Since June 30, 1995, there has been no ------------------------ change in the business, Property, prospects, condition (financial or otherwise) or results of operations of the Borrower and its Subsidiaries which could reasonably be expected to have a Material Adverse Effect. 5.6. Taxes. The Borrower and its Subsidiaries have filed all United ------ States federal tax returns and all other tax returns which are required to be filed (after any available extensions) and have paid all taxes due pursuant to said returns or pursuant to any assessment received by the Borrower or any of its Subsidiaries, except (i) those which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves have been set aside, or (ii) where such failure would not, with respect to any individual failure or any failures in the aggregate, have a Material Adverse Effect. No claims are being asserted with respect to any such taxes, except where any claims, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. No tax liens in excess of $1,000,000, individually or in the aggregate, have been filed. 5.7. Litigation and Contingent Obligations. Except as set forth on ------------------------------------- Schedule "1" hereto, there is no litigation, arbitration, governmental investigation, proceeding or inquiry pending or, to the knowledge of any of their officers, threatened against or affecting the Borrower or any of its Subsidiaries which could reasonably be expected to have a Material Adverse Effect. Other than any liability incident to such litigation, arbitration or proceedings, the Borrower has no contingent obligations which could reasonably be expected to have a Material Adverse Effect, except as permitted pursuant to Section 6.14 hereof. 5.8. Subsidiaries. Form 10-K or 10-Q most recently filed by the Borrower ------------- with the Securities and Exchange Commission contains an accurate list of all of the "significant subsidiaries" (as defined in Rule 1-02 of Regulation S-X of the Securities and Exchange Commission) of the Borrower as of the date thereof. All of the issued and outstanding shares of capital stock of such Subsidiaries have been duly authorized and issued and are fully paid and non-assessable. 5.9. ERISA. The Unfunded Liabilities of all Single Employer Plans do not ------ in the aggregate exceed $30,000,000. Neither Page 39 the Borrower nor any other member of the Controlled Group has any Multiemployer Plan. Each Plan complies in all material respects with all applicable requirements of law and regulations. No Reportable Event which, individually or in the aggregate with other Reportable Events then existing, could reasonably be expected to have a Material Adverse Effect has occurred in connection with any Plan. Neither the Borrower nor any other member of the Controlled Group has withdrawn from any Plan or initiated steps to do so, and no steps have been taken to reorganize or terminate any Plan, except in each case where any such action would not reasonably be expected to have a Material Adverse Effect. 5.10. Accuracy of Information. No information, exhibit or report furnished ----------------------- by the Borrower or any of its Subsidiaries to the Agent or to any Lender in connection with the negotiation of, or compliance with, the Loan Documents contained any material misstatement of fact. 5.11. Regulation constitutes less than 25% of those assets of the Borrower ---------- and its Subsidiaries which are subject to any limitation on sale, pledge, or other restriction hereunder. 5.12. Material Agreements. Neither the Borrower nor any Subsidiary is a ------------------- party to any agreement or instrument or subject to any charter or other corporate restriction which could, if performed or complied with by the Borrower or any such Subsidiary, have a Material Adverse Effect. Neither the Borrower nor any Subsidiary is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in (i) any agreement to which it is a party, which default could reasonably be expected to have a Material Adverse Effect or (ii) any agreement or instrument evidencing or governing Indebtedness in excess of $25,000,000 individually or in the aggregate. 5.13. Compliance With Laws. The Borrower and its Subsidiaries have -------------------- complied with all applicable material statutes, rules, regulations, orders and restrictions of any domestic or foreign government or any instrumentality or agency thereof, having jurisdiction over the conduct of their respective businesses or the ownership of their respective Property, except where any individual noncompliance or any noncompliance in the aggregate would not reasonably be expected to have a Material Adverse Effect. Neither the Borrower nor any Subsidiary has received any notice to the effect that its operations are not in material compliance with any of the requirements of applicable federal, state and local environmental, health and safety statutes and regulations or the subject of any federal or state investigation evaluating whether any remedial action is needed to respond to a release of any toxic or hazardous waste or substance into the environment, which non-compliance or remedial action, individually or in the Page 40 aggregate, could reasonably be expected to have a Material Adverse Effect. 5.14. Investment Company Act. Neither the Borrower nor any Subsidiary ---------------------- thereof is an "investment company" or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. 5.15. Public Utility Holding Company Act. Neither the Borrower nor any ---------------------------------- Subsidiary is a "holding company" or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935, as amended. ARTICLE VI COVENANTS --------- During the term of this Agreement, unless the Required Lenders shall otherwise consent in writing: 6.1. Financial Reporting. The Borrower will maintain, for itself and ------------------- each Subsidiary, a system of accounting established and administered in accordance with generally accepted accounting principles, and furnish the following to the Agent (and the Agent shall furnish copies thereof to the Lenders): (i) Within 90 days after the close of each of its fiscal years, an unqualified (except for qualifications relating to changes in accounting principles or practices reflecting changes in generally accepted accounting principles and required or approved by the Borrower's independent certified public accountants) audit report certified by independent certified public accountants, reasonably selected by the Borrower, prepared in accordance with Agreement Accounting Principles on a consolidated basis for itself and the Subsidiaries, including balance sheets as of the end of such period, related profit and loss and reconciliation of surplus statements, and a statement of cash flows, accompanied by any management letter prepared by said accountants. (ii) Within 60 days after the close of each of the first three quarterly periods of each of its fiscal years, for itself and the Subsidiaries, consolidated unaudited balance sheets as at the close of each such period and consolidated profit and loss and reconciliation of surplus statements Page 41 and a consolidated statement of cash flows for the period from the beginning of such fiscal year to the end of such quarter, all certified by its chief financial officer or treasurer. (iii) Together with the financial statements required hereunder, a compliance certificate in substantially the form of Exhibit "F" hereto signed by its chief financial officer or treasurer showing the calculations necessary to determine compliance with this Agreement and stating that no Default or Unmatured Default exists, or if any Default or Unmatured Default exists, stating the nature and status thereof. (iv) As soon as possible and in any event within 21 days after the Borrower knows that any Reportable Event has occurred with respect to any Plan, a statement, signed by the chief financial officer of the Borrower, describing said Reportable Event and the action which the Borrower proposes to take with respect thereto. (v) As soon as possible and in any event within 21 days after receipt by the Borrower and reasonable determination by the Borrower that such notice or claim is subject to this Section 6.1(v), a copy of (a) 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 toxic or hazardous waste or substance into the environment, and (b) any notice alleging any violation of any federal, state or local environmental, health or safety law or regulation by the Borrower or any of its Subsidiaries, which, in either case, could reasonably be expected to have a Material Adverse Effect. (vi) Promptly upon the furnishing thereof to the shareholders of the Borrower, copies of all financial statements, reports and proxy statements so furnished. (vii) Promptly upon the filing thereof, copies of all registration statements and annual, quarterly, monthly or other regular reports which the Borrower or any of its Subsidiaries files with the Securities and Exchange Commission. (viii) Such other information (including non-financial information) as the Agent or any Lender may from time to time reasonably request. Page 42 6.2. Use of Proceeds. The Borrower will, and will cause each Subsidiary --------------- to, use the proceeds of the Advances for general corporate purposes, including commercial paper back-up, and to repay outstanding Advances. The Borrower will not, nor will it permit any Subsidiary to, use any of the proceeds of the Advances (x) to purchase or carry any "margin stock" (as defined in Regulation U) in violation of Regulation U, or (y) to make any Acquisition which has not been approved by the board of directors of the entity being acquired. 6.3. Notice of Default. The Borrower will give prompt notice in writing ----------------- to the Agent (and the Agent will promptly give a copy thereof to the Lenders) of the occurrence of any Default or Unmatured Default and of any other development, financial or otherwise, which could reasonably be expected to have a Material Adverse Effect. 6.4. Conduct of Business. The Borrower will, and will cause each ------------------- Subsidiary to, carry on and conduct its business in the achievement and affiliation recognition business as it is presently conducted and to do all things necessary to remain duly incorporated, validly existing and in good standing as a domestic corporation in its jurisdiction of incorporation and maintain all requisite authority to conduct its business in each jurisdiction in which its business is conducted, except where such failure to maintain all requisite authority would not, with respect to any individual failure or any failures in the aggregate, have a Material Adverse Effect. 6.5. Taxes. The Borrower will, and will cause each Subsidiary to, pay ----- when due all taxes, assessments and governmental charges and levies upon it or its income, profits or Property, except (i) those which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves have been set aside, or (ii) where such failure would not, with respect to any individual failure or any failures in the aggregate, have a Material Adverse Effect. 6.6. Insurance. The Borrower will, and will cause each Subsidiary to, --------- maintain with financially sound and reputable insurance companies insurance on all their Property in such amounts and covering such risks as is consistent with sound business practice. 6.7. Compliance with Laws. The Borrower will, and will cause each -------------------- Subsidiary to, comply with all material laws, rules, regulations, orders, writs, judgments, injunctions, decrees or awards to which it may be subject, except where any individual noncompliance or any noncompliance in the aggregate would not reasonably be expected to have a Material Adverse Effect. Page 43 6.8. Maintenance of Properties. The Borrower will, and will cause each ------------------------- Subsidiary to, do all things necessary to maintain, preserve, protect and keep its Property generally in good repair, working order and condition, and make all necessary and proper repairs, renewals and replacements so that its business carried on in connection therewith may be properly conducted at all times. 6.9. Inspection. The Borrower will, and will cause each Subsidiary to, ---------- permit the Agent, by its representatives and agents, and at the expense and reasonable request of the Required Lenders, to inspect any of the Property, corporate books and financial records of the Borrower and each Subsidiary, to examine and make copies of the books of accounts and other financial records of the Borrower and each Subsidiary, and to discuss the affairs, finances and accounts of the Borrower and each Subsidiary with, and to be advised as to the same by, their respective officers, all upon reasonable notice to the Borrower and at such reasonable times and intervals as the Agent may designate; provided, however, that upon the occurrence and during the continuance of a Default or Unmatured Default, the Agent and any of the Lenders may exercise any of the rights set forth in this Section 6.9, all at the Borrower's expense and at such times and intervals as the Agent and any such Lender may designate. 6.10. Borrower will not, nor will it permit any Subsidiary to, merge or consolidate with or into any other Person, except that: (i) any Subsidiary may merge with the Borrower or a Wholly-Owned Subsidiary provided that the Borrower or such Wholly-Owned Subsidiary is the continuing or surviving corporation; or (ii) the Borrower or any Wholly-Owned Subsidiary, as the case may be, may merge with another Person; provided that (x) the Borrower or such Wholly-Owned Subsidiary, as the case may be, is the continuing or surviving corporation; and (y) immediately after the consummation of the transaction, and after giving effect thereto, no Default or Unmatured Default exists. 6.11. Sale of Assets. The Borrower will not, nor will it permit any -------------- Subsidiary to, lease, sell or otherwise dispose of its Property, to any other Person except for (i) sales of inventory in the ordinary course of business and (ii) leases, sales or other dispositions of its Property that, together with all other Property of the Borrower and its Subsidiaries previously leased, sold or disposed of (other than inventory in the ordinary course of business) as permitted by this Section during the twelve-month period ending with the month in which any such lease, sale or other disposition occurs, do not constitute a Substantial Portion of the Property of the Borrower and its Subsidiaries. Page 44 6.12. Investments and Acquisitions. The Borrower will not, nor will it ---------------------------- permit any Subsidiary to, make or suffer to exist any Investments (including, without limitation, loans and advances to, and other Investments in, Subsidiaries), or commitments therefor, or to make any Acquisition of any Person, except: (i) Investments made in accordance with the Investment Guidelines. (ii) Commission, travel and similar advances made by the Borrower or any Subsidiary to its officers, employees and independent sales representatives in the ordinary course of business. (iii) Existing Investments in Subsidiaries and other Investments in existence on the date hereof and described in Schedule "2" hereto. (iv) Acquisitions of Persons organized in the United States; provided that (x) any such Acquisition has been approved by the board of directors of the Person being acquired, and (y) prior to the consummation of any such Acquisition having a purchase price in excess of $150,000,000, the Borrower furnishes to the Agent and the Lenders pro forma financial statements, in form and substance --- ----- satisfactory to the Required Lenders, demonstrating that immediately after the consummation of any such Acquisition, there shall be no Default or Unmatured Default. (v) Acquisitions of Persons organized outside of the United States; provided that (x) such Acquisition has been approved by the board of directors of the Person being acquired, and (y) prior to the consummation of any such Acquisition having a purchase price in excess of $50,000,000, the Borrower furnishes to the Agent and the Lenders pro forma financial statements, in form and substance --- ----- satisfactory to the Required Lenders, demonstrating that immediately after the consummation of any such Acquisition, there shall be no Default or Unmatured Default. (vi) Investments in Wholly-Owned Subsidiaries. (vii) Investments in Subsidiaries (other than Wholly-Owned Subsidiaries) in an aggregate amount not to exceed 20% of Consolidated Assets at any one time outstanding. (viii) In addition to the foregoing, Investments in an aggregate amount not to exceed 10% of Consolidated Assets at any one time outstanding. Page 45 6.13. Subsidiary Indebtedness. The Borrower will not permit any ----------------------- Subsidiary to create, incur or suffer to exist any Indebtedness, except: (i) Indebtedness existing on the date hereof and described in Schedule "3" hereto. (ii) Indebtedness owing to their independent sales representatives in connection with commissions to be paid to such representatives in the ordinary course of business. (iii) Indebtedness incurred in connection with Investments permitted under Section 6.12(vi), (vii) or (viii). (iv) Contingent Obligations permitted under Section 6.14 hereof. (v) Indebtedness owing to the Borrower or any Wholly-Owned Subsidiary. (vi) In addition to the foregoing, Indebtedness in an aggregate principal amount not to exceed 10% of Consolidated Assets at any one time outstanding. 6.14. Contingent Obligations. The Borrower will not, nor will it permit ---------------------- any Subsidiary to, make or suffer to exist any Contingent Obligation (including, without limitation, any Contingent Obligation with respect to the obligations of a Subsidiary), except: (i) Contingent Obligations existing on the date hereof and described in Schedule "3" hereto. (ii) By endorsement of instruments for deposit or collection in the ordinary course of business. (iii) Contingent Obligations incurred by the Borrower or any Subsidiary in connection with the intercompany Indebtedness of the Borrower or any Wholly-Owned Subsidiary. (iv) In addition to the foregoing, Contingent Obligations of the Borrower and its Subsidiaries not exceeding $50,000,000 in the aggregate at any one time outstanding. 6.15. Liens. The Borrower will not, nor will it permit any Subsidiary to, ----- create, incur, or suffer to exist any Lien in, of or on the Property of the Borrower or any of its Subsidiaries, except: Page 46 (i) Liens for taxes, assessments or governmental charges or levies on its Property if the same shall not at the time be delinquent or thereafter can be paid without penalty, or are being contested in good faith and by appropriate proceedings and for which adequate reserves in accordance with generally accepted accounting principles shall have been set aside on its books. (ii) Liens imposed by law such as carriers', warehousemen's and mechanics' liens and other similar liens arising in the ordinary course of business which secure payment of obligations not more than 60 days past due or which are being contested in good faith by appropriate proceedings and for which adequate reserves shall have been set aside on its books. (iii) Liens arising out of pledges or deposits under worker's compensation laws, unemployment insurance, old age pensions, or other social security or retirement benefits, or similar legislation (except ERISA). (iv) Utility easements, building restrictions and such other encumbrances or charges against real property as are of a nature generally existing with respect to properties of a similar character and which do not in any material way affect the marketability of the same or interfere with the use thereof in the business of the Borrower or the Subsidiaries. (v) Liens existing on the date hereof and described in Schedule "3" hereto. (vi) Liens of or resulting from any judgments or awards in an amount not exceeding $10,000,000 in the aggregate, the time for the appeal or petition for rehearing of which shall not have expired, or in respect of which the Borrower or such Subsidiary is prosecuting an appeal or proceeding for review. (vii) Liens arising in the ordinary course of business in connection with obligations that are not overdue or which are being contested in good faith and by appropriate proceedings, including, but not limited to, Liens under bid, performance and other surety bonds, supersedeas and appeal bonds, Liens on advance or progress payments received from customers under contracts for the sale, lease or license of goods, software or services and upon the products being sold or licensed, in each case securing performance of the underlying contract or the repayment of such advances in the event final acceptance or performance under such contracts does not occur; and Page 47 Liens upon funds collected temporarily from others pending payment or remittance on their behalf. (viii) Purchase money security interests on any Property acquired or held by the Borrower or its Subsidiaries in the ordinary course of business, securing Indebtedness incurred or assumed for the purpose of financing all or any part of the cost of acquiring such Property; provided that (i) any such Lien attaches to such Property concurrently with or within 20 days after the acquisition thereof, (ii) such Lien attaches solely to the Property so acquired in such transaction, and (iii) the principal amount of the Indebtedness secured thereby does not exceed 100% of the cost of such Property. (ix) Liens arising solely by virtue of any statutory or common law provision relating to bankers' liens, rights of set-off or similar rights and remedies as to deposit accounts or other funds maintained with a creditor depository institution. (x) Any Lien on any asset acquired by the Borrower or any of its Subsidiaries, which Lien existed at the time such asset was acquired by the Borrower or any of its Subsidiaries or is merged into or consolidated with the Borrower or any of its Subsidiaries and not created in contemplation of such event, and any extension, renewal or replacement Lien (any "Replacement Lien") arising out of the extension, renewal or replacement of the related Indebtedness secured by such Lien; provided that (x) the aggregate unpaid principal amount of Indebtedness which is secured pursuant to this clause (x) after any such extension, renewal or replacement shall be no greater than the aggregate unpaid principal amount of such Indebtedness secured pursuant to this clause (x) immediately preceding such extension, renewal or replacement, and (y) any such Replacement Lien shall attach solely to the Property which was subject to a Lien immediately preceding such extension, renewal or replacement. (xi) In addition to the foregoing, Liens securing Indebtedness of the Borrower and its Subsidiaries in an aggregate principal amount not exceeding $30,000,000 at any one time outstanding. 6.16. Interest Coverage Ratio. The Borrower shall maintain, as at the ----------------------- last day of each fiscal quarter of the Borrower, an Interest Coverage Ratio for such fiscal quarter and the three immediately preceding fiscal quarters, of not less than 3.0:1.0. Page 48 6.17. Net Worth. The Borrower shall maintain at all times Net Worth of not --------- less than $80,000,000. 6.18. Affiliates. The Borrower will not, and will not permit any ---------- Subsidiary to, enter into any transaction (including, without limitation, the purchase or sale of any Property or service) with, or make any payment or transfer to, any Affiliate (except for any Wholly-Owned Subsidiary) except in the ordinary course of business and pursuant to the reasonable requirements of the Borrower's or such Subsidiary's business and upon fair and reasonable terms no less favorable to the Borrower or such Subsidiary than the Borrower or such Subsidiary would obtain in a comparable arms-length transaction. ARTICLE VII DEFAULTS -------- The occurrence of any one or more of the following events shall constitute a Default: 7.1. Any representation or warranty made or deemed made by or on behalf of the Borrower or any of its Subsidiaries to the Lenders or the Agent under or in connection with this Agreement, any Loan, or any certificate or information delivered in connection with this Agreement or any other Loan Document shall be materially false on the date as of which made. 7.2. Nonpayment of principal of any Note when due, or nonpayment of interest upon any Note or of any fee or other Obligations under any of the Loan Documents within five days after the same becomes due. 7.3. The breach by the Borrower of any of the terms or provisions of Section 6.2 and Sections 6.10 through and including 6.18. 7.4. The breach by the Borrower (other than a breach which constitutes a Default under Section 7.1, 7.2 or 7.3) of any of the terms or provisions of this Agreement which is not remedied within thirty days after written notice from the Agent or any Lender. 7.5. Failure of the Borrower or any of its Subsidiaries to pay any Indebtedness in excess of $25,000,000 individually or in the aggregate when due; or the default by the Borrower or any of its Subsidiaries in the performance of any term, provision or condition contained in any agreement under which any Indebtedness in excess of $25,000,000 individually or in the aggregate was created or is governed, or any other event shall occur or condition Page 49 exist, and continue after any applicable notice or grace period has expired, the effect of which is to cause, or to permit the holder or holders of such Indebtedness to cause, such Indebtedness to become due prior to its stated maturity; or any Indebtedness of the Borrower or any of its Subsidiaries in excess of $25,000,000 individually or in the aggregate shall be declared to be due and payable or required to be prepaid (other than by a regularly scheduled payment) prior to the stated maturity thereof; or the Borrower or any of its Subsidiaries shall not pay, or admit in writing its inability to pay, its debts generally as they become due; provided that, notwithstanding anything to the contrary in this Section 7.5, the failure of the Borrower or any of its Subsidiaries to pay obligations on commercial paper issued by any of them when due, arising solely out of the inability of any of them to rollover or issue replacement commercial paper on the maturity date and the inability of the Borrower to borrow hereunder solely because of time and notice limitations on such date shall not be deemed a Default under this Section 7.5, so long as the Borrower or any such Subsidiary is able to cure any default under such commercial paper on the next day by a rollover or issue of replacement commercial paper on the next day or is able to pay such obligations on the next day (including, without limitation, with proceeds of the Loans hereunder so long as all of the conditions set forth in Section 4.2 hereof shall have been satisfied). 7.6. The Borrower or any of its Subsidiaries shall (i) have an order for relief entered with respect to it under the Federal bankruptcy laws as now or hereafter in effect, (ii) make an assignment for the benefit of creditors, (iii) apply for, seek, consent to, or acquiesce in, the appointment of a receiver, custodian, trustee, examiner, liquidator or similar official for it or any Substantial Portion of its Property, (iv) institute any proceeding seeking an order for relief under the Federal bankruptcy laws as now or hereafter in effect or seeking to adjudicate it a bankrupt or insolvent, or seeking dissolution, winding up, liquidation, reorganization, arrangement, adjustment or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors or fail to file an answer or other pleading denying the material allegations of any such proceeding filed against it, (v) take any corporate action to authorize or effect any of the foregoing actions set forth in this Section 7.6 or (vi) fail to contest in good faith any appointment or proceeding described in Section 7.7. 7.7. Without the application, approval or consent of the Borrower or any of its Subsidiaries, a receiver, trustee, examiner, liquidator or similar official shall be appointed for the Borrower or any of its Subsidiaries or any Substantial Portion of its Property, or a proceeding described in Section 7.6(iv) shall be instituted against the Borrower or any of its Subsidiaries and such appointment continues undischarged or such proceeding continues undismissed or unstayed for a period of 45 consecutive days. Page 50 7.8. Any court or Governmental Agency shall condemn, seize or otherwise appropriate, or take custody or control of (each a "Condemnation"), all or any portion of the Property of the Borrower and its Subsidiaries which, when taken together with all other Property of the Borrower and its Subsidiaries so condemned, seized, appropriated, or taken custody or control of, during the twelve-month period ending with the month in which any such Condemnation occurs, constitutes a Substantial Portion. 7.9. The Borrower or any of its Subsidiaries shall fail within 30 days to pay, bond or otherwise discharge any judgment or order for the payment of money in excess of $10,000,000, which is not stayed on appeal or otherwise being appropriately contested in good faith. 7.10. The Unfunded Liabilities of all Single Employer Plans shall exceed in the aggregate $30,000,000. 7.11. Any Reportable Event which, individually or in the aggregate with other Reportable Events then existing, could reasonably be expected to have a Material Adverse Effect shall occur in connection with any Plan. 7.12. The Borrower or any of its Subsidiaries shall be the subject of any proceeding or investigation pertaining to the release by the Borrower or any of its Subsidiaries, or any other Person of any toxic or hazardous waste or substance into the environment, or any violation of any federal, state or local environmental, health or safety law or regulation, which, in either case, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. 7.13. Any Change in Control shall occur. ARTICLE VIII ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES ---------------------------------------------- 8.1. Acceleration. If any Default described in Section 7.6 or 7.7 occurs ------------ with respect to the Borrower, the obligations of the Lenders to make Loans 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 and is continuing, the Required Lenders may terminate or suspend the obligations of the Lenders to make Loans hereunder, or declare the Obligations to be due and payable, or both, whereupon the Obligations shall become immediately due and payable, or both, all without presentment, Page 51 demand, protest or notice of any kind, all of which the Borrower hereby expressly waives. If, within fourteen (14) days after acceleration of the maturity of the Obligations or termination or suspension of the obligations of the Lenders to make Loans hereunder as a result of any Default (other than any Default as described in Section 7.6 or 7.7 with respect to the Borrower) and before any judgment or decree for the payment of the Obligations due shall have been obtained or entered, the Required Lenders (in their sole discretion) shall so direct, the Agent shall, by notice to the Borrower, rescind and annul such acceleration and/or termination (or suspension). 8.2. Amendments. Subject to the provisions of this Article VIII, the ---------- Required Lenders (or the Agent with the consent in writing of the Required Lenders) and the Borrower may enter into agreements supplemental hereto for the purpose of adding or modifying any provisions to the Loan Documents or changing in any manner the rights of the Lenders or the Borrower hereunder or waiving any Default hereunder; provided, however, that no such supplemental agreement shall, without the consent of each Lender affected thereby: (i) Extend the maturity of any Loan or Note or forgive all or any portion of the principal amount thereof, or reduce the rate or extend the time of payment of interest or fees thereon. (ii) Reduce the percentage specified in the definition of Required Lenders. (iii) Extend the Termination Date, or increase the amount of the Commitment of any Lender hereunder, or permit the Borrower to assign its rights under this Agreement. (iv) Amend this Section 8.2. No amendment of any provision of this Agreement relating to the Agent shall be effective without the written consent of the Agent. The Agent may waive payment of the fee required under Section 12.3.2 without obtaining the consent of any other party to this Agreement. 8.3. 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 Default or an acquiescence therein, and the making of a Loan notwithstanding the existence of a Default or the inability of the Borrower to satisfy the conditions precedent to such Loan 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, Page 52 amendment or other variation of the terms, conditions or provisions of the Loan Documents whatsoever shall be valid unless in writing signed by the Lenders required pursuant to Section 8.2 (or the Agent with the consent in writing of such Lenders), 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 IX GENERAL PROVISIONS ------------------ 9.1. 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. 9.2. 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. 9.3. Taxes. Any taxes (excluding federal income taxes on the overall net ----- income of any Lender) or other similar assessments or charges made by any governmental or revenue authority in respect of the Loan Documents shall be paid by the Borrower, together with interest and penalties, if any. 9.4. 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. 9.5. Entire Agreement. The Loan Documents and the Letter Agreement referred ---------------- to in Section 2.6.2 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. 9.6. 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 (except to the extent to which the 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 Page 53 parties to this Agreement and their respective successors and assigns. 9.7. Expenses; Indemnification. ------------------------- (i) Subject to the Letter Agreement, dated November 16, 1995, between the Borrower and the Agent, the Borrower shall reimburse the Agent for any costs, internal charges and out-of-pocket expenses (including attorneys' fees and time charges of attorneys for the Agent, which attorneys may be employees of the Agent) paid or incurred by the Agent in connection with the preparation, negotiation, execution, delivery, review, amendment, modification, and administration of the Loan Documents. The Borrower also agrees to reimburse the Agent and the Lenders for any costs, internal charges and out-of-pocket expenses (including attorneys' fees and time charges of attorneys for the Agent and the Lenders, which attorneys may be employees of the Agent or the Lenders) paid or incurred by the Agent or any Lender in connection with the collection and enforcement of the Loan Documents. The Borrower further agrees to indemnify the Agent and each Lender and their respective directors, officers and employees (each an "Indemnified Party") against all losses, claims, damages, penalties, judgments, liabilities and expenses (including, without limitation, all expenses of litigation or preparation therefor whether or not the Agent or any Lender is a party thereto) which any Indemnified Party may pay or incur arising out of or relating to this Agreement, the other Loan Documents, the transactions contemplated hereby or the direct or indirect application or proposed application of the proceeds of any Loan hereunder, except that any such Indemnified Party shall not be indemnified for any such losses, claims, damages, penalties, judgments, liabilities and expenses to the extent that they arise from the gross negligence or willful misconduct of such Indemnified Party. The obligations of the Borrower under this Section shall survive the termination of this Agreement. (ii) The obligations and liabilities of the Borrower with respect to claims resulting from the assertion of liability by third parties shall be subject to the following terms and conditions: (a) Each Indemnified Party agrees to give prompt written notice thereof to the Borrower of any claim based on this Section 9.7, stating the nature and basis of said claim and the amount thereof, to the extent known. (b) In the event such Indemnified Party shall notify the Borrower of any claim pursuant to subsection (a) hereof, the Borrower shall have the right to elect to defend such claim (including all actions, suits, proceedings and all proceedings on appeal or for review which counsel deems appropriate), with counsel reasonably satisfactory to Page 54 such Indemnified Party, by written notice to such Indemnified Party within 30 days after receipt of such notice. The Indemnified Party may retain its own counsel on such matter, at its own expense, to consult or otherwise represent its interests. The Indemnified Party shall make available to the Borrower and its attorneys and accountants all books and records of the Indemnified Party relating to such proceedings or litigation, and the parties hereto agree to render to each other such assistance as they may reasonably require of each other in order to ensure the proper and adequate defense of any such action, suit or proceeding. (c) So long as the Borrower is defending in good faith any such claim, the Indemnified Party shall not compromise or settle such claim, without written consent of the Borrower. 9.8. 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. 9.9. 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. 9.10. 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. 9.11. Nonliability of Lenders. The relationship between the Borrower and ----------------------- the Lenders and the Agent shall be solely that of borrower and lender. Neither the Agent nor any Lender shall have any fiduciary responsibilities to the Borrower under the Loan Documents. Neither the 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. 9.12. CHOICE OF LAW. THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A ------------- CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF ILLINOIS, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS. Page 55 9.13. CONSENT TO JURISDICTION. THE BORROWER HEREBY IRREVOCABLY SUBMITS TO ----------------------- THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR ILLINOIS STATE COURT SITTING IN CHICAGO IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENTS AND THE BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. ANY JUDICIAL PROCEEDING BY THE BORROWER AGAINST THE AGENT OR ANY LENDER OR ANY AFFILIATE OF THE AGENT OR ANY LENDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN CHICAGO, ILLINOIS. 9.14. WAIVER OF JURY TRIAL. THE BORROWER, THE AGENT AND EACH LENDER HEREBY -------------------- WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER. 9.15. Confidentiality. Each Lender agrees to hold any confidential --------------- information which it may receive from the Borrower pursuant to this Agreement in confidence, except for disclosure (i) to other Lenders and their respective Lender Affiliates, (ii) to legal counsel, accountants, and other professional advisors to such Lender or to a Transferee, (iii) to regulatory officials, (iv) to any Person as required by law, regulation, or legal process, (v) to any Person in connection with any legal proceeding to which such Lender is a party, provided that such Lender gives the Borrower reasonable notice to allow the Borrower to object to such Lender or such Person regarding such disclosure (so long as such Lender is not prohibited from giving such notice), and (vi) permitted by Section 12.4. ARTICLE X THE AGENT --------- 10.1. Appointment. The First National Bank of Chicago is hereby appointed ----------- Agent hereunder and under each other Loan Document, and each of the Lenders irrevocably authorizes the Agent to act as the agent of such Lender. The Agent agrees to act as such upon the express conditions contained in this Article X. The Agent shall not have a fiduciary relationship in respect of the Borrower or any Lender by reason of this Agreement. 10.2. Powers. The Agent shall have and may exercise such powers under the ------ Loan Documents as are specifically delegated to Page 56 the Agent by the terms of each thereof, together with such powers as are reasonably incidental thereto. The Agent shall have no implied duties to the Lenders, or any obligation to the Lenders to take any action thereunder except any action specifically provided by the Loan Documents to be taken by the Agent. 10.3. 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 for its or their own gross negligence or willful misconduct. 10.4. No Responsibility for Loans, 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, including, without limitation, any agreement by an obligor to furnish information directly to each Lender; (iii) the satisfaction of any condition specified in Article IV, except receipt of items required to be delivered to the Agent; (iv) the validity, effectiveness or genuineness of any Loan Document or any other instrument or writing furnished in connection therewith; or (v) the value, sufficiency, creation, perfection or priority of any interest in any collateral security. The Agent shall have no duty to disclose to the Lenders information that is not required to be furnished by the Borrower to the Agent at such time, but is voluntarily furnished by the Borrower to the Agent (either in its capacity as Agent or in its individual capacity). 10.5. Action on Instructions of Lenders. 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 Lenders (or, when expressly required hereunder or under any other Loan Document, all the Lenders), and such instructions and any action taken or failure to act pursuant thereto shall be binding on all of the Lenders and on all holders of Notes. 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 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. 10.6. Employment of Agents and Counsel. The Agent may execute any of its -------------------------------- duties as 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 Page 57 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 all matters pertaining to the agency hereby created and its duties hereunder and under any other Loan Document. 10.7. 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. 10.8. Agent's Reimbursement and Indemnification. The Lenders agree to ----------------------------------------- reimburse and indemnify the Agent ratably in proportion to their respective Commitments (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 or of any such other documents, provided that no Lender shall be liable for any of the foregoing to the extent they arise from the gross negligence or willful misconduct of the Agent. The obligations of the Lenders under this Section 10.8 shall survive payment of the Obligations and termination of this Agreement. 10.9. Rights as a Lender. In the event the Agent is a Lender, the Agent ------------------ shall have the same rights and powers hereunder and under any other Loan Document as any Lender and may exercise the same as though it were not the Agent, and the term "Lender" or "Lenders" shall, at any time when the Agent is a Lender, 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 the Borrower or such Subsidiary is not restricted hereby from engaging with any other Person. The Agent, in its individual capacity, is not obligated to remain a Lender. 10.10. Lender Credit Decision. Each Lender acknowledges that it has, ---------------------- independently and without reliance upon the Agent or any other Lender and based on the financial statements prepared by Page 58 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 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. 10.11. Successor Agent. The Agent may resign at any time by giving written --------------- notice thereof to the Lenders and the Borrower, such resignation to be effective upon the appointment of a successor Agent or, if no successor Agent has been appointed, forty-five days after the retiring Agent gives notice of its intention to resign. Upon any such resignation and so long as no Default or Unmatured Default has occurred and is continuing, the Borrower shall have the right to appoint, on behalf of the Borrower and the Lenders, a successor Agent; provided, however, that such successor Agent shall be approved by the Required Lenders (with such approval not to be unreasonably withheld). If a Default or Unmatured Default has occurred and is continuing, such successor Agent shall be appointed, on behalf of the Borrower and the Lenders, by the Required Lenders. If no successor Agent shall have been appointed pursuant to the immediately preceding two sentences within thirty days after the resigning Agent's giving notice of its intention to resign, then the resigning Agent may appoint, on behalf of the Borrower and the Lenders, a successor Agent. If the Agent has resigned and no successor Agent has been appointed, the Lenders may perform all the duties of the Agent hereunder and the Borrower shall make all payments in respect of the Obligations to the applicable Lenders and for all other purposes shall deal directly with the Lenders. In addition to the foregoing, so long as no Default or Unmatured Default has occurred and is continuing, the Borrower shall have the right to replace the Agent; provided, however, that such successor Agent shall be approved by the Required Lenders (with such approval not to be unreasonably withheld. No successor Agent shall be deemed to be appointed hereunder until such successor Agent has accepted the appointment. Any such successor Agent shall be a commercial bank having capital and retained earnings of at least $250,000,000. Upon the acceptance of any appointment as Agent hereunder 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. Upon the effectiveness of the resignation or replacement of the Agent, the resigning or replaced Agent shall be discharged from its duties and obligations hereunder and under the Loan Documents. After the effectiveness of the resignation or replacement of the Agent, the provisions of this Article X shall continue in effect for the benefit of such Agent in respect of any actions taken or omitted to be taken by it while it was acting as the Agent hereunder and under the other Loan Documents. Page 59 ARTICLE XI SETOFF; RATABLE PAYMENTS ------------------------ 11.1. Setoff. In addition to, and without limitation of, any rights of the ------ Lenders under applicable law, if the Borrower becomes insolvent and for so long as the Borrower is insolvent, however evidenced, or any Default occurs and is continuing, any and all deposits (including all account balances, whether provisional or final and whether or not collected or available) and any other Indebtedness at any time held or owing by any Lender to or for the credit or account of the Borrower 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. 11.2. 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 3.1, 3.2 or 3.4) 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 Obligations or such amounts which may be subject to setoff, such Lender agrees, promptly upon demand, to take such action necessary such that all Lenders share in the benefits of such collateral ratably in proportion to their Loans. In case any such payment is disturbed by legal process, or otherwise, appropriate further adjustments shall be made. ARTICLE XII BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS ------------------------------------------------- 12.1. Successors and Assigns. The terms and provisions of the Loan ---------------------- Documents shall be binding upon and inure to the benefit of the Borrower 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 12.3. Notwithstanding clause (ii) of this Section, 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 12.3 in the case of an assignment Page 60 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. 12.2. Participations. -------------- 12.2.1 Permitted Participants; Effect. Any Lender 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 ("Participants") participating interests in any Loan owing to such Lender, any Note held by such Lender, the Commitment of such Lender or any other interest of such Lender under the Loan Documents. 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. 12.2.2. 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. 12.3. Assignments. ----------- 12.3.1. Permitted Assignments. Any Lender may, in the ordinary --------------------- course of its business and in accordance with applicable law, at any time assign to one or more banks or other entities ("Purchasers") all or any part, in a minimum amount of $10,000,000, of its rights and obligations under the Loan Documents. Such assignment shall be substantially in the form of Exhibit "H" hereto or in such other form as may be agreed to by the parties thereto. The consent of the Borrower and the Agent shall be required prior to an assignment becoming effective with respect to a Purchaser which is not a Lender or a Lender Affiliate. 12.3.2. Effect; Effective Date. Upon (i) delivery to the Agent of a ---------------------- notice of assignment, substantially in the form Page 61 attached as Exhibit "I" to Exhibit "H" hereto (a "Notice of Assignment"), together with any consents required by Section 12.3.1, and (ii) payment of a $3,000 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 and Loans 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 shall for all purposes be a Lender party to this Agreement and any other Loan Document 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 Commitment and Loans assigned to such Purchaser. Upon the consummation of any assignment to a Purchaser pursuant to this Section 12.3.2, 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 Commitment, as adjusted pursuant to such assignment. 12.4. Dissemination of Information. The Borrower authorizes each Lender to ----------------------------- disclose to any 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 creditworthiness of the Borrower and its Subsidiaries; provided that each Transferee and prospective Transferee agrees to be bound by Section 9.15 of this Agreement. 12.5. Tax Treatment. If any interest in any Loan Document is transferred ------------- to any Transferee which is organized under the laws of any jurisdiction other than the United States or any State thereof, the transferor Lender shall cause such Transferee, concurrently with the effectiveness of such transfer, to comply with the provisions of Section 2.16. ARTICLE XIII NOTICES ------- 13.1. Giving Notice. Except as otherwise permitted by Section 2.11 with ------------- respect to borrowing notices, all notices and Page 62 other communications provided to any party hereto under this Agreement or any other Loan Document 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). 13.2. 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 XIV 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, facsimile, or telephone, that it has taken such action. IN WITNESS WHEREOF, the Borrower, the Lenders and the Agent have executed this Agreement as of the date first above written. JOSTENS, INC. By: /s/ Trudy A. Ratio ------------------ Print Name: Trudy A. Rautio --------------- Title: Sr. VP & CFO By: /s/ Lee U. McGrath ------------------ Print Name: Lee U. McGrath -------------- Title: VP & Treasurer 5501 Norman Center Drive Minneapolis, Minnesota 55437 Attn: Lee U. McGrath Treasurer Tel: (612) 830-3261 Fax: (612) 830-3293 Page 63 Commitment $30,000,000 THE FIRST NATIONAL BANK OF CHICAGO, Individually and as Agent By: /s/ Michael W. McCorkle -------------------------- Print Name: Michael W. McCorkle ------------------- Title: Authorized Agent One First National Plaza Chicago, Illinois 60670 Attn: Michael W. McCorkle Vice President/ Senior Banker Tel: (312) 732-3568 Fax: (312) 732-1712 Page 64 Commitment - ---------- $30,000,000 CREDIT SUISSE By: /s/ Jan Kofol ------------- Print Name: Jan Kofol --------- Title: Member of Senior Management By: /s/ Kristinn R. Kristinsson ----------------------------- Print Name: Kristinn R. Kristinsson ----------------------- Title: Associate 227 West Monroe Street 40th Floor Chicago, Illinois 60606 Attn: Tracy Toulouse Member of Senior Management Tel: (312) 630-0086 Fax: (312) 630-0359 Page 65 Commitment - ---------- $30,000,000 MORGAN GUARANTY TRUST COMPANY OF NEW YORK By: /s/ Elizabeth R. Gile --------------------- Print Name: Elizabeth R. Gile ----------------- Title: Vice President 60 Wall Street 22nd Floor New York, New York 10260-0060 Attn: Corporate Banking North America 1 Tel: (212) 648-6744 Fax: (212) 648-5336 Page 66 Commitment - ---------- $30,000,000 NORWEST BANK MINNESOTA N.A. By: /s/ Janet M. Klein ------------------ Print Name: Janet M. Klein -------------- Title: Assistant Vice President 6th and Marquette Minneapolis, Minnesota 55479-0085 Attn: Janet Klein Assistant Vice President Tel: (612) 667-3437 Fax: (612) 667-4145 Page 67 Commitment - ---------- $30,000,000 ROYAL BANK OF CANADA By: /s/ Preston D. Jones -------------------- Print Name: Preston D. Jones ---------------- Title: Senior Manager, Corporate Banking Grand Cayman (North America No. 1) Branch c/o New York Branch Financial Square, 23rd Floor New York, New York 10005-3531 Attn: Manager, Credit Administration Tel: (212) 428-6311 Fax: (212) 428-2372 Page 68 EX-10.2 4 ADMENDMENT TO CREDIT AGREEMENT Exhibit 10.2 AMENDMENT TO CREDIT AGREEMENT THIS AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), dated as of July 14, 1997, is among Jostens, Inc., a Minnesota corporation (the "Borrower"), the Lenders and The First National Bank of Chicago, as agent for the Lenders (the "Agent"). W I T N E S S E T H : WHEREAS, the Borrower, the Lenders and the Agent entered into that certain Credit Agreement dated as of December 20, 1995 (as amended or otherwise modified to date, the "Credit Agreement"); WHEREAS, the parties desire to increase the size of the credit facility provided under the Credit Agreement; and WHEREAS, the parties desire to make certain changes to the other terms and provisions of the Credit Agreement as more fully described hereinafter; NOW, THEREFORE, in consideration of the premises herein contained, and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto hereby agree as follows: 1. Defined Terms. Capitalized terms used herein and not otherwise defined ------------- shall have the meanings attributed to such terms in the Credit Agreement. 2. Amendments to the Credit Agreement. Effective upon the satisfaction of ---------------------------------- the conditions precedent set forth in Section 4 hereof: (a) Article I of the Credit Agreement is hereby amended to delete the definitions of "Level I", "Level II", "Level III", "Level IV" and "Long Term Debt Rating". (b) The Aggregate Commitment is increased to $180,000,000 in accordance with Section 2.17 of the Credit Agreement. (c) Section 2.3.4 of the Credit Agreement is hereby amended and restated to read in its entirety as follows: 2.3.4 Applicable Margin. ----------------- (a) The Applicable Margin for Eurocurrency Committed Advances and for facility fees payable pursuant to Section 2.6.1 hereunder shall be subject to adjustment (upwards or downwards, as appropriate) based on the applicable Level and shall be determined in accordance with the table set forth below in this Section 2.3.4(a). The Level shall be based on the applicable Commercial Paper Rating. The Applicable Margin shall be adjusted on the earlier of the date of announcement or the date of publication by the respective rating agencies of a change in the Commercial Paper Rating or, in the absence of such announcement or publication, on the effective date of such changed Commercial Paper Rating (the "Adjustment Date"), and shall apply to all outstanding Eurocurrency Committed Advances and the facility fees from and after such Adjustment Date to the next Adjustment Date. Applicable Margin (basis points per annum) ------------------------ Eurocurrency Rating Committed Advances Facility Fees ------- ------------------ ------------- Level A 12.5 b.p. 7.5 b.p. Level B 20.0 b.p. 10.0 b.p. Level C 25.0 b.p. 15.0 b.p. (b) For purposes of Section 2.3.4(a) of this Agreement, the applicable Level shall be determined in accordance with the following definitions: "Commercial Paper Rating" means the then most recent rating assigned by Standard & Poor's or Moody's to the Borrower's commercial paper. "Level A" means the level applicable at any time when the Borrower's Commercial Paper Rating is at least A1 or better from Standard & Poor's or -- at least P1 from Moody's. "Level B" means the level applicable at any time when the Borrower's Commercial Paper Rating is A2 from Standard & Poor's and P2 from Moody's. --- "Level C" means the level applicable at any time when Level B does not apply and the Borrower's Commercial Paper Rating is A2 or below from Standard & Poor's or P2 or below from Moody's. -- (d) Section 2.17(f) of the Credit Agreement is hereby amended by deleting clause (i) thereof in its entirety. (e) Section 6.17 of the Credit Agreement is hereby amended and restated to read in its entirety as follows: 6.17 Leverage Ratio. The Borrower shall maintain, as at the last day -------------- of each fiscal quarter of the Borrower, a Leverage Ratio of not more than 3.0:1.0. For purposes of this section, the term "Leverage Ratio" means the ratio of (i) total Indebtedness at any time of determination to (ii) earnings before Interest Expense, taxes, depreciation and amortization, for such fiscal quarter and three immediately preceding fiscal quarters, all as determined for the Borrower and its Subsidiaries on a consolidated basis in accordance with Agreement Accounting Principles consistently applied. 2 (f) Schedule I of the Compliance Certificate attached as Exhibit F to the Credit Agreement is hereby replaced by Schedule I hereto. 3. Representations and Warranties. The Borrower hereby confirms, ------------------------------ reaffirms and restates as of the Effective Date (as defined in Section 4 of this Amendment) the representations and warranties set forth in Article V of the Credit Agreement, except as such representations and warranties by their terms are made as of a prior date. A Default under and as defined in the Credit Agreement as amended by this Amendment shall be deemed to have occurred if any representation or warranty made pursuant to the foregoing sentence of this Section 3 shall be materially false as of the date on which made. 4. Conditions Precedent. This Amendment and the amendments provided for -------------------- herein shall become effective on and as of the date first above written (the "Effective Date") provided that all of the following conditions precedent shall have been satisfied: (a) This Amendment shall have been duly executed and delivered by the Borrower, each of the Lenders and the Agent. (b) Commitment Increase Letters shall have been executed by the Borrower, each of the Lenders and the Agent. (c) The Agent shall have received (i) a certified copy of resolutions of the Board of Directors of Borrower authorizing the execution and delivery of this Amendment by Borrower and (ii) new promissory notes for each Lender in the form of Exhibit A to the Agreement, as amended hereby, executed by the Borrower. (d) The Agent shall have received a written opinion of the Borrower's counsel with respect to this Amendment in form and substance acceptable to the Agent. (e) No Default or Unmatured Default shall have occurred and be continuing. 5. Effect on the Credit Agreement. Except as expressly amended hereby, ------------------------------ all of the representations, warranties, terms, covenants and conditions of the Credit Agreement and the other Loan Documents (a) shall remain unaltered, (b) shall continue to be, and shall remain, in full force and effect in accordance with their respective terms, and (c) are hereby ratified and confirmed in all respects. Upon the effectiveness of this Amendment, all references in the Credit Agreement (including references in the Credit Agreement as amended by this Amendment) to "this Agreement" (and all indirect references such as "hereby", "herein", "hereof" and "hereunder") shall be deemed to be references to the Credit Agreement as amended by this Amendment. 6. Expenses. Borrower shall reimburse the Agent for any and all -------- reasonable costs, internal charges and out-of-pocket expenses (including attorneys' fees and time charges of attorneys for the Agent, which attorneys may be employees of the Agent) 3 paid or incurred by the Agent in connection with the preparation, review, execution and delivery of this Amendment. 7. Entire Agreement. This Amendment, the Credit Agreement as amended by ---------------- this Amendment and the other Loan Documents embody the entire agreement and understanding among the parties hereto and supersede any and all prior agreements and understandings among the parties hereto relating to the subject matter hereof. 8. Governing Law. This Amendment shall be construed in accordance with ------------- the internal laws (and not the law of conflicts) of the State of Illinois, but giving effect to federal laws applicable to national banks. 9. Counterparts. This Amendment 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 Amendment by signing any such counterpart. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to Credit Agreement to be duly executed as of the date first above written. JOSTENS, INC. By: /s/ Orville E. Fisher, Jr. -------------------------------------- Print Name: Orville E. Fisher, Jr. ------------------------------ Title: Senior Vice President ----------------------------------- By: /s/ Lee U. McGrath -------------------------------------- Print Name: Lee U. McGrath ------------------------------ Title: Vice President & Treasurer ----------------------------------- THE FIRST NATIONAL BANK OF CHICAGO, Individually and as Agent By: /s/ J. Garland Smith -------------------------------------- Print Name: J. Garland Smith ------------------------------ Title: Managing Director ----------------------------------- CREDIT SUISSE FIRST BOSTON By: /s/ Geoffrey M. Craig -------------------------------------- Print Name: Geoffrey M. Craig ------------------------------ Title: Vice President ----------------------------------- By: /s/ Kristinn R. Kristinsson -------------------------------------- Print Name: Kristinn R. Kristinsson ------------------------------ Title: Assistant Vice President ----------------------------------- 4 MORGAN GUARANTY TRUST COMPANY OF NEW YORK By: /s/ Pat Merritt ----------------------------------- Print Name: Pat Merritt --------------------------- Title: Vice President -------------------------------- NORWEST BANK MINNESOTA N.A. By: /s/ Janet M. Klein ----------------------------------- Print Name: Janet M. Klein --------------------------- Title: Vice President -------------------------------- ROYAL BANK OF CANADA By: /s/ Karen T. Hull ----------------------------------- Print Name: Karen T. Hull --------------------------- Title: Retail Group Manager -------------------------------- 5 EXHIBIT F SCHEDULE I TO COMPLIANCE CERTIFICATE Schedule of Compliance as of _____________________ with Sections 6.16 and 6.17 of the Agreement Section 6.16. Interest Coverage Ratio: ----------------------- A. Earnings before Interest Expense and taxes $_______________ B. Interest Expense 1. Total Interest Expense $_______________ 2. Cash interest income $_______________ 3. Net amount (1 minus 2) $_______________ C. Ratio (A/B3) :1.0 --------------- D. Minimum Permitted 3.0:1.0 --------------- Section 6.17. Leverage Ratio: -------------- A. Total Indebtedness $--------------- B. Earnings before Interest Expense, taxes, depreciation and amortization $--------------- C. Ratio (A/B) :1.0 --------------- D. Maximum Permitted 3.0:1.0 --------------- 6 EX-12 5 COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
- ------------------------------------------------------------------------------------------------------------------------------------ Jostens, Inc. and Subsidiaries Computation of Ratio of Earnings to Fixed Charges Exhibit 12 (unaudited) - ------------------------------------------------------------------------------------------------------------------------------------ Six months ended Years ended Six months ended Years ended - ------------------------------------------------------------------------------------------------------------------------------------ July 3 January 2 January 3 December 28 June 30 June 30 June 30 Dollars in thousands 1999 1999 1998 1996 1996 1995 1994 - ------------------------------------------------------------------------------------------------------------------------------------ Earnings Income from continuing operations before income taxes $ 79,142 $ 83,520 $ 93,383 $ 26 $ 87,479 $ 93,893 $ 48,494 Interest expense (excluding capitalized interest) 2,694 7,014 6,854 4,324 9,296 5,350 6,701 Portion of rent expense under long-term operating leases representative of an interest factor 777 1,233 2,133 1,070 2,103 2,100 2,000 Amotization of debt expense 6 12 12 6 107 102 102 - ------------------------------------------------------------------------------------------------------------------------------------ Total earnings $ 82,619 $ 91,779 $ 102,382 $ 5,426 $ 98,985 $ 101,445 $ 57,297 ==================================================================================================================================== Fixed charges Interest expense (including capitalized interest) 2,956 7,717 6,854 4,324 9,296 5,350 6,701 Portion of rent expense under long-term operating leases representative of an interest factor 777 1,233 2,133 1,070 2,103 2,100 2,000 Amotization of debt expense 6 12 12 6 107 102 102 - ------------------------------------------------------------------------------------------------------------------------------------ Total fixed charges $ 3,739 $ 8,962 $ 8,999 $ 5,400 $ 11,506 $ 7,552 $ 8,803 ==================================================================================================================================== Ratio of earnings to fixed charges 22.1 10.2 11.4 1.0 8.6 13.4 6.5 - ------------------------------------------------------------------------------------------------------------------------------------
EX-27 6 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM JOSTENS, INC. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE SIX MONTH PERIOD ENDED JULY 3, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS JAN-01-2000 JAN-03-1999 JUL-03-1999 0 8,405 135,613 (6,234) 77,783 246,565 268,654 (179,583) 377,437 290,114 3,600 0 0 11,350 56,675 377,437 469,519 469,519 209,243 209,243 178,636 886 2,498 79,142 32,053 47,089 0 0 0 47,089 1.37 1.36
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