EXHIBIT 10
CREDIT AGREEMENT
DATED AS OF FEBRUARY 11, 1997
AMONG
VIDEO UPDATE CANADA INC.,
VIDEO UPDATE, INC.,
VARIOUS FINANCIAL INSTITUTIONS,
AND
BANK OF AMERICA ILLINOIS,
AS U.S. AGENT,
AND
BANK OF AMERICA CANADA,
AS CANADIAN AGENT
TABLE OF CONTENTS
Section Page
ARTICLE I DEFINITIONS.......................................................................................... 1
1.1 Certain Defined Terms................................................................................ 1
1.2 Other Interpretive Provisions........................................................................ 21
1.3 Accounting Principles................................................................................ 22
ARTICLE II THE CREDITS......................................................................................... 23
2.1 U.S. Borrowings.................................................................................... 23
2.1.1 Commitments to Make U.S. Loans..................................................................... 23
2.1.2 Procedure for U.S. Borrowing....................................................................... 23
2.1.3 Conversion and Continuation Elections for U.S. Borrowings.......................................... 24
2.1.4 Optional Prepayments of U.S. Borrowings............................................................ 25
2.1.5 Repayment of U.S. Borrowings....................................................................... 26
2.2 Canadian Borrowings................................................................................ 26
2.2.1. Canadian Loans..................................................................................... 26
2.2.2 Procedure for Canadian Borrowings.................................................................. 26
2.2.3 Conversion and Continuation Elections for Canadian Borrowings...................................... 27
2.2.4 Optional Prepayments of Canadian Borrowings........................................................ 29
2.2.5 Repayment of Canadian Borrowings................................................................... 29
2.2.6 Participations in Canadian Loans................................................................... 29
2.2.7 Canadian Participation Obligations Unconditional................................................... 30
2.3 Voluntary Termination or Reduction of Commitments.................................................. 31
2.4 Interest........................................................................................... 31
2.5 Fees ............................................................................................ 32
(a) Agency Fees............................................................................ 32
(b) Non-Use Fees........................................................................... 32
(c) Upfront Fees........................................................................... 32
2.6 Computation of Fees and Interest................................................................... 32
2.7 Payments by the Borrowers.......................................................................... 33
2.8 Payments by the Lenders to the Agents.............................................................. 34
2.9 Sharing of Payments, Etc........................................................................... 34
2.10 Currency Exchange Fluctuations..................................................................... 35
2.11 Extension of Revolving Termination Date............................................................ 35
ARTICLE III LOAN ACCOUNTS; NOTES............................................................................... 36
3.1 Loan Accounts........................................................................................ 36
3.2 Notes ............................................................................................ 36
Section Page
ARTICLE IV THE LETTERS OF CREDIT............................................................................... 36
4.1 The Letter of Credit Subfacility..................................................................... 36
4.2 Issuance, Amendment and Renewal of Letters of Credit................................................. 38
4.3 Risk Participations, Drawings and Reimbursements..................................................... 40
4.4 Repayment of Participations.......................................................................... 41
4.5 Role of the Issuing Lender........................................................................... 42
4.6 Obligations of the Company........................................................................... 43
4.7 Cash Collateral Pledge............................................................................... 44
4.8 Letter of Credit Fees................................................................................ 44
4.9 Uniform Customs and Practice......................................................................... 44
ARTICLE V TAXES, YIELD PROTECTION AND ILLEGALITY............................................................... 45
5.1 Taxes ............................................................................................ 45
5.2 Illegality........................................................................................... 49
5.3 Increased Costs and Reduction of Return.............................................................. 50
5.4 Funding Losses....................................................................................... 50
5.5 Inability to Determine Rates......................................................................... 51
5.6 Certificates of Lenders.............................................................................. 52
5.7 Substitution of Lenders.............................................................................. 52
5.8 Right of Lenders to Fund through Branches and Affiliates............................................. 52
5.9 Survival ............................................................................................ 53
ARTICLE VI CONDITIONS PRECEDENT................................................................................ 53
6.1 Conditions of Initial Credit Extensions.............................................................. 53
(a) Credit Agreement and Notes.......................................................... 53
(b) Resolutions; Incumbency............................................................. 53
(c) Organization Documents; Good Standing............................................... 53
(d) U.S. Subsidiary Guaranty............................................................ 54
(e) Canadian Guaranties................................................................. 54
(f) U.S. Security Agreement............................................................. 54
(g) Canadian Security Agreements........................................................ 54
(h) Company Pledge Agreement............................................................ 54
(i) VUCI Pledge Agreement............................................................... 54
(j) Parent Guaranty..................................................................... 54
(k) Insurance Certificates.............................................................. 54
(l) Lien Subordination.................................................................. 55
(m) Payment of Fees..................................................................... 55
(n) Certificate......................................................................... 55
(o) Legal Opinions...................................................................... 55
(p) Lien Searches....................................................................... 55
(q) Other Documents..................................................................... 55
6.2 Conditions to All Credit Extensions.................................................................. 56
(a) Notice, Application................................................................. 56
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Section Page
(b) Continuation of Representations and Warranties...................................... 56
(c) No Existing Default................................................................. 56
(d) Funded Debt Ratio................................................................... 56
ARTICLE VII REPRESENTATIONS AND WARRANTIES..................................................................... 56
7.1 Corporate Existence and Power....................................................................... 56
7.2 Corporate Authorization; No Contravention........................................................... 57
7.3 Governmental Authorization.......................................................................... 57
7.4 Binding Effect...................................................................................... 57
7.5 Financial Statements................................................................................ 57
7.6 No Material Adverse Change.......................................................................... 58
7.7 Litigation and Contingent Liabilities............................................................... 58
7.8 Ownership of Properties; Liens...................................................................... 58
7.9 Subsidiaries........................................................................................ 58
7.10 Pension and Welfare Plans........................................................................... 58
7.11 Investment Company Act.............................................................................. 59
7.12 Public Utility Holding Company Act.................................................................. 59
7.13 Regulation U........................................................................................ 59
7.14 Taxes ............................................................................................ 59
7.15 Solvency, etc....................................................................................... 59
7.16 Hazardous Materials................................................................................. 59
7.16.1 Release and Disposal............................................................... 59
7.16.2 Treatment and Storage.............................................................. 60
7.17 Absence of Default.................................................................................. 60
7.18 Leased Premises..................................................................................... 60
7.19 Information......................................................................................... 60
ARTICLE VIII COVENANTS......................................................................................... 61
8.1 Reports, Certificates and Other Information.......................................................... 61
8.1.1 Audit Report......................................................................... 61
8.1.2 Quarterly Reports.................................................................... 61
8.1.3 Monthly Reports...................................................................... 61
8.1.4 Compliance Certificates.............................................................. 62
8.1.5 Reports to SEC and to Shareholders................................................... 62
8.1.6 Notice of Default, Litigation and ERISA Matters...................................... 62
8.1.7 Subsidiaries......................................................................... 63
8.1.8 Management Reports................................................................... 63
8.1.9 Projections.......................................................................... 63
8.1.10 Other Information.................................................................... 63
8.2 Books, Records and Inspections....................................................................... 63
8.3 Insurance............................................................................................ 64
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Section Page
8.4 Compliance with Laws; Payment of Taxes and Liabilities............................................... 64
8.5 Maintenance of Existence, etc........................................................................ 64
8.6 Financial Covenants.................................................................................. 64
8.6.1 Minimum Net Worth.................................................................... 64
8.6.2 Fixed Charge Ratio................................................................... 64
8.6.3 Funded Debt Ratio.................................................................... 65
8.6.4 Mature Store Contribution Margin..................................................... 65
8.6.5 New Store Contribution Margin........................................................ 65
8.7 Limitations on Debt.................................................................................. 65
8.8 Liens ............................................................................................ 65
8.9 Dividends, etc....................................................................................... 66
8.10 Loans or Advances.................................................................................... 67
8.11 Mergers and Consolidations; Acquisitions............................................................. 67
8.12 Asset Dispositions................................................................................... 68
8.13 Use of Proceeds...................................................................................... 68
8.14 Transactions with Affiliates......................................................................... 68
8.15 Pension Plans........................................................................................ 68
8.16 Environmental Covenants.............................................................................. 68
8.16.1 Environmental Response Obligation................................................... 68
8.16.2 Environmental Liabilities........................................................... 69
8.17 Unconditional Purchase Obligations................................................................... 69
8.18 Further Assurances................................................................................... 69
8.19 Landlord's Consents.................................................................................. 70
8.20 Business ............................................................................................ 70
8.21 Inconsistent Agreements.............................................................................. 70
8.22 Preferred Stock...................................................................................... 70
8.23 Other Negative Pledges............................................................................... 70
ARTICLE IX EVENTS OF DEFAULT................................................................................... 70
9.1 Event of Default..................................................................................... 70
(a) Non-Payment of the Loans, etc....................................................... 70
(b) Non-Payment of Other Debt........................................................... 70
(c) Other Material Obligations.......................................................... 71
(d) Bankruptcy, Insolvency, etc......................................................... 71
(e) Non-Compliance with Provisions of This Agreement.................................... 71
(f) Warranties.......................................................................... 71
(g) Pension Plans....................................................................... 71
(h) Judgments........................................................................... 72
(i) Invalidity of Collateral Documents, etc............................................. 72
(j) Invalidity of Guaranty, etc......................................................... 72
(k) Change of Control................................................................... 72
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Section Page
9.2 Remedies ............................................................................................ 72
9.3 Rights Not Exclusive................................................................................. 73
ARTICLE X THE AGENTS........................................................................................... 73
10.1 Appointment and Authorization....................................................................... 73
10.2 Delegation of Duties................................................................................ 73
10.3 Liability of Agents................................................................................. 74
10.4 Reliance by Agents.................................................................................. 74
10.5 Notice of Default................................................................................... 74
10.6 Credit Decision..................................................................................... 75
10.7 Indemnification of Agents........................................................................... 75
10.8 Agents in Individual Capacity....................................................................... 76
10.9 Successor Agents.................................................................................... 76
10.10 Withholding Tax..................................................................................... 77
10.11 Collateral Matters.................................................................................. 77
ARTICLE XI MISCELLANEOUS....................................................................................... 78
11.1 Amendments and Waivers.............................................................................. 78
11.2 Notices ............................................................................................ 79
11.3 No Waiver; Cumulative Remedies...................................................................... 80
11.4 Costs and Expenses.................................................................................. 80
11.5 Borrower Indemnification............................................................................ 80
11.6 Payments Set Aside.................................................................................. 81
11.7 Successors and Assigns.............................................................................. 81
11.8 Assignments, Participations, etc.................................................................... 81
11.9 Confidentiality..................................................................................... 83
11.10 Set-off ............................................................................................ 84
11.11 Notification of Addresses, Lending Offices, Etc..................................................... 84
11.12 Counterparts........................................................................................ 84
11.13 Severability........................................................................................ 84
11.14 No Third Parties Benefited.......................................................................... 84
11.15 Governing Law and Jurisdiction...................................................................... 84
11.16 Waiver of Jury Trial................................................................................ 85
11.17 Judgment............................................................................................ 85
11.18 Entire Agreement.................................................................................... 86
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Section Page
SCHEDULE 1.1A COMMITMENTS, PRO RATA SHARES AND PERCENTAGES
SCHEDULE 1.1B PRICING SCHEDULE
SCHEDULE 7.7 LITIGATION AND CONTINGENT LIABILITIES
SCHEDULE 7.9 SUBSIDIARIES
SCHEDULE 7.10 PENSION AND WELFARE PLANS
SCHEDULE 7.18 LEASED PREMISES
SCHEDULE 8.6.5 NEW STORE CONTRIBUTION MARGIN
SCHEDULE 8.7 DEBT
SCHEDULE 8.8 LIENS
SCHEDULE 11.2 CANADIAN AND DOMESTIC LENDING OFFICES,
ADDRESSES FOR NOTICES
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Section Page
EXHIBITS
Exhibit A-1 Form of Notice of U.S. Borrowing
Exhibit A-2 Form of Notice of Canadian Borrowing
Exhibit B-1 Form of Notice of Conversion/Continuation (Company)
Exhibit B-2 Form of Notice of Conversion/Continuation (VUCI)
Exhibit C Form of Compliance Certificate
Exhibit D-1 Form of Opinion of Counsel to the Company
Exhibit D-2 Form of Opinion of Ontario Counsel to VUCI
Exhibit D-3 Form of Opinion of British Columbia Counsel to VUCI and Canadian
Guarantors
Exhibit D-4 Form of Opinion of British Columbia Counsel to Agents
Exhibit D-5 Form of Opinion of Alberta Counsel to Agents
Exhibit D-6 Form of Opinion of Ontario Counsel to Agents
Exhibit E Form of Lien Subordination Letter
Exhibit F Form of Assignment and Acceptance
Exhibit G-1 Form of Promissory Note (Company)
Exhibit G-2 Form of Promissory Note (VUCI)
Exhibit H-1 Form of U.S. Subsidiary Guaranty
Exhibit H-2 Form of Canadian Guaranty
Exhibit H-3 Form of Parent Guaranty
Exhibit I-1 Form of U.S. Security Agreement
Exhibit I-2 Form of Canadian Security Agreement
Exhibit J-1 Form of Company Pledge Agreement
Exhibit J-2 Form of VUCI Pledge Agreement
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CREDIT AGREEMENT
----------------
This CREDIT AGREEMENT is entered into as of February 11, 1997 among
VIDEO UPDATE, INC., a Delaware corporation (the "Company"), VIDEO UPDATE CANADA
INC., an Ontario corporation ("VUCI"), various financial institutions as
lenders, BANK OF AMERICA ILLINOIS, as U.S. Agent, and BANK OF AMERICA CANADA, as
Canadian Agent.
WHEREAS, the Lenders have agreed to make available to the Company a
revolving credit facility with a letter of credit subfacility, together with a
Canadian Dollar subfacility for VUCI, upon the terms and conditions set forth in
this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
-----------
1.1 Certain Defined Terms. The following terms have the following
meanings:
Affected Lender - see Section 5.7.
Affiliate means, as to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by, or is under
common control with, such Person. A Person shall be deemed to control
another Person if the controlling Person possesses, directly or
indirectly, the power to direct or cause the direction of the
management and policies of such other Person, whether through the
ownership of voting securities or membership interests, by contract, or
otherwise.
Agent-Related Persons means either Agent and any successor
thereto in such capacity hereunder, together with their respective
Affiliates and the officers, directors, employees, agents and
attorneys-in-fact of such Persons and Affiliates.
Agents means the Canadian Agent and the U.S. Agent; and Agent
means the Canadian Agent or the U.S. Agent.
Agreement means this Credit Agreement.
Applicable Agent means (a) with respect to matters relating to
U.S. Dollar Loans and Letters of Credit, the U.S. Agent, and (b) with
respect to matters relating to Canadian Loans, the Canadian Agent.
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Applicable Margin means the applicable rate per annum for a
Loan set forth in Schedule 1.1B.
Assignee - see subsection 11.8(a).
Assignment and Acceptance - see subsection 11.8(a).
Attorney Costs means and includes all reasonable fees and
disbursements of any law firm or other external counsel and, without
duplication, the reasonable allocated cost of internal legal services
and all reasonable disbursements of internal counsel.
BAC means Bank of America Canada, a bank chartered under the
laws of Canada.
Bankruptcy Code means the Federal Bankruptcy Reform Act of
1978 (11 U.S.C. ss.101, et seq.).
BA Rate means, for any Interest Period with respect to BA Rate
Loans comprising part of the same Borrowing, the rate of interest per
annum as announced by BAC in Toronto, Ontario as its "BA Rate."
BA Rate Loan means a Loan that bears interest based on the BA
Rate.
BAI means Bank of America Illinois, an Illinois banking
corporation.
Base Rate means, for any day, the higher of: (a) 0.50% per
annum above the latest U.S. Federal Funds Rate; and (b) the per annum
rate of interest in effect for such day as publicly announced from time
to time by BAI in Chicago, Illinois, as its "reference rate." (The
"reference rate" is a rate set by BAI based upon various factors
including BAI's costs and desired return, general economic conditions
and other factors, and is used as a reference point for pricing some
loans, which may be priced at, above or below such announced rate.) Any
change in the reference rate announced by BAI shall take effect at the
opening of business on the day specified in the public announcement of
such change.
Base Rate Loan means a Loan that bears interest based on the
Base Rate.
Borrower means the Company or VUCI; and Borrowers means the
Company and VUCI.
Borrowing means a borrowing hereunder consisting of (a) Loans
of the same Type made to the Company on the same day by the Lenders
under Section 2.1 and,
2
other than in the case of Base Rate Loans, having the same Interest
Period or (b) Canadian Loans made to VUCI on the same day by the
Canadian Lenders pursuant to Section 2.2 and, other than in the case of
Prime Rate Loans, having the same Interest Period. A Borrowing may be a
U.S. Borrowing or a Canadian Borrowing.
Borrowing Date means any date on which a Borrowing occurs
under Section 2.1.2 or Section 2.2.2.
Business Day means any day other than a Saturday, Sunday or
other day on which commercial banks in Chicago (and in the case of
disbursements and payments in Canadian Dollars, in Vancouver and
Toronto) are authorized or required by law to close and, if the
applicable Business Day relates to an Offshore Rate Loan, means such a
day on which dealings are carried on in the applicable offshore U.S.
Dollar or Canadian Dollar interbank market.
Canadian Agent means BAC in its capacity as agent hereunder
and under the other Loan Documents, as provided in Article X, and any
successor Canadian Agent under Section 10.9.
Canadian Borrowing means a Borrowing hereunder consisting of
Canadian Loans made by the Canadian Lenders ratably according to their
Canadian Percentages.
Canadian Commitment means the combined commitments of the
Canadian Lenders severally to make Canadian Loans to VUCI pursuant to
Section 2.2 in Canadian Dollars in an aggregate principal amount not to
exceed on any date an amount equal to the Dollar Equivalent of U.S.
$5,000,000; it being understood that the Canadian Commitment is a part
of the combined Commitments of all Lenders, rather than a separate,
independent commitment, and does not increase the total amount
available for borrowing hereunder.
Canadian Cost of Funds means the cost of funds of the Canadian
Agent as established by the Canadian Agent based on its customary
practice.
Canadian Dollars and Cdn. $ each mean lawful money of Canada.
Canadian Guarantor means (a) as of the Closing Date, 24 Hour
Entertainment Group Ltd. and 24 Hour Entertainment Leasing Ltd. and (b)
thereafter, the entities referred to in clause (a) and each other
Person which from time to time executes and delivers a Canadian
Guaranty.
3
Canadian Guaranty means each guaranty executed by a Canadian
Guarantor substantially in the form of Exhibit H-2, as amended,
supplemented or otherwise modified from time to time.
Canadian Lender means BAC and any other Lender which, with the
consent of the Borrowers and the Agents, agrees to become a Canadian
Lender hereunder; provided that, unless such other Lender is organized
under the laws of Canada, such Lender shall designate a Canadian branch
or affiliate of such Lender which will have all rights, and perform all
obligations, of such Lender hereunder in respect of Canadian Loans,
such designation to be made either (i) by causing such branch or
affiliate to execute a signature page hereof or (ii) by written notice
to the Company and the Agents (including any notice changing the
designation of such Lender's branch or affiliate which will act as a
Canadian Lender hereunder); provided, further, that no affiliate of a
Lender may be so designated pursuant to clause (ii) unless such
affiliate has executed an agreement satisfactory to the Company and the
Agents agreeing to become a party hereto. Neither BAC nor any other
branch or affiliate of a Lender which has been designated to act as a
Canadian Lender hereunder shall have any obligation hereunder in
respect of U.S. Dollar Loans or in respect of Letters of Credit.
Canadian Loan means any Prime Rate Loan, BA Rate Loan or
Offshore Canadian Loan made to VUCI under Section 2.2 of this
Agreement. All Canadian Loans shall be made in Canadian Dollars.
Canadian Participation Funding Notice means a written notice
from any Lender (including any Canadian Lender) informing the U.S.
Agent that an Event of Default has occurred and is continuing and
directing the U.S. Agent to notify all Non-Canadian Lenders to fund
their participations in the Canadian Loans as provided in Section
2.2.6.
Canadian Percentage means, as to any Canadian Lender at any
time, the percentage equivalent (expressed as a decimal, rounded to the
ninth decimal place) at such time of such Canadian Lender's portion of
the Canadian Commitment divided by the amount of the Canadian
Commitment. The initial Canadian Percentage of each Canadian Lender is
set forth on Schedule 1.1A, and each Canadian Lender's Canadian
Percentage shall change simultaneously with any assignment by or to
such Canadian Lender pursuant to Section 11.8.
Canadian Security Agreement - see Section 6.1(g).
Canadian Subsidiary means any Subsidiary of the Company which
is organized under the federal or provincial laws of Canada.
4
Capital Adequacy Regulation means any guideline, request or
directive of any central bank or other Governmental Authority, or any
other law, rule or regulation, whether or not having the force of law,
in each case regarding capital adequacy of any bank or of any
corporation controlling a bank.
Capital Lease means, with respect to any Person, any lease of
(or other agreement conveying the right to use) any real or personal
property by such Person which, in conformity with GAAP, is accounted
for as a capital lease on the balance sheet of such Person.
Cash Collateralize means, for purposes of Section 4.7, to
pledge and deposit with or deliver to the U.S. Agent, for the benefit
of the U.S. Agent, the Issuing Lender and the Lenders, as collateral
for the L/C Obligations, cash or deposit account balances pursuant to
documentation in form and substance satisfactory to the U.S. Agent and
the Lenders. Derivatives of such term shall have corresponding
meanings. The Company hereby grants the U.S. Agent, for the benefit of
the U.S. Agent, the Issuing Lender and the Lenders, a security interest
in any such cash and deposit account balances. Cash collateral shall be
maintained in blocked, deposit accounts at the U.S. Agent or an
Affiliate thereof.
Change of Control means (a) any Person or group of Persons
(within the meaning of Section 13 or 14 of the Securities Exchange Act
of 1934, as amended, but excluding ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇
so long as such persons are employees of the Company) shall acquire
beneficial ownership (within the meaning of Rule 13d-3 promulgated
under such Act) of 20% or more of the outstanding shares of common
stock of the Company; or (b) during any 24-month period, individuals
who at the beginning of such period constituted the Company's Board of
Directors (together with any new directors whose election by the
Company's Board of Directors or whose nomination for election by the
Company's shareholders was approved by a vote of a majority of the
directors who either were directors at beginning of such period or
whose election or nomination was previously so approved) cease for any
reason to constitute a majority of the Board of Directors of the
Company.
Class B Warrants means warrants entitling the holder thereof
to purchase at an exercise price of U.S. $8.75, subject to adjustment,
one share of the Company's Class A Common Stock, U.S. $0.01 par value.
Closing Date means the date on which all conditions precedent
set forth in Section 6.1 are satisfied or waived by all Lenders.
Code means the Internal Revenue Code of 1986.
5
Collateral means any property on which or in which a lien is
granted to the U.S. Agent pursuant to any Collateral Document.
Collateral Documents means the Company Pledge Agreement, the
VUCI Pledge Agreement, the U.S. Security Agreement and the Canadian
Security Agreements.
Commitment means, as to each Lender, the amount set forth
opposite such Lender's name on Schedule 1.1A, as adjusted from time to
time in accordance with the terms of this Agreement. The initial amount
of the combined Commitments of all Lenders is U.S. $60,000,000.
Company - see the introductory clause hereto.
Company Pledge Agreement - see Section 6.1(h).
Computation Date means any date on which the U.S. Agent
determines the Dollar Equivalent amount of any Canadian Loans pursuant
to Section 2.10.
Computation Period means any period of 3 consecutive calendar
months ending on the last day of a calendar month.
Consolidated Net Income means, with respect to the Company and
its Subsidiaries for any period, the net income (or loss) of the
Company and its Subsidiaries for such period (excluding any
extraordinary, unusual or non-recurring items of income); provided that
there shall be excluded therefrom (i) the income of any Subsidiary to
the extent that the declaration or payment of dividends or similar
distributions by such Subsidiary of such income is not at the time
permitted by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to such Subsidiary and (ii) any non-cash charges
relating to the release of management stock on the date of this
Agreement held in escrow.
Contractual Obligation means, as to any Person, any provision
of any security issued by such Person or of any agreement, undertaking,
contract, indenture, mortgage, deed of trust or other instrument,
document or agreement to which such Person is a party or by which it or
any of its property is bound.
Conversion/Continuation Date means any Business Day on which
(a) the Company (i) converts U.S. Dollar Loans from one Type to the
other Type or (ii) continues as U.S. Dollar Loans of the same Type, but
with a new Interest Period, U.S. Dollar Loans having Interest Periods
expiring on such date or (b) VUCI (i) converts Canadian Loans from one
Type to another Type or (ii) continues as
6
Canadian Loans of the same Type, but with a new Interest Period,
Canadian Loans having Interest Periods expiring on such date.
Credit Extension means and includes (a) the making of any Loan
hereunder and (b) the Issuance of any Letter of Credit hereunder.
Debt of any Person means, without duplication, (a) all
indebtedness of such Person for borrowed money, whether or not
evidenced by bonds, debentures, notes or similar instruments, (b) all
obligations of such Person as lessee under Capital Leases which have
been recorded as liabilities on a balance sheet of such Person, (c) all
obligations of such Person to pay the deferred purchase price of
property or services (other than current accounts payable in the
ordinary course of business), (d) all indebtedness secured by a Lien on
the property of such Person, whether or not such indebtedness shall
have been assumed by such Person (it being understood that if such
Person has not assumed or otherwise become personally liable for any
such indebtedness, the amount of the Debt of such Person in connection
therewith shall be limited to the lesser of the face amount of such
indebtedness or the fair market value of all property of such Person
securing such indebtedness), (e) all obligations, contingent or
otherwise, with respect to the face amount of all letters of credit
(whether or not drawn) and banker's acceptances issued for the account
of such Person, (f) liabilities of such Person in respect of Hedging
Agreements, and (g) all Suretyship Liabilities (other than Suretyship
Liabilities in respect of operating leases of other Persons) of such
Person.
Debt to be Repaid means all Debt listed on Schedule 8.7 under
the heading "Debt to be Repaid".
Dollar Equivalent means, at any time, (a) as to any amount
denominated in U.S. Dollars, the amount thereof at such time, and (b)
as to any amount denominated in Canadian Dollars, the equivalent amount
in U.S. Dollars as determined by the U.S. Agent at such time on the
basis of the Spot Rate for the purchase of U.S. Dollars with such
Canadian Dollars on the most recent Computation Date provided for in
Section 2.10 or such other date as is specified herein.
EBITDA means, with respect to any period, Consolidated Net
Income before deducting Interest Expense, taxes, depreciation and
amortization for such period.
Effective Amount means, with respect to the outstanding L/C
Obligations on any date, the aggregate Dollar Equivalent amount of such
L/C Obligations on such date after giving effect to any Issuances of
Letters of Credit occurring on such date and any other changes in the
aggregate Dollar Equivalent amount of the L/C Obligations as of such
date, including as a result of any reimbursements of outstanding unpaid
drawings under any Letter of Credit or any reduction in the
7
maximum amount available for drawing under Letters of Credit taking
effect on such date.
Eligible Assignee means (i) a commercial bank organized under
the laws of the United States, or any state thereof, and having a
combined capital and surplus of at least U.S. $100,000,000; (ii) a
commercial bank organized under the laws of any other country which is
a member of the Organization for Economic Cooperation and Development
(the OECD), or a political subdivision of any such country, and having
a combined capital and surplus of at least U.S. $100,000,000, provided
that such bank is acting through a branch or agency located in the
United States; and (iii) a Person that is primarily engaged in the
business of commercial banking and that is (A) is a Subsidiary of a
Lender, (B) is a Subsidiary of a Person of which a Lender is a
Subsidiary, (C) is a Person of which a Lender is a Subsidiary or (D)
has been approved by the chief executive or chief financial officer of
the Company.
Environmental Laws means all applicable federal, state,
provincial or local statutes, laws, ordinances, codes, rules,
regulations, guidelines, orders and judgments (including consent
decrees and administrative orders) relating to any hazardous, toxic or
dangerous substance or material, public health and safety, the
protection of the environment, land use, chemical use, pollution,
sanitation or the health and welfare of any living thing.
ERISA means the Employee Retirement Income Security Act of
1974, as amended, and any successor statute of similar import.
Event of Default means any of the events or circumstances
specified in Section 9.1.
Fixed Charge Ratio means, as of the last day of any month, the
ratio of (a) the sum of (i) EBITDA for the Computation Period ending on
such day plus (ii) rental expense of the Company and its Subsidiaries
for such Computation Period to (b) the sum of (i) Interest Expense for
such Computation Period plus (ii) rental expense of the Company and its
Subsidiaries for such Computation Period.
Foreign Subsidiary means any Subsidiary (i) organized under
the laws of a jurisdiction other than the United States or a state
thereof and (ii) which conducts substantially all of its business and
operations outside of the United States.
FRB means the Board of Governors of the Federal Reserve
System, and any Governmental Authority succeeding to any of its
principal functions.
Funded Debt means (without duplication) all Debt of the
Company and its Subsidiaries, excluding (i) contingent obligations in
respect of undrawn letters of
8
credit (except to the extent constituting Suretyship Liabilities in
respect of any indebtedness, obligation or other liability of a Person
other than the Company or any Subsidiary), (ii) Debt described in
clause (f) of the definition of "Debt" and (iii) Debt of the Company to
Subsidiaries and Debt of Subsidiaries to the Company or to other
Subsidiaries.
Funded Debt Ratio means, as of any date of calculation, the
ratio of (x) Funded Debt as of such date to (y) the product of (i) the
total of (a) EBITDA for the Computation Period most recently ended
minus (b) 26% of the revenues of the Company and its Subsidiaries for
such Computation Period multiplied by (ii) four.
GAAP means U.S. generally accepted accounting principles set
forth from time to time in the opinions and pronouncements of the
Accounting Principles Board and the American Institute of Certified
Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board (or agencies with similar functions of
comparable stature and authority within the U.S. accounting
profession), which are applicable to the circumstances as of the date
of determination.
Governmental Authority means any nation or government, any
state or province or other political subdivision thereof, any central
bank (or similar monetary or regulatory authority) thereof, any entity
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, and any
corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
Guarantor means each U.S. Subsidiary Guarantor, each Canadian
Guarantor and the Company.
Guaranty means each of the U.S. Subsidiary Guaranty, each
Canadian Guaranty and the Parent Guaranty.
Hazardous Material means any hazardous, toxic or dangerous
substance or material defined as such in (or for purposes of) any
Environmental Law.
Hedging Agreement means any interest rate, currency or
commodity swap agreement, interest rate cap agreement, interest rate
collar agreement, or other agreement or arrangement designed to protect
a Person against fluctuations in interest rates, currency exchange
rates or commodity prices.
Honor Date - see subsection 4.3(b).
Indemnified Liabilities - see Section 11.5.
9
Indemnified Person - see Section 11.5.
Insolvency Proceeding means, with respect to any Person, (a)
any case, action or proceeding with respect to such Person before any
court or other Governmental Authority relating to bankruptcy,
reorganization, insolvency, liquidation, receivership, dissolution,
winding-up, compromise, arrangement or relief of debtors (including any
proceeding under the Bankruptcy Code, the Bankruptcy and Insolvency Act
(Canada), the Companies' Creditor's Arrangement Act (Canada) or any
similar legislation in any jurisdiction) or (b) any general assignment
for the benefit of creditors, composition, marshalling of assets for
creditors, or other similar arrangement in respect of such Person's
creditors generally or any substantial portion of such creditors.
Interest Expense means, for any period, the consolidated
interest expense of the Company and its Subsidiaries for such period
(including all imputed interest on Capital Leases).
Interest Payment Date means (a) as to any Loan other than a
Base Rate Loan or a Prime Rate Loan, the last day of each Interest
Period applicable to such Loan, (b) as to any Base Rate Loan, the first
day of each calendar quarter, and (c) as to any Prime Rate Loan, the
first day of each calendar month.
Interest Period means, (a) as to any Offshore Rate Loan, the
period commencing on the Borrowing Date of such Loan or the
Conversion/Continuation Date on which such Loan is converted into or
continued as an Offshore U.S. Loan or Offshore Canadian Loan, as
applicable, and ending on the date one, two or three months thereafter
as selected by the applicable Borrower in its Notice of U.S. Borrowing,
Notice of Canadian Borrowing or Notice of Conversion/Continuation, as
the case may be; and (b) as to any BA Rate Loan, the period commencing
on the Borrowing Date of such Loan or on the Conversion/Continuation
Date on which such Loan is converted into or continued as a BA Rate
Loan, and ending on the date 30, 60 or 90 days thereafter, as selected
by VUCI in its Notice of Canadian Borrowing or Notice of
Continuation/Conversion;
provided that:
(i) if any Interest Period would otherwise end on a
day that is not a Business Day, such Interest Period shall be
extended to the following Business Day unless, in the case of
an Offshore Rate Loan, the result of such extension would be
to carry such Interest Period into another calendar month, in
which event such Interest Period shall end on the preceding
Business Day;
(ii) any Interest Period for an Offshore Rate Loan
that begins on the last Business Day of a calendar month (or
on a day for which there is no
10
numerically corresponding day in the calendar month at the end
of such Interest Period) shall end on the last Business Day of
the calendar month at the end of such Interest Period;
(iii) no Interest Period for a U.S. Dollar Loan shall
extend beyond any date on which an installment of principal is
scheduled to be paid pursuant to Section 2.1.5 unless the
aggregate principal amount of all Base Rate Loans, plus the
aggregate principal amount of all U.S. Dollar Loans having
Interest Periods that will expire on or before such scheduled
installment date, equals or exceeds the amount of the
installment of the U.S. Dollar Loans due on such date; and
(iv) no Interest Period for a Canadian Loan shall
extend beyond any date on which an installment of principal is
scheduled to be paid pursuant to Section 2.2.5 unless the
aggregate principal amount of all Prime Rate Loans, plus the
aggregate principal amount of all BA Rate Loans and Offshore
Canadian Loans having Interest Periods that will expire on or
before such scheduled installment date, equals or exceeds the
amount of the Canadian Loans due on such date.
IRS means the Internal Revenue Service, and any Governmental
Authority succeeding to any of its principal functions under the Code.
Issuance Date - see subsection 4.1(a).
Issue means, with respect to any Letter of Credit, to issue or
to extend the expiry of, or to renew or increase the amount of, such
Letter of Credit; and the terms "Issued," "Issuing" and "Issuance" have
corresponding meanings.
Issuing Lender means BAI in its capacity as issuer of one or
more Letters of Credit hereunder, together with any replacement letter
of credit issuer arising under Section 10.9.
L/C Advance means each Lender's participation in any L/C
Borrowing in accordance with its Pro Rata Share.
L/C Amendment Application means an application form for
amendment of an outstanding standby letter of credit as shall at any
time be in use at the Issuing Lender, as the Issuing Lender shall
specify.
L/C Application means an application form for issuance of a
standby letter of credit as shall at any time be in use by the Issuing
Lender, as the Issuing Lender shall specify.
11
L/C Borrowing means an extension of credit resulting from a
drawing under any Letter of Credit which shall not have been reimbursed
on the date when made nor converted into a Borrowing of Loans under
subsection 4.3(c).
L/C Commitment means the commitment of the Issuing Lender to
Issue, and the commitment of the Lenders severally to participate in,
Letters of Credit from time to time Issued under Article IV, in an
aggregate amount not to exceed on any date U.S. $5,000,000; it being
understood that the L/C Commitment is a part of the combined
Commitments, rather than a separate, independent commitment.
L/C Obligations means at any time the sum of (a) the aggregate
undrawn amount of all Letters of Credit then outstanding, plus (b) the
amount of all unreimbursed drawings under all Letters of Credit,
including all outstanding L/C Borrowings.
L/C-Related Documents means the Letters of Credit, the L/C
Applications, the L/C Amendment Applications and any other document
executed by the Company relating to any Letter of Credit.
Lender means each financial institution identified on the
signature pages hereof and their respective permitted successors and
assigns. References to the "Lenders" shall include BAI in its capacity
as Issuing Lender; for purposes of clarification only, to the extent
that BAI may have any rights or obligations in addition to those of the
other Lenders due to its status as Issuing Lender, its status as such
will be specifically referenced. The term Lender shall, whenever
appropriate, include any branch or affiliate of a Lender which is
acting as a Canadian Lender hereunder.
Lending Office means, as to any Lender, the office or offices
of such Lender (or, in the case of any Canadian Loan, of an Affiliate
of such Lender) specified as its "Lending Office" or "Domestic Lending
Office" or "Canadian Lending Office", as the case may be, on Schedule
11.2, or such other office or offices as such Lender (or, in the case
of any Canadian Loan, of an Affiliate of such Lender) may from time to
time specify to the Company and the U.S. Agent (and, with respect to
any Canadian Loan, the Canadian Agent).
Letter of Credit means any standby letter of credit Issued by
the Issuing Lender pursuant to Article IV.
Lien means any security interest, mortgage, deed of trust,
pledge, hypothecation, assignment, charge or deposit arrangement,
encumbrance, lien (statutory or other) or preferential arrangement of
any kind or nature whatsoever in respect of any property (including
those created by, arising under or evidenced by any conditional sale or
other title retention agreement, the interest of a lessor under a
12
capital lease, or any financing lease having substantially the same
economic effect as any of the foregoing, but not including the interest
of a lessor under an operating lease).
Loan or Loans means (a) one or more loans to be made by a
Lender to the Company pursuant to Section 2.1 (which may be Base Rate
Loans or Offshore U.S. Loans), or (b) one or more loans by a Canadian
Lender to VUCI pursuant to Section 2.2 (which may be Prime Rate Loans,
BA Rate Loans or Offshore Canadian Loans).
Loan Documents means this Agreement, the Notes, the
Guaranties, the Collateral Documents, the L/C - Related Documents and
all other documents delivered to either Agent or any Lender in
connection herewith.
Loan Parties means the Company, VUCI and their respective
Subsidiaries.
Margin Stock means "margin stock" as such term is defined in
Regulation G, T, U or X of the FRB.
Material Adverse Effect means a material adverse effect on (a)
the financial condition, operations, business or assets of the Company
and its Subsidiaries taken as a whole or (b) the ability of the Company
or any Subsidiary to timely and fully perform any of its payment or
other material obligations under this Agreement or any other Loan
Document to which it is a party.
Mature Store Consolidated Net Income means, with respect to
the Company and its Subsidiaries for any period, the net income (or
loss) of the Company and its Subsidiaries with respect to Mature Stores
for such period (excluding any extraordinary, unusual or non-recurring
items of income); provided that there shall be excluded therefrom (i)
the income of any Subsidiary to the extent that the declaration or
payment of dividends or similar distributions by such Subsidiary of
such income is not at the time permitted by operation of the terms of
its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to such Subsidiary
and (ii) any non-cash charges relating to the release of management
stock on the date of this Agreement held in escrow.
Mature Store Contribution means, with respect to any period,
(x) Mature Store Consolidated Net Income before deducting Mature Store
Interest Expense, depreciation, amortization and non-cash rent expense
and before any allocation of corporate overhead minus (y) 26% of the
revenues of the Company and its Subsidiaries for such period with
respect to Mature Stores.
Mature Store Contribution Margin means, with respect to any
period, an amount equal to (x) Mature Store Contribution for the
Computation Period most recently ended, divided by (y) the total
revenue of the Company and its Subsidiaries for such period with
respect to Mature Stores.
13
Mature Store Interest Expense means, for any period, the
consolidated interest expense of the Company and its Subsidiaries with
respect to Mature Stores for such period (including all imputed
interest on Capital Leases).
Mature Stores means stores of the Company and its Subsidiaries
which have been owned by the Company or a Subsidiary for a period of
thirteen months or longer.
Net Worth means the Company's consolidated stockholders'
equity.
New Store Consolidated Net Income means, with respect to the
Company and its Subsidiaries for any period, the net income (or loss)
of the Company and its Subsidiaries with respect to New Stores for such
period (excluding any extraordinary, unusual or non-recurring items of
income); provided that there shall be excluded therefrom the income of
any Subsidiary to the extent that the declaration or payment of
dividends or similar distributions by such Subsidiary of such income is
not at the time permitted by operation of the terms of its charter or
any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to such Subsidiary.
New Store Contribution means, with respect to any period, (x)
New Store Consolidated Net Income before deducting New Store Interest
Expense, depreciation, amortization and non-cash rent expense and
before any allocation of corporate overhead minus (y) 26% of the
revenues of the Company and its Subsidiaries for such period with
respect to New Stores.
New Store Contribution Margin means, with respect to any
period, an amount equal to (x) New Store Contribution for the
Computation Period most recently ended, divided by (y) the total
revenue of the Company and its Subsidiaries for such period with
respect to New Stores.
New Store Interest Expense means, for any period, the
consolidated interest expense of the Company and its Subsidiaries with
respect to New Stores for such period (including all imputed interest
on Capital Leases).
New Stores means stores of the Company and its Subsidiaries
which have been owned by the Company or a Subsidiary for a period of
less than thirteen months.
14
Non-Canadian Lender means each Lender which is not (and has
not designated an Affiliate as) a Canadian Lender.
Note means a promissory note executed by a Borrower in favor
of a Lender pursuant to subsection 2.2(b), in substantially the form of
Exhibit G-1 or G-2, as applicable.
Notice of Canadian Borrowing means a notice in substantially
the form of Exhibit A-2.
Notice of Conversion/Continuation means a notice in
substantially the form of Exhibit B-1 (in the case of a notice pursuant
to Section 2.1.3) or Exhibit B-2 (in the case of a notice pursuant to
Section 2.2.3).
Notice of U.S. Borrowing means a notice in substantially the
form of Exhibit A-1.
Obligations means all advances, debts, liabilities,
obligations, covenants and duties arising under this Agreement or any
other Loan Document owing by either Borrower to any Lender, either
Agent or any Indemnified Person, whether absolute or contingent, due or
to become due, or now existing or hereafter arising.
Offshore Canadian Loan means any Canadian Loan that bears
interest based on the Offshore Rate.
Offshore Rate means, for any Interest Period, with respect to
Offshore Rate Loans comprising part of the same Borrowing, the rate of
interest per annum (rounded upward, if necessary, to the next 1/16th of
1%) determined by the Applicable Agent as follows:
(a) In the case of Offshore U.S. Loans:
Offshore Rate = LIBOR
1.00 - Eurodollar Reserve Percentage
where,
Eurodollar Reserve Percentage means for any day for
any Interest Period the maximum reserve percentage (expressed
as a decimal, rounded upward to the next 1/100th of 1%) in
effect on such day (whether or not applicable to any Lender)
under regulations issued from time to time by the FRB for
determining the maximum reserve requirement (including any
15
emergency, supplemental or other marginal reserve requirement)
with respect to Eurocurrency funding (currently referred to as
"Eurocurrency liabilities").
LIBOR means the rate at which deposits in U.S.
Dollars in the approximate amount of the Offshore U.S. Loan of
BAI included in such Borrowing, and having a maturity
comparable to such Interest Period, are offered by BAI to
major banks in the London eurocurrency market at approximately
11:00 a.m. (London time) two Business Days prior to the
commencement of such Interest Period.
(b) In the case of Offshore Canadian Loans:
Offshore Rate = Canadian LIBOR
1.00 - Canadian Eurodollar Reserve Percentage
where,
Canadian Eurodollar Reserve Percentage means for any
day for any Interest Period the maximum reserve percentage
(expressed as a decimal, rounded upward to the next 1/100th of
1%) in effect on such day (whether or not applicable to any
Lender) under regulations issued from time to time by the Bank
of Canada or any other relevant Governmental Authority in
Canada for determining the maximum reserve requirement
(including any emergency, supplemental or other marginal
reserve requirement) with respect to Eurocurrency funding.
Canadian LIBOR means the rate at which deposits in
Canadian Dollars in the approximate amount of the Offshore
Canadian Loan of BAC comprising such Borrowing, and having a
maturity comparable to such Interest Period, are offered by
BAC to major banks in the London eurocurrency market at
approximately 11:00 a.m. (London time) two Business Days prior
to the commencement of such Interest Period.
Offshore Rate Loan means any Offshore U.S. Loan or any
Offshore Canadian Loan.
Offshore U.S. Loan means any U.S. Dollar Loan that bears
interest based on the Offshore Rate.
Organization Documents means (i) for any corporation, the
certificate or articles of incorporation, the memorandum and the
articles, the bylaws, any certificate of determination or instrument
relating to the rights of preferred shareholders of such
16
corporation, any shareholder rights agreement, and all applicable
resolutions of the board of directors (or any committee thereof) of
such corporation, (ii) for any partnership or joint venture, the
partnership or joint venture agreement and any other organizational
document of such entity, (iii) for any limited liability company, the
certificate or articles of organization, the operating agreement and
any other organizational document of such limited liability company,
(iv) for any trust, the declaration of trust, the trust agreement and
any other organizational document of such trust and (v) for any other
entity, the document or agreement pursuant to which such entity was
formed and any other organizational document of such entity.
Other Taxes means any present or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies
which arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this
Agreement or any other Loan Document.
Parent Guaranty - see subsection 6.1(j).
Participant - see subsection 11.8(c).
Payment Office means (i) in respect of payments in U.S.
Dollars, the address for payments set forth on Schedule 11.2 for the
U.S. Agent or such other address as the U.S. Agent may from time to
time specify in accordance with Section 11.2 and (ii) in the case of
payments in Canadian Dollars, the address for payments set forth on
Schedule 11.2 for the Canadian Agent or such other address as the
Canadian Agent may from time to time specify in accordance with Section
11.2.
PBGC means the Pension Benefit Guaranty Corporation and any
entity succeeding to any of its principal functions under ERISA.
Pension Plan means a "pension plan", as such term is defined
in section 3(2) of ERISA, which is subject to title IV of ERISA (other
than a multiemployer plan as defined in section 4001(a)(3) of ERISA),
and to which the Company or any corporation, trade or business that is,
along with the Company, a member of a controlled group of corporations
or a controlled group of trades or businesses, as described in section
414 of the Code, or section 4001 of ERISA, may have any liability,
including any liability by reason of having been a substantial employer
within the meaning of section 4063 of ERISA at any time during the
preceding five years or by reason of being deemed to be a contributing
sponsor under section 4069 of ERISA.
Person means an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust,
unincorporated association, joint venture or Governmental Authority.
17
Preferred Stock means, as applied to any corporation, shares
of such corporation that shall be entitled to preference or priority
over any other shares of such corporation in respect of either the
payment of dividends or the distribution of assets upon liquidation, or
both.
Prime Rate means, for any day, the per annum rate of interest
in effect for such day as publicly announced from time to time by BAC
in Toronto, Ontario as its "prime rate." (The "prime rate" is a rate
set by BAC based upon various factors including BAC's costs and desired
return, general economic conditions and other factors, and is used as a
reference point for pricing some loans, which may be priced at, above,
or below such announced rate.) Any change in the prime rate announced
by BAC shall take effect at the opening of business on the day
specified in the public announcement of such change.
Prime Rate Loan means a Canadian Loan that bears interest
based on the Prime Rate.
Pro Rata Share means, as to any Lender at any time, the
percentage equivalent (expressed as a decimal, rounded to the ninth
decimal place) at such time of
(a) prior to termination of the Commitments (i) such
Lender's Commitment divided by (ii) the combined Commitments
of all Lenders, or
(b) after termination of the Commitments, (i) the
aggregate principal amount of such Lender's U.S. Dollar Loans
plus (without duplication) the direct (after subtracting all
amounts which have been participated) or participation
interest of such Lender in the aggregate Dollar Equivalent
principal amount of all Canadian Loans and the Effective
Amount of all L/C Obligations, divided by (ii) the aggregate
Dollar Equivalent principal amount of all Loans plus (without
duplication) the Effective Amount of all L/C Obligations.
Replacement Lender - see Section 5.7.
Required Lenders means (a) at any time prior to the Revolving
Termination Date, Lenders then holding at least 66-2/3 % of the amount
of the combined Commitments and (b) otherwise, Lenders then holding at
least 66-2/3% of the then aggregate unpaid principal Dollar Equivalent
amount of the Loans and the Effective Amount of the L/C Obligations (it
being understood that, for purposes of this clause (b), the principal
amount of each Lender's Loans shall be deemed to be (i) in the case of
any Non-Canadian Lender, increased by such Lender's participations in
the Canadian Loans pursuant to Section 2.2.6 (whether funded or
unfunded), except to the extent such Lender shall not have funded such
participations as required pursuant
18
to Section 2.2.6, and (ii) in the case of any Canadian Lender,
decreased by the amount of the participations of all other Lenders in
its Canadian Loans (whether funded or unfunded), except to the extent
any such other Lender shall not have funded such participations as
required pursuant to Section 2.2.6).
Requirement of Law means, as to any Person, any law (statutory
or common), treaty, rule or regulation or determination of an
arbitrator or of a Governmental Authority, in each case applicable to
or binding upon such Person or any of its property or to which such
Person or any of its property is subject.
Revolving Termination Date means the earlier to occur of:
(a) February 10, 1998 (or such later date to which
the Revolving Termination Date shall be extended pursuant to
Section 2.11); and
(b) the date on which the Commitments terminate in
accordance with the provisions of this Agreement.
Same Day Funds means (i) with respect to disbursements and
payments in U.S. Dollars, immediately available funds, and (ii) with
respect to disbursements and payments in Canadian Dollars, same day or
other funds as may be determined by the Applicable Agent to be
customary in the place of disbursement or payment for the settlement of
international banking transactions in Canadian Dollars.
SEC means the Securities and Exchange Commission.
Spot Rate for a currency means the rate quoted by BAI as the
spot rate for the purchase by BAI of such currency with another
currency in accordance with its customary procedures at approximately
10:00 a.m. (Chicago time) on the date two Business Days prior to the
date as of which the foreign exchange computation is made.
Subordinated Debt means Debt of the Company having maturities
and other terms, and which is subordinated to the obligations of the
Company hereunder in a manner, satisfactory to the Agents and the
Lenders.
Subsidiary of a Person means any corporation, association,
partnership, limited liability company, joint venture or other business
entity of which more than 50% of the voting stock, membership interests
or other equity interests is owned or controlled directly or indirectly
by such Person, or by one or more of the Subsidiaries of such Person,
or by a combination thereof. Unless the context otherwise clearly
requires, references herein to a "Subsidiary" refer to a Subsidiary of
the Company.
19
Suretyship Liability means any agreement, undertaking or
arrangement by which any Person guarantees, endorses or otherwise
becomes or is contingently liable upon (by direct or indirect
agreement, contingent or otherwise, to provide funds for payment, to
supply funds to or otherwise to invest in a debtor, or otherwise to
assure a creditor against loss) any indebtedness, obligation or other
liability of any other Person (other than by endorsements of
instruments in the course of collection), or guarantees the payment of
dividends or other distributions upon the shares of any other Person.
The amount of any Person's obligation under any Suretyship Liability
shall (subject to any limitation set forth therein) be deemed to be the
principal amount of the debt, obligation or other liability guaranteed
thereby.
Taxes means any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, excluding, in the case of each Lender and the Agents,
such taxes (including income taxes or franchise taxes) as are imposed
on or measured by such Lender's or such Agent's, as the case may be,
net income by the jurisdiction (or any political subdivision thereof)
under the laws of which such Lender or such Agent, as the case may be,
is organized or maintains a lending office.
Type of Loan means (a) in the case of U.S. Dollar Loans, a
Base Rate Loan or an Offshore U.S. Loan and (b) in the case of Canadian
Loans, a Prime Rate Loan, an Offshore Canadian Loan or a BA Rate Loan.
United States and U.S. each means the United States of
America.
Unmatured Event of Default means any event or circumstance
which, with the giving of notice, the lapse of time, or both, would (if
not cured or otherwise remedied during such time) constitute an Event
of Default.
U.S. Agent means BAI in its capacity as agent hereunder and
under the other Loan Documents, as provided in Article X, and any
successor U.S. Agent arising under Section 10.9.
U.S. Borrowing means a Borrowing hereunder consisting of U.S.
Dollar Loans made by the Lenders ratably according to their respective
Pro Rata Shares.
U.S. Dollar Loans means any Base Rate Loan or Offshore U.S.
Loan made to the Company under Section 2.1 of this Agreement.
U.S. Dollars and U.S. $ each means lawful money of the United
States.
U.S. Federal Funds Rate means, for any day, the rate set forth
in the weekly statistical release designated as H.15(519), or any
successor publication, published by
20
the Federal Reserve Bank of New York (including any such successor,
"H.15(519)") on the preceding Business Day opposite the caption
"Federal Funds (Effective)"; or, if for any relevant day such rate is
not so published on any such preceding Business Day, the rate for such
day will be the arithmetic mean as determined by the U.S. Agent of the
rates for the last transaction in overnight Federal funds arranged
prior to 9:00 a.m. (New York City time) on that day by each of three
leading brokers of Federal funds transactions in New York City selected
by the U.S. Agent.
U.S. Subsidiary Guarantor means (a) as of the Closing Date,
Tinseltown Video, Inc. and (b) thereafter, Tinseltown Video, Inc. and
each other Person which from time to time executes and delivers a
counterpart of the U.S. Subsidiary Guaranty.
U.S. Subsidiary Guaranty - see Section 6.1(d).
U.S. Security Agreement - see Section 6.1(f).
VUCI - see the introductory clause hereto.
VUCI Pledge Agreement - see Section 6.1(i).
Weighted Average Age of New Stores means, with respect to any
period, the sum of the following for all New Stores as calculated with
respect to each New Store: (x) (i) the revenue of the Company and its
Subsidiaries for such period with respect to such New Store divided by
(ii) the total revenue of the Company and its Subsidiaries for such
period with respect to all New Stores multiplied by (y) the number of
months that such New Store has been owned by the Company or any
Subsidiary.
Welfare Plan means an "employee welfare benefit plan" as such
term is defined in section 3(1) ERISA.
1.2 Other Interpretive Provisions.
(a) The meanings of defined terms are equally applicable to
the singular and plural forms of such terms.
(b) Section, Subsection, Schedule and Exhibit references are
to this Agreement unless otherwise specified.
(c) (i) The term "documents" includes any and all instruments,
documents, agreements, certificates, indentures, notices and other writings,
however evidenced.
21
(ii) The term "including" is not limiting and means "including
without limitation."
(iii) In the computation of periods of time from a specified
date to a later specified date, the word "from" means "from and
including"; the words "to" and "until" each mean "to but excluding";
and the word "through" means "to and including."
(d) Unless otherwise expressly provided herein, (i) references
to agreements (including this Agreement) and other contractual instruments shall
be deemed to include all subsequent amendments and other modifications thereto,
but only to the extent such amendments and other modifications are not
prohibited by the terms of this Agreement, and (ii) references to any statute or
regulation are to be construed as including all statutory and regulatory
provisions consolidating, amending, replacing, supplementing or interpreting the
statute or regulation.
(e) The captions and headings of this Agreement are for
convenience of reference only and shall not affect the interpretation of this
Agreement.
(f) This Agreement may use several different limitations,
tests or measurements to regulate the same or similar matters. All such
limitations, tests and measurements are cumulative and shall each be performed
in accordance with their terms.
(g) This Agreement is the result of negotiations among and has
been reviewed by counsel to the Agents, the Borrowers and the other parties, and
is the product of all parties. Accordingly, this Agreement shall not be
construed against the Lenders or the Agents merely because of the Lenders' or
the Agents' involvement in their preparation.
1.3 Accounting Principles.
(a) Unless the context otherwise clearly requires, all
accounting terms not expressly defined herein shall be construed, and all
financial computations required under this Agreement shall be made, in
accordance with GAAP, consistently applied; provided that if the Company
notifies the U.S. Agent that the Company wishes to amend any covenant in Article
VIII to eliminate the effect of any change in GAAP on the operation of such
covenant (or if the U.S. Agent notifies the Company that the Required Lenders
wish to amend Article VIII for such purpose), then the Company's compliance with
such covenant shall be determined on the basis of GAAP in effect immediately
before the relevant change in GAAP became effective, until either such notice is
withdrawn or such covenant is amended in a manner satisfactory to the Company
and the Required Lenders. The definitions of "Mature Store Interest Expense" and
"New Store Interest Expense" shall be determined in the same manner as
customarily calculated and determined prior to the date of this Agreement in
22
reports delivered to BAI by the Company pursuant to the credit facility between
BAI and the Company in existence immediately prior to the date of this
Agreement.
(b) References herein to "fiscal year" and "fiscal quarter"
refer to such fiscal periods of the Company.
ARTICLE II
THE CREDITS
-----------
2.1 U.S. Borrowings.
2.1.1 Commitments to Make U.S. Loans. Each Lender severally agrees, on
the terms and conditions set forth herein, to make U.S. Dollar Loans to the
Company from time to time, on any Business Day during the period from the
Closing Date to the Revolving Termination Date, in an aggregate amount not to
exceed at any time outstanding such Lender's Pro Rata Share of the amount of the
combined Commitments, provided that, after giving effect to any Borrowing of
U.S. Dollar Loans, the aggregate principal amount of all U.S. Dollar Loans plus
the aggregate principal Dollar Equivalent amount of all Canadian Loans plus the
Effective Amount of all L/C Obligations shall not exceed the amount of the
combined Commitments; and provided, further, that the aggregate principal amount
of the U.S. Dollar Loans of any Lender plus such Lender's Pro Rata Share of the
aggregate Dollar Equivalent amount of all Canadian Loans plus the participation
of such Lender in the Effective Amount of all L/C Obligations shall not at any
time exceed such Lender's Commitment. Within the foregoing limits, and subject
to the other terms and conditions hereof, the Company may borrow under this
Section 2.1.1, prepay under Section 2.1.4 and reborrow under this Section 2.1.1.
2.1.2 Procedure for U.S. Borrowing. (a) Each Borrowing of U.S. Dollar
Loans shall be made upon the Company's irrevocable written notice delivered to
the U.S. Agent in the form of a Notice of U.S. Borrowing, which notice must be
received by the U.S. Agent prior to 11:00 a.m. (Chicago time) (i) three Business
Days prior to the requested Borrowing Date, in the case of Offshore U.S. Loans,
and (ii) on the requested Borrowing Date, in the case of Base Rate Loans,
specifying:
(A) the amount of such Borrowing, which
shall be in the amount of U.S. $2,500,000 or a higher integral
multiple of U.S. $500,000, in the case of Offshore U.S. Loans,
and U.S. $1,000,000 or a higher integral multiple of U.S.
$500,000, in the case of Base Rate Loans;
(B) the requested Borrowing Date, which
shall be a Business Day;
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(C) the Type of Loans comprising such
Borrowing; and
(D) in the case of Offshore U.S. Loans, the
duration of the Interest Period therefor.
(b) The U.S. Agent will promptly notify each Lender of its
receipt of any Notice of U.S. Borrowing and of the amount of such Lender's Pro
Rata Share of such U.S. Borrowing.
(c) Each Lender will make the amount of its Pro Rata Share of
each U.S. Borrowing available to the U.S. Agent for the account of the Company
at the U.S. Agent's Payment Office by 2:00 p.m. (Chicago time) on the Borrowing
Date requested by the Company in funds immediately available to the U.S. Agent.
The proceeds of all Loans will then be made available to the Company by the U.S.
Agent at such office by crediting an account of the Company maintained with BAI
with the aggregate of the amounts made available to the U.S. Agent by the
Lenders in like funds as received by the U.S. Agent.
(d) After giving effect to any Borrowing, there may not be
more than six different Interest Periods in effect for all U.S. Borrowings.
2.1.3 Conversion and Continuation Elections for U.S. Borrowings. (a)
The Company may, upon irrevocable written notice to the U.S. Agent in accordance
with subsection 2.2.3(b):
(i) elect to convert, on any Business Day, any Base
Rate Loans (in an aggregate minimum amount of U.S. $2,500,000 or a
higher integral multiple of U.S. $500,000) into Offshore U.S. Loans;
(ii) elect to convert, on the last day of the
applicable Interest Period, any Offshore U.S. Loans (or any part
thereof in an aggregate minimum amount of U.S. $1,000,000 or a higher
integral multiple of U.S. $500,000) into Base Rate Loans; or
(iii) elect to continue, as of the last day of the
applicable Interest Period, any Offshore U.S. Loans having Interest
Periods expiring on such day (or any part thereof in an aggregate
minimum amount of U.S. $2,500,000 or a higher integral multiple of U.S.
$500,000);
provided that if at any time the aggregate amount of Offshore U.S. Loans in
respect of any U.S. Borrowing shall have been reduced, by payment, prepayment,
or conversion of part thereof, to be less than U.S. $2,500,000, such Offshore
U.S. Loans shall automatically convert into Base Rate Loans.
24
(b) The Company shall deliver a Notice of
Conversion/Continuation to be received by the U.S. Agent not later than 11:00
a.m. (Chicago time) at least (i) three Business Days in advance of the
Conversion/Continuation Date, if the Loans are to be converted into or continued
as Offshore U.S. Loans; and (ii) on the Conversion/Continuation Date, if the
Loans are to be converted into Base Rate Loans, specifying:
(A) the proposed Conversion/Continuation
Date;
(B) the aggregate amount of U.S. Dollar
Loans to be converted or continued;
(C) the Type of U.S. Dollar Loans resulting
from the proposed conversion or continuation; and
(D) other than in the case of conversions
into Base Rate Loans, the duration of the requested Interest
Period.
(c) If upon the expiration of any Interest Period applicable
to Offshore U.S. Loans, the Company has failed to select timely a new Interest
Period to be applicable to such Offshore U.S. Loans, the Company shall be deemed
to have elected to convert such Offshore U.S. Loans into Base Rate Loans
effective as of the expiration date of such Interest Period.
(d) The U.S. Agent will promptly notify each Lender of its
receipt of a Notice of Conversion/Continuation or, if no timely notice is
provided by the Company, the U.S. Agent will promptly notify each Lender of the
details of any automatic conversion. All conversions and continuations shall be
made ratably according to the respective outstanding principal amounts of the
U.S. Dollar Loans held by each Lender with respect to which such notice was
given.
(e) Unless the Required Lenders otherwise agree, during the
existence of an Event of Default or Unmatured Event of Default, the Company may
not elect to have a U.S.
Dollar Loan converted into or continued as an Offshore U.S. Loan.
(f) After giving effect to any conversion or continuation of
U.S. Dollar Loans, there may not be more than six different Interest Periods in
effect for all U.S. Borrowings.
2.1.4 Optional Prepayments of U.S. Borrowings. Subject to Section 5.4,
the Company may, from time to time, ratably prepay any U.S. Dollar Loans in
whole or in part, in an aggregate amount of U.S. $2,500,000 or a higher integral
multiple of U.S. $500,000 in the case of Offshore U.S. Loans, and an aggregate
amount of U.S. $1,000,000 or a higher integral multiple of U.S. $500,000 in the
case of Base Rate Loans. The Company shall
25
deliver a notice of prepayment in accordance with Section 11.2 to be received by
the U.S. Agent not later than (i) 11:00 a.m. (Chicago time) three Business Days
in advance of the prepayment date in the case of Offshore U.S. Loans, and (ii)
11:00 a.m. (Chicago time) on the prepayment date in the case of Base Rate Loans.
Each notice of prepayment shall specify the date and amount of such prepayment
and the U.S. Dollar Loans to be prepaid. The U.S. Agent will promptly notify
each Lender of its receipt of any such notice and of such Lender's Pro Rata
Share of such prepayment. If any such notice is given by the Company, the
Company shall make such prepayment and the payment amount specified in such
notice shall be due and payable on the date specified therein, together with, in
the case of Offshore U.S. Loans, accrued interest to such date on the amount
prepaid and any amounts required pursuant to Section 5.4 with respect to such
Offshore U.S. Loans.
2.1.5 Repayment of U.S. Borrowings. The Company shall repay the
principal of the U.S. Dollar Loans outstanding at the close of business on the
Revolving Termination Date in 24 consecutive monthly principal installments,
payable on the last day of each calendar month commencing with the first such
date to occur after the Revolving Termination Date. The first 23 installments
shall each be equal to 1/36 of the unpaid principal amount of the U.S. Dollar
Loans outstanding on the Revolving Termination Date; and the final installment
shall be in the remaining unpaid principal amount of the U.S. Dollar Loans.
2.2 Canadian Borrowings.
2.2.1. Canadian Loans. Each Canadian Lender agrees, on the terms and
conditions set forth herein, to make Canadian Loans to VUCI from time to time on
any Business Day during the period from the Closing Date to the Revolving
Termination Date, in an aggregate principal amount at any one time outstanding
not to exceed such Canadian Lender's Canadian Percentage of the aggregate
principal amount of all outstanding Canadian Loans of all Canadian Lenders, it
being understood that such Canadian Lender's Canadian Loans, when aggregated
with such Canadian Lender's (or its related U.S. branch's or affiliate's) other
outstanding Loans and (without duplication) the participation of such Canadian
Lender (or its related U.S. branch or affiliate) in the Effective Amount of all
L/C Obligations, may exceed such Lender's (or its related branch's or
affiliate's) Commitment; provided that at no time shall (i) the aggregate
principal Dollar Equivalent amount of all Loans plus (without duplication) the
Effective Amount of all L/C Obligations exceed the combined Commitments of all
Lenders or (ii) the aggregate principal amount of all Canadian Loans exceed the
Canadian Commitment. Subject to the other terms and conditions hereof, VUCI may
borrow under this Section 2.2.1, prepay pursuant to Section 2.2.4 and reborrow
pursuant to this Section 2.2.1 from time to time.
2.2.2 Procedure for Canadian Borrowings. (a) Each Canadian Borrowing
shall be made upon VUCI's irrevocable written notice delivered to each Agent in
the form of a Notice of Canadian Borrowing, which notice must be received by the
Agents prior to (i) 11:00 a.m. (Chicago time) four Business Days prior to the
requested Borrowing Date, in the
26
case of Offshore Canadian Loans; (ii) 11:00 a.m. (Chicago time) three Business
Days prior to the requested Borrowing Date, in the case of BA Rate Loans; and
(iii) 11:00 a.m. (Chicago time) one Business Day prior to the requested
Borrowing Date, in the case of Prime Rate Loans, specifying:
(A) the amount of the Canadian Borrowing, which shall
be in an aggregate amount not less than Cdn. $500,000 or a
higher integral multiple of Cdn. $100,000;
(B) the requested Borrowing Date, which shall be a
Business Day;
(C) the Type of Loans comprising the Canadian
Borrowing; and
(D) in the case of a Borrowing of Offshore Canadian
Loans or BA Rate Loans, the duration of the Interest Period
therefor.
(b) Upon receipt of a Notice of Canadian Borrowing, the Canadian Agent
will promptly notify each Canadian Lender thereof and of the amount of such
Canadian Lender's Canadian Percentage of the Canadian Borrowing.
(c) Each Canadian Lender will make the amount of its Canadian
Percentage of each Canadian Borrowing available to the Canadian Agent for the
account of VUCI at the Canadian Agent's Payment Office by 11:00 a.m. (Chicago
time) on the Borrowing Date requested by VUCI in Same Day Funds. The proceeds of
all such Canadian Loans will then be made available to VUCI at such place and in
such manner as designated in writing by VUCI to the Canadian Agent in the
aggregate amount made available to the Canadian Agent by the Canadian Lenders in
like funds as received by the Canadian Agent.
(d) After giving effect to any Canadian Borrowing, there may not be
more than four different Interest Periods in effect in respect of all Canadian
Loans then outstanding.
2.2.3 Conversion and Continuation Elections for Canadian Borrowings.
(a) VUCI may, upon irrevocable written notice to the Agents in accordance with
subsection 2.2.3(b):
(i) elect, as of any Business Day, in the
case of Prime Rate Loans, or as of the last day of the
applicable Interest Period, in the case of Offshore Canadian
Loans and BA Rate Loans, to convert any Canadian Loans (or any
part thereof in an amount not less than Cdn. $500,000 or a
higher integral multiple of Cdn. $100,000) into Canadian Loans
of another Type; or
(ii) elect, as of the last day of the
applicable Interest Period, to continue any Canadian Loans
having Interest Periods expiring on such day (or
27
any part thereof in an amount not less than Cdn. $500,000 or a
higher integral multiple of Cdn. $100,000);
provided that if at any time the aggregate amount of Offshore Canadian Loans or
BA Rate Loans in respect of any Canadian Borrowing is reduced, by payment,
prepayment or conversion of part thereof, to be less than Cdn $500,000, such
Offshore Canadian Loans or BA Rate Loans shall automatically convert into Prime
Rate Loans.
(b) VUCI shall deliver a Notice of Conversion/Continuation to be
received by the Agents not later than (i) 11:00 a.m. (Chicago time) at least
four Business Days prior to the Conversion/Continuation Date, if the Canadian
Loans are to be converted into or continued as Offshore Canadian Loans; (ii)
11:00 a.m. (Chicago time) three Business Days prior the Conversion/Continuation
Date, if the Canadian Loans are to be converted into or continued as BA Rate
Loans; and (iii) 11:00 a.m. (Chicago time) one Business Day prior to the
Conversion/Continuation Date, if the Canadian Loans are to be converted into
Prime Rate Loans, specifying:
(A) the proposed Conversion/Continuation Date;
(B) the aggregate amount of Canadian Loans to be
converted or renewed;
(C) the Type of Canadian Loans resulting from the
proposed conversion or continuation; and
(D) other than in the case of conversions into Prime
Rate Loans, the duration of the requested Interest Period.
(c) If upon the expiration of any Interest Period applicable to
Offshore Canadian Loans or BA Rate Loans, VUCI has failed to select timely a new
Interest Period to be applicable to such Offshore Canadian Loans or BA Rate
Loans, VUCI shall be deemed to have elected to convert such Offshore Canadian
Loans or BA Rate Loans into Prime Rate Loans effective as of the expiration date
of such Interest Period.
(d) The Canadian Agent will promptly notify each Canadian Lender of its
receipt of a Notice of Conversion/Continuation pursuant to this Section 2.2.3,
or, if no timely notice is provided by VUCI, the Canadian Agent will promptly
notify each Lender of the details of any automatic conversion. All conversions
and continuations shall be made ratably according to the respective outstanding
principal amounts of the Canadian Loans held by each Canadian Lender with
respect to which the notice was given.
28
(e) Unless the Required Lenders otherwise agree, during the existence
of an Event of Default or Unmatured Event of Default, VUCI may not elect to have
a Canadian Loan converted into or continued as an Offshore Canadian Loan or a BA
Rate Loan.
(f) After giving effect to any conversion or continuation of Canadian
Loans, there may not be more than four different Interest Periods in effect in
respect of all Canadian Loans together then outstanding.
2.2.4 Optional Prepayments of Canadian Borrowings. Subject to Section
5.4, VUCI may, from time to time, ratably prepay any Canadian Loans in whole or
in part, in an aggregate amount of (Cdn. $500,000 or a higher integral multiple
of Cdn. $100,000 in the case of Offshore Canadian Loans or BA Rate Loans, and an
aggregate amount of Cdn. $250,000 or a higher integral multiple thereof in the
case of Prime Rate Loans. VUCI shall deliver a notice of prepayment in
accordance with Section 11.2 to be received by the Agents not later than (i)
11:00 a.m. (Chicago time) four Business Days in advance of the prepayment date
in the case of Offshore Canadian Loans or BA Rate Loans, and (ii) 11:00 a.m.
(Chicago time) one Business Day in advance of the prepayment date in the case of
Prime Rate Loans. Each notice of prepayment shall specify the date and amount of
such prepayment and the Canadian Loans to be prepaid. The Canadian Agent will
promptly notify each Canadian Lender of its receipt of any such notice and of
such Canadian Lender's Canadian Percentage of such prepayment. If any such
notice is given by VUCI, VUCI shall make such prepayment and the payment amount
specified in such notice shall be due and payable on the date specified therein,
together with, in the case of Offshore Canadian Loans and BA Rate Loans, accrued
interest to such date on the amount prepaid and any amounts required pursuant to
Section 5.4.
2.2.5 Repayment of Canadian Borrowings. VUCI shall repay the principal
amount of the Canadian Loans outstanding at the close of business on the
Revolving Termination Date in 24 consecutive monthly principal installments,
payable on the first day of each calendar month commencing with the first such
date to occur after the Revolving Termination Date. The first 23 installments
shall each be equal to 1/36 of the unpaid principal amount of the Canadian Loans
outstanding on the Revolving Termination Date; and the final installment shall
be the remaining unpaid principal amount of the Canadian Loans.
2.2.6 Participations in Canadian Loans. (a) Each Non-Canadian Lender
agrees that it shall at all times have a participation in, and acknowledges that
it is irrevocably and unconditionally obligated, upon receipt of notice that the
U.S. Agent has received a Canadian Participation Funding Notice, to fund (or to
cause an Affiliate to fund) its participation in, each outstanding Canadian Loan
in an amount equal to its Pro Rata Share of the amount of such Canadian Loan.
(b) The U.S. Agent shall promptly notify the Canadian Agent
and each Non- Canadian Lender of its receipt of a Canadian Participation Funding
Notice. Promptly upon
29
receipt of such Notice, each Non-Canadian Lender shall (or shall cause an
Affiliate to) make available to the Canadian Agent for the account of the
Canadian Lenders an amount in Canadian Dollars and in Same Day Funds equal to
its Pro Rata Share of all outstanding Canadian Loans. If any Non-Canadian Lender
so notified fails to make available to the Canadian Agent for the account of the
Canadian Lenders the full amount of such Non- Canadian Lender's participations
in all Canadian Loans by 12:00 noon (Chicago time) on the Business Day following
its receipt of such notice from the U.S. Agent (or two Business Days following
receipt of such notice if such notice is received after 12:00 noon (Chicago
time) on any Business Day), then interest shall accrue on such Non-Canadian
Lender's obligation to fund such participations, from the date such obligation
became due to the date such Non- Canadian Lender pays such obligations in full,
at a rate per annum equal to the Canadian Cost of Funds in effect from time to
time during such period. The Canadian Agent shall promptly distribute to each
Canadian Lender an amount equal to its applicable share of the amount received
from any Lender to fund its participation in the Canadian Loans of such Canadian
Lender together with its applicable share of any interest received from any
Lender pursuant to the previous sentence, in the same funds as those received by
the Canadian Agent.
(c) From and after the date on which the Canadian Agent has
received notice from the U.S. Agent of its receipt of a Canadian Participation
Funding Notice, all funds received by the Canadian Agent in payment of the
Canadian Loans, interest thereon and other amounts payable thereon shall be
distributed by the Canadian Agent, in the same funds as those received by the
Canadian Agent, to all Lenders in accordance with their respective Pro Rata
Shares (i.e., giving effect to the funding of participations pursuant to this
Section 2.2.6), except that the Pro Rata Share of such funds of any Non-Canadian
Lender that has not funded its participations as provided herein shall be
distributed ratably to the Canadian Lenders.
(d) If either Agent or any Canadian Lender is required at any
time to return to either Borrower, or to a trustee, receiver, liquidator or
custodian, or any official in any Insolvency Proceeding, any portion of any
payment made by such Borrower to such Agent in respect of any Canadian Loan or
interest or fee thereon, each Non-Canadian Lender shall, on demand of either
Agent, forthwith return to the Canadian Agent for the account of the applicable
Canadian Lender the amount of its Pro Rata Share of the amount so returned by
either Agent or such Canadian Lender plus interest thereon from the date such
demand is made to the date such amount is returned by such Lender to the
Canadian Agent, at a rate per annum equal to the Canadian Cost of Funds from
time to time in effect.
(e) The Required Lenders, the Canadian Lenders and the Agents
may agree on any other reasonable method (such as making assignments of Canadian
Loans) for sharing the risks of Canadian Loans ratably among all Lenders
according to their Pro Rata Shares so long as such method does not materially
disadvantage the Borrowers or any Lender.
30
2.2.7 Canadian Participation Obligations Unconditional.
(a) Each Non-Canadian Lender's obligation to purchase
participation interests in Canadian Loans pursuant to Section 2.2.6 shall be
absolute and unconditional and shall not be affected by any circumstance
whatsoever, including (a) any set-off, counterclaim, recoupment, defense or
other right which such Non-Canadian Lender may have against the Canadian Agent,
any Canadian Lender, either Borrower or any other Person for any reason
whatsoever; (b) the occurrence or continuance of an Event of Default or an
Unmatured Event of Default; (c) any adverse change in the condition (financial
or otherwise) of either Borrower or any other Person; (d) any breach of this
Agreement by either Borrower or any other Lender; (e) any inability of VUCI to
satisfy the conditions precedent to borrowing set forth in this Agreement on the
date upon which any participation interest in any Canadian Loan is to be
purchased; or (f) any other circumstance, happening or event whatsoever, whether
or not similar to any of the foregoing.
(b) Notwithstanding the provisions of clause (a) above, no
Non-Canadian Lender shall be required to purchase a participation interest in a
Canadian Loan pursuant to Section 2.2.6 if, prior to the making by the Canadian
Lenders of such Canadian Loan, the Canadian Lenders received written notice from
either Agent or any Lender specifying that such Agent or such Lender believed in
good faith that one or more of the conditions precedent to the making of such
Canadian Loan were not satisfied and, in fact, such conditions precedent were
not satisfied at the time of the making of such Canadian Loan.
2.3 Voluntary Termination or Reduction of Commitments. (a) The Company
may, upon not less than five Business Days' prior notice to the U.S. Agent,
terminate the Commitments in full or permanently reduce the Commitments by an
aggregate Dollar Equivalent amount of U.S. $2,500,000 or a higher integral
multiple of U.S. $500,000; unless, after giving effect thereto and to any
prepayment of Loans made on the effective date thereof, the aggregate principal
amount of all U.S. Dollar Loans plus the aggregate principal Dollar Equivalent
amount of all Canadian Loans plus the Effective Amount of all L/C Obligations
would exceed the amount of the Commitments. Any reduction of the Commitments
shall be applied to each Lender according to its Pro Rata Share.
(b) If, after giving effect to any reduction of the
Commitments pursuant to clause (a) above, the Canadian Commitment would exceed
the amount of the combined Commitments, the Canadian Commitment shall be
automatically and immediately reduced to the amount of the combined Commitments.
2.4 Interest. (a) Each U.S. Dollar Loan shall bear interest on the
outstanding principal amount thereof from the applicable Borrowing Date at a
rate per annum equal to the Offshore Rate or the Base Rate, as the case may be,
plus the Applicable Margin. Each Canadian Loan shall bear interest on the
outstanding principal amount thereof from the
31
applicable Borrowing Date at a rate per annum equal to the Offshore Rate, the BA
Rate or the Prime Rate, as the case may be, plus the Applicable Margin.
(b) Interest on each Loan shall be paid in arrears on each
Interest Payment Date therefor. Interest also shall be paid on the date of any
prepayment of Offshore Rate Loans under Section 2.1.4 or 2.2.4 for the portion
of the Loans so prepaid.
(c) Notwithstanding subsections (a) and (b) of this Section,
if any amount of principal of any Loan is not paid in full when due (whether at
stated maturity, by acceleration, demand or otherwise), each Borrower agrees, to
the extent permitted by applicable law, to pay interest on such unpaid principal
from the date such amount becomes due until the date such amount is paid in
full, after as well as before any entry of judgment thereon, payable on demand,
at a rate per annum equal to (i) in the case of principal due in respect of any
Loan prior to the end of an Interest Period applicable thereto, the rate
otherwise applicable to such Loan plus 2%, and (ii) in the case of any other
amount, (x) in the case of a U.S. Dollar Loan, the Base Rate from time to time
in effect plus the Applicable Margin plus 2%, and (y) in the case of a Canadian
Dollar Loan, the Prime Rate from time to time in effect plus the Applicable
Margin plus 2%.
(d) Anything herein to the contrary notwithstanding, the
obligations of the Borrowers to any Lender hereunder shall be subject to the
limitation that payments of interest shall not be required for any period for
which interest is computed hereunder to the extent (but only to the extent) that
contracting for or receiving such payment by such Lender would be contrary to
the provisions of any law applicable to such Lender limiting the highest rate of
interest that may be lawfully contracted for, charged or received by such
Lender, and in such event the applicable Borrower shall pay such Lender interest
at the highest rate permitted by applicable law.
2.5 Fees. In addition to certain fees described in Section 4.8:
(a) Agency Fees. The Company shall pay agency fees to the U.S.
Agent for the U.S. Agent's own account as agreed from time to time between the
Company and the U.S. Agent.
(b) Non-Use Fees. The Company shall pay to the U.S. Agent for
the account of each Lender a non-use fee computed at the applicable rate per
annum set forth in Schedule 1.1B multiplied by the average daily amount of such
Lender's unused Commitment, computed on a quarterly basis in arrears on the last
Business Day of each calendar quarter (or, if earlier, the Revolving Termination
Date) as calculated by the U.S. Agent. Such non-use fee shall accrue from the
date of the execution and delivery of this Agreement to the Revolving
Termination Date and shall be due and payable quarterly in arrears on the last
Business Day of each calendar quarter, with the final payment to be made on the
Revolving Termination Date.
32
(c) Upfront Fees. The Company shall pay to the U.S. Agent for
the account of each Lender an upfront fee in the amount previously agreed to by
such Lender and the Agents. Such upfront fee shall be paid on the Closing Date.
2.6 Computation of Fees and Interest. (a) All computations of interest
on Base Rate Loans when the Base Rate is determined by BAI's "reference rate"
and on Prime Rate Loans and BA Rate Loans shall be made on the basis of a year
of 365 or 366 days, as the case may be, and actual days elapsed. All other
computations of interest and fees shall be made on the basis of a 360-day year
and actual days elapsed (which results in more interest and fees being paid than
if computed on the basis of a 365-day year). Interest and fees shall accrue
during each period during which interest or fees are computed from the first day
thereof to the last day thereof.
(b) Each determination of an interest rate or a Dollar Equivalent
amount by the Applicable Agent shall be conclusive and binding on the Borrowers
and the Lenders in the absence of manifest error. The Applicable Agent will, at
the request of the applicable Borrower or any Lender, deliver to such Borrower
or such Lender, as the case may be, a statement showing the quotations used by
such Agent in determining any interest rate or Dollar Equivalent amount.
(c) For the purposes of the Interest Act (Canada), where any rate of
interest is stated herein to be calculated on the basis of a 360-day year, the
annual rate of interest to which such stated rate is equivalent is such stated
rate, multiplied by the number of days in the year (being 365 or 366, as the
case may be), and divided by 360.
2.7 Payments by the Borrowers. (a) All payments to be made by the
Borrowers shall be made without set-off, recoupment or counterclaim. Except as
otherwise expressly provided herein, all payments by the Borrowers shall be made
to the Applicable Agent for the account of the Lenders at the applicable Payment
Office and (i) with respect to principal of, interest on and any other amount
relating to any Canadian Loan, shall be made in Canadian Dollars, and (ii) with
respect to all other amounts payable hereunder, shall be made in U.S. Dollars.
Such payments shall be made in Same Day Funds and (x) in the case of Canadian
Dollar payments, no later than 11:00 a.m. (Chicago time) on the date specified
herein and (y) in the case of U.S. Dollar payments, no later than 11:00 a.m.
(Chicago time) on the date specified herein. The Applicable Agent will promptly
distribute to each Lender its Pro Rata Share (or its Canadian Percentage or
other applicable share as expressly provided in Section 2.2.6 or elsewhere
herein) of such payment in like funds as received. Any payment received by an
Agent later than the time specified in clause (x) or (y) above, as applicable,
shall be deemed to have been received on the following Business Day, and any
applicable interest shall continue to accrue.
33
(b) Whenever any payment is due on a day other than a Business
Day, such payment shall be made on the following Business Day, and such
extension of time shall be included in the computation of interest or fees, as
the case may be.
(c) Unless the Applicable Agent receives notice from the
applicable Borrower prior to the date on which any payment is due to the Lenders
(or any of them) that such Borrower will not make such payment in full as and
when required, such Agent may assume that such Borrower has made such payment in
full to such Agent on such date in Same Day Funds and such Agent may (but shall
not be required to), in reliance upon such assumption, distribute to each
applicable Lender on such date the amount then due such Lender. If and to the
extent the applicable Borrower has not made such payment in full to such Agent,
each applicable Lender shall repay to such Agent on demand such amount
distributed to such Lender, together with interest thereon at (i) in the case of
a payment in Canadian Dollars, the Canadian Cost of Funds, and (ii) in the case
of a payment in U.S. Dollars, the U.S. Federal Funds Rate, in each case for each
day from the date such amount is distributed to such Lender until the date
repaid.
2.8 Payments by the Lenders to the Agents. (a) Unless the Applicable
Agent receives notice from a Lender at least one Business Day prior to the date
of any Borrowing that such Lender will not make available as and when required
hereunder to such Agent for the account of the applicable Borrower the amount of
that Lender's Pro Rata Share (in the case of U.S. Dollar Borrowing) or Canadian
Percentage (in the case of Canadian Borrowing) of such Borrowing, as applicable,
such Agent may assume that such Lender has made such amount available to such
Agent in Same Day Funds on the Borrowing Date and such Agent may (but shall not
be required to), in reliance upon such assumption, make available to the
applicable Borrower on such date a corresponding amount. If and to the extent
any Lender shall not have made its full amount available to such Agent in Same
Day Funds and such Agent in such circumstances has made available to the
applicable Borrower such amount, such Lender shall on the Business Day following
such Borrowing Date make such amount available to such Agent, together with
interest at (i) in the case of a Canadian Dollar Loan, the Canadian Cost of
Funds, and (ii) in the case of a U.S. Dollar Loan, at the U.S. Federal Funds
Rate, in each case for each day during such period. A notice of either Agent
submitted to any Lender with respect to amounts owing under this subsection (a)
shall be conclusive, absent manifest error. If such amount is so made available,
such payment to the Applicable Agent shall constitute such Lender's Loan on the
date of Borrowing for all purposes of this Agreement. If such amount is not made
available to the Applicable Agent on the Business Day following the Borrowing
Date, such Agent will notify the Company of such failure to fund and, upon
demand by such Agent, the Company shall pay (or, if applicable, shall cause VUCI
to pay) such amount to such Agent for such Agent's account, together with
interest thereon for each day elapsed since the date of such U.S. Dollar
Borrowing or Canadian Borrowing, at a rate per annum equal to the interest rate
applicable at the time to the U.S. Dollar Loans or Canadian Loans, as the case
may be, comprising such Borrowing.
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(b) The failure of any Lender to make any Loan on any
Borrowing Date shall not relieve any other Lender of its obligation hereunder
(if any) to make a Loan on such Borrowing Date, but no Lender shall be
responsible for the failure of any other Lender to make the Loan to be made by
such other Lender on any Borrowing Date.
2.9 Sharing of Payments, Etc. If, other than as expressly provided
elsewhere herein, any Lender shall obtain any payment or other recovery (whether
voluntary, involuntary, by application of offset, enforcement of security or
otherwise) on account of principal of or interest on any Loan or any
participation therein, its participation in any Letter of Credit or any fees in
excess of the share of payments and other recoveries (exclusive of payments or
recoveries under Article V) in excess of its Pro Rata Share (or other share
contemplated hereunder), such Lender shall immediately (a) notify the Agents of
such fact and (b) purchase from the other Lenders, in a manner to be reasonably
specified by the Agents, such participations in the Loans held by them (and, if
applicable, such sub-participations in the Canadian Loans and the Letters of
Credit) as shall be necessary to cause such purchasing Lender to share the
excess payment or other recovery pro rata with each of them; provided, however,
that if all or any portion of the excess payment or other recovery is thereafter
recovered from such purchasing Lender, the purchase shall be rescinded and the
purchase price restored to the extent of such recovery, together with an amount
equal to such paying Lender's ratable share (according to the proportion of (i)
the amount of such paying Lender's required repayment to (ii) the total amount
so recovered from the purchasing Lender) of any interest or other amount paid or
payable by the purchasing Lender in respect of the total amount so recovered.
Each Borrower agrees that any Lender so purchasing a participation from another
Lender may, to the fullest extent permitted by law, exercise all its rights of
payment (including the right of set-off, but subject to Section 11.10) with
respect to such participation as fully as if such Lender were the direct
creditor of such Borrower in the amount of such participation. The Agents will
keep records (which shall be conclusive and binding in the absence of manifest
error) of participations purchased under this Section and will in each case
notify the Lenders following any such purchases or repayments.
2.10 Currency Exchange Fluctuations. (a) The U.S. Agent will determine
the Dollar Equivalent amount of (i) any Canadian Loans as of the requested
Borrowing Date therefor and any Conversion/Continuation Date therefor and (ii)
each outstanding Borrowing of Canadian Loans as of the last Business Day of each
month (and, in each case, the amount so determined shall be deemed for all
purposes of this Agreement to be the Dollar Equivalent amount of the applicable
Loans until the next Computation Date for such Loans).
(b) If on any Computation Date the aggregate Dollar Equivalent of all
outstanding Loans plus the aggregate Effective Amount of all L/C Obligations
exceeds the combined Commitments, one or more of the Borrowers shall immediately
prepay one or more Loans in an amount sufficient to eliminate such excess.
35
2.11 Extension of Revolving Termination Date. The Company, the Agents
and the Lenders hereby agree that:
(a) at least 45 but not more than 60 days before the then-scheduled
Revolving Termination Date, the Company may, by delivery of a written request to
the U.S. Agent, request that the Lenders extend the Revolving Termination Date
for one additional year.
(b) Upon receipt of such notification from the Company, the Lenders
may, in their sole discretion, agree to extend the Revolving Termination Date
for one year. Nothing in this Section 2.11 shall commit any Lender to agree to
any extension of the Revolving Termination Date, or limit the complete
discretion of the Lenders in responding to any such extension request. Within 30
days of its receipt of any extension request from the Company, each Lender will
notify the U.S. Agent as to its decision to extend the Revolving Termination
Date and the U.S. Agent shall then notify the Company as to such decision. If
any Lender shall not so notify the U.S. Agent within the time period specified
above, such Lender shall be deemed not to have consented to such request.
ARTICLE III
LOAN ACCOUNTS; NOTES
--------------------
3.1 Loan Accounts. The Loans made by each Lender and the Letters of
Credit Issued by the Issuing Lender shall be evidenced by one or more accounts
or records maintained by the applicable Agent, such Lender or the Issuing
Lender, as the case may be, in the ordinary course of business. The accounts or
records maintained by the U.S. Agent (and, in the case of Canadian Loans, the
Canadian Agent), the Issuing Lender and each Lender shall be conclusive (absent
manifest error) as to the amount of the Loans made by the Lenders to the
Borrowers and the Letters of Credit Issued for the account of the Company, and
the interest and payments thereon. Any failure to so record or any error in
doing so shall not, however, limit or otherwise affect the obligations of the
Borrowers hereunder to pay any amount owing with respect to any Loan or any
Letter of Credit.
3.2 Notes. Upon the request of any Lender made through the U.S. Agent,
the Loans made by such Lender to either Borrower may be evidenced by one or more
Notes issued by such Borrower, instead of loan accounts. Each such Lender may
endorse on the schedules annexed to its Note(s) the date, amount and maturity of
each Loan made by it and the amount of each payment of principal made by the
applicable Borrower with respect thereto, and such Lender's record shall be
conclusive (absent manifest error); provided that the failure of a Lender to
make, or an error in making, a notation thereon with respect to any Loan shall
not limit or otherwise affect the obligations of the applicable Borrower
hereunder or under any such Note to such Lender.
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ARTICLE IV
THE LETTERS OF CREDIT
---------------------
4.1 The Letter of Credit Subfacility. (a) On the terms and conditions
set forth herein, (i) the Issuing Lender agrees, (A) from time to time, on any
Business Day during the period from the Closing Date to the Revolving
Termination Date, to issue Letters of Credit for the account of the Company, and
to amend or renew Letters of Credit previously issued by it, in accordance with
subsections 4.2(c) and (d), and (B) to honor properly drawn drafts under the
Letters of Credit issued by it; and (ii) the Lenders severally agree to
participate in Letters of Credit Issued for the account of the Company; provided
that the Issuing Lender shall not be obligated to Issue, and no Lender shall be
obligated to participate in, any Letter of Credit if as of the date of Issuance
of such Letter of Credit (the "Issuance Date") (1) the Effective Amount of all
L/C Obligations plus the aggregate principal Dollar Equivalent amount of all
Loans exceeds the amount of the combined Commitments; (2) the participation of
such Lender in the Effective Amount of all L/C Obligations plus (without
duplication) the outstanding principal amount of the U.S. Dollar Loans of such
Lender plus such Lender's Pro Rata Share of the aggregate outstanding principal
Dollar Equivalent amount of all Canadian Loans exceeds such Lender's Commitment;
or (3) the Effective Amount of all L/C Obligations exceeds the L/C Commitment.
Within the foregoing limits, and subject to the other terms and conditions
hereof, the Company's ability to obtain Letters of Credit shall be fully
revolving, and, accordingly, the Company may, during the foregoing period,
obtain Letters of Credit to replace Letters of Credit which have expired or
which have been drawn upon and reimbursed.
(b) The Issuing Lender shall be under no obligation to Issue
any Letter of Credit if:
(i) any order, judgment or decree of any Governmental
Authority or arbitrator shall by its terms purport to enjoin or
restrain the Issuing Lender from Issuing such Letter of Credit, or any
Requirement of Law applicable to the Issuing Lender or any request or
directive (whether or not having the force of law) from any
Governmental Authority with jurisdiction over the Issuing Lender shall
prohibit, or request that the Issuing Lender refrain from, the Issuance
of letters of credit generally or such Letter of Credit in particular
or shall impose upon the Issuing Lender with respect to such Letter of
Credit any restriction, reserve or capital requirement (for which the
Issuing Lender is not otherwise compensated hereunder) not in effect on
the Closing Date, or shall impose upon the Issuing Lender any
unreimbursed loss, cost or expense which was not applicable on the
Closing Date and which the Issuing Lender in good ▇▇▇▇▇ ▇▇▇▇▇ material
to it;
(ii) the Issuing Lender has received written notice
from any Lender, the U.S. Agent or the Company, on or prior to the
Business Day prior to the
37
requested date of Issuance of such Letter of Credit, that one or more
of the applicable conditions contained in Article VI is not then
satisfied;
(iii) the expiry date of any requested Letter of
Credit is more than two years after the Revolving Termination Date,
unless all of the Lenders have approved such expiry date in writing;
(iv) any requested Letter of Credit does not provide
for drafts, or is not otherwise in form and substance acceptable to the
Issuing Lender, or the Issuance of a Letter of Credit shall violate any
applicable policy of the Issuing Lender;
(v) such Letter of Credit is denominated in a
currency other than U.S. Dollars; or
(vi) such Letter of Credit is not a standby letter of
credit.
4.2 Issuance, Amendment and Renewal of Letters of Credit. (a) Each
Letter of Credit shall be irrevocable and shall be issued upon the written
request of the Company received by the Issuing Lender (with a copy sent by the
Company to the U.S. Agent) at least five days (or such shorter time as the
Issuing Lender and the U.S. Agent may agree in a particular instance in their
sole discretion) prior to the proposed date of Issuance. Each such request for
Issuance of a Letter of Credit shall be by facsimile, confirmed immediately in
an original writing, in the form of an L/C Application, and shall specify in
form and detail satisfactory to the Issuing Lender: (i) the proposed date of
issuance of the Letter of Credit (which shall be a Business Day); (ii) the face
amount of the Letter of Credit; (iii) the expiry date of the Letter of Credit;
(iv) the name and address of the beneficiary thereof; (v) the documents to be
presented by the beneficiary of the Letter of Credit in case of any drawing
thereunder; (vi) the full text of any certificate to be presented by the
beneficiary in case of any drawing thereunder; and (vii) such other matters as
the Issuing Lender may reasonably require.
(b) At least two Business Days prior to the Issuance of any
Letter of Credit, the Issuing Lender will confirm with the U.S. Agent (by
telephone or in writing) that the U.S. Agent has received a copy of the L/C
Application or L/C Amendment Application from the Company and, if not, the
Issuing Lender will provide the U.S. Agent with a copy thereof. Unless the
Issuing Lender has received, on or before the Business Day immediately preceding
the date on which the Issuing Lender is to issue a requested Letter of Credit,
(A) notice from the U.S. Agent directing the Issuing Lender not to issue such
Letter of Credit because such issuance is not then permitted under subsection
4.1(a) as a result of the limitations set forth in clause (1), (2) or (3)
thereof or (B) a notice described in subsection 4.1(b)(ii), then, subject to the
terms and conditions hereof, the Issuing Lender shall, on the requested date,
issue a Letter of Credit for the account of the Company in accordance with the
Issuing Lender's usual and customary business practices.
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(c) From time to time while a Letter of Credit is outstanding
and prior to the Revolving Termination Date, the Issuing Lender will, upon the
written request of the Company received by the Issuing Lender (with a copy sent
by the Company to the U.S. Agent) at least five days (or such shorter time as
the Issuing Lender and the U.S. Agent may agree in a particular instance in
their sole discretion) prior to the proposed date of amendment, amend any Letter
of Credit issued by it. Each such request for amendment of a Letter of Credit
shall be made by facsimile, confirmed immediately in an original writing, made
in the form of an L/C Amendment Application and shall specify in form and detail
satisfactory to the Issuing Lender: (i) the Letter of Credit to be amended; (ii)
the proposed date of amendment of such Letter of Credit (which shall be a
Business Day); (iii) the nature of the proposed amendment; and (iv) such other
matters as the Issuing Lender may require. The Issuing Lender shall not have any
obligation to amend any Letter of Credit if: (A) the Issuing Lender would have
no obligation at such time to issue such Letter of Credit in its amended form
under the terms of this Agreement; or (B) the beneficiary of such Letter of
Credit does not accept the proposed amendment to such Letter of Credit.
(d) The Issuing Lender and the Lenders agree that, while any
Letter of Credit is outstanding and prior to the Revolving Termination Date, at
the option of the Company and upon the written request of the Company received
by the Issuing Lender (with a copy sent by the Company to the U.S. Agent) at
least five days (or such shorter time as the Issuing Lender and the U.S. Agent
may agree in a particular instance in their sole discretion) prior to the
proposed date of notification of renewal, the Issuing Lender shall be entitled
to authorize the automatic renewal of any Letter of Credit. Each such request
for renewal of a Letter of Credit shall be made by facsimile, confirmed
immediately in an original writing, in the form of an L/C Amendment Application,
and shall specify in form and detail satisfactory to the Issuing Lender: (i) the
Letter of Credit to be renewed; (ii) the proposed date of notification of
renewal of such Letter of Credit (which shall be a Business Day); (iii) the
revised expiry date of such Letter of Credit (which, unless all Lenders
otherwise consent, shall be prior to the Revolving Termination Date); and (iv)
such other matters as the Issuing Lender may reasonably require. The Issuing
Lender shall be under no obligation to renew any Letter of Credit if: (A) the
Issuing Lender would have no obligation at such time to issue or amend such
Letter of Credit in its renewed form under the terms of this Agreement; or (B)
the beneficiary of such Letter of Credit does not accept the proposed renewal of
such Letter of Credit. If any outstanding Letter of Credit shall provide that it
shall be automatically renewed unless the beneficiary thereof receives notice
from the Issuing Lender that such Letter of Credit shall not be renewed, and if
at the time of renewal such Issuing Lender would be entitled to authorize the
automatic renewal of such Letter of Credit in accordance with this subsection
4.2(d) upon the request of the Company but the Issuing Lender shall not have
received any L/C Amendment Application from the Company with respect to such
renewal or other written direction by the Company with respect thereto, the
Issuing Lender shall nonetheless be permitted to allow such Letter of Credit to
renew, and the Company and the Lenders hereby authorize such renewal, and,
accordingly, such Issuing
39
Lender shall be deemed to have received an L/C Amendment Application from the
Company requesting such renewal.
(e) The Issuing Lender may (to the extent permitted under the
applicable Letter of Credit), at its election (or as required by the U.S. Agent
at the direction of the Required Lenders), deliver any notice of termination or
other communication to any Letter of Credit beneficiary or transferee, and take
any other action as necessary or appropriate, at any time and from time to time,
in order to cause the expiry date of any Letter of Credit to be a date not later
than the scheduled Revolving Termination Date.
(f) This Agreement shall control in the event of any conflict
with any L/C- Related Document (other than any Letter of Credit).
(g) The Issuing Lender will deliver to the U.S. Agent,
concurrently or promptly following its delivery of a Letter of Credit, or an
amendment to or renewal of a Letter of Credit, to an advising bank or a
beneficiary, a true and complete copy of such Letter of Credit or amendment to
or renewal of a Letter of Credit.
4.3 Risk Participations, Drawings and Reimbursements. (a) Immediately
upon the Issuance of each Letter of Credit, each Lender shall be deemed to, and
hereby irrevocably and unconditionally agrees to, purchase from the Issuing
Lender a participation in such Letter of Credit and each drawing thereunder in
an amount equal to the product of (i) such Lender's Pro Rata Share times (ii)
the maximum amount available to be drawn under such Letter of Credit and the
amount of such drawing, respectively.
(b) In the event of any request for a drawing under a Letter
of Credit by the beneficiary or transferee thereof, the Issuing Lender will
promptly notify the Company and the U.S. Agent. The Company shall reimburse the
Issuing Lender prior to 12:00 noon (Chicago time), on each date that any amount
is paid by the Issuing Lender under any Letter of Credit (each such date, an
"Honor Date"), in an amount equal to the amount so paid by the Issuing Lender.
If the Company fails to reimburse the Issuing Lender for the full amount of any
drawing under any Letter of Credit by 12:00 noon (Chicago time) on the Honor
Date, the Issuing Lender will promptly notify the U.S. Agent and the U.S. Agent
will promptly notify each Lender thereof, and the Company shall be deemed to
have requested that Base Rate Loans be made by the Lenders to be disbursed on
the Honor Date under such Letter of Credit, subject to the amount of the
unutilized portion of the combined Commitments and subject to the conditions set
forth in Section 6.2 (other than subsection 6.2(a) thereof). Any notice given by
the Issuing Lender or the U.S. Agent pursuant to this subsection 4.3(b) may be
oral if immediately confirmed in writing (including by facsimile); provided that
the lack of such an immediate confirmation shall not affect the conclusiveness
or binding effect of such notice.
40
(c) Each Lender shall upon receipt of any notice pursuant to
subsection 4.3(b) make available to the U.S. Agent for the account of the
Issuing Lender an amount in U.S. Dollars and in immediately available funds
equal to its Pro Rata Share of the amount of the drawing, whereupon the
participating Lenders shall (subject to subsection 4.3(d)) each be deemed to
have made a Base Rate Loan to the Company in such amount. If any Lender so
notified fails to make available to the U.S. Agent for the account of the
Issuing Lender the amount of such Lender's Pro Rata Share of the amount of such
drawing by no later than 2:00 p.m. (Chicago time) on the Honor Date, then
interest shall accrue on such Lender's obligation to make such payment, from the
Honor Date to the date such Lender makes such payment, at a rate per annum equal
to the U.S. Federal Funds Rate in effect from time to time during such period.
The U.S. Agent will promptly give notice of the occurrence of the Honor Date,
but failure of the U.S. Agent to give any such notice on the Honor Date or in
sufficient time to enable any Lender to effect such payment on such date shall
not relieve such Lender from its obligations under this Section 4.3.
(d) With respect to any unreimbursed drawing that is not
converted into Base Rate Loans in whole or in part, because of the Company's
failure to satisfy the conditions set forth in Section 6.2 or for any other
reason, the Company shall be deemed to have incurred from the Issuing Lender an
L/C Borrowing in the amount of such drawing, which L/C Borrowing shall be due
and payable on demand (together with interest) and shall bear interest at a rate
per annum equal to the Base Rate plus 2% per annum, and each Lender's payment to
the Issuing Lender pursuant to subsection 4.3(c) shall be deemed payment in
respect of its participation in such L/C Borrowing and shall constitute an L/C
Advance from such Lender in satisfaction of its participation obligation under
this Section 4.3.
(e) Each Lender's obligation in accordance with this Agreement
to make Loans or L/C Advances, as contemplated by this Section 4.3, as a result
of a drawing under a Letter of Credit, shall be absolute and unconditional and
without recourse to the Issuing Lender and shall not be affected by any
circumstance, including (i) any set-off, counterclaim, recoupment, defense or
other right which such Lender may have against the Issuing Lender, the Company
or any other Person for any reason whatsoever; (ii) the existence of an Event of
Default, an Unmatured Event of Default or a Material Adverse Effect; or (iii)
any other circumstance, happening or event whatsoever, whether or not similar to
any of the foregoing; provided that each Lender's obligation to make Loans (but
not L/C Advances) under this Section 4.3 is subject to the conditions set forth
in Section 6.2.
4.4 Repayment of Participations. (a) Promptly upon (and only upon)
receipt by the U.S. Agent for the account of the Issuing Lender of immediately
available funds from the Company (i) in reimbursement of any payment made by the
Issuing Lender under a Letter of Credit with respect to which any Lender has
paid the U.S. Agent for the account of the Issuing Lender for such Lender's
participation in such Letter of Credit pursuant to Section 4.3 or (ii) in
payment of interest thereon, the U.S. Agent will pay to each Lender, in the
41
same funds as those received by the U.S. Agent for the account of the Issuing
Lender, the amount of such Lender's Pro Rata Share of such funds, and the
Issuing Lender shall receive the amount of the Pro Rata Share of such funds of
any Lender that did not so pay the U.S. Agent for the account of the Issuing
Lender.
(b) If the U.S. Agent or the Issuing Lender is required at any
time to return to the Company, or to a trustee, receiver, liquidator or
custodian, or to any official in any Insolvency Proceeding, any portion of any
payment made by the Company to the U.S. Agent for the account of the Issuing
Lender pursuant to subsection 4.4(a) in reimbursement of a payment made under a
Letter of Credit or interest or fee thereon, each Lender shall, on demand of the
U.S. Agent, forthwith return to the U.S. Agent or the Issuing Lender the amount
of its Pro Rata Share of any amount so returned by the U.S. Agent or the Issuing
Lender plus interest thereon from the date such demand is made to the date such
amount is returned by such Lender to the U.S. Agent or the Issuing Lender, at a
rate per annum equal to the U.S. Federal Funds Rate in effect from time to time.
4.5 Role of the Issuing Lender. (a) Each Lender and the Company agree
that, in paying any drawing under a Letter of Credit, the Issuing Lender shall
have no responsibility to obtain any document (other than any sight draft and
certificate expressly required by such Letter of Credit) or to ascertain or
inquire as to the validity or accuracy of any such document or the authority of
the Person executing or delivering any such document.
(b) No Agent-Related Person nor any of the respective
correspondents, participants or assignees of the Issuing Lender shall be liable
to any Lender for: (i) any action taken or omitted in connection herewith at the
request or with the approval of the Lenders (including the Required Lenders, as
applicable); (ii) any action taken or omitted in the absence of gross negligence
or willful misconduct; or (iii) the due execution, effectiveness, validity or
enforceability of any L/C-Related Document.
(c) The Company hereby assumes all risks of the acts or
omissions of any beneficiary or transferee with respect to its use of any Letter
of Credit; provided that this assumption is not intended to, and shall not,
preclude the Company's pursuing such rights and remedies as it may have against
the beneficiary or transferee at law or under any other agreement. No
Agent-Related Person, nor any of the respective correspondents, participants or
assignees of the Issuing Lender, shall be liable or responsible for any of the
matters described in clauses (i) through (vii) of Section 4.6; provided that,
anything in such clauses to the contrary notwithstanding, the Company may have a
claim against the Issuing Lender, and the Issuing Lender may be liable to the
Company, to the extent, but only to the extent, of any direct, as opposed to
consequential or exemplary, damages suffered by the Company which the Company
proves were caused by the Issuing Lender's willful misconduct or gross
negligence or the Issuing Lender's willful failure to pay under any Letter of
Credit after the presentation to it by the beneficiary of a sight draft and
certificate(s) strictly complying with the terms and conditions of a Letter of
Credit. In furtherance and not in limitation of the
42
foregoing: (i) the Issuing Lender may accept documents that appear on their face
to be in order, without responsibility for further investigation, regardless of
any notice or information to the contrary; and (ii) the Issuing Lender shall not
be responsible for the validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign a Letter of Credit or the rights
or benefits thereunder or proceeds thereof, in whole or in part, which may prove
to be invalid or ineffective for any reason.
4.6 Obligations of the Company. The obligations of the Company under
this Agreement and any L/C-Related Document to reimburse the Issuing Lender for
a drawing under a Letter of Credit, and to repay any L/C Borrowing and any
drawing under a Letter of Credit converted into Loans, shall be unconditional
and irrevocable, and shall be paid strictly in accordance with the terms of this
Agreement and each L/C-Related Document under all circumstances, including the
following:
(i) any lack of validity or enforceability of this
Agreement or any L/C- Related Document;
(ii) any change in the time, manner or place of
payment of, or in any other term of, all or any of the obligations of
the Company in respect of any Letter of Credit or any other amendment
or waiver of or any consent to departure from all or any of the
L/C-Related Documents;
(iii) the existence of any claim, set-off, defense or
other right that the Company may have at any time against any
beneficiary or any transferee of any Letter of Credit (or any Person
for whom any such beneficiary or any such transferee may be acting),
the Issuing Lender or any other Person, whether in connection with this
Agreement, the transactions contemplated hereby or by the L/C-Related
Documents or any unrelated transaction;
(iv) any draft, demand, certificate or other document
presented under any Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being
untrue or inaccurate in any respect; or any loss or delay in the
transmission or otherwise of any document required in order to make a
drawing under any Letter of Credit;
(v) any payment by the Issuing Lender under any
Letter of Credit against presentation of a draft or certificate that
does not strictly comply with the terms of such Letter of Credit; or
any payment made by the Issuing Lender under any Letter of Credit to
any Person purporting to be a trustee in bankruptcy,
debtor-in-possession, assignee for the benefit of creditors,
liquidator, receiver or other representative of or successor to any
beneficiary or any transferee of any Letter of Credit, including any
arising in connection with any Insolvency Proceeding;
43
(vi) any exchange, release or non-perfection of any
collateral, or any release or amendment or waiver of or consent to
departure from any guarantee, for all or any of the obligations of the
Company in respect of any Letter of Credit; or
(vii) any other circumstance or happening whatsoever,
whether or not similar to any of the foregoing, including any other
circumstance that might otherwise constitute a defense available to, or
a discharge of, the Company or a guarantor.
4.7 Cash Collateral Pledge. If any Letter of Credit remains outstanding
and partially or wholly undrawn as of the Revolving Termination Date, then the
Company shall immediately Cash Collateralize the L/C Obligations in an amount
equal to the maximum amount then available to be drawn under all Letters of
Credit.
4.8 Letter of Credit Fees. (a) The Company shall pay to the U.S. Agent
for the ratable account of each Lender a letter of credit fee with respect to
each Letter of Credit computed at the applicable rate per annum set forth in
Schedule 1.1B of the average daily maximum amount available to be drawn on such
Letter of Credit, computed on a quarterly basis in arrears on the last Business
Day of each calendar quarter and on the Revolving Termination Date (or such
later date on which such Letter of Credit shall expire or be fully drawn) as
calculated by the U.S. Agent.
(b) The Company shall pay to the U.S. Agent for the account of
the Issuing Lender a letter of credit fronting fee for each Letter of Credit
Issued by the Issuing Lender at the rate per annum separately agreed to by the
Company and the Issuing Lender of the average daily maximum amount available to
be drawn on such Letter of Credit, computed on the first day of each calendar
quarter and on the Revolving Termination Date (or such later date on which such
Letter of Credit shall expire or be fully drawn) as calculated by the U.S.
Agent.
(c) The letter of credit fees payable under subsection 4.8(a)
and the fronting fees payable under subsection 4.8(b) shall be due and payable
quarterly in arrears on the first day of each calendar quarter during which
Letters of Credit are outstanding, commencing on the first such quarterly date
to occur after the Closing Date, through the Revolving Termination Date (or such
later date upon which all outstanding Letters of Credit shall have been
terminated), with the final payment to be made on the Revolving Termination Date
(or such later expiration date).
(d) The Company shall pay to the Issuing Lender from time to
time on demand the normal issuance, presentation, amendment and other processing
fees, and other standard costs and charges, of the Issuing Lender relating to
letters of credit as from time to time in effect.
44
4.9 Uniform Customs and Practice. The Uniform Customs and Practice for
Documentary Credits as published by the International Chamber of Commerce most
recently at the time of issuance of any Letter of Credit shall (unless otherwise
expressly provided in such Letter of Credit) apply to each Letter of Credit.
ARTICLE V
TAXES, YIELD PROTECTION AND ILLEGALITY
--------------------------------------
5.1 Taxes. (a) Any and all payments by either Borrower to each Lender
and each Agent under this Agreement shall be made free and clear of, and without
deduction or withholding for, any Taxes. In addition, the applicable Borrower
shall pay all Other Taxes.
(b) The applicable Borrower agrees to indemnify each Lender
and each Agent for, and hold each such Person harmless from, the full amount of
Taxes or Other Taxes (including any Taxes or Other Taxes imposed by any
jurisdiction on amounts payable under this Section) paid by such Lender or such
Agent and any liability (including penalties, interest, additions to tax and
expenses) arising therefrom or with respect thereto, whether or not such Taxes
or Other Taxes were correctly or legally asserted. Payment under this
indemnification shall be made within 30 days after the date such Lender or such
Agent makes written demand therefor.
(c) If either Borrower shall be required by law to deduct or
withhold any Taxes or Other Taxes from or in respect of any sum payable
hereunder to any Lender or Agent, then:
(i) the sum payable shall be increased as necessary
so that after making all required deductions and withholdings
(including deductions and withholdings applicable to additional sums
payable under this Section) such Lender or such Agent, as the case may
be, receives an amount equal to the sum it would have received had no
such deductions or withholdings been made;
(ii) such Borrower shall make such deductions and
withholdings; and
(iii) such Borrower shall pay the full amount
deducted or withheld to the relevant taxing authority or other
authority in accordance with applicable law.
(d) Within 30 days after the date of any payment by a Borrower
of Taxes or Other Taxes, such Borrower shall furnish the Agents the original or
a copy of a receipt evidencing payment thereof, or other evidence of payment
satisfactory to the Agents.
45
(e) If either Borrower is required to pay additional amounts
to any Lender or either Agent pursuant to subsection (c) of this Section, then
such Lender shall use reasonable efforts (consistent with legal and regulatory
restrictions) to change the jurisdiction of its Lending Office so as to
eliminate any such additional payment by such Borrower which may thereafter
accrue, if such change in the judgment of such Lender is not otherwise
disadvantageous to such Lender.
(f) (i) Each Lender, other than a Canadian Lender, which is a
foreign person (i.e., a person other than a United States person for United
States Federal income tax purposes) agrees that:
(A) it shall, no later than the Closing Date (or, in
the case of a Lender which becomes a party hereto after the
Closing Date, the date upon which such Lender becomes a party
hereto) deliver to the U.S. Agent and to the Company through
the U.S. Agent two accurate and complete signed originals of
Internal Revenue Service Form 4224 or any successor thereto
("Form 4224"), or two accurate and complete signed originals
of Internal Revenue Service Form 1001 or any successor thereto
("Form 1001"), as appropriate, in each case indicating that
such Lender is on the date of delivery thereof entitled to
receive payments of principal, interest and fees under this
Agreement free from withholding of United States Federal
income tax;
(B) if at any time such Lender makes any change
necessitating a new Form 4224 or Form 1001, it shall with
reasonable promptness deliver to the U.S. Agent and to the
Company through the U.S. Agent in replacement for, or in
addition to, the forms previously delivered by it hereunder,
two accurate and complete signed originals of Form 4224 or
Form 1001, as appropriate, in each case indicating that such
Lender is on the date of delivery thereof entitled to receive
payments of principal, interest and fees under this Agreement
free from withholding of United States Federal income tax;
(C) it shall, before or promptly after the occurrence
of any event (including the passing of time (and in any event
(x) in the case of a Form 4224, before the payment of any
interest in each succeeding taxable year of such Lender after
the Closing Date during which interest may be paid under this
Agreement, and (y) in the case of a Form 1001, before the
payment of any interest in each third succeeding calendar year
after the Closing Date during which interest may be paid under
this Agreement) but excluding any event mentioned in clause
(B) above) requiring a change in or renewal of the most recent
Form 4224 or Form 1001 previously delivered by such Lender,
deliver to the U.S. Agent and to the Company through the U.S.
Agent two accurate and complete original signed copies of Form
4224 or Form 1001 in replacement for the forms previously
delivered by such Lender; and
46
(D) it shall, promptly upon the Company's or the U.S.
Agent's reasonable request to that effect, deliver to the
Company or the U.S. Agent (as the case may be) such other
forms or similar documentation as may be required from time to
time by any applicable law, treaty, rule or regulation in
order to establish such Lender's tax status for withholding
purposes.
(ii) Each Canadian Lender agrees that it shall, no later than
the Closing Date (or, in the case of a Canadian Lender which becomes a party
hereto after the Closing Date, the date upon which such Lender becomes a party
hereto) deliver to the Canadian Agent and to VUCI through the Canadian Agent an
instrument in writing certifying one of the following:
(A) that such Canadian Lender is not a non-resident
of Canada for the purposes of Part XIII of the Income Tax Act
(Canada) and that it is the sole beneficial owner of payments
of principal of and interest on its Canadian Loans under this
Agreement;
(B) its jurisdiction of incorporation and residence
for tax purposes, that it is the sole beneficial owner of
payments of principal of and interest on its Canadian Loans
under this Agreement and the rate of withholding tax
applicable to any payment of interest to it pursuant to any
applicable tax conventions between Canada, on the one hand,
and its jurisdiction of residence for tax purposes, on the
other hand; or
(C) its jurisdiction of incorporation and residence
for tax purpose, the names of the beneficial owners of
payments of principal of and interest on its Canadian Loans
under this Agreement, the residence for tax purposes of each
of such beneficial owners and the rate of withholding tax
applicable to any payment of interest in respect of each
beneficial owner pursuant to any applicable tax convention
between Canada, on the one hand, and the jurisdiction of
residence for tax purposes of each beneficial owner, on the
other hand;
and undertaking to advise VUCI and the Canadian Agent, of any changes in respect
of (A), (B) or (C), as the case may be (provided that no Canadian Lender shall
be required to notify VUCI or the Canadian Agent of any change resulting solely
from delivery to the Canadian Agent of a Canadian Participation Funding Notice).
In addition, each Canadian Lender shall, promptly upon VUCI's or the Canadian
Agent's reasonable request to that effect, deliver to VUCI or the Canadian Agent
(as the case may be) such other instruments in writing, forms or similar
documentation as may be required from time to time by any applicable law,
treaty, rule or regulation or the official interpretation of such laws or
regulations by any Governmental Authority charged with the interpretation or
administration thereof (whether or not having the force of law) in order to
establish such Canadian Lender's tax status for
47
withholding purposes. If the Canadian Agent receives a request from Revenue
Canada Customs, Excise and Taxation or another taxing authority to provide
additional information concerning the withholding tax status of any Canadian
Lender, such Canadian Lender shall (upon notice of such request from the
Canadian Agent) use reasonable efforts to obtain and deliver such information to
such taxing authority and the Canadian Agent.
(iii) Notwithstanding the foregoing provisions of this
subsection (f) or any other provision of this Section 5.1, no Lender shall be
required to deliver any form pursuant to this Section 5.1 if such Lender is not
legally permitted to deliver such form as a result of a change in any
Requirement of Law after the date of this Agreement.
(g) (i) The Company will not be required to pay any
additional amount in respect of United States Federal tax pursuant to this
Section 5.1 to any Lender or to either Agent with respect to any Lender:
(A) if the obligation to pay such additional amount
would not have arisen but for a failure by such Lender to
comply with its obligations under subsection 5.1(f)(i),
Section 10.10 or Section 11.8;
(B) if such Lender shall have delivered to the
Company a Form 4224 in respect of its applicable Lending
Office pursuant to subsection 5.1(f)(i), and such Lender shall
at any time not be entitled to exemption from deduction or
withholding of United States Federal income tax in respect of
payments by the Company hereunder for the account of such
Lending Office for any reason other than a change in United
States law or regulations or in the official interpretation of
such law or regulations by any Governmental Authority charged
with the interpretation or administration thereof (whether or
not having the force of law) after the date of delivery of
such Form 4224; or
(C) if such Lender shall have delivered to the
Company a Form 1001 in respect of its applicable Lending
Office pursuant to subsection 5.1(f)(i), and such Lender shall
at any time not be entitled to exemption from deduction or
withholding of United States Federal income tax in respect of
payments by the Company hereunder for the account of such
Lending Office for any reason other than a change in United
States law or regulations or any applicable tax treaty or
regulations or in the official interpretation of any such law,
treaty or regulations by any Governmental Authority charged
48
with the interpretation or administration thereof (whether or
not having the force of law) after the date of delivery of
such Form 1001.
(ii) VUCI will not be required to pay any additional amount in
respect of Canadian federal income tax pursuant to this Section 5.1 to any
Canadian Lender:
(A) if the obligation to pay such additional amount
would not have arisen but for a failure by such Lender to
comply with its obligations under subsection 5.1(f)(ii),
Section 10.10 or Section 11.8; or
(B) if such Lender shall have delivered an instrument
in writing pursuant to subsection 5.1(f)(ii), and such Lender
shall at any time not be entitled to exemption from deduction
or withholding of Canadian federal income tax in respect of
payments by VUCI hereunder for the account of its applicable
Lending Office for any reason other than a change in the laws
of Canada, its provinces or any political subdivision thereof
or any regulations promulgated thereunder or any applicable
tax treaty or regulations or in the official interpretation of
such laws, treaty or regulations by any Governmental Authority
charged with the interpretation or administration thereof
(whether or not having the force of law) after the date of the
delivery of said instrument.
(h) If, at any time, the Company requests any Lender
to deliver any forms or other documentation pursuant to subsection 5.1(f)(i)(D),
then the Company shall, on demand of such Lender through the U.S. Agent,
reimburse such Lender for any costs and expenses (including Attorney Costs)
reasonably incurred by such Lender in the preparation or delivery of such forms
or other documentation. If, at any time, VUCI requests any Canadian Lender to
deliver any forms or other documentation pursuant to subsection 5.1(f)(ii), then
VUCI shall, on demand of such Canadian Lender through the Canadian Agent,
reimburse such Lender for any costs and expenses (including Attorney Costs)
reasonably incurred by such Canadian Lender in the preparation or delivery of
such instruments, forms or other documentation.
5.2 Illegality. (a) If any Lender determines that the introduction of,
or any change in, any Requirement of Law, or in the interpretation or
administration of any Requirement of Law, has made it unlawful, or that any
central bank or other Governmental Authority has asserted that it is unlawful,
for such Lender or its applicable Lending Office to make Offshore U.S. Loans or,
in the case of any Canadian Lender, Offshore Canadian Loans or BA Rate Loans,
then, on notice thereof by such Lender to the applicable Borrower through the
Applicable Agent, any obligation of such Lender to make Offshore U.S. Loans,
Offshore Canadian Loans or BA Rate Loans, as the case may be, shall be suspended
until such Lender notifies the Applicable Agent and the applicable Borrower that
the circumstances giving rise to such determination no longer exist.
49
(b) If a Lender determines that it is unlawful to maintain any
Offshore U.S. Loan or, in the case of any Canadian Lender, any Offshore Canadian
Loan or BA Rate Loan, the applicable Borrower shall, upon its receipt of notice
of such fact and demand from such Lender (with a copy to the Applicable Agent),
prepay in full such Offshore U.S. Loan, Offshore Canadian Loan or BA Rate Loan,
as applicable, together with interest accrued thereon and amounts required under
Section 5.4, either on the last day of the Interest Period thereof, if such
Lender may lawfully continue to maintain such Offshore Rate Loan or such BA Rate
Loan to such day, or on such earlier date on which such Lender may no longer
lawfully continue to maintain such Offshore Rate Loan or such BA Rate Loan (as
determined by such Lender). If either Borrower is required to so prepay any
Offshore Rate Loan, or VUCI is required to prepay any BA Rate Loan, then
concurrently with such prepayment, such Borrower shall borrow from the affected
Lender, in the amount of such repayment, a Base Rate Loan (in the case of the
Company) or a Prime Rate Loan (in the case of VUCI).
5.3 Increased Costs and Reduction of Return. (a) If any Lender
determines that, due to either (i) the introduction of or any change in or in
the interpretation of any law or regulation or (ii) compliance by such Lender
with any guideline or request from any central bank or other Governmental
Authority (whether or not having the force of law), there shall be any increase
in the cost to such Lender of agreeing to make or making, funding or maintaining
any Offshore Rate Loan or BA Rate Loan or participating in Letters of Credit or,
in the case of the Issuing Lender, any increase in the cost to the Issuing
Lender of agreeing to issue, issuing or maintaining any Letter of Credit, then
the Company (or, in the case of an Offshore Canadian Loan or a BA Rate Loan,
VUCI) shall be liable for, and shall from time to time, upon demand (with a copy
of such demand to be sent to the Applicable Agent), pay to the Applicable Agent
for the account of such Lender, additional amounts as are sufficient to
compensate such Lender for such increased cost.
(b) If any Lender shall have determined that (i) the
introduction of any Capital Adequacy Regulation, (ii) any change in any Capital
Adequacy Regulation, (iii) any change in the interpretation or administration of
any Capital Adequacy Regulation by any central bank or other Governmental
Authority charged with the interpretation or administration thereof, or (iv)
compliance by such Lender (or its Lending Office) or any corporation controlling
such Lender with any Capital Adequacy Regulation affects or would affect the
amount of capital required or expected to be maintained by such Lender or any
corporation controlling such Lender (taking into consideration such Lender's or
such corporation's policies with respect to capital adequacy) and that the
amount of such capital is increased as a consequence of its Commitment, loans,
credits or obligations under this Agreement, then, upon demand of such Lender to
the Company through the Applicable Agent, the Company shall pay to such Lender,
from time to time as specified by such Lender, additional amounts sufficient to
compensate such Lender for such increase.
50
5.4 Funding Losses. The applicable Borrower shall reimburse each Lender
and hold each Lender harmless from any loss or expense which such Lender may
sustain or incur as a consequence of:
(a) the failure of such Borrower to make on a timely basis any
payment of principal of any Offshore Rate Loan or BA Rate Loan;
(b) the failure of such Borrower to borrow, continue or
convert a Loan after such Borrower has given (or is deemed to have given) a
Notice of Canadian Borrowing, a Notice of U.S. Borrowing or a Notice of
Conversion/Continuation;
(c) the failure of such Borrower to make any prepayment in
accordance with any notice delivered under Section 2.1.4 or 2.2.4;
(d) the prepayment (including pursuant to Section 2.1.4, 2.2.4
or 2.10) or other payment (including after acceleration thereof) of an Offshore
Rate Loan or a BA Rate Loan on a day that is not the last day of the relevant
Interest Period; or
(e) the automatic conversion under Section 2.1.3 or 2.2.3 of
any Offshore Rate Loan or BA Rate Loan to a Base Rate Loan or a Prime Rate Loan,
as applicable, on a day that is not the last day of the relevant Interest
Period;
including any such loss or expense arising from the liquidation or reemployment
of funds obtained by it to maintain its applicable Loans or from fees payable to
terminate the deposits from which such funds were obtained. For purposes of
calculating amounts payable by a Borrower to a Lender under this Section and
under subsection 5.3(a), (i) each Offshore Rate Loan made by a Lender shall be
conclusively deemed to have been funded (and to have been subject to each
related reserve, special deposit or similar requirement) at the Offshore Rate
for such Offshore Rate Loan by a matching deposit or other borrowing in the
interbank eurodollar market for a comparable amount and for a comparable period
in U.S. Dollars or Canadian Dollars, as applicable, whether or not such Offshore
Rate Loan is in fact so funded, and (ii) each BA Rate Loan made by a Canadian
Lender (and each related reserve, special deposit or similar requirement) shall
be conclusively deemed to have been funded at the BA Rate applicable to such BA
Rate Loan by the purchase by such Canadian Lender of a bankers' acceptance in a
comparable amount and for a comparable period, whether or not such BA Rate Loan
is in fact so funded.
5.5 Inability to Determine Rates. (a) If the U.S. Agent reasonably
determines that for any reason adequate and reasonable means do not exist for
determining the Offshore Rate for any requested Interest Period with respect to
an Offshore U.S. Loan, or Lenders having a Pro Rata Share of 25% or more
determine that the Offshore Rate to be applicable for any requested Interest
Period with respect to an Offshore U.S. Loan does not adequately and fairly
reflect the cost to such Lenders of funding such Loan, then the U.S. Agent will
51
promptly so notify the Company and each Lender. Thereafter, the obligation of
the Lenders to make or maintain Offshore U.S. Loans hereunder shall be suspended
until the U.S. Agent (upon the instructions of the applicable Lenders, if
applicable), revoke such notice in writing. Upon receipt of such notice, the
Company may revoke any Notice of U.S. Borrowing or Notice of
Conversion/Continuation then submitted by it. If the Company does not revoke
such Notice, the Lenders shall make, convert or continue the Loans, as proposed
by the Company, in the amount specified in the applicable notice submitted by
the Company, but such Loans shall be made, converted or continued as Base Rate
Loans instead of Offshore U.S. Loans.
(b) If the Canadian Agent shall have determined that for any
reason adequate and reasonable means do not exist for ascertaining the Offshore
Rate or the BA Rate for any requested Interest Period with respect to an
Offshore Canadian Loan or BA Rate Loan, or any Canadian Lender shall have
determined (and notified the Canadian Agent) that the Offshore Rate or the BA
Rate to be applicable for any requested Interest Period with respect to a
proposed Offshore Canadian Loan or BA Rate Loan does not adequately and fairly
reflect the cost to such Canadian Lender of funding such Loan, the Canadian
Agent will forthwith give notice of such determination to VUCI, the U.S. Agent
and each Canadian Lender. Thereafter, the obligation of the Canadian Lenders to
make or maintain Offshore Canadian Loans or BA Rate Loans, as applicable, for
the account of VUCI hereunder shall be suspended until the Canadian Agent (at
the request of the applicable Lender, if applicable) revokes such notice in
writing. Upon receipt of such notice, VUCI may revoke any Notice of Canadian
Borrowing or Notice of Conversion/Continuation then submitted by it. If VUCI
does not revoke such notice, the Canadian Lenders shall make, convert or
continue the Loans, as proposed by VUCI, in the amount specified in the
applicable notice submitted by VUCI, but such Loans shall be made, converted or
continued as Prime Rate Loans.
5.6 Certificates of Lenders. Any Lender claiming reimbursement or
compensation under this Article V shall deliver to the applicable Borrower (with
a copy to the Applicable Agent) a certificate setting forth in reasonable detail
the amount payable to such Lender hereunder and such certificate shall be
conclusive and binding on such Borrower in the absence of manifest error.
5.7 Substitution of Lenders. Upon the receipt by either Borrower or the
U.S. Agent from any Lender (an "Affected Lender") of a claim for compensation
under Section 5.1 or 5.3 or a notice of the type described in subsection 5.2(a)
or (b), the applicable Borrower may: (i) request one or more of the other
Lenders to acquire and assume all or part of such Affected Lender's Loans and
Commitment; or (ii) designate a replacement bank or financial institution
satisfactory to the Company to acquire and assume all or a ratable part of all
of such Affected Lender's Loans and Commitment (a "Replacement Lender"). Any
designation of a Replacement Lender shall be subject to the prior written
consent of the U.S. Agent and the Issuing Lender.
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5.8 Right of Lenders to Fund through Branches and Affiliates. Each
Lender may, if it so elects, fulfill its commitment as to any Loan hereunder by
designating a branch or Affiliate of such Lender to make such Loan; provided
that (a) such Lender shall remain solely responsible for the performance of its
obligations hereunder and (b) no such designation shall result in any increased
costs to the applicable Borrower.
5.9 Survival. The agreements and obligations of the Borrowers in this
Article V shall survive the termination of this Agreement and the payment of all
Obligations.
ARTICLE VI
CONDITIONS PRECEDENT
--------------------
6.1 Conditions of Initial Credit Extensions. The obligation of each
Lender to make its initial Credit Extension is subject to the conditions that
(i) the Company shall have submitted evidence reasonably satisfactory to the
Agents that all Debt to be Repaid has been (or concurrently with the initial
Credit Extensions will be) paid in full and that all Liens securing such Debt to
be Repaid have been terminated (or assigned to the U.S. Agent) and (ii) the
Agents shall have received all of the following, in form and substance
satisfactory to each Agent and each Lender, and in sufficient copies for each
Agent and each Lender:
(a) Credit Agreement and Notes. This Agreement and the Notes
(if any) executed by each party thereto.
(b) Resolutions; Incumbency.
(i) Copies of resolutions of the board of directors
(or the executive committee thereof) of each Loan Party authorizing the
transactions contemplated hereby, certified as of the Closing Date by
the Secretary or an Assistant Secretary of such Loan Party; and
(ii) a certificate of the Secretary or an Assistant
Secretary of each Loan Party certifying the names and true signatures
of the officers of such Loan Party authorized to execute, deliver and
perform the Loan Documents to which such Loan Party is a party.
(c) Organization Documents; Good Standing. Each of the
following documents:
(i) the articles or certificate of incorporation or
association and, if applicable, the bylaws of each Loan Party as in
effect on the Closing Date, certified
53
by the Secretary or Assistant Secretary of such Loan Party as of the
Closing Date; and
(ii) in the case of the Company and Tinseltown Video,
Inc., certificates of good standing from the respective States of
incorporation of each such entity; and in the case of each Canadian
Subsidiary a Certificate of Status from the Ministry of Consumer and
Commercial Relations of Ontario or the Registrar of Companies of
British Columbia, as applicable, with respect to such entity.
(d) U.S. Subsidiary Guaranty. A guaranty, substantially in the
form of Exhibit H-1, by Tinseltown Video, Inc. (as amended, supplemented or
otherwise modified from time to time, the "U.S. Subsidiary Guaranty").
(e) Canadian Guaranties. Guaranties, each substantially in the
form of Exhibit H-2, issued by each Canadian Guarantor.
(f) U.S. Security Agreement. A security agreement,
substantially in the form of Exhibit I-1, issued by the Company and each U.S.
Subsidiary Guarantor (as amended, supplemented or otherwise modified from time
to time, the "U.S. Security Agreement"), together with evidence, satisfactory to
the U.S. Agent, that substantially all filings necessary to perfect the U.S.
Agent's Lien on any collateral granted under the U.S. Security Agreement have
been duly made and are in full force and effect (subject to such exceptions as
the U.S. Agent may approve).
(g) Canadian Security Agreements. Security agreements,
substantially in the form of Exhibit I-2, issued by VUCI and each Canadian
Guarantor (as amended, supplemented or otherwise modified from time to time,
individually each a "Canadian Security Agreement" and collectively the "Canadian
Security Agreements"), together with evidence, satisfactory to the U.S. Agent,
that substantially all filings necessary to perfect the U.S. Agent's Lien on any
collateral granted under the Canadian Security Agreements have been duly made
and are in full force and effect (subject to such exceptions as the U.S. Agent
may approve).
(h) Company Pledge Agreement. A pledge agreement,
substantially in the form of Exhibit J-1, issued by the Company (as amended or
otherwise modified from time to time, the "Company Pledge Agreement").
(i) VUCI Pledge Agreement. A pledge agreement, substantially
in the form of Exhibit J-2, issued by VUCI (as amended or otherwise modified
from time to time, the "VUCI Pledge Agreement").
54
(j) Parent Guaranty. A guaranty, substantially in the form of
Exhibit H-3, by the Company (as amended, supplemented or otherwise modified from
time to time, the "Parent Guaranty").
(k) Insurance Certificates. Certificates of insurance naming
the U.S. Agent as an additional insured, as required pursuant to Section 8.3.
(l) Lien Subordination. A lien subordination letter from Sight
and Sound Distributors, Inc. in the form of Exhibit E.
(m) Payment of Fees. Evidence of payment by the Company of all
accrued and unpaid fees, costs and expenses to the extent then due and payable
on the Closing Date, together with Attorney Costs of the Agents to the extent
invoiced prior to or on the Closing Date, plus such additional amounts of
Attorney Costs as shall constitute the Agents' reasonable estimate of Attorney
Costs incurred or to be incurred through the closing proceedings (provided that
such estimate shall not thereafter preclude final settling of accounts between
the Company and the Agents), including any such costs, fees and expenses arising
under or referenced in Section 2.5 or 11.4.
(n) Certificate. A certificate signed by the chief executive
officer or the chief financial officer of the Company, dated as of the Closing
Date, stating that:
(i) the representations and warranties contained in
Article VII are true and correct on and as of such date, as though made
on and as of such date;
(ii) no Event of Default or Unmatured Event of
Default exists or will result from the initial Credit Extensions;
(iii) no event or circumstance has occurred since
April 30, 1996 that has resulted or could reasonably be expected to
result in a Material Adverse Effect; and
(iv) the Funded Debt Ratio is not greater than 2.25
to 1.
(o) Legal Opinions. The opinion of ▇'▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇,
counsel to the Company, substantially in the form of Exhibit D-1; the opinion of
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, Ontario counsel to VUCI, substantially in the form
of Exhibit D-2; the opinion of ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, British Columbia
counsel to VUCI and the Canadian Guarantors, substantially in the form of
Exhibit D-3; the opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, counsel to the
Canadian Agent and special British Columbia counsel to the U.S. Agent,
substantially in the form of Exhibit D-4; the opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇,special
Alberta counsel to the Canadian Agent and the U.S. Agent, substantially in
55
the form of Exhibit D-5; and the opinion of ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇,special Ontario
counsel to the Canadian Agent and the U.S. Agent, substantially in the form of
Exhibit D-6.
(p) Lien Searches. A search report or reports provided to the
U.S. Agent as of a recent date (or dates) acceptable to the U.S. Agent, listing
all UCC or PPSA financing statements that name the Company or any Subsidiary as
a debtor and that are filed in any jurisdiction in which filings are made
pursuant to subsections (f) and (g) above and in such other jurisdictions as the
U.S. Agent shall reasonably request, together with copies of such financing
statements.
(q) Other Documents. Such other approvals, opinions, documents
or materials as either Agent or any Lender may reasonably request.
6.2 Conditions to All Credit Extensions. The obligation of each Lender
to make any Credit Extension (including the initial Credit Extension) is subject
to the satisfaction of the following conditions precedent on the relevant
Borrowing Date or Issuance Date:
(a) Notice, Application. The U.S. Agent (and, if applicable,
the Canadian Agent) shall have received a Notice of U.S. Borrowing (in the case
of a U.S. Borrowing) or a Notice of Canadian Borrowing (in the case of a
Canadian Borrowing) or the Issuing Lender and the U.S. Agent shall have received
an L/C Application or L/C Amendment Application, as required under Section 4.2
(in the case of any Issuance of a Letter of Credit).
(b) Continuation of Representations and Warranties. The
representations and warranties in Article VII shall be true and correct on and
as of such Borrowing Date or Issuance Date with the same effect as if made on
and as of such Borrowing Date or Issuance Date (except to the extent such
representations and warranties expressly refer to an earlier date, in which case
they shall be true and correct as of such earlier date).
(c) No Existing Default. No Event of Default or Unmatured
Event of Default shall exist or shall result from such Borrowing or Issuance.
(d) Funded Debt Ratio. The Funded Debt Ratio shall not be
greater than 2.25 to 1.
Each Notice of U.S. Borrowing, Notice of Canadian Borrowing, L/C Application and
L/C Amendment Application submitted by the Company or VUCI hereunder shall
constitute a representation and warranty by the Company (and, in the case of a
Canadian Borrowing, by VUCI) hereunder, as of the date of such notice or request
and as of the relevant Borrowing Date or Issuance Date, as applicable, that the
applicable conditions in this Section 6.2 are satisfied.
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ARTICLE VII
REPRESENTATIONS AND WARRANTIES
------------------------------
The Company represents and warrants to each Agent and each Lender (and,
with respect to Sections 7.1 through 7.4, VUCI represents and warrants to each
Agent and each Lender as to itself) that:
7.1 Corporate Existence and Power. Each Borrower and each of its
Subsidiaries:
(a) is a corporation duly organized, validly existing and in
good corporate standing under the laws of the jurisdiction of its organization;
(b) has the power and authority and all governmental licenses,
authorizations, consents and approvals (i) to own its assets and to carry on its
business and (ii) to execute, deliver and perform its obligations under the Loan
Documents to which it is a party;
(c) is duly qualified as a foreign entity and is licensed and
in good standing under the laws of each jurisdiction where its ownership, lease
or operation of property or the conduct of its business requires such
qualification or license; and
(d) is in compliance with all Requirements of Law;
except, in each case referred to in clause (b)(i), (c) or (d), to the extent
that the failure to do so could not reasonably be expected to have a Material
Adverse Effect.
7.2 Corporate Authorization; No Contravention. The execution, delivery
and performance by each Loan Party of each Loan Document to which such Loan
Party is a party have been duly authorized by all necessary corporate action,
and do not and will not:
(a) contravene the terms of any of such Loan Party's
Organization Documents;
(b) conflict with or result in a breach or contravention of,
or the creation of any Lien under, any document evidencing any Contractual
Obligation to which the Company or any Subsidiary is a party or any order,
injunction, writ or decree of any Governmental Authority to which the Company or
any Subsidiary or any of their respective assets is subject; or
(c) violate any Requirement of Law.
57
7.3 Governmental Authorization. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority is necessary or required in connection with the
execution, delivery or performance by, or the enforcement against, any Loan
Party of any Loan Document to which such Loan Party is a party.
7.4 Binding Effect. Each of this Agreement and each other Loan Document
to which any Loan Party is a party constitutes the legal, valid and binding
obligation of such Loan Party enforceable against such Loan Party in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency or similar laws affecting the enforcement of creditors'
rights generally or by equitable principles relating to enforceability.
7.5 Financial Statements. The Company has furnished or caused to be
furnished to the Agents and the Lenders, (a) the audited consolidated financial
statements of the Company and its Subsidiaries as at April 30, 1996, which
statements have been prepared in conformity with GAAP applied on a basis
consistent with that of the preceding fiscal year and present fairly the
financial condition of the Company and its Subsidiaries as at such date and the
results of their operations for the period then ended and (b) the unaudited
financial statements of the Company and its Subsidiaries as at October 31, 1996,
which have been prepared in conformity with GAAP and present fairly the
financial condition of Company and its Subsidiaries as at such date and the
results of operations for the period then ended (subject to normal year-end
adjustments and the absence of footnotes).
7.6 No Material Adverse Change. Since the date of the audited
consolidated financial statements described in Section 7.5, no event or events
have occurred which, individually or in the aggregate, has had or is reasonably
likely to have a Material Adverse Effect.
7.7 Litigation and Contingent Liabilities. No litigation (including any
derivative action), arbitration proceeding or governmental proceeding is pending
or, to the Company's knowledge, threatened against the Company or any Subsidiary
which is reasonably likely to have a Material Adverse Effect, except as set
forth in Schedule 7.7. Other than any liability incident to such litigation or
proceedings, neither the Company nor any Subsidiary has any material contingent
liabilities not provided for or disclosed in the financial statements referred
to in Section 7.5 or listed in Schedule 7.7.
7.8 Ownership of Properties; Liens. Each of the Company and each
Subsidiary owns good and marketable title to, or a valid leasehold interest in,
all of its properties and assets, real and personal, tangible and intangible, of
any nature whatsoever (including patents, trademarks, trade names, service marks
and copyrights), free and clear of all Liens, charges and claims (including
infringement claims with respect to patents, trademarks, copyrights and the
like) except as permitted pursuant to Section 8.8.
58
7.9 Subsidiaries. The Company has no Subsidiaries except those listed
in Schedule 7.9.
7.10 Pension and Welfare Plans. Except as set forth on Schedule 7.10,
during the twelve-consecutive-month period prior to the date of the execution
and delivery of this Agreement or the making of any Credit Extension hereunder,
(a) no steps have been taken to terminate any Pension Plan which would be
reasonably likely to result in the Company being required to make a contribution
to such Pension Plan, or incurring a liability or obligation to such Pension
Plan, in excess of U.S. $25,000, and (b) no contribution failure has occurred
with respect to any Pension Plan sufficient to give rise to a Lien under Section
302(f) of ERISA. No condition exists or event or transaction has occurred with
respect to any Pension Plan which could result in the incurrence by the Company
of any material liability, fine or penalty. Except as set forth on Schedule
7.10, the Company has no contingent liability with respect to any
post-retirement benefit under a Welfare Plan, other than liability for
continuation coverage described in Part 6 of subtitle B of title I of ERISA.
7.11 Investment Company Act. Neither the Company nor any Subsidiary is
an "investment company" or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended.
7.12 Public Utility Holding Company Act. Neither the Company 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.
7.13 Regulation U. The Company is not engaged principally, or as one of
its important activities, in the business of extending credit for the purpose of
purchasing or carrying Margin Stock.
7.14 Taxes. Each of the Company and each Subsidiary has filed all tax
returns and reports required by law to have been filed by it and has paid all
taxes and governmental charges thereby shown to be owing, except for any such
taxes or charges which are being diligently contested in good faith by
appropriate proceedings and for which adequate reserves in accordance with GAAP
shall have been set aside on its books.
7.15 Solvency, etc. On the Closing Date, and immediately prior to and
after giving effect to each Credit Extension hereunder and the use of the
proceeds thereof, (a) each of the Company's and each Subsidiary's assets will
exceed its liabilities and (b) each of the Company and each Subsidiary will be
solvent, will be able to pay its debts as they mature, will own property with
fair saleable value greater than the amount required to pay its debts and will
have capital sufficient to carry on its business as then conducted.
59
7.16 Hazardous Materials.
7.16.1 Release and Disposal. Except as previously disclosed to the
Agents and the Lenders in writing prior to the date of this Agreement, (a)
neither the Company nor, to the best of the Company's knowledge, any other
Person has ever caused or permitted a "reportable quantity" (as defined in the
Comprehensive Environmental Response, Compensation and Liability Act) of any
Hazardous Material to be released or disposed of on, under or at any real
property located in the United States and now owned, leased or operated by the
Company or any Subsidiary and neither the Company nor, to the best of the
Company's knowledge, any other Person has ever caused or permitted any Hazardous
Material to be released or disposed of on, under or at any real property located
in Canada and now owned, leased or operated by the Company or any Subsidiary,
(b) no such real property has ever been used (by the Company or, to the best of
the Company's knowledge, by any other Person) as a site for intentional disposal
of any Hazardous Material or a permanent storage site for any Hazardous
Material, and (c) neither the Company nor, to the best of the Company's
knowledge, any of its predecessors has ever caused or permitted any Hazardous
Material to be disposed of at any locations other than those identified pursuant
to clause (a).
7.16.2 Treatment and Storage. Except in compliance with applicable law
or as previously disclosed to the Agents and the Lenders in writing prior to the
date of this Agreement, (a) neither the Company nor, to the best of the
Company's knowledge, any other Person has ever caused or permitted any Hazardous
Material to be treated or stored on, under or at any real property owned, leased
or operated by the Company or any Subsidiary and (b) neither the Company nor, to
the best of the Company's knowledge, any of its predecessors has ever caused or
permitted any Hazardous Material (except for any which may have been present in
raw materials or any products) to be transported to, treated, or stored at any
locations other than those identified pursuant to clause (a).
7.17 Absence of Default. Except for the failure to obtain consents of
(i) landlords under leases of real property or (ii) lessors under equipment
leases, in each case, assumed by the Company or any Subsidiary in connection
with acquisitions and having annual lease payments in the aggregate for all such
leases of not more than a Dollar Equivalent amount of U.S. $1,000,000 (it being
understood that the Company shall, and shall cause its Subsidiaries to, use
reasonable efforts to obtain such consents), neither the Company nor any
Subsidiary is in material default under any contract to which it is a party or
by which it is bound.
7.18 Leased Premises. As of the Closing Date neither the Company nor
any Subsidiary is the lessee of any premises other than those premises set forth
on Schedule 7.18.
7.19 Information. All written information taken as a whole heretofore
or contemporaneously herewith furnished by the Company or any Subsidiary to the
Agents and the Lenders for purposes of or in connection with this Agreement and
the transactions
60
contemplated hereby is, and all written information taken as a whole hereafter
furnished by or on behalf of the Company or any Subsidiary to either Agent or
any Lender pursuant hereto or in connection herewith will be, true and accurate
in every material respect on the date as of which such information is dated or
certified, and none of such information is or will be incomplete by omitting to
state any material fact necessary to make such information not misleading (it
being recognized by the Agents and the Lenders that projections and forecasts
provided by the Company are not to be viewed as representations and warranties
and that actual results during the period or periods covered by any such
projections and forecasts may differ from projected or forecasted results).
ARTICLE VIII
COVENANTS
---------
So long as any Lender shall have any Commitment hereunder, or any Loan
or other Obligation shall remain unpaid or unsatisfied, or any Letter of Credit
shall remain outstanding, unless the Required Lenders waive compliance in
writing, the Company shall:
8.1 Reports, Certificates and Other Information. Furnish to each Agent
and each Lender:
8.1.1 Audit Report. Promptly when available and in any event within 105
days after the close of each fiscal year, (a) a copy of the annual audit report
of the Company and its Subsidiaries for such fiscal year, including therein
consolidated balance sheets of the Company and its Subsidiaries as of the end of
such fiscal year and consolidated statements of earnings and cash flow of the
Company and its Subsidiaries for such fiscal year, which audit report shall be
without qualification as to going concern or scope and shall be prepared by
Ernst & Young LLP or other independent auditors of recognized standing selected
by the Company and acceptable to the Required Lenders, together with a written
statement from such auditors to the effect that in making the examination
necessary for the signing of such audit report by such accountants, they have
not become aware of any Event of Default or Unmatured Event of Default that has
occurred and is continuing or, if they have become aware of any such event,
describing it in reasonable detail; and (b) consolidating balance sheets of the
Company and its Subsidiaries as of the end of such fiscal year and consolidating
statements of earnings for the Company and its Subsidiaries for such fiscal
year, together with a certificate of the chief executive officer or the chief
financial officer of the Company certifying that such financial statements
fairly present the financial condition and results of operations of the Company
and its Subsidiaries as of the dates and periods indicated.
8.1.2 Quarterly Reports. Promptly when available and in any event
within 60 days after the end of each fiscal quarter (except the last fiscal
quarter) of each fiscal year, consolidated and consolidating balance sheets of
the Company and its Subsidiaries as of the
61
end of such fiscal quarter and consolidated and consolidating statements of
earnings and cash flow for such fiscal quarter and for the period beginning with
the first day of such fiscal year and ending on the last day of such fiscal
quarter, together with a certificate of the chief executive officer or the chief
financial officer of the Company, certifying that such financial statements
fairly present the financial condition and results of operations of the Company
and its Subsidiaries as of the dates and periods indicated, subject to changes
resulting from normal year-end adjustments.
8.1.3 Monthly Reports. (a) Promptly when available and in any event
within 45 days after the end of each month of each fiscal year, (i) consolidated
and consolidating balance sheets of the Company and its Subsidiaries as of the
end of such month and (ii) consolidated and consolidating statements of earnings
and cash flow for such month and for the period beginning with the first day of
such fiscal year and ending on the last day of such month, together with a
certificate of the chief executive officer or the chief financial officer of the
Company, certifying that such financial statements fairly present the financial
condition and results of operations of the Company and its Subsidiaries as of
the dates and periods indicated, subject to changes resulting from normal
year-end adjustments
(b) Promptly when available and in any event within 30 days
after the end of each month of each fiscal year, a report of the revenue of the
Company and its Subsidiaries for such month showing a comparison (i) of the
revenue of the Company and its Subsidiaries for such month, on a store by store
basis, to the revenue generated by each such store for the corresponding month
of the previous fiscal year, and (ii) to the budget of the Company and its
Subsidiaries
8.1.4 Compliance Certificates. Contemporaneously with the furnishing of
a copy of each annual audit report pursuant to Section 8.1.1, of each set of
quarterly statements pursuant to Section 8.1.2 and of each set of monthly
statements pursuant to Section 8.1.3, a duly completed certificate in the form
of Exhibit C, with appropriate insertions, dated the date of such annual report,
such quarterly statements or such monthly statements and signed by the chief
executive officer or the chief financial officer of the Company, containing a
computation of each of the financial ratios and restrictions set forth in this
Section 8 and to the effect that such officer has not become aware of any Event
of Default or Unmatured Event of Default that has occurred and is continuing or,
if there is any such event, describing it and the steps, if any, being taken to
cure it.
8.1.5 Reports to SEC and to Shareholders. Promptly upon the filing or
sending thereof, a copy of any annual, periodic or special report or
registration statement (inclusive of exhibits thereto) filed with the SEC or any
securities exchange and any report, proxy statement or other communication to
the Company's shareholders generally.
8.1.6 Notice of Default, Litigation and ERISA Matters. Promptly (and in
any event within one Business Day in the case of clause (a) and within five days
in the case of clauses
62
(b) through (e)) after learning of any of the following, written notice
describing the same and the steps being taken by the Company or the Subsidiary
affected thereby with respect thereto: (a) the occurrence of an Event of Default
or an Unmatured Event of Default; (b) any litigation, arbitration or
governmental investigation or proceeding not previously disclosed by the Company
to the Agents and the Lenders which has been instituted or, to the knowledge of
the Company, is threatened against the Company or any Subsidiary or to which any
of the properties of any thereof is subject which has had or is reasonably
likely to have a Material Adverse Effect; (c) any material adverse development
which occurs in any litigation, arbitration or governmental investigation or
proceeding previously disclosed pursuant to clause (b); (d) the institution of
any steps by the Company, any of its Subsidiaries or any other Person to
terminate any Pension Plan, or the failure to make a required contribution to
any Pension Plan if such failure is sufficient to give rise to a Lien under
Section 302(f) of ERISA, or the taking of any action with respect to a Pension
Plan which could result in the requirement that the Company furnish a bond or
other security to the PBGC or such Pension Plan, or the occurrence of any event
with respect to any Pension Plan which could result in the incurrence by the
Company of any material liability, fine or penalty, or any material increase in
the contingent liability of the Company with respect to any post-retirement
Welfare Plan benefit; and (e) the occurrence of any other event or circumstance
which has had or is reasonably likely to have a Material Adverse Effect.
8.1.7 Subsidiaries. Promptly upon the occurrences thereof, a written
report of any change in the list of its Subsidiaries.
8.1.8 Management Reports. Promptly upon the request of either Agent or
any Lender, copies of all detailed financial and management reports submitted to
the Company by its independent auditors in connection with any annual or interim
audit made by such auditors of the books of the Company or any Subsidiary.
8.1.9 Projections. As soon as practicable and in any event within 105
days after the commencement of each fiscal year, a consolidated plan and
financial forecast for the next three fiscal years, including (a) a forecasted
consolidated balance sheet and a consolidated statement of cash flow of the
Company for such fiscal years and (b) forecasted consolidated statements of
income and cash flows of the Company for each month of such fiscal years.
8.1.10 Other Information. Promptly from time to time, such other
information concerning the Company and its Subsidiaries as either Agent or any
Lender may reasonably request.
8.2 Books, Records and Inspections. Keep, and cause each Subsidiary to
keep, its books and records in accordance with sound business practices
sufficient to allow the preparation of financial statements in accordance with
GAAP; permit, and cause each Subsidiary to permit, on reasonable notice and at
reasonable times and intervals (or at any time without notice during the
existence of an Event of Default) either Agent or any Lender
63
or any representative thereof to inspect the properties and operations of the
Company and of such Subsidiary; and permit, and cause each Subsidiary to permit,
on reasonable notice and at reasonable times and intervals (or at any time
without notice during the existence of an Event of Default) either Agent or any
Lender or any representative thereof to visit any or all of its offices, to
discuss its financial matters with its officers and its independent auditors
(and the Company hereby authorizes such independent auditors to discuss such
financial matters with either Agent or any Lender or any representative
thereof), and to examine (and, at the expense of the Company or the applicable
Subsidiary, photocopy extracts from) any of its books or other corporate
records. The Company agrees to pay the fees of its auditors incurred in
connection with any reasonable exercise of the rights of the Agents and the
Lenders pursuant to this Section.
8.3 Insurance. Maintain, and cause each Subsidiary to maintain, with
reputable, financially sound insurance companies, insurance to such extent and
against such hazards and liabilities as is customarily maintained by companies
similarly situated (and, in any event, such insurance as may be required by any
law or governmental regulation or any court order or decree); and, upon request
of either Agent or any Lender, furnish to such Agent or such Lender a
certificate setting forth in reasonable detail the nature and extent of all
insurance maintained by the Company and its Subsidiaries. Without limiting the
foregoing, the Company will cause, and cause each Subsidiary to cause, each
issuer of an insurance policy to provide the U.S. Agent with an endorsement or
an independent instrument (i) in form and substance acceptable to the U.S. Agent
and (ii) showing loss payable to the U.S. Agent and, if required by the U.S.
Agent, naming the U.S. Agent as an additional insured.
8.4 Compliance with Laws; Payment of Taxes and Liabilities. (a) Comply,
and cause each Subsidiary to comply, in all material respects with all
applicable laws, rules, regulations and orders; and (b) pay, and cause each
Subsidiary to pay, prior to delinquency, all taxes and other governmental
charges against it or any of its property; provided, however, that the foregoing
shall not require the Company or any Subsidiary to pay any such tax or charge so
long as it shall contest the validity thereof in good faith by appropriate
proceedings and shall set aside on its books adequate reserves with respect
thereto in accordance with GAAP.
8.5 Maintenance of Existence, etc. Maintain and preserve, and (subject
to Section 8.11) cause each Subsidiary to maintain and preserve, (a) its
existence and good standing in the jurisdiction of its incorporation and (b) its
qualification and good standing as a foreign corporation in each jurisdiction
where the nature of its business makes such qualification necessary.
64
8.6 Financial Covenants.
8.6.1 Minimum Net Worth. Not permit Net Worth at any time to be less
than (a) U.S.$80,000,000 plus (b) 75% of cumulative Consolidated Net Income for
each fiscal quarter ending after the Closing Date (excluding (i) any fiscal
quarter in which Consolidated Net Income is not positive and (ii) any non-cash
charge to income resulting from the release of management stock held in escrow
on the date of this Agreement) plus (c) 90% of the net proceeds received by the
Company from the exercise of any warrants following a notice of redemption plus
(d) 90% of the value of any stock issued by the Company to the extent that it
affects Net Worth, excluding any change in Net Worth resulting from the release
of management stock held in escrow on the date of this Agreement.
8.6.2 Fixed Charge Ratio. Not permit the Fixed Charge Ratio as of the
last day of any month to be less than 2.50 to 1.
8.6.3 Funded Debt Ratio. Not permit the Funded Debt Ratio to at any
time exceed 2.75 to 1.
8.6.4 Mature Store Contribution Margin. Not permit the Mature Store
Contribution Margin for any Computation Period to be less than 0.185 to 1.000.
8.6.5 New Store Contribution Margin. Not permit the New Store
Contribution Margin for any Computation Period to be less than the ratio set
forth on Schedule 8.6.5 with respect to the applicable Weighted Average Age of
New Stores.
For purposes of calculating the financial covenants contained in this Section
8.6, if the Company or any Subsidiary has made an acquisition pursuant to
Section 8.11 during the period for which such calculation is to be made, such
calculation shall be made on a pro forma basis as if such acquisition had
occurred as of the first day of such period and any resulting Debt had been
incurred as of the last day of such period .
8.7 Limitations on Debt. Not, and not permit any Subsidiary to, create,
incur, assume or suffer to exist any Debt, except (a) obligations arising under
the Loan Documents; (b) Debt in respect of Capital Leases provided that the
annual lease payments for all such Capital Leases do not exceed a Dollar
Equivalent amount of U.S. $1,000,000; (c) Debt of Subsidiaries to the Company or
to other Subsidiaries; (d) Hedging Agreements entered into by the Company or any
Subsidiary with any Lender or any Affiliate of any Lender; (e) Suretyship
Liabilities in respect of any obligation of the Company or any Subsidiary
permitted under this Agreement; (f) Debt in respect of taxes, assessments or
governmental charges to the extent that payment thereof shall not at the time be
required to be made in accordance with Section 8.4; (g) Debt not at any time
exceeding an aggregate principal Dollar Equivalent amount of U.S. $4,500,000 to
sellers of assets or stock permitted to be acquired pursuant to Section 8.11, so
long as (i) such Debt matures no later than one year
65
from the date of such acquisition, (ii) the interest rate on such Debt does not
exceed a rate per annum equal to the U.S. Federal Funds Rate plus 4.00%, (iii)
the instrument or documentation representing or governing such Debt does not
contain any restrictive covenants, (iv) the obligor of such Debt is not the
Company and (v) so long as such Debt is outstanding, the Subsidiary which is the
obligor under such Debt is not merged into the Company; (h) guaranties by the
Company of obligations of Subsidiaries not exceeding U.S. $3,000,000 in the
aggregate at any one time outstanding, (i) other Debt outstanding on the date
hereof and listed in Schedule 8.7 or hereafter incurred in connection with Liens
permitted by Section 8.8, and extensions, renewals and refinancings of any Debt
described in this clause (i) so long as the principal amount thereof is not
increased; and (j) Subordinated Debt.
8.8 Liens. Not, and not permit any Subsidiary to, create or permit to
exist any Lien on any of its real or personal properties, assets or rights of
whatsoever nature (whether now owned or hereafter acquired), except (a) Liens
for taxes or other governmental charges not at the time delinquent or thereafter
payable without penalty or being contested in good faith by appropriate
proceedings and, in each case, for which it maintains adequate reserves; (b)
Liens arising in the ordinary course of business (such as (i) Liens of carriers,
landlords, warehousemen, mechanics and materialmen and other similar Liens
imposed by law and (ii) Liens incurred in connection with worker's compensation,
unemployment compensation and other types of social security (excluding Liens
arising under ERISA) or in connection with surety bonds (excluding appeal bonds
and other bonds relating to judgments), bids, performance bonds and similar
obligations) for sums not overdue or being contested in good faith by
appropriate proceedings and not involving any deposits or advances or borrowed
money or the deferred purchase price of property or services, and, in each case,
for which it maintains adequate reserves; (c) Liens identified on Schedule 8.8;
(d) Liens in connection with Capital Leases to the extent permitted pursuant to
Section 8.7; (e) any Lien arising in connection with the acquisition,
construction or improvement of property after the date hereof, and attaching
only to the property being acquired, constructed or improved, if (i) the Debt
secured thereby does not exceed 90% of the fair market value of the property
acquired at the time of acquisition thereof or 90% of the cost of such
construction or improvement, as the case may be, and (ii) no more than a Dollar
Equivalent amount of U.S. $100,000 of such Debt is incurred in any fiscal year;
(f) attachments, judgments and other similar Liens, and appeal bonds and other
bonds relating to judgments, for sums not exceeding in the aggregate a Dollar
Equivalent amount of U.S. $100,000, arising in connection with court
proceedings, provided the execution or other enforcement of such Liens is
effectively stayed and claims secured thereby are being actively contested in
good faith and by appropriate proceedings; (g) easements, rights of way,
restrictions, minor defects or irregularities in title and other similar Liens
not interfering in any material respect with the ordinary conduct of the
business of the Company and its Subsidiaries taken as a whole; (h) leases or
subleases granted by the Company or any Subsidiary in the ordinary course of its
business; (i) the interest or title of the lessor of any lease with respect to
which the Company or a Subsidiary is lessee; (j) Liens securing Debt permitted
pursuant to Section 8.7(g) so long as (i) such Liens attach only to
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the assets acquired in such acquisition, (ii) the assets subject to such Lien
also equally and ratably secure the obligations of the applicable Subsidiary
under the applicable Guaranty, and (iii) the holder of such Debt shall have
entered into an intercreditor agreement with the U.S. Agent in form and
substance satisfactory to the U.S. Agent and the Required Lenders; (k)
extensions, renewals or replacements of any Lien permitted by the foregoing
provisions of this Section 8.8, but only if the principal amount of the Debt
secured thereby immediately prior to such extension, renewal or replacement is
not increased and such Lien is not extended to any other property; and (l) Liens
arising under the Loan Documents.
8.9 Dividends, etc. Not, and not permit any Subsidiary to, (a) declare
or pay any dividends on any of its capital stock (other than dividends payable
in stock, warrants, options, or other non-cash rights with respect to stock of
the Company), (b) purchase or redeem any capital stock of the Company or any
Subsidiary or any warrants, options or other rights in respect of such stock,
(c) make any other distribution (other than distributions payable in warrants,
options, or other non-cash rights with respect to stock of the Company) to
shareholders of the Company or any Subsidiary, (d) prepay, purchase or redeem
any Subordinated Debt or (e) set aside funds for any of the foregoing; provided
that (i) any Subsidiary may declare and pay dividends to the Company or to
another wholly-owned Subsidiary, (ii) the Company may redeem the Class B
Warrants at any time in accordance with the provisions thereof as in effect on
the date hereof and (iii) so long as (x) no Event of Default or Unmatured Event
of Default shall have occurred and be continuing or would result therefrom and
(y) the Funded Debt Ratio is less than 2.0 to 1, the Company may pay dividends
on Preferred Stock not exceeding U.S. $1,500,000 in any 12 month period.
8.10 Loans or Advances. Not, and not permit any Subsidiary to, make any
loans or advances, except for (i) loans or advances by the Company to any
Subsidiary (other than to the Company's Canadian Subsidiaries), (ii) loans or
advances by the Company to the Company's Canadian Subsidiaries not exceeding
U.S. $4,000,000 at any one time outstanding, and (iii) advances not to exceed,
in the aggregate for the Company and all Subsidiaries at any one time
outstanding, (x) U.S. $150,000 to officers and employees in connection with
travel, housing and other expenses in the ordinary course of business and (y)
U.S. $4,000,000 to officers of the Company in connection with the exercise of
stock options and any associated tax liability.
8.11 Mergers and Consolidations; Acquisitions. Not, and not permit any
Subsidiary to, be a party to any merger or consolidation, or purchase or
otherwise acquire all or substantially all of the assets or any stock of any
class of, or any partnership or joint venture interest in, any other Person,
except (a) any such merger or consolidation of or by any wholly-owned Subsidiary
into the Company or any other wholly-owned Subsidiary, (b) any such purchase or
other acquisition by the Company or any wholly-owned Subsidiary of the assets or
stock of any wholly-owned Subsidiary, and (c) acquisitions of all of the assets
or stock of Persons which are in the same or a similar line of business as the
Company and its Subsidiaries; provided that any acquisition described in this
clause (c) must satisfy all of the
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following conditions: (i) each Person so acquired shall comply with all of the
terms of this Agreement and the other Loan Documents that are applicable to such
Person; (ii) either the required majority of the Board of Directors (or other
equivalent governing body) of the Person so acquired incumbent at the time such
acquisition is proposed has acquiesced to such acquisition, or the acquisition
is otherwise deemed in the reasonable judgment of the Required Lenders to be a
"friendly" acquisition; (iii) no Event of Default or Unmatured Event of Default
shall have occurred and be continuing at the time of, or would result from the
making of, such acquisition (it being understood that compliance with the
covenants contained in Section 8.6 shall be calculated on a pro forma basis as
if such acquisition had occurred as of the first day of the Computation Period
(or fiscal quarter in the case of Section 8.6.1) most recently ended and as if
any resulting Debt had been incurred as of the last day of such period); (iv)
the aggregate total consideration paid by the Company and its Subsidiaries for
any one acquisition or series of substantially contemporaneous related
acquisitions shall not exceed U.S. $15,000,000; (v) the aggregate total
consideration for all such acquisitions since October 31, 1996 shall not exceed
U.S. $25,000,000; (vi) the entity whose stock or assets are so acquired shall
have had positive net income for the 12-month period most recently ended; (vii)
simultaneously with any such acquisition, the Company shall grant, or cause the
applicable Person(s) to grant, to the U.S. Agent a first perfected security
interest in all of the stock and/or assets so acquired, subject to any Liens
permitted pursuant to Section 8.8(j). The term "consideration" when used in this
Section 8.11 shall include (without duplication) all cash consideration paid or
otherwise given in connection with any such acquisition, any assumption of Debt
in connection with such acquisition, any Debt incurred in connection with such
acquisition, and any equity issued in connection with such acquisition.
8.12 Asset Dispositions. Not, and not permit any Subsidiary to, sell,
transfer, convey, lease or otherwise dispose of, or grant any option, warrant or
other right with respect to, any of its assets, or sell, assign, pledge or
otherwise transfer any receivables, contract rights, general intangibles,
chattel paper or instruments, with or without recourse, except (i) the
disposition of inventory or obsolete assets in the ordinary course of business
consistent with past practices and (ii) other dispositions with a book value not
exceeding 5% of the Company's Net Worth during any 12-month period.
8.13 Use of Proceeds. Use the proceeds of the Loans for (a) general
corporate purposes of the Company, (b) ongoing working capital requirements of
the Company and its Subsidiaries, (c) acquisitions permitted by Section 8.11,
and (d) to repay Debt to be Repaid; and not use or permit any proceeds of any
Loan to be used, either directly or indirectly, for the purpose, whether
immediate, incidental or ultimate, of (a) "purchasing or carrying" any Margin
Stock or (b) purchasing or otherwise acquiring any stock of any Person if such
Person (or its board of directors) has (i) announced that it will oppose such
purchase or other acquisition or (ii) commenced any litigation which alleges
that such purchase or other acquisition violates, or will violate, applicable
law.
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8.14 Transactions with Affiliates. Not, and not permit any Subsidiary
to, enter into or cause, suffer or permit to exist any transaction, arrangement
or contract with any of its Affiliates (other than the Company or any
Subsidiary) which is on terms which are less favorable than are obtainable from
any Person which is not one of its Affiliates.
8.15 Pension Plans. Maintain, and cause each Subsidiary to maintain,
each Pension Plan in material compliance with all applicable requirements of law
and regulations.
8.16 Environmental Covenants.
8.16.1 Environmental Response Obligation. (a) Comply, and cause each
Subsidiary to comply, in all material respects with any Federal, provincial or
state judicial or administrative order requiring the performance at any real
property owned, operated or leased by the Company or any Subsidiary of
activities in response to the release or threatened release of a Hazardous
Material; (b) notify the U.S. Agent within ten days of the receipt of any
written claim, demand, proceeding, action or notice of liability by any Person
arising out of or relating to the release or threatened release of a Hazardous
Material; and (c) notify the U.S. Agent within ten days of any release, threat
of release, or disposal of Hazardous Material reported by the Company or any
Subsidiary to any governmental or regulatory authority at any real property
owned, operated, or leased by the Company or any Subsidiary.
8.16.2 Environmental Liabilities. (a) Comply, and cause each Subsidiary
to comply, in all material respects with all material Environmental Laws; (b)
without limiting clause (a), not commence disposal of any Hazardous Material
into or onto any real property owned, operated or leased by the Company or any
Subsidiary; and (c) without limiting clause (a), not allow any Lien imposed
pursuant to any law, regulation or order relating to Hazardous Materials or the
disposal thereof to remain on any real property owned, operated or leased by the
Company or any Subsidiary.
8.17 Unconditional Purchase Obligations. Not, and not permit any
Subsidiary to, enter into or be a party to any contract for the purchase of
materials, supplies or other property or services, if such contract requires
that payment be made by it regardless of whether or not delivery is ever made of
such materials, supplies or other property or services.
8.18 Further Assurances. Take, and cause each Subsidiary to take, such
actions as the U.S. Agent or the Required Lenders may reasonably request from
time to time (including the execution and delivery of guaranties, security
agreements, pledge agreements, stock powers, leasehold mortgages, financing
statements and other documents, the filing or recording of any of the foregoing,
and the delivery of stock certificates and other collateral with respect to
which perfection is obtained by possession) to ensure that (i) the obligations
of the Company hereunder and under the other Loan Documents to which it is a
party are secured by substantially all of the assets of the Company and
guarantied by all Subsidiaries
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(other than a Foreign Subsidiary) of the Company (including, promptly upon the
acquisition or creation thereof, any Subsidiary (other than a Foreign
Subsidiary) acquired or created after the date hereof), (ii) the obligations of
VUCI hereunder and under the other Loan Documents to which it is a party are
secured by substantially all of the assets of VUCI and guarantied by all
Canadian Subsidiaries (including, promptly upon the acquisition or creation
thereof, any Canadian Subsidiary acquired or created after the date hereof), and
(iii) the obligations of each Guarantor under the Guaranty to which it is a
party are secured by substantially all of the assets of such Guarantor, subject,
in the case of clauses (i) through (iii) above, to such exceptions as the U.S.
Agent or the Required Lenders may permit from time to time; provided that (x)
neither the Company nor any Subsidiary (other than a Canadian Subsidiary) shall
be required to pledge more than 65% of the stock of any Foreign Subsidiary (or,
in the case of 24 Hour Entertainment Group Ltd. ("Entertainment"), the shares of
stock of Entertainment which when aggregated with the percentage of stock of
Entertainment held by VUCI and pledged to the U.S. Agent is not in excess of 65%
of all of the stock of Entertainment) except that the Company shall pledge 100%
of the stock of VUCI as security for the Parent Guaranty and (y) so long as
1137239 Ontario Limited does not conduct any business and does not own any
assets it shall not be required to guaranty the obligations of VUCI hereunder
and under the other Loan Documents to which VUCI is a party.
8.19 Landlord's Consents. To the extent that the Company or any
Subsidiary enters into an extension or a renewal of an existing lease of real
property, enters into a new lease of real property, or assumes an existing lease
of real property, the Company or such Subsidiary shall use reasonable commercial
efforts to deliver to the U.S. Agent a landlord's consent with respect to such
lease in form and substance satisfactory to the U.S. Agent.
8.20 Business. Not, and not permit any Subsidiary to, engage in any
business other than the owning, operating and franchising of video rental
superstores or locations or similar lines of businesses.
8.21 Inconsistent Agreements. Not, and not permit any Subsidiary to,
enter into any material agreement containing any provision which would be
violated or breached by any borrowing by the Company hereunder or by the
performance by the Company or any Subsidiary of any of its obligations hereunder
or under any other Loan Document.
8.22 Preferred Stock. Not issue Preferred Stock other than Preferred
Stock with an aggregate liquidation value not greater than U.S. $15,000,000
which is issued pursuant to documentation and terms in form and substance
satisfactory to the U.S. Agent and the Required Lenders.
8.23 Other Negative Pledges. Not, and not permit any Subsidiary to,
enter into any agreement, other than the Loan Documents, with any Person which
in any way restricts the
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ability of the Company or any Subsidiary to place a Lien on any of its real or
personal property, assets or rights of whatsoever nature.
ARTICLE IX
EVENTS OF DEFAULT
-----------------
9.1 Event of Default. Any of the following shall constitute an "Event
of Default":
(a) Non-Payment of the Loans, etc. Default in the payment when
due of the principal of any Loan or of any L/C Obligation; or default, and
continuance thereof for five days, in the payment when due of any interest, fee,
or other amount payable by either Borrower hereunder or under any other Loan
Document.
(b) Non-Payment of Other Debt. Any default shall occur under
the terms applicable to any Debt of the Company or any Subsidiary in an
aggregate amount (for all Debt so affected) exceeding a Dollar Equivalent amount
of U.S. $250,000 and such default shall (a) consist of the failure to pay such
Debt when due (subject to any applicable grace period), whether by acceleration
or otherwise, or (b) accelerate the maturity of such Debt or permit the holder
or holders thereof, or any trustee or agent for such holder or holders, to cause
such Debt to become due and payable prior to its expressed maturity.
(c) Other Material Obligations. Default in the payment when
due, or in the performance or observance of, any material obligation of, or
condition agreed to by, the Company or any Subsidiary with respect to any
material purchase or lease of goods or services if such default has had or is
reasonably likely to have a Material Adverse Effect.
(d) Bankruptcy, Insolvency, etc. The Company or any Subsidiary
becomes insolvent or generally fails to pay, or admits in writing its inability
or refusal to pay, debts as they become due; or the Company or any Subsidiary
applies for, consents to, or acquiesces in the appointment of a trustee,
receiver or other custodian for the Company or such Subsidiary or any property
thereof, or makes a general assignment for the benefit of creditors; or, in the
absence of such application, consent or acquiescence, a trustee, receiver or
other custodian is appointed for the Company or any Subsidiary or for a
substantial part of the property of any thereof and is not discharged within 60
days; or any bankruptcy, reorganization, debt arrangement, or other case or
proceeding (including any Insolvency Proceeding) under any bankruptcy or
insolvency law, or any dissolution or liquidation proceeding (except the
voluntary dissolution, not under any bankruptcy or insolvency law, of any
Subsidiary other than VUCI), is commenced in respect of the Company or any
Subsidiary, and if such case or proceeding is not commenced by the Company or
such Subsidiary, it is consented to or acquiesced in by the Company or such
Subsidiary, or
71
remains for 60 days undismissed; or the Company or any Subsidiary takes any
corporate action to authorize, or in furtherance of, any of the foregoing.
(e) Non-Compliance with Provisions of This Agreement. Failure
by the Company to comply with or to perform any covenant set forth in Sections
8.6 through 8.22; or failure by the Company to comply with or to perform any
other provision of this Agreement (and not constituting an Event of Default
under any of the other provisions of this Section 9) and continuance of such
failure for 30 days after written notice thereof to the Company from either
Agent or any Lender.
(f) Warranties. Any warranty made by either Borrower herein is
breached or is false or misleading in any material respect, or any schedule,
certificate, financial statement, report, notice or other writing furnished by
either Borrower to either Agent or any Lender is false or misleading in any
material respect on the date as of which the facts therein set forth are stated
or certified.
(g) Pension Plans. (i) Institution of any steps by the Company
or any other Person to terminate a Pension Plan if as a result of such
termination the Company could be required to make a contribution to such Pension
Plan, or could incur a liability or obligation to such Pension Plan, in excess
of U.S. $100,000, or (ii) a contribution failure occurs with respect to any
Pension Plan sufficient to give rise to a Lien under section 302(f) of ERISA.
(h) Judgments. Final judgments which exceed an aggregate
Dollar Equivalent amount of U.S. $250,000 shall be rendered against the Company
or any Subsidiary and shall not have been discharged or vacated or had execution
thereof stayed pending appeal within 30 days after entry or filing of such
judgments.
(i) Invalidity of Collateral Documents, etc. Any Collateral
Document shall cease to be in full force and effect with respect to the Loan
Party which is a party thereto; any Loan Party shall fail (subject to any
applicable grace period) to comply with or to perform any applicable provision
of any Collateral Document to which it is a party (i) if as a result thereof the
Lien on any material portion of the collateral granted thereunder becomes
unperfected or is otherwise adversely affected or (ii) within ten days after
written request of either Agent or any Lender; or any Loan Party (or any Person
by, through or on behalf of any Loan Party) shall contest in any manner the
validity, binding nature or enforceability of any Collateral Document.
(j) Invalidity of Guaranty, etc. Any Guaranty shall cease to
be in full force and effect with respect to any applicable Guarantor, any
Guarantor shall fail (subject to any applicable grace period) to comply with or
to perform any applicable provision of the applicable Guaranty, or any Guarantor
(or any Person by, through or on behalf of such Guarantor) shall contest in any
manner the validity, binding nature or enforceability of the applicable Guaranty
with respect to such Guarantor.
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(k) Change of Control. Any Change of Control shall occur.
9.2 Remedies. If any Event of Default occurs, the Agents shall, at the
request of, or may, with the consent of, the Required Lenders do any or all of
the following:
(a) declare the commitment of each Lender to make Loans and
any obligation of the Issuing Lender to Issue Letters of Credit to be
terminated, whereupon such commitments and obligation shall be terminated;
(b) declare an amount equal to the maximum aggregate amount
that is or at any time thereafter may become available for drawing under any
outstanding Letter of Credit (whether or not any beneficiary shall have
presented, or shall be entitled at such time to present, the drafts or other
documents required to draw under such Letter of Credit) to be immediately due
and payable, and declare the unpaid principal amount of all outstanding Loans,
all interest accrued and unpaid thereon, and all other amounts owing or payable
hereunder to be immediately due and payable, without presentment, demand,
protest or other notice of any kind, all of which are hereby expressly waived by
the Borrowers; and
(c) exercise on behalf of the Agents and the Lenders all
rights and remedies available to the Agents and the Lenders under the Loan
Documents or applicable law;
provided, however, that upon the occurrence of any Event of Default specified in
subsection 9.1(d), the obligation of each Lender to make Loans and the
obligation of the Issuing Lender to Issue Letters of Credit shall automatically
terminate and the unpaid principal amount of all outstanding Loans and other
Obligations and all interest and other amounts as aforesaid shall automatically
become due and payable without further act of either Agent, the Issuing Lender
or any other Lender.
9.3 Rights Not Exclusive. The rights provided for in this Agreement are
cumulative and are not exclusive of any other rights, powers, privileges or
remedies provided by law or in equity, or under any other instrument, document
or agreement now existing or hereafter arising.
ARTICLE X
THE AGENTS
----------
10.1 Appointment and Authorization. (a) Each Lender hereby irrevocably
(subject to Section 10.9) appoints, designates and authorizes each Agent to take
such action on its behalf under the provisions of this Agreement and to exercise
such powers and perform such duties as are expressly delegated to it by the
terms of this Agreement, together with such
73
powers as are reasonably incidental thereto. Notwithstanding any provision to
the contrary contained elsewhere in this Agreement, no Agent shall have any
duties or responsibilities except those expressly set forth herein, nor shall
either Agent have or be deemed to have any fiduciary relationship with any
Lender, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or otherwise exist
against either Agent.
(b) The Issuing Lender shall act on behalf of the Lenders with
respect to the Letters of Credit Issued by it and the documents associated
therewith until such time and except for so long as the U.S. Agent may agree at
the request of the Required Lenders to act for such Issuing Lender with respect
thereto; provided, however, that the Issuing Lender shall have all of the
benefits and immunities (i) provided to the Agents in this Article X with
respect to any acts taken or omissions of the Issuing Lender in connection with
Letters of Credit Issued by it or proposed to be Issued by it and the
applications and agreements for letters of credit pertaining to the Letters of
Credit as fully as if the term "Agent", as used in this Article X, included the
Issuing Lender with respect to such acts or omissions, and (ii) as additionally
provided in this Agreement with respect to the Issuing Lender.
10.2 Delegation of Duties. Each Agent may execute any of its duties
under this Agreement by or through agents, employees or attorneys-in-fact and
shall be entitled to advice of counsel concerning all matters pertaining to such
duties. No Agent shall be responsible for the negligence or misconduct of any
agent or attorney-in-fact that it selects with reasonable care.
10.3 Liability of Agents. None of the Agent-Related Persons shall (i)
be liable for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or the transactions contemplated hereby (except
for its own gross negligence or willful misconduct), or (ii) be responsible in
any manner to any of the Lenders for any recital, statement, representation or
warranty made by the Company or any Subsidiary or Affiliate of the Company, or
any officer thereof, contained in this Agreement or in any certificate, report,
statement or other document referred to or provided for in, or received by
either Agent under or in connection with, this Agreement, or the validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement, or
for any failure of the Company or any other party to perform its obligations
hereunder. No Agent-Related Person shall be under any obligation to any Lender
to ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement, or to inspect the
properties, books or records of the Company or any of the Company's Subsidiaries
or Affiliates.
10.4 Reliance by Agents. (a) Each Agent shall be entitled to rely, and
shall be fully protected in relying, upon any writing, resolution, notice,
consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone
message, statement or other document or conversation believed by it to be
genuine and correct and to have been signed, sent or made
74
by the proper Person or Persons, and upon advice and statements of legal counsel
(including counsel to the Company), independent accountants and other experts
selected by either Agent. Each Agent shall be fully justified in failing or
refusing to take any action under this Agreement unless it shall first receive
such advice or concurrence of the Required Lenders as it deems appropriate and,
if it so requests, it shall first be indemnified to its satisfaction by the
Lenders against any and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action. Each Agent shall in all
cases be fully protected in acting, or in refraining from acting, under this
Agreement in accordance with a request or consent of the Required Lenders (or,
if applicable, all Lenders) and such request and any action taken or failure to
act pursuant thereto shall be binding upon all of the Lenders.
(b) For purposes of determining compliance with the conditions
specified in Section 6.1, each Lender that has executed this Agreement shall be
deemed to have consented to, approved or accepted, or to be satisfied with, each
document or other matter sent by an Agent to such Lender for consent, approval,
acceptance or satisfaction.
10.5 Notice of Default. No Agent shall be deemed to have knowledge or
notice of the occurrence of any Event of Default or Unmatured Event of Default,
except with respect to defaults in the payment of principal, interest and fees
required to be paid to such Agent for the account of the Lenders, unless such
Agent shall have received written notice from a Lender or a Borrower referring
to this Agreement, describing such Event of Default or Unmatured Event of
Default and stating that such notice is a "notice of default". If either Agent
receives such a notice, such Agent will notify the other Agent and the Lenders
of its receipt thereof. Each Agent shall take such action with respect to such
Event of Default or Unmatured Event of Default as may be requested by the
Required Lenders in accordance with Article IX; provided, however, that unless
and until such Agent has received any such request, such Agent may (but shall
not be obligated to) take such action, or refrain from taking such action, with
respect to such Event of Default or Unmatured Event of Default as it shall deem
advisable or in the best interest of the Lenders.
10.6 Credit Decision. Each Lender acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it, and that no
act by either Agent hereinafter taken, including any review of the affairs of
the Company and its Subsidiaries, shall be deemed to constitute any
representation or warranty by any Agent-Related Person to any Lender. Each
Lender represents to each Agent that it has, independently and without reliance
upon any Agent-Related Person and based on such documents and information as it
has deemed appropriate, made its own appraisal of and investigation into the
business, prospects, operations, property, financial and other condition and
creditworthiness of the Company and its Subsidiaries, and all applicable bank
regulatory laws relating to the transactions contemplated hereby, and made its
own decision to enter into this Agreement and to extend credit to the Borrowers
hereunder. Each Lender also represents that it will, independently and without
reliance upon any Agent-Related Person and based on such
75
documents and information as it shall deem appropriate at the time, continue to
make its own credit analysis, appraisals and decisions in taking or not taking
action under this Agreement, and to make such investigations as it deems
necessary to inform itself as to the business, prospects, operations, property,
financial and other condition and creditworthiness of the Borrowers. Except for
notices, reports and other documents expressly herein required to be furnished
to the Lenders by an Agent, no Agent shall have any duty or responsibility to
provide any Lender with any credit or other information concerning the business,
prospects, operations, property, financial and other condition or
creditworthiness of the Borrowers which may come into the possession of any of
the Agent-Related Persons.
10.7 Indemnification of Agents. Whether or not the transactions
contemplated hereby are consummated, the Lenders shall indemnify upon demand the
Agent-Related Persons (to the extent not reimbursed by or on behalf of the
Borrowers and without limiting the obligation of the Borrowers to do so),
ratably according to their Pro Rata Shares, from and against any and all
Indemnified Liabilities; provided, however, that no Lender shall be liable for
the payment to any Agent-Related Person of any portion of the Indemnified
Liabilities resulting solely from such Person's gross negligence or willful
misconduct. Without limitation of the foregoing, each Lender shall reimburse
each Agent upon demand for its ratable share of any costs or out-of-pocket
expenses (including Attorney Costs) incurred by such Agent in connection with
the preparation, execution, delivery, administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Agreement
or any document contemplated by or referred to herein, to the extent that such
Agent is not reimbursed for such expenses by or on behalf of the Borrowers. The
undertaking in this Section shall survive the termination of this Agreement, the
payment of all Obligations hereunder and the resignation or replacement of
either Agent.
10.8 Agents in Individual Capacity. BAI and its Affiliates may make
loans to, issue letters of credit for the account of, accept deposits from,
acquire equity interests in and generally engage in any kind of banking, trust,
financial advisory, underwriting or other business with the Company and its
Subsidiaries and Affiliates as though BAI were not the U.S. Agent and the
Issuing Lender and BAC were not the Canadian Agent, and without notice to or
consent of the Lenders. The Lenders acknowledge that, pursuant to such
activities, BAI or its Affiliates may receive information regarding the Company
or its Affiliates (including information that may be subject to confidentiality
obligations in favor of the Company or such Subsidiary) and acknowledge that BAI
and its Affiliates shall be under no obligation to provide such information to
them. With respect to their respective Loans, BAI and any Affiliate thereof
shall have the same rights and powers under this Agreement as any other Lender
and may exercise the same as though it were not an Agent or the Issuing Lender.
10.9 Successor Agents. Either Agent may, and at the request of the
Required Lenders shall, resign as an Agent upon 30 days' notice to the Lenders.
If either Agent
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resigns under this Agreement, the Required Lenders shall appoint from among the
Lenders a successor U.S. Agent or Canadian Agent, as applicable, for the
Lenders. If no successor agent is appointed prior to the effective date of the
resignation of the Applicable Agent, such Agent may appoint, after consulting
with the Lenders and the Company, a successor U.S. Agent or Canadian Agent, as
applicable, from among the Lenders. Upon the acceptance of its appointment as
successor Agent hereunder, such successor Agent shall succeed to all the rights,
powers and duties of the retiring Agent and the term "U.S. Agent" or "Canadian
Agent," as applicable, shall mean such successor agent and the retiring Agent's
appointment, powers and duties as Agent shall be terminated. After any retiring
Agent's resignation hereunder as Agent, the provisions of this Article X and
Sections 11.4 and 11.5 shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was an Agent under this Agreement. If no
successor agent has accepted appointment as the Applicable Agent by the date
which is 30 days following a retiring Agent's notice of resignation, the
retiring Agent's resignation shall nevertheless thereupon become effective and
the Lenders (or, in the case of the Canadian Agent, the Canadian Lenders) shall
perform all of the duties of such Agent hereunder until such time, if any, as
the Required Lenders appoint a successor agent as provided for above.
Notwithstanding the foregoing, however, BAI may not be removed as the U.S. Agent
at the request of the Required Lenders unless BAI or any Affiliate of BAI
(including BAC) shall also simultaneously be replaced as "Canadian Lender" and
as "Issuing Lender" hereunder pursuant to documentation in form and substance
reasonably satisfactory to BAI and, if applicable, such Affiliate.
10.10 Withholding Tax. (a) If any Lender, other than a Canadian Lender,
claims exemption from, or reduction of, withholding tax under a United States
tax treaty by providing IRS Form 1001 pursuant to subsection 5.1(f) and such
Lender sells, assigns, grants a participation in, or otherwise transfers all or
part of the Obligations of the Company to such Lender, such Lender agrees to
notify the U.S. Agent of the percentage amount in which it is no longer the
beneficial owner of Obligations of such Borrower to such Lender. To the extent
of such percentage amount, the U.S. Agent will treat such Lender's IRS Form 1001
as no longer valid, and such Lender agrees to undertake sole responsibility for
complying with the withholding tax requirements imposed by Sections 1441 and
1442 of the Code.
(b) If any Lender, other than a Canadian Lender, claiming
exemption from United States withholding tax by filing IRS Form 4224 with the
U.S. Agent pursuant to subsection 4.1(f) sells, assigns, grants a participation
in, or otherwise transfers all or part of the Obligations of either Borrower to
such Lender, such Lender agrees to undertake sole responsibility for complying
with the withholding tax requirements imposed by Sections 1441 and 1442 of the
Code.
(c) If any Lender is entitled to a reduction in the applicable
withholding tax, the Applicable Agent may withhold from any interest payment to
such Lender an amount equivalent to the applicable withholding tax after taking
into account such reduction. If the forms or other documentation required by
subsection 5.1(f) are not delivered to the
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Applicable Agent, then the Applicable Agent may withhold from any interest
payment to such Lender not providing such forms or other documentation an amount
equivalent to the applicable withholding tax.
(d) If the IRS or Revenue Canada or any other Governmental
Authority of the United States, Canada or any other jurisdiction asserts a claim
that an Agent did not properly withhold tax from amounts paid to or for the
account of any Lender (because the appropriate form was not delivered or was not
properly executed, or because such Lender failed to notify the Agent of a change
in circumstances which rendered the exemption from, or reduction of, withholding
tax ineffective, or for any other reason) such Lender shall indemnify such Agent
fully for all amounts paid, directly or indirectly, by such Agent as tax or
otherwise, including penalties and interest, and including any taxes imposed by
any jurisdiction on the amounts payable to such Agent under this Section,
together with all costs and expenses (including Attorney Costs). The obligation
of the Lenders under this subsection shall survive the payment of all
Obligations.
10.11 Collateral Matters. The Lenders irrevocably authorize the U.S.
Agent, at its option and in its discretion, to release any Lien granted to or
held by the U.S. Agent upon any Collateral (i) upon termination of the
Commitments and payment in full of all Loans and all other obligations of the
Company hereunder and expiration or termination of all Letters of Credit; (ii)
constituting property sold or to be sold or disposed of as part of or in
connection with any disposition permitted hereunder; (iii) constituting property
in which the Company or the applicable Subsidiary owned no interest at the time
the Lien was granted or at any time thereafter; or (iv) subject to Section 11.1,
if approved, authorized or ratified in writing by the Required Lenders. Upon
request by the U.S. Agent at any time, the Lenders will confirm in writing the
U.S. Agent's authority to release particular types or items of Collateral
pursuant to this Section 10.11.
ARTICLE XI
MISCELLANEOUS
-------------
11.1 Amendments and Waivers. No amendment or waiver of any provision of
this Agreement, and no consent with respect to any departure by either Borrower
herefrom, shall be effective unless the same shall be in writing and signed by
the Required Lenders (or by the U.S. Agent at the written request or with the
written consent of the Required Lenders) and the Company and acknowledged by the
U.S. Agent, and then any such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given; provided that no
such waiver, amendment or consent shall, unless in writing and signed by all
Lenders and the Borrowers and acknowledged by the U.S. Agent, do any of the
following:
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(a) increase or extend the Commitment of any Lender (or
reinstate any Commitment terminated pursuant to Section 9.2);
(b) postpone or delay any date fixed by this Agreement for any
payment of principal, interest, fees or other amounts due to the Lenders (or any
of them) hereunder or under any other Loan Document;
(c) reduce the principal of, or the rate of interest specified
herein on, any Loan or (subject to clause (iv) below) reduce any fees or other
amounts payable hereunder or under any other Loan Document;
(d) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Loans and L/C Obligations which is
required for the Lenders or any of them to take any action hereunder;
(e) amend or release any Guaranty or (subject to Section
10.11) release or subordinate any substantial portion of the collateral granted
under the Collateral Documents; or
(f) amend this Section, Section 2.9, the definition of "Pro
Rata Share", or any provision herein providing for consent or other action by
all Lenders;
and provided, further, that (i) no amendment, waiver or consent shall, unless in
writing and signed by the Issuing Lender in addition to the Required Lenders or
all Lenders, as the case may be, affect the rights or duties of the Issuing
Lender under this Agreement or any L/C- Related Document, (ii) no amendment,
waiver or consent shall, unless in writing and signed by the Applicable Agent in
addition to the Required Lenders or all Lenders, as the case may be, affect the
rights or duties of such Agent under this Agreement, (iii) no amendment, waiver
or consent shall, unless in writing and signed by all Canadian Lenders in
addition to the Required Lenders or all Lenders, as the case may be, affect the
rights or duties of the Canadian Lenders under this Agreement or any other Loan
Document and (iv) the amount of any fee payable pursuant to subsection 2.9(a) or
subsection 4.8(b) may be changed pursuant to a written agreement between the
Company and the Person to which such fee is payable.
11.2 Notices. (a) All notices, requests and other communications
hereunder shall be in writing (including, unless the context expressly otherwise
provides, by facsimile transmission, provided that any matter transmitted by
either Borrower to either Agent by facsimile shall be immediately confirmed by a
telephone call to the recipient at the number specified on Schedule 11.2) and
mailed, faxed or delivered to the address or facsimile number specified for
notices on Schedule 11.2; or, in the case of either Borrower or either Agent, to
such other address as shall be designated by such party in a written notice to
the other parties, and in the case of any other party, at such other address as
shall be designated by such party in a written notice to the Borrowers and the
Agents.
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(b) All such notices, requests and other communications
hereunder shall, when transmitted by overnight delivery, or faxed, be effective
when delivered, or transmitted in legible form by facsimile machine,
respectively, or if mailed, upon the third Business Day after the date deposited
into the U.S. mail; except that notices to either Agent pursuant to Article II,
III, IV or X shall not be effective until actually received by such Agent, and
notices pursuant to Article IV to the Issuing Lender shall not be effective
until actually received by the Issuing Lender.
(c) Any agreement of the Agents and the Lenders herein to
receive certain notices by telephone or facsimile is solely for the convenience
and at the request of the Borrowers. The Agents and the Lenders shall be
entitled to rely on the authority of any Person purporting to be a Person
authorized by the applicable Borrower to give such notice and the Agents and the
Lenders shall not have any liability to such Borrower or other Person on account
of any action taken or not taken by either Agent or any Lender in reliance upon
such telephonic or facsimile notice. The obligation of the Borrowers to repay
the Loans and L/C Obligations shall not be affected in any way or to any extent
by any failure of either Agent or any Lender to receive written confirmation of
any telephonic or facsimile notice or the receipt by either Agent or any Lender
of a confirmation which is at variance with the terms understood by such Agent
or such Lender to be contained in the telephonic or facsimile notice.
(d) All notices sent to the Canadian Agent also shall be sent
simultaneously to the U.S. Agent.
11.3 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of either Agent or any Lender, any right,
remedy, power or privilege hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, remedy, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of any
other right, remedy, power or privilege.
11.4 Costs and Expenses. The Company shall:
(a) whether or not the transactions contemplated hereby are
consummated, pay or reimburse BAI (in its capacity as U.S. Agent and Issuing
Lender) and BAC (in its capacity as Canadian Agent) within five Business Days
after demand (subject to subsection 6.1(m)) for all reasonable costs and
expenses incurred by BAI (in its capacity as U.S. Agent and Issuing Lender) or
BAC (in its capacity as Canadian Agent) in connection with the development,
preparation, syndication, delivery, administration and execution of, and any
amendment, supplement, waiver or modification to (in each case, whether or not
consummated), this Agreement, any other Loan Document and any other document
prepared in connection herewith or therewith, and the consummation of the
transactions contemplated hereby and thereby, including reasonable Attorney
Costs incurred by BAI (in its capacity as
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U.S. Agent and Issuing Lender) and BAC (in its capacity as Canadian Agent) with
respect thereto; and
(b) pay or reimburse each Agent and each Lender within five
Business Days after demand for all reasonable costs and expenses (including
Attorney Costs) incurred by them in connection with the enforcement, attempted
enforcement or preservation of any right or remedy under this Agreement or any
other Loan Document during the existence of an Event of Default or after
acceleration of the Loans (including in connection with any "workout" or
restructuring regarding the Loans, and including in any Insolvency Proceeding or
appellate proceeding).
The agreements in this Section shall survive the termination of this Agreement
and the payment of all other Obligations.
11.5 Borrower Indemnification. Whether or not the transactions
contemplated hereby are consummated, the Borrowers shall indemnify and hold the
Agent-Related Persons and each Lender and each of their respective officers,
directors, employees, counsel, agents and attorneys-in-fact (each an
"Indemnified Person") harmless from and against any and all reasonable
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, charges, expenses and disbursements (including Attorney Costs) of any
kind or nature whatsoever which may at any time (including at any time following
repayment of the Loans, the termination of the Letters of Credit and the
termination, resignation or replacement of either Agent or the replacement of
any Lender) be imposed on, incurred by or asserted against any Indemnified
Person in any way relating to or arising out of this Agreement or any document
contemplated by or referred to herein, or the transactions contemplated hereby
or thereby, or any action taken or omitted by any such Person under or in
connection with any of the foregoing, including with respect to any
investigation, litigation or proceeding (including any Insolvency Proceeding or
appellate proceeding) related to or arising out of this Agreement or the Loans
or Letters of Credit or the use of the proceeds thereof, whether or not any
Indemnified Person is a party thereto (all the foregoing, collectively, the
"Indemnified Liabilities"); provided that (a) neither Borrower shall have any
obligation hereunder to any Indemnified Person with respect to Indemnified
Liabilities (a) resulting solely from the gross negligence or willful misconduct
of such Indemnified Person; and (b) VUCI shall not have any liability for an
Indemnified Liabilities to the extent they arise out of matters relating solely
to the Company. The agreements in this Section shall survive the termination of
this Agreement and the payment of all other Obligations.
11.6 Payments Set Aside. To the extent that either Borrower makes a
payment to either Agent or any Lender, or either Agent or any Lender exercises
its right of set-off, and such payment or the proceeds of such set-off or any
part thereof is subsequently invalidated, declared to be fraudulent or
preferential, set aside or required (including pursuant to any settlement
entered into by such Agent or such Lender in its discretion) to be repaid to a
trustee or receiver, or any other party, in connection with any Insolvency
Proceeding or
81
otherwise, then (a) to the extent of such recovery the obligation or part
thereof originally intended to be satisfied shall be revived and continued in
full force and effect as if such payment had not been made or such set-off had
not occurred and (b) each Lender severally agrees to pay to the Applicable Agent
upon demand its pro rata share of any amount so recovered from or repaid by such
Agent.
11.7 Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that the Borrowers may not assign or transfer any
of their respective rights or obligations under this Agreement without the prior
written consent of the Agents and each Lender.
11.8 Assignments, Participations, etc. (a) Any Lender may, with the
written consent of the Company (at all times other than during the existence of
an Event of Default), the Agents and the Issuing Lender, which consents shall
not be unreasonably withheld or delayed, at any time assign and delegate to one
or more Eligible Assignees (provided that no written consent of the Company,
either Agent or the Issuing Lender shall be required in connection with any
assignment and delegation by a Lender to an Eligible Assignee that is an
Affiliate of such Lender (so long as such assignment will not result in any
increased costs to either Borrower) or to another Lender) (each an "Assignee")
all or any part of the Loans, the Commitment, the L/C Obligations and the other
rights and obligations of such Lender hereunder, in a minimum Dollar Equivalent
amount of U.S. $2,500,000 or, if less, the entire amount of all Loans, the
Commitment, L/C Obligations and other rights and obligations of such Lender
hereunder; provided, however, that (i) the Borrowers and the Agents may continue
to deal solely and directly with such Lender in connection with the interest so
assigned to an Assignee until (x) written notice of such assignment, together
with payment instructions, addresses and related information with respect to the
Assignee, shall have been given to the Borrowers and the Agents by such Lender
and the Assignee; (y) such Lender and its Assignee shall have delivered to the
Borrowers and the Agents an Assignment and Acceptance in the form of Exhibit F
("Assignment and Acceptance") together with any Note or Notes subject to such
assignment and (z) the assignor Lender or Assignee shall have paid to the U.S.
Agent a processing fee in the amount of U.S. $3,000; and (ii) no Lender which is
(or is a branch or an Affiliate of) a Canadian Lender may assign all of its
rights and obligations hereunder unless arrangements satisfactory to the
Borrowers and the Agents have been made for one or more Lenders to act (or to
cause their respective Affiliates to act) as Canadian Lenders hereunder in an
amount equal to such Lender's Canadian Percentage of the Canadian Commitment.
(b) From and after the date that the U.S. Agent notifies the
assignor Lender that it has received (and provided its consent and, to the
extent required, received the consents of the Company, the other Agent and the
Issuing Lender with respect to) an executed Assignment and Acceptance and
payment of the above-referenced processing fee, (i) the Assignee thereunder
shall be a party hereto and, to the extent that rights hereunder have
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been assigned to it and obligations hereunder have been assumed by it pursuant
to such Assignment and Acceptance, shall have the rights and obligations of a
Lender under the Loan Documents, and (ii) the assignor Lender shall, to the
extent that rights and obligations hereunder and under the other Loan Documents
have been assigned by it pursuant to such Assignment and Acceptance, relinquish
its rights and be released from its obligations under the Loan Documents.
(c) Any Lender may at any time sell to one or more commercial
banks or other Persons not Affiliates of the Company (a "Participant")
participating interests in any Loan, the Commitment of such Lender and the other
interests of such Lender (the "originating Lender") hereunder and under the
other Loan Documents; provided, however, that (i) the originating Lender's
obligations under this Agreement shall remain unchanged, (ii) the originating
Lender shall remain solely responsible for the performance of such obligations,
(iii) the Borrowers, the Issuing Lender and the Agents shall continue to deal
solely and directly with the originating Lender in connection with the
originating Lender's rights and obligations under this Agreement and the other
Loan Documents, and (iv) no Lender shall transfer or grant any participating
interest under which the Participant has the right to approve any amendment to,
or any consent or waiver with respect to, this Agreement or any other Loan
Document, except to the extent such amendment, consent or waiver would require
unanimous consent of the Lenders as described in the first proviso to Section
11.1. In the case of any such participation, the Participant shall be entitled
to the benefit of Sections 5.1, 5.3, 5.4, 5.6 and 11.5 as though it were also a
Lender hereunder (provided that neither Borrower shall be obligated to pay any
amount under Section 5.1, 5.3, or 5.6 to any Participant which is greater than
such Lender would have been required to pay to the originating Lender if no such
participation had been sold), and if amounts outstanding under this Agreement
are due and unpaid, or shall have been declared or shall have become due and
payable upon the occurrence of an Event of Default, the Participant shall be
deemed to have the right of set-off in respect of its participating interest in
amounts owing under this Agreement to the same extent as if the amount of its
participating interest were owing directly to it as a Lender under this
Agreement.
(d) Notwithstanding any other provision in this Agreement, any
Lender may at any time create a security interest in, or pledge, all or any
portion of its rights under and interest in this Agreement and any Note held by
it in favor of any Federal Reserve Bank in accordance with Regulation A of the
FRB or U.S. Treasury Regulation 31 CFR ss.203.14, and such Federal Reserve Bank
may enforce such pledge or security interest in any manner permitted under
applicable law.
11.9 Confidentiality. Each Lender agrees to take and to cause its
Affiliates to take normal and reasonable precautions and exercise due care to
maintain the confidentiality of all information identified in writing as
"confidential" or "secret" by the Company (including projections required by
Section 8.1.9, which information is non-public and may constitute "inside
information" for purposes of state or federal securities laws) and provided to
it by the
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Company or any Subsidiary, or by either Agent on the Company's or any
Subsidiary's behalf, under this Agreement, and neither such Lender nor any of
its Affiliates shall use any such information other than in connection with or
in enforcement of this Agreement and the other Loan Documents or in connection
with other business now or hereafter existing or contemplated with the Company
or any Subsidiary; except to the extent such information (i) was or becomes
generally available to the public other than as a result of disclosure by such
Lender, or (ii) was or becomes available on a non-confidential basis from a
source other than the Company or any Subsidiary, provided that such source is
not bound by a confidentiality agreement with the Company or any Subsidiary
known to such Lender; provided, however, that any Lender may disclose such
information (A) at the request or pursuant to any requirement of any
Governmental Authority to which such Lender is subject or in connection with an
examination of such Lender by any such authority; (B) pursuant to subpoena or
other court process; (C) when required to do so in accordance with the
provisions of any applicable Requirement of Law; (D) to the extent reasonably
required in connection with any litigation or proceeding to which either Agent
or any Lender or any of their respective Affiliates may be party; (E) to the
extent reasonably required in connection with the exercise of any remedy
hereunder or under any other Loan Document; (F) to such Lender's independent
auditors and other professional advisors; (G) to any Participant or Assignee,
actual or potential, provided that such Person agrees in writing to keep such
information confidential to the same extent required of the Lenders hereunder;
(H) as to any Lender or its Affiliates, as expressly permitted under the terms
of any other document or agreement regarding confidentiality to which the
Company or any Subsidiary is party or is deemed party with such Lender or such
Affiliate; and (I) to its Affiliates.
11.10 Set-off. In addition to any right or remedy of the Lenders
provided by law, if an Event of Default exists, each Lender is authorized at any
time and from time to time, without prior notice to either Borrower, any such
notice being waived by each Borrower to the fullest extent permitted by law, to
set off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held by, and other indebtedness at any time
owing by, such Lender to or for the credit or the account of either Borrower
against any and all Obligations owing to such Lender, now or hereafter existing,
irrespective of whether or not either Agent or such Lender shall have made
demand under this Agreement and although such Obligations may be contingent or
unmatured. Each Lender agrees promptly to notify the Company and the Agents
after any such set-off and application made by such Lender; provided that the
failure to give such notice shall not affect the validity of such set-off and
application.
11.11 Notification of Addresses, Lending Offices, Etc. Each Lender
shall notify the U.S. Agent (and, in the case of a Canadian Lender, the Canadian
Agent) in writing of any change in the address to which notices to such Lender
should be directed, of addresses of any Lending Office, of payment instructions
in respect of all payments to be made to it hereunder and of such other
administrative information as either Agent shall reasonably request.
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11.12 Counterparts. This Agreement may be executed in any number of
separate counterparts, each of which, when so executed, shall be deemed an
original, and all of which taken together shall constitute but one and the same
instrument.
11.13 Severability. The illegality or unenforceability of any provision
of this Agreement or any instrument or agreement required hereunder shall not in
any way affect or impair the legality or enforceability of the remaining
provisions of this Agreement or such instrument or agreement.
11.14 No Third Parties Benefited. This Agreement is made and entered
into for the sole protection and legal benefit of the Borrowers, the Lenders,
the Agents and the Agent- Related Persons, and their permitted successors and
assigns, and no other Person shall be a direct or indirect legal beneficiary of,
or have any direct or indirect cause of action or claim in connection with, this
Agreement.
11.15 Governing Law and Jurisdiction. (a) THIS AGREEMENT AND ANY NOTE
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
ILLINOIS; PROVIDED THAT THE AGENTS AND THE LENDERS SHALL RETAIN ALL RIGHTS
ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE
OF ILLINOIS OR OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF ILLINOIS, AND
BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH BORROWER, EACH AGENT AND EACH
LENDER CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NONEXCLUSIVE
JURISDICTION OF SUCH COURTS. EACH BORROWER, EACH AGENT AND EACH LENDER
IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE
OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT
OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. EACH BORROWER, EACH AGENT AND
EACH LENDER WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS,
WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY ILLINOIS LAW.
11.16 Waiver of Jury Trial. EACH BORROWER, EACH LENDER AND EACH AGENT
WAIVES ITS RIGHT TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY IN ANY ACTION, PROCEEDING OR OTHER LITIGATION
OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR ANY
AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH
85
RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. EACH BORROWER, EACH
LENDER AND EACH AGENT AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE
TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, EACH
PARTY FURTHER AGREES THAT ITS RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF
THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN
WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT
OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER
SHALL APPLY TO ANY SUBSEQUENT AMENDMENT, RENEWAL, SUPPLEMENT OR MODIFICATION TO
THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
11.17 Judgment. If, for the purposes of obtaining judgment in any
court, it is necessary to convert a sum due hereunder or any other Loan Document
in one currency into another currency, the rate of exchange used shall be that
at which in accordance with normal banking procedures the Applicable Agent could
purchase the first currency with such other currency on the Business Day
preceding that on which final judgment is given. The obligation of each Borrower
in respect of any such sum due from it to the Applicable Agent hereunder or
under any other Loan Document shall, notwithstanding any judgment in a currency
(the "Judgment Currency") other than that in which such sum is denominated in
accordance with the applicable provisions of this Agreement (the "Agreement
Currency"), be discharged only to the extent that on the Business Day following
receipt by the Applicable Agent of any sum adjudged to be so due in the Judgment
Currency, such Agent may in accordance with normal banking procedures purchase
the Agreement Currency with the Judgment Currency. If the amount of the
Agreement Currency so purchased is less than the sum originally due to the
Applicable Agent in the Agreement Currency, the applicable Borrower agrees, as a
separate obligation and notwithstanding any such judgment, to indemnify such
Agent or the Person to whom such obligation was owing against such loss. If the
amount of the Agreement Currency so purchased is greater than the sum originally
due to the Applicable Agent in such currency, such Agent agrees to return the
amount of any excess to the applicable Borrower (or to any other Person who may
be entitled thereto under applicable law).
11.18 Entire Agreement. This Agreement, together with the other Loan
Documents and any letters relating to fees described in subsection 2.5(a) or
4.8(b), embodies the entire agreement and understanding among the Borrowers, the
Lenders and the Agents, and supersedes all prior or contemporaneous agreements
and understandings of such Persons, verbal or written, relating to the subject
matter hereof and thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered in Chicago, Illinois by their proper and duly
authorized officers as of the day and year first above written.
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VIDEO UPDATE, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: CEO
VIDEO UPDATE CANADA INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: CEO
BANK OF AMERICA ILLINOIS,
as U.S. Agent
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Vice President
BANK OF AMERICA CANADA,
as Canadian Agent
By: /s/
Title: Vice President
BANK OF AMERICA ILLINOIS,
as Issuing Lender
By: /s/
Title: Vice President
BANK OF AMERICA ILLINOIS,
as a Lender
By: /s/
Title: Vice President
▇▇
▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, as a
Canadian Lender designated by
Bank of America Illinois
By: /s/
Title: Vice President
BANK LEUMI TRUST COMPANY
OF NEW YORK
By: /s/
Title:
BANK ONE, CHICAGO, NA
By: /s/
Title: Asst. Vice President
▇▇▇▇▇▇ TRUST AND SAVINGS BANK
By: /s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
LASALLE NATIONAL BANK
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
MICHIGAN NATIONAL BANK
a National Banking
Association
By: /s/ ▇▇▇▇▇▇▇ ▇. Read III
Title: Relationship Manager
88
THE SUMITOMO BANK, LIMITED,
CHICAGO BRANCH
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Title: Vice President
By: /s/ ▇▇▇▇▇▇▇ ▇. Philippe
Title: V. P. & Manager
89
EXHIBITS AND SCHEDULES
----------------------
Copies of the Exhibits and Schedules will be provided to the Commission upon
request