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EXHIBIT 10.1
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CREDIT AGREEMENT
Dated as of March 24, 2000
among
▇▇▇▇▇▇▇ PIANO & ORGAN COMPANY,
as Borrower,
THE OTHER CREDIT PARTIES SIGNATORY HERETO,
as Credit Parties,
THE LENDERS SIGNATORY HERETO
FROM TIME TO TIME,
as Lenders,
and
GENERAL ELECTRIC CAPITAL CORPORATION,
as Agent and Lender
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TABLE OF CONTENTS
Page
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1. AMOUNT AND TERMS OF CREDIT..............................................................................1
1.1. Credit Facilities..............................................................................1
1.2. Letters of Credit..............................................................................2
1.3. Prepayments....................................................................................2
1.4. Use of Proceeds................................................................................3
1.5. Interest and Applicable Margins................................................................3
1.6. Eligible Accounts..............................................................................5
1.7. Eligible Inventory.............................................................................8
1.8. Eligible Raw Materials........................................................................10
1.9. Eligible Fixed Assets.........................................................................11
1.10. Cash Management Systems.......................................................................12
1.11. Fees..........................................................................................12
1.12. Receipt of Payments...........................................................................13
1.13. Application and Allocation of Payments........................................................13
1.14. Loan Account and Accounting...................................................................14
1.15. Indemnity.....................................................................................14
1.16. Access........................................................................................14
1.17. Taxes.........................................................................................15
1.18. Capital Adequacy; Increased Costs.............................................................16
1.19. Single Loan...................................................................................17
2. CONDITIONS PRECEDENT...................................................................................17
2.1. Conditions to the Initial Loans...............................................................17
2.2. Further Conditions to Each Loan...............................................................19
3. REPRESENTATIONS AND WARRANTIES.........................................................................19
3.1. Corporate Existence; Compliance with Law......................................................19
3.2. Executive Offices; FEIN.......................................................................20
3.3. Corporate Power, Authorization, Enforceable Obligations.......................................20
3.4. Financial Statements and Projections..........................................................20
3.5. Material Adverse Effect.......................................................................21
3.6. Ownership of Property; Liens..................................................................22
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3.7. Labor Matters.................................................................................22
3.8. Ventures, Subsidiaries and Affiliates; Outstanding Stock and Indebtedness.....................23
3.9. Government Regulation.........................................................................23
3.10. Margin Regulations............................................................................23
3.11. Taxes.........................................................................................23
3.12. ERISA and Canadian Pension and Benefit Plans..................................................24
3.13. No Litigation.................................................................................25
3.14. Brokers.......................................................................................25
3.15. Intellectual Property.........................................................................25
3.16. Full Disclosure...............................................................................26
3.17. Environmental Matters.........................................................................26
3.18. Insurance.....................................................................................27
3.19. Deposit and Disbursement Accounts.............................................................27
3.20. Government Contracts..........................................................................27
3.21. Customer and Trade Relations..................................................................27
3.22. Agreements and Other Documents................................................................27
3.23. Solvency......................................................................................28
3.24. KAC Sale Agreement............................................................................28
3.25. Payables Subject to Extended Trade Terms......................................................28
3.26. Repurchase Agreements.........................................................................28
3.27. Repurchase Obligations and Guaranteed Indebtedness............................................29
4. FINANCIAL STATEMENTS AND INFORMATION...................................................................29
4.1. Reports and Notices...........................................................................29
4.2. Communication with Accountants................................................................29
5. AFFIRMATIVE COVENANTS..................................................................................29
5.1. Maintenance of Existence and Conduct of Business..............................................29
5.2. Payment of Obligations........................................................................30
5.3. Books and Records.............................................................................30
5.4. Insurance; Damage to or Destruction of Collateral.............................................31
5.5. Compliance with Laws..........................................................................32
5.6. Supplemental Disclosure.......................................................................33
5.7. Intellectual Property.........................................................................33
5.8. Environmental Matters.........................................................................33
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5.9. Landlords' Agreements, Mortgagee Agreements and Bailee Letters................................34
5.10. Further Assurances............................................................................34
6. NEGATIVE COVENANTS.....................................................................................35
6.1. Mergers, Subsidiaries, Etc....................................................................35
6.2. Investments; Loans and Advances...............................................................35
6.3. Indebtedness..................................................................................36
6.4. Employee Loans and Affiliate Transactions.....................................................37
6.5. Capital Structure and Business................................................................37
6.6. Guaranteed Indebtedness.......................................................................37
6.7. Liens.........................................................................................38
6.8. Sale of Stock and Assets......................................................................38
6.9. ERISA.........................................................................................38
6.10. Financial Covenants...........................................................................39
6.11. Hazardous Materials...........................................................................39
6.12. Sale-Leasebacks...............................................................................39
6.13. Cancellation of Indebtedness..................................................................39
6.14. Restricted Payments...........................................................................39
6.15. Change of Corporate Name or Location; Change of Fiscal Year...................................39
6.16. No Impairment of Intercompany Transfers.......................................................40
6.17. No Speculative Transactions...................................................................40
6.18. Real Estate...................................................................................40
6.19. Amendments to Related Material Contracts; Licenses............................................40
6.20. Repurchase Agreements.........................................................................41
7. TERM...................................................................................................41
7.1. Termination...................................................................................41
7.2. Survival of Obligations Upon Termination of Financing Arrangements............................41
8. EVENTS OF DEFAULT: RIGHTS AND REMEDIES.................................................................42
8.1. Events of Default.............................................................................42
8.2. Remedies......................................................................................44
8.3. Waivers by Credit Parties.....................................................................45
9. ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT....................................................45
9.1. Assignment and Participations.................................................................45
9.2. Appointment of Agent..........................................................................47
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9.3. Agent's Reliance, Etc.........................................................................47
9.4. GE Capital and Affiliates.....................................................................48
9.5. Lender Credit Decision........................................................................48
9.6. Indemnification...............................................................................48
9.7. Successor Agent...............................................................................49
9.8. Setoff and Sharing of Payments................................................................49
9.9. Advances; Payments; Non-Funding Lenders; Information; Actions in Concert......................50
10. SUCCESSORS AND ASSIGNS.................................................................................52
10.1. Successors and Assigns........................................................................52
11. MISCELLANEOUS..........................................................................................52
11.1. Complete Agreement; Modification of Agreement.................................................52
11.2. Amendments and Waivers........................................................................52
11.3. Fees and Expenses.............................................................................54
11.4. No Waiver.....................................................................................55
11.5. Remedies......................................................................................56
11.6. Severability..................................................................................56
11.7. Conflict of Terms.............................................................................56
11.8. Confidentiality...............................................................................56
11.9. GOVERNING LAW.................................................................................56
11.10. Notices.......................................................................................57
11.11. Section Titles................................................................................58
11.12. Counterparts..................................................................................58
11.13. WAIVER OF JURY TRIAL..........................................................................58
11.14. Press Releases................................................................................58
11.15. Reinstatement.................................................................................59
11.16. Advice of Counsel.............................................................................59
11.17. No Strict Construction........................................................................59
11.18. Judgment Currency.............................................................................59
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INDEX OF APPENDICES
Exhibit 1.1(a)(i) - Form of Notice of Revolving Credit Advance
Exhibit 1.1(a)(ii) - Form of Revolving Note
Exhibit 4.1(b) - Form of Borrowing Base Certificate
Exhibit 9.1(a) - Form of Assignment Agreement
Schedule 1.1 - Responsible Individual
Schedule 1.4 - Sources and Uses; Funds Flow Memorandum
Schedule 3.2 - Executive Offices; Collateral Locations; FEIN
Schedule 3.4(A) - Financial Statements
Schedule 3.4(B) - Pro Forma
Schedule 3.4(C) - Projections
Schedule 3.6 - Real Estate and Leases
Schedule 3.7 - Labor Matters
Schedule 3.8 - Ventures, Subsidiaries and Affiliates;
Outstanding Stock
Schedule 3.11 - Tax Matters
Schedule 3.12 - ERISA Plans
Schedule 3.13 - Litigation
Schedule 3.15 - Intellectual Property
Schedule 3.17 - Hazardous Materials
Schedule 3.18 - Insurance
Schedule 3.19 - Deposit and Disbursement Accounts
Schedule 3.20 - Government Contracts
Schedule 3.22 - Material Agreements
Schedule 3.25 - Charges Subject to Extended Trade Terms
Schedule 3.26 - Repurchase Agreements
Schedule 5.1 - Trade Names
Schedule 6.3 - Indebtedness
Schedule 6.4(a) - Transactions with Affiliates
Schedule 6.7 - Existing Liens
Schedule A - Material Contracts
Annex A (Recitals) - Definitions
Annex B (Section 1.2) - Letters of Credit
Annex C (Section 1.8) - Cash Management System
Annex D (Section 2.1(a)) - Schedule of Additional Closing Documents
Annex E (Section 4.1(a)) - Financial Statements and Projections - Reporting
Annex F (Section 4.1(b)) - Collateral Reports
Annex G (Section 6.10) - Financial Covenants
Annex H (Section 9.9(a)) - Lenders' Wire Transfer Information
Annex I (Section 11.10) - Notice Addresses
Annex J (from Annex A-
Commitments definition) - Commitments as of Closing Date
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CREDIT AGREEMENT, dated as of March 24, 2000 among ▇▇▇▇▇▇▇
PIANO & ORGAN COMPANY, a Delaware corporation ("Borrower"); the other Credit
Parties signatory hereto; GENERAL ELECTRIC CAPITAL CORPORATION, a New York
corporation (in its individual capacity, "GE Capital"), for itself, as Lender,
and as Agent for Lenders; and the other Lenders signatory hereto from time to
time.
RECITALS
WHEREAS, Borrower desires that Lenders extend revolving credit
facilities to Borrower of up to Forty Million Dollars ($40,000,000) in the
aggregate for the purpose of refinancing certain indebtedness of Borrower and to
provide (a) working capital financing for Borrower, and (b) funds for other
general corporate purposes of Borrower; and for these purposes, Lenders are
willing to make certain loans and other extensions of credit to Borrower of up
to such amount upon the terms and conditions set forth herein; and
WHEREAS, it is a condition precedent to the extension of
credit by Lenders hereunder that the Guarantors guaranty the obligations of
Borrower hereunder pursuant to the Subsidiary Guaranty;
WHEREAS, it is a condition precedent to the extension of
credit by Lenders hereunder that Credit Parties secure their respective
obligations hereunder and under the other Loan Documents by granting to Agent on
behalf of itself and Lenders a first priority security interest in and lien upon
all of their respective existing and after-acquired assets all as set forth
herein and in the Collateral Documents; and
WHEREAS, capitalized terms used in this Agreement shall have
the meanings ascribed to them in Annex A and, for purposes of this Agreement and
the other Loan Documents, the rules of construction set forth in Annex A shall
govern. All Annexes, Disclosure Schedules, Exhibits and other attachments
(collectively, "Appendices") hereto, or expressly identified to this Agreement,
are incorporated herein by reference, and taken together with this Agreement,
shall constitute but a single agreement. These Recitals shall be construed as
part of the Agreement.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants hereinafter contained, and for other good and valuable
consideration, the parties hereto agree as follows:
1. AMOUNT AND TERMS OF CREDIT
1.1. Credit Facilities.
(a) Revolving Credit Facility.
(i) Subject to the terms and conditions hereof, each
Revolving Lender agrees to make available from time to time until the
Commitment Termination Date its Pro Rata Share of advances (each, a
"Revolving Credit Advance"). The Pro Rata Share of the Revolving Loan
of any Revolving Lender shall not at any time exceed its separate
Commitment. The obligations of each Revolving Lender hereunder shall be
several and not joint. The aggregate amount of Revolving Credit
Advances outstanding shall not
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exceed at any time the lesser of (A) the Maximum Amount and (B) the
Borrowing Base, in each case less the Letter of Credit Obligations
outstanding at such time ("Borrowing Availability"). Borrowing
Availability may be further reduced by Reserves imposed by Agent in its
reasonable credit judgment. Until the Commitment Termination Date,
Borrower may from time to time borrow, repay and reborrow under this
Section 1.1(a). Each Revolving Credit Advance shall be made on notice
by Borrower to the representative of Agent identified on Schedule 1.1
at the address specified thereon. Those notices must be given no later
than (1) 11:00 a.m. (New York time) on the Business Day of the proposed
Revolving Credit Advance. Each such notice (a "Notice of Revolving
Credit Advance") must be given in writing (by telecopy or overnight
courier) substantially in the form of Exhibit 1.1(a)(i), and shall
include the information required in such Exhibit and such other
information as may be required by Agent. All Revolving Credit Advances
shall be made in Dollars.
(ii) Borrower shall execute and deliver to each
Revolving Lender a note to evidence the Commitment of that Revolving
Lender. Each note shall be in the principal amount of the Commitment of
the applicable Revolving Lender, dated the Closing Date and
substantially in the form of Exhibit 1.1(a)(ii) (each a "Revolving
Note" and, collectively, the "Revolving Notes"). Each Revolving Note
shall represent the obligation of Borrower to pay the amount of each
Revolving Lender's Commitment or, if less, the applicable Revolving
Lender's Pro Rata Share of the aggregate unpaid principal amount of all
Revolving Credit Advances to Borrower together with interest thereon as
prescribed in Section 1.5. The entire unpaid balance of the Revolving
Loan and all other non-contingent Obligations shall be immediately due
and payable in full in immediately available funds on the Commitment
Termination Date.
(b) Reliance on Notices. Agent shall be entitled to rely upon,
and shall be fully protected in relying upon, any Notice of Revolving Credit
Advance or similar notice believed by Agent to be genuine. Agent may assume that
each Person executing and delivering such a notice was duly authorized, unless
the responsible individual acting thereon for Agent has actual knowledge to the
contrary.
1.2. Letters of Credit. Subject to and in accordance with the
terms and conditions contained herein and in Annex B, Borrower shall have the
right to request, and Revolving Lenders agree to incur, or purchase
participations in, Letter of Credit Obligations in respect of Borrower.
1.3. Prepayments.
(a) Voluntary Commitment Reductions. Borrower may at any time
on at least five (5) days' prior written notice to Agent (i) voluntarily
permanently reduce (but not terminate) the Commitment; provided that (A) any
such reductions shall be in a minimum amount of $5,000,000 and integral
multiples of $250,000 in excess of such amount and (B) the Commitment shall not
be reduced to an amount less than $25,000,000. Borrower may at any time on at
least ten (10) days' prior written notice to Agent terminate the Commitment;
provided that upon such termination all Loans and other Obligations shall be
immediately due and payable in full and all Letter of Credit Obligations cash
collateralized or otherwise satisfied in accordance
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with Annex B. Any such reduction or termination of the Commitment must be
accompanied by the payment of the fee required by Section 1.11(c), if any. Upon
any such reduction or termination of the Commitment, Borrower's right to request
Revolving Credit Advances, or request that Letter of Credit Obligations be
incurred on its behalf shall simultaneously be permanently reduced or
terminated, as the case may be; provided that a permanent reduction of the
Commitment shall not require a corresponding pro rata reduction in the L/C
Sublimit (as defined in Annex B.
(b) Mandatory Prepayments.
(i) If at any time the outstanding balance of the
Revolving Loan exceeds the lesser of (A) the Maximum Amount and (B) the
Borrowing Base, Borrower shall immediately repay the aggregate
outstanding Revolving Credit Advances to the extent required to
eliminate such excess. If any such excess remains after repayment in
full of the aggregate outstanding Revolving Credit Advances, Borrower
shall provide cash collateral for the Letter of Credit Obligations in
the manner set forth in Annex B to the extent required to eliminate
such excess.
(ii) Borrower hereby irrevocably authorizes Agent to
apply on daily basis all available funds on deposit in the Collection
Account to the prepayment of the Obligations in accordance with Annex
C.
(c) Application of Prepayments from Insurance Proceeds. Any
prepayments made by Borrower from insurance proceeds in accordance with Section
5.4(c) shall be applied as follows: first, to Fees and reimbursable expenses of
Agent then due and payable pursuant to any of the Loan Documents; second, to
interest then due and payable on the Revolving Credit Advances; third, to the
outstanding principal balance of Revolving Credit Advances until the same shall
have been paid in full; and fourth, to any Letter of Credit Obligations, to
provide cash collateral therefor in the manner set forth in Annex B, until all
such Letter of Credit Obligations have been fully cash collateralized in the
manner set forth in Annex B. The Commitment shall not be permanently reduced by
the amount of any such prepayments.
1.4. Use of Proceeds. Borrower shall utilize the proceeds of
the Revolving Loan solely for the Refinancing (and to pay any related
transaction expenses), and for the financing of Borrower's ordinary working
capital and general corporate needs (but excluding in any event the making of
any Restricted Payment not specifically permitted by Section 6.14). Disclosure
Schedule (1.4) contains a description of Borrower's sources and uses of funds as
of the Closing Date, including Loans and Letter of Credit Obligations to be made
or incurred on that date, and a funds flow memorandum detailing how funds from
each source are to be transferred to particular uses.
1.5. Interest and Applicable Margins.
(a) Borrower shall pay interest to Agent, for the ratable
benefit of Lenders in accordance with the various Loans being made by each
Lender, in arrears on each applicable Interest Payment Date, at the Index Rate
plus the Applicable Index Margin per annum.
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The Applicable Index Margin and Applicable L/C Margin will be
2.50%, and 2.00%, per annum, respectively, as of the Closing Date. The
Applicable Margins will be adjusted (up or down) prospectively on a quarterly
basis, in each case as determined by Borrower's consolidated financial
performance, commencing on the first Business Day (the "First Adjustment Date")
of the first full calendar month that occurs more than five (5) days after
delivery of Borrower's quarterly Financial Statements covering the first Fiscal
Quarter of the 2001 Fiscal Year. Adjustments in Applicable Margins will be
determined by reference to the Operating Cash Flow Ratio for the Credit Parties
on a consolidated basis for the 12-month period ended on the last date of such
quarterly Financial Statements and will be based on the following grids:
IF OPERATING CASH FLOW LEVEL OF
RATIO IS: APPLICABLE MARGINS:
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>4.00 Level I
>3.00, but < 4.00 Level II
-
>2.00, but < 3.00 Level III
-
>1.50, but < 2.00 Level IV
-
< 1.50 Level V
-
APPLICABLE MARGINS
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LEVEL I LEVEL II LEVEL III LEVEL IV LEVEL V
------- -------- --------- -------- -------
Applicable Index Margin 2.00% 2.25% 2.50% 2.75% 3.00%
Applicable L/C Margin 1.75% 1.75% 2.00% 2.25% 2.50%
If there is a disparity between the financial tests described above, the test
resulting in the greater level of Applicable Margins will prevail.
All adjustments in the Applicable Margins after the First
Adjustment Date will be implemented quarterly on a prospective basis, for each
calendar month commencing at least five (5) days after the date of delivery to
Lenders of the quarterly unaudited or annual audited (as applicable) Financial
Statements of Borrower evidencing the need for an adjustment. Concurrently with
the delivery of those Financial Statements, Borrower shall deliver to Agent and
Lenders a certificate, signed by its chief financial officer, setting forth in
reasonable detail the basis for the continuance of, or any change in, the
Applicable Margins. Failure to timely deliver such Financial Statements shall,
in addition to any other remedy provided for in this Agreement, result in an
increase in the Applicable Margins to the highest level set forth in the
foregoing grid, until the first day of the first calendar month following the
delivery of those Financial Statements demonstrating that such an increase is
not required. If a Default or an Event of Default shall have occurred or be
continuing at the time any reduction in the Applicable Margins is to be
implemented, that reduction shall be deferred until the first day of the first
calendar month following the date on which such Default or Event of Default is
waived or cured.
(b) If any payment on any Loan becomes due and payable on a
day other than a Business Day, the maturity thereof will be extended to the next
succeeding Business Day and,
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with respect to payments of principal, interest thereon shall be payable at the
then applicable rate during such extension.
(c) All computations of Fees calculated on a per annum basis
and interest shall be made by Agent on the basis of a three hundred and sixty
(360) day year, in each case for the actual number of days occurring in the
period for which such interest and Fees are payable. The Index Rate shall be
determined each day based upon the Index Rate as in effect each day. Each
determination by Agent of an interest rate and Fees hereunder shall be
conclusive, absent manifest error.
(d) So long as an Event of Default shall have occurred and be
continuing under Section 8.1(a), (h) or (i), or so long as any other Default or
Event of Default shall have occurred and be continuing and at the election of
Agent (or upon the written request of Requisite Lenders) confirmed by written
notice from Agent to Borrower, the interest rates applicable to the Loans and
the Letter of Credit Fees shall be increased by two percentage points (2%) per
annum above the rates of interest or the rate of such Fees otherwise applicable
hereunder ("Default Rate"), and all outstanding Obligations shall bear interest
at the Default Rate applicable to such Obligations. Interest and Letter of
Credit Fees at the Default Rate shall accrue from the initial date of such
Default or Event of Default until that Default or Event of Default is cured or
waived and shall be payable upon demand.
(e) Notwithstanding anything to the contrary set forth in this
Section 1.5, if a court of competent jurisdiction determines in a final order
that the rate of interest payable hereunder exceeds the highest rate of interest
permissible under law (the "Maximum Lawful Rate"), then so long as the Maximum
Lawful Rate would be so exceeded, the rate of interest payable hereunder shall
be equal to the Maximum Lawful Rate; provided, however, that if at any time
thereafter the rate of interest payable hereunder is less than the Maximum
Lawful Rate, Borrower shall continue to pay interest hereunder at the Maximum
Lawful Rate until such time as the total interest received by Agent, on behalf
of Lenders, is equal to the total interest which would have been received had
the interest rate payable hereunder been (but for the operation of this
paragraph) the interest rate payable since the Closing Date as otherwise
provided in this Agreement. Thereafter, interest hereunder shall be paid at the
rate(s) of interest and in the manner provided in Sections 1.5(a) through (d)
above, unless and until the rate of interest again exceeds the Maximum Lawful
Rate, and at that time this paragraph shall again apply. In no event shall the
total interest received by any Lender pursuant to the terms hereof exceed the
amount which such Lender could lawfully have received had the interest due
hereunder been calculated for the full term hereof at the Maximum Lawful Rate.
If the Maximum Lawful Rate is calculated pursuant to this paragraph, such
interest shall be calculated at a daily rate equal to the Maximum Lawful Rate
divided by the number of days in the year in which such calculation is made. If,
notwithstanding the provisions of this Section 1.5(e), a court of competent
jurisdiction shall finally determine that a Lender has received interest
hereunder in excess of the Maximum Lawful Rate, Agent shall, to the extent
permitted by applicable law, promptly apply such excess in the order specified
in Section 1.13 and thereafter shall refund any excess to Borrower or as a court
of competent jurisdiction may otherwise order.
1.6. Eligible Accounts. Based on the most recent Borrowing
Base Certificate delivered by Borrower to Agent and on other information
available to Agent, Agent shall in its
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reasonable credit judgment determine which Accounts of Borrower and ▇▇▇▇▇▇▇
Canada shall be "Eligible Accounts", except that no Account to which any of the
exclusionary criteria set forth below applies shall be Eligible Accounts. Agent
shall have the right to establish, modify, or eliminate Reserves against
Eligible Accounts from time to time in its reasonable credit judgment. Agent
reserves the right, at any time and from time to time after the Closing Date, to
adjust any such criteria, to establish new criteria and to adjust advance rates
with respect to Eligible Accounts, in its reasonable credit judgment, subject to
the approval of Supermajority Lenders in the case of adjustments, new criteria
or changes in advance rates which have the effect of making more credit
available. Eligible Accounts shall not include any Account of Borrower or
▇▇▇▇▇▇▇ Canada:
(a) which does not arise from the sale of goods or the
performance of services by Borrower or ▇▇▇▇▇▇▇ Canada in the ordinary course of
its business;
(b) (i) upon which Borrower's or ▇▇▇▇▇▇▇ Canada's right to
receive payment is not absolute or is contingent upon the fulfillment of any
condition whatsoever or (ii) as to which Borrower or ▇▇▇▇▇▇▇ Canada is not able
to bring suit or otherwise enforce its remedies against the Account Debtor
through judicial process, or (iii) if the Account represents a progress billing
consisting of an invoice for goods sold or used or services rendered pursuant to
a contract under which the Account Debtor's obligation to pay that invoice is
subject to Borrower's or ▇▇▇▇▇▇▇ Canada's completion of further performance
under such contract or is subject to the equitable lien of a surety bond issuer;
(c) in the event and to the extent that any defense,
counterclaim, setoff or dispute is asserted as to such Account, including by
DFS, any dealer or distributor or any provider of floor plan financing;
(d) that is not a true and correct statement of bona fide
indebtedness incurred in the amount of the Account for merchandise sold to or
services rendered and accepted by the applicable Account Debtor;
(e) with respect to which an invoice, acceptable to Agent in
form and substance, has not been sent to the applicable Account Debtor (it being
understood and agreed that the forms of invoices delivered to Agent on or prior
to the Closing Date are acceptable forms for purposes of this clause (e);
provided that any subsequent changes or modifications thereto shall be subject
to the prior approval of Agent);
(f) that (i) is not owned by Borrower or ▇▇▇▇▇▇▇ Canada or
(ii) is subject to any right, claim, security interest or other interest of any
other Person, other than Liens in favor of Agent, on behalf of itself and
Lenders and Prior Claims that are unregistered and that secure amounts that are
not yet due and payable;
(g) that arises from a sale to any director, officer, other
employee or Affiliate of any Credit Party, or to any entity which has any common
officer or director with any Credit Party;
(h) that is the obligation of an Account Debtor that is the
United States government or a political subdivision thereof, or any state or
municipality or department, agency
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or instrumentality thereof or that is the Canadian government (Her Majesty in
Right of Canada) or a political subdivision thereof, or department, agency or
instrumentality thereof, unless Agent, in its sole discretion, has agreed to the
contrary in writing, the Account is assignable by way of security and Borrower,
if necessary or desirable, has complied with the Federal Assignment of Claims
Act of 1940, and any amendments thereto, or any applicable state statute or
municipal ordinance of similar purpose and effect with respect to such
obligation or ▇▇▇▇▇▇▇ Canada, if necessary or desirable, has complied with the
Financial Administration Act (Canada) or any applicable provincial or
territorial statute or municipal ordinance of similar purpose with respect to
such obligation;
(i) that is the obligation of an Account Debtor located in a
foreign country other than Canada (excluding Northwest Territories and Nunavut)
unless and to the extent that payment thereof is assured by a letter of credit
assigned and delivered to Agent (which assignment is acknowledged by the issuer
thereof), satisfactory to Agent as to form, amount and issuer (it being
understood and agreed that the standby letter of credit issued for the account
of Salachopin by Bank of Cleveland for the benefit of Borrower and delivered to
Agent on the Closing Date pursuant to Annex D, once so assigned and acknowledged
shall be deemed an acceptable letter of credit for purposes of this clause (i));
provided that upon the request of Agent and so long as Borrower is then entitled
to draw upon any such letter of credit, Borrower shall promptly submit a draw
under such letter of credit in the amount directed by Agent in such request;
(j) to the extent Borrower or any Subsidiary thereof is liable
for goods sold or services rendered by the applicable Account Debtor to Borrower
or any Subsidiary thereof but only to the extent of the potential offset;
(k) that arises with respect to goods which are delivered on a
▇▇▇▇-and-hold, cash-on-delivery basis or placed on consignment, guaranteed sale
or other terms by reason of which the payment by the Account Debtor is or may be
conditional;
(l) that is in default; provided, that, without limiting the
generality of the foregoing, an Account shall be deemed in default upon the
occurrence of any of the following:
(i) it is not paid within the earlier of: sixty (60)
days following its due date or ninety (90) days following its original
invoice date, or, with respect to any Account owing by Biasco Musical
Instrument Co. or Salachopin only, the earlier of thirty (30) days
following its due date or one hundred-eighty (180) days following its
original invoice date;
(ii) if any Account Debtor obligated upon such
Account suspends business, makes a general assignment for the benefit
of creditors or fails to pay its debts generally as they come due; or
(iii) if any petition is filed by or against any
Account Debtor obligated upon such Account under any bankruptcy law or
any other federal, state or foreign (including any provincial)
receivership, insolvency relief or other law or laws for the relief of
debtors;
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(m) which is the obligation of an Account Debtor if fifty
percent (50%) or more of the dollar amount of all Accounts owing by that Account
Debtor are ineligible under the other criteria set forth in this Section 1.6;
(n) as to which Agent's Lien thereon, on behalf of itself and
Lenders, is not a first priority perfected Lien;
(o) as to which any of the representations or warranties
pertaining to Accounts set forth in this Agreement or any of the other Loan
Documents is untrue;
(p) to the extent such Account is evidenced by a judgment,
Instrument or Chattel Paper;
(q) to the extent such Account exceeds any credit limit
established by Agent, in its reasonable credit judgment;
(r) to the extent that such Account, together with all other
Accounts owing by such Account Debtor and its Affiliates (other than Accounts
owing by Biasco Musical Instrument Co.) as of any date of determination exceed
ten percent (10%) of all Eligible Accounts;
(s) with respect to any Account owing by Biasco Musical
Instrument Co., to the extent such Account, together with all other Accounts
owing by Biasco Musical Instrument Co. and its Affiliates, (i) as at any date of
determination during the period commencing on the Closing Date through December
31, 2000 exceeds twenty percent (20%) of all Eligible Accounts and (ii) as at
any date of determination thereafter exceeds fifteen percent (15%) of all
Eligible Accounts;
(t) which is an Account owing by DFS;
(u) which is payable in any currency other than Dollars or
Canadian Dollars; or
(v) which is unacceptable to Agent in its reasonable credit
judgment.
1.7. Eligible Inventory. Based on the most recent Borrowing
Base Certificate delivered by Borrower to Agent and on other information
available to Agent, Agent shall in its reasonable credit judgment determine
which Inventory of Borrower and ▇▇▇▇▇▇▇ Trading shall be "Eligible Inventory",
except that no Inventory to which any of the exclusionary criteria set forth
below applies shall be Eligible Inventory. Agent shall have the right to
establish, modify, or eliminate Reserves against Eligible Inventory from time to
time in its reasonable credit judgment. Agent reserves the right, at any time
and from time to time after the Closing Date, to adjust any such criteria, to
establish new criteria and to adjust advance rates with respect to Eligible
Inventory in its reasonable credit judgment, subject to the approval of
Supermajority Revolving Lenders in the case of adjustments or new criteria or
changes in advance rates which have the effect of making more credit available.
Eligible Inventory shall not include any Inventory of Borrower that:
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(a) does not consist of finished goods consisting of acoustic
pianos, electric pianos or other musical instruments of Borrower's Music
Division (or purchased by ▇▇▇▇▇▇▇ Trading for Borrower's Music Division);
(b) is not owned by Borrower or ▇▇▇▇▇▇▇ Trading (or, in the
case of Inventory in transit of ▇▇▇▇▇▇▇ Trading, title to such Inventory is not
held by the L/C Issuer of the Letter of Credit issued with respect to such
Inventory, as consignee) free and clear of all Liens and rights of any other
Person (including the rights of a purchaser that has made progress payments and
the rights of a surety that has issued a bond to assure Borrower's performance
with respect to that Inventory), except the Liens in favor of Agent, on behalf
of itself and Lenders, and Permitted Encumbrances in favor of landlords and
bailees to the extent permitted in Section 5.9 hereof (subject to Reserves,
including those established by agent in accordance with Section 5.9 hereof);
(c) is (i) not located on premises owned, leased or rented by
Borrower and set forth on Disclosure Schedule (3.2) or (ii) stored at a leased
location or with a bailee, warehouseman or similar Person, unless Agent has
given its prior consent thereto and unless (x) a satisfactory bailee letter or
landlord waiver has been delivered to Agent, or (y) Reserves satisfactory to
Agent have been established with respect thereto, or (iii) located at any site
if the aggregate book value of Inventory at any such location is less than
$100,000;
(d) is placed on consignment;
(e) is in transit unless the primary payment mechanism for the
purchase of such Inventory is a Letter of Credit issued under this Agreement
and, at the time of issuance, Agent, in its sole discretion, is satisfied that,
at the time of the drawing on such Letter of Credit, (i) such Inventory will be
in transit to one of the manufacturing facilities, warehouses or retail
locations which, once the Inventory arrives at such location, would not cause
such Inventory to be excluded under clause (c) above, (ii) Agent shall have
received reasonably satisfactory evidence that such Inventory is fully insured
against risk of loss, that Agent is named as a loss payee thereunder and that
any ▇▇▇▇ of lading or other title document issued with respect to such Inventory
is a negotiable document naming the L/C Issuer as consignee and (iii) Agent and
the applicable L/C Issuer shall have received such other instruments or
documents as they may reasonably request;
(f) is covered by a negotiable document of title, unless such
document has been delivered to Agent or, to the extent purchased through a
Letter of Credit, L/C Issuer, in each case with all necessary endorsements, free
and clear of all Liens except those in favor of Agent and Lenders;
(g) in Agent's reasonable determination, is excess, obsolete,
unsalable, shopworn, seconds, damaged or unfit for sale;
(h) consists of display items or packing or shipping
materials, manufacturing supplies, raw materials, completed assemblies or other
work-in-process Inventory, repossessed Inventory or replacement parts;
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(i) consists of goods which have been returned by the buyer
other than goods returned by the buyer and classified as "factory repairs" in
Borrower's inventory to the extent permitted under clause (j) below;
(j) consists of slow moving goods which have not sold within
the last twelve (12) months or goods returned by the buyer and classified as
factory repairs in Borrower's inventory to the extent the aggregate amount of
all such slow moving goods and factory repairs exceeds, (i) during the period
from the Closing Date to June 30, 2000, twenty percent (20%) of all Eligible
Inventory at standard cost and (ii) thereafter, fifteen percent (15%) of all
Eligible Inventory at standard cost;
(k) is not of a type held for sale in the ordinary course of
Borrower's business;
(l) as to which Agent's Lien, on behalf of itself and Lenders,
therein is not a first priority perfected Lien;
(m) as to which any of the representations or warranties
pertaining to such Inventory set forth in this Agreement or any of the other
Loan Documents is untrue;
(n) consists of Hazardous Materials or goods that can be
transported or sold only with licenses that are not readily available;
(o) is not covered by casualty insurance reasonably acceptable
to Agent; or
(p) is otherwise unacceptable to Agent in its reasonable
credit judgment.
1.8. Eligible Raw Materials. Based on the most recent
Borrowing Base Certificate delivered by Borrower to Agent and on other
information available to Agent, Agent shall in its reasonable credit judgment
determine which Raw Materials of Borrower shall be "Eligible Raw Materials",
except that no Raw Materials to which any of the exclusionary criteria set forth
below applies shall be Eligible Raw Materials. Agent shall have the right to
establish, modify, or eliminate Reserves against Eligible Raw Materials from
time to time in its reasonable credit judgment. Agent reserves the right, at any
time and from time to time after the Closing Date, to adjust any such criteria,
to establish new criteria and to adjust advance rates with respect to Eligible
Raw Materials in its reasonable credit judgment, subject to the approval of
Supermajority Revolving Lenders in the case of adjustments or new criteria or
changes in advance rates which have the effect of making more credit available.
Eligible Raw Materials shall not include any Raw Material of Borrower that:
(a) is not owned by Borrower free and clear of all Liens and
rights of any other Person (including the rights of a purchaser that has made
progress payments and the rights of a surety that has issued a bond to assure
Borrower's performance with respect to that Inventory), except the Liens in
favor of Agent, on behalf of itself and Lenders, and Permitted Encumbrances in
favor of landlords and bailees to the extent permitted in Section 5.9 hereof
(subject to Reserves, including those established by Agent in accordance with
Section 5.9 hereof);
(b) is (i) not located on premises owned, leased or rented by
Borrower and set forth on Disclosure Schedule (3.2) or (ii) stored at a leased
location or with a bailee,
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warehouseman or similar Person, unless Agent has given its prior consent thereto
and unless (x) a satisfactory bailee letter or landlord waiver has been
delivered to Agent, or (y) Reserves satisfactory to Agent have been established
with respect thereto, or (iii) located at any site if the aggregate book value
of materials which otherwise meet the criteria of Eligible Raw Materials at any
such location is less than $100,000;
(c) is placed on consignment or is in transit;
(d) is covered by a negotiable document of title, unless such
document has been delivered to Agent or Issuing Lender with all necessary
endorsements, free and clear of all Liens except those in favor of Agent and
Lenders;
(e) in Agent's reasonable determination, is excess, obsolete,
unusable in or unfit for the production of Inventory, shopworn, seconds,
damaged;
(f) consists of packing or shipping materials, work-in-process
or replacement parts;
(g) consists of goods which have been returned by the buyer;
(h) as to which Agent's Lien, on behalf of itself and Lenders,
therein is not a first priority perfected Lien;
(i) as to which any of the representations or warranties
pertaining to such Raw Materials set forth in this Agreement or any of the other
Loan Documents is untrue;
(j) consists of Hazardous Materials or goods that can be
transported or sold only with licenses that are not readily available;
(k) is not covered by casualty insurance reasonably acceptable
to Agent; or
(l) is otherwise unacceptable to Agent in its reasonable
credit judgment.
1.9. Eligible Fixed Assets. Based on the most recent Borrowing
Base Certificate delivered by Borrower to Agent and on other information
available to Agent, Agent shall in its reasonable credit judgment determine
which Designated Mortgaged Properties of Borrower shall be "Eligible Fixed
Assets", except that no Designated Mortgaged Property to which any of the
exclusionary criteria set forth below applies shall be Eligible Fixed Assets.
Agent shall have the right to establish, modify, or eliminate Reserves against
Eligible Fixed Assets from time to time in its reasonable credit judgment. Agent
reserves the right, at any time and from time to time after the Closing Date, to
adjust any such criteria, to establish new criteria and to adjust advance rates
with respect to Eligible Fixed Assets in its reasonable credit judgment, subject
to the approval of Supermajority Revolving Lenders in the case of adjustments or
new criteria or changes in advance rates which have the effect of making more
credit available. Eligible Fixed Assets shall not include any assets of Borrower
that:
(a) is not owned by Borrower free and clear of all Liens and
rights of any other Person, except the Liens in favor of Agent, on behalf of
itself and Lenders and Permitted
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Encumbrances specifically identified in the title report with respect to such
Mortgaged Property delivered at Closing pursuant to Annex D;
(b) as to which Agent's Lien, on behalf of itself and Lenders,
therein is not a first priority perfected Lien;
(c) as to which any of the representations or warranties
pertaining to such Mortgaged Property set forth in this Agreement or any of the
other Loan Documents is untrue;
(d) is not covered by casualty insurance, title insurance and
flood hazard insurance (if applicable) in amounts and by insurance companies
acceptable to Agent (it being understood that such casualty insurance policies
in effect as of the Closing Date (but not necessarily any renewals or extensions
thereof) are, subject to the provisions of Section 5.4(b), acceptable as to
scope and amount through December 31, 2000); or
(e) is otherwise unacceptable to Agent in its reasonable
credit judgment.
1.10. Cash Management Systems. On or prior to the Closing
Date, Borrower will establish and will maintain until the Termination Date, the
cash management systems described on Annex C (the "Cash Management Systems").
1.11. Fees.
(a) Borrower shall pay to GE Capital, individually, the Fees
specified in that certain fee letter dated as of February 18, 2000 between
Borrower and GE Capital (the "GE Capital Fee Letter"), at the times specified
for payment therein.
(b) As additional compensation for the Revolving Lenders,
Borrower agrees to pay to Agent, for the ratable benefit of such Lenders, in
arrears, on the first Business Day of each month prior to the Commitment
Termination Date and on the Commitment Termination Date, a fee for Borrower's
non-use of available funds in an amount equal to one half of one percent (0.50%)
per annum (calculated on the basis of a 360 day year for actual days elapsed) of
the difference between (x) the Maximum Amount (as it may be reduced from time to
time) and (y) the average for the period of the daily closing balance of the
Revolving Loan outstanding during the period for which the such fee is due.
(c) If Borrower reduces or terminates the Commitment, whether
voluntarily or involuntarily and whether before or after acceleration of the
Obligations, Borrower shall pay to Agent, for the benefit of Lenders as
liquidated damages and compensation for the costs of being prepared to make
funds available hereunder an amount determined by multiplying the Applicable
Percentage (as defined below) by the amount of the reduction of the Commitment.
As used herein, the term "Applicable Percentage" shall mean (x) two percent
(2.00%), in the case of a reduction on or prior to the first anniversary of the
Closing Date, (y) one percent (1.00%), in the case of a reduction after the
first anniversary of the Closing Date but on or prior to the second anniversary,
and (z) one half of one percent (0.50%), in the case of a reduction after the
second anniversary of the Closing Date but on or prior to the third anniversary.
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(d) Borrowers shall pay to Agent, for the ratable benefit of
Revolving Lenders, the Letter of Credit Fee as provided in Annex B.
1.12. Receipt of Payments. Borrower shall make each payment
under this Agreement not later than 2:00 p.m. (New York time) on the day when
due in immediately available funds in Dollars to the Collection Account. For
purposes of computing interest and Fees and determining Borrowing Availability
or Net Borrowing Availability as of any date, all payments shall be deemed
received on the first Business Day after the day of receipt of immediately
available funds therefor in the Collection Account. If Agent receives any
payment from or on behalf of any Credit Party in a currency other than the
currency in which an Obligation payable is denominated, Agent may convert the
payment (including the monetary proceeds of realization upon any Collateral and
any funds then held in a cash collateral account) into the currency of the
relevant Obligation at the exchange rate that Agent would be prepared to sell
the currency received in New York, New York on the Business Day immediately
preceding the date of actual payment. The Obligations shall be satisfied only to
the extent of the amount actually received by Agent upon such conversion.
1.13. Application and Allocation of Payments.
(a) So long as no Default or Event of Default shall have
occurred and be continuing, (i) payments consisting of proceeds of Accounts
received in the ordinary course of business shall be applied to the Revolving
Loan; and (ii) mandatory prepayments shall be applied as set forth in Section
1.3. All payments and prepayments applied to a particular Loan shall be applied
ratably to the portion thereof held by each Lender as determined by its Pro Rata
Share. As to each other payment, and as to all payments made when a Default or
Event or Default shall have occurred and be continuing or following the
Commitment Termination Date, Borrower hereby irrevocably waives the right to
direct the application of any and all payments received from or on behalf of
Borrower, and Borrower hereby irrevocably agrees that Agent shall have the
continuing exclusive right to apply any and all such payments against the
Obligations as Agent may deem advisable notwithstanding any previous entry by
Agent in the Loan Account or any other books and records. In the absence of a
specific determination by Agent with respect thereto, payments shall be applied
to amounts then due and payable in the following order: (1) to Fees and Agent's
expenses reimbursable hereunder; (2) to interest on the Loans; (3) to principal
payments on the Loans and to provide cash collateral for Letter of Credit
Obligations in the manner described in Annex B, ratably to the aggregate,
combined principal balance of the other Loans and outstanding Letter of Credit
Obligations; and (4) to all other Obligations including expenses of Lenders to
the extent reimbursable under Section 11.3.
(b) Agent is authorized to, and at its sole election may,
charge to the Revolving Loan balance on behalf of Borrower and cause to be paid
all Fees, expenses, Charges, costs (including insurance premiums in accordance
with Section 5.4(a)) and interest and principal, other than principal of the
Revolving Loan, owing by Borrower under this Agreement or any of the other Loan
Documents if and to the extent Borrower fails to promptly pay any such amounts
as and when due, even if such charges would cause the aggregate balance of the
Revolving Loan to exceed the Borrowing Availability. At Agent's option and to
the extent permitted by law, any charges so made shall constitute part of the
Revolving Loan hereunder.
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1.14. Loan Account and Accounting. Agent shall maintain a loan
account (the "Loan Account") on its books to record: all Advances, all payments
made by Borrower, and all other debits and credits as provided in this Agreement
with respect to the Loans or any other Obligations. All entries in the Loan
Account shall be made in accordance with Agent's customary accounting practices
as in effect from time to time. The balance in the Loan Account, as recorded on
Agent's most recent printout or other written statement, shall, absent manifest
error, be presumptive evidence of the amounts due and owing to Agent and Lenders
by Borrower; provided that any failure to so record or any error in so recording
shall not limit or otherwise affect Borrower's duty to pay the Obligations.
Agent shall render to Borrower a monthly accounting of transactions with respect
to the Loans setting forth the balance of the Loan Account. Unless Borrower
notifies Agent in writing of any objection to any such accounting (specifically
describing the basis for such objection), within thirty (30) days after the date
thereof, each and every such accounting shall, absent manifest error, be deemed
final, binding and conclusive upon Borrower in all respects as to all matters
reflected therein. Only those items expressly objected to in such notice shall
be deemed to be disputed by Borrower. Notwithstanding any provision herein
contained to the contrary, any Lender may elect (which election may be revoked)
to dispense with the issuance of Notes to that Lender and may rely on the Loan
Account as evidence of the amount of Obligations from time to time owing to it.
1.15. Indemnity. Each Credit Party that is a signatory hereto
(other than ▇▇▇▇▇▇▇ Canada) shall jointly and severally indemnify and hold
harmless, and ▇▇▇▇▇▇▇ Canada shall indemnify and hold harmless, each of Agent,
Lenders and their respective Affiliates, and each such Person's respective
officers, directors, employees, attorneys, agents and representatives (each, an
"Indemnified Person"), from and against any and all suits, actions, proceedings,
claims, damages, losses, liabilities and expenses (including reasonable
attorneys' fees and disbursements and other costs of investigation or defense,
including those incurred upon any appeal) which may be instituted or asserted
against or incurred by any such Indemnified Person as the result of credit
having been extended, suspended or terminated under this Agreement and the other
Loan Documents and the administration of such credit, and in connection with or
arising out of the transactions contemplated hereunder and thereunder and any
actions or failures to act in connection therewith, including any and all
Environmental Liabilities and legal costs and expenses arising out of or
incurred in connection with disputes between or among any parties to any of the
Loan Documents (collectively, "Indemnified Liabilities"); provided, that no such
Credit Party shall be liable for any indemnification to an Indemnified Person to
the extent that any such suit, action, proceeding, claim, damage, loss,
liability or expense results from that Indemnified Person's gross negligence or
willful misconduct. NO INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY
OTHER PARTY TO ANY LOAN DOCUMENT, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY
BENEFICIARY OF SUCH PERSON OR ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY
THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES
WHICH MAY BE ALLEGED AS A RESULT OF CREDIT HAVING BEEN EXTENDED, SUSPENDED OR
TERMINATED UNDER ANY LOAN DOCUMENT OR AS A RESULT OF ANY OTHER TRANSACTION
CONTEMPLATED HEREUNDER OR THEREUNDER.
1.16. Access. Each Credit Party which is a party hereto shall,
during normal business hours, from time to time upon one (1) Business Day's
prior notice as frequently as
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Agent determines to be appropriate: (a) provide Agent and any of its officers,
employees and agents access to its properties, facilities, advisors and
employees (including officers) of each Credit Party and to the Collateral, (b)
permit Agent, and any of its officers, employees and agents, to inspect, audit
and make extracts from any Credit Party's books and records, and (c) permit
Agent, and its officers, employees and agents, to inspect, review, evaluate and
make test verifications and counts of the Accounts, Inventory and other
Collateral of any Credit Party. If a Default or Event of Default shall have
occurred and be continuing or if access is necessary to preserve or protect the
Collateral as determined by the Agent, each such Credit Party shall provide such
access to Agent and to each Lender at all times and without advance notice.
Furthermore, so long as any Event of Default shall have occurred and be
continuing, Borrower shall provide Agent and each Lender with access to its
suppliers and customers. Each Credit Party shall make available to Agent and its
counsel, as quickly as is possible under the circumstances, originals or copies
of all books and records which Agent may request. Each Credit Party shall
deliver any document or instrument necessary for Agent, as it may from time to
time request, to obtain records from any service bureau or other Person which
maintains records for such Credit Party, and shall maintain duplicate records or
supporting documentation on media, including computer tapes and discs owned by
such Credit Party. Agent will give Lenders at least ten (10) days' prior written
notice of regularly scheduled audits. Representatives of other Lenders may
accompany Agent's representatives on regularly scheduled audits at no charge to
Borrower.
1.17. Taxes.
(a) Any and all payments by Borrower hereunder or under the
Notes shall be made, in accordance with this Section 1.17, free and clear of and
without deduction for any and all present or future Taxes. If Borrower shall be
required by law to deduct any Taxes from or in respect of any sum payable
hereunder or under the Notes, (i) the sum payable shall be increased as much as
shall be necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section 1.17) Agent
or Lenders, as applicable, receive an amount equal to the sum they would have
received had no such deductions been made, (ii) Borrower shall make such
deductions, and (iii) Borrower shall pay the full amount deducted to the
relevant taxing or other authority in accordance with applicable law. Within
thirty (30) days after the date of any payment of Taxes, Borrower shall furnish
to Agent the original or a certified copy of a receipt evidencing payment
thereof.
(b) Each Credit Party that is a signatory hereto shall
indemnify and, within ten (10) days of demand therefor, pay Agent and each
Lender for the full amount of Taxes (including any Taxes imposed by any
jurisdiction on amounts payable under this Section 1.17) paid by Agent or such
Lender, as appropriate, and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto, whether or not such Taxes
were correctly or legally asserted.
(c) Each Lender organized under the laws of a jurisdiction
outside the United States (a "Foreign Lender") as to which payments to be made
under this Agreement or under the Notes are exempt from United States
withholding tax under an applicable statute or tax treaty shall provide to
Borrower and Agent a properly completed and executed IRS Form 4224 or Form 1001
or other applicable form, certificate or document prescribed by the IRS or the
United States
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certifying as to such Foreign Lender's entitlement to such exemption (a
"Certificate of Exemption"). Any foreign Person that seeks to become a Lender
under this Agreement shall provide a Certificate of Exemption to Borrower and
Agent prior to becoming a Lender hereunder. No foreign Person may become a
Lender hereunder if such Person is unable to deliver a Certificate of Exemption.
1.18. Capital Adequacy; Increased Costs.
(a) If any Lender shall have determined that any law, treaty,
governmental (or quasi-governmental) rule, regulation, guideline or order
regarding capital adequacy, reserve requirements or similar requirements or
compliance by any Lender with any request or directive regarding capital
adequacy, reserve requirements or similar requirements (whether or not having
the force of law), in each case, adopted after the Closing Date, from any
central bank or other Governmental Authority increases or would have the effect
of increasing the amount of capital, reserves or other funds required to be
maintained by such Lender and thereby reducing the rate of return on such
Lender's capital as a consequence of its obligations hereunder, then Borrower
shall from time to time upon demand by such Lender (with a copy of such demand
to Agent) pay to Agent, for the account of such Lender, additional amounts
sufficient to compensate such Lender for such reduction. A certificate as to the
amount of that reduction and showing the basis of the computation thereof
submitted by such Lender to Borrower and to Agent shall, absent manifest error,
be final, conclusive and binding for all purposes.
(b) If, due to either (i) the introduction of or any change in
any law or regulation (or any change in the interpretation thereof) or (ii) the
compliance with any guideline or request from any central bank or other
Governmental Authority (whether or not having the force of law), in each case
adopted after the Closing Date, there shall be any increase in the cost to any
Lender of agreeing to make or making, funding or maintaining any Loan, then
Borrower shall from time to time, upon demand by such Lender (with a copy of
such demand to Agent), pay to Agent for the account of such Lender additional
amounts sufficient to compensate such Lender for such increased cost. A
certificate as to the amount of such increased cost, submitted to Borrower and
to Agent by such Lender, shall be conclusive and binding on Borrower for all
purposes, absent manifest error. Each Lender agrees that, as promptly as
practicable after it becomes aware of any circumstances referred to above which
would result in any such increased cost, the affected Lender shall, to the
extent not inconsistent with such Lender's internal policies of general
application, use reasonable commercial efforts to minimize costs and expenses
incurred by it and payable to it by Borrower pursuant to this Section 1.18(b).
(c) Replacement of Lender in Respect of Increased Costs.
Within fifteen (15) days after receipt by Borrower of written notice and demand
from any Lender (an "Affected Lender") for payment of additional amounts or
increased costs as provided in Section 1.17(a), 1.18(a) or 1.18(b), Borrower
may, at its option, notify Agent and such Affected Lender of its intention to
replace the Affected Lender. So long as no Default or Event of Default shall
have occurred and be continuing, Borrower, with the consent of Agent, may
obtain, at Borrower's expense, a replacement Lender ("Replacement Lender") for
the Affected Lender, which Replacement Lender must be satisfactory to Agent. If
Borrower obtains a Replacement Lender within ninety (90) days following notice
of its intention to do so, the Affected Lender must sell and assign its Loans
and Commitments to such Replacement Lender for an amount equal to the
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principal balance of all Loans held by the Affected Lender and all accrued
interest and Fees with respect thereto through the date of such sale, provided
that Borrower shall have reimbursed such Affected Lender for the additional
amounts or increased costs that it is entitled to receive under this Agreement
through the date of such sale and assignment.
Notwithstanding the foregoing, Borrower shall not have the right to obtain a
Replacement Lender if the Affected Lender rescinds its demand for increased
costs or additional amounts within fifteen (15) days following its receipt of
Borrower's notice of intention to replace such Affected Lender. Furthermore, if
Borrower gives a notice of intention to replace and does not so replace such
Affected Lender within ninety (90) days thereafter, Borrower's rights under this
Section 1.18(c) shall terminate and Borrower shall promptly pay all increased
costs or additional amounts demanded by such Affected Lender pursuant to
Sections 1.17(a), 1.18(a) and 1.18(b).
1.19. Single Loan. All Loans to Borrower and all of the other
Obligations of Borrower arising under this Agreement and the other Loan
Documents shall constitute one general obligation of Borrower secured, until the
Termination Date, by all of its Collateral.
2. CONDITIONS PRECEDENT
2.1. Conditions to the Initial Loans.
No Lender shall be obligated to make any Loan or incur any
Letter of Credit Obligations on the Closing Date, or to take, fulfill, or
perform any other action hereunder, until the following conditions have been
satisfied or provided for in a manner satisfactory to Agent, or waived in
writing by Agent and Lenders:
(a) Credit Agreement; Loan Documents. This Agreement or
counterparts hereof shall have been duly executed by, and delivered to,
Borrower, each other Credit Party signatory hereto, Agent and Lenders; and Agent
shall have received such documents, instruments, agreements and legal opinions
as Agent shall reasonably request in connection with the transactions
contemplated by this Agreement and the other Loan Documents, including all those
listed in the Closing Checklist attached hereto as Annex D, each in form and
substance satisfactory to Agent.
(b) Repayment of Prior Lender Obligations; Satisfaction of
Outstanding L/Cs. (i) Agent shall have received a fully executed original of a
pay-off letter satisfactory to Agent confirming that all of the Prior Lender
Obligations will be repaid in full from the proceeds of the KAC Sale and the
initial Revolving Credit Advance and all Liens upon any of the property of
Borrower or any of its Subsidiaries in favor of Prior Lender shall be terminated
by Prior Lender immediately upon such payment; and (ii) all letters of credit
issued or guaranteed by Prior Lender shall have been cash collateralized,
supported by a guaranty of Agent or supported by a Letter of Credit issued
pursuant to Annex B, as mutually agreed upon by Agent, Borrower and Prior
Lender.
(c) Approvals. Agent shall have received (i) satisfactory
evidence that the Credit Parties have obtained all required consents and
approvals of all Persons including all requisite Governmental Authorities, to
the execution, delivery and performance of this Agreement and the other Loan
Documents and the consummation of the Related Transactions or (ii) an officer's
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certificate in form and substance satisfactory to Agent affirming that no such
consents or approvals are required.
(d) Opening Availability. The Eligible Accounts, Eligible
Inventory, Eligible Raw Materials and Eligible Fixed Assets, if any, of
Borrower, ▇▇▇▇▇▇▇ Trading and ▇▇▇▇▇▇▇ Canada, as applicable, supporting the
initial Revolving Credit Advance and the initial Letter of Credit Obligations
incurred and the amount of the Reserves to be established on the Closing Date
shall be sufficient in value, as determined by Agent, to provide Borrower with
Net Borrowing Availability, after giving effect to the initial Revolving Credit
Advance, the incurrence of any initial Letter of Credit Obligations and the
consummation of the Related Transactions (on a pro forma basis, with trade
payables (other than those set forth on Disclosure Schedule (3.25)) being paid
currently, and expenses and liabilities being paid in the ordinary course of
business and without acceleration of sales) of at least $7,500,000. Except as
set forth on Disclosure Schedule (3.25), as of the Closing Date Borrower shall
have, and shall have caused each of its Subsidiaries to have, paid all
outstanding and unpaid Charges, trade payables and other claims of Borrower and
its Subsidiaries for labor, materials, supplies and services consistent with the
provisions of Section 5.2. Borrower shall have provided to Agent the evidence of
extended trade terms required under Section 5.2(a)(iv).
(e) Payment of Fees. Borrower shall have paid the Fees
required to be paid on the Closing Date in the respective amounts specified in
Section 1.9 (including the Fees specified in the GE Capital Fee Letter), and
shall have reimbursed Agent for all fees, costs and expenses of closing
presented as of the Closing Date.
(f) Capital Structure: Other Indebtedness. The capital
structure of each Credit Party and the terms and conditions of all Indebtedness
of each Credit Party shall be acceptable to Agent in its sole discretion.
(g) Consummation of Related Transactions. Agent shall have
received fully executed copies of the KAC Sale Agreement and each of the other
Related Transactions Documents, each of which shall be in form and substance
satisfactory to Agent and its counsel. The KAC Sale and the other Related
Transactions shall have been consummated in accordance with the terms of the KAC
Sale Agreement and the other Related Transactions Documents and Borrower shall
have received not less than $33,000,000 in gross cash proceeds from DFS as a
result of the consummation of the KAC Sale, of which (i) no more than
$12,000,000 shall have been applied by Borrower in payment of Borrower's
outstanding trade payables and (ii) the balance shall have been applied to
prepay the Prior Lender Obligations. Agent shall have received a written
accounting satisfactory to Agent setting forth a detailed description of the use
of such gross cash proceeds.
(h) Amendment of DFS Inventory Purchase and Consignment
Agreement. Agent shall have received (i) a fully executed original of an
amendment to the DFS Inventory Purchase and Consignment Agreement satisfactory
to Agent terminating all provisions regarding the purchase and consignment of
any pianos or other Inventory held for sale or to be held for sale by Borrower
to retail store customers (the "Retail Consigned Goods"), (ii) evidence
satisfactory Agent confirming that all obligations of Borrower with respect to
any such Retail Consigned Good have been repaid in full from the proceeds of KAC
Sale and initial Revolving Credit
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Advance and (iii) evidence satisfactory to Agent that all Liens upon any Retail
Consigned Goods in favor of DFS shall have been terminated by DFS immediately
upon such payment.
(i) Purchase and Administration Agreement. Agent shall have
received evidence satisfactory to Agent that the Purchase and Administration
Agreement dated October 1, 1990 (as amended through the date hereof) by and
among Borrower, KAC and Retail Funding Corporation shall have been terminated
and all obligations thereunder of Borrower and KAC shall have been repaid in
full.
2.2. Further Conditions to Each Loan. Except as otherwise
expressly provided herein, no Lender shall be obligated to fund any Advance or
incur any Letter of Credit Obligation, if, as of the date thereof:
(a) Any representation or warranty by any Credit Party
contained herein or in any of the other Loan Documents shall be untrue or
incorrect as of such date, except to the extent that such representation or
warranty expressly relates to an earlier date and except for changes therein
expressly permitted or expressly contemplated by this Agreement; or
(b) Any event or circumstance having a Material Adverse Effect
shall have occurred since the date hereof as determined by the Requisite
Lenders; or
(c) (i) Any Default or Event of Default shall have occurred
and be continuing or would result after giving effect to any Advance (or the
incurrence of any Letter of Credit Obligations), and Agent or Requisite Lenders
shall have determined not to make any Advance or incur any Letter of Credit
Obligation as a result of that Default or Event of Default; or
(d) After giving effect to any Advance (or the incurrence of
any Letter of Credit Obligations), the outstanding principal amount of the
Revolving Loan would exceed the lesser of the Borrowing Base and the Maximum
Amount.
The request and acceptance by Borrower of the proceeds of any Loan, the
incurrence of any Letter of Credit Obligations shall be deemed to constitute, as
of the date of such request, acceptance or incurrence, (i) a representation and
warranty by Borrower that the conditions in this Section 2.2 have been satisfied
and (ii) a reaffirmation by Borrower of the granting and continuance of Agent's
Liens, on behalf of itself and Lenders, pursuant to the Collateral Documents.
3. REPRESENTATIONS AND WARRANTIES
To induce Lenders to make the Loans and to incur Letter of
Credit Obligations, the Credit Parties executing this Agreement, jointly and
severally, make the following representations and warranties to Agent and each
Lender with respect to all Credit Parties, each and all of which shall survive
the execution and delivery of this Agreement.
3.1. Corporate Existence; Compliance with Law. Each Credit
Party and each of its Subsidiaries (a) is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation; (b) is duly qualified to conduct business and is in good standing
in each other jurisdiction where its ownership or lease of property or the
conduct of its
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business requires such qualification, except where the failure to be so
qualified would not result in exposure to losses, damages or liabilities in
excess of $50,000; (c) has the requisite corporate power and authority and the
legal right to own, pledge, mortgage or otherwise encumber and operate its
properties, to lease the property it operates under lease and to conduct its
business as now, heretofore and proposed to be conducted; (d) subject to
specific representations regarding Environmental Laws, has all licenses,
permits, consents or approvals from or by, and has made all filings with, and
has given all notices to, all Governmental Authorities having jurisdiction, to
the extent required for such ownership, operation and conduct; (e) is in
compliance with its charter and bylaws; and (f) subject to specific
representations set forth herein regarding ERISA, Environmental Laws, tax and
other laws, is in compliance with all applicable provisions of law, except where
the failure to comply, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
3.2. Executive Offices; FEIN. As of the Closing Date, the
current location of each Credit Party's chief executive office, domicile (within
the meaning of the Quebec Civil Code), principal place of business and the
warehouses and premises at which Collateral is located are set forth in
Disclosure Schedule (3.2), and none of such locations have changed within the
twelve (12) months preceding the Closing Date. In addition, Disclosure Schedule
(3.2) lists the federal employer identification number of each Credit Party.
3.3. Corporate Power, Authorization, Enforceable Obligations.
The execution, delivery and performance by each Credit Party of the Loan
Documents and Related Transaction Documents to which it is a party and the
creation of all Liens provided for in the Loan Documents: (a) are within such
Person's corporate power; (b) have been duly authorized by all necessary or
proper corporate and shareholder action; (c) do not contravene any provision of
such Person's charter or bylaws; (d) do not violate any law or regulation, or
any order or decree of any court or Governmental Authority; (e) do not conflict
with or result in the breach or termination of, constitute a default under or
accelerate or permit the acceleration of any performance required by, any
indenture, mortgage, deed of trust, lease, agreement or other instrument to
which such Person is a party or by which such Person or any of its property is
bound; (f) do not result in the creation or imposition of any Lien upon any of
the property of such Person other than those in favor of Agent, on behalf of
itself and Lenders, pursuant to the Loan Documents; and (g) do not require the
consent or approval of any Governmental Authority or any other Person, except
those referred to in Section 2.1(c), all of which will have been duly obtained,
made or complied with prior to the Closing Date. On or prior to the Closing
Date, each of the Loan Documents and Related Transaction Documents shall have
been duly executed and delivered by each Credit Party thereto and each such Loan
Document and Related Transaction Document shall then constitute a legal, valid
and binding obligation of such Credit Party enforceable against it in accordance
with its terms.
3.4. Financial Statements and Projections. Except for the
Projections, all Financial Statements concerning Borrower and its Subsidiaries
which are referenced below have been prepared in accordance with GAAP
consistently applied throughout the periods covered (except as disclosed therein
and except, with respect to unaudited Financial Statements, for the absence of
footnotes and normal year-end audit adjustments) and present fairly in all
material respects the financial position of the Persons covered thereby as at
the dates thereof and the results of their operations and cash flows for the
periods then ended.
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(a) The following Financial Statements attached hereto as
Disclosure Schedule (3.4(A)) have been delivered on the date hereof:
(i) The audited consolidated and consolidating
balance sheets at December 31, 1997 and 1998 and the related statements
of income and cash flows of Borrower and its Subsidiaries for the
Fiscal Years then ended, certified by Deloitte & Touche LLP.
(ii) The unaudited consolidated and consolidating
balance sheet(s) at the end of each Fiscal Month of Fiscal Year 1999
and for the Fiscal Month of January, 2000 and the related consolidated
and consolidating statement(s) of income and cash flows of Borrower and
its Subsidiaries for each such Fiscal Month then ended.
(b) Pro Forma. The Pro Forma delivered on the date hereof and
attached hereto as Disclosure Schedule (3.4(B)) was prepared by Borrower giving
pro forma effect to the Related Transactions, was based on the unaudited
consolidated and consolidating balance sheets of Borrower and its Subsidiaries
dated February 29, 2000, and was prepared in accordance with GAAP, with only
such adjustments thereto as would be required in accordance with GAAP.
(c) Projections. The Projections delivered on the date hereof
and attached hereto as Disclosure Schedule (3.4(C)) have been prepared by
Borrower in light of the past operations of its businesses, but including future
payments of known contingent liabilities, and reflect projections on a
consolidated basis for Borrower and its Subsidiaries for the three year period
beginning on January 1, 2000 on a month by month basis through December 31, 2000
and on a year by year basis thereafter. The Projections are based upon estimates
and assumptions stated therein, all of which Borrower believes to be reasonable
and fair in light of current conditions and current facts known to Borrower and,
as of the Closing Date, reflect Borrower's good faith and reasonable estimates
of the future financial performance of Borrower and its Subsidiaries and of the
other information projected therein for the period set forth therein.
3.5. Material Adverse Effect. Between December 31, 1998 and
the Closing Date, except as may be disclosed in the Draft Audited Statements,
(a) no Credit Party or any of its Subsidiaries has incurred any obligations,
contingent or non-contingent liabilities, liabilities for Charges, long-term
leases or unusual forward or long-term commitments which are not reflected in
the Pro Forma and which, alone or in the aggregate, could reasonably be expected
to have a Material Adverse Effect, (b) no contract, lease or other agreement or
instrument has been entered into by any Credit Party or any of its Subsidiaries
or has become binding upon any Credit Party's or any such Subsidiary's assets
and no law or regulation applicable to any Credit Party or any of its
Subsidiaries has been adopted which has had or could reasonably be expected to
have a Material Adverse Effect, and (c) no Credit Party or any of its
Subsidiaries is in default and to the best of Borrower's knowledge no third
party is in default under any material contract, lease or other agreement or
instrument, which alone or in the aggregate could reasonably be expected to have
a Material Adverse Effect. Between December 31, 1998 and the Closing Date,
except as may be disclosed in the Draft Audited Statements, no event has
occurred, which alone or together with other events, could reasonably be
expected to have a Material Adverse Effect. The representations contained in
this Section 3.5 shall be deemed to have been incorrect when made if the audited
Financial Statements for the Fiscal Year ending December 31, 1999 delivered to
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Agent and Lenders pursuant to Annex E differ in any material respect from the
Draft Audited Statements.
3.6. Ownership of Property; Liens. As of the Closing Date, the
real estate ("Real Estate") listed on Disclosure Schedule (3.6) constitutes all
of the real property owned, leased, subleased, or used by any Credit Party or
any of its Subsidiaries. Each Credit Party and each of its Subsidiaries owns
good and marketable fee simple title to all of its owned real estate, and valid
and marketable leasehold interests in all of its leased Real Estate, all as
described on Disclosure Schedule (3.6), and copies of all such leases or a
summary of terms thereof satisfactory to Agent have been delivered to Agent.
Disclosure Schedule (3.6) further describes any Real Estate with respect to
which any Credit Party or any of its Subsidiaries is a lessor, sublessor or
assignor as of the Closing Date. Each Credit Party and each of its Subsidiaries
also has good and marketable title to, or valid leasehold interests in, all of
its personal properties and assets. As of the Closing Date, none of the
properties and assets of any Credit Party or any of its Subsidiaries are subject
to any Liens other than Permitted Encumbrances, and there are no facts,
circumstances or conditions known to any Credit Party that may result in any
Liens (including Liens arising under Environmental Laws) other than Permitted
Encumbrances. Each Credit Party and each of its Subsidiaries has received all
deeds, assignments, waivers, consents, nondisturbance and attornment or similar
agreements, bills of sale and other documents, and has duly effected all
recordings, filings and other actions necessary to establish, protect and
perfect such Credit Party's and such Subsidiary's right, title and interest in
and to all such Real Estate and other properties and assets. Disclosure Schedule
(3.6) also describes any purchase options, rights of first refusal or other
similar contractual rights pertaining to any Real Estate. As of the Closing
Date, no portion of any Credit Party's or any of its Subsidiaries' Real Estate
has suffered any material damage by fire or other casualty loss which has not
heretofore been repaired and restored in all material respects to its original
condition or otherwise remedied. As of the Closing Date, all material permits
required to have been issued or appropriate to enable the Real Estate to be
lawfully occupied and used for all of the purposes for which they are currently
occupied and used have been lawfully issued and are in full force and effect.
3.7. Labor Matters. As of the Closing Date (a) no strikes or
other material labor disputes against any Credit Party or any of its
Subsidiaries are pending or, to any Credit Party's knowledge, threatened; (b)
hours worked by and payment made to employees of each Credit Party and each of
its Subsidiaries comply with the Fair Labor Standards Act and each other
federal, state, local or foreign law applicable to such matter; (c) all payments
due from any Credit Party or any of its Subsidiaries for employee health and
welfare insurance have been paid or accrued as a liability on the books of such
Credit Party or Subsidiary, as applicable; (d) except as set forth in Disclosure
Schedule (3.7), no Credit Party or any of its Subsidiaries is a party to or
bound by any collective bargaining agreement, management agreement, consulting
agreement, employment agreement, bonus, stock option, or stock appreciation plan
or agreement (and true and complete copies of any agreements described on
Disclosure Schedule (3.7) have been delivered to Agent); (e) there is no
organizing activity involving any Credit Party or any of its Subsidiaries
pending or, to any Credit Party's knowledge, threatened by any labor union or
group of employees; (f) there are no representation proceedings pending or, to
any Credit Party's knowledge, threatened with the National Labor Relations Board
or any other labor relations board, and no labor organization or group of
employees of any Credit Party or any of its Subsidiaries has made a pending
demand for recognition; and (g) except as set forth in
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Disclosure Schedule (3.7), there are no complaints or charges against any Credit
Party or any of its Subsidiaries pending or, to the knowledge of any Credit
Party, threatened to be filed with any Governmental Authority or arbitrator
based on, arising out of, in connection with, or otherwise relating to the
employment or termination of employment by any Credit Party or any of its
Subsidiaries of any individual.
3.8. Ventures, Subsidiaries and Affiliates; Outstanding Stock
and Indebtedness. Except as set forth in Disclosure Schedule (3.8), no Credit
Party or any of its Subsidiaries has any Subsidiaries, is engaged in any joint
venture or partnership with any other Person, or is an Affiliate of any other
Person. Except as set forth in Disclosure Schedule (3.8), all of the issued and
outstanding Stock of each Credit Party and each of its Subsidiaries is owned by
each of the stockholders and in the amounts set forth on Disclosure Schedule
(3.8). There are no outstanding rights to purchase, options, warrants or similar
rights or agreements pursuant to which any Credit Party or any of its
Subsidiaries may be required to issue, sell, repurchase or redeem any of its
Stock or other equity securities or any Stock or other equity securities of its
Subsidiaries. All outstanding Indebtedness and Guaranteed Indebtedness of each
Credit Party as of the Closing Date is described in Section 6.3 (including
Disclosure Schedule (6.3)).
3.9. Government Regulation. No Credit Party or any of its
Subsidiaries is an "investment company" or an "affiliated person" of, or
"promoter" or "principal underwriter" for, an "investment company," as such
terms are defined in the Investment Company Act of 1940 as amended. No Credit
Party or any of its Subsidiaries is subject to regulation under the Public
Utility Holding Company Act of 1935, the Federal Power Act, or any other
domestic or foreign federal, state or provincial statute that restricts or
limits its ability to incur Indebtedness or to perform its obligations
hereunder. The making of the Loans by Lenders to Borrower, the incurrence of the
Letter of Credit Obligations on behalf of Borrower, the application of the
proceeds thereof and repayment thereof and the consummation of the Related
Transactions will not violate any provision of any such statute or any rule,
regulation or order issued by the Securities and Exchange Commission.
3.10. Margin Regulations. No Credit Party or any of its
Subsidiaries is engaged, nor will it engage, principally or as one of its
important activities, in the business of extending credit for the purpose of
"purchasing" or "carrying" any "margin security" as such terms are defined in
Regulation U or G of the Federal Reserve Board as now and from time to time
hereafter in effect (such securities being referred to herein as "Margin
Stock"). No Credit Party or any of its Subsidiaries owns any Margin Stock, and
none of the proceeds of the Loans or other extensions of credit under this
Agreement will be used, directly or indirectly, for the purpose of purchasing or
carrying any Margin Stock, for the purpose of reducing or retiring any
Indebtedness which was originally incurred to purchase or carry any Margin Stock
or for any other purpose which might cause any of the Loans or other extensions
of credit under this Agreement to be considered a "purpose credit" within the
meaning of Regulation G, T, U or X of the Federal Reserve Board. No Credit Party
or any of its Subsidiaries will take or permit to be taken any action which
might cause any Loan Document to violate any regulation of the Federal Reserve
Board.
3.11. Taxes. All tax returns, reports and statements,
including information returns, required by any Governmental Authority to be
filed by any Credit Party and any of its
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Subsidiaries have been filed with the appropriate Governmental Authority and all
Charges have been paid prior to the date on which any fine, penalty, interest or
late charge may be added thereto for nonpayment thereof (or any such fine,
penalty, interest, late charge or loss has been paid), excluding Charges or
other amounts being contested in accordance with Section 5.2(b). Proper and
accurate amounts have been withheld by each Credit Party and each of its
Subsidiaries from its respective employees for all periods in full and complete
compliance with all applicable federal, state, local and foreign law and such
withholdings have been timely paid to the respective Governmental Authorities.
Disclosure Schedule (3.11) sets forth as of the Closing Date those taxable years
for which any Credit Party's or any of its Subsidiaries' tax returns are
currently being audited by the IRS or any other applicable Governmental
Authority and any assessments or threatened assessments in connection with such
audit, or otherwise currently outstanding. Except as described on Disclosure
Schedule (3.11), no Credit Party or any of its Subsidiaries has executed or
filed with the IRS or any other Governmental Authority any agreement or other
document extending, or having the effect of extending, the period for assessment
or collection of any Charges. None of the Credit Parties or any of their
respective Subsidiaries or their respective predecessors is liable for any
Charges: (a) under any agreement (including any tax sharing agreements) or (b)
to each Credit Party's knowledge, as a transferee. As of the Closing Date, no
Credit Party or any of its Subsidiaries has agreed or been requested to make any
adjustment under IRC Section 481(a), by reason of a change in accounting method
or otherwise, which would have a Material Adverse Effect.
3.12. ERISA and Canadian Pension and Benefit Plans.
(a) Disclosure Schedule (3.12) lists and separately identifies
all Title IV Plans, Multiemployer Plans, ESOPs and Retiree Welfare Plans. Copies
of all such listed Plans, together with a copy of the latest form 5500 for each
such Plan, have been delivered to Agent. Except with respect to Multiemployee
Plans, each Qualified Plan has been determined by the IRS to qualify under
Section 401 of the IRC, and the trusts created thereunder have been determined
to be exempt from tax under the provisions of Section 501 of the IRC, and
nothing has occurred which would cause the loss of such qualification or
tax-exempt status. Each Plan is in compliance in all material respects with the
applicable provisions of ERISA and the IRC, including the filing of reports
required under the IRC or ERISA. No Credit Party or ERISA Affiliate has failed
to make any contribution or pay any amount due as required by either Section 412
of the IRC or Section 302 of ERISA or the terms of any such Plan. No Credit
Party or ERISA Affiliate has engaged in a prohibited transaction, as defined in
Section 4975 of the IRC, in connection with any Plan, which would subject any
Credit Party to a material tax on prohibited transactions imposed by Section
4975 of the IRC.
(b) Except as set forth in Disclosure Schedule (3.12): (i) no
Title IV Plan has any Unfunded Pension Liability; (ii) no ERISA Event or event
described in Section 4062(e) of ERISA with respect to any Title IV Plan has
occurred or is reasonably expected to occur; (iii) there are no pending, or to
the knowledge of any Credit Party, threatened claims (other than claims for
benefits in the normal course), sanctions, actions or lawsuits, asserted or
instituted against any Plan or any Person as fiduciary or sponsor of any Plan;
(iv) no Credit Party or ERISA Affiliate has incurred or reasonably expects to
incur any liability as a result of a complete or partial withdrawal from a
Multiemployer Plan; (v) within the last five years no Title IV Plan of any
Credit Party or ERISA Affiliate has been terminated nor has any such Plan with
Unfunded
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Pension Liabilities been transferred outside of the "controlled group" (within
the meaning of Section 4001(a)(14) of ERISA) of any Credit Party or ERISA
Affiliate; (vi) except in the case of any ESOP, Stock of all Credit Parties and
their ERISA Affiliates makes up, in the aggregate, no more than 10% of fair
market value of the assets of any Plan; and (vii) no liability under any Title
IV Plan has been satisfied with the purchase of a contract from an insurance
company that is not rated AAA by the Standard & Poor's Corporation or the
equivalent by another nationally recognized rating agency.
(c) Disclosure Schedule (3.12) lists all Canadian Benefit
Plans (other than, for greater certainty, universal plans created by and to
which any Credit Party is obligated to contribute by statute) and Canadian
Pension Plans adopted by any Credit Party. The Canadian Pension Plans are duly
registered under the ITA and all other applicable laws which require
registration and no event has occurred which is reasonably likely to cause the
loss of such registered status. All material obligations of any Credit Party or
any of its Subsidiaries (including fiduciary, funding, investment and
administration obligations) required to be performed in connection with the
Canadian Pension Plans and the funding agreements therefor have been performed
in a timely fashion. There have been no improper withdrawals or applications of
the assets of the Canadian Pension Plans or the Canadian Benefit Plans. There
are no outstanding disputes concerning the assets of the Canadian Pension Plans
or the Canadian Benefit Plans. Each of the Canadian Pension Plans is fully
funded on a solvency basis (using actuarial methods and assumptions which are
consistent with the valuations last filed with the applicable Governmental
Authorities and which are consistent with generally accepted actuarial
principles).
3.13. No Litigation. No action, claim, lawsuit, demand,
investigation or proceeding is now pending or, to the knowledge of any Credit
Party, threatened against any Credit Party or any of its Subsidiaries, before
any Governmental Authority or before any arbitrator or panel of arbitrators
(collectively, "Litigation"), (a) which challenges any Credit Party's right or
power to enter into or perform any of its obligations under the Loan Documents
to which it is a party, or the validity or enforceability of any Loan Document
or any action taken thereunder, or (b) which has a reasonable risk of being
determined adversely to any Credit Party or any of its Subsidiaries and which,
if so determined, could have a Material Adverse Effect. Except as set forth on
Disclosure Schedule (3.13), as of the Closing Date there is no Litigation
pending or threatened which seeks damages in excess of $200,000 or injunctive
relief against or alleges criminal misconduct of any Credit Party or any of its
Subsidiaries.
3.14. Brokers. No broker or finder acting on behalf of any
Credit Party or Affiliate thereof brought about the obtaining, making or closing
of the Loans or the Related Transactions, and no Credit Party or Affiliate
thereof has any obligation to any Person in respect of any finder's or brokerage
fees in connection therewith.
3.15. Intellectual Property. As of the Closing Date, each
Credit Party and each of its Subsidiaries owns or has rights to use all
Intellectual Property necessary to continue to conduct its business as now or
heretofore conducted by it or proposed to be conducted by it, and each Patent,
Design, Trademark, Copyright and License is listed, together with application or
registration numbers, as applicable, in Disclosure Schedule (3.15) hereto. Each
Credit Party and each of its Subsidiaries conducts its business and affairs
without infringement of or interference
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with any Intellectual Property of any other Person. Except as set forth in
Disclosure Schedule (3.15), no Credit Party is aware of any infringement claim
by any other Person with respect to any Intellectual Property.
3.16. Full Disclosure. No information contained in this
Agreement, any of the other Loan Documents, any Projections, Financial
Statements or Collateral Reports or other reports from time to time delivered
hereunder or any written statement furnished by or on behalf of any Credit Party
or any of its Subsidiaries to Agent or any Lender pursuant to the terms of this
Agreement contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact necessary to make the statements
contained herein or therein not misleading in light of the circumstances under
which they were made. The Liens granted to Agent, on behalf of itself and
Lenders, pursuant to the Collateral Documents will at all times be fully
perfected first priority Liens in and to the Collateral described therein,
subject, as to priority, only to Permitted Encumbrances with respect to the
Collateral other than Accounts and to the provisions of the DFS Intercreditor
Agreement.
3.17. Environmental Matters.
(a) Except as set forth in Disclosure Schedule (3.17), as of
the Closing Date: (i) the Real Estate is free of contamination from any
Hazardous Material except for such contamination that would not adversely impact
the value or marketability of such Real Estate and which would not result in
Environmental Liabilities which could reasonably be expected to exceed $350,000,
(ii) no Credit Party or any of its Subsidiaries has caused or suffered to occur
any Release of Hazardous Materials on, at, in, under, above, to, from or about
any of its Real Estate that are likely to result in Environmental Liabilities
which could reasonably be expected to exceed $350,000; (iii) the Credit Parties
and their respective Subsidiaries are and have been in compliance with all
Environmental Laws, except for such noncompliance which would not result in
Environmental Liabilities which could reasonably be expected to exceed $350,000;
(iv) the Credit Parties and their respective Subsidiaries have obtained, and are
in compliance with, all Environmental Permits required by Environmental Laws for
the operations of their respective businesses as presently conducted and will
obtain all such Environmental Permits required by Environmental Laws for such
operations as proposed to be conducted prior to the commencement thereof, except
where the failure to so obtain or comply with such Environmental Permits would
not result in Environmental Liabilities which could reasonably be expected to
exceed $350,000, and all such Environmental Permits which have been so obtained
are valid, uncontested and in good standing; (v) no Credit Party or any of its
Subsidiaries is involved in operations or knows of any facts, circumstances or
conditions, including any Releases of Hazardous Materials, that are likely to
result in any Environmental Liabilities of such Credit Party which could
reasonably be expected to exceed $350,000 and no Credit Party or any of its
Subsidiaries has permitted any current or former tenant or occupant of the Real
Estate to engage in any such operations; (vi) there is no Litigation arising
under or related to any Environmental Laws, Environmental Permits or Hazardous
Material which seeks damages, penalties, fines, costs or expenses in excess of
$25,000 or injunctive relief, or which alleges criminal misconduct by any Credit
Party or any of its Subsidiaries; (vii) no notice has been received by any
Credit Party or any of its Subsidiaries identifying it as a "potentially
responsible party" or requesting information under CERCLA or analogous state
statutes, and to the knowledge of the Credit Parties, there are no facts,
circumstances or conditions that may result in
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any Credit Party or any of its Subsidiaries being identified as a "potentially
responsible party" under CERCLA or analogous state statutes; and (viii) the
Credit Parties and their respective Subsidiaries have provided to Agent a
written description of and reasonable access to, all environmental reports,
reviews and audits and all written information pertaining to actual or potential
Environmental Liabilities in the possession of the Credit Parties, in each case
relating to any Credit Party or any such Subsidiary.
(b) Each Credit Party hereby acknowledges and agrees that
Agent (i) is not now, and has not ever been, in control of any of the Real
Estate or any Credit Party's or any of their respective Subsidiaries' affairs,
and (ii) does not have the capacity through the provisions of the Loan Documents
or otherwise to influence any Credit Party's or such Subsidiary's conduct with
respect to the ownership, operation or management of any of its Real Estate or
compliance with Environmental Laws or Environmental Permits.
3.18. Insurance. Disclosure Schedule (3.18) lists all
insurance policies of any nature maintained, as of the Closing Date, for current
occurrences by each Credit Party and each of its Subsidiaries, as well as a
summary of the terms of each such policy.
3.19. Deposit and Disbursement Accounts. Disclosure Schedule
(3.19) lists all banks and other financial institutions at which any Credit
Party or any of its Subsidiaries maintains deposits and/or other accounts as of
the Closing Date, including any Disbursement Accounts, and such Schedule
correctly identifies the name, address and telephone number of each depository,
the name in which the account is held, a description of the purpose of the
account, and the complete account number.
3.20. Government Contracts. Except as set forth in Disclosure
Schedule (3.20), as of the Closing Date, no Credit Party or any of its
Subsidiaries is a party to any contract or agreement with any Governmental
Authority and no Credit Party's Accounts are subject to the Federal Assignment
of Claims Act, as amended (31 U.S.C. Section 3727), the Financial Administration
Act (Canada) or any similar state, provincial or local law.
3.21. Customer and Trade Relations. As of the Closing Date,
there exists no actual or, to the knowledge of any Credit Party, threatened
termination or cancellation of, or any material adverse modification or change
in: the business relationship of any Credit Party or any of its Subsidiaries
with any customer or group of customers whose purchases during the preceding
twelve (12) months caused them to be ranked among the ten largest customers of
such Credit Party or such Subsidiary; or the business relationship of any Credit
Party or any of its Subsidiaries with any supplier material to its operations.
3.22. Agreements and Other Documents. As of the Closing Date,
each Credit Party has provided to Agent or its counsel, on behalf of Lenders,
accurate and complete copies (or summaries) of all of the following agreements
or documents to which any it is subject and each of which are listed on
Disclosure Schedule (3.22): (i) supply agreements and purchase agreements not
terminable by such Credit Party or any of its Subsidiaries within sixty (60)
days following written notice issued by such Credit Party or such Subsidiary and
involving transactions in excess of $1,000,000 per annum; (ii) any lease of
Equipment having a remaining term of one year or longer and requiring aggregate
rental and other payments in excess of
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$500,000 per annum; (iii) licenses and permits held by the Credit Parties and
their respective Subsidiaries, the absence of which could be reasonably likely
to have a Material Adverse Effect; (iv) instruments or documents evidencing
Indebtedness of such Credit Party or such Subsidiary and any security interest
granted by such Credit Party or Subsidiary with respect thereto; (v) instruments
and agreements evidencing the issuance of any equity securities, warrants,
rights or options to purchase equity securities of such Credit Party or such
Subsidiary; each of the Related Transaction Documents; and (vi) each agreement
or document to which DFS and any one or more Credit Parties or Subsidiary
thereof is party.
3.23. Solvency. Both before and after giving effect to (a) the
Loans and Letter of Credit Obligations to be made or extended on the Closing
Date or such other date as Loans and Letter of Credit Obligations requested
hereunder are made or extended, (b) the disbursement of the proceeds of such
Loans pursuant to the instructions of Borrower, (c) the KAC Sale, the
Refinancing and the consummation of the other Related Transactions and (d) the
payment and accrual of all transaction costs in connection with the foregoing,
each Credit Party and each of its Subsidiaries is and will be Solvent.
3.24. KAC Sale Agreement. As of the Closing Date, Borrower has
delivered to Agent a complete and correct copy of the KAC Sale Agreement
(including all schedules, exhibits, amendments, supplements, modifications,
assignments and all other documents delivered pursuant thereto or in connection
therewith). No Credit Party and no other Person party thereto is in default in
the performance or compliance with any provisions thereof. The KAC Sale
Agreement complies with, and the KAC Sale has been consummated in accordance
with, all applicable laws. The KAC Sale Agreement is in full force and effect as
of the Closing Date, has not been terminated, rescinded or withdrawn. All
requisite approvals by Governmental Authorities having jurisdiction over DFS,
any Credit Party and other Persons referenced therein, with respect to the
transactions contemplated by the KAC Sale Agreement, have been obtained, and no
such approvals impose any conditions to the consummation of the transactions
contemplated by the KAC Sale Agreement or to the conduct by any Credit Party of
its business thereafter. To the best of each Credit Party's knowledge, none of
DFS's representations or warranties in the KAC Sale Agreement contain any untrue
statement of a material fact. Each of the representations and warranties given
by each applicable Credit Party in the KAC Sale Agreement is true and correct in
all material respects and do not or omit any fact necessary to make the
statements therein not misleading. Notwithstanding anything contained in the KAC
Sale Agreement to the contrary, such representations and warranties of the
Credit Parties are incorporated into this Agreement by this Section 3.24 and
shall, solely for purposes of this Agreement and the benefit of Agent and
Lenders, survive the consummation of the KAC Sale.
3.25. Payables Subject to Extended Trade Terms. Disclosure
Schedule (3.25) sets forth a complete and accurate list of all outstanding and
unpaid trade payables and other claims of each Credit Party and each of their
respective Subsidiaries for labor, materials, supplies and services which as of
the Closing Date are past due more than thirty (30) days.
3.26. Repurchase Agreements. As of the Closing Date, each
Credit Party has provided to Agent or its counsel, on behalf of Lenders,
accurate and complete copies of each agreement to which any Credit Party or any
of its Subsidiaries is party under which such Credit
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Party or Subsidiary may now or in the future incur or become liable with respect
to any Repurchase Obligations, each of which agreements is listed on Disclosure
Schedule (3.26).
3.27. Repurchase Obligations and Guaranteed Indebtedness. On
the date Borrower makes any payment (i) to DFS under the DFS Account Receivable
Purchase Agreement and Promissory Note, the DFS Inventory Purchase Agreement and
Consignment Agreement or the DFS Vendor Agreements, and (ii) in respect of any
Repurchase Obligations, Borrower has or will have Net Borrowing Availability of
at least the greater of (a) ten percent (10%) of the Borrowing Base then in
effect and (b) $2,500,000, in each case after giving effect to such payment.
4. FINANCIAL STATEMENTS AND INFORMATION
4.1. Reports and Notices.
(a) Each Credit Party executing this Agreement hereby agrees
that from and after the Closing Date and until the Termination Date, it shall
deliver to Agent and/or Lenders, as required, the Financial Statements, notices,
Projections and other information at the times, to the Persons and in the manner
set forth in Annex E.
(b) Each Credit Party executing this Agreement hereby agrees
that from and after the Closing Date and until the Termination Date, it shall
deliver to Agent and/or Lenders, as required, the various Collateral Reports
(including Borrowing Base Certificates in the form of Exhibit 4.1(b)) at the
times, to the Persons and in the manner set forth in Annex F.
4.2. Communication with Accountants. Each Credit Party
executing this Agreement authorizes Agent and, so long as a Default or Event of
Default shall have occurred and be continuing, each Lender, to communicate
directly with its independent certified public accountants including Deloitte &
Touche LLP, and authorizes and shall instruct those accountants and advisors to
disclose and make available to Agent and each Lender any and all Financial
Statements and other supporting financial documents, schedules and information
relating to any Credit Party or any of its Subsidiaries (including copies of any
issued management letters) with respect to the business, financial condition and
other affairs of any Credit Party or any such Subsidiary.
5. AFFIRMATIVE COVENANTS
Each Credit Party (other than ▇▇▇▇▇▇▇ Canada) executing this
Agreement jointly and severally agrees as to all Credit Parties, and ▇▇▇▇▇▇▇
Canada agrees as to itself, that from and after the date hereof and until the
Termination Date:
5.1. Maintenance of Existence and Conduct of Business. Each
Credit Party shall and shall cause each of its Subsidiaries to: do or cause to
be done all things necessary to preserve and keep in full force and effect its
corporate existence and its rights and franchises; continue to conduct its
business substantially as now conducted or as otherwise permitted hereunder; at
all times maintain, preserve and protect all of its assets and properties used
or useful in the conduct of its business, and keep the same in good repair,
working order and condition in all material respects (taking into consideration
ordinary wear and tear) and from
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time to time make, or cause to be made, all necessary or appropriate repairs,
replacements and improvements thereto consistent with industry practices; and
transact business only in such corporate and trade names as are set forth in
Disclosure Schedule (5.1).
5.2. Payment of Obligations.
(a) Subject to Section 5.2(b), each Credit Party shall, and
shall cause each of its Subsidiaries to, pay and discharge or cause to be paid
and discharged promptly all Charges and claims (including trade payables)
payable by it, including (A) Charges imposed upon it, its income and profits, or
any of its property (real, personal or mixed) and all Charges with respect to
tax, social security and unemployment withholding with respect to its employees,
(B) lawful claims for labor, materials, supplies and services or otherwise and
(C) all storage or rental charges payable to warehousemen and bailees, in each
case before any thereof shall become past due. Notwithstanding the foregoing,
Borrower shall be deemed to be in compliance with this Section 5.2 with respect
to any trade payables and other claims for labor, materials, supplies and
services in existence on the Closing Date which are past due more than thirty
(30) days so long as (i) such trade payables and claims are paid and discharged
within ninety (90) days after the Closing Date (and (x) until so paid and
discharged, Agent shall establish such Reserves with respect to such past due
amounts as it deems appropriate in its reasonable credit judgment and (y)
promptly upon Agent's request, Borrower shall provide Agent with evidence
satisfactory to Agent of payment of such trade payables and claims), (ii) none
of the Collateral becomes subject to forfeiture as a result thereof, (iii) no
Lien shall be imposed to secure payment of such trade payables and claims other
than Permitted Encumbrances and (iv) on the Closing Date, Borrower shall have
provided Agent with copies of extended trade terms commitments from the vendors
of such labor, materials, supplies or services or other evidence satisfactory to
Agent that such vendors have agreed to grant to Borrower payment periods in
excess of thirty (30) days. Borrower hereby authorizes Agent and its
representatives to contact each such vendor orally or in writing for the purpose
of confirming such extended terms.
(b) Each Credit Party and each of its Subsidiaries may in good
faith contest, by appropriate proceedings, the validity or amount of any Charges
or claims described in Section 5.2(a); provided, that (i) adequate reserves with
respect to such contest are maintained on the books of such Credit Party and
such Subsidiary, in accordance with GAAP, (ii) no Lien shall be imposed or arise
to secure payment of such Charges that is superior to any of the Liens securing
payment of the Obligations and such contest is maintained and prosecuted
continuously and with diligence and operates to suspend collection or
enforcement of such Charges, (iii) none of the Collateral becomes subject to
forfeiture or loss as a result of such contest, (iv) such Credit Party and such
Subsidiary shall promptly pay or discharge such contested Charges or claims and
all additional charges, interest, penalties and expenses, if any, and shall
deliver to Agent evidence acceptable to Agent of such compliance, payment or
discharge, if such contest is terminated or discontinued adversely to such
Credit Party or Subsidiary or the conditions set forth in this Section 5.2(b)
are no longer met, and (v) Agent has not advised Borrower in writing that Agent
reasonably believes that nonpayment or nondischarge thereof could have or result
in a Material Adverse Effect.
5.3. Books and Records. Each Credit Party shall, and shall
cause each of its Subsidiaries to, keep adequate books and records with respect
to its business activities in which
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proper entries, reflecting all financial transactions, are made in accordance
with GAAP and on a basis consistent with the Financial Statements attached as
Disclosure Schedule (3.4(A)).
5.4. Insurance; Damage to or Destruction of Collateral.
(a) The Credit Parties shall, and shall cause each of their
respective Subsidiaries to, at their sole cost and expense, maintain the
policies of insurance described on Disclosure Schedule (3.18) as in effect on
the date hereof or otherwise in form and amounts and with insurers acceptable to
Agent. If any Credit Party or any of its Subsidiaries at any time or times
hereafter shall fail to obtain or maintain any of the policies of insurance
required above or to pay all premiums relating thereto, Agent may at any time or
times thereafter obtain and maintain such policies of insurance and pay such
premiums and take any other action with respect thereto which Agent deems
advisable. Agent shall have no obligation to obtain insurance for any Credit
Party or any of its Subsidiaries or pay any premiums therefor. By doing so,
Agent shall not be deemed to have waived any Default or Event of Default arising
from any Credit Party's or such Subsidiary's failure to maintain such insurance
or pay any premiums therefor. All sums so disbursed, including attorneys' fees,
court costs and other charges related thereto, shall be payable on demand by
Borrower to Agent and shall be additional Obligations hereunder secured by the
Collateral. All policies of insurance shall provide for at least thirty (30)
days prior written notice to Agent of any modification or cancellation of such
policy.
(b) Agent reserves the right at any time upon any change in
any Credit Party's risk profile (including any change in the product mix
maintained by any Credit Party or any laws affecting the potential liability of
such Credit Party) to require additional forms and limits of insurance to, in
Agent's opinion, adequately protect both Agent's and Lenders' interests in all
or any portion of the Collateral and to ensure that each Credit Party is
protected by insurance in amounts and with coverage customary for its industry.
If requested by Agent, each Credit Party shall deliver to Agent from time to
time a report of a reputable insurance broker, satisfactory to Agent, with
respect to its insurance policies. Agent agrees that, so long as Marsh maintains
a commercial paper rating of BBB or higher as rated by Standard & Poor's
Corporation, Marsh shall be an acceptable insurance broker for purposes of this
Section 5.4(b).
(c) Each Credit Party shall deliver to Agent, in form and
substance satisfactory to Agent, endorsements to (i) all "All Risk" and business
interruption insurance naming Agent, on behalf of itself and Lenders, as loss
payee, and, in the case pay Collateral located in Canada, containing the
standard mortgage clause approved by the Insurance Bureau of Canada, and (ii)
all general liability and other liability policies naming Agent, on behalf of
itself and Lenders, as additional insured. Each Credit Party irrevocably makes,
constitutes and appoints Agent (and all officers, employees or agents designated
by Agent), so long as any Default or Event of Default shall have occurred and be
continuing or the anticipated insurance proceeds exceed $2,000,000, as each
Credit Party's true and lawful agent and attorney-in-fact for the purpose of
making, settling and adjusting claims under such "All Risk" policies of
insurance, endorsing the name of each Credit Party on any check or other item of
payment for the proceeds of such "All Risk" policies of insurance and for making
all determinations and decisions with respect to such "All Risk" policies of
insurance. Agent shall have no duty to exercise any rights or powers granted to
it pursuant to the foregoing power-of-attorney. Borrower shall promptly notify
Agent of any loss, damage, or destruction to the Collateral in the amount of
$250,000 or more, whether or not
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covered by insurance. After deducting from such proceeds the expenses, if any,
incurred by Agent in the collection or handling thereof, Agent may, at its
option, apply such proceeds to the reduction of the Obligations in accordance
with Section 1.3(c), or permit or require each Credit Party to use such money,
or any part thereof, to replace, repair, restore or rebuild the Collateral in a
diligent and expeditious manner with materials and workmanship of substantially
the same quality as existed before the loss, damage or destruction.
Notwithstanding the foregoing, if the casualty giving rise to such insurance
proceeds would not reasonably be expected to have a Material Adverse Effect and
such insurance proceeds do not exceed $500,000 in the aggregate, Agent shall
permit the applicable Credit Party to replace, restore, repair or rebuild the
property; provided that if such Credit Party has not completed or entered into
binding agreements to complete such replacement, restoration, repair or
rebuilding within 180 days of such casualty, Agent may apply such insurance
proceeds to the Obligations in accordance with Section 1.3(c). All insurance
proceeds which are to be made available to Borrower to replace, repair, restore
or rebuild the Collateral shall be applied by Agent to reduce the outstanding
principal balance of the Revolving Loan (which application shall not result in a
permanent reduction of the Commitment) and upon such application, Agent shall
establish a Reserve against the Borrowing Base in an amount equal to the amount
of such proceeds so applied. All insurance proceeds made available to any Credit
Party that is not a Borrower to replace, repair, restore or rebuild Collateral
shall be deposited in a cash collateral account. Thereafter, such funds shall be
made available to such Credit Party to provide funds to replace, repair, restore
or rebuild the Collateral as follows: (i) Borrower shall request a Revolving
Credit Advance or release from the cash collateral account be made to such
Credit Party in the amount requested to be released; (ii) so long as the
conditions set forth in Section 2.2 have been met, Revolving Lenders shall make
such Revolving Credit Advance or Agent shall release funds from the cash
collateral account; and (iii) in the case of insurance proceeds applied against
the Revolving Loan, the Reserve established with respect to such insurance
proceeds shall be reduced by the amount of such Revolving Credit Advance. To the
extent not used to replace, repair, restore or rebuild the Collateral, such
insurance proceeds shall be applied in accordance with Section 1.3(c).
5.5. Compliance with Laws. Each Credit Party shall, and shall
cause each of its Subsidiaries to, comply with all federal, state, local and
foreign laws and regulations applicable to it, including those relating to ERISA
and labor matters and Environmental Laws and Environmental Permits, except to
the extent that the failure to comply, individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect. In addition, (i)
for each existing Canadian Pension Plan, each Credit Party shall, and shall
cause each of its Subsidiaries to, ensure that such plan retains its registered
status under and is administered in a timely manner in all material respects in
accordance with the applicable pension plan text, funding agreement, the ITA and
all other applicable laws; (ii) for each Canadian Pension Plan hereafter adopted
by any Credit Party or any of its Subsidiaries which is required to be
registered under the ITA or any other applicable laws, that Credit Party or
Subsidiary shall use its best efforts to seek and receive confirmation in
writing from the applicable Governmental Authorities to the effect that such
plan is unconditionally registered under the ITA and such other applicable laws;
(iii) for each existing and hereafter adopted Canadian Pension Plan and Canadian
Benefit Plan, each Credit Party shall, and shall cause each of its Subsidiaries
to, in a timely fashion perform in all material respects all obligations
(including fiduciary, funding, investment and administration obligations)
required to be performed in connection with such plan and the funding media
therefore; (iv) each Credit Party shall, and shall cause each of its
Subsidiaries to,
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deliver to Agent (a) if requested by Agent, promptly after the filing thereof by
any Credit Party or any such Subsidiary with any applicable Governmental
Authority, copies of each annual and other return, report or valuation with
respect to each Canadian Pension Plan; (b) promptly after receipt thereof, a
copy of any direction, order, notice, ruling or opinion that any Credit Party or
any such Subsidiary may receive from any applicable Governmental Authority with
respect to any Canadian Pension Plan; and (c) notification within thirty (30)
days of any increases having a cost to such Credit Party or Subsidiary in excess
of Cdn.$25,000 per annum, in the benefits of any existing Canadian Pension Plan
or Canadian Benefit Plan, or the establishment of any new Canadian Pension Plan
or Canadian Benefit Plan, or the commencement of contributions to any such plan
to which any Credit Party was not previously contributing.
5.6. Supplemental Disclosure. From time to time as may be
requested by Agent (which request will not be made more frequently than once
each year absent the occurrence and continuance of a Default or an Event of
Default), the Credit Parties shall supplement each Disclosure Schedule hereto,
or any representation herein or in any other Loan Document, with respect to any
matter hereafter arising which, if existing or occurring at the date of this
Agreement, would have been required to be set forth or described in such
Disclosure Schedule or as an exception to such representation or which is
necessary to correct any information in such Disclosure Schedule or
representation which has been rendered inaccurate thereby (and, in the case of
any supplements to any Disclosure Schedule, such Disclosure Schedule shall be
appropriately marked to show the changes made therein); provided that (a) no
such supplement to any such Disclosure Schedule or representation shall be or be
deemed a waiver of any Default or Event of Default resulting from the matters
disclosed therein, except as consented to by Agent and Requisite Lenders in
writing; and (b) no supplement shall be required as to representations and
warranties that relate solely to the Closing Date.
5.7. Intellectual Property. Each Credit Party shall, and shall
cause each of its Subsidiaries to, conduct its business and affairs without
infringement of or interference with any Intellectual Property of any other
Person in any material respect.
5.8. Environmental Matters. Each Credit Party shall and shall
cause each Person within its control to: (a) conduct its operations and keep and
maintain its Real Estate in compliance with all Environmental Laws and
Environmental Permits other than noncompliance which could not reasonably be
expected to have a Material Adverse Effect; (b) implement any and all
investigation, remediation, removal and response actions which are appropriate
or necessary to maintain the value and marketability of the Real Estate or to
otherwise comply with Environmental Laws and Environmental Permits pertaining to
the presence, generation, treatment, storage, use, disposal, transportation or
Release of any Hazardous Material on, at, in, under, above, to, from or about
any of its Real Estate; (c) notify Agent promptly after such Credit Party
becomes aware of any violation of Environmental Laws or Environmental Permits or
any Release on, at, in, under, above, to, from or about any Real Estate which
violation or Release is reasonably likely to result in Environmental Liabilities
in excess of $25,000; and (d) promptly forward to Agent a copy of any order,
notice, request for information or any communication or report received by such
Credit Party in connection with any such violation or Release or any other
matter relating to any Environmental Laws or Environmental Permits that could
reasonably be expected to result in Environmental Liabilities in excess of
$25,000, in each case whether or not the Environmental Protection Agency or any
Governmental Authority has taken or
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threatened any action in connection with any such violation, Release or other
matter. If Agent at any time has a reasonable basis to believe that there may be
a violation of any Environmental Laws or Environmental Permits by any Credit
Party or any of its Subsidiaries or any Environmental Liability arising
thereunder, or a Release of Hazardous Materials on, at, in, under, above, to,
from or about any of its Real Estate, which, in each case, could reasonably be
expected to have a Material Adverse Effect, then each Credit Party shall, upon
Agent's written request (i) cause the performance of such environmental audits
including subsurface sampling of soil and groundwater, and preparation of such
environmental reports, at Borrower's expense, as Agent may from time to time
reasonably request, which shall be conducted by reputable environmental
consulting firms reasonably acceptable to Agent and shall be in form and
substance acceptable to Agent, and (ii) permit Agent or its representatives to
have access to all Real Estate for the purpose of conducting such environmental
audits and testing as Agent and, so long as no Default has occurred, the
applicable Credit Party (which determination by such Credit Party shall not be
unreasonably withheld or delayed), deem appropriate, including subsurface
sampling of soil and groundwater. Borrower shall reimburse Agent for the costs
of such audits and tests and the same will constitute a part of the Obligations
secured hereunder.
5.9. Landlords' Agreements, Mortgagee Agreements and Bailee
Letters. Each Credit Party shall, and shall cause each of its Subsidiaries to,
obtain a landlord's agreement, mortgagee agreement or bailee letter, as
applicable, from the lessor of each leased property or mortgagee of owned
property or bailee with respect to any warehouse, processor or converter
facility or other location where Collateral (including any books and records) is
stored or located, which agreement or letter shall contain a waiver or
subordination of all Liens or claims that the landlord, mortgagee or bailee may
assert against the Collateral at that location, and shall otherwise be
reasonably satisfactory in form and substance to Agent. With respect to such
locations or warehouse space leased or owned as of the Closing Date and
thereafter, if Agent has not received a landlord or mortgagee agreement or
bailee letter as of the Closing Date (or, if later, as of the date such location
is acquired or leased), Borrower's Eligible Inventory and Eligible Raw Materials
at that location shall, in Agent's discretion, be excluded from the Borrowing
Base or be subject to such Reserves as may be established by Agent in its
reasonable credit judgment. After the Closing Date, no real property or
warehouse space shall be leased or acquired by any Credit Party or any of its
Subsidiaries and no Inventory or Raw Materials shall be shipped to a processor
or converter under arrangements established after the Closing Date without the
prior written consent of Agent (which consent shall not be unreasonably
withheld, but, in Agent's discretion, may be conditioned upon the exclusion from
the Borrowing Base of Eligible Inventory or Eligible Raw Materials at that
location or the establishment of Reserves acceptable to Agent) or, unless and
until a satisfactory landlord or mortgagee agreement or bailee letter, as
appropriate, shall first have been obtained with respect to such location. Each
Credit Party shall, and shall cause each of its Subsidiaries to, timely and
fully pay and perform its obligations under all leases and other agreements with
respect to each leased location or public warehouse where any Collateral is or
may be located.
5.10. Further Assurances. Each Credit Party executing this
Agreement agrees that it shall and shall cause each other Credit Party and each
of its Subsidiaries to, at such Credit Party's expense and upon request of
Agent, duly execute and deliver, or cause to be duly executed and delivered, to
Agent such further instruments and do and cause to be done such further acts as
may be necessary or proper in the reasonable opinion of Agent to carry out more
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effectively the provisions and purposes of this Agreement or any other Loan
Document. In furtherance of, and not by way of limitation of, the foregoing,
each Credit Party shall promptly take, and shall cause each of its Subsidiaries
to take, such actions as may be requested by Agent to enhance Agent's and
Lenders' rights under Mexican law with respect to Agent's security interest in,
pledge of, and enforcement rights with respect to, the outstanding Stock of the
Credit Parties' Subsidiaries organized under the laws of Mexico. Such actions
may include the establishment under Mexican law of, and transfer of such Stock
to, a trust under a guaranty trust agreement in form and substance acceptable to
Agent and the delivery of legal opinions in form and substance and from local
counsel acceptable to Agent.
6. NEGATIVE COVENANTS
Each Credit Party (other than ▇▇▇▇▇▇▇ Canada) executing this
Agreement jointly and severally agrees as to all Credit Parties, and ▇▇▇▇▇▇▇
Canada agrees as to itself, that, without the prior written consent of Agent and
the Requisite Lenders, from and after the date hereof until the Termination
Date:
6.1. Mergers, Subsidiaries, Etc.
No Credit Party shall, or shall permit any of its Subsidiaries
to, directly or indirectly, by operation of law or otherwise, (a) form or
acquire any Subsidiary, or (b) merge with, consolidate with, acquire all or
substantially all of the assets or capital stock of, or otherwise combine with
or acquire, any Person.
6.2. Investments; Loans and Advances. Except as otherwise
expressly permitted by this Section 6, no Credit Party shall, or shall permit
any of its Subsidiaries to, make or permit to exist any investment in, or make,
accrue or permit to exist loans or advances of money to, any Person, through the
direct or indirect lending of money, holding of securities or otherwise, except
that (a) Borrower may hold investments comprised of notes payable, or stock or
other securities issued by Account Debtors to Borrower pursuant to negotiated
agreements with respect to settlement of such Account Debtor's Accounts in the
ordinary course of business, so long as the aggregate amount of such Accounts so
settled by Borrower does not exceed $250,000; (b) each Credit Party may maintain
its existing investments in its Subsidiaries as of the Closing Date; (c)
Borrower and its Subsidiaries may maintain their existing investment in
Southland Marketing, Inc., an Arkansas corporation, pursuant to the Equipment
and Services Agreement dated as of July 15, 1998, the aggregate principal amount
of which investment does not exceed $2,200,000 as of the Closing Date or at any
time thereafter, and (d) so long as no Default or Event of Default shall have
occurred and be continuing and there is no outstanding Revolving Loan balance,
Borrower may make investments up to $1,000,000 in the aggregate, subject to a
perfected security interest in favor of Agent for the benefit of Lenders, in (i)
marketable direct obligations issued or unconditionally guaranteed by the United
States of America or any agency thereof maturing within one year from the date
of acquisition thereof, (ii) commercial paper maturing no more than one year
from the date of creation thereof and currently having the highest rating
obtainable from either Standard & Poor's Ratings Group or ▇▇▇▇▇'▇ Investors
Service, Inc., (iii) certificates of deposit, maturing no more than one year
from the date of creation thereof, issued by commercial banks incorporated under
the laws of the United States of America, each having combined capital, surplus
and undivided profits of not less than
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$300,000,000 and having a senior unsecured rating of "A" or better by a
nationally recognized rating agency (an "A Rated Bank"), (iv) time deposits,
maturing no more than thirty (30) days from the date of creation thereof with A
Rated Banks and (v) mutual funds that invest solely in one or more of the
investments described in clauses (i) through (iv) above.
6.3. Indebtedness.
(a) No Credit Party shall, or shall permit any of its
Subsidiaries to, create, incur, assume or permit to exist any Indebtedness,
except (without duplication) (i) Indebtedness secured by purchase money security
interests and Capitalized Leases permitted in clause (c) of Section 6.7, (ii)
the Loans and the other Obligations, (iii) unfunded pension fund and other
employee benefit plan obligations and liabilities to the extent they are
permitted to remain unfunded under applicable law, (iv) existing Indebtedness
described in Disclosure Schedule (6.3) and refinancings thereof or amendments or
modifications thereof which do not have the effect of increasing the principal
amount thereof or changing the amortization thereof (other than to extend the
same) and which are otherwise on terms and conditions no less favorable to any
Credit Party, Agent or any Lender, as determined by Agent, than the terms of the
Indebtedness being refinanced, amended or modified, (v) Indebtedness consisting
of intercompany loans and advances made or maintained by Borrower to any of its
Subsidiaries (other than Korean American Musical Instrument Corporation) or by
any such Subsidiary to Borrower; provided that (A) Borrower shall have executed
and delivered to each such Subsidiary, and each such Subsidiary shall have
executed and delivered to Borrower, on the Closing Date, a demand note
(collectively, the "Intercompany Notes") to evidence any such intercompany
Indebtedness owing at any time by Borrower to such Subsidiary or by such
Subsidiary to Borrower, which Intercompany Notes shall be in form and substance
satisfactory to Agent and, to the extent evidencing intercompany Indebtedness
owing to any Credit Party, shall be pledged by such Credit Party and delivered
to Agent pursuant to the applicable Pledge Agreement or Security Agreement as
additional collateral security for the Obligations; (B) Borrower shall record
all intercompany transactions on its books and records in a manner satisfactory
to Agent; (C) the obligations of Borrower under any such Intercompany Notes
shall be subordinated to the Obligations of Borrower hereunder in a manner
satisfactory to Agent; (D) at the time any such intercompany loan or advance is
made by Borrower and after giving effect thereto, Borrower shall be Solvent; (E)
no Default or Event of Default would occur and be continuing after giving effect
to any such proposed intercompany loan; (F) any payment by any Guarantor under
any guaranty of the Obligations shall result in a pro tanto reduction of the
amount of Indebtedness owed by such Guarantor to Borrower; (G) in the case of
any such intercompany loans made by Borrower, Borrower shall have Net Borrowing
Availability of not less than the greater of $2,500,000 and ten percent (10%) of
the Borrowing Base then in effect after giving effect to such intercompany loan;
(H) the aggregate balance of all such intercompany loans owing to Borrower by
Subsidiary Guarantors shall not exceed $3,000,000 at any time; (I) the aggregate
balance of all such intercompany loans owing to Borrower by Subsidiaries of
Borrower which are not Guarantors shall not exceed $3,000,000 at any time; and
(J) the recipient of any such intercompany loans shall be creditworthy as
determined by Agent; (vi) Indebtedness of Borrower under the DFS Inventory
Purchase and Consignment Agreement in an aggregate principal amount not to
exceed at any time outstanding, (A) $12,000,000 during the period commencing on
the Closing Date and continuing through December 31, 2000, and (B) $5,000,000 at
anytime thereafter and (vii) Indebtedness under the DFS Account Receivable
Purchase Agreement and
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Promissory Note in an aggregate amount not to exceed (x) $6,500,000 as of the
Closing Date, and (y) $10,000,000 at any time thereafter.
(b) No Credit Party shall, or shall permit any of its
Subsidiaries to, directly or indirectly, voluntarily purchase, redeem, defease
or prepay any principal of, premium, if any, interest or other amount payable in
respect of any Indebtedness, other than (i) the Obligations, and (ii)
Indebtedness secured by a Permitted Encumbrance if the asset securing such
Indebtedness has been sold or otherwise disposed of in accordance with Sections
6.8(b) or (c).
6.4. Employee Loans and Affiliate Transactions.
(a) Except as otherwise expressly permitted in this Section 6
with respect to Affiliates, no Credit Party shall, or shall permit any of its
Subsidiaries to, enter into or be a party to any transaction with any other
Credit Party or any Affiliate thereof except in the ordinary course of and
pursuant to the reasonable requirements of such Credit Party's or such
Subsidiary's business and upon fair and reasonable terms that are no less
favorable to such Credit Party or Subsidiary than would be obtained in a
comparable arm's length transaction with a Person not an Affiliate of such
Credit Party or Subsidiary and in compliance with restrictions on granting
financial assistance under applicable law. In addition, if any such transaction
or series of related transactions involves payments in excess of $250,000 in the
aggregate, the terms of these transactions must be disclosed in advance to Agent
and Lenders. All such transactions existing as of the date hereof are described
on Disclosure Schedule (6.4(a)).
(b) No Credit Party shall, or shall permit any of its
Subsidiaries to, enter into any lending or borrowing transaction with any
employees of any Credit Party or any of its Subsidiaries, except loans to their
respective employees on an arm's-length basis in the ordinary course of business
consistent with past practices for travel expenses, relocation costs and similar
purposes and stock option financing up to a maximum of $150,000 to any employee
and up to a maximum of $500,000 in the aggregate at any one time outstanding.
6.5. Capital Structure and Business. No Credit Party shall, or
shall permit any of its Subsidiaries to, (a) make any changes in any of its
business objectives, purposes or operations which could in any way adversely
affect the repayment of the Loans or any of the other Obligations or could
reasonably be expected to have or result in a Material Adverse Effect, (b) make
any change in its capital structure as described on Disclosure Schedule (3.8),
including the issuance of any shares of Stock, warrants or other securities
convertible into Stock or any revision of the terms of its outstanding Stock,
except that Borrower may issue its common Stock so long as (i) the proceeds
thereof (net of underwriting discounts and commissions and other reasonable
costs paid to non-Affiliates in connection therewith) are immediately deposited
into the Concentration Account to be applied to the Obligations in accordance
with Annex C, and (ii) no Change of Control occurs after giving effect thereto,
or (c) amend its charter or bylaws in a manner which would adversely affect
Agent or Lenders or such Credit Party's duty or ability to repay the
Obligations. No Credit Party shall, or shall permit any of its Subsidiaries to,
engage in any business other than the businesses currently engaged in by it.
6.6. Guaranteed Indebtedness. No Credit Party shall, or shall
permit any of its Subsidiaries to, create, incur, assume or permit to exist any
Guaranteed Indebtedness except (a)
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by endorsement of instruments or items of payment for deposit to the general
account of any Credit Party, (b) for Guaranteed Indebtedness incurred for the
benefit of any other Credit Party if the primary obligation is expressly
permitted by this Agreement, (c) for Guaranteed Indebtedness of Borrower in
respect of floor plan financing arrangements of dealers and distributors
pursuant to the DFS Vendor Agreements in an amount not to exceed $7,000,000 at
any time outstanding, and (d) for Guaranteed Indebtedness of Borrower in respect
of Repurchase Obligations under the agreements listed on Disclosure Schedule
(3.26).
6.7. Liens. No Credit Party shall, or shall permit any of its
Subsidiaries to, create, incur, assume or permit to exist any Lien on or with
respect to its Accounts or any of its other properties or assets (whether now
owned or hereafter acquired) except for (a) Permitted Encumbrances; (b) Liens in
existence on the date hereof and summarized on Disclosure Schedule (6.7); (c)
Liens created after the date hereof by conditional sale or other title retention
agreements (including Capital Leases) or in connection with purchase money
Indebtedness with respect to Equipment and Fixtures acquired by any Credit Party
in the ordinary course of business, involving the incurrence of an aggregate
amount of purchase money Indebtedness and Capital Lease Obligations of not more
than $1,000,000 outstanding at any one time for all such Liens (provided that
such Liens attach only to the assets subject to such purchase money debt and
such Indebtedness is incurred within twenty (20) days following such purchase
and does not exceed 100% of the purchase price of the subject assets); (d) the
DFS Consignment Lien; and (e) the DFS Accounts and Repossession Lien. In
addition, no Credit Party shall become a party to any agreement, note, indenture
or instrument, or take any other action, which would prohibit the creation of a
Lien on any of its properties or other assets in favor of Agent, on behalf of
itself and Lenders, as additional collateral for the Obligations, except
operating leases, Capital Leases or Licenses which prohibit Liens upon the
assets that are subject thereto.
6.8. Sale of Stock and Assets. No Credit Party shall, or shall
permit any of its Subsidiaries to, sell, transfer, convey, assign or otherwise
dispose of any of its properties or other assets, including the capital Stock of
any of its Subsidiaries (whether in a public or a private offering or otherwise)
or any of their Accounts, other than (a) the sale of Inventory in the ordinary
course of business, and (b) the sale, transfer, conveyance or other disposition
by a Credit Party of Equipment, Fixtures or Real Estate that are obsolete or no
longer used or useful in such Credit Party's business and having a value not
exceeding $250,000 in any single transaction or $500,000 in the aggregate in any
Fiscal Year and (c) other Equipment and Fixtures having a value not exceeding
$100,000 in any single transaction or $250,000 in the aggregate in any Fiscal
Year; provided that the consideration received in any such sale under clause (b)
or clause (c) above, shall be in an amount equal to at least the fair market
value thereof, shall be paid solely in cash and shall be deposited directly into
the Concentration Account upon receipt to be applied to the Obligations in
accordance with Annex C. With respect to any disposition of assets or other
properties permitted pursuant to clause (b) and clause (c) above, Agent agrees
on reasonable prior written notice to release its Lien on such assets or other
properties in order to permit the applicable Credit Party to effect such
disposition and shall execute and deliver to Borrower, at Borrower's expense,
appropriate UCC-3 termination statements and other releases as reasonably
requested by Borrower.
6.9. ERISA. No Credit Party shall, or shall cause or permit
any ERISA Affiliate to, cause or permit to occur an event which could result in
the imposition of a Lien under Section
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412 of the IRC or Section 302 or 4068 of ERISA or cause or permit to occur an
ERISA Event to the extent such ERISA Event could reasonably be expected to have
a Material Adverse Effect.
6.10. Financial Covenants. Borrower shall not breach or fail
to comply with any of the Financial Covenants (the "Financial Covenants") set
forth in Annex G.
6.11. Hazardous Materials. No Credit Party shall, or shall
permit any of its Subsidiaries to, cause or permit a Release of any Hazardous
Material on, at, in, under, above, to, from or about any of the Real Estate
where such Release would (a) violate in any respect, or form the basis for any
Environmental Liabilities under, any Environmental Laws or Environmental Permits
or (b) otherwise adversely impact the value or marketability of any of the Real
Estate or any of the Collateral, other than such violations or Environmental
Liabilities which could not reasonably be expected to have a Material Adverse
Effect.
6.12. Sale-Leasebacks. No Credit Party shall, or shall permit
any of its Subsidiaries to, engage in any sale-leaseback, synthetic lease or
similar transaction involving any of its assets.
6.13. Cancellation of Indebtedness. No Credit Party shall, or
shall permit any of its Subsidiaries to, cancel any claim or debt owing to it,
except for reasonable consideration negotiated on an arm's-length basis and in
the ordinary course of its business consistent with past practices.
6.14. Restricted Payments. No Credit Party shall, or shall
permit any of its Subsidiaries to, make any Restricted Payment, except (a)
intercompany loans and advances between Borrower and its Subsidiaries to the
extent permitted by Section 6.3 above, (b) dividends and distributions by
Subsidiaries of Borrower paid to Borrower, (c) payments of principal and
interest of any Intercompany Note issued by any Subsidiary of Borrower to
Borrower, (d) payments of principal and interest of Intercompany Notes issued by
Borrower to any of its Subsidiaries in accordance with Section 6.3, (e) employee
loans permitted under Section 6.4(b) above, and (f) Restricted Payments to
cancel, redeem, acquire or repurchase shares of common stock of the Borrower
held by, or stock options granted to, employees of the Borrower in the event of
death, disability, termination of employment or retirement of any such employee;
provided that the aggregate amount of any such Restricted Payments shall not
exceed $250,000 in any Fiscal Year; provided that with respect to any such
payment pursuant to clauses (d), (e) and (f) above, (i) no Default or Event of
Default shall have occurred and be continuing or would result after giving
effect to any such payment, (ii) Agent shall have received an officer's
certificate the Chief Financial Officer of Borrower demonstrating in reasonable
detail Borrower's projected compliance with the consolidated Financial Covenants
giving effect to such Restricted Payment on a pro forma basis based on the most
recent Financial Statements delivered to Agent and Lenders under Annex E for the
twelve months preceding such payment, and (iii) Borrower shall have Net
Borrowing Availability of at least the greater of (a) ten percent (10%) of the
Borrowing Base and (b) $2,500,000, in each case after giving effect to any such
payment.
6.15. Change of Corporate Name or Location; Change of Fiscal
Year. No Credit Party shall, or shall permit any of its Subsidiaries to, (a)
change its corporate name, or (b)
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change its chief executive office, domicile (within the meaning of the Quebec
Civil Code), principal place of business, corporate offices or warehouses or
locations at which Collateral is held or stored, or the location of its records
concerning the Collateral, in any case without at least thirty (30) days prior
written notice to Agent and after Agent's written acknowledgment that any
reasonable action requested by Agent in connection therewith, including to
continue the perfection of any Liens in favor of Agent, on behalf of itself and
Lenders, in any Collateral, has been completed or taken, and provided that any
such new location shall be in the continental United States or, in the case of
▇▇▇▇▇▇▇ Canada, in Canada. Without limiting the foregoing, no Credit Party
shall, or shall permit any of its Subsidiaries to, change its name, identity or
corporate structure in any manner which might make any financing or continuation
statement filed in connection herewith seriously misleading within the meaning
of Section 9-402(7) of the Code or any other then applicable provision of the
Code or materially misleading within the meaning of any other applicable law
except upon prior written notice to Agent and Lenders and after Agent's written
acknowledgment that any reasonable action requested by Agent in connection
therewith, including to continue the perfection of any Liens in favor of Agent,
on behalf of itself and Lenders, in any Collateral, has been completed or taken.
No Credit Party shall, or shall permit any of its Subsidiaries to, change its
Fiscal Year.
6.16. No Impairment of Intercompany Transfers. No Credit Party
shall, or shall permit any of its Subsidiaries to, directly or indirectly enter
into or become bound by any agreement, instrument, indenture or other obligation
(other than this Agreement and the other Loan Documents) which could directly or
indirectly restrict, prohibit or require the consent of any Person with respect
to the payment of dividends or distributions or the making or repayment of
intercompany loans by a Subsidiary of Borrower to Borrower.
6.17. No Speculative Transactions. No Credit Party shall, or
shall permit any of its Subsidiaries to, engage in any transaction involving
commodity options, futures contracts or similar transactions, except solely to
hedge against fluctuations in the prices of commodities owned or purchased by it
and the values of foreign currencies receivable or payable by it and interest
swaps, caps or collars.
6.18. Real Estate. No Credit Party shall, or shall permit any
of its Subsidiaries to, purchase fee simple ownership interest in Real Estate.
6.19. Amendments to Related Material Contracts; Licenses.
(A) No Credit Party shall, or shall permit any of its
Subsidiaries to (i) terminate, modify, amend or supplement or waive any of its
rights under, any Material Contract (in addition to and not by way of limitation
of the restrictions contained in clause (b) below) in any way which would be
materially adverse to the interests of such Credit Party, such Subsidiary, Agent
or any Lender, (ii) enter into any new Material Contracts pursuant to which any
Credit Party or Subsidiary thereof could be obligated to make payments in excess
of $3,000,000 in any twelve- (12) month period, or (iii) terminate, modify,
amend or supplement or waive any of its rights under the Headquarters Lease,
without, in each case, obtaining the prior written consent of Agent to such
termination, modification, amendment, supplement waiver or new Material
Contract.
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(B) No Credit Party shall, or shall permit any of its
Subsidiaries to, amend or otherwise change the terms of the Indebtedness
evidenced by the DFS Inventory Purchase and Consignment Agreement, or DFS
Accounts Receivable Purchase Agreement and Promissory Note or make any payment
consistent with an amendment thereof or change thereto, if the effect of such
amendment or change is to increase the interest rate on such Indebtedness,
change (to earlier dates) any dates upon which payments of principal or interest
are due thereon, change any event of default or condition to an event of default
with respect thereto (other than to eliminate or make less restrictive any such
event of default), change the redemption, prepayment or defeasance provisions
thereof, change any subordination provisions thereof (or of any guaranty
thereof), if any, or change any collateral therefor (other than to release any
or all such collateral), or if the effect of such amendment or change, together
with all other amendments or changes made, is to increase materially the
obligations of the obligor thereunder or to confer any additional rights on the
holders of such Indebtedness (or a trustee or other representative on their
behalf) which would be adverse to a Credit Party or one of its Subsidiaries,
Agent or Lenders.
(C) No Credit Party shall, or shall permit any of its
Subsidiaries to, enter into any new License or grant any right to use any
Intellectual Property to any Person or agree to any material amendment to, or
waive any of its material rights under, any License if such License, grant,
amendment or waiver (individually or in the aggregate) would limit or impair in
any material respect any of the rights of Agent to use, or realize its interest
in, any material Intellectual Property or other Collateral in accordance with
the terms of the Collateral Documents.
6.20. Repurchase Agreements . Except for the agreements set
forth on Disclosure Schedule (3.22) no Credit Party shall, or shall permit any
of its Subsidiaries to, without the prior consent of the Agent, enter into or
become or remain obligated under any agreement which obligates or may in the
future obligate such Credit Party or Subsidiary to become or remain liable with
respect to any Repurchase Obligations.
7. TERM
7.1. Termination. The financing arrangements contemplated
hereby shall be in effect until the Commitment Termination Date, and the Loans
and all other Obligations shall be automatically due and payable in full on such
date.
7.2. Survival of Obligations Upon Termination of Financing
Arrangements. Except as otherwise expressly provided for in the Loan Documents,
no termination or cancellation (regardless of cause or procedure) of any
financing arrangement under this Agreement shall in any way affect or impair the
obligations, duties and liabilities of the Credit Parties or the rights of Agent
and Lenders relating to any unpaid portion of the Loans or any other
Obligations, due or not due, liquidated, contingent or unliquidated or any
transaction or event occurring prior to such termination, or any transaction or
event, the performance of which is required after the Commitment Termination
Date. Except as otherwise expressly provided herein or in any other Loan
Document, all undertakings, agreements, covenants, warranties and
representations of or binding upon the Credit Parties, and all rights of Agent
and each Lender, all as contained in the Loan Documents, shall not terminate or
expire, but rather shall survive any such termination or cancellation and shall
continue in full force and effect until the Termination
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Date; provided however, that in all events the provisions of Section 11, the
payment obligations under Sections 1.17 and 1.18, and the indemnities contained
in the Loan Documents shall survive the Termination Date.
8. EVENTS OF DEFAULT: RIGHTS AND REMEDIES
8.1. Events of Default. The occurrence of any one or more of
the following events (regardless of the reason therefor) shall constitute an
"Event of Default" hereunder:
(a) Borrower (i) fails to make any payment of principal of, or
interest on, or Fees owing in respect of, the Loans or any of the other
Obligations when due and payable, or (ii) fails to pay or reimburse Agent or
Lenders for any expense reimbursable hereunder or under any other Loan Document
within ten (10) days following Agent's demand for such reimbursement or payment
of expenses.
(b) Any Credit Party shall fail or neglect to perform, keep or
observe any of the provisions of Sections 1.4, 1.8, 5.4, 5.5, 5.6 or 6, or any
of the provisions set forth in Annexes C or G, respectively.
(c) Borrower shall fail or neglect to perform, keep or observe
any of the provisions of Section 4 or any provisions set forth in Annexes E or
F, respectively, and the same shall remain unremedied for five (5) days or more.
(d) Any Credit Party shall fail or neglect to perform, keep or
observe any other provision of this Agreement or of any of the other Loan
Documents (other than any provision embodied in or covered by any other clause
of this Section 8.1) and the same shall remain unremedied for twenty (20) days
or more.
(e) A default or breach shall occur under any other agreement,
document or instrument to which any Credit Party or any of its Subsidiaries is a
party which is not cured within any applicable grace period, and such default or
breach (i) involves the failure to make any payment when due in respect of any
Indebtedness (other than the Obligations) or Guaranteed Indebtedness of any
Credit Party or any of its Subsidiaries in excess of $500,000 in the aggregate,
or (ii) causes, or permits any holder of such Indebtedness or Guaranteed
Indebtedness or a trustee to cause, Indebtedness or Guaranteed Indebtedness or a
portion thereof in excess of $500,000 in the aggregate to become due prior to
its stated maturity or prior to its regularly scheduled dates of payment,
regardless of whether such default is waived, or such right is exercised, by
such holder or trustee.
(f) Any information contained in any Borrowing Base
Certificate is untrue or incorrect in any respect (other than inadvertent
immaterial errors not in excess of $100,000), or any representation or warranty
herein or in any Loan Document or in any written statement, report, financial
statement or certificate (other than a Borrowing Base Certificate) made or
delivered to Agent or any Lender by any Credit Party is untrue or incorrect in
any material respect as of the date when made or deemed made.
(g) Assets of any Credit Party or any of its Subsidiaries with
a fair market value of $250,000 or more shall be attached, seized, levied upon
or subjected to a writ or distress
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warrant, or come within the possession of any receiver, trustee, custodian or
assignee for the benefit of creditors of any Credit Party or any of its
Subsidiaries and such condition continues for thirty (30) days or more.
(h) A case or proceeding shall have been commenced against any
Credit Party or any of its Subsidiaries seeking a decree or order in respect of
any Credit Party or any of its Subsidiaries (i) under Title 11 of the United
States Code, as now constituted or hereafter amended, or any other applicable
federal, state or foreign Insolvency Law or other similar law, (ii) appointing a
custodian, receiver, interim receiver, receiver manager, monitor, liquidator,
assignee, trustee or sequestrator (or similar official) for any Credit Party or
any of its Subsidiaries or of any substantial part of any such Person's assets,
or (iii) ordering the winding-up or liquidation of the affairs of any Credit
Party or any of its Subsidiaries, and each such case or proceeding shall remain
undismissed or unstayed for sixty (60) days or more or such court shall enter a
decree or order granting the relief sought in such case or proceeding.
(i) Any Credit Party or any of its Subsidiaries (i) shall file
a petition seeking relief under Title 11 of the United States Code, as now
constituted or hereafter amended, or any other applicable federal, state or
foreign Insolvency Law or other similar law, (ii) shall fail to contest in a
timely and appropriate manner or shall consent to the institution of proceedings
thereunder or to the filing of any such petition or to the appointment of or
taking possession by a custodian, receiver, interim receiver, receiver manager,
monitor, liquidator, assignee, trustee or sequestrator (or similar official) of
any Credit Party or any of its Subsidiaries or of any substantial part of any
such Person's assets, (iii) shall make an assignment for the benefit of
creditors, (iv) shall file a proposal or a notice of intention to file a
proposal under any applicable Insolvency Law, (v) shall take any corporate
action in furtherance of any of the foregoing, (vi) shall admit in writing its
inability to, or shall be generally unable to, pay its debts as such debts
become due, or (vii) is not Solvent.
(j) A final judgment or judgments for the payment of money in
excess of $250,000 in the aggregate at any time outstanding shall be rendered
against any Credit Party or any of its Subsidiaries and the same shall not,
within thirty (30) days after the entry thereof, have been discharged or
execution thereof stayed or bonded pending appeal, or shall not have been
discharged prior to the expiration of any such stay.
(k) Any material provision of any Loan Document shall for any
reason cease to be valid, binding and enforceable in accordance with its terms
(or any Credit Party shall challenge the enforceability of any Loan Document or
shall assert in writing, or engage in any action or inaction based on any such
assertion, that any provision of any of the Loan Documents has ceased to be or
otherwise is not valid, binding and enforceable in accordance with its terms),
or any security interest created under any Loan Document shall cease to be a
valid and perfected first priority security interest or Lien (except as
otherwise permitted herein or therein) in any of the Collateral purported to be
covered thereby.
(l) Any Change of Control shall occur.
(m) Any event shall occur, whether or not insured or
insurable, as a result of which revenue-producing activities cease or are
substantially curtailed at any facility of any
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Credit Party or any of its Subsidiaries generating more than ten percent (10%)
of Borrower's consolidated revenues for the Fiscal Year preceding such event and
such cessation or curtailment continues for more than thirty (30) days.
(n) (i) Any breach or default under any Material Contract
shall occur and be continuing which breach or default is not cured within any
applicable grace period and gives rise to a right to terminate or exercise
remedies under such Material Contract or any such Material Contract shall be
terminated, or (ii) any breach or default under any Material Contract shall
occur and be continuing which breach or default could reasonably be expected to
result in a Material Adverse Effect.
(o) DFS shall initiate or take any action with respect to
Borrower or any Collateral in violation of the DFS Intercreditor Agreement.
(p) Any breach or default shall occur under the Headquarters
Lease or the Headquarters Lease shall be terminated for any reason.
8.2. Remedies.
(a) If any Event of Default shall have occurred and be
continuing, or if a Default shall have occurred and be continuing and Agent or
Requisite Lenders shall have determined not to make any Advances or incur any
Letter of Credit Obligations so long as that specific Default is continuing,
Agent may (and at the written request of the Requisite Lenders shall), without
notice, suspend the Revolving Loan facility with respect to additional Advances
and/or the incurrence of additional Letter of Credit Obligations whereupon any
additional Advances and Letter of Credit Obligations shall be made or extended
in Agent's sole discretion (or in the sole discretion of the Requisite Lenders,
if such suspension occurred at their direction) so long as such Default or Event
of Default is continuing. If any Default or Event of Default shall have occurred
and be continuing, Agent may (and at the written request of Requisite Lenders
shall), without notice except as otherwise expressly provided herein, increase
the rate of interest applicable to the Loans and the Letter of Credit Fees to
the Default Rate.
(b) If any Event of Default shall have occurred and be
continuing, Agent may (and at the written request of the Requisite Lenders
shall), without notice, (i) terminate the Revolving Loan facility with respect
to further Advances or the incurrence of further Letter of Credit Obligations;
(ii) declare all or any portion of the Obligations, including all or any portion
of any Loan to be forthwith due and payable, and require that the Letter of
Credit Obligations be cash collateralized as provided in Annex B, all without
presentment, demand, protest or further notice of any kind, all of which are
expressly waived by Borrower and each other Credit Party; and (iii) exercise any
rights and remedies provided to Agent under the Loan Documents and/or at law or
equity, including all remedies provided under the Code; provided, however, that
upon the occurrence of an Event of Default specified in Sections 8.1(g), (h) or
(i), the Revolving Loan facility shall be immediately terminated and all of the
Obligations, including the Revolving Loan, shall become immediately due and
payable without declaration, notice or demand by any Person.
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8.3. Waivers by Credit Parties. Except as otherwise provided
for in this Agreement or by applicable law, each Credit Party waives: (a)
presentment, demand and protest and notice of presentment, dishonor, notice of
intent to accelerate, notice of acceleration, protest, default, nonpayment,
maturity, release, compromise, settlement, extension or renewal of any or all
commercial paper, accounts, contract rights, documents, instruments, chattel
paper and guaranties at any time held by Agent on which any Credit Party may in
any way be liable, and hereby ratifies and confirms whatever Agent may do in
this regard, (b) all rights to notice and a hearing prior to Agent's taking
possession or control of, or to Agent's replevy, attachment or levy upon, the
Collateral or any bond or security which might be required by any court prior to
allowing Agent to exercise any of its remedies, and (c) the benefit of all
valuation, appraisal, marshaling and exemption laws.
9. ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT
9.1. Assignment and Participations.
(a) The Credit Parties signatory hereto consent to any
Lender's assignment of, and/or sale of participations in, at any time or times,
the Loan Documents, Loans, Letter of Credit Obligations and any Commitment or of
any portion thereof or interest therein, including any Lender's rights, title,
interests, remedies, powers or duties thereunder, whether evidenced by a writing
or not. Any assignment by a Lender shall (i) require the consent of Agent and,
so long as no Default or Event of Default has occurred and is continuing,
Borrower (which consent shall not be unreasonably withheld or delayed) and the
execution of an assignment agreement (an "Assignment Agreement") substantially
in the form attached hereto as Exhibit 9.1(a) and otherwise in form and
substance satisfactory to, and acknowledged by, Agent; (ii) be conditioned on
such assignee Lender representing to the assigning Lender and Agent that it is
purchasing the applicable Loans to be assigned to it for its own account, for
investment purposes and not with a view to the distribution thereof; (iii) if a
partial assignment, be in an amount at least equal to $5,000,000 and, after
giving effect to any such partial assignment, the assigning Lender shall have
retained Commitments in an amount at least equal to $5,000,000; and (iv) include
a payment to Agent of an assignment fee of $3,500. In the case of an assignment
by a Lender under this Section 9.1, the assignee shall have, to the extent of
such assignment, the same rights, benefits and obligations as it would if it
were a Lender hereunder. The assigning Lender shall be relieved of its
obligations hereunder with respect to its Commitments or assigned portion
thereof from and after the date of such assignment. Borrower hereby acknowledges
and agrees that any assignment will give rise to a direct obligation of Borrower
to the assignee and that the assignee shall be considered to be a "Lender". In
all instances, each Lender's liability to make Loans hereunder shall be several
and not joint and shall be limited to such Lender's Pro Rata Share of the
applicable Commitment. In the event Agent or any Lender assigns or otherwise
transfers all or any part of the Obligations, Agent or any such Lender shall so
notify Borrower and Borrower shall, upon the request of Agent or such Lender,
execute new Notes in exchange for the Notes, if any, being assigned.
Notwithstanding the foregoing provisions of this Section 9.1(a), any Lender may
at any time pledge the Obligations held by it and such Lender's rights under
this Agreement and the other Loan Documents to a Federal Reserve Bank, and any
lender that is an investment fund may assign the Obligations held by it and such
Lender's rights under this Agreement and the other Loan Documents to another
investment fund managed by the same investment advisor;
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provided, however, that no such pledge to a Federal Reserve Bank shall release
such Lender from such Lender's obligations hereunder or under any other Loan
Document.
(b) Any participation by a Lender of all or any part of its
Commitments shall be made with the understanding that all amounts payable by
Borrower hereunder shall be determined as if that Lender had not sold such
participation, and that the holder of any such participation shall not be
entitled to require such Lender to take or omit to take any action hereunder
except actions directly affecting (i) any reduction in the principal amount of,
or interest rate or Fees payable with respect to, any Loan in which such holder
participates, (ii) any extension of the scheduled amortization of the principal
amount of any Loan in which such holder participates or the final maturity date
thereof, and (iii) any release of all or substantially all of the Collateral
(other than in accordance with the terms of this Agreement, the Collateral
Documents or the other Loan Documents). Solely for purposes of Sections 1.15,
1.17, 1.18 and 9.8, Borrower acknowledges and agrees that a participation shall
give rise to a direct obligation of Borrower to the participant and the
participant shall be considered to be a "Lender". Except as set forth in the
preceding sentence neither Borrower nor any other Credit Party shall have any
obligation or duty to any participant. Neither Agent nor any Lender (other than
the Lender selling a participation) shall have any duty to any participant and
may continue to deal solely with the Lender selling a participation as if no
such sale had occurred.
(c) Except as expressly provided in this Section 9.1, no
Lender shall, as between Borrower and that Lender, or Agent and that Lender, be
relieved of any of its obligations hereunder as a result of any sale,
assignment, transfer or negotiation of, or granting of participation in, all or
any part of the Loans, the Notes or other Obligations owed to such Lender.
(d) Each Credit Party executing this Agreement shall assist
any Lender permitted to sell assignments or participations under this Section
9.1 as reasonably required to enable the assigning or selling Lender to effect
any such assignment or participation, including the execution and delivery of
any and all agreements, notes and other documents and instruments as shall be
requested and the preparation of informational materials for, and the
participation of management in meetings with, potential assignees or
participants. Each Credit Party executing this Agreement shall certify the
correctness, completeness and accuracy of all descriptions of the Credit Parties
and their affairs contained in any selling materials provided by it and all
other information provided by it and included in such materials, except that any
Projections delivered by Borrower shall only be certified by Borrower as having
been prepared by Borrower in compliance with the representations contained in
Section 3.4(c).
(e) A Lender may furnish any information concerning Credit
Parties in the possession of such Lender from time to time to assignees and
participants (including prospective assignees and participants). Each Lender
shall obtain from assignees or participants confidentiality covenants
substantially equivalent to those contained in Section 11.8.
(f) So long as no Event of Default shall have occurred and be
continuing, no Lender shall assign or sell participations in any portion of its
Loans or Commitments to a potential Lender or participant, if, as of the date of
the proposed assignment or sale, the assignee Lender or participant would be
subject to capital adequacy or similar requirements under Section
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1.18(a), increased costs under Section 1.18(b), or withholding taxes in
accordance with Section 1.17(a).
9.2. Appointment of Agent. GE Capital is hereby appointed to
act on behalf of all Lenders as Agent under this Agreement and the other Loan
Documents. The provisions of this Section 9.2 are solely for the benefit of
Agent and Lenders and no Credit Party nor any other Person shall have any rights
as a third party beneficiary of any of the provisions hereof. In performing its
functions and duties under this Agreement and the other Loan Documents, Agent
shall act solely as an agent of Lenders and does not assume and shall not be
deemed to have assumed any obligation toward or relationship of agency or trust
with or for any Credit Party or any other Person. Agent shall have no duties or
responsibilities except for those expressly set forth in this Agreement and the
other Loan Documents. The duties of Agent shall be mechanical and administrative
in nature and Agent shall not have, or be deemed to have, by reason of this
Agreement, any other Loan Document or otherwise a fiduciary relationship in
respect of any Lender. Neither Agent nor any of its Affiliates nor any of their
respective officers, directors, employees, agents or representatives shall be
liable to any Lender for any action taken or omitted to be taken by it hereunder
or under any other Loan Document, or in connection herewith or therewith, except
for damages caused by its or their own gross negligence or willful misconduct.
If Agent shall request instructions from Requisite Lenders,
Supermajority Lenders or all affected Lenders with respect to any act or action
(including failure to act) in connection with this Agreement or any other Loan
Document, then Agent shall be entitled to refrain from such act or taking such
action unless and until Agent shall have received instructions from Requisite
Lenders, Supermajority Lenders, or all affected Lenders, as the case may be, and
Agent shall not incur liability to any Person by reason of so refraining. Agent
shall be fully justified in failing or refusing to take any action hereunder or
under any other Loan Document (a) if such action would, in the opinion of Agent,
be contrary to law or the terms of this Agreement or any other Loan Document,
(b) if such action would, in the opinion of Agent, expose Agent to Environmental
Liabilities or (c) if Agent shall not first be indemnified to its satisfaction
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. Without limiting the foregoing,
no Lender shall have any right of action whatsoever against Agent as a result of
Agent acting or refraining from acting hereunder or under any other Loan
Document in accordance with the instructions of Requisite Lenders, Supermajority
Lenders or all affected Lenders, as applicable.
9.3. Agent's Reliance, Etc. Neither Agent nor any of its
Affiliates nor any of their respective directors, officers, agents or employees
shall be liable for any action taken or omitted to be taken by it or them under
or in connection with this Agreement or the other Loan Documents, except for
damages caused by its or their own gross negligence or willful misconduct.
Without limitation of the generality of the foregoing, Agent: (a) may treat the
payee of any Note as the holder thereof until Agent receives written notice of
the assignment or transfer thereof signed by such payee and in form satisfactory
to Agent; (b) may consult with legal counsel, independent public accountants and
other experts selected by it and shall not be liable for any action taken or
omitted to be taken in good faith by it in accordance with the advice of such
counsel, accountants or experts; (c) makes no warranty or representation to any
Lender and shall not be responsible to any Lender for any statements, warranties
or representations made in or in connection with this Agreement or the other
Loan Documents; (d)
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shall not have any duty to ascertain or to inquire as to the performance or
observance of any of the terms, covenants or conditions of this Agreement or the
other Loan Documents on the part of any Credit Party or to inspect the
Collateral (including the books and records) of any Credit Party; (e) shall not
be responsible to any Lender for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or the other
Loan Documents or any other instrument or document furnished pursuant hereto or
thereto; and (f) shall incur no liability under or in respect of this Agreement
or the other Loan Documents by acting upon any notice, consent, certificate or
other instrument or writing (which may be by telecopy, telegram, cable or telex)
believed by it to be genuine and signed or sent by the proper party or parties.
9.4. GE Capital and Affiliates. With respect to its
Commitments hereunder, GE Capital shall have the same rights and powers under
this Agreement and the other Loan Documents as any other Lender and may exercise
the same as though it were not Agent; and the term "Lender" or "Lenders" shall,
unless otherwise expressly indicated, include GE Capital in its individual
capacity. GE Capital and its Affiliates may lend money to, invest in, and
generally engage in any kind of business with, any Credit Party, any of their
Affiliates and any Person who may do business with or own securities of any
Credit Party or any such Affiliate, all as if GE Capital were not Agent and
without any duty to account therefor to Lenders. GE Capital and its Affiliates
may accept fees and other consideration from any Credit Party for services in
connection with this Agreement or otherwise without having to account for the
same to Lenders. Each Lender acknowledges the potential conflict of interest
between GE Capital as a Lender holding disproportionate interests in the Loans,
and GE Capital as Agent.
9.5. Lender Credit Decision. Each Lender acknowledges that it
has, independently and without reliance upon Agent or any other Lender and based
on the Financial Statements referred to in Section 3.4(a) and such other
documents and information as it has deemed appropriate, made its own credit and
financial analysis of the Credit Parties and its own decision to enter into this
Agreement. Each Lender also acknowledges that it will, independently and without
reliance upon Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement. Each
Lender acknowledges the potential conflict of interest of each other Lender as a
result of Lenders holding disproportionate interests in the Loans, and expressly
consents to, and waives any claim based upon, such conflict of interest.
9.6. Indemnification. Lenders agree to indemnify Agent (to the
extent not reimbursed by Credit Parties and without limiting the obligations of
Borrower hereunder), ratably according to their respective Pro Rata Shares, from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by, or asserted against
Agent in any way relating to or arising out of this Agreement or any other Loan
Document or any action taken or omitted by Agent in connection therewith;
provided, however, that no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from Agent's gross negligence or
willful misconduct. Without limiting the foregoing, each Lender agrees to
reimburse Agent promptly upon demand for its ratable share of any out-of-pocket
expenses (including counsel fees) incurred by Agent in connection with the
preparation, execution, delivery, administration, modification, amendment or
enforcement (whether through
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negotiations, legal proceedings or otherwise) of, or legal advice in respect of
rights or responsibilities under, this Agreement and each other Loan Document,
to the extent that Agent is not reimbursed for such expenses by Credit Parties.
9.7. Successor Agent. Agent may resign at any time by giving
not less than thirty (30) days' prior written notice thereof to Lenders and
Borrower. Upon any such resignation, the Requisite Lenders shall have the right
to appoint a successor Agent. If no successor Agent shall have been so appointed
by the Requisite Lenders and shall have accepted such appointment within thirty
(30) days after the resigning Agent's giving notice of resignation, then the
resigning Agent may, on behalf of Lenders, appoint a successor Agent, which
shall be a Lender, if a Lender is willing to accept such appointment, or
otherwise shall be a commercial bank or financial institution or a subsidiary of
a commercial bank or financial institution if such commercial bank or financial
institution is organized under the laws of the United States of America or of
any State thereof and has a combined capital and surplus of at least
$300,000,000. If no successor Agent has been appointed pursuant to the
foregoing, by the 30th day after the date such notice of resignation was given
by the resigning Agent, such resignation shall become effective and the
Requisite Lenders shall thereafter perform all the duties of Agent hereunder
until such time, if any, as the Requisite Lenders appoint a successor Agent as
provided above. Any successor Agent appointed by Requisite Lenders hereunder
shall be subject to the approval of Borrower, such approval not to be
unreasonably withheld or delayed; provided that such approval shall not be
required if a Default or an Event of Default shall have occurred and be
continuing. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall succeed to and become vested with
all the rights, powers, privileges and duties of the resigning Agent. Upon the
earlier of the acceptance of any appointment as Agent hereunder by a successor
Agent or the effective date of the resigning Agent's resignation, the resigning
Agent shall be discharged from its duties and obligations under this Agreement
and the other Loan Documents, except that any indemnity rights or other rights
in favor of such resigning Agent shall continue. After any resigning Agent's
resignation hereunder, the provisions of this Section 9 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was Agent
under this Agreement and the other Loan Documents.
9.8. Setoff and Sharing of Payments. In addition to any rights
now or hereafter granted under applicable law and not by way of limitation of
any such rights, upon the occurrence and during the continuance of any Event of
Default, each Lender and each holder of any Note is hereby authorized at any
time or from time to time, without notice to any Credit Party or to any other
Person, any such notice being hereby expressly waived, to set off and to
appropriate and to apply any and all balances held by it at any of its offices
for the account of Borrower or any Guarantor (regardless of whether such
balances are then due to Borrower or any Guarantor) and any other properties or
assets any time held or owing by that Lender or that holder to or for the credit
or for the account of Borrower or any Guarantor against and on account of any of
the Obligations which are not paid when due. Any Lender or holder of any Note
exercising a right to set off or otherwise receiving any payment on account of
the Obligations in excess of its Pro Rata Share thereof shall purchase for cash
(and the other Lenders or holders shall sell) such participations in each such
other Lender's or holder's Pro Rata Share of the Obligations as would be
necessary to cause such Lender to share the amount so set off or otherwise
received with each other Lender or holder in accordance with their respective
Pro Rata Shares. Borrower and each Guarantor agrees, to the fullest extent
permitted by law, that (a) any
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Lender or holder may exercise its right to set off with respect to amounts in
excess of its Pro Rata Share of the Obligations and may sell participations in
such amount so set off to other Lenders and holders and (b) any Lender or
holders so purchasing a participation in the Loans made or other Obligations
held by other Lenders or holders may exercise all rights of set-off, bankers'
lien, counterclaim or similar rights with respect to such participation as fully
as if such Lender or holder were a direct holder of the Loans and the other
Obligations in the amount of such participation. Notwithstanding the foregoing,
if all or any portion of the set-off amount or payment otherwise received is
thereafter recovered from the Lender that has exercised the right of set-off,
the purchase of participations by that Lender shall be rescinded and the
purchase price restored without interest.
9.9. Advances; Payments; Non-Funding Lenders; Information;
Actions in Concert.
(a) Advances; Payments.
(i) Agent shall notify Revolving Lenders, promptly
after receipt of a Notice of Revolving Advance and in any event prior
to 1:00 p.m. (New York time) on the date such Notice of Revolving
Advance is received, by telecopy, telephone or other similar form of
transmission. Each Revolving Lender shall make the amount of such
Lender's Pro Rata Share of such Revolving Credit Advance available to
Agent in same day funds by wire transfer to Agent's account as set
forth in Annex H not later than 3:00 p.m. (New York time) on the
requested funding date. After receipt of such wire transfers (or, in
the Agent's sole discretion, before receipt of such wire transfers),
subject to the terms hereof, Agent shall make the requested Revolving
Credit Advance to Borrower. All payments by each Revolving Lender shall
be made without setoff, counterclaim or deduction of any kind.
(ii) On the second (2nd) Business Day of each
calendar week or more frequently as aggregate cumulative payments in
excess of $5,000,000 are received with respect to the Loans (each, a
"Settlement Date"), Agent will advise each Lender by telephone, or
telecopy of the amount of such Lender's Pro Rata Share of principal,
interest and Fees paid for the benefit of Lenders with respect to each
applicable Loan. Provided that such Lender has funded all payments and
Advances required to be made by it and purchased all participations
required to be purchased by it under this Agreement and the other Loan
Documents as of such Settlement Date, Agent will pay to each Lender
such Lender's Pro Rata Share of principal, interest and Fees paid by
Borrower since the previous Settlement Date for the benefit of that
Lender on the Loans held by it. To the extent that any Lender (a
"Non-Funding Lender") has failed to fund all such payments and Advances
or failed to fund the purchase of all such participations, Agent shall
be entitled to set off the funding short-fall against that Non-Funding
Lender's Pro Rata Share of all payments received from Borrower. Such
payments shall be made by wire transfer to such Lender's account (as
specified by such Lender in Annex H or the applicable Assignment
Agreement) not later than 2:00 p.m. (New York time) on the next
Business Day following each Settlement Date.
(b) Availability of Lender's Pro Rata Share. Agent may assume
that each Revolving Lender will make its Pro Rata Share of each Revolving Credit
Advance available to
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Agent on each funding date. If such Pro Rata Share is not, in fact, paid to
Agent by such Revolving Lender when due, Agent will be entitled to recover such
amount on demand from such Revolving Lender without set-off, counterclaim or
deduction of any kind. If any Revolving Lender fails to pay the amount of its
Pro Rata Share forthwith upon Agent's demand, Agent shall promptly notify
Borrower and Borrower shall immediately repay such amount to Agent. Nothing in
this Section 9.9(b) or elsewhere in this Agreement or the other Loan Documents
shall be deemed to require Agent to advance funds on behalf of any Revolving
Lender or to relieve any Revolving Lender from its obligation to fulfill its
Commitments hereunder or to prejudice any rights that Borrower may have against
any Revolving Lender as a result of any default by such Revolving Lender
hereunder. To the extent that Agent advances funds to Borrower on behalf of any
Revolving Lender and is not reimbursed therefor on the same Business Day as such
Advance is made, Agent shall be entitled to retain for its account all interest
accrued on such Advance until reimbursed by the applicable Revolving Lender.
(c) Return of Payments.
(i) If Agent pays an amount to a Lender under this
Agreement in the belief or expectation that a related payment has been
or will be received by Agent from Borrower and such related payment is
not received by Agent, then Agent will be entitled to recover such
amount from such Lender on demand without set-off, counterclaim or
deduction of any kind.
(ii) If Agent determines at any time that any amount
received by Agent under this Agreement must be returned to Borrower or
paid to any other Person pursuant to any insolvency law or otherwise,
then, notwithstanding any other term or condition of this Agreement or
any other Loan Document, Agent will not be required to distribute any
portion thereof to any Lender. In addition, each Lender will repay to
Agent on demand any portion of such amount that Agent has distributed
to such Lender, together with interest at such rate, if any, as Agent
is required to pay to Borrower or such other Person, without set-off,
counterclaim or deduction of any kind.
(d) Non-Funding Lenders. The failure of any Non-Funding Lender
to make any Revolving Credit Advance or any payment required by it hereunder,
shall not relieve any other Revolving Lender (each such other Revolving Lender,
an "Other Lender") of its obligations to make such Advance, but neither any
Other Lender nor Agent shall be responsible for the failure of any Non-Funding
Lender to make an Advance. Notwithstanding anything set forth herein to the
contrary, a Non-Funding Lender shall not have any voting or consent rights under
or with respect to any Loan Document or constitute a "Lender" or a "Revolving
Lender" (or be included in the calculation of "Requisite Lenders", or
"Supermajority Lenders" hereunder) for any voting or consent rights under or
with respect to any Loan Document.
(e) Dissemination of Information. Agent will use reasonable
efforts to provide Lenders with any notice of Default or Event of Default
received by Agent from, or delivered by Agent to, any Credit Party, with notice
of any Event of Default of which Agent has actually become aware and with notice
of any action taken by Agent following any Event of Default; provided, however,
that Agent shall not be liable to any Lender for any failure to do so, except to
the extent that such failure is attributable to Agent's gross negligence or
willful misconduct.
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Lenders acknowledge that Borrower is required to provide Financial Statements
and Collateral Reports to Lenders in accordance with Annexes E and F hereto and
agree that Agent shall have no duty to provide the same to Lenders.
(f) Actions in Concert. Anything in this Agreement to the
contrary notwithstanding, each Lender hereby agrees with each other Lender that
no Lender shall take any action to protect or enforce its rights arising out of
this Agreement or the Notes (including exercising any rights of set-off) without
first obtaining the prior written consent of Agent and Requisite Lenders, it
being the intent of Lenders that any such action to protect or enforce rights
under this Agreement and the Notes shall be taken in concert and at the
direction or with the consent of Agent.
10. SUCCESSORS AND ASSIGNS
10.1. Successors and Assigns. This Agreement and the other
Loan Documents shall be binding on and shall inure to the benefit of each Credit
Party, Agent, Lenders and their respective successors and assigns (including, in
the case of any Credit Party, a debtor-in-possession on behalf of such Credit
Party), except as otherwise provided herein or therein. No Credit Party may
assign, transfer, hypothecate or otherwise convey its rights, benefits,
obligations or duties hereunder or under any of the other Loan Documents without
the prior express written consent of Agent and Lenders. Any such purported
assignment, transfer, hypothecation or other conveyance by any Credit Party
without the prior express written consent of Agent and Lenders shall be void.
The terms and provisions of this Agreement are for the purpose of defining the
relative rights and obligations of each Credit Party, Agent and Lenders with
respect to the transactions contemplated hereby and no Person shall be a third
party beneficiary of any of the terms and provisions of this Agreement or any of
the other Loan Documents.
11. MISCELLANEOUS
11.1. Complete Agreement; Modification of Agreement. The Loan
Documents constitute the complete agreement between the parties with respect to
the subject matter thereof and may not be modified, altered or amended except as
set forth in Section 11.2 below. Any letter of interest, commitment letter
and/or fee letter (other than the GE Capital Fee Letter) between any Credit
Party and Agent or any Lender or any of their respective affiliates, predating
this Agreement and relating to a financing of substantially similar form,
purpose or effect shall be superseded by this Agreement.
11.2. Amendments and Waivers.
(a) Except for actions expressly permitted to be taken by
Agent, no amendment, modification, termination or waiver of any provision of
this Agreement or any of the Notes, or any consent to any departure by any
Credit Party therefrom, shall in any event be effective unless the same shall be
in writing and signed by Agent and Borrower, and by Requisite Lenders,
Supermajority Lenders or all affected Lenders, as applicable. Except as set
forth in clauses (b) and (c) below, all such amendments, modifications,
terminations or waivers requiring the consent of any Lenders shall require the
written consent of Requisite Lenders.
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(b) No amendment, modification, termination or waiver of or
consent with respect to any provision of this Agreement which increases the
percentage advance rates set forth in the definition of the Borrowing Base, or
which makes less restrictive the nondiscretionary criteria for exclusion from
Eligible Accounts, Eligible Inventory, Eligible Raw Materials and Eligible Fixed
Assets set forth in Sections 1.6, 1.7, 1.8 and 1.9, shall be effective unless
the same shall be in writing and signed by Agent, Supermajority Lenders and
Borrower. No amendment, modification, termination or waiver of or consent with
respect to any provision of this Agreement which waives compliance with the
conditions precedent set forth in Section 2.2 to the making of any Loan or the
incurrence of any Letter of Credit Obligations shall be effective unless the
same shall be in writing and signed by Agent, Requisite Lenders and Borrower.
Notwithstanding anything contained in this Agreement to the contrary, no waiver
or consent with respect to any Default (if in connection therewith Agent or
Requisite Lenders, as the case may be, have exercised its or their right to
suspend the making or incurrence of further Advances or Letter of Credit
Obligations pursuant to Section 8.2(a)) or any Event of Default shall be
effective for purposes of the conditions precedent to the making of Loans or the
incurrence of Letter of Credit Obligations set forth in Section 2.2 unless the
same shall be in writing and signed by Agent, Requisite Lenders and Borrower.
(c) No amendment, modification, termination or waiver shall,
unless in writing and signed by Agent and each Lender directly affected thereby,
do any of the following: (i) increase the principal amount of any Lender's
Commitment (which action shall be deemed to directly affect all Lenders); (ii)
reduce the principal of, rate of interest on or Fees payable with respect to any
Loan or Letter of Credit Obligations of any affected Lender; (iii) extend any
scheduled payment date or final maturity date of the principal amount of any
Loan of any affected Lender; (iv) waive, forgive, defer, extend or postpone any
payment of interest or Fees as to any affected Lender; (v) release any Guaranty
or, except as otherwise permitted herein or in the other Loan Documents,
release, or permit any Credit Party to sell or otherwise dispose of, any
Collateral with a value exceeding $5,000,000 in the aggregate (which action
shall be deemed to directly affect all Lenders); (vi) change the percentage of
the Commitments or of the aggregate unpaid principal amount of the Loans which
shall be required for Lenders or any of them to take any action hereunder; and
(vii) amend or waive this Section 11.2 or the definitions of the terms
"Requisite Lenders", or "Supermajority Lenders" insofar as such definitions
affect the substance of this Section 11.2. Furthermore, no amendment,
modification, termination or waiver affecting the rights or duties of Agent
under this Agreement or any other Loan Document shall be effective unless in
writing and signed by Agent, in addition to Lenders required hereinabove to take
such action. Each amendment, modification, termination or waiver shall be
effective only in the specific instance and for the specific purpose for which
it was given. No amendment, modification, termination or waiver shall be
required for Agent to take additional Collateral pursuant to any Loan Document.
No amendment, modification, termination or waiver of any provision of any Note
shall be effective without the written concurrence of the holder of that Note.
No notice to or demand on any Credit Party in any case shall entitle such Credit
Party or any other Credit Party to any other or further notice or demand in
similar or other circumstances. Any amendment, modification, termination, waiver
or consent effected in accordance with this Section 11.2 shall be binding upon
each holder of the Notes at the time outstanding and each future holder of the
Notes.
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(d) If, in connection with any proposed amendment,
modification, waiver or termination (a "Proposed Change"):
(i) requiring the consent of all affected Lenders,
the consent of Requisite Lenders is obtained, but the consent of other
Lenders whose consent is required is not obtained (any such Lender
whose consent is not obtained as described this clause (i) and in
clauses (ii), (iii) and (iv) below being referred to as a
"Non-Consenting Lender"), or
(ii) requiring the consent of Supermajority Lenders,
the consent of Requisite Lenders is obtained, but the consent of
Supermajority Lenders is not obtained, or
(iii) requiring the consent of Requisite Lenders, the
consent of Lenders holding 51% or more of the aggregate Commitments is
obtained, but the consent of Requisite Lenders is not obtained,
then, so long as Agent is not a Non-Consenting Lender, at Borrower's request
Agent, or a Person acceptable to Agent, shall have the right with Agent's
consent and in Agent's sole discretion (but shall have no obligation) to
purchase from such Non-Consenting Lenders, and such Non-Consenting Lenders agree
that they shall, upon Agent's request, sell and assign to Agent or such Person,
all of the Commitments of such Non-Consenting Lender for an amount equal to the
principal balance of all Loans held by the Non-Consenting Lender and all accrued
interest and Fees with respect thereto through the date of sale, such purchase
and sale to be consummated pursuant to an executed Assignment Agreement.
(e) Upon indefeasible payment in full in cash and performance
of all of the Obligations (other than indemnification Obligations under Section
1.15), termination of the Commitments and a release of all claims against Agent
and Lenders, and so long as no suits, actions proceedings, or claims are pending
or threatened against any Indemnified Person asserting any damages, losses or
liabilities that are Indemnified Liabilities, Agent shall deliver to Borrower
termination statements, mortgage releases and other documents necessary or
appropriate to evidence the termination of the Liens securing payment of the
Obligations.
11.3. Fees and Expenses. Borrower shall reimburse Agent for
all out-of-pocket expenses incurred in connection with the preparation of the
Loan Documents (including the reasonable fees and expenses of all of its special
loan counsel, advisors, consultants and auditors retained in connection with the
Loan Documents and the Related Transactions and advice in connection therewith).
Borrower shall reimburse Agent (and, with respect to clauses (c) and (d) below,
all Lenders) for all fees, costs and expenses, including the reasonable fees,
costs and expenses of counsel or other advisors (including environmental and
management consultants and appraisers) for advice, assistance, or other
representation in connection with:
(a) the forwarding to Borrower or any other Person on behalf
of Borrower by Agent of the proceeds of the Loans;
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(b) any amendment, modification or waiver of, or consent with
respect to, any of the Loan Documents or Related Transactions Documents or
advice in connection with the administration of the Loans made pursuant hereto
or its rights hereunder or thereunder;
(c) any litigation, contest, dispute, suit, proceeding or
action (whether instituted by Agent, any Lender, Borrower or any other Person
and whether as a Party, witness or otherwise) in any way relating to the
Collateral, any of the Loan Documents or any other agreement to be executed or
delivered in connection therewith or herewith, whether as party, witness, or
otherwise, including any litigation, contest, dispute, suit, case, proceeding or
action, and any appeal or review thereof, in connection with a case commenced by
or against Borrower or any other Person that may be obligated to Agent by virtue
of the Loan Documents; including any such litigation, contest, dispute, suit,
proceeding or action arising in connection with any work-out or restructuring of
the Loans during the pendency of one or more Events of Default; provided that in
the case of reimbursement of counsel for Lenders other than Agent, such
reimbursement shall be limited to one counsel for all such Lenders;
(d) any attempt to enforce any remedies of Agent or any Lender
against any or all of the Credit Parties or any other Person that may be
obligated to Agent or any Lender by virtue of any of the Loan Documents;
including any such attempt to enforce any such remedies in the course of any
work-out or restructuring of the Loans during the pendency of one or more Events
of Default; provided that in the case of reimbursement of counsel for Lenders
other than Agent, such reimbursement shall be limited to one counsel for all
such Lenders;
(e) any work-out or restructuring of the Loans during the
pendency of one or more Events of Default;
(f) efforts to (i) monitor the Loans or any of the other
Obligations, (ii) evaluate, observe or assess any of the Credit Parties or their
respective affairs, and (iii) verify, protect, evaluate, assess, appraise,
collect, sell, liquidate or otherwise dispose of any of the Collateral;
including, as to each of clauses (a) through (f) above, all attorneys' and other
professional and service providers' fees arising from such services, including
those in connection with any appellate proceedings; and all expenses, costs,
charges and other fees incurred by such counsel and others in any way or respect
arising in connection with or relating to any of the events or actions described
in this Section 11.3 shall be payable, on demand, by Borrower to Agent. Without
limiting the generality of the foregoing, such expenses, costs, charges and fees
may include: fees, costs and expenses of accountants, environmental advisors,
appraisers, investment bankers, management and other consultants and paralegals;
court costs and expenses; photocopying and duplication expenses; court reporter
fees, costs and expenses; long distance telephone charges; air express charges;
telegram or telecopy charges; secretarial overtime charges; and expenses for
travel, lodging and food paid or incurred in connection with the performance of
such legal or other advisory services.
11.4. No Waiver. Agent's or any Lender's failure, at any time
or times, to require strict performance by the Credit Parties of any provision
of this Agreement and any of the other Loan Documents shall not waive, affect or
diminish any right of Agent or such Lender thereafter to demand strict
compliance and performance therewith. Any suspension or waiver of
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62
an Event of Default shall not suspend, waive or affect any other Event of
Default whether the same is prior or subsequent thereto and whether the same or
of a different type. Subject to the provisions of Section 11.2, none of the
undertakings, agreements, warranties, covenants and representations of any
Credit Party contained in this Agreement or any of the other Loan Documents and
no Default or Event of Default by any Credit Party shall be deemed to have been
suspended or waived by Agent or any Lender, unless such waiver or suspension is
by an instrument in writing signed by an officer of or other authorized employee
of Agent and the applicable required Lenders and directed to Borrower specifying
such suspension or waiver.
11.5. Remedies. Agent's and Lenders' rights and remedies under
this Agreement shall be cumulative and nonexclusive of any other rights and
remedies which Agent or any Lender may have under any other agreement, including
the other Loan Documents, by operation of law or otherwise. Recourse to the
Collateral shall not be required.
11.6. Severability. Wherever possible, each provision of this
Agreement and the other Loan Documents shall be interpreted in such a manner as
to be effective and valid under applicable law, but if any provision of this
Agreement shall be prohibited by or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.
11.7. Conflict of Terms. Except as otherwise provided in this
Agreement or any of the other Loan Documents by specific reference to the
applicable provisions of this Agreement, if any provision contained in this
Agreement is in conflict with, or inconsistent with, any provision in any of the
other Loan Documents, the provision contained in this Agreement shall govern and
control.
11.8. Confidentiality. Agent and each Lender agree to use
commercially reasonable efforts (equivalent to the efforts Agent or such Lender
applies to maintain the confidentiality of its own confidential information) to
maintain as confidential all confidential information provided to them by the
Credit Parties and designated as confidential for a period of two (2) years
following receipt thereof, except that Agent and each Lender may disclose such
information (a) to Persons employed or engaged by Agent or such Lender in
evaluating, approving, structuring or administering the Loans and the
Commitments; (b) to any bona fide assignee or participant or potential assignee
or participant that has agreed to comply with the covenant contained in this
Section 11.8 (and any such bona fide assignee or participant or potential
assignee or participant may disclose such information to Persons employed or
engaged by them as described in clause (a) above); (c) as required or requested
by any Governmental Authority or reasonably believed by Agent or such Lender to
be compelled by any court decree, subpoena or legal or administrative order or
process; (d) as, on the advise of Agent's or such Lender's counsel, required by
law; (e) in connection with the exercise of any right or remedy under the Loan
Documents or in connection with any Litigation to which Agent or such Lender is
a party; or (f) which ceases to be confidential through no fault of Agent or
such Lender.
11.9. GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN
ANY OF THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, THE
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LOAN DOCUMENTS AND THE OBLIGATIONS SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND PERFORMED IN THAT STATE AND ANY APPLICABLE LAWS OF THE UNITED
STATES OF AMERICA. EACH CREDIT PARTY HEREBY CONSENTS AND AGREES THAT THE STATE
OR FEDERAL COURTS LOCATED IN NEW YORK COUNTY, CITY OF NEW YORK, NEW YORK, SHALL
HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN
THE CREDIT PARTIES, AGENT AND LENDERS PERTAINING TO THIS AGREEMENT OR ANY OF THE
OTHER LOAN DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, PROVIDED, THAT AGENT, LENDERS AND
THE CREDIT PARTIES ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE
HEARD BY A COURT LOCATED OUTSIDE OF NEW YORK COUNTY, CITY OF NEW YORK, NEW YORK,
AND, PROVIDED, FURTHER NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO
PRECLUDE AGENT FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER
JURISDICTION TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE
OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF AGENT.
EACH CREDIT PARTY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION
IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH CREDIT PARTY HEREBY
WAIVES ANY OBJECTION WHICH SUCH CREDIT PARTY MAY HAVE BASED UPON LACK OF
PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY
CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY SUCH COURT. EACH CREDIT PARTY HEREBY WAIVES PERSONAL SERVICE OF
THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND
AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH CREDIT PARTY AT THE ADDRESS SET
FORTH IN ANNEX I OF THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED
COMPLETED UPON THE EARLIER OF SUCH CREDIT PARTY'S ACTUAL RECEIPT THEREOF OR
THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID.
11.10. Notices. Except as otherwise provided herein, whenever
it is provided herein that any notice, demand, request, consent, approval,
declaration or other communication shall or may be given to or served upon any
of the parties by any other parties, or whenever any of the parties desires to
give or serve upon any other parties any communication with respect to this
Agreement, each such notice, demand, request, consent, approval, declaration or
other communication shall be in writing and shall be deemed to have been validly
served, given or delivered (a) upon the earlier of actual receipt and three (3)
Business Days after deposit in the United States Mail, registered or certified
mail, return receipt requested, with proper postage prepaid, (b) upon
transmission, when sent by telecopy or other similar facsimile transmission
(with such telecopy or facsimile promptly confirmed by delivery of a copy by
personal delivery or United States Mail as otherwise provided in this Section
11.10), (c) one (1) Business Day after
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deposit with a reputable overnight courier with all charges prepaid or (d) when
delivered, if hand-delivered by messenger, all of which shall be addressed to
the party to be notified and sent to the address or facsimile number indicated
on Annex I or to such other address (or facsimile number) as may be substituted
by notice given as herein provided. The giving of any notice required hereunder
may be waived in writing by the party entitled to receive such notice. Failure
or delay in delivering copies of any notice, demand, request, consent, approval,
declaration or other communication to any Person (other than Borrower or Agent)
designated on Annex I to receive copies shall in no way adversely affect the
effectiveness of such notice, demand, request, consent, approval, declaration or
other communication.
11.11. Section Titles. The Section titles and Table of
Contents contained in this Agreement are and shall be without substantive
meaning or content of any kind whatsoever and are not a part of the agreement
between the parties hereto.
11.12. Counterparts. This Agreement may be executed in any
number of separate counterparts, each of which shall collectively and separately
constitute one agreement.
11.13. WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN
CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY
RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE
STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES
DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS.
THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL
SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY
IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG AGENT, LENDERS AND ANY CREDIT
PARTY ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF
THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS RELATED THERETO.
11.14. Press Releases. Each Credit Party executing this
Agreement agrees that neither it nor its Affiliates will in the future issue any
press releases or other public disclosure using the name of GE Capital or its
Affiliates or referring to this Agreement, the other Loan Documents or the
Related Transactions Documents without at least two (2) Business Days' prior
notice to GE Capital and without the prior written consent of GE Capital unless
(and only to the extent that) such Credit Party or Affiliate is required to do
so under law and then, in any event, such Credit Party or Affiliate will consult
with GE Capital before issuing such press release or other public disclosure.
Without limiting the foregoing, GE Capital acknowledges that Borrower is
required under the Securities and Exchange Act of 1934 to submit a timely report
on form 8-K together with a full copy of this Agreement and certain of the other
Loan Documents to the Securities and Exchange Commission; provided, however,
that, unless GE Capital is afforded a reasonable period of time of at least two
(2) Business Days to review any such submission and make such redactions as it
deems appropriate, no such submission shall include the name of GE Capital or
any of its Affiliates. Each Credit Party consents to the publication by Agent or
any
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Lender of a tombstone or similar advertising material relating to the financing
transactions contemplated by this Agreement. Agent or such Lender shall provide
a draft of any such tombstone or similar advertising material to each Credit
Party for review and comment prior to the publication thereof. Agent reserves
the right to provide to industry trade organizations information necessary and
customary for inclusion in league table measurements with Borrower's consent
which shall not be unreasonably withheld or delayed.
11.15. Reinstatement. This Agreement shall remain in full
force and effect and continue to be effective should any petition be filed by or
against Borrower for liquidation or reorganization, should Borrower become
insolvent or make an assignment for the benefit of any creditor or creditors or
should a receiver or trustee be appointed for all or any significant part of
Borrower's assets, and shall continue to be effective or to be reinstated, as
the case may be, if at any time payment and performance of the Obligations, or
any part thereof, is, pursuant to applicable law, rescinded or reduced in
amount, or must otherwise be restored or returned by any obligee of the
Obligations, whether as a "voidable preference," "fraudulent conveyance," or
otherwise, all as though such payment or performance had not been made. In the
event that any payment, or any part thereof, is rescinded, reduced, restored or
returned, the Obligations shall be reinstated and deemed reduced only by such
amount paid and not so rescinded, reduced, restored or returned.
11.16. Advice of Counsel. Each of the parties represents to
each other party hereto that it has discussed this Agreement and, specifically,
the provisions of Sections 11.9 and 11.13, with its counsel.
11.17. No Strict Construction. The parties hereto have
participated jointly in the negotiation and drafting of this Agreement. In the
event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties hereto and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provisions of this Agreement.
11.18. Judgment Currency. Without limiting and in addition to
the provisions of Section 1.1, if for the purposes of obtaining judgment in any
court in any jurisdiction with respect to this Agreement or any other Loan
Document to which any Credit Party is party it becomes necessary to convert into
the currency of such jurisdiction (the "Judgment Currency") any amount due
hereunder in any currency other than the Judgment Currency, then conversion
shall be made at the rate of exchange prevailing on the Business Day before the
day of which judgment is given. For this purpose, "rate of exchange" means the
rate at which Agent would, on the relevant date at or about 12:00 noon (New York
time), be prepared to sell a similar amount of such currency in New York against
the Judgment Currency. In the event that there is a change in the rate of
exchange prevailing between the Business Day before the day on which the
judgment is given and the date of payment of the amount due, the applicable
Credit Party shall, on the date of payment, pay such additional amounts (if any)
as may be necessary to ensure that the amount paid on such date is the amount in
the Judgment Currency which when converted at the rate of exchange prevailing on
the date of payment is the amount then due under this Agreement or such other
applicable Loan Document in such other currency. Any additional amount due from
any Credit Party under this Section 11.18 will be due as a separate debt and
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shall not be affected by judgment being obtained for any other sums due under or
in respect of any of the Loan Documents.
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The following Persons are signatories to this Agreement in
their capacity as Credit Parties and not as Borrowers.
THE WURLITZER COMPANY
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
-----------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President and Chief Financial Officer
▇▇▇▇▇▇▇ TRADING COMPANY
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
-----------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President and Chief Financial Officer
THE ▇▇▇▇▇▇▇ PIANO COMPANY (CANADA) LIMITED
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
-----------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President and Chief Financial Officer
68
IN WITNESS WHEREOF, this Agreement has been duly executed as
of the date first written above.
▇▇▇▇▇▇▇ PIANO & ORGAN COMPANY
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
-----------------
▇▇▇▇▇ ▇▇▇▇▇▇
Executive Vice President and Chief Financial Officer
GENERAL ELECTRIC CAPITAL
CORPORATION, as Agent and Lender
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
A Duly Authorized Signatory
69
EXHIBIT 1.1(a)(i)
to
CREDIT AGREEMENT
COMBINED NOTICE OF REVOLVING CREDIT ADVANCE AND COLLATERAL ACTIVITY REPORT -
(A/R ONLY ROLLFORWARD)
Capitalized terms used herein which are defined in the Credit Agreement
dated as of March 24, 2000 by and among the undersigned, the Lenders party
thereto and GENERAL ELECTRIC CAPITAL CORPORATION, as Agent (including all
annexes, schedules and exhibits, as amended, restated supplemented or otherwise
modified, the "Credit Agreement") shall have the meanings therein defined. The
Borrower hereby certifies that on the date hereof and on the borrowing date set
forth below, and after giving effect to the Advances requested hereby: (i) there
exists and there shall exist no Default or Event of Default under the Credit
Agreement; (ii) the proceeds of the Advances will be used in accordance with
Section ___ of the Credit Agreement; and (iii) each of the representations and
warranties contained in the Credit Agreement and the other Loan Documents shall
be true and correct. The Borrower acknowledges that this Notice is irrevocable.
------------------------------------------------------------------------------------------------------------------------------------
CLIENT AND ADDRESS ▇▇▇▇▇▇▇ Piano & Organ Co. NAME OF CONTACT PHONE (###) ###-####
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ (###) ###-####
▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
------------------------------------------------------------------------------------------------------------------------------------
REQUEST DATE AMOUNT
------------------------- --------------------------
------------------------------------------------------------------------------------------------------------------------------------
COLLATERAL AVAILABILITY INFORMATION
------------------------------------------------------------------------------------------------------------------------------------
GROSS A/R BALANCE - from previous request dated MM/DD/YY $ -
--------------------------
Plus: Sales (from MM/DD/YY to MM/DD/YY) + -
--------------------------
Minus: Cash Receipts Applied (MM/DD/YY) - -
--------------------------
Minus: Credit Memos (from MM/DD/YY to MM/DD/YY) - -
--------------------------
Minus: Discounts (from MM/DD/YY to MM/DD/YY) - -
--------------------------
Plus/Minus: Other Debits/Credits (from MM/DD/YY to MM/DD/YY) +/- -
--------------------------
Explanation
------------------------------------------------
A/R BALANCE (as of MM/DD/YY) $ -
--------------------------
Less: Ineligibles (Borrowing Base Certificate dated MM/DD/YY) - -
--------------------------
Eligible A/R $ -
--------------------------
Available A/R 85.0% $ -
---------------------
Less: Dilution Reserve 3.8% -
---------------------
---------------------
NET AVAILABLE ACCOUNTS RECEIVABLE D $ -
---------------------
INVENTORY AVAILABILITY (Borrowing Base Certificate dated MM/DD/YY) E $ -
---------------------
Fixed Assets Availability (Borrowing Base Certificate dated MM/DD/YY) F $ -
---------------------
D + E + F G $ -
---------------------
TOTAL AVAILABLE: LESSER OF: LINE G OR TOTAL CREDIT LINE ($40.0MM) $ -
---------------------
Less: Revolver H -
---------------------
Less: Outstanding Letters of Credit -
---------------------
Less: Reserves ( ) -
-------------------- ---------------------
( ) -
-------------------- ---------------------
EXCESS AVAILABILITY $ -
---------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
LOAN BALANCE
------------------------------------------------------------------------------------------------------------------------------------
Revolver Balance (Line H From Last Request Dated MM/DD/YY) $ -
--------------------------
Minus: Collections From Last to Current Request -
--------------------------
Plus: Current Amount Requested (From Above) -
--------------------------
Plus: Interest/Other (From MM/DD/YY to MM/DD/YY) -
--------------------------
Minus: Other (From MM/DD/YY to MM/DD/YY) -
--------------------------
Revolver Balance After Advance J $ -
------------------------------------------------------------------------------------------------------------------------------------
AUTHORIZATIONS Phone Fax
Requested by: (###) ###-#### (###) ###-####
------------------------------------------------ -------------------------- ---------------------
Duly Authorized Signatory
The Borrower has caused this Request to be executed by its duly authorized officer as of the date and year first written above.
------------------------------------------------------------------------------------------------------------------------------------
Fax to: GE Capital (▇▇▇) ▇▇▇-▇▇▇▇ ; Phone: (▇▇▇) ▇▇▇-▇▇▇▇
------------------------------------------------------------------------------------------------------------------------------------
70
EXHIBIT 1.1(a)(ii)
to
CREDIT AGREEMENT
FORM OF REVOLVING NOTE
March 24, 2000
New York, New York
$40,000,000.00
FOR VALUE RECEIVED, the undersigned, ▇▇▇▇▇▇▇ PIANO & ORGAN
COMPANY, a Delaware corporation ("Borrower"), HEREBY PROMISES TO PAY to the
order of GENERAL ELECTRIC CAPITAL CORPORATION ("Lender"), at the offices of
GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation, as Agent for
Lenders ("Agent"), at its address at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇, or at such other place as Agent may designate from time to time in
writing, in lawful money of the United States of America and in immediately
available funds, the amount of FORTY MILLION DOLLARS AND NO CENTS ($40,000,000)
or, if less, the aggregate unpaid amount of all Revolving Credit Advances made
to the undersigned under the "Credit Agreement" (as hereinafter defined). All
capitalized terms used but not otherwise defined herein have the meanings given
to them in the Credit Agreement or in Annex A thereto.
This Revolving Note is one of the Revolving Notes issued
pursuant to that certain Credit Agreement dated as of March 24, 2000 by and
among Borrower, the other Persons named therein as Credit Parties, Agent, Lender
and the other Persons signatory thereto from time to time as Lenders (including
all annexes, exhibits and schedules thereto, and as from time to time amended,
restated, supplemented or otherwise modified, the "Credit Agreement"), and is
entitled to the benefit and security of the Credit Agreement, the Security
Agreement and all of the other Loan Documents referred to therein. Reference is
hereby made to the Credit Agreement for a statement of all of the terms and
conditions under which the Loans evidenced hereby are made and are to be repaid.
The date and amount of each Revolving Credit Advance made by Lenders to
Borrower, the rates of interest applicable thereto and each payment made on
account of the principal thereof, shall be recorded by Agent on its books;
provided that the failure of Agent to make any such recordation shall not affect
the obligations of Borrower to make a payment when due of any amount owing under
the Credit Agreement or this Note in respect of the Revolving Credit Advances
made by Lender to Borrower.
The principal amount of the indebtedness evidenced hereby
shall be payable in the amounts and on the dates specified in the Credit
Agreement, the terms of which are hereby incorporated herein by reference.
Interest thereon shall be paid until such principal amount is paid in full at
such interest rates and at such times, and pursuant to such calculations, as are
specified in the Credit Agreement.
71
If any payment on this Revolving Note becomes due and payable
on a day other than a Business Day, the maturity thereof shall be extended to
the next succeeding Business Day and, with respect to payments of principal,
interest thereon shall be payable at the then applicable rate during such
extension.
Upon and after the occurrence of any Event of Default, this
Revolving Note may, as provided in the Credit Agreement, and without demand,
notice or legal process of any kind, be declared, and immediately shall become,
due and payable.
Time is of the essence of this Revolving Note. Demand,
presentment, protest and notice of nonpayment and protest are hereby waived by
Borrower.
Except as provided in the Credit Agreement, this Revolving
Note may not be assigned by Lender to any Person.
THIS REVOLVING NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE
AND PERFORMED IN THAT STATE.
▇▇▇▇▇▇▇ PIANO & ORGAN COMPANY
By: _____________________________
Title: __________________________
72
EXHIBIT 4.1(b)
to
CREDIT AGREEMENT
================================================================================
▇▇▇▇▇▇▇ PIANO & ORGAN COMPANY
BORROWING BASE CERTIFICATE
Pursuant to the Credit Agreement dated as of March [ ], 2000 by and among the
undersigned, the other Credit Parties signatory thereto, GENERAL CAPITAL
ELECTRIC CORPORATION as Agent and the Lenders party thereto (including all
annexes, schedules and exhibits, as amended, restated, supplemented or otherwise
modified, the "Credit Agreement"), the undersigned certifies that as of the
close of business evidenced above, the Borrowing Base is computed as set forth
on Schedule A hereto.
Borrower represents and warrants that this Borrowing Base Certificate is a true
and correct statement and that the information contained herein is true and
correct regarding the status of Eligible Accounts, Eligible Inventory, Eligible
Raw Materials and Eligible Fixed Assets and that the amounts reflected herein
are in compliance with the provisions of the Credit Agreement and the Schedules
and Exhibits thereof. The Borrower further represents and warrants that there is
no Default or Event of Default and all representations and warranties contained
in the Credit Agreement and other Loan Documents are true and correct. The
Borrower understands that General Electric Capital Corporation will extend loans
in reliance upon the information contained herein.
Capitalized terms used herein and not otherwise defined herein shall have the
meaning specified in the Credit Agreement.
ACCOUNTS RECEIVABLE BORROWING BASE (SCHEDULE A) MM/DD/YY
Accounts Receivable Balance Per Aging $ -
Less Ineligibles $ -
Net Eligible Accounts Receivable $ -
Advance Rate 85.0%
-------------------
Available Accounts Receivable $ -
Less Dilution Reserve
Net Available Accounts Receivable $ -
===================
INVENTORY BORROWING BASE (SCHEDULE B) MM/DD/YY
Raw Materials Per Perpetual $ -
Less Ineligibles $ -
Eligible Raw Materials $ -
Advance Rate 55.0%
-------------------
Available Raw Materials $ -
===================
Music Inventory Per Perpetual $ -
Less Ineligibles $ -
Net Eligible Music Inventory At Net Wholesale Dealer Cost $ -
Advance Rate 56.5%
-------------------
Available Music Inventory $ -
===================
Total Available Inventory $ -
===================
FIXED ASSETS AVAILABILITY
FMV Eligible Fixed Assets $ -
-------------------
Advance Rate 50.0%
-------------------
Available Fixed Assets (Lesser of FMV at 50% Advance Rate and $3.0MM) $ -
-------------------
Less $375M at End of Each Fiscal Quarter Beginning 6/30/01 $ -
-------------------
Net Available Fixed Assets $ -
-------------------
BORROWING BASE AVAILABILITY BEFORE RESERVES $ -
-------------------
Less: Reserves for Prior Claims (Schedule C) $ -
-------------------
Less: Reserves For Past Due Trade Payables (As Per Schedule 3.25) $ -
-------------------
Less: Other Reserves (Landlord Waiver Reserve) $ -
-------------------
BORROWING BASE AVAILABILITY AFTER RESERVES $ -
===================
Less: Revolver Outstandings $ -
-------------------
Letters of Credit Outstanding $ -
-------------------
EXCESS AVAILABILITY $ -
===================
▇▇▇▇▇▇▇ PIANO & ORGAN COMPANY By
------------------------------------
Duly Authorized Signature
===============================================================================
73
--------------------------------------------------------------------------------
SCHEDULE A
ACCOUNTS RECEIVABLE BORROWING BASE
ACCOUNTS RECEIVABLE BALANCE PER AGING AS OF MM/DD/YY $ -
--------------
Less: Past Due (Over 60 Days) $ -
--------------
50% Rule
--------------
Credit Balances > 60
--------------
DFS Receivable
--------------
Foreign (Not Backed By L/C)
--------------
Government
--------------
Contra Accounts
--------------
Finance Charges
--------------
Bankruptcy Accounts
--------------
Intercompany
--------------
Past Due > Total
--------------
Unreconciled Variance To G/L
--------------
Other (Extended Terms)
--------------
Total Ineligible A/R $ -
--------------
Eligible Accounts Receivable
--------------
Less: Biasco A/R Exceeding 20% (Note 1)
--------------
Less: Canadian A/R Exceeding 10% (Note 2)
--------------
Net Eligible Accounts Receivable
--------------
Available A/R 85.0%
--------------
Less: Dilution Reserve 3.8%
--------------
NET AVAILABLE ACCOUNTS RECEIVABLE $ -
--------------
(Note 1)
Biasco Accounts Receivable $ -
--------------
% of Total Eligible Accounts Receivable
--------------
Value of Percentage Exceeding 20% $ -
--------------
(Note 2)
Canadian Accounts Receivable in CDN$ $ -
--------------
Current Exchange Rate CDN$x.xx = US$1.00 xx
Canadian Accounts Receivable in US$ $ -
--------------
--------------
% of Total Eligible Accounts Receivable
--------------
Value of Percentage Exceeding 10% $ -
--------------------------------------------------------------------------------
74
-------------------------------------------------------------------------------
SCHEDULE B
INVENTORY BORROWING BASE
MUSIC RAW MATERIALS INVENTORY AT STANDARD COST PER PERPETUAL AS OF MM/DD/YY $ -
-----------
Less: Raw Materials Excluding Eligible Raw Material Consisting of
Pre-Cut Panels, Raw Lumber and Pre-Cut Veneer $ -
----------
Total Ineligible Music Raw Materials -
-----------
-----------
Eligible Music Raw Materials Inventory -
-----------
-----------
Available Music Raw Materials Inventory 55.0% $ -
-----------
MUSIC INVENTORY AT STANDARD COST PER PERPETUAL AS OF MM/DD/YY $ -
-----------
Less: WIP $ -
----------
Completed Assemblies -
----------
Advertising & Other -
----------
Finished Goods In-Transit Not Supported By L/C -
----------
Consigned Inventory -
----------
Factory Repairs (Electronic In-Transit/Acoustic) -
----------
Locations < $100M -
----------
Outside Processors (QRS) -
----------
Total Ineligible Inventory $ -
-----------
Eligible Music Inventory at Standard Cost -
-----------
Less: Factory Repairs/Slow Moving Goods In Excess of 20% (Note 1) -
-----------
Net Eligible Inventory at Standard Cost -
-----------
Eligible Music Inventory at Net Wholesale Dealer Cost x 1.35 -
-----------
Available Music Inventory 56.5% $ -
-----------
Total Available Inventory $ -
-----------
Note 1
Factory Repairs at Standard Cost $ -
-----------
Slow Moving Goods at Standard Cost $ -
-----------
Total $ -
-----------
% of Total Eligible Music Inventory at Standard Cost -
-----------
Value of Percentage Exceeding 20% $ -
-----------
--------------------------------------------------------------------------------
75
--------------------------------------------------------------------------------
SCHEDULE C
RESERVE FOR PRIOR CLAIMS (CANADA ONLY)
LIST OF RESERVES TO BE DEDUCTED FROM THE BORROWING BASE*
CDN DOLLAR US DOLLAR
---------- ---------
Accrued employee income tax deductions /
witholdings not yet remitted $ -
------------- ------------
Goods and Services Tax required to be
collected and not yet remitted $ -
------------- ------------
Provincial Sales Tax required to be collected
but not yet remitted $ -
------------- ------------
Accrued employee health taxes not yet remitted $ -
------------- ------------
Municipal and business taxes due and unpaid $ -
------------- ------------
Workers compensation premiums / contributions $ -
------------- ------------
Accrued employee vacation pay not yet paid $ -
------------- ------------
(25% of accrued vacation pay)
Canada Pension Plan and Provincial Pension Plan
contributions required to be withheld
and not yet remitted $ -
------------- ------------
Unemployment insurance premiums required
to be withheld and not yet remitted $ -
------------- ------------
Other Prior Claims $ -
------------- ------------
Reserve for Lease Rentals $ -
------------- ------------
Other Reserves $ -
------------- ------------
TOTAL RESERVES: $ -
------------- ------------
* All amounts should include accrued amounts, regardless of whether yet due
and payable
-------------------------------------------------------------------------------
76
EXHIBIT 9.1(a)
to
CREDIT AGREEMENT
FORM OF ASSIGNMENT AGREEMENT
This Assignment Agreement (this "Agreement") is made as of ___________ __, ____
by and between __________________ ("Assignor Lender") and
________________________ ("Assignee Lender") and acknowledged and consented to
by GENERAL ELECTRIC CAPITAL CORPORATION, as agent ("Agent"). All capitalized
terms used in this Agreement and not otherwise defined herein will have the
respective meanings set forth in the Credit Agreement as hereinafter defined.
RECITALS:
WHEREAS, ▇▇▇▇▇▇▇ Piano & Organ Company, a Delaware
corporation, the other Credit Parties signatory thereto, Agent, Assignor Lender
and other Persons signatory thereto as Lenders have entered into that certain
Credit Agreement dated as of March 24, 2000 (as amended, restated, supplemented
or otherwise modified from time to time, the "Credit Agreement") pursuant to
which Assignor Lender has agreed to make certain Loans to, and incur certain
Letter of Credit Obligations for, Borrowers;
WHEREAS, Assignor Lender desires to assign to Assignee Lender
[all/a portion] of its interest in the Loans (as described below), the Letter of
Credit Obligations and the Collateral and to delegate to Assignee Lender [all/a
portion] of its Commitments and other duties with respect to such Loans, Letter
of Credit Obligations and Collateral;
WHEREAS, Assignee Lender desires to become a Lender under the
Credit Agreement and to accept such assignment and delegation from Assignor
Lender; and
WHEREAS, Assignee Lender desires to appoint Agent to serve as
agent for Assignee Lender under the Credit Agreement.
NOW, THEREFORE, in consideration of the premises and the
agreements, provisions, and covenants herein contained, Assignor Lender and
Assignee Lender agree as follows:
1. ASSIGNMENT, DELEGATION, AND ACCEPTANCE
2
77
1.1. Assignment. Assignor Lender hereby transfers and assigns
to Assignee Lender, without recourse and without representations or warranties
of any kind (except as set forth in Section 3.2), [all/such percentage] of
Assignor Lender's right, title, and interest in the Loans, Letter of Credit
Obligations, Loan Documents and Collateral as will result in Assignee Lender
having as of the Effective Date (as hereinafter defined) a Pro Rata Share
thereof, as follows:
Assignee Lender's Loans Principal Amount Pro Rata Share
----------------------- ---------------- --------------
Revolving Loan $____________ ____%
1.2. Delegation. Assignor Lender hereby irrevocably assigns
and delegates to Assignee Lender [all/a portion] of its Commitments and its
other duties and obligations as a Lender under the Loan Documents equivalent to
[100%/___%] of Assignor Lender's Revolving Loan Commitment (such percentage
representing a commitment of $ ___________).
1.3. Acceptance by Assignee Lender. By its execution of this
Agreement, Assignee Lender irrevocably purchases, assumes and accepts such
assignment and delegation and agrees to be a Lender with respect to the
delegated interest under the Loan Documents and to be bound by the terms and
conditions thereof. By its execution of this Agreement, Assignor Lender agrees,
to the extent provided herein, to relinquish its rights and be released from its
obligations and duties under the Credit Agreement.
1.4. Effective Date. Such assignment and delegation by
Assignor Lender and acceptance by Assignee Lender will be effective and Assignee
Lender will become a Lender under the Loan Documents as of [the date of this
Agreement] ("Effective Date") and upon payment of the Assigned Amount and the
Assignment Fee (as each term is defined below). [Interest and Fees accrued prior
to the Effective Date are for the account of Assignor Lender, and Interest and
Fees accrued from and after the Effective Date are for the account of Assignee
Lender.]
2. INITIAL PAYMENT AND DELIVERY OF NOTES
2.1. Payment of the Assigned Amount. Assignee Lender will pay
to Assignor Lender, in immediately available funds, not later than 12:00 noon
(New York time) on the Effective Date, an amount equal to its Pro Rata Share of
the then outstanding principal amount of the Loans as set forth above in Section
1.1 [together with accrued interest, fees and other amounts as set forth on
Schedule 2.1] (the "Assigned Amount").
2.2. Payment of Assignment Fee. [Assignor Lender and/or
Assignee Lender] will pay to Agent, for its own account in immediately available
funds, not later than 12:00 noon
3
78
(New York time) on the Effective Date, the assignment fee in the amount of
$3,500 (the "Assignment Fee") as required pursuant to Section 9.1(a) of the
Credit Agreement.
2.3. Execution and Delivery of Notes. Following payment of the
Assigned Amount and the Assignment Fee, Assignor Lender will deliver to Agent
the Notes previously delivered to Assignor Lender for redelivery to Borrowers
and Agent will obtain from Borrowers for delivery to [Assignor Lender and]
Assignee Lender, new executed Notes evidencing Assignee Lender's [and Assignor
Lender's respective] Pro Rata Share[s] in the Loans after giving effect to the
assignment described in Section 1. Each new Note will be issued in the aggregate
maximum principal amount of the [applicable] Commitment [of the Lender to whom
such Note is issued] OR [the Assignee Lender].
3. REPRESENTATIONS, WARRANTIES AND COVENANTS
3.1. Assignee Lender's Representations, Warranties and
Covenants. Assignee Lender hereby represents, warrants, and covenants the
following to Assignor Lender and Agent:
(a) This Agreement is a legal, valid, and binding agreement of
Assignee Lender, enforceable according to its terms;
(b) The execution and performance by Assignee Lender of its
duties and obligations under this Agreement and the Loan Documents will
not require any registration with, notice to, or consent or approval by
any Governmental Authority;
(c) Assignee Lender is familiar with transactions of the kind
and scope reflected in the Loan Documents and in this Agreement;
(d) Assignee Lender has made its own independent investigation
and appraisal of the financial condition and affairs of each Credit
Party, has conducted its own evaluation of the Loans and Letter of
Credit Obligations, the Loan Documents and each Credit Party's
creditworthiness, has made its decision to become a Lender to Borrowers
under the Credit Agreement independently and without reliance upon
Assignor Lender or Agent, and will continue to do so;
(e) Assignee Lender is entering into this Agreement in the
ordinary course of its business, and is acquiring its interest in the
Loans and Letter of Credit Obligations for its own account and not with
a view to or for sale in connection with any subsequent distribution;
provided, however, that at all times the distribution of Assignee
Lender's property shall, subject to the terms of the Credit Agreement,
be and remain within its control;
4
79
(f) No future assignment or participation granted by Assignee
Lender pursuant to Section 9.1 of the Credit Agreement will require
Assignor Lender, Agent, or Borrower to file any registration statement
with the Securities and Exchange Commission or to apply to qualify
under the blue sky laws of any state;
(g) Assignee Lender has no loans to, written or oral
agreements with, or equity or other ownership interest in any Credit
Party;
(h) Assignee Lender will not enter into any written or oral
agreement with, or acquire any equity or other ownership interest in,
any Credit Party without the prior written consent of Agent; and
(i) As of the Effective Date, Assignee Lender (i) is entitled
to receive payments of principal and interest in respect of the
Obligations without deduction for or on account of any taxes imposed by
the United States of America or any political subdivision thereof, (ii)
is not subject to capital adequacy or similar requirements under
Section 1.18(a) of the Credit Agreement, and (iii) does not require the
payment of any increased costs under Section 1.18(b) of the Credit
Agreement, and Assignee Lender will indemnify Agent from and against
all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, or expenses that result from Assignee Lender's
failure to fulfill its obligations under the terms of Section 1.17(c)
of the Credit Agreement or from any other inaccuracy in the foregoing.
3.2. Assignor Lender's Representations, Warranties and
Covenants. Assignor Lender hereby represents, warrants and covenants the
following to Assignee Lender:
(a) Assignor Lender is the legal and beneficial owner of the
Assigned Amount;
(b) This Agreement is a legal, valid and binding agreement of
Assignor Lender, enforceable according to its terms;
(c) The execution and performance by Assignor Lender of its
duties and obligations under this Agreement and the Loan Documents will
not require any registration with, notice to or consent or approval by
any Governmental Authority;
(d) Assignor Lender has full power and authority, and has
taken all action necessary to execute and deliver this Agreement and to
fulfill the obligations hereunder and to consummate the transactions
contemplated hereby;
(e) Assignor Lender is the legal and beneficial owner of the
interests being assigned hereby, free and clear of any adverse claim,
lien, encumbrance, security interest, restriction on transfer, purchase
option, call or similar right of a third party; and
(f) This Assignment by Assignor Lender to Assignee Lender
complies, in all material respects, with the terms of the Loan
Documents.
5
80
4. LIMITATIONS OF LIABILITY
Neither Assignor Lender (except as provided in Section 3.2)
nor Agent makes any representations or warranties of any kind, nor assumes any
responsibility or liability whatsoever, with regard to (a) the Loan Documents or
any other document or instrument furnished pursuant thereto or the Loans, Letter
of Credit Obligations or other Obligations, (b) the creation, validity,
genuineness, enforceability, sufficiency, value or collectibility of any of
them, (c) the amount, value or existence of the Collateral, (d) the perfection
or priority of any Lien upon the Collateral, or (e) the financial condition of
any Credit Party or other obligor or the performance or observance by any Credit
Party of its obligations under any of the Loan Documents. Neither Assignor
Lender nor Agent has or will have any duty, either initially or on a continuing
basis, to make any investigation, evaluation, appraisal of, or any
responsibility or liability with respect to the accuracy or completeness of, any
information provided to Assignee Lender which has been provided to Assignor
Lender or Agent by any Credit Party. Nothing in this Agreement or in the Loan
Documents shall impose upon the Assignor Lender or Agent any fiduciary
relationship in respect of the Assignee Lender.
5. FAILURE TO ENFORCE
No failure or delay on the part of Agent or Assignor Lender in
the exercise of any power, right, or privilege hereunder or under any Loan
Document will impair such power, right, or privilege or be construed to be a
waiver of any default or acquiescence therein. No single or partial exercise of
any such power, right, or privilege will preclude further exercise thereof or of
any other right, power, or privilege. All rights and remedies existing under
this Agreement are cumulative with, and not exclusive of, any rights or remedies
otherwise available.
6. NOTICES
Unless otherwise specifically provided herein, any notice or
other communication required or permitted to be given will be in writing and
addressed to the respective party as set forth below its signature hereunder, or
to such other address as the party may designate in writing to the other.
7. AMENDMENTS AND WAIVERS
No amendment, modification, termination, or waiver of any
provision of this Agreement will be effective without the written concurrence of
Assignor Lender, Agent and Assignee Lender.
6
81
8. SEVERABILITY
Whenever possible, each provision of this Agreement will be
interpreted in such manner as to be effective and valid under applicable law. In
the event any provision of this Agreement is or is held to be invalid, illegal,
or unenforceable under applicable law, such provision will be ineffective only
to the extent of such invalidity, illegality, or unenforceability, without
invalidating the remainder of such provision or the remaining provisions of the
Agreement. In addition, in the event any provision of or obligation under this
Agreement is or is held to be invalid, illegal, or unenforceable in any
jurisdiction, the validity, legality, and enforceability of the remaining
provisions or obligations in any other jurisdictions will not in any way be
affected or impaired thereby.
9. SECTION TITLES
Section and Subsection titles in this Agreement are included
for convenience of reference only, do not constitute a part of this Agreement
for any other purpose, and have no substantive effect.
10. SUCCESSORS AND ASSIGNS
This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns.
11. APPLICABLE LAW
THIS AGREEMENT WILL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND
PERFORMED IN THAT STATE.
12. COUNTERPARTS
This Agreement and any amendments, waivers, consents, or
supplements may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which, when so executed and
delivered, will be deemed an original and all of which shall together constitute
one and the same instrument.
[signature page follows]
7
82
IN WITNESS WHEREOF, this Agreement has been duly executed as of the
date first written above.
ASSIGNEE LENDER: ASSIGNOR LENDER:
------------------------------------ -------------------------------------
By: By:
--------------------------------- ----------------------------------
Title: Title:
------------------------------ -------------------------------
Notice Address: Notice Address:
------------------------------------ -------------------------------------
------------------------------------ -------------------------------------
------------------------------------ -------------------------------------
ACKNOWLEDGED AND CONSENTED TO:
AGENT:
GENERAL ELECTRIC CAPITAL
CORPORATION
By:
---------------------------------
Title:
------------------------------
BORROWER (TO THE EXTENT BORROWER'S CONSENT
IS REQUIRED PURSUANT TO SECTION 9.1 OF THE
CREDIT AGREEMENT):
▇▇▇▇▇▇▇ PIANO & ORGAN COMPANY
By:
---------------------------------
Title:
------------------------------
S-1
83
SCHEDULE 2.1
Assignor Lender's Loans
Principal Amount
Revolving Loan $
----------
Subtotal $
----------
Accrued Interest $
----------
Unused Line Fee $
----------
Other + or - $
----------
Total $
==========
All determined as of the Effective Date.
S-2
84
ANNEX A (RECITALS)
TO
CREDIT AGREEMENT
DEFINITIONS
Capitalized terms used in the Loan Documents shall have
(unless otherwise provided elsewhere in the Loan Documents) the following
respective meanings and all section references in the following definitions
shall refer to Sections of the Agreement:
"Account Debtor" shall mean any Person who may become
obligated to any Credit Party under, with respect to, or on account of, an
Account.
"Accounts" shall mean all "accounts," as such term is defined
in the Code, and all "claims" as such term is defined in the Quebec Civil Code,
in each case, now owned or hereafter acquired by any Credit Party and, in any
event, including (a) all accounts receivable, other receivables, book debts and
other forms of obligations (other than forms of obligations evidenced by Chattel
Paper, Documents or Instruments) now owned or hereafter received or acquired by
or belonging or owing to any Credit Party, whether arising out of goods sold or
services rendered by it or from any other transaction (including any such
obligations which may be characterized as an account or contract right under the
Code), (b) all of each Credit Party's rights in, to and under all purchase
orders or receipts now owned or hereafter acquired by it for goods or services,
(c) all of each Credit Party's rights to any goods represented by any of the
foregoing (including unpaid sellers' rights of rescission, replevin, reclamation
and stoppage in transit and rights to returned, reclaimed or repossessed goods),
(d) all monies due or to become due to any Credit Party, under all purchase
orders and contracts for the sale of goods or the performance of services or
both by such Credit Party or in connection with any other transaction (whether
or not yet earned by performance on the part of such Credit Party) now or
hereafter in existence, including the right to receive the proceeds of said
purchase orders and contracts, and (e) all collateral security and guarantees of
any kind, now or hereafter in existence, given by any Person with respect to any
of the foregoing.
"Advance" shall mean any Revolving Credit Advance.
"Affiliate" shall mean, with respect to any Person, (a) each
Person that, directly or indirectly, owns or controls, whether beneficially, or
as a trustee, guardian or other fiduciary, five percent (5%) or more of the
Stock having ordinary voting power in the election of directors of such Persons,
(b) each Person that controls, is controlled by or is under common control with
such Person, (c) each of such Person's officers, directors, joint venturers and
partners and (d) in the case of Borrower, the immediate family members, spouses
and lineal descendants of individuals who are Affiliates of Borrower. For the
purposes of this definition, "control" of a Person shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of its
management or policies, whether through the ownership of voting securities, by
contract or otherwise; provided, however, that the term "Affiliate" shall
specifically exclude Agent and each Lender.
"Agent" shall mean GE Capital or its successor appointed
pursuant to Section 9.7.
A-1
85
"Agreement" shall mean the Credit Agreement by and among
Borrower, the other Credit Parties named therein, GE Capital, as Agent and
Lender and the other Lenders from time to time party thereto, as the same may be
amended, supplemented, restated or otherwise modified from time to time.
"Appendices" shall have the meaning assigned to it in the
recitals to the Agreement.
"Applicable Index Margin" shall mean the per annum interest
rate margin from time to time in effect and payable in addition to the Index
Rate applicable to the Revolving Loan, as determined by reference to Section
1.5(a) of the Agreement.
"Applicable L/C Margin" shall mean the per annum fee, from
time to time in effect, payable with respect to outstanding Letter of Credit
Obligations as determined by reference to Section 1.5(a).
"Applicable Margins" shall mean collectively the Applicable
L/C Margin and the Applicable Index Margin.
"Assignment Agreement" shall have the meaning assigned to it
in Section 9.1(a).
"▇▇▇▇▇▇▇ Canada" shall mean The ▇▇▇▇▇▇▇ Piano Company (Canada)
Limited, a company organized under the laws of Canada and a wholly owned
Subsidiary of Borrower.
"▇▇▇▇▇▇▇ Canada Guaranty" shall mean the ▇▇▇▇▇▇▇ Canada
Guarantee of even date herewith executed by ▇▇▇▇▇▇▇ Canada in favor of Agent, on
behalf of itself and Lenders.
"▇▇▇▇▇▇▇ Canada Security Agreement" shall mean the ▇▇▇▇▇▇▇
Canada Security Agreement of even date herewith entered into between Agent, on
its own behalf and on behalf of Lenders, and ▇▇▇▇▇▇▇ Canada.
"▇▇▇▇▇▇▇ Trading" shall mean ▇▇▇▇▇▇▇ Trading Company, an Ohio
corporation and a wholly owned Subsidiary of Borrower.
"Borrower" shall have the meaning assigned thereto in the
recitals to the Agreement.
"Borrower Accounts" shall have the meaning assigned to it in
Annex C.
"Borrower Pledge Agreement" shall mean the Pledge Agreement of
even date herewith executed by Borrower in favor of Agent, on behalf of itself
and Lenders, pledging all Stock of its Subsidiaries, if any, and all
Intercompany Notes owing to or held by it.
"Borrowing Availability" shall have the meaning assigned to it
in Section 1.1(a)(i).
"Borrowing Base" shall mean, as of any date of determination
by Agent, from time to time, an amount equal to the sum at such time of:
A-2
86
(a) eighty-five percent (85%) of the book value of Borrower's
and ▇▇▇▇▇▇▇ Canada's Eligible Accounts, in each case less any Reserves
established by Agent at such time; provided, however, that, for all
purposes hereunder, the book value of any Eligible Accounts payable in
Canadian Dollars on each date which a Borrowing Base Certificate is
required to be delivered, as of last Business Day of each month and as
of such more frequent times as Agent shall notify Borrower, shall equal
the Equivalent U.S. $ Amount of the book value in Canadian Dollars of
such Eligible Accounts; provided further, however, that, in no event
shall the aggregate book value of all Eligible Accounts payable in
Canadian Dollars (as calculated in the preceding proviso) exceed ten
percent (10%) of the aggregate book value of all Eligible Accounts;
(b) fifty-six and five-tenths percent (56.5%) of the book
value of Borrower's and ▇▇▇▇▇▇▇ Trading's Eligible Inventory valued at
the Net Wholesale Dealer cost, in each case less any Reserves
established by Agent in its reasonable credit judgment at such time;
(c) fifty-five percent (55%) of Borrower's Eligible Raw
Materials, valued on a first-in, first-out basis (at the lower of cost
or market), less any Reserves established by Agent at such time; and
(d) the sum of (i) the lesser of (A) $3,000,000 and (B) fifty
percent (50%) of the fair market value of Eligible Fixed Assets, in
each case less any Reserves established by Agent at such time minus
(ii) the sum of (x) $375,000 commencing on the last Business Day of the
Fiscal Quarter ending June 30, 2001, and (y) $375,000 on the last
Business Day of each Fiscal Quarter thereafter.
"Borrowing Base Certificate" shall mean a certificate to be
executed and delivered from time to time by the Chief Financial Officer of
Borrower (or other authorized officer of Borrower acceptable to Agent) in the
form attached to the Agreement as Exhibit 4.1(b).
"Business Day" shall mean any day that is not a Saturday, a
Sunday or a day on which banks are required or permitted to be closed in the
State of New York.
"Canadian Benefit Plans" means all material employee benefit
plans of any nature or kind whatsoever that are not Canadian Pension Plans and
are maintained or contributed to by any Credit party having employees in Canada.
"Canadian Dollars" and the sign "Cdn.$" shall mean the lawful
money of Canada.
"Canadian Pension Plans" means each plan which is considered
to be a pension plan for the purposes of any applicable pension benefits
standards statute and/or regulation in Canada established, maintained or
contributed to by any Credit Party for its employees or former employees.
"Capital Expenditures" shall mean, with respect to any Person,
all expenditures (by the expenditure of cash or the incurrence of Indebtedness)
by such Person during any measuring period for any fixed assets or improvements
or for replacements, substitutions or
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additions thereto, that have a useful life of more than one year and that are
required to be capitalized under GAAP.
"Capital Lease" shall mean, with respect to any Person, any
lease of any property (whether real, personal or mixed) by such Person as lessee
that, in accordance with GAAP, would be required to be classified and accounted
for as a capital lease on a balance sheet of such Person.
"Capital Lease Obligation" shall mean, with respect to any
Capital Lease of any Person, the amount of the obligation of the lessee
thereunder that, in accordance with GAAP, would appear on a balance sheet of
such lessee in respect of such Capital Lease.
"Cash Equivalents" shall have the meaning assigned to it in
Annex B.
"Cash Management Systems" shall have the meaning assigned to
it in Section 1.8.
"Change of Control" means any of the following: (a) any person
or group of persons (within the meaning of the Securities Exchange Act of 1934,
as amended) shall have acquired beneficial ownership (within the meaning of Rule
13d-3 promulgated by the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended) of thirty-five percent (35%) or more of the
issued and outstanding shares of capital Stock of Borrower having the right to
vote for the election of directors of Borrower under ordinary circumstances; (b)
during any period of twelve consecutive calendar months, individuals who at the
beginning of such period constituted the board of directors of Borrower
(together with any new directors whose election by the board of directors of
Borrower or whose nomination for election by the stockholders of Borrower was
approved by a vote of at least two thirds of the directors then still in office
who either were directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason other
than death or disability to constitute a majority of the directors then in
office, or (c) Borrower shall cease to own and control all of the economic and
voting rights associated with all of the outstanding capital Stock of any of its
Subsidiaries.
"Charges" shall mean all federal, state, county, city,
municipal, local, foreign or other governmental taxes (including taxes owed to
the PBGC at the time due and payable), levies, assessments, charges, liens,
claims or encumbrances upon or relating to (a) the Collateral, (b) the
Obligations, (c) the employees, payroll, income or gross receipts of any Credit
Party, (d) any Credit Party's ownership or use of any properties or other
assets, or (e) any other aspect of any Credit Party's business.
"Chattel Paper" shall mean any "chattel paper," as such term
is defined in the Code, now owned or hereafter acquired by any Credit Party,
wherever located.
"Closing Date" shall mean March 24, 2000.
"Closing Checklist" shall mean the schedule, including all
appendices, exhibits or schedules thereto, listing certain documents and
information to be delivered in connection with the Agreement, the other Loan
Documents and the transactions contemplated thereunder, substantially in the
form attached hereto as Annex D.
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"Code" shall mean the Uniform Commercial Code as the same may,
from time to time, be enacted and in effect in the State of New York; provided,
however, in the event that, by reason of mandatory provisions of law, any or all
of the attachment, perfection or priority of Agent's or any Lender's security
interest in any Collateral is governed by the Uniform Commercial Code as enacted
and in effect in a jurisdiction other than the State of New York or by foreign
personal property security laws as enacted and in effect in a foreign
jurisdiction, the term "Code" shall mean the Uniform Commercial Code or such
foreign personal property security laws as enacted and in effect in such other
jurisdiction solely for purposes of the provisions hereof relating to such
attachment, perfection or priority and for purposes of definitions related to
such provisions.
"Collateral" shall mean the property covered by the Security
Agreement, the Mortgages and the other Collateral Documents and any other
property, real or personal, tangible or intangible, now existing or hereafter
acquired, that may at any time be or become subject to a security interest or
Lien in favor of Agent, on behalf of itself and Lenders, to secure the
Obligations.
"Collateral Documents" shall mean the Security Agreement, the
Pledge Agreements, the Guaranties, the Patent Security Agreement, the Trademark
Security Agreement, the Copyright Security Agreement, the ▇▇▇▇▇▇▇ Canada
Security Agreement, the Mortgages and all similar agreements entered into
guaranteeing payment of, or granting a Lien upon property as security for
payment of, the Obligations.
"Collateral Reports" shall mean the reports with respect to
the Collateral referred to in Annex F.
"Collection Account" shall mean that certain account of Agent,
account number ▇▇▇-▇▇▇-▇▇ in the name of Agent at Bankers Trust Company in New
York, New York or such other account as Agent shall specify.
"Commitments" shall mean (a) as to any Revolving Lender, the
aggregate commitment of such Revolving Lender to make Revolving Credit Advances
and/or incur Letter of Credit Obligations as set forth on Annex J to the
Agreement or in the most recent Assignment Agreement executed by such Revolving
Lender and (b) as to all Revolving Lenders, the aggregate commitment of all
Revolving Lenders to make Revolving Credit Advances and/or incur Letter of
Credit Obligations, which aggregate commitment shall be Forty Million Dollars
($40,000,000) on the Closing Date, as to each of clauses (a) and (b), as such
commitments may be reduced or adjusted, if at all, from time to time in
accordance with the Agreement.
"Commitment Termination Date" shall mean the earliest of (a)
▇▇▇▇▇ ▇▇, ▇▇▇▇, (▇) the date of termination of Lenders' obligations to make
Advances and/or incur Letter of Credit Obligations or permit existing Loans to
remain outstanding pursuant to Section 8.2(b), and (c) the date of indefeasible
prepayment in full by Borrower of the Loans and the cancellation and return (or
stand-by guarantee) of all Letters of Credit or the cash collateralization of
all Letter of Credit Obligations pursuant to Annex B, and the permanent
reduction of the Commitment to zero dollars ($0).
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"Compliance Certificate" shall have the meaning assigned to it
in Annex E.
"Concentration Account" shall have the meaning assigned to it
in Annex C.
"Contracts" shall mean all "contracts," as such term is
defined in the Code, now owned or hereafter acquired by any Credit Party, in any
event, including all contracts, undertakings, or agreements (other than rights
evidenced by Chattel Paper, Documents or Instruments) in or under which any
Credit Party may now or hereafter have any right, title or interest, including
any agreement relating to the terms of payment or the terms of performance of
any Account.
"Control Letter" means a letter agreement between Agent and
(i) the issuer of uncertificated securities with respect to uncertificated
securities in the name of any Credit Party, (ii) a securities intermediary with
respect to securities, whether certificated or uncertificated, securities
entitlements and other financial assets held in a securities account in the name
of any Credit Party, (iii) a futures commission merchant or clearing house with
respect to commodity accounts and commodity contracts held by any Credit Party,
whereby, among other things, the issuer, securities intermediary or futures
commission merchant disclaims any security interest in the applicable financial
assets, acknowledges the Lien of Agent, on behalf of itself and Lenders, on such
financial assets, and agrees to follow the instructions or entitlement orders of
Agent without further consent by the affected Credit Party.
"Copyright License" shall mean any and all rights now owned or
hereafter acquired by any Credit Party under any written agreement granting any
right to use any Copyright or Copyright registration.
"Copyright Security Agreements" shall mean the Copyright
Security Agreements made in favor of Agent, on behalf of itself and Lenders, by
each applicable Credit Party.
"Copyrights" shall mean all of the following now owned or
hereafter acquired by any Credit Party: (a) all copyrights and General
Intangibles of like nature (whether registered or unregistered), now owned or
existing or hereafter adopted or acquired, all registrations and recordings
thereof, and all applications in connection therewith, including all
registrations, recordings and applications in the United States Copyright Office
or in any similar office or agency of the United States, any state or territory
thereof, or any other country or any political subdivision thereof, and (b) all
reissues, extensions or renewals thereof.
"Credit Parties" shall mean Borrower and Guarantors, and each
of their respective Subsidiaries party to a Collateral Document.
"Default" shall mean any event which, with the passage of time
or notice or both, would, unless cured or waived, become an Event of Default.
"Default Rate" shall have the meaning assigned to it in
Section 1.5(d).
"Design License" means rights under any written agreement now
owned or hereafter acquired by any Credit Party granting any right to use any
Design.
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"Designs" means the following now owned or hereafter acquired
by any Credit Party: (a) all industrial designs, design patents and other
designs now owned or existing or hereafter adopted or acquired, all
registrations and recordings thereof and all applications in connection
therewith including all registrations, recordings and applications in the
Canadian Industrial Designs Office or any similar office in any country and all
records thereof and (b) all reissues, extensions or renewals thereof.
"Designated Mortgaged Properties" shall mean, collectively,
the Mortgaged Properties located at Conway, Arkansas and ▇▇▇▇▇▇, Arkansas.
"DFS" means Deutsche Financial Services Corporation, a Nevada
Corporation.
"DFS Accounts and Repossession Lien" shall mean a lien in
favor of DFS on all KAC Accounts (as defined in the DFS Accounts Receivable
Purchase Agreement and Promissory Note) which have been transferred to Borrower
pursuant to the DFS Accounts Receivable Purchase Agreement and Promissory Note,
in each case so long as and to the extent that (i) collections therefrom are
applied to the payment of obligations owing by Borrower to KAC under the DFS
Accounts Receivable Purchase Agreement and Promissory Note, and (ii) a lien
thereon is granted in favor of DFS pursuant to the DFS Accounts Receivable
Purchase Agreement and Promissory Note.
"DFS Accounts Receivable Purchase Agreement and Promissory
Note" means that certain Accounts Receivable Purchase Agreement and Promissory
Note dated as of March 10, 2000 by and among Borrower, DFS, KAC and SLC and
executed pursuant to the KAC Sale Agreement, as such agreement may be amended,
supplemented or otherwise modified in accordance with Section 6.19.
"DFS Consignment Lien" shall mean a lien in favor of DFS on
Inventory of DFS consigned to Borrower consisting of pianos consigned to concert
halls, universities and artists, and the related proceeds thereof realized upon
a foreclosure thereof, in each case to the extent subject to a Lien in favor of
DFS under the DFS Inventory Purchase and Consignment Agreement.
"DFS Intercreditor Agreement" means that certain Intercreditor
Agreement dated as of even date herewith by and between Agent, for the benefit
of itself and Lenders, and DFS.
"DFS Inventory Purchase and Consignment Agreement" means that
certain Amended and Restated DFS Inventory Purchase and Assignment Agreement
dated as of June 30, 1998 by and between Borrower and DFS, as amended by
Amendments dated April 26, 1999 and January 13, 2000, respectively, and the
amendment entered into and delivered pursuant to Section DD of Annex B, as such
Agreement may be further amended, supplemented or otherwise modified in
accordance with Section 6.19.
"DFS Repossession and Sale Agreement" means that certain
Repossession and Sale Agreement dated as of March 10, 2000 by and among
Borrower, DFS, KAC and SLC and executed pursuant to the KAC Sale Agreement, as
such agreement may be amended, supplemented or otherwise modified in accordance
with Section 6.19.
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"DFS Vendor Agreements" means, collectively, (i) the Vendor
Agreement dated as of May 21, 1997 by and between DFS and Borrower as amended by
that certain Recourse Addendum dated as of May 30, 1997 and that certain
Recourse Addendum dated as of October 25, 1997, and (ii) the Vendor Agreement
dated as of May 30, 1997 by and between Deutsche Financial Services, a division
of Deutsche Bank Canada, and Borrower, in each case as such agreements may be
amended, supplemented or otherwise modified in accordance with Section 6.19.
"Disbursement Accounts" shall have the meaning assigned to it
on Annex C.
"Disclosure Schedules" shall mean the Schedules prepared by
Borrower and denominated as Disclosure Schedules 1.4 through 6.7 in the Index to
the Agreement.
"Documents" shall mean any "documents," as such term is
defined in the Code, now owned or hereafter acquired by any Credit Party,
wherever located.
"Dollars" or "$" shall mean lawful currency of the United
States of America.
"Draft Audited Statements" shall mean the draft consolidated
and consolidating balance sheets at December 31, 1999 and related statements of
income and cash flows of Borrower and its Subsidiaries for the Fiscal Year then
ended and delivered to Agent on the Closing Date.
"EBITDA" shall mean, with respect to any Person for any fiscal
period, an amount equal to (a) consolidated net income of such Person for such
period, minus (b) the sum of (i) any provisions for income tax credits, (ii)
interest income, (iii) gain from extraordinary items for such period, (iv) any
aggregate net gain (but not any aggregate net loss) during such period arising
from the sale, exchange or other disposition of capital assets by such Person
(including any fixed assets, whether tangible or intangible, all inventory sold
in conjunction with the disposition of fixed assets and all securities), (v) any
credits to reserves established to account for last-in-first-out Inventory in
accordance with GAAP, and (vi) any other non-cash gains which have been added in
determining consolidated net income, in each case to the extent included in the
calculation of consolidated net income of such Person for such period in
accordance with GAAP, but without duplication, plus (c) the sum of (i) any
provision for income taxes, (ii) Interest Expense, (iii) loss from extraordinary
items for such period, (iv) the amount of non-cash charges (including
depreciation and amortization) for such period, (v) amortized debt discount for
such period, (vi) any charges to reserves established to account for
last-in-first-out Inventory in accordance with GAAP and (vii) the amount of any
deduction to consolidated net income as the result of any grant to any members
of the management of such Person of any Stock, in each case to the extent
included in the calculation of consolidated net income of such Person for such
period in accordance with GAAP, but without duplication. For purposes of this
definition, the following items shall be excluded in determining consolidated
net income of a Person: (1) the income (or deficit) of any other Person accrued
prior to the date it became a Subsidiary of, or was merged or consolidated into,
such Person or any of such Person's Subsidiaries; (2) the income (or deficit) of
any other Person (other than a Subsidiary) in which such Person has an ownership
interest, except to the extent any such income has actually been received by
such Person in the form of cash dividends or distributions; (3) the
undistributed
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earnings of any Subsidiary of such Person to the extent that the declaration or
payment of dividends or similar distributions by such Subsidiary is not at the
time permitted by the terms of any contractual obligation or requirement of law
applicable to such Subsidiary; (4) any restoration to income of any contingency
reserve, except to the extent that provision for such reserve was made out of
income accrued during such period; (5) any write-up of any asset; (6) any net
gain from the collection of the proceeds of life insurance policies; (7) any net
gain arising from the acquisition of any securities, or the extinguishment,
under GAAP, of any Indebtedness, of such Person, (8) in the case of a successor
to such Person by consolidation or merger or as a transferee of its assets, any
earnings of such successor prior to such consolidation, merger or transfer of
assets, and (9) any deferred credit representing the excess of equity in any
Subsidiary of such Person at the date of acquisition of such Subsidiary over the
cost to such Person of the investment in such Subsidiary.
"Eligible Accounts" shall have the meaning assigned to it in
Section 1.6 of the Agreement.
"Eligible Fixed Assets" shall have the meaning assigned to it
in Section 1.9 of this Agreement.
"Eligible Inventory" shall have the meaning assigned to it in
Section 1.7 of the Agreement.
"Eligible Raw Materials" shall have the meaning assigned to it
in Section 1.8 of this Agreement.
"Environmental Laws" shall mean all applicable federal, state,
local and foreign laws, statutes, ordinances, codes, rules, standards,
orders-in-council and regulations, now or hereafter in effect, and in each case
as amended or supplemented from time to time, and any applicable judicial or
administrative interpretation thereof, including any applicable judicial or
administrative order, consent decree, order or judgment, imposing on any Credit
Party or any of its Subsidiaries liability or standards of conduct for or
relating to the regulation and protection of human health, safety, the
environment and natural resources (including ambient air, surface water,
groundwater, wetlands, land surface or subsurface strata, wildlife, aquatic
species and vegetation). Environmental Laws include the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980 (42 U.S.C.
sections 9601 et seq.) ("CERCLA"); the Hazardous Materials Transportation
Authorization Act of 1994 (49 U.S.C. sections 5101 et seq.); the Federal
Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. sections 136 et seq.); the
Solid Waste Disposal Act (42 U.S.C. sections 6901 et seq.); the Toxic Substance
Control Act (15 U.S.C. sections 2601 et seq.); the Clean Air Act (42 U.S.C.
sections 7401 et seq.); the Federal Water Pollution Control Act (33 U.S.C.
sections 1251 et seq.); the Occupational Safety and Health Act (29 U.S.C.
sections 651 et seq.); and the Safe Drinking Water Act (42 U.S.C. sections
300(f) et seq.), each as from time to time amended, and any and all regulations
promulgated thereunder, and all analogous state, local and foreign counterparts
or equivalents and any transfer of ownership notification or approval statutes.
"Environmental Liabilities" shall mean, with respect to any
Person, all liabilities, obligations, responsibilities, response, remedial and
removal costs, investigation and feasibility study costs, capital costs,
operation and maintenance costs, losses, damages, punitive damages,
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property damages, natural resource damages, consequential damages, treble
damages, costs and expenses (including all fees, disbursements and expenses of
counsel, experts and consultants), fines, penalties, sanctions and interest
incurred as a result of or related to any claim, suit, action, investigation,
proceeding or demand by any Person, whether based in contract, tort, implied or
express warranty, strict liability, criminal or civil statute or common law,
including any arising under or related to any Environmental Laws, Environmental
Permits, or in connection with any Release or threatened Release or presence of
a Hazardous Material whether on, at, in, under, from or about or in the vicinity
of any real or personal property.
"Environmental Permits" shall mean all permits, licenses,
authorizations, certificates, approvals or registrations required by any
Governmental Authority under any Environmental Laws.
"Equipment" shall mean all "equipment," as such term is
defined in the Code, now owned or hereafter acquired by any Credit Party,
wherever located and, in any event, including all such Credit Party's machinery
and equipment, including processing equipment, conveyors, machine tools, data
processing and computer equipment with software and peripheral equipment (other
than software constituting part of the Accounts), and all engineering,
processing and manufacturing equipment, office machinery, furniture, materials
handling equipment, tools, attachments, accessories, automotive equipment,
trailers, trucks, forklifts, molds, dies, stamps, motor vehicles, rolling stock
and other equipment of every kind and nature, trade fixtures and fixtures not
forming a part of real property, all whether now owned or hereafter acquired,
and wherever situated, together with all additions and accessions thereto,
replacements therefor, all parts therefor, all substitutes for any of the
foregoing, fuel therefor, and all manuals, drawings, instructions, warranties
and rights with respect thereto, and all products and proceeds thereof and
condemnation awards and insurance proceeds with respect thereto.
"Equivalent U.S. $ Amount" shall mean, (i) on any day with
respect to any amount of Canadian Dollars, the amount of Dollars which would be
required to buy such amount of Canadian Dollars using the noon rate quoted by
the Bank of Canada on that day or, if such day is not a Business Day, on the
Business Day immediately preceding such day, as reported on Reuters Monitor
Screen (page BOFC) or such other page as may replace such page for the purpose
of displaying such exchange rates or at such other rate as may have been agreed
in writing between Borrower and Agent and (ii) on any day with respect to any
amount of Mexican Pesos, the amount of Dollars which would be required to buy
such amount of Mexican Pesos using the noon rate quoted by the Bank of Mexico on
that day or at such other rate as may have been agreed in writing by Borrower
and Agent.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974 (or any successor legislation thereto), as amended from time to time,
and any regulations promulgated thereunder.
"ERISA Affiliate" shall mean, with respect to any Credit
Party, any trade or business (whether or not incorporated) which, together with
such Credit Party, are treated as a single employer within the meaning of
Sections 414(b), (c), (m) or (o) of the IRC.
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"ERISA Event" shall mean, with respect to any Credit Party or
any ERISA Affiliate, (a) any event described in Section 4043(c) of ERISA with
respect to a Title IV Plan; (b) the withdrawal of any Credit Party or ERISA
Affiliate from a Title IV Plan subject to Section 4063 of ERISA during a plan
year in which it was a substantial employer, as defined in Section 4001(a)(2) of
ERISA; (c) the complete or partial withdrawal of any Credit Party or any ERISA
Affiliate from any Multiemployer Plan; (d) the filing of a notice of intent to
terminate a Title IV Plan or the treatment of a plan amendment as a termination
under Section 4041 of ERISA; (e) the institution of proceedings to terminate a
Title IV Plan or Multiemployer Plan by the PBGC; (f) the failure by any Credit
Party or ERISA Affiliate to make when due required contributions to a
Multiemployer Plan or Title IV Plan unless such failure is cured within thirty
(30) days; (g) any other event or condition which might reasonably be expected
to constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Title IV Plan or Multiemployer Plan
or for the imposition of liability under Section 4069 or 4212(c) of ERISA; (h)
the termination of a Multiemployer Plan under Section 4041A of ERISA or the
reorganization or insolvency of a Multiemployer Plan under Section 4241 of
ERISA; (i) the loss of a Qualified Plan's qualification or tax exempt status; or
(j) the termination of a Plan described in Section 4064 of ERISA.
"ESOP" shall mean a Plan which is intended to satisfy the
requirements of Section 4975(e)(7) of the IRC.
"Event of Default" shall have the meaning assigned to it in
Section 8.1.
"Existing Credit Facilities" shall mean, collectively, (i) the
Credit Agreement dated as of October 16, 1997 (as amended through the date
hereof) among Borrower, The Fifth Third Bank, as agent and lender, Bank One,
Indiana, N.A. (formerly known as NBD Bank, N.A.), as lender, (ii) the Amended
and Restated Term Loan Agreement dated as of May 15, 1998 (as amended through
the date hereof) among Borrower, ▇▇▇▇▇▇▇ Canada, Wurlitzer, ▇▇▇▇▇▇▇ Trading,
SLC, The Fifth Third Bank, as agent and lender, and Bank One, Indiana, N.A.
(formerly known as NBD Bank, N.A.), as lender and (iii) all agreements,
instruments, documents and certificates including promissory notes, security
agreements, mortgages, deeds of trust, consents, assignments, contracts, and
notices delivered in connection therewith or the transactions contemplated
thereby.
"Federal Funds Rate" shall mean, for any day, a floating rate
equal to the weighted average of the rates on overnight federal funds
transactions among members of the Federal Reserve System, as determined by
Agent.
"Federal Reserve Board" means the Board of Governors of the
Federal Reserve System, or any successor thereto.
"Fees" shall mean any and all fees payable to Agent or any
Lender pursuant to the Agreement or any of the other Loan Documents.
"Fifth Third" means Fifth Third Bank, an Ohio banking
corporation.
"Financial Covenants" shall mean the financial covenants set
forth in ▇▇▇▇▇ ▇.
▇-▇▇
▇▇
"▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇" shall mean the consolidated and
consolidating income statements, statements of cash flows and balance sheets of
Borrower delivered in accordance with Section 3.4 of the Agreement and Annex E
to the Agreement.
"First Adjustment Date" shall have the meaning assigned to it
in Section 1.5(a).
"Fiscal Month" shall mean any of the monthly accounting
periods of Borrower.
"Fiscal Quarter" shall mean any of the quarterly accounting
periods of Borrower, ending on March 31, June 30, September 30 and December 31
of each year.
"Fiscal Year" shall mean any of the annual accounting periods
of Borrower ending on December 31 of each year.
"Fixed Charges" shall mean, with respect to any Person for any
fiscal period, (a) the aggregate of all Interest Expense incurred during such
period, plus (b) scheduled payments of principal with respect to Indebtedness
during such period, plus (c) Capital Expenditures during such period plus (d)
Taxes paid in cash during such period.
"Fixed Charge Coverage Ratio" shall mean, with respect to any
Person for any fiscal period, the ratio of EBITDA to Fixed Charges.
"Fixtures" shall mean any "fixtures" as such term is defined
in the Code, now owned or hereafter acquired by any Credit Party.
"Foreign Subsidiary" means a Subsidiary of Borrower other than
a Domestic Subsidiary.
"Funded Debt" shall mean, with respect to any Person, all
Indebtedness for borrowed money evidenced by notes, bonds, debentures, or
similar evidences of Indebtedness and which by its terms matures more than one
year from, or is directly or indirectly renewable or extendible at such Person's
option under a revolving credit or similar agreement obligating the lender or
lenders to extend credit over a period of more than one year from the date of
creation thereof, and specifically including Capital Lease Obligations, current
maturities of long-term debt, revolving credit and short-term debt extendible
beyond one year at the option of the debtor, and also including, in the case of
Borrower, the Obligations and, without duplication, Guaranteed Indebtedness
consisting of guaranties of Funded Debt of other Persons.
"GAAP" shall mean generally accepted accounting principles in
the United States of America, consistently applied, as such term is further
defined in Annex G to the Agreement.
"GE Capital Fee Letter" shall mean that certain letter, dated
as of February 18, 2000, between GE Capital and Borrower with respect to certain
Fees to be paid from time to time by Borrower to GE Capital.
"General Intangibles" shall mean any "general intangibles," as
such term is defined in the Code, now owned or hereafter acquired by any Credit
Party, and, in any event, including all right, title and interest which such
Credit Party may now or hereafter have in or
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under any Contract, all customer lists, Licenses, Copyrights, Designs,
Trademarks, Patents, and all applications therefor and reissues, extensions or
renewals thereof, rights in Intellectual Property, interests in partnerships,
joint ventures and other business associations, licenses, permits, copyrights,
trade secrets, proprietary or confidential information, inventions (whether or
not patented or patentable), technical information, procedures, designs,
knowledge, know-how, software, data bases, data, skill, expertise, experience,
processes, models, drawings, materials and records, goodwill (including the
goodwill associated with any Trademark or Trademark License), all rights and
claims in or under insurance policies (including insurance for fire, damage,
loss and casualty, whether covering personal property, real property, tangible
rights or intangible rights, all liability, life, key man and business
interruption insurance, and all unearned premiums), uncertificated securities,
choses in action, deposit, checking and other bank accounts, rights to receive
tax refunds or to receive dividends or other distributions in respect of stock
or other equity securities and other payments, rights of indemnification, all
books and records, correspondence, credit files, invoices and other papers,
including without limitation all tapes, cards, computer runs and other papers
and documents in the possession or under the control of such Credit Party or any
computer bureau or service company from time to time acting for such Credit
Party.
"Governmental Authority" shall mean any nation or government,
any state, province or other political subdivision thereof, and any agency,
department or other entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government.
"Guaranteed Indebtedness" shall mean, as to any Person, any
direct or indirect obligation of such Person guaranteeing or providing comfort
or otherwise supporting any indebtedness, lease, dividend, or other obligation
("primary obligations") of any other Person (the "primary obligor") in any
manner, including any obligation or arrangement of such Person (a) to purchase
or repurchase any such primary obligation, (b) to advance or supply funds (i)
for the purchase or payment of any such primary obligation or (ii) to maintain
working capital or equity capital of the primary obligor or otherwise to
maintain the net worth or solvency or any balance sheet condition of the primary
obligor, (c) to purchase property, securities or services primarily for the
purpose of assuring the owner of any such primary obligation of the ability of
the primary obligor to make payment of such primary obligation, or (d) to
indemnify the owner of such primary obligation against loss in respect thereof.
The amount of any Guaranteed Indebtedness at any time shall be deemed to be an
amount equal to the lesser at such time of (x) the stated or determinable amount
of the primary obligation in respect of which such Guaranteed Indebtedness is
made and (y) the maximum amount for which such Person may be liable pursuant to
the terms of the instrument embodying such Guaranteed Indebtedness; or, if not
stated or determinable, the maximum reasonably anticipated liability (assuming
full performance) in respect thereof.
"Guaranties" shall mean, collectively, the ▇▇▇▇▇▇▇ Canada
Guaranty, the Subsidiary Guaranty and any other guaranty executed by any
Guarantor in favor of Agent and Lenders in respect of the Obligations.
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"Guarantors" shall mean ▇▇▇▇▇▇▇ Trading, ▇▇▇▇▇▇▇ Canada,
Wurlitzer, and each other Person, if any, which executes a guarantee or other
similar agreement in favor of Agent in connection with the transactions
contemplated by the Agreement and the other Loan Documents.
"Hazardous Material" shall mean any substance, material or
waste which is regulated by or forms the basis of liability now or hereafter
under, any Environmental Laws, including any material or substance which is (a)
defined as a "solid waste," "hazardous waste," "hazardous material," "hazardous
substance," "dangerous goods," "extremely hazardous waste," "restricted
hazardous waste," "pollutant," "contaminant," "hazardous constituent," "special
waste," "toxic substance" or other similar term or phrase under any
Environmental Laws, (b) petroleum or any fraction or by-product thereof,
asbestos, polychlorinated biphenyls (PCB's), or any radioactive substance.
"Headquarters Lease" shall mean that certain Office Lease
dated July 2, 1998, by and between Borrower and Duke Realty Limited Partnership
with respect to ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, as such lease may be
further amended, supplemented or otherwise modified in accordance with Section
6.19.
"Indebtedness" of any Person shall mean without duplication
(a) all indebtedness of such Person for borrowed money or for the deferred
purchase price of property payment for which is deferred six (6) months or more,
but excluding obligations to trade creditors incurred in the ordinary course of
business that are not overdue by more than six (6) months unless being contested
in good faith, (b) all reimbursement and other obligations with respect to
letters of credit, bankers' acceptances and surety bonds, whether or not
matured, (c) all obligations evidenced by notes, bonds, debentures or similar
instruments, (d) all indebtedness created or arising under any conditional sale
or other title retention agreement with respect to property acquired by such
Person (even though the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession or sale of such
property), (e) all Capital Lease Obligations and the present value (discounted
at the Index Rate as in effect on the Closing Date) of future rental payments
under all synthetic leases, (f) all obligations of such Person under commodity
purchase or option agreements or other commodity price hedging arrangements, in
each case whether contingent or matured, (g) all obligations of such Person
under any foreign exchange contract, currency swap agreement, interest rate
swap, cap or collar agreement or other similar agreement or arrangement designed
to alter the risks of that Person arising from fluctuations in currency values
or interest rates, in each case whether contingent or matured, (h) all
Indebtedness referred to above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien upon or in property or other assets (including accounts and contract
rights) owned by such Person, even though such Person has not assumed or become
liable for the payment of such Indebtedness, and (i) the Obligations.
"Indemnified Liabilities" shall have the meaning assigned to
it in Section 1.15.
"Indemnified Person" shall have the meaning assigned to it in
Section 1.13.
"Index Rate" shall mean the latest 30-day commercial paper
rate for high-grade unsecured notes sold through dealers by major corporations
as from time to time reported in the
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"Money Rates" section of The Wall Street Journal (or if such rate ceases to be
so published as quoted from such other generally available and recognizable
source as Agent may select). The Index Rate shall be determined (i) on the first
Business Day immediately prior to the Closing Date and (ii) thereafter, on the
last Business Day of each calendar month for calculation of interest for the
following months.
"Index Rate Loan" shall mean a Loan or portion thereof bearing
interest by reference to the Index Rate.
"Insolvency Laws" means any of Title 11 of the United States
Code, the Bankruptcy and Insolvency Act (Canada) and the Companies' Creditors
Arrangement Act (Canada), each as now and hereafter in effect, any successors to
such statues and any other applicable bankruptcy, insolvency or other similar
law of any jurisdiction including any law of any jurisdiction permitting a
debtor to obtain a stay or a compromise of the claims of its creditors against
it.
"ITA" means the Income Tax Act (Canada) as the same may, from
time to time, be in effect.
"Instruments" shall mean any "instrument," as such term is
defined in the Code, now owned or hereafter acquired by any Credit Party,
wherever located, and, in any event, including all certificated securities, all
certificates of deposit, and all notes and other, without limitation, evidences
of indebtedness, other than instruments that constitute, or are a part of a
group of writings that constitute, Chattel Paper.
"Intellectual Property" shall mean any and all Licenses,
Patents, Designs, Copyrights, Trademarks, trade secrets and customer lists.
"Intercompany Notes" shall have the meaning assigned to it in
Section 6.3.
"Interest Expense" shall mean, with respect to any Person for
any fiscal period, interest expense (whether cash or non-cash) of such Person
determined in accordance with GAAP for the relevant period ended on such date,
including, in any event, interest expense with respect to any Funded Debt of
such Person and interest expense for the relevant period that has been
capitalized on the balance sheet of such Person.
"Interest Payment Date" means, as to any Loan, the first
Business Day of each month to occur while such Loan is outstanding; provided
that, in addition to the foregoing, each of (x) the date upon which all of the
Commitments have been terminated and the Loans have been paid in full and (y)
the Commitment Termination Date shall be deemed to be an "Interest Payment Date"
with respect to any interest which is then accrued under the Agreement.
"Inventory" shall mean any "inventory," as such term is
defined in the Code, now or hereafter owned or acquired by any Credit Party,
wherever located, and in any event including inventory, merchandise, goods and
other personal property which are held by or on behalf of any Credit Party for
sale or lease or are furnished or are to be furnished under a contract of
service, or which constitute raw materials, work in process or materials used or
consumed or to be used or
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consumed in such Credit Party's business or in the processing, production,
packaging, promotion, delivery or shipping of the same, including other
supplies.
"Investment Property" shall have the meaning ascribed thereto
in Section 9-115 of the Code in those jurisdictions in which such definition has
been adopted and shall include (i) all securities, whether certificated or
uncertificated, including stocks, bonds, interests in limited liability
companies, partnership interests, treasuries, certificates of deposit, and
mutual fund shares; (ii) all securities entitlements of any Credit Party,
including the rights of such Credit Party to any securities account and the
financial assets held by a securities intermediary in such securities account
and any free credit balance or other money owing by any securities intermediary
with respect to that account; (iii) all securities accounts held by any Credit
Party; (iv) all commodity contracts held by any Credit Party; and (v) all
commodity accounts held by any Credit Party.
"IRC" shall mean the Internal Revenue Code of 1986, as
amended, and any successor thereto.
"IRS" shall mean the Internal Revenue Service, or any
successor thereto.
"Judgment Currency" shall have the meaning assigned to such
term in Section 11.18.
"KAC" means Keyboard Acceptance Corporation, a Delaware
corporation.
"KAC Sale" means the sale by Borrower to DFS of all of the
capital stock of KAC pursuant to the KAC Sale Agreement.
"KAC Sale Agreement" shall mean that certain Stock Purchase
Agreement dated as of December 8, 1999 by and between DFS and Borrower, pursuant
to which Borrower agreed to sell and DFS agreed to purchase all of the capital
stock of KAC and SLC.
"KAC Retail Store Financing Agreement" means that certain
Retail Store Finance Agreement dated as of March 10, 2000 by and among Borrower,
KAC and SLC and executed pursuant to the KAC Sale Agreement, pursuant to which
KAC and SLC will continue to provide financing to retail customers of Borrower,
as such agreement may be amended, supplemented or otherwise modified in
accordance with Section 6.19.
"L/C Issuer" shall have the meaning assigned to such term in
Annex B.
"L/C Sublimit" shall have the meaning assigned to it in Annex
B.
"Lenders" shall mean GE Capital, the other Lenders named on
the signature page of the Agreement, and, if any such Lender shall decide to
assign all or any portion of the Obligations, such term shall include such
assignee.
"Letter of Credit Fee" has the meaning ascribed thereto in
Annex B.
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"Letter of Credit Obligations" shall mean all outstanding
obligations incurred by Agent and Lenders at the request of Borrower, whether
direct or indirect, contingent or otherwise, due or not due, in connection with
the issuance of a reimbursement agreement or guaranty by Agent or purchase of a
participation as set forth in Annex B with respect to any Letter of Credit. The
amount of such Letter of Credit Obligations shall equal the maximum amount which
may be payable by Agent or Lenders thereupon or pursuant thereto.
"Letters of Credit" shall mean commercial or standby letters
of credit issued for the account of Borrower by any L/C Issuer, and bankers'
acceptances issued by Borrower, for which Agent and Lenders have incurred Letter
of Credit Obligations.
"License" shall mean any Copyright License, Patent License,
Trademark License, Design License or other license of rights or interests now
held or hereafter acquired by any Credit Party.
"Lien" shall mean any mortgage or deed of trust, pledge,
hypothecation, assignment, deposit arrangement, lien, charge, claim, security
interest, easement or encumbrance, or preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including any lease or title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of, or agreement to give, any financing statement perfecting a security interest
under the Code or comparable law of any jurisdiction).
"Litigation" shall have the meaning assigned to it in Section
3.13.
"Loan Account" shall have the meaning assigned to it in
Section 1.14.
"Loan Documents" shall mean the Agreement, the Notes, the DFS
Intercreditor Agreement, the Collateral Documents and all other agreements,
instruments, documents and certificates identified in the Closing Checklist
executed and delivered to, or in favor of, Agent and/or Lenders and including
all other pledges, powers of attorney, consents, assignments, contracts,
notices, and all other written matter whether heretofore, now or hereafter
executed by or on behalf of any Credit Party, or any employee of any Credit
Party, and delivered to Agent or any Lender in connection with the Agreement or
the transactions contemplated hereby. Any reference in the Agreement or any
other Loan Document to a Loan Document shall include all appendices, exhibits or
schedules thereto, and all amendments, restatements, supplements or other
modifications thereto, and shall refer to such Agreement as the same may be in
effect at any and all times such reference becomes operative.
"Loans" shall mean the Revolving Loan.
"Lock Boxes" shall have the meaning assigned to it in Annex C.
"Margin Stock" shall have the meaning assigned to it in
Section 3.10.
"Material Adverse Effect" shall mean a material adverse effect
on (a) the business, assets, operations, prospects or financial or other
condition of any Credit Party, (b) Borrower's ability to pay any of the Loans or
any of the other Obligations in accordance with the
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terms of the Agreement, or any Subsidiary Guarantor's ability to perform its
obligations under the Subsidiary Guaranty, (c) the Collateral or Agent's Liens,
on behalf of itself and Lenders, on the Collateral or the priority of such
Liens, or (d) Agent's or any Lender's rights and remedies under the Agreement
and the other Loan Documents. Without limiting the foregoing, any event or
occurrence adverse to one or more Credit Parties which results or could
reasonably be expected to result in costs and/or liabilities and/or loss of
revenues, individually, or in the aggregate, to any Credit Party in any 30-day
period in excess of the lesser of $3,000,000 and 10% of Borrowing Availability
as of any date of determination shall be deemed to have had Material Adverse
Effect.
"Material Contract" means each Agreement listed on Disclosure
Schedule (A), each agreement listed on Disclosure Schedule (3.26) and any other
contract or other arrangement to which a Credit Party or any of its Subsidiaries
is a party (other than the Loan Documents) for which breach, nonperformance,
cancellation or failure to renew could have a Material Adverse Effect or which
is otherwise material to the business of such Person.
"Maximum Amount" shall mean, at any particular time, an amount
equal to the Commitment of all Lenders.
"Mexican Pesos" shall mean the lawful money of the Republic of
Mexico.
"Mortgaged Properties" shall have the meaning assigned to it
in Annex D.
"Mortgages" shall mean each of the mortgages, deeds of trust,
leasehold mortgages, leasehold deeds of trust, collateral assignments of leases
or other real estate security documents delivered by any Credit Party to Agent
with respect to the Mortgaged Properties, all in form and substance satisfactory
to Agent.
"Multiemployer Plan" shall mean a "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA, and to which any Credit Party or ERISA
Affiliate is making, is obligated to make, has made or been obligated to make,
contributions on behalf of participants who are or were employed by any of them.
"Net Borrowing Availability" shall mean as of any date of
determination, the lesser of (i) the Maximum Amount and (ii) the Borrowing Base,
in each case less the sum of the Revolving Loan then outstanding.
"Net Wholesale Dealer Cost" shall mean, as at any date of
determination, the standard cost of Inventory multiplied by a percentage equal
to the weighted average ▇▇▇▇-up from standard cost to wholesale dealer cost for
the finished goods Inventory of Borrower's Music Division for the most recently
ended Fiscal Quarter for which Agent has received Financial Statements pursuant
to Annex E, which ▇▇▇▇-up shall (i) be equal to 135% as of the Closing Date and
(ii) be subject to adjustment up or down as determined from time to time by
Agent in its reasonable credit judgment.
"Net Worth" shall mean, with respect to any Person as of any
date of determination, the book value of the assets of such Person, minus (a)
reserves applicable thereto,
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and minus (b) all of such Person's liabilities on a consolidated basis
(including accrued and deferred income taxes), all as determined in accordance
with GAAP.
"Non-Funding Lender" shall have the meaning assigned to it in
Section 9.9(a)(ii).
"Notes" shall mean the Revolving Notes, collectively.
"Notice of Revolving Credit Advance" shall have the meaning
assigned to it in Section 1.1(a).
"Obligations" shall mean all loans, advances, debts,
liabilities and obligations, for the performance of covenants, tasks or duties
or for payment of monetary amounts (whether or not such performance is then
required or contingent, or such amounts are liquidated or determinable) owing by
any Credit Party to Agent or any Lender, and all covenants and duties regarding
such amounts, of any kind or nature, present or future, whether or not evidenced
by any note, agreement or other instrument, arising under the Agreement or any
of the other Loan Documents. This term includes all principal, interest
(including all interest which accrues after the commencement of any case or
proceeding in bankruptcy after the insolvency of, or for the reorganization of
any Credit Party, whether or not allowed in such proceeding), Fees, Charges,
expenses, attorneys' fees and any other sum chargeable to any Credit Party under
the Agreement or any of the other Loan Documents.
"Operating Cash Flow" shall mean, with respect to any Person
for any fiscal period, the sum of EBITDA for such period minus Capital
Expenditures for such period.
"Operating Cash Flow Ratio" shall mean, with respect to any
Person for any fiscal period, the ratio of Operating Cash Flow to Interest
Expense. In computing Interest Expense for any fiscal period, interest payments
that are due within one week after the end of that fiscal period, without
duplication, shall be deemed to have been paid on the last day of that fiscal
period.
"Patent License" shall mean rights under any written agreement
now owned or hereafter acquired by any Credit Party granting any right with
respect to any invention on which a Patent is in existence.
"Patent Security Agreements" shall mean the Patent Security
Agreements made in favor of Agent, on behalf of itself and Lenders, by each
applicable Credit Party.
"Patents" shall mean all of the following in which any Credit
Party now holds or hereafter acquires any interest: (a) all letters patent of
the United States or any other country, all registrations and recordings
thereof, and all applications for letters patent of the United States or any
other country, including registrations, recordings and applications in the
United States Patent and Trademark Office or in any similar office or agency of
the United States, any State or Territory thereof, or any other country, and (b)
all reissues, continuations, continuations-in-part or extensions thereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or
any successor thereto.
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"Pension Plan" shall mean a Plan described in Section 3(2) of
ERISA.
"Permitted Encumbrances" shall mean the following
encumbrances: (a) Liens for taxes or assessments or other governmental Charges
not yet due and payable; (b) pledges or deposits of money securing statutory
obligations under workmen's compensation, unemployment insurance, social
security or public liability laws or similar legislation (excluding Liens under
ERISA); (c) pledges or deposits of money securing bids, tenders, contracts
(other than contracts for the payment of money) or leases to which any Credit
Party is a party as lessee made in the ordinary course of business; (d) inchoate
and unperfected workers', mechanics' or similar liens arising in the ordinary
course of business, so long as such Liens attach only to Equipment, Fixtures
and/or Real Estate; (e) carriers', warehousemen's, suppliers' or other similar
possessory liens arising in the ordinary course of business and securing
liabilities in an outstanding aggregate amount not in excess of $50,000 at any
time, so long as such Liens attach only to Inventory; (f) deposits securing, or
in lieu of, surety, appeal or customs bonds in proceedings to which any Credit
Party is a party; (g) any attachment or judgment lien not constituting an Event
of Default under Section 8.1(j); (h) zoning restrictions, easements, licenses,
or other restrictions on the use of any Real Estate or other minor
irregularities in title (including leasehold title and exceptions with respect
to the Designated Mortgaged Properties set forth in the title policies delivered
to and approved by Agent on the Closing Date) thereto, so long as the same do
not materially impair the use, value, or marketability of such Real Estate; (i)
presently existing or hereinafter created Liens in favor of Agent, on behalf of
itself and Lenders; (j) Liens expressly permitted under clauses (b), (c), d and
e of Section 6.7 of the Agreement; and (k) to the extent not included in clauses
(a), (d) or (e) of this definition, Prior Claims that are unregistered and that
secure amounts that are not yet due and payable.
"Person" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization, association,
corporation, limited liability company, institution, public benefit corporation,
other entity or government (whether federal, state, county, city, municipal,
local, foreign, or otherwise, including any instrumentality, division, agency,
body or department thereof).
"Plan" shall mean, at any time, an employee benefit plan, as
defined in Section 3(3) of ERISA, which any Credit Party maintains, contributes
to or has an obligation to contribute to on behalf of participants who are or
were employed by any Credit Party.
"Pledge Agreements" shall mean the Borrower Pledge Agreement,
and any other pledge agreement entered into after the Closing Date by any Credit
Party (as required by the Agreement or any other Loan Document).
"Prior Claims" means all Liens created by applicable law (in
contrast with liens voluntarily granted) which rank or are capable of ranking
prior or pari passu with Agent's security interests or Agent's and Lenders'
hypothecs (or the applicable equivalent of such Liens), as applicable, against
all or part of the Collateral, including for amounts owing for wages, employee
deductions, goods and services taxes, sales taxes, income taxes, employer health
taxes, municipal taxes, workers' compensation, pension funding obligations and
overdue rents.
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"Prior Lender" shall mean, collectively, The Fifth Third Bank,
Bank One, Indiana, N.A. (formerly known as NBD Bank, N.A.), and any other
"Lender" under and as defined in the Existing Credit Facilities.
"Prior Lender Obligations" shall mean all amounts owed under
the Existing Credit Facilities including any contingent obligations.
"Proceeds" shall mean "proceeds," as such term is defined in
the Code and, in any event, shall include (a) any and all proceeds of any
insurance, indemnity, warranty or guaranty payable to any Credit Party from time
to time with respect to any of the Collateral, (b) any and all payments (in any
form whatsoever) made or due and payable to any Credit Party from time to time
in connection with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Collateral by any Governmental Authority
(or any Person acting under color of governmental authority), (c) any claim of
any Credit Party against third parties (i) for past, present or future
infringement of any Patent or Patent License, or (ii) for past, present or
future infringement or dilution of any Copyright, Copyright License, Trademark
or Trademark License, or for injury to the goodwill associated with any
Trademark or Trademark License, (d) any recoveries by any Credit Party against
third parties with respect to any litigation or dispute concerning any of the
Collateral, and (e) any and all other amounts from time to time paid or payable
under or in connection with any of the Collateral, upon disposition or
otherwise.
"Pro Forma" means the unaudited consolidated and consolidating
balance sheet of Borrower and its Subsidiaries as of February 29, 2000 after
giving pro forma effect to the Related Transactions.
"Projections" means Borrower's forecasted consolidated and
consolidating: (a) balance sheets; (b) profit and loss statements; (c) cash flow
statements; and (d) capitalization statements, all prepared on a consolidated
basis, if applicable, and otherwise consistent with the historical Financial
Statements of Borrower, together with appropriate supporting details and a
statement of underlying assumptions.
"Pro Rata Share" shall mean with respect to all matters
relating to any Lender (a) with respect to all Loans, the percentage obtained by
dividing (i) the aggregate Commitments of that Lender by (ii) the aggregate
Commitments of all Lenders, and (b) with respect to all Loans on and after the
Commitment Termination Date, the percentage obtained by dividing (i) the
aggregate outstanding principal balance of the Loans held by that Lender, by
(ii) the outstanding principal balance of the Loans held by all Lenders.
"Public Offering" shall mean a firm underwritten public
offering of common stock registered on form ▇-▇, ▇-▇ or S-3 under the Securities
Act of 1933, as amended, by a nationally recognized investment banking firm and
after giving effect to which the issuer shall be qualified for listing on the
NASDAQ National Market, the American Stock Exchange or the New York Stock
Exchange.
"Qualified Plan" shall mean a Plan which is intended to be
tax-qualified under Section 401(a) of the IRC.
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"Raw Materials" shall mean Inventory consisting of pre-cut
lumber panels, raw lumber or pre-cut veneer, in each case to the extent used in
the manufacture and production of finished goods Inventory in the ordinary
course of Borrower's business.
"Real Estate" shall have the meaning assigned to it in Section
3.6.
"Refinancing" shall mean the repayment in full by Borrower of
the Prior Lender Obligations on the Closing Date.
"Related Transactions" means each borrowing under the
Revolving Loan on the Closing Date, the Refinancing, the KAC Sale, and the
transactions entered into pursuant to the KAC Sale Agreement, the payment of all
fees, costs and expenses associated with all of the foregoing and the execution
and delivery of all of the Related Transactions Documents.
"Related Transactions Documents" shall mean the Loan
Documents, the KAC Sale Agreement, the DFS Accounts Receivable Purchase
Agreement and Promissory Note, the DFS Repossession and Sale Agreement, the DFS
Inventory Purchase and Consignment Agreement, the KAC Retail Store Financing
Agreement and the Tax Allocation Agreement, and each other document, agreement
and instrument executed in connection with the KAC Sale.
"Release" shall mean any release, threatened release, spill,
emission, leaking, pumping, pouring, emitting, emptying, escape, injection,
deposit, disposal, discharge, dispersal, dumping, leaching or migration of
Hazardous Material in the indoor or outdoor environment, including the movement
of Hazardous Material through or in the air, soil, surface water, ground water
or property.
"Repurchase Obligations" means any present or future
obligations of any Credit Party or any of its Subsidiaries to (i) repurchase
from any Person (other than a Credit Party or Subsidiary thereof) pianos or
other merchandise or goods manufactured by such Credit Party or Subsidiary, or
(ii) purchase from any Person (other than a Credit Party or Subsidiary thereof)
pianos or other merchandise or goods which have been repossessed by, or are
subject to repossession by, such Person or Affiliate thereof, whether pursuant
to a financing, lease or other arrangement.
"Requisite Lenders" shall mean (a) Lenders having more than
sixty-six and two-thirds percent (66 2/3%) of the Commitments of all Lenders, or
(b) if the Commitments have been terminated, more than sixty-six and two-thirds
percent (66 2/3%) of the aggregate outstanding amount of the Loans.
"Reserves" shall mean, with respect to the Borrowing Base of
Borrower (a) reserves established by Agent from time to time against Eligible
Inventory or Eligible Raw Materials pursuant to Section 5.9, (b) reserves
established pursuant to Section 5.4(c), (c) from and after the Closing Date, a
dilution reserve of three and eight tenths of a percent (3.8%) of Borrower's and
▇▇▇▇▇▇▇ Canada's Eligible Accounts, which reserve may be adjusted upwards or
downwards and at such times as Agent may determine in its reasonable credit
judgment, and (c) such other reserves against Eligible Accounts, Eligible
Inventory, Eligible Raw Materials, Eligible Fixed Assets or Borrowing
Availability of Borrower which Agent may, in its reasonable credit judgment,
establish from time to time. Without limiting the generality of the foregoing,
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Reserves established to ensure the payment of accrued Interest Expenses,
Indebtedness or on account of Prior Claims shall be deemed to be a reasonable
exercise of Agent's credit judgment.
"Restricted Payment" shall mean (a) the declaration or payment
of any dividend or the incurrence of any liability to make any other payment or
distribution of cash or other property or assets in respect of a Person's Stock,
(b) any payment on account of the purchase, redemption, defeasance, sinking fund
or other retirement of a Person's Stock or any other payment or distribution
made in respect thereof, either directly or indirectly, (c) any payment or
prepayment of principal of, premium, if any, or interest, fees or other charges
on or with respect to, and any redemption, purchase, retirement, defeasance,
sinking fund or similar payment and any claim for rescission with respect to,
any Subordinated Debt; (d) any payment made to redeem, purchase, repurchase or
retire, or to obtain the surrender of, any outstanding warrants, options or
other rights to acquire Stock of such Person now or hereafter outstanding; (e)
any payment of a claim for the rescission of the purchase or sale of, or for
material damages arising from the purchase or sale of, any shares of such
Person's Stock or of a claim for reimbursement, indemnification or contribution
arising out of or related to any such claim for damages or rescission; (f) any
payment, loan, contribution, or other transfer of funds or other property to any
Stockholder of such Person other than payment of compensation in the ordinary
course to stockholders who are employees of such Person; and (g) any payment of
management fees (or other fees of a similar nature) by such Person to any
Stockholder of such Person or their Affiliates.
"Retail Consigned Goods" shall have the meaning assigned to it
in Section 2.1(h).
"Retiree Welfare Plan" shall mean, at any time, a Plan that is
a "welfare plan" as defined in Section 3(2) of ERISA, that provides for
continuing coverage or benefits for any participant or any beneficiary of a
participant after such participant's termination of employment, other than
continuation coverage provided pursuant to Section 4980B of the IRC and at the
sole expense of the participant or the beneficiary of the participant.
"Revolving Credit Advance" shall have the meaning assigned to
it in Section 1.1(a)(i).
"Revolving Lenders" shall mean, as of any date of
determination, Lenders having a Commitment.
"Revolving Loan" shall mean, at any time, the sum of (i) the
aggregate amount of Revolving Credit Advances outstanding to Borrower plus (ii)
the aggregate Letter of Credit Obligations incurred on behalf of Borrower.
Unless the context otherwise requires, references to the outstanding principal
balance of the Revolving Loan shall include the outstanding balance of Letter of
Credit Obligations.
"Revolving Note" shall have the meaning assigned to it in
Section 1.1(a)(ii).
"Security Agreement" shall mean the Security Agreement of even
date herewith entered into between Agent, on behalf of itself and Lenders, and
each Credit Party that is a signatory thereto.
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"SLC" shall mean Signature Leasing Company, an Ohio
corporation.
"Solvent" shall mean (i) with respect to any Person on a
particular date that is subject to the Insolvency Laws of the United Sates of
America, that on such date (a) the fair value of the property of such Person is
greater than the total amount of liabilities, including contingent liabilities,
of such Person; (b) such Person does not intend to, and does not believe that it
will, incur debts or liabilities beyond such Person's ability to pay as such
debts and liabilities mature; and (c) such Person is not engaged in a business
or transaction, and is not about to engage in a business or transaction, for
which such Person's property would constitute an unreasonably small capital and
(ii) with respect to any other person on a particular date that is subject to
Insolvency Laws of Canada, that on such date (A) the property of such Person is
sufficient, if disposed of at a fairly conducted sale under legal process, to
enable payment of all its obligations, due and accruing due; (B) the property of
such Person is, at a fair valuation, greater than the total amount of
liabilities, including contingent liabilities, of such Person; and (C) such
Person has not ceased paying its current obligations in the ordinary course of
business as they generally become due. The amount of contingent liabilities
(such as litigation, guarantees and pension plan liabilities) at any time shall
be computed as the amount which, in light of all the facts and circumstances
existing at the time, represents the amount which can be reasonably be expected
to become an actual or matured liability.
"Stock" shall mean all shares, options, warrants, general or
limited partnership interests or other equivalents (regardless of how
designated) of or in a corporation, partnership or equivalent entity whether
voting or nonvoting, including common stock, preferred stock or any other
"equity security" (as such term is defined in Rule 3a11-1 of the General Rules
and Regulations promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended).
"Subordinated Debt" shall mean any Indebtedness of any Credit
Party subordinated to the Obligations in a manner and form satisfactory to Agent
and Lenders in their sole discretion, as to right and time of payment and as to
any other rights and remedies thereunder.
"Subsidiary" shall mean, with respect to any Person, (a) any
corporation of which an aggregate of more than fifty percent (50%) of the
outstanding Stock having ordinary voting power to elect a majority of the board
of directors of such corporation (irrespective of whether, at the time, Stock of
any other class or classes of such corporation shall have or might have voting
power by reason of the happening of any contingency) is at the time, directly or
indirectly, owned legally or beneficially by such Person and/or one or more
Subsidiaries of such Person, or with respect to which any such Person has the
right to vote or designate the vote of fifty percent (50%) or more of such Stock
whether by proxy, agreement, operation of law or otherwise, and (b) any
partnership or limited liability company in which such Person and/or one or more
Subsidiaries of such Person shall have an interest (whether in the form of
voting or participation in profits or capital contribution) of more than fifty
percent (50%) or of which any such Person is a general partner or may exercise
the powers of a general partner. For the avoidance of doubt, the Korean American
Musical Instrument Corporation shall be deemed a Subsidiary for all purposes
under Sections 3, 5, 6 and 8 of this Agreement.
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"Subsidiary Guaranty" shall mean the Subsidiary Guaranty of
even date herewith executed by ▇▇▇▇▇▇▇ Trading and Wurlitzer in favor of Agent,
on behalf of itself and Lenders.
"Supermajority Lenders" shall mean (a) Lenders having eighty
percent (80%) or more of the Commitments of all Lenders, or (b) if the
Commitments have been terminated, eighty percent (80%) or more of the aggregate
outstanding amount of the Revolving Loan and Letter of Credit Obligations.
"Tangible Net Worth" shall mean, with respect to any Person at
any date, the Net Worth of such Person at such date, excluding, however, from
the determination of the total assets at such date, (a) all goodwill, reserves
for last-in-first-out Inventory in accordance with GAAP, capitalized
organizational expenses, capitalized research and development expenses,
trademarks, trade names, copyrights, patents, patent applications, licenses and
rights in any thereof, and other intangible items, (b) all unamortized debt
discount and expense, (c) treasury Stock, and (d) any write-up in the book value
of any asset resulting from a revaluation thereof.
"Tax Allocation Agreement" shall mean the Tax Allocation
Agreement dated as of March 10, 2000 by and between Borrower and DFS and
executed pursuant to the KAC Sale Agreement, as such agreement may be amended,
supplemented or otherwise modified in accordance with Section 6.19.
"Taxes" shall mean taxes, levies, imposts, deductions, Charges
and withholdings, and all liabilities with respect thereto, excluding taxes
imposed on or measured by the net income of Agent or a Lender by the
jurisdictions under the laws of which Agent and Lenders are organized or any
political subdivision thereof.
"Termination Date" shall mean the date on which the Loans have
been indefeasibly repaid in full and all other Obligations under the Agreement
and the other Loan Documents have been completely discharged and Letter of
Credit Obligations have been cash collateralized, cancelled or backed by
stand-by letters of credit in accordance with Annex B, and Borrower shall not
have any further right to borrow any monies under the Agreement.
"Title IV Plan" shall mean an employee pension benefit plan,
as defined in Section 3 (2) of ERISA (other than a Multiemployer Plan), which is
covered by Title IV of ERISA, and which any Credit Party or ERISA Affiliate
maintains, contributes to or has an obligation to contribute to on behalf of
participants who are or were employed by any of them.
"Trademark Security Agreements" shall mean the Trademark
Security Agreements made in favor of Agent, on behalf of Lenders, by each
applicable Credit Party.
"Trademark License" shall mean rights under any written
agreement now owned or hereafter acquired by any Credit Party granting any right
to use any Trademark.
"Trademarks" shall mean all of the following now owned or
hereafter acquired by any Credit Party: (a) all trademarks, trade names,
corporate names, business names, trade styles, service marks, logos, other
source or business identifiers, prints and labels on which any of the foregoing
have appeared or appear, designs and general intangibles of like nature (whether
registered or unregistered), now owned or existing or hereafter adopted or
acquired, all
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registrations and recordings thereof, and all applications in connection
therewith, including registrations, recordings and applications in the United
States Patent and Trademark Office or in any similar office or agency of the
United States, any state or territory thereof, or any other country or any
political subdivision thereof; (b) all reissues, extensions or renewals thereof;
and (c) all goodwill associated with or symbolized by any of the foregoing.
"Unfunded Pension Liability" shall mean, at any time, the
aggregate amount, if any, of the sum of (a) the amount by which the present
value of all accrued benefits under each Title IV Plan exceeds the fair market
value of all assets of such Title IV Plan allocable to such benefits in
accordance with Title IV of ERISA, all determined as of the most recent
valuation date for each such Title IV Plan using the actuarial assumptions for
funding purposes in effect under such Title IV Plan, and (b) for a period of
five (5) years following a transaction which might reasonably be expected to be
covered by Section 4069 of ERISA, the liabilities (whether or not accrued) that
could be avoided by any Credit Party or any ERISA Affiliate as a result of such
transaction.
"Wurlitzer' shall mean The Wurlitzer Company, a Delaware
corporation and a wholly owned Subsidiary of Borrower.
Rules of construction with respect to accounting terms used in
the Agreement or the other Loan Documents shall be as set forth in Annex G.
All other undefined terms contained in any of the Loan
Documents shall, unless the context indicates otherwise, have the meanings
provided for by the Code as in effect in the State of New York to the extent the
same are used or defined therein. Unless otherwise specified, references in the
Agreement or any of the Appendices to a Section, subsection or clause refer to
such Section, subsection or clause as contained in the Agreement. The words
"herein," "hereof" and "hereunder" and other words of similar import refer to
the Agreement as a whole, including all Annexes, Exhibits and Schedules, as the
same may from time to time be amended, restated, modified or supplemented, and
not to any particular section, subsection or clause contained in the Agreement
or any such Annex, Exhibit or Schedule.
Wherever from the context it appears appropriate, each term
stated in either the singular or plural shall include the singular and the
plural, and pronouns stated in the masculine, feminine or neuter gender shall
include the masculine, feminine and neuter genders. The words "including",
"includes" and "include" shall be deemed to be followed by the words "without
limitation"; references to Persons include their respective successors and
assigns (to the extent and only to the extent permitted by the Loan Documents)
or, in the case of governmental Persons, Persons succeeding to the relevant
functions of such Persons; and all references to statutes and related
regulations shall include any amendments of the same and any successor statutes
and regulations. Whenever any provision in any Loan Document refers to the
knowledge (or an analogous phrase) of any Credit Party, such words are intended
to signify that such Credit Party has actual knowledge or awareness of a
particular fact or circumstance or that such Credit Party, if it had exercised
reasonable diligence, would have known or been aware of such fact or
circumstance.
▇-▇▇
▇▇▇
▇▇▇▇▇ B (SECTION 1.2)
TO
CREDIT AGREEMENT
LETTERS OF CREDIT
(a) Issuance. Subject to the terms and conditions of the
Agreement, Agent and Revolving Lenders agree to incur, from time to time prior
to the Commitment Termination Date, upon the request of Borrower and for
Borrower's account, Letter of Credit Obligations by causing Letters of Credit to
be issued (by a bank or other legally authorized Person selected by or
acceptable to Agent in its sole discretion, except with respect to documentary
letters of credit which shall be issued by GE Capital Finance, Ltd. in
conjunction with a bank or other legally authorized institution acceptable to GE
Capital Finance, Ltd., in its sole discretion (each, an "L/C Issuer")) for
Borrower's account and guaranteed by Agent; provided, however, that if the L/C
Issuer is a Revolving Lender, then such Letters of Credit shall not be
guaranteed by Agent but rather each Revolving Lender shall, subject to the terms
and conditions hereinafter set forth, purchase (or be deemed to have purchased)
risk participations in all such Letters of Credit issued with the written
consent of Agent, as more fully described in paragraph (b)(ii) below. The
aggregate amount of all such Letter of Credit Obligations shall not at any time
exceed the least of (i) Ten Million Dollars ($10,000,000) (the "L/C Sublimit"),
and (ii) the Maximum Amount less the aggregate outstanding principal balance of
the Revolving Credit Advances, and (iii) the Borrowing Base less the aggregate
outstanding principal balance of the Revolving Credit Advances. No such Letter
of Credit shall have an expiry date which is more than one year following the
date of issuance thereof, and neither Agent nor Revolving Lenders shall be under
any obligation to incur Letter of Credit Obligations in respect of, or purchase
risk participations in, any Letter of Credit having an expiry date which is
later than the Commitment Termination Date.
(b)
(i) Advances Automatic; Participations. In the event
that Agent or any Revolving Lender shall make any payment on or
pursuant to any Letter of Credit Obligation, such payment shall then be
deemed automatically to constitute a Revolving Credit Advance under
Section 1.1(a) of the Agreement regardless of whether a Default or
Event of Default shall have occurred and be continuing and
notwithstanding Borrower's failure to satisfy the conditions precedent
set forth in Section 2, and each Revolving Lender shall be obligated to
pay its Pro Rata Share thereof in accordance with the Agreement. The
failure of any Revolving Lender to make available to Agent for Agent's
own account its Pro Rata Share of any such Revolving Credit Advance or
payment by Agent under or in respect of a Letter of Credit shall not
relieve any other Revolving Lender of its obligation hereunder to make
available to Agent its Pro Rata Share thereof, but no Revolving Lender
shall be responsible for the failure of any other Revolving Lender to
make available such other Revolving Lender's Pro Rata Share of any such
payment.
(ii) If it shall be illegal or unlawful for Borrower
to incur Revolving Credit Advances as contemplated by paragraph (b)(i)
above because of an Event of
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Default described in Section 8.1(h) or (i) or otherwise or if it shall
be illegal or unlawful for any Revolving Lender to be deemed to have
assumed a ratable share of the reimbursement obligations owed to an L/C
Issuer, or if the L/C Issuer is a Revolving Lender, then (i)
immediately and without further action whatsoever, each Revolving
Lender shall be deemed to have irrevocably and unconditionally
purchased from Agent (or such L/C Issuer, as the case may be) an
undivided interest and participation equal to such Revolving Lender's
Pro Rata Share (based on the Commitments) of the Letter of Credit
Obligations in respect of all Letters of Credit then outstanding and
(ii) thereafter, immediately upon issuance of any Letter of Credit,
each Revolving Lender shall be deemed to have irrevocably and
unconditionally purchased from Agent (or such L/C Issuer, as the case
may be) an undivided interest and participation in such Revolving
Lender's Pro Rata Share (based on the Commitments) of the Letter of
Credit Obligations with respect to such Letter of Credit on the date of
such issuance. Each Revolving Lender shall fund its participation in
all payments or disbursements made under the Letters of Credit in the
same manner as provided in the Agreement with respect to Revolving
Credit Advances.
(c) Cash Collateral. If Borrower is required to provide cash
collateral for any Letter of Credit Obligations pursuant to the Agreement prior
to the Commitment Termination Date, Borrower will pay to Agent for the benefit
of Revolving Lenders cash or cash equivalents acceptable to Agent ("Cash
Equivalents") in an amount equal to 105% of the maximum amount then available to
be drawn under each applicable Letter of Credit outstanding. Such funds or Cash
Equivalents shall be held by Agent in a cash collateral account (the "Cash
Collateral Account") maintained at a bank or financial institution acceptable to
Agent. The Cash Collateral Account shall be in the name of Borrower and shall be
pledged to, and subject to the control of, Agent, for the benefit of Agent and
Lenders, in a manner satisfactory to Agent. Borrower hereby pledges and grants
to Agent, on behalf of itself and Lenders, a security interest in all such funds
and Cash Equivalents held in the Cash Collateral Account from time to time and
all proceeds thereof, as security for the payment of all amounts due in respect
of the Letter of Credit Obligations and other Obligations, whether or not then
due. The Agreement, including this Annex B, shall constitute a security
agreement under applicable law.
If any Letter of Credit Obligations, whether or not then due
and payable, shall for any reason be outstanding on the Commitment Termination
Date, Borrower shall either (i) provide cash collateral therefor in the manner
described above, or (ii) cause all such Letters of Credit and guaranties thereof
to be canceled and returned, or (iii) deliver a stand-by letter (or letters) of
credit in guarantee of such Letter of Credit Obligations, which stand-by letter
(or letters) of credit shall be of like tenor and duration (plus thirty (30)
additional days) as, and in an amount equal to 105% of the aggregate maximum
amount then available to be drawn under, the Letters of Credit to which such
outstanding Letter of Credit Obligations relate and shall be issued by a Person,
and shall be subject to such terms and conditions, as are be satisfactory to
Agent in its sole discretion.
From time to time after funds are deposited in the Cash
Collateral Account by Borrower, whether before or after the Commitment
Termination Date, Agent may apply such funds or Cash Equivalents then held in
the Cash Collateral Account to the payment of any amounts, in such order as
Agent may elect, as shall be or shall become due and payable by
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Borrower to Lenders with respect to such Letter of Credit Obligations of
Borrower and, upon the satisfaction in full of all Letter of Credit Obligations
of Borrower, to any other Obligations then due and payable.
Neither Borrower nor any Person claiming on behalf of or
through Borrower shall have any right to withdraw any of the funds or Cash
Equivalents held in the Cash Collateral Account, except that upon the
termination of all Letter of Credit Obligations and the payment of all amounts
payable by Borrower to Lenders in respect thereof, any funds remaining in the
Cash Collateral Account shall be applied to other Obligations when due and owing
and upon payment in full of such Obligations, any remaining amount shall be paid
to Borrower or as otherwise required by law.
(d) Fees and Expenses. Borrower agrees to pay to Agent for the
benefit of itself and Revolving Lenders, as compensation to Agent and such
Lenders for Letter of Credit Obligations incurred hereunder, (x) all costs and
expenses incurred by Agent or any Lender on account of such Letter of Credit
Obligations, and (y) for each month during which any Letter of Credit Obligation
shall remain outstanding, a fee (the "Letter of Credit Fee") in an amount equal
to the Applicable L/C Margin from time to time in effect multiplied by the
maximum amount available from time to time to be drawn under the applicable
Letter of Credit. Such fee shall be paid to Agent for the benefit of the
Revolving Lenders in arrears, on the first day of each month. In addition,
Borrower shall pay to any L/C Issuer, on demand, such fees (including all per
annum fees), charges and expenses of such L/C Issuer in respect of the issuance,
negotiation, acceptance, amendment, transfer and payment of such Letter of
Credit or otherwise payable pursuant to the application and related
documentation under which such Letter of Credit is issued.
(e) Request for Incurrence of Letter of Credit Obligations.
Borrower shall give Agent at least one (1) Business Day prior written notice
requesting the incurrence of any Letter of Credit Obligation, specifying the
date such Letter of Credit Obligation is to be incurred, identifying the
beneficiary to which such Letter of Credit Obligation relates and describing the
nature of the transactions proposed to be supported thereby. The notice shall be
accompanied by the form of the Letter of Credit (which shall be acceptable to
the L/C Issuer) to be guaranteed and, to the extent not previously delivered to
Agent, copies of all agreements between Borrower and the L/C Issuer pertaining
to the issuance of Letters of Credit. Notwithstanding anything contained herein
to the contrary, Letter of Credit applications by Borrower and approvals by
Agent and the L/C Issuer may be made and transmitted pursuant to electronic
codes and security measures mutually agreed upon and established by and among
Borrower, Agent and the L/C Issuer.
(f) Obligation Absolute. The obligation of Borrower to
reimburse Agent and Revolving Lenders for payments made with respect to any
Letter of Credit Obligation shall be absolute, unconditional and irrevocable,
without necessity of presentment, demand, protest or other formalities, and the
obligations of each Revolving Lender to make payments to Agent with respect to
Letters of Credit shall be unconditional and irrevocable. Such obligations of
Borrower and Revolving Lenders shall be paid strictly in accordance with the
terms hereof under all circumstances including the following circumstances:
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(i) any lack of validity or enforceability of any
Letter of Credit or the Agreement or the other Loan Documents or any
other agreement;
(ii) the existence of any claim, set-off, defense or
other right which Borrower or any of its Affiliates or any Lender may
at any time have against a beneficiary or any transferee of any Letter
of Credit (or any Persons or entities for whom any such transferee may
be acting), Agent, any Lender, or any other Person, whether in
connection with the Agreement, the Letter of Credit, the transactions
contemplated herein or therein or any unrelated transaction (including
any underlying transaction between Borrower or any of its Affiliates
and the beneficiary for which the Letter of Credit was procured);
(iii) any draft, demand, certificate or any 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;
(iv) payment by Agent (except as otherwise expressly
provided in paragraph (g)(ii)(C) below) or any L/C Issuer under any
Letter of Credit or guaranty thereof against presentation of a demand,
draft or certificate or other document which does not comply with the
terms of such Letter of Credit or such guaranty;
(v) any other circumstance or happening whatsoever,
which is similar to any of the foregoing; or
(vi) the fact that a Default or an Event of Default
shall have occurred and be continuing.
(g) Indemnification; Nature of Lenders' Duties.
(i) In addition to amounts payable as elsewhere
provided in the Agreement, Borrower hereby agrees to pay and to
protect, indemnify, and save harmless Agent and each Lender from and
against any and all claims, demands, liabilities, damages, losses,
costs, charges and expenses (including attorneys' fees and allocated
costs of internal counsel) which Agent or any Lender may incur or be
subject to as a consequence, direct or indirect, of (A) the issuance of
any Letter of Credit or guaranty thereof, or (B) the failure of Agent
or any Lender seeking indemnification or of any L/C Issuer to honor a
demand for payment under any Letter of Credit or guaranty thereof as a
result of any act or omission, whether rightful or wrongful, of any
present or future de jure or de facto government or Governmental
Authority, in each case other than to the extent solely as a result of
the gross negligence or willful misconduct of Agent or such Lender (as
finally determined by a court of competent jurisdiction).
(ii) As between Agent and any Lender and Borrower,
Borrower assumes all risks of the acts and omissions of, or misuse of
any Letter of Credit by beneficiaries of any Letter of Credit. In
furtherance and not in limitation of the foregoing, to the fullest
extent permitted by law neither Agent nor any Lender shall be
responsible: (A) for the form, validity, sufficiency, accuracy,
genuineness or legal effect of any document issued by any party in
connection with the application for and issuance
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of any Letter of Credit, even if it should in fact prove to be in any
or all respects invalid, insufficient, inaccurate, fraudulent or
forged; (B) for the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign any
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; (C) for failure of the beneficiary of any
Letter of Credit to comply fully with conditions required in order to
demand payment under such Letter of Credit; provided that, in the case
of any payment by Agent under any Letter of Credit or guaranty thereof,
Agent shall be liable to the extent such payment was made solely as a
result of its gross negligence or willful misconduct (as finally
determined by a court of competent jurisdiction) in determining that
the demand for payment under such Letter of Credit or guaranty thereof
complies on its face with any applicable requirements for a demand for
payment under such Letter of Credit or guaranty thereof; (D) for
errors, omissions, interruptions or delays in transmission or delivery
of any messages, by mail, cable, telegraph, telex or otherwise, whether
or not they be in cipher; (E) for errors in interpretation of technical
terms; (F) for any loss or delay in the transmission or otherwise of
any document required in order to make a payment under any Letter of
Credit or guaranty thereof or of the proceeds thereof; (G) for the
credit of the proceeds of any drawing under any Letter of Credit or
guaranty thereof; and (H) for any consequences arising from causes
beyond the control of Agent or any Lender. None of the above shall
affect, impair, or prevent the vesting of any of Agent's or any
Lender's rights or powers hereunder or under the Agreement.
(iii) Nothing contained herein shall be deemed to
limit or to expand any waivers, covenants or indemnities made by
Borrower in favor of any L/C Issuer in any letter of credit
application, reimbursement agreement or similar document, instrument or
agreement between Borrower and such L/C Issuer.
(h) With respect to all documents of title, certificates and
other documentation delivered in connection with any Letters of Credit issued
for the purpose of providing the primary payment mechanism in connection with
the purchase of any materials, goods or services by Borrower or any of its
Subsidiaries, each L/C Issuer shall act as agent for Agent, in its capacity as
secured party under the Collateral Documents. Agent hereby appoints each such
L/C Issuer as its agent for such purposes and each L/C Issuer, by performing the
role of L/C Issuer hereunder hereby accepts such appointment.
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ANNEX C (SECTION 1.8)
TO
CREDIT AGREEMENT
CASH MANAGEMENT SYSTEMS
Borrower shall, and shall cause its Subsidiaries to, establish
and maintain the Cash Management Systems described below:
(i) On or before the Closing Date and until the Termination
Date, Borrower shall (i) establish lock boxes ("Lock Boxes") at one or more of
the banks set forth on Disclosure Schedule (3.19), and shall request in writing
and otherwise take such reasonable steps to ensure that all Account Debtors
forward payment directly to such Lock Boxes or directly to the Concentration
Account described below, and (ii) deposit and cause its Subsidiaries to deposit
or cause to be deposited promptly, and in any event no later than the first
Business Day after the date of receipt thereof, all cash, checks, drafts or
other similar items of payment relating to or constituting payments made in
respect of any and all Collateral (whether or not otherwise delivered to a Lock
Box) into bank accounts in Borrower's name or any such Subsidiary's name
(collectively, the "Borrower Accounts") at banks set forth on Disclosure
Schedule (3.19) (each, a "Relationship Bank"). On or before the Closing Date,
Borrower shall have established a concentration account in its name (the
"Concentration Account") at the bank which shall be designated as the
Concentration Account bank for Borrower on Disclosure Schedule (3.19) (the
"Concentration Account Bank") which bank shall be satisfactory to Agent.
(j) On or before the Closing Date (or such later date as Agent
shall consent to in writing), the Concentration Account Bank, each bank where a
Lock Box is located and, to the extent requested by Agent, all other
Relationship Banks, shall have entered into tri-party blocked account agreements
with Agent, for the benefit of itself and Lenders, and Borrower and Subsidiaries
thereof, as applicable, in form and substance acceptable to Agent, which shall
become operative on or prior to the Closing Date. Each such blocked account
agreement shall provide, among other things, that (i) all items of payment
deposited in such account and proceeds thereof deposited in the Concentration
Account are held by such bank as agent or bailee-in-possession for Agent, on
behalf of Lenders, (ii) the bank executing such agreement has no rights of
setoff or recoupment or any other claim against such account, as the case may
be, other than for payment of its service fees and other charges directly
related to the administration of such account, for returned checks or other
items of payment and, in the case of any such account located in Canada, for
payment for any required adjustments due to clerical error or calculation errors
relating to such account and in accordance with any court order, notice of
garnishment binding on such bank or any other applicable law binding on such
bank, and (iii) from and after the Closing Date (A) with respect to banks at
which a Borrower Account is located, such bank agrees to forward immediately all
amounts in each Borrower Account to the Concentration Account Bank and to
commence the process of daily sweeps from such Borrower Account into the
Concentration Account and (B) with respect to the Concentration Account Bank,
such bank agrees to immediately forward all amounts received in the
Concentration Account to the Collection Account through daily sweeps from such
Concentration Account into the Collection Account. With respect to all
disbursement and payroll accounts, Borrower shall and shall
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instruct each Relationship Bank to, transfer on a daily basis amounts on deposit
at the close of business in each such account listed on Disclosure Schedule
(3.19) to the Concentration Account provided that, so long as no Default or
Event of Default has occurred and is continuing, at the end of each day, (i)
each such account identified in Disclosure Schedule (3.19) as a $10,000 maximum
balance account may have on deposit an amount not to exceed $10,000 (or, with
respect to any such account located in Canada or Mexico, the Equivalent U.S $
Amount), (iii) each such account identified in Disclosure Schedule (3.19) as a
$5,000 maximum balance account may have on deposit an amount not to exceed
$5,000 (or with respect to any such account located in Canada or Mexico, the
Equivalent U.S $ Amount), (iv) all such accounts of Fabricantes Tecnicos S.A. de
C.V. may have on deposit an amount not to exceed $150,000 (or the Equivalent US$
Amount) and (v) all such accounts of Desarrollos ▇▇▇▇▇▇▇ ▇.▇. de C.V. may have
on deposit an amount not to exceed $50,000 (or the Equivalent US$ Amount).
(k) So long as no Default or Event of Default has occurred and
is continuing, Borrower may amend Disclosure Schedule (3.19) to add or replace a
Relationship Bank, Lock Box or Borrower Account or to replace any Concentration
Account or any Disbursement Account; provided, however, that (i) Agent shall
have consented in writing in advance to the opening of such account or Lock Box
with the relevant bank (which consent shall not be unreasonably withheld or
delayed) and (ii) prior to the time of the opening of such account or Lock Box,
Borrower and/or the Subsidiaries thereof, as applicable, and such bank shall
have, to the extent requested by Agent, executed and delivered to Agent a
tri-party blocked account agreement, in form and substance satisfactory to
Agent. Borrower shall close any of its accounts (and establish replacement
accounts in accordance with the foregoing sentence) promptly and in any event
within thirty (30) days of notice from Agent that the creditworthiness of any
bank holding an account is no longer acceptable in Agent's reasonable judgment,
or as promptly as practicable and in any event within sixty (60) days of notice
from Agent that the operating performance, funds transfer and/or availability
procedures or performance with respect to accounts or Lock Boxes of the bank
holding such accounts or Agent's liability under any tri-party blocked account
agreement with such bank is no longer acceptable in Agent's reasonable judgment.
(l) The Lock Boxes, Borrower Accounts, Disbursement Accounts
and the Concentration Account shall be cash collateral accounts, with all cash,
checks and other similar items of payment in such accounts securing payment of
the Loans and all other Obligations, and in which Borrower and each Subsidiary
thereof shall have granted a Lien to Agent, on behalf of itself and Lenders,
pursuant to the Security Agreement.
(m) All amounts deposited in the Collection Account shall be
deemed received by Agent in accordance with Section 1.12 and shall be applied
(and allocated) by Agent in accordance with Section 1.13. In no event shall any
amount be so applied unless and until such amount shall have been credited in
immediately available funds to the Collection Account.
(n) Borrower may maintain, in its name, an account (each a
"Disbursement Account" and collectively, the "Disbursement Accounts") at a bank
acceptable to Agent into which Agent shall, from time to time, deposit proceeds
of Revolving Credit Advances made to Borrower pursuant to Section 1.1 for use by
Borrower solely in accordance with the provisions
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of Section 1.4, it being understood that Fifth Third shall, subject to blocked
account agreements acceptable to Agent to the extent applicable, be a bank
acceptable to Agent under this clause (f).
(o) Borrower shall and shall cause its Affiliates, officers,
employees, agents, directors or other Persons acting for or in concert with
Borrower (each a "Related Person") to (i) hold in trust for Agent, for the
benefit of itself and Lenders, all checks, cash and other items of payment
received by Borrower or any such Related Person, and (ii) within one (1)
Business Day after receipt by Borrower or any such Related Person of any checks,
cash or other items or payment, deposit the same into a Borrower Account.
Borrower and each Related Person thereof acknowledges and agrees that all cash,
checks or items of payment constituting proceeds of Collateral are the property
of Agent and Lenders. All proceeds of the sale or other disposition of any
Collateral, shall be deposited directly into Borrower Accounts.
(p) No later than four (4) months following the Closing Date,
Borrower and ▇▇▇▇▇▇▇ Canada shall have closed Lock Box No. 70495 at the Bank of
Montreal and shall have terminated all documentation relating thereto including
any such documentation between Bank of Montreal and Fifth Third relating
thereto.
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ANNEX D (SECTION 2.1(a))
TO
CREDIT AGREEMENT
SCHEDULE OF ADDITIONAL CLOSING DOCUMENTS
In addition to, and not in limitation of, the conditions
described in Section 2.1 of the Agreement, pursuant to Section 2.1(a), the
following items must be received by Agent in form and substance satisfactory to
Agent on or prior to the Closing Date (each capitalized term used but not
otherwise defined herein shall have the meaning ascribed thereto in Annex A to
the Agreement):
A. Appendices. All Appendices to the Agreement, in form and
substance satisfactory to Agent.
B. Revolving Notes. Duly executed originals of the Revolving
Notes for each applicable Lender, dated the Closing Date.
C. Security Agreement. Duly executed originals of the Security
Agreement, dated the Closing Date, and all instruments, documents and agreements
executed pursuant thereto.
D. Insurance. Satisfactory evidence that the insurance
policies required by Section 5.4 are in full force and effect, together with
appropriate evidence showing loss payable and/or additional insured clauses or
endorsements, as requested by Agent, in favor of Agent, on behalf of Lenders.
E. Security Interests and Code Filings. (a) Evidence
satisfactory to Agent that Agent (for the benefit of itself and Lenders) has a
valid and perfected first priority security interest in and first ranking charge
on the Collateral, including (i) such documents duly executed by each Credit
Party (including financing statements under the Code and other applicable
documents under the laws of any jurisdiction with respect to the perfection of
Liens) as Agent may request in order to perfect its security interests in the
Collateral and (ii) copies of Code search reports or equivalent search reports
of the personal property records performed by Persons satisfactory to Agent
listing all effective financing statements or similar personal property filings
that name any Credit Party as debtor, together with copies of such financing
statements and filings, none of which shall cover the Collateral, except for
those relating to the Prior Lender Obligations (all of which shall be terminated
on the Closing Date).
(b) Evidence satisfactory to Agent, including copies, of all
UCC-1 and other financing statements or similar filings filed in favor of any
Credit Party with respect to each location, if any, at which Inventory may be
consigned.
(c) Control Letters from (i) all issuers of uncertificated
securities and financial assets held by Borrower, (ii) all securities
intermediaries with respect to all securities accounts and securities
entitlements of Borrower, and (iii) all futures commission agents and clearing
houses with respect to all commodities contracts and commodities accounts held
by Borrower.
▇-▇
▇▇▇
▇. ▇▇▇▇▇▇ Letter; Termination Statements. Copies of a duly
executed payoff letter, in form and substance satisfactory to Agent, by and
between all parties to the Prior Lender loan documents evidencing repayment in
full of all Prior Lender Obligations, together with (a) UCC-3 or other
appropriate termination statements (including financing change statements), in
form and substance satisfactory to Agent, manually signed by the Prior Lender
releasing all liens of Prior Lender upon any of the personal property of each
Credit Party, and (b) termination of all blocked account agreements, bank agency
agreements or other similar agreements or arrangements or arrangements in favor
of Prior Lender or relating to the Prior Lender Obligations.
G. Intellectual Property Security Agreements. Duly executed
originals of Trademark Security Agreements, Copyright Security Agreements and
Patent Security Agreements, each dated the Closing Date and signed by each
Credit Party which owns Trademarks, Copyrights and/or Patents, as applicable,
all in form and substance satisfactory to Agent, together with all instruments,
documents and agreements executed pursuant thereto.
H. KAC Sale; KAC and SLC Releases. (i) Copies of the executed
KAC Sale Agreement and each of the other Related Transactions Documents, each of
which shall be in form and substance satisfactory to Agent and its counsel,
accompanied by a certificate of the Chief Executive Officer or Chief Financial
Officer of Borrower certifying that (a) all conditions to the effectiveness of
the KAC Sale have been satisfied and (b) the KAC Sale Agreement and each such
other Related Document is in full force and effect as of the Closing Date
without amendment, supplement or modification, (ii) a reliance letter from
counsel to Borrower and DFS, respectively, addressed to Agent and Lenders and
attaching copies of the legal opinions delivered by such counsel in connection
with the consummation of the KAC Sale, and (iii) copies of duly executed release
and termination agreements from all existing creditors of KAC and SLC releasing
Borrower from all Guaranteed Indebtedness of Borrower in respect of outstanding
obligations of KAC and SLC.
I. Subsidiary Guaranties. Guaranties executed by ▇▇▇▇▇▇▇
Trading, Wurlitzer and ▇▇▇▇▇▇▇ Canada in favor of Agent, for the benefit of
itself and Lenders.
J. Initial Borrowing Base Certificate. Duly executed originals
of an initial Borrowing Base Certificate from Borrower, dated the Closing Date,
reflecting information concerning Eligible Accounts, Eligible Inventory,
Eligible Raw Materials and Eligible Fixed Assets, if any, of Borrower as of a
date not more than twenty (20) days prior to the Closing Date.
K. Initial Notice of Revolving Credit Advance. Duly executed
originals of a Notice of Revolving Credit Advance, dated the Closing Date, with
respect to the initial Revolving Credit Advance to be requested by Borrower on
the Closing Date.
L. Letter of Direction. Duly executed originals of a letter of
direction from Borrower addressed to Agent, on behalf of itself and Lenders,
with respect to the disbursement on the Closing Date of the proceeds of the
initial Revolving Credit Advance.
M. Cash Management System; Blocked Account Agreements.
Evidence satisfactory to Agent that, as of the Closing Date, Cash Management
Systems complying with
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Annex C to the Agreement have been established and are currently being
maintained in the manner set forth in such Annex C, together with (i) copies of
duly executed tri-party blocked account and lock box agreements, satisfactory to
Agent, with the banks as required by Annex C, (ii) evidence satisfactory to
Agent that Borrower and ▇▇▇▇▇▇▇ Canada (a) have instructed Bank of Montreal in
writing to change Account No. 3144-▇▇▇▇▇▇▇ maintained with the Bank of Montreal
from an operating account to a Disbursement Account and (b) have delivered
irrevocable instructions to the Bank of Montreal to forward all payments
received in Lock Box No. ▇▇▇▇▇ from and after the Closing Date to Lock Box No.
632383 of Fifth Third and (iii) evidence satisfactory to Agent that Borrower and
▇▇▇▇▇▇▇ Canada have sent or on the Closing Date will send written notices to all
Account Debtors which have previously been instructed to direct payments to Lock
Box No. ▇▇▇▇▇ at the Bank of Montreal instructing such Account Debtors
thereafter to send such payments to Lock Box No. 632383 maintained by ▇▇▇▇▇▇▇
Canada at Fifth Third.
N. Charter and Good Standing. For each Credit Party, such
Person's (a) charter and all amendments thereto, (b) good standing certificates
(including verification of tax status), or applicable equivalent, in its
jurisdiction of incorporation and (c) good standing certificates (including
verification of tax status) and certificates of qualification, or applicable
equivalent, to conduct business in each jurisdiction where its ownership or
lease of property or the conduct of its business requires such qualification,
each dated a recent date prior to the Closing Date and certified by the
applicable Secretary of State or other authorized Governmental Authority.
O. Bylaws and Resolutions. For each Credit Party, (a) such
Person's bylaws, together with all amendments thereto and (b) resolutions of
such Person's Board of Directors and stockholders, approving and authorizing the
execution, delivery and performance of the Loan Documents to which such Person
is a party and the transactions to be consummated in connection therewith, each
certified as of the Closing Date by such Person's corporate secretary or an
assistant secretary as being in full force and effect without any modification
or amendment.
P. Incumbency Certificates. For each Credit Party, signature
and incumbency certificates of the officers of each such Person executing any of
the Loan Documents, certified as of the Closing Date by such Person's corporate
secretary or an assistant secretary as being true, accurate, correct and
complete.
Q. Opinions of Counsel. Duly executed originals of opinions of
▇▇▇▇▇▇▇ Head & ▇▇▇▇▇▇▇, counsel for the Credit Parties, together with any local
counsel opinions requested by Agent, each in form and substance satisfactory to
Agent and its counsel, dated the Closing Date, and each accompanied by a letter
addressed to such counsel from the Credit Parties, authorizing and directing
such counsel to address its opinion to Agent, on behalf of Lenders, and to
include in such opinion an express statement to the effect that Agent and
Lenders are authorized to rely on such opinion.
R. Pledge Agreements. Duly executed originals of each of the
Pledge Agreements accompanied by (as applicable) (a) share certificates
representing all of the outstanding Stock being pledged pursuant to such Pledge
Agreement and stock powers for such share certificates executed in blank (except
for such share certificates which are registered in
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Agent's name, which share certificates shall be accompanied by a copy of the
share register for the shares evidenced thereby certified as being true and
complete) and (b) the original Intercompany Notes and other instruments
evidencing Indebtedness being pledged pursuant to such Pledge Agreement, duly
endorsed in blank.
S. Accountants' Letters. A letter from the Credit Parties to
their independent auditors authorizing the independent certified public
accountants of the Credit Parties to communicate with Agent and Lenders in
accordance with Section 4.2.
T. Fee Letter. Duly executed originals of the GE Capital Fee
Letter.
U. Management. The management structure of Borrower,
composition of its Board of Directors and its board selection procedures shall
in all respects be acceptable to Agent.
V. Salachopin Letter of Credit. The letter of credit issued to
Borrower by the Banca Serfin SNC and advised by Key Bank National Association
for the account of Salachopin, duly assigned to Agent, which letter of credit
and assignment instruments shall be in form and substance satisfactory to Agent.
W. Officer's Certificate. Agent shall have received duly
executed originals of a certificate of the Chief Executive Officer and Chief
Financial Officer of Borrower, dated the Closing Date, stating that, since
December 31, 1998, except as may be disclosed in Draft Audited Statements, (a)
no event or condition has occurred or is existing which could reasonably be
expected to have a Material Adverse Effect; (b) there has been no material
adverse change in the industry in which Borrower operates; (c) no Litigation has
been commenced which, if successful, would have a Material Adverse Effect or
could challenge any of the transactions contemplated by the Agreement and the
other Loan Documents; (d) there have been no Restricted Payments made by any
Credit Party; and (e) there has been no material increase in liabilities,
liquidated or contingent, and no material decrease in assets of Borrower or any
of its Subsidiaries. The representation contained in such officer's certificate
shall be deemed to have been incorrect when made if the audited Financial
Statements for the Fiscal Year ending December 31, 1999 delivered to Agent and
Lenders pursuant to Annex E differ in any material respect from the Draft
Audited Statements.
X. Waivers. Agent, on behalf of Lenders, shall have received
landlord waivers and consents, bailee letters and mortgagee agreements in form
and substance satisfactory to Agent, in each case as required pursuant to
Section 5.9.
Y. Subordination and Intercreditor Agreements. Agent and
Lenders shall have received any and all subordination and/or intercreditor
agreements, all in form and substance reasonably satisfactory to Agent, in its
sole discretion, as Agent shall have deemed necessary or appropriate with
respect to any Indebtedness of any Credit Party including the DFS Intercreditor
Agreement.
Z. Mortgages. Mortgages covering all of the Real Estate owned
by any Credit Party (the "Mortgaged Properties") together with: (a) with respect
to the Designated Mortgaged Properties only, title insurance policies, current
as-built surveys, zoning letters and certificates of occupancy, in each case
satisfactory in form and substance to Agent, in its sole
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discretion, and with respect to each other Mortgaged Property, a title report
satisfactory in form and substance to Agent, (b) evidence that counterparts of
the Mortgages have been recorded in all places to the extent necessary or
desirable, in the judgment of Agent, to create a valid and enforceable first
priority lien (subject to Permitted Encumbrances) on each Mortgaged Property in
favor of Agent for the benefit of itself and Lenders (or in favor of such other
trustee as may be required or desired under local law); and (c) an opinion of
counsel in each state (other than the States of Mississippi and Georgia) in
which any Mortgaged Property is located in form and substance and from counsel
satisfactory to Agent.
AA. Environmental Reports. Agent shall have received Phase I
Environmental Site Assessment Reports, consistent with American Society of
Testing and Materials (ASTM) Standard E 1527-94, and applicable state
requirements, on all of the Real Estate, dated no more than 6 months prior to
the Closing Date, prepared by environmental engineers satisfactory to Agent, all
in form and substance satisfactory to Agent, in its sole discretion; and Agent
shall have further received such environmental review and audit reports,
including Phase II reports, with respect to the Real Estate of any Credit Party
as Agent shall have requested, and Agent shall be satisfied, in its sole
discretion, with the contents of all such environmental reports. Agent shall
have received letters executed by the environmental firms preparing such
environmental reports, in form and substance satisfactory to Agent, authorizing
Agent and Lenders to rely on such reports.
BB. Appraisals. Agent shall have received appraisals as to all
Inventory and each of the Designated Mortgaged Properties, each of which shall
be in form and substance satisfactory to Agent.
CC. Audited Financials; Financial Condition. Agent shall have
received Borrower's final Financial Statements for its Fiscal Year ended
December 31, 1998, audited by Deloitte & Touche LLP. Borrower shall have
provided Agent with its current operating statements, a consolidated and
consolidating balance sheet and statement of cash flows, the Pro Forma,
Projections, and a Borrowing Base Certificate with respect to Borrower certified
by its Chief Financial Officer, in each case in form and substance satisfactory
to Agent, and Agent shall be satisfied, in its sole discretion, with all of the
foregoing. Agent shall have further received a certificate of the Chief
Executive Officer and/or the Chief Financial Officer of Borrower, based on such
Pro Forma and Projections, to the effect that (a) Borrower will be Solvent upon
the consummation of the transactions contemplated herein; (b) the Pro Forma
fairly presents the financial condition of Borrower and its Subsidiaries as of
the date thereof after giving effect to the transactions contemplated by the
Loan Documents; (c) the Projections are based upon estimates and assumptions
stated therein, all of which Borrower believes to be reasonable and fair in
light of current conditions and current facts known to Borrower and, as of the
Closing Date, reflect Borrower's good faith and reasonable estimates of its
future consolidated financial performance and of the other information projected
therein for the period set forth therein; and (d) containing such other
statements with respect to the solvency of Borrower and its Subsidiaries and
matters related thereto as Agent shall request.
DD. Amendment to DFS Inventory Purchase and Consignment
Agreement; Termination Statements. Copies of a duly executed amendment to the
DFS Inventory Purchase and Consignment Agreement, in form and substance
satisfactory to Agent, by and between
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Borrower and DFS evidencing repayment in full of all obligations of Borrower
with respect to the Retail Consigned Goods, together with, to the extent
required by Agent, UCC-3 or other appropriate termination statements, in form
and substance satisfactory to Agent, manually signed by DFS releasing all liens
of DFS upon any of the Retail Consigned Goods and any other property related
thereto.
EE. Other Documents. Such other certificates, documents and
agreements respecting any Credit Party as Agent may, in its sole discretion,
request.
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ANNEX E (SECTION 4.1(a))
TO
CREDIT AGREEMENT
FINANCIAL STATEMENTS AND PROJECTIONS -- REPORTING
Borrower shall deliver or cause to be delivered to Agent or to
Agent and Lenders, as indicated, the following:
(a) Monthly Financials. To Agent and Lenders, within thirty
(30) days after the end of each Fiscal Month, financial information regarding
Borrower and its Subsidiaries, certified by the Chief Financial Officer of
Borrower, consisting of consolidated and consolidating (i) unaudited balance
sheets as of the close of such Fiscal Month and the related statements of income
and cash flow for that portion of the Fiscal Year ending as of the close of such
Fiscal Month; (ii) unaudited statements of income and cash flows for such Fiscal
Month, setting forth in comparative form the figures for the corresponding
period in the prior year and the figures contained in the Projections for such
Fiscal Year, all prepared in accordance with GAAP (subject to normal year-end
adjustments); and (iii) a summary of the outstanding balance of all Intercompany
Notes as of the last day of that Fiscal Month. Such financial information shall
be accompanied by the certification of the Chief Financial Officer of Borrower
that (i) such financial information presents fairly in accordance with GAAP
(subject to normal year-end adjustments) the financial position and results of
operations of Borrower and its Subsidiaries, on a consolidated and consolidating
basis, in each case as at the end of such month and for the period then ended
and (ii) any other information presented is true, correct and complete in all
material respects and that there was no Default or Event of Default in existence
as of such time or, if a Default or Event of Default shall have occurred and be
continuing, describing the nature thereof and all efforts undertaken to cure
such Default or Event of Default.
(b) Quarterly Financials. To Agent and Lenders, within
forty-five (45) days after the end of each Fiscal Quarter, consolidated and
consolidating financial information regarding Borrower and its Subsidiaries,
certified by the Chief Financial Officer of Borrower, including (i) unaudited
balance sheets as of the close of such Fiscal Quarter and the related statements
of income and cash flow for that portion of the Fiscal Year ending as of the
close of such Fiscal Quarter and (ii) unaudited statements of income and cash
flows for such Fiscal Quarter, in each case setting forth in comparative form
the figures for the corresponding period in the prior year and the figures
contained in the Projections for such Fiscal Year, all prepared in accordance
with GAAP (subject to normal year-end adjustments). Such financial information
shall be accompanied by (A) a statement in reasonable detail (each, a
"Compliance Certificate") showing Borrower's quarterly calculation of the
weighted average ▇▇▇▇-up from standard cost to wholesale dealer cost and the
calculations used in determining compliance with (x) the covenant contained in
Section 6.6, (y) each of the financial covenants set forth on Annex G which is
tested on a quarterly basis, and (z) for purposes of determining the Applicable
Margins, the Operating Cash Flow Ratio, and (B) the certification of the Chief
Financial Officer of Borrower that (i) such financial information presents
fairly in accordance with GAAP (subject to normal year-end adjustments) the
financial position, results of operations and statements of cash flows of
Borrower and its Subsidiaries, on both a consolidated and consolidating basis,
as at the end of such Fiscal Quarter and for the period then ended, (ii) any
other information presented is true,
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correct and complete in all material respects and that there was no Default or
Event of Default in existence as of such time or, if a Default or Event of
Default shall have occurred and be continuing, describing the nature thereof and
all efforts undertaken to cure such Default or Event of Default. In addition,
Borrower shall deliver to Agent and Lenders, within forty-five (45) days after
the end of each Fiscal Quarter, a management discussion and analysis which
includes a comparison to budget for that Fiscal Quarter and a comparison of
performance for that Fiscal Quarter to the corresponding period in the prior
year;
(c) Operating Plan. To Agent and Lenders, as soon as
available, but not later than thirty (30) days after the end of each Fiscal
Year, an annual operating plan for Borrower and its Subsidiaries, approved by
the Board of Directors of Borrower, for the following year, which will include a
statement of all of the material assumptions on which such plan is based, will
include monthly balance sheets and a monthly budget for the following year and
will integrate sales, gross profits, operating expenses, operating profit, cash
flow projections and Borrowing Availability projections all prepared on the same
basis and in similar detail as that on which operating results are reported (and
in the case of cash flow projections, representing management's good faith
estimates of future financial performance based on historical performance), and
including plans for personnel, Capital Expenditures and facilities;
(d) Annual Audited Financials. To Agent and Lenders, within
ninety (90) days after the end of each Fiscal Year, audited Financial Statements
for Borrower and its Subsidiaries on a consolidated and (unaudited)
consolidating basis, consisting of balance sheets and statements of income and
retained earnings and cash flows, setting forth in comparative form in each case
the figures for the previous Fiscal Year, which Financial Statements shall be
prepared in accordance with GAAP, certified without qualification, by an
independent certified public accounting firm of national standing or otherwise
acceptable to Agent. Such Financial Statements shall be accompanied by (i) a
statement prepared in reasonable detail showing the calculations used in
determining compliance with each of the financial covenants set forth on Annex
G, (ii) a report from such accounting firm to the effect that, in connection
with their audit examination, nothing has come to their attention to cause them
to believe that a Default or Event of Default has occurred (or specifying those
Defaults and Events of Default that they became aware of), it being understood
that such audit examination extended only to accounting matters and that no
special investigation was made with respect to the existence of Defaults or
Events of Default, (iii) a letter addressed to Agent, on behalf of itself and
Lenders, in form and substance reasonably satisfactory to Agent and subject to
standard qualifications taken by nationally recognized accounting firms, signed
by such accounting firm acknowledging that Agent and Lenders are entitled to
rely upon such accounting firm's certification of such audited Financial
Statements, (iv) the annual letters to such accountants in connection with their
audit examination detailing contingent liabilities and material litigation
matters, and (v) the certification of the Chief Executive Officer or Chief
Financial Officer of Borrower that all such Financial Statements present fairly
in accordance with GAAP the financial position, results of operations and
statements of cash flows of Borrower and its Subsidiaries on a consolidated and
consolidating basis, as at the end of such year and for the period then ended,
and that there was no Default or Event of Default in existence as of such time
or, if a Default or Event of Default shall have occurred and be continuing,
describing the nature thereof and all efforts undertaken to cure such Default or
Event of Default;
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(e) Management Letters. To Agent and Lenders, within five (5)
Business Days after receipt thereof by any Credit Party, copies of all
management letters, exception reports or similar letters or reports received by
such Credit Party from its independent certified public accountants;
(f) Default Notices. To Agent and Lenders, as soon as
practicable, and in any event within five (5) Business Days after an executive
officer of Borrower has actual knowledge of the existence of any Default, Event
of Default or other event which has had a Material Adverse Effect, telephonic or
telecopied notice specifying the nature of such Default or Event of Default or
other event, including the anticipated effect thereof, which notice, if given
telephonically, shall be promptly confirmed in writing on the next Business Day;
(g) SEC Filings and Press Releases. To Agent and Lenders,
promptly upon their becoming available, copies of: (i) all Financial Statements,
reports, notices and proxy statements made publicly available by any Credit
Party to its security holders; (ii) all regular and periodic reports and all
registration statements and prospectuses, if any, filed by any Credit Party with
any securities exchange or with the Securities and Exchange Commission or any
governmental or private regulatory authority; and (iii) all press releases and
other statements made available by any Credit Party to the public concerning
material changes or developments in the business of any such Person;
(h) Other Indebtedness and Equity Notices. To Agent, as soon
as practicable, copies of all material written notices given or received by any
Credit Party with respect to any other Indebtedness or Stock of such Person,
and, within two (2) Business Days after any Credit Party obtains knowledge of
any matured or unmatured event of default with respect to any other
Indebtedness, notice of such event of default;
(i) Supplemental Schedules. To Agent, supplemental
disclosures, if any, required by Section 5.6 of the Agreement;
(j) Litigation. To Agent in writing, promptly upon learning
thereof, notice of any Litigation commenced or threatened against any Credit
Party that (i) seeks damages in excess of $200,000, (ii) seeks injunctive
relief, (iii) is asserted or instituted against any Plan, its fiduciaries or its
assets or against any Credit Party or ERISA Affiliate in connection with any
Plan, (iv) alleges criminal misconduct by any Credit Party, (v) alleges the
violation of any law regarding, or seeks remedies in connection with, any
Environmental Liabilities; or (vi) involves any product recall;
(k) Insurance Notices. To Agent, disclosure of losses or
casualties required by Section 5.4 of the Agreement;
(l) Lease Default Notices. To Agent, copies of (i) any and all
default notices received under or with respect to any leased location or public
warehouse where Collateral is located, and (ii) such other notices or documents
as Agent may request in its reasonable discretion; and
(m) Lease Amendments. To Agent, copies of all material
amendments to real estate leases.
▇-▇
▇▇▇
(▇) Other Documents. To Agent and Lenders, such other
financial and other information respecting any Credit Party's business or
financial condition as Agent or any Lender shall, from time to time, request.
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ANNEX F (SECTION 4.1(b))
TO
CREDIT AGREEMENT
COLLATERAL REPORTS
Borrower shall deliver or cause to be delivered the following:
(a) To Agent, upon its request, and in no event less
frequently than the third Business Day after the fifteenth day of each calendar
month (together with a copy of all or any part of such delivery requested by any
Lender in writing after the Closing Date), each of the following, in each case
as of the last Business Day immediately preceding such fifteenth day:
(i) a Borrowing Base Certificate calculating Eligible
Accounts, accompanied by such supporting detail and documentation as
shall be requested by Agent in its reasonable discretion;
(ii) collateral reports with respect to Borrower, ▇▇▇▇▇▇▇
Trading and ▇▇▇▇▇▇▇ Canada, including all additions and reductions
(cash and non-cash) with respect to Accounts of Borrower and ▇▇▇▇▇▇▇
Canada, in each case accompanied by such supporting detail and
documentation as shall be requested by Agent in its reasonable
discretion; and
(iii) with respect to Borrower and its Subsidiaries, a weekly
trial balance showing Accounts outstanding aged from invoice due date
as follows: 1 to 30 days, 31 to 60 days, 61 to 90 days and 91 days or
more, accompanied by such supporting detail and documentation as shall
be requested by Agent in its reasonable discretion;
(b) To Agent, upon its request, and in no event less
frequently than the fifth Business Day after the end of each Fiscal Month
(together with a copy of all or any part of such delivery requested by any
Lender in writing after the Closing Date), each of the following, in each case
as of the last day of the immediately preceding Fiscal Month:
(i) each of the items described in clauses (i), (ii) and (iii)
of Paragraph (a) above;
(ii) a Borrowing Base Certificate calculating Borrower's and
▇▇▇▇▇▇▇ Trading's Eligible Inventory and Borrower's Eligible Raw
Materials and Eligible Fixed Assets, accompanied by such supporting
detail and documentation as shall be requested by Agent in its
reasonable discretion;
(iii) with respect to Borrower and its Subsidiaries, a summary
of Inventory by location and type with a supporting perpetual Inventory
report, in each case accompanied by such supporting detail and
documentation as shall be requested by Agent in its reasonable
discretion; and
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129
(iv) with respect to Borrower and its Subsidiaries, a summary
of Raw Materials by location and type with a supporting perpetual Raw
Materials report, in each case accompanied by such supporting detail
and documentation as shall be requested by Agent in its reasonable
discretion;
(c) To Agent, at the time of delivery of each of the monthly
Financial Statements delivered pursuant to Annex E, a reconciliation of the
Accounts trial balance and month-end Inventory reports of Borrower and its
Subsidiaries to Borrower's general ledger and monthly Financial Statements
delivered pursuant to such Annex E, in each case accompanied by such supporting
detail and documentation as shall be requested by Agent in its reasonable
discretion;
(d) To Agent, at the time of delivery of each of the quarterly
or annual Financial Statements delivered pursuant to Annex E, (i) a listing of
government contracts of Borrower and its Subsidiaries subject to the Federal
Assignment of Claims Act of 1940, the Financial Administration Act (Canada) or
any applicable state, province or territorial statute or municipal ordinance of
similar purpose and effect; and (ii) a list of any applications for the
registration of any Patent, Trademark or Copyright filed by any Credit Party
with the United States Patent and Trademark Office, the United States Copyright
Office or any similar office or agency (including in any foreign jurisdiction)
which any Credit Party thereof has filed in the prior Fiscal Quarter;
(e) Borrower, at its own expense, shall deliver to Agent the
results of each physical verification, if any, which Borrower or any of its
Subsidiaries may in their discretion have made, or caused any other Person to
have made on their behalf, of all or any portion of their Inventory (and, if a
Default or an Event of Default shall have occurred and be continuing, Borrower
shall, upon the request of Agent, conduct, and deliver the results of, such
physical verifications as Agent may require);
(f) Borrower, at its own expense, shall deliver to Agent such
appraisals and audits of its assets as Agent may request, such appraisals and
audits to be conducted by an appraiser and auditor, as applicable, and in form
and substance, satisfactory to Agent; provided, however, that so long as no
Default has occurred, Borrower shall not be required to pay for more than three
audits or more than one appraisal, in each case in any twelve month period. All
such appraisals and audits will be updated from time to time in Agent's
discretion; and
(g) Such other reports, statements and reconciliations with
respect to the Borrowing Base or Collateral of any or all Credit Parties as
Agent shall from time to time request in its reasonable discretion.
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130
ANNEX G (SECTION 6.10)
TO
CREDIT AGREEMENT
FINANCIAL COVENANTS
Borrower shall not breach or fail to comply with any of the
following financial covenants, each of which shall be calculated in accordance
with GAAP consistently applied:
(a) Maximum Capital Expenditures. Borrower and its Subsidiaries on a
consolidated basis shall not make Capital Expenditures during the following
periods that exceed in the aggregate the amounts set forth opposite each of such
periods:
Maximum Capital
Expenditures
Period per Period
------ ----------
January 1, 2000 to June 30, 2000 $1,500,000
January 1, 2000 to December 31, 2000 $3,000,000
January 1, 2001 to December 31, 2001 and each $3,500,000
Fiscal Year thereafter
(b) Minimum Fixed Charge Coverage Ratio. Borrower and its Subsidiaries
shall have on a consolidated basis at the end of each Fiscal Quarter set forth
below, a Fixed Charge Coverage Ratio for the 12-month period then ended (or with
respect to the Fiscal Quarters ending on or before September 30, 2000, the
period commencing on January 1, 2000 and ending on the last day of such Fiscal
Quarter) of not less than the following:
Minimum Fixed Charge
Period Coverage Ratio
------ --------------
For the Fiscal Quarter ending June 30, 2000 0.15 to 1.00
For the Fiscal Quarter ending September 30, 2000 0.75 to 1.00
For the Fiscal Quarter ending December 31, 2000 and for each 1.25 to 1.00
Fiscal Quarter thereafter
G-1
131
(c) Minimum EBITDA. Borrower and its Subsidiaries on a consolidated
basis shall have, at the end of each Fiscal Quarter set forth below, EBITDA for
the 12-month period then ended (or with respect to the Fiscal Quarters ending on
or before September 30, 2000, the period commencing on January 1, 2000 and
ending on the last day of such Fiscal Quarter) of not less than the following:
Period Minimum EBITDA
------ --------------
For the Fiscal Quarter ending March 31, 2000 $ (750,000)
For the Fiscal Quarter ending June 30, 2000 $ 500,000
For the Fiscal Quarter ending September 30, 2000 $3,100,000
For the Fiscal Quarter ending December 31, 2000 and for each $7,500,000
Fiscal Quarter thereafter
(c) Minimum Tangible Net Worth. Borrower and its Subsidiaries on a
consolidated basis shall maintain at all times Tangible Net Worth equal to or
greater than $60,000,000.
Unless otherwise specifically provided herein, any accounting term used
in the Agreement shall have the meaning customarily given such term in
accordance with GAAP, and all financial computations hereunder shall be computed
in accordance with GAAP consistently applied. That certain items or computations
are explicitly modified by the phrase "in accordance with GAAP" shall in no way
be construed to limit the foregoing. If any "Accounting Changes" (as defined
below) occur and such changes result in a change in the calculation of the
financial covenants, standards or terms used in the Agreement or any other Loan
Document, then Borrower, Agent and Lenders agree to enter into negotiations in
order to amend such provisions of the Agreement so as to equitably reflect such
Accounting Changes with the desired result that the criteria for evaluating
Borrower's and its Subsidiaries' financial condition shall be the same after
such Accounting Changes as if such Accounting Changes had not been made;
provided, however, that the agreement of Requisite Lenders to any required
amendments of such provisions shall be sufficient to bind all Lenders.
"Accounting Changes" means (a) changes in accounting principles required by the
promulgation of any rule, regulation, pronouncement or opinion by the Financial
Accounting Standards Board of the American Institute of Certified Public
Accountants (or successor thereto or any agency with similar functions), (b)
changes in accounting principles concurred in by Borrower's certified public
accountants; (c) purchase accounting adjustments under A.P.B. 16 and/or 17 and
EITF 88-16, and the application of the accounting principles set forth in FASB
109, including the establishment of reserves pursuant thereto and any subsequent
reversal (in whole or in part) of such reserves; and (d) the reversal of any
reserves established as a result of purchase accounting adjustments. All such
adjustments resulting from expenditures made subsequent to the Closing Date
(including capitalization of costs and expenses or payment of pre-Closing Date
liabilities) shall be treated as expenses in the period the expenditures are
made and deducted as part of the calculation of EBITDA in such period. If Agent,
Borrower and Requisite Lenders agree upon the required amendments, then after
appropriate amendments have been executed and the underlying Accounting Change
with respect thereto has been implemented, any reference to GAAP contained in
the Agreement or in
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132
any other Loan Document shall, only to the extent of such Accounting Change,
refer to GAAP, consistently applied after giving effect to the implementation of
such Accounting Change. If Agent, Borrower and Requisite Lenders cannot agree
upon the required amendments within thirty (30) days following the date of
implementation of any Accounting Change, then all Financial Statements delivered
and all calculations of Financial Covenants and other standards and terms in
accordance with the Agreement and the other Loan Documents shall be prepared,
delivered and made without regard to the underlying Accounting Change. For
purposes of Section 8.1, a breach of a Financial Covenant contained in this
Annex G shall be deemed to have occurred as of any date of determination by
Agent or as of the last day of any specified measurement period, regardless of
when the Financial Statements reflecting such breach are delivered to Agent.
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133
ANNEX H (SECTION 1.1(d))
TO
CREDIT AGREEMENT
LENDERS' WIRE TRANSFER INFORMATION
NOTE - INCLUDE REASON FOR PAYMENT ON ALL WIRES
(E.G., INTEREST, FEES, COLLECTIONS, ETC.).
H-1
134
ANNEX I (SECTION 11.10)
TO
CREDIT AGREEMENT
NOTICE ADDRESSES
(A) If to Agent or GE Capital, at
General Electric Capital Corporation
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ Piano Account Manager
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
O'Melveny & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
and
General Electric Capital Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Corporate Counsel-Commercial Finance
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
(B) If to Borrower, at
▇▇▇▇▇▇▇ Piano & Organ Company
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Chief Financial Officer
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
With copies to:
▇▇▇▇▇▇▇ Head & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, #▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
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135
ANNEX J (FROM ANNEX A - COMMITMENTS DEFINITION)
TO
CREDIT AGREEMENT
----------------
Lender(s):
General Electric Capital Corporation
Commitment $40,000,000