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Exhibit 10.28
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CREDIT AGREEMENT
Dated as of June 22, 1999,
among
STYLING TECHNOLOGY CORPORATION,
as Borrower,
THE OTHER CREDIT PARTIES SIGNATORY HERETO
FROM TIME TO TIME,
as Credit Parties,
THE LENDERS SIGNATORY HERETO FROM TIME TO TIME,
as Lenders,
and
GENERAL ELECTRIC CAPITAL CORPORATION,
as Agent and a Lender
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TABLE OF CONTENTS
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1. AMOUNT AND TERMS OF CREDIT .................................................... 1
1.1 Credit Facilities ....................................................... 1
1.2 Letters of Credit ....................................................... 4
1.3 Prepayments ............................................................. 4
1.4 Use of Proceeds ......................................................... 6
1.5 Interest and Applicable Margins ......................................... 6
1.6 Eligible Accounts ....................................................... 9
1.7 Eligible Inventory ...................................................... 11
1.8 Cash Management System .................................................. 13
1.9 Fees .................................................................... 13
1.10 Receipt of Payments ..................................................... 13
1.11 Application and Allocation of Payments .................................. 13
1.12 Loan Account and Accounting ............................................. 14
1.13 Indemnity ............................................................... 14
1.14 Access .................................................................. 15
1.15 Taxes ................................................................... 16
1.16 Capital Adequacy; Increased Costs; Illegality ........................... 17
1.17 Single Loan ............................................................. 18
2. CONDITIONS PRECEDENT .......................................................... 18
2.1 Conditions to the Initial Loans ......................................... 18
2.2 Further Conditions to Each Loan ......................................... 19
3. REPRESENTATIONS AND WARRANTIES ................................................ 20
3.1 Corporate Existence; Compliance with Law ................................ 20
3.2 Executive Offices; Collateral Locations; FEIN ........................... 20
3.3 Corporate Power, Authorization, Enforceable Obligations ................. 21
3.4 Financial Statements and Projections .................................... 21
3.5 Material Adverse Effect ................................................. 22
3.6 Ownership of Property; Liens ............................................ 22
3.7 Labor Matters ........................................................... 23
3.8 Ventures, Subsidiaries and Affiliates; Outstanding Stock and Indebtedness 23
3.9 Government Regulation ................................................... 23
3.10 Margin Regulations ...................................................... 24
3.11 Taxes ................................................................... 24
3.12 ERISA ................................................................... 24
3.13 No Litigation ........................................................... 25
3.14 Brokers ................................................................. 25
3.15 Intellectual Property ................................................... 26
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
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3.22 Agreements and Other Documents .......................................... 27
3.23 Solvency ................................................................ 27
3.24 Year 2000 Representations ............................................... 28
3.25 Subordinated Debt ....................................................... 28
4. FINANCIAL STATEMENTS AND INFORMATION .......................................... 28
4.1 Reports and Notices ..................................................... 28
4.2 Communication with Accountants .......................................... 28
5. AFFIRMATIVE COVENANTS ......................................................... 29
5.1 Maintenance of Existence and Conduct of Business ........................ 29
5.2 Payment of Obligations .................................................. 29
5.3 Books and Records ....................................................... 29
5.4 Insurance; Damage to or Destruction of Collateral; Condemnation ......... 30
5.5 Compliance with Laws .................................................... 31
5.6 Supplemental Disclosure ................................................. 32
5.7 Intellectual Property ................................................... 32
5.8 Environmental Matters ................................................... 32
5.9 Landlords' Agreements, Mortgagee Agreements and Bailee Letters .......... 33
5.10 Further Assurances ...................................................... 33
5.11 Year 2000 Problems ...................................................... 33
6. NEGATIVE COVENANTS ............................................................ 33
6.1 Mergers, Subsidiaries, Etc .............................................. 34
6.2 Investments; Loans and Advances ......................................... 36
6.3 Indebtedness ............................................................ 37
6.4 Employee Loans and Affiliate Transactions ............................... 38
6.5 Capital Structure and Business .......................................... 39
6.6 Guaranteed Indebtedness ................................................. 39
6.7 Liens ................................................................... 39
6.8 Sale of Stock and Assets ................................................ 40
6.9 ERISA ................................................................... 40
6.10 Financial Covenants ..................................................... 40
6.11 Hazardous Materials ..................................................... 40
6.12 Sale-Leasebacks ......................................................... 40
6.13 Cancellation of Indebtedness ............................................ 40
6.14 Restricted Payments ..................................................... 41
6.15 Change of Corporate Name or Location; Change of Fiscal Year ............. 41
6.16 No Impairment of Intercompany Transfers ................................. 42
6.17 No Speculative Transactions ............................................. 42
6.18 Leases .................................................................. 42
6.19 Changes and Other Matters Relating to Subordinated Debt ................. 42
7. TERM .......................................................................... 43
7.1 Termination ............................................................. 43
7.2 Survival of Obligations Upon Termination of Financing Arrangements ...... 43
8. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ........................................ 43
8.1 Events of Default ....................................................... 43
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8.2 Remedies ................................................................ 45
8.3 Waivers by Credit Parties ............................................... 46
9. ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT ........................... 46
9.1 Assignment and Participations ........................................... 46
9.2 Appointment of Agent .................................................... 48
9.3 Agent's Reliance, Etc ................................................... 48
9.4 GE Capital and Affiliates ............................................... 49
9.5 Lender Credit Decision .................................................. 49
9.6 Indemnification ......................................................... 49
9.7 Successor Agent ......................................................... 50
9.8 Setoff and Sharing of Payments .......................................... 50
9.9 Advances; Non-Funding Lenders; Information; Actions in Concert .......... 51
10.SUCCESSORS AND ASSIGNS ........................................................ 53
11.MISCELLANEOUS ................................................................. 53
11.1 Complete Agreement; Modification of Agreement .......................... 53
11.2 Amendments and Waivers ................................................. 53
11.3 Fees and Expenses ...................................................... 55
11.4 No Waiver .............................................................. 56
11.5 Remedies ............................................................... 57
11.6 Severability ........................................................... 57
11.7 Conflict of Terms ...................................................... 57
11.8 Confidentiality ........................................................ 57
11.9 GOVERNING LAW .......................................................... 57
11.10 Notices ................................................................ 58
11.11 Section Titles ......................................................... 59
11.12 Counterparts ........................................................... 59
11.13 WAIVER OF JURY TRIAL ................................................... 59
11.14 Press Releases ......................................................... 59
11.15 Reinstatement .......................................................... 59
11.16 Advice of Counsel ...................................................... 60
11.17 No Strict Construction ................................................. 60
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INDEX OF APPENDICES
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 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 (Annex A) - Commitments as of Closing Date
Exhibit 1.1(a)(i) - Form of Notice of Revolving Credit Advance
Exhibit 1.1(a)(ii) - Form of Revolving Note
Exhibit 1.1(b)(ii) - Form of Swing Line Note
Exhibit 1.5(e) - Form of Notice of Conversion/Continuation
Exhibit 4.1(b) - Form of Borrowing Base Certificate
Exhibit 9.1(a) - Form of Assignment Agreement
Schedule (1.1) - Agent Representative
Disclosure Schedule (1.4) - Sources and Uses; Funds Flow Memorandum
Disclosure Schedule (3.2) - Executive Offices; Collateral Locations; FEIN
Disclosure Schedule (3.4(a)) - Financial Statements
Disclosure Schedule (3.4(b)) - Pro Forma
Disclosure Schedule (3.4(c)) - Projections
Disclosure Schedule (3.4(d)) - Fair Salable Balance Sheet
Disclosure Schedule (3.6) - Real Estate and Leases
Disclosure Schedule (3.7) - Labor Matters
Disclosure Schedule (3.8) - Ventures and Affiliates; Stock
Disclosure Schedule (3.11) - Tax Matters
Disclosure Schedule (3.12) - ERISA Plans
Disclosure Schedule (3.13) - Litigation
Disclosure Schedule (3.14) - Brokers
Disclosure Schedule (3.15) - Intellectual Property
Disclosure Schedule (3.17) - Hazardous Materials
Disclosure Schedule (3.18) - Insurance
Disclosure Schedule (3.19) - Deposit and Disbursement Accounts
Disclosure Schedule (3.20) - Government Contracts
Disclosure Schedule (3.22) - Material Agreements
Disclosure Schedule (5.1) - Trade Names
Disclosure Schedule (6.3) - Indebtedness
Disclosure Schedule (6.4(a)) - Transactions with Affiliates
Disclosure Schedule (6.7) - Existing Liens
Disclosure Schedule (8.1(n)) - Material Agreements for Default Purposes
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THIS CREDIT AGREEMENT ("Agreement") is entered into as of June 22,
1999, by and among STYLING TECHNOLOGY CORPORATION, a Delaware corporation
("Borrower"); the other Credit Parties signatory hereto from time to time;
GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation (in its individual
capacity, "GE Capital"), for itself, as a Lender, and as Agent for Lenders; and
the other Lenders signatory hereto from time to time.
RECITALS
A. Borrower has requested that Lenders extend a revolving credit
facility to Borrower of up to Ninety Million Dollars ($90,000,000) in the
aggregate for the purpose of refinancing certain indebtedness of Borrower,
including certain unsecured indebtedness of Borrower assumed by it in connection
with its acquisition of Ft. Pitt Acquisition, Inc., and to provide (i) working
capital financing for Borrower and the other Credit Parties and funds for
capital expenditures and acquisitions permitted herein, (ii) funds for other
general corporate purposes of Borrower and the other Credit Parties, and (iii)
funds for certain fees and expenses in connection with the financing
transactions contemplated herein, and 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.
B. Borrower desires to secure all of its obligations under the Loan
Documents by granting to Agent, for the benefit of Agent and Lenders, a security
interest in and lien upon all of its existing and after-acquired personal and
real property.
C. 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
exhibits, schedules, annexes 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 this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter contained, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, 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 to Borrower 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 Revolving Loan Commitment. The
obligations of each Revolving Lender hereunder shall be several and not joint.
Except to the extent otherwise provided in Section 1.1(a)(iii), the aggregate
amount of Revolving Credit Advances outstanding shall not exceed at any time the
lesser of (A) the
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Maximum Amount and (B) the Borrowing Base, in each case less the sum of the
Letter of Credit Obligations and the Swing Line Loan outstanding at such time
("Borrowing Availability"). 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 a representative
of Agent identified in Schedule (1.1) at the address specified therein. Any such
notice must be given no later than (1) 10:00 a.m. (California time) on the
Business Day of the proposed Revolving Credit Advance, in the case of an Index
Rate Loan, or (2) 10:00 a.m. (California time) on the date that is three
Business Days prior to the proposed Revolving Credit Advance, in the case of a
LIBOR Loan. Each such notice (a "Notice of Revolving Credit Advance") shall 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 reasonably required by Agent. If Borrower
desires to have any Revolving Credit Advance bear interest by reference to a
LIBOR Rate, it must comply with Section 1.5(e).
(ii) Borrower shall execute and deliver to each Revolving
Lender a note to evidence the Revolving Loan Commitment of such Revolving
Lender, which note shall be (A) in the principal amount of the Revolving Loan
Commitment of such Revolving Lender, (B) dated the Closing Date and (C)
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 the applicable Revolving Lender's
Revolving Loan Commitment or, if less, such Revolving Lender's Pro Rata Share of
the aggregate unpaid principal amount of all Revolving Credit Advances made to
Borrower together with interest thereon as prescribed in Section 1.5. The entire
unpaid balance of the Revolving Loan and all other noncontingent Obligations
shall be immediately due and payable in full in immediately available funds on
the Commitment Termination Date.
(iii) At the request of Borrower, Agent may (but shall have
absolutely no obligation to), in its discretion, make Revolving Credit Advances
to Borrower on behalf of Revolving Lenders in amounts that cause the outstanding
balance of the aggregate Revolving Loan to exceed the Borrowing Base (less the
Swing Line Loan) (any such excess Revolving Credit Advances are herein referred
to collectively as "Overadvances"); provided, that (A) no such event or
occurrence shall cause or constitute a waiver of Agent's, the Swing Line
Lender's or Revolving Lenders' right to refuse to make any further Overadvances,
Swing Line Advances or Revolving Credit Advances, or incur any Letter of Credit
Obligations, as the case may be, at any time that an Overadvance exists or would
result therefrom, and (B) any Overadvances shall not constitute a Default or
Event of Default due to Borrower's failure to comply with Section 1.3(b)(i) for
so long as Agent permits such Overadvance to be outstanding. In addition,
Overadvances may be made even if the conditions to lending set forth in Section
2 have not been met. All Overadvances shall constitute Index Rate Loans, shall
bear interest at the Default Rate and shall be payable on demand. Except as
otherwise provided in Section 1.11(b), the authority of Agent to make
Overadvances (1) is limited to an aggregate amount not to exceed $500,000 at any
time, (2) shall not cause the Revolving Loan to exceed the Maximum Amount, and
(3) may be revoked prospectively by a written notice to Agent signed by
Revolving Lenders holding fifty percent (50%) or more of the Revolving Loan
Commitments.
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(b) Swing Line Facility.
(i) Swing Line Advances. Agent shall notify the Swing Line
Lender upon Agent's receipt of any Notice of Revolving Credit Advance. Subject
to the terms and conditions hereof, the Swing Line Lender may, in its
discretion, make available from time to time until the Commitment Termination
Date advances (each, a "Swing Line Advance") in accordance with any such notice.
The aggregate amount of Swing Line Advances outstanding shall not exceed at any
time the lesser of (A) the Swing Line Commitment and (B) the lesser of (1) the
Maximum Amount and (2) (except for Overadvances) the Borrowing Base, in each
case less the outstanding balance of the Revolving Loan at such time ("Swing
Line Availability"). Until the Commitment Termination Date, Borrower may from
time to time borrow, repay and reborrow under this Section 1.1(b). Each Swing
Line Advance shall be made pursuant to a Notice of Revolving Credit Advance
delivered by Borrower to Agent in accordance with Section 1.1(a). Any such
notice must be given no later than 10:00 a.m. (California time) on the Business
Day of the proposed Swing Line Advance. Notwithstanding any other provision of
this Agreement or the other Loan Documents, the Swing Line Loan shall constitute
an Index Rate Loan. Unless the Swing Line Lender has received at least one
Business Day's prior written notice from Agent or Requisite Revolving Lenders
instructing it not to make any Swing Line Advance, the Swing Line Lender shall,
notwithstanding the failure of any condition precedent set forth in Section 2.2
(other than the condition precedent set forth in Section 2.2(e)) be entitled to
fund such Swing Line Advance and, in connection with such Swing Line Advance, to
have each Revolving Lender make Revolving Credit Advances in accordance with
Section 1.1(b)(iii) and to purchase participating interests in accordance with
Section 1.1(b)(iv). Borrower shall repay the aggregate outstanding principal
amount of the Swing Line Loan upon demand therefor by Agent.
(ii) Swing Line Note. Borrower shall execute and deliver to
the Swing Line Lender a promissory note to evidence the Swing Line Commitment.
Such note shall be (A) in the principal amount of the Swing Line Commitment, (B)
dated the Closing Date, and (C) substantially in the form of Exhibit 1.1(b)(ii)
(the "Swing Line Note"). The Swing Line Note shall represent the obligation of
Borrower to pay the amount of the Swing Line Commitment or, if less, the
aggregate unpaid principal amount of all Swing Line Advances made to Borrower
together with interest thereon as prescribed in Section 1.5. The entire unpaid
balance of the Swing Line Loan and all other noncontingent Obligations shall be
immediately due and payable in full in immediately available funds on the
Commitment Termination Date if not sooner paid in full.
(iii) Refunding of Swing Line Loans. The Swing Line Lender, at
any time and from time to time in its sole and absolute discretion, but no less
frequently than once weekly, shall on behalf of Borrower (and Borrower hereby
irrevocably authorizes the Swing Line Lender to so act on its behalf) request
each Revolving Lender (including the Swing Line Lender) to make a Revolving
Credit Advance to Borrower (which shall be an Index Rate Loan) in an amount
equal to such Revolving Lender's Pro Rata Share of the principal amount of the
Swing Line Loan (the "Refunded Swing Line Loan") outstanding on the date such
notice is given. Unless any of the events described in Sections 8.1(h) or 8.1(i)
shall have occurred (in which event the procedures of Section 1.1(b)(iv) shall
apply) and regardless of whether the conditions precedent set forth in this
Agreement to the making of a Revolving Credit Advance are then
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satisfied, each Revolving Lender shall disburse directly to Agent its Pro Rata
Share of a Revolving Credit Advance on behalf of the Swing Line Lender prior to
12:00 noon (California time) in immediately available funds on the Business Day
next succeeding the date such notice is given. The proceeds of such Revolving
Credit Advances shall be immediately paid to the Swing Line Lender and applied
to repay the Refunded Swing Line Loan.
(iv) Participation in Swing Line Loans. If, prior to refunding
a Swing Line Loan with a Revolving Credit Advance pursuant to Section
1.1(b)(iii), one of the events described in Sections 8.1(h) or 8.1(i) shall have
occurred, then, subject to the provisions of Section 1.1(b)(v), each Revolving
Lender shall, on the date such Revolving Credit Advance was to have been made
for the benefit of Borrower, purchase from the Swing Line Lender an undivided
participation interest in the Swing Line Loan in an amount equal to its Pro Rata
Share of such Swing Line Loan. Upon request, each Revolving Lender shall
promptly transfer to the Swing Line Lender, in immediately available funds, the
amount of its participation interest.
(v) Revolving Lenders' Obligations Unconditional. Each
Revolving Lender's obligation to make Revolving Credit Advances in accordance
with Section 1.1(b)(iii) and to purchase participating interests in accordance
with Section 1.1(b)(iv) shall be absolute and unconditional and shall not be
affected by any circumstance, including: (A) any setoff, counterclaim,
recoupment, defense or other right that such Revolving Lender may have against
the Swing Line Lender, Borrower or any other Person for any reason whatsoever;
(B) the occurrence or continuance of any Default or Event of Default; (C) any
inability of Borrower to satisfy the conditions precedent to borrowing set forth
in this Agreement on the date upon which such participating interest is to be
purchased; or (D) any other circumstance, happening or event whatsoever, whether
or not similar to any of the foregoing. If any Revolving Lender does not make
available to Agent or the Swing Line Lender, as applicable, the amount required
pursuant to Sections 1.1(b)(iii) or 1.1(b)(iv), as the case may be, the Swing
Line Lender shall be entitled to recover such amount on demand from such
Revolving Lender, together with interest thereon for each day from the date of
non-payment until such amount is paid in full at the Federal Funds Rate for the
first two Business Days and at the Index Rate thereafter.
(c) Reliance on Notices. Agent shall be entitled to rely upon, and
shall be fully protected in relying upon, any Notice of Revolving Credit
Advance, Notice of Conversion/Continuation or similar notice reasonably believed
by Agent to be genuine. Agent may assume that each Person executing and
delivering any such 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 Prepayments. Borrower may at any time on at least five
days' prior written notice to Agent voluntarily prepay all or part of the
Revolving Loan and permanently reduce (but not terminate) the Revolving Loan
Commitment; provided, that (i) any
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such prepayments or reductions shall be in a minimum amount of $1,000,000 and
integral multiples of $1,000,000 in excess of such amount and (ii) the Revolving
Loan Commitment shall not be reduced to an amount less than $50,000,000.
Borrower may at any time on at least ten days' prior written notice to Agent
terminate the Revolving Loan Commitment; provided, that upon such termination
all Loans and other Obligations shall be immediately due and payable in full and
Borrower shall make arrangements, in accordance with the terms and conditions of
Annex B, for the satisfaction of any outstanding Letter of Credit Obligations.
Any such voluntary prepayment and any such reduction or termination of the
Revolving Loan Commitment must be accompanied by payment of Agent's and each
Lender's reasonable out-of-pocket expenses and payment of any LIBOR funding
breakage costs in accordance with Section 1.13(b). Upon any such prepayment and
reduction or termination of the Revolving Loan Commitment, Borrower's right to
request Revolving Credit Advances or Swing Line 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 Revolving Loan Commitment shall not require a
corresponding pro rata reduction in the L/C Sublimit. Each notice of partial
prepayment shall designate the Loan or other Obligations to which such
prepayment is to be applied.
(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, in
each case less the outstanding Swing Line Loan at such time, then 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.
Notwithstanding the foregoing, any Overadvance made pursuant to Section
1.1(a)(iii) shall be repaid only on demand.
(ii) Immediately upon receipt by any Credit Party of any cash
proceeds of any asset disposition or any sale of Stock of any Subsidiary of any
Credit Party, Borrower shall prepay the Loans in an amount equal to all such
proceeds, net of (A) commissions and other reasonable and customary transaction
costs, fees and expenses properly attributable to such transaction and payable
by any Credit Party in connection therewith (in each case, paid to
non-Affiliates), (B) transfer taxes, (C) amounts payable to holders of senior
Liens (to the extent such Liens constitute Permitted Encumbrances hereunder), if
any, and (D) an appropriate reserve for income taxes in accordance with GAAP in
connection therewith. Any such prepayment shall be applied in accordance with
Section 1.3(c).
(iii) If any Credit Party issues Stock or debt securities, no
later than the Business Day following the date of receipt of any cash proceeds
thereof, Borrower shall prepay the Loans in an amount equal to all such
proceeds, net of underwriting discounts and commissions and other reasonable
costs paid to non-Affiliates in connection therewith. Any such prepayment shall
be applied in accordance with Section 1.3(c).
(c) Application of Certain Mandatory Prepayments. Any prepayments
made
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by Borrower pursuant to Sections 1.3(b)(ii) or (b)(iii) or Section 1.3(d) 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 Swing Line Loan; third, to the principal balance of the
Swing Line Loan until the same shall have been repaid in full; fourth, to
interest then due and payable on the Revolving Credit Advances; fifth, to the
outstanding principal balance of Revolving Credit Advances until the same shall
have been paid in full; and sixth, 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. Neither the Revolving Loan Commitment nor the Swing
Line Commitment shall be permanently reduced by the amount of any such
prepayments.
(d) Application of Prepayments from Insurance and Condemnation
Proceeds. Prepayments from insurance or condemnation proceeds in accordance with
Sections 5.4(c) or 5.4(d), respectively, shall be applied in accordance with
Section 1.3(c).
(e) No Consent to Prohibited Transactions. Nothing in this Section
1.3 shall be construed to constitute Agent's or any Lender's consent to any
transaction that is not permitted by other provisions of this Agreement or the
other Loan Documents.
1.4 Use of Proceeds. Borrower shall utilize the proceeds of the Revolving
Loan and the Swing Line Loan solely for the Refinancing and the other Related
Transactions (and to pay any related transaction expenses), for the financing of
Borrower's and the other Credit Parties' 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), and to provide funds for capital
expenditures and Permitted Acquisitions. 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 such
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 following rates: (i)
with respect to the Revolving Credit Advances, the Index Rate plus the
Applicable Revolver Index Margin per annum or, at the election of Borrower, the
applicable LIBOR Rate plus the Applicable Revolver LIBOR Margin per annum, based
on the aggregate Revolving Credit Advances outstanding from time to time; and
(ii) with respect to the Swing Line Loan, the Index Rate plus the Applicable
Revolver Index Margin per annum.
The Applicable Margins as of the Closing Date shall be determined by
reference to the following table:
Applicable Margin Per Annum Rate
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Applicable Revolver Index Margin 1.75%
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Applicable Revolver LIBOR Margin 3.25%
Applicable L/C Margin 2.00%
Applicable Unused Line Fee Margin 0.50%
The Applicable Revolver Index Margin and the Applicable Revolver LIBOR Margin
shall be adjusted (up or down) prospectively on a quarterly basis as determined
by Borrower's consolidated financial performance, which adjustments shall be
implemented commencing on the later of (A) January 1, 2000, and (B) the first
day of the first calendar month that occurs more than five days after delivery
of Borrower's Financial Statements to Agent for the Fiscal Quarter ending
September 30, 1999 (such date hereinafter the "First Adjustment Date").
Adjustments in such Applicable Margins will be determined by reference to the
following grid:
If Total Level of
Leverage Ratio is: Applicable Margins:
----------------- ------------------
Greater than or equal to 0, but < 4.00 Level I
Greater than or equal to 4.00, but < 4.25 Level II
Greater than or equal to 4.25, but < 4.50 Level III
Greater than or equal to 4.50, but < 4.75 Level IV
Greater than or equal to 4.75, but < 5.00 Level V
Greater than or equal to 5.00, but < 5.25 Level VI
< 0, or Greater than or equal to 5.25 Level VII
Applicable Margins
----------------------------------------------------------------------------------------------
Level I ▇▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇
----------------------------------------------------------------------------------------------------------------------------
Applicable Revolver 0.50% 0.75% 1.00% 1.25% 1.50% 1.75% 2.00%
Index Margin
----------------------------------------------------------------------------------------------------------------------------
Applicable Revolver 2.00% 2.25% 2.50% 2.75% 3.00% 3.25% 3.50%
LIBOR Margin
----------------------------------------------------------------------------------------------------------------------------
All adjustments in such Applicable Margins after the First
Adjustment Date shall be implemented quarterly on a prospective basis,
commencing with the first day of the first calendar month that occurs more than
five days after the date of delivery to Agent of the quarterly unaudited or
annual audited (as applicable) Financial Statements evidencing the need for an
adjustment. Concurrently with the delivery of such Financial Statements,
Borrower shall deliver to Agent a certificate, signed by its chief financial
officer or, in the event such officer is not available, its chief accounting
officer, setting forth in reasonable detail the basis for the continuance of, or
any change in, such 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 such Applicable Margins to the next 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 and be continuing at the time any
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reduction in such 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 of any of the Obligations 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, 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 360-day year, in each case for
the actual number of days occurring in the period for which such Fees or
interest are payable. Each determination by Agent of an interest rate or Fees
hereunder shall be final, binding and conclusive on Borrower (absent
demonstrable error).
(d) So long as an Event of Default shall have occurred and be
continuing under Sections 8.1(a), 8.1(h) or 8.1(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 Revolving 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 (2.00%) per annum above the rates of interest or the rate of
such Fees otherwise applicable hereunder (the "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) Subject to the conditions precedent set forth in Section 2.2,
Borrower shall have the option to (i) request that any Revolving Credit Advance
be made as a LIBOR Loan, (ii) convert at any time all or any part of outstanding
Loans (other than the Swing Line Loan) from Index Rate Loans to LIBOR Loans,
(iii) convert any LIBOR Loan to an Index Rate Loan, subject to payment of LIBOR
breakage costs in accordance with Section 1.13(b) if such conversion is made
prior to the expiration of the LIBOR Period applicable thereto, or (iv) continue
all or any portion of any Loan (other than the Swing Line Loan) as a LIBOR Loan
upon the expiration of the applicable LIBOR Period and the succeeding LIBOR
Period of that continued Loan shall commence on the last day of the LIBOR Period
of the Loan to be continued. Any Loan to be made or continued as, or converted
into, a LIBOR Loan must be in a minimum amount of $2,000,000 and integral
multiples of $500,000 in excess of such amount. Any such election must be made
by 10:00 a.m. (California time) on the third Business Day prior to (A) the date
of any proposed Advance that is to bear interest at the LIBOR Rate, (B) the end
of each LIBOR Period with respect to any LIBOR Loans to be continued as such, or
(C) the date on which Borrower wishes to convert any Index Rate Loan to a LIBOR
Loan for a LIBOR Period designated by Borrower in such election. If no election
is received with respect to a LIBOR Loan by 10:00 a.m. (California time) on the
third Business Day prior to the end of the LIBOR Period with respect thereto (or
if a Default or an Event of Default shall have occurred and be continuing or the
additional conditions precedent set forth in Section 2.2 shall not have been
satisfied), that LIBOR Loan shall be converted to an Index Rate Loan at the end
of its LIBOR Period. Borrower must make such election by notice to Agent in
writing, by telecopy or overnight courier. In the case of any conversion or
continuation, such election must be made pursuant to a written notice (a "Notice
of Conversion/Continuation") in the form of Exhibit 1.5(e). No Loan may be made
as or converted into a LIBOR Loan until the earlier of 45 days after the Closing
Date or completion of the
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syndication.
(f) 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, 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 that 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 (e), 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 that 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(f), a court of competent
jurisdiction shall finally determine that a Lender has received interest
hereunder in excess of the Maximum Lawful Rate, then Agent shall, to the extent
permitted by applicable law, promptly apply such excess in the order specified
in Section 1.11 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 any other information available to Agent,
Agent shall in its reasonable credit judgment determine which Accounts of any
Credit Party shall be "Eligible Accounts" for purposes of this Agreement. In
determining whether a particular Account constitutes an Eligible Account, Agent
shall not include any such Account to which any of the exclusionary criteria set
forth below applies. Agent reserves the right, at any time and from time to time
after the Closing Date in its reasonable credit judgment, to adjust any such
criteria, to establish new criteria, to adjust advance rates, and to establish
and modify Reserves with respect to Eligible Accounts, in each case subject to
the approval of Supermajority Revolving Lenders in the event any such
adjustments or the establishment of such new criteria or Reserves have the
effect of making more credit available. Eligible Accounts shall not include any
Account of any Credit Party:
(a) that does not arise from the sale of goods or the performance of
services by such Credit Party in the ordinary course of its business;
(b) upon which such Credit Party's right to receive payment is not
absolute or is contingent upon the fulfillment of any condition whatsoever or
(i) as to which such Credit Party is not able to bring suit or otherwise enforce
its remedies against the Account Debtor through judicial process, or (ii) 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 such Credit Party's
completion of further performance under such contract or is subject to the
equitable lien of a surety bond issuer;
(c) to the extent that any defense, counterclaim, setoff or dispute
is asserted as to
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such Account;
(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, reasonably acceptable to Agent
in form and substance, has not been sent to the applicable Account Debtor;
(f) that (i) is not owned by such Credit Party 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;
(g) that arises from a sale to any director, officer, other employee
or Affiliate of any Credit Party or to any entity that 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 or instrumentality thereof unless Agent, in
its sole discretion, has agreed to the contrary in writing and Borrower, if
necessary or desirable, has complied with the Federal Assignment of Claims Act
of 1940 or any applicable state statute or municipal ordinance of similar
purpose and effect with respect to such obligation;
(i) that is the obligation of an Account Debtor located in a foreign
country unless (A) payment thereof is assured by a letter of credit assigned and
delivered to Agent, reasonably satisfactory to Agent as to form, amount and
issuer or (B) such Account Debtor is otherwise acceptable to Agent in its sole
discretion and then only to the extent that the Dollar amount of such Account,
when added to the Dollar amount of all other foreign Accounts that constitute
Eligible Accounts pursuant to this clause (B), does not exceed the lesser of (1)
$2,000,000 and (2) 5% of the Dollar amount of all Eligible Accounts;
(j) to the extent such Credit Party is liable for goods sold or
services rendered by the applicable Account Debtor to any Credit Party but only
to the extent of the potential offset;
(k) that arises with respect to goods that 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) (A) if the invoice for such Account provides that payment
is due within 60 days following the date thereof, such Account is not paid
within the earlier of 60 days following its due date or 90 days following
its original invoice date and (B) if the invoice for such Account provides
that payment is due more than 60 days following the date thereof, such
Account is not paid within 30 days following the due date thereof;
(ii) the 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
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they come due; or
(iii) a 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;
(m) if the invoice for such Account provides that payment is due
more than 60 days but not more than 120 days following the date thereof, to the
extent the Dollar amount of such Account, when added to the Dollar amount of all
such Accounts, exceeds the lesser of (i) $2,000,000 or (ii) 5% of the Dollar
amount of all Eligible Accounts;
(n) if the invoice for such Account provides that payment is due
more than 120 days following the date thereof;
(o) that is an obligation of an Account Debtor with respect to which
fifty percent (50%) or more of the Dollar amount of all Accounts owing by such
Account Debtor are ineligible under the other criteria set forth in this Section
1.6;
(p) as to which Agent's Lien thereon, on behalf of itself and
Lenders, is not a first priority perfected Lien;
(q) as to which any of the representations or warranties pertaining
to Accounts in the Loan Documents is untrue;
(r) to the extent such Account is evidenced by a judgment,
Instrument or Chattel Paper;
(s) to the extent such Account exceeds any credit limit established
by Agent in its reasonable credit judgment;
(t) to the extent that such Account, together with all other
Accounts owing by such Account Debtor and its Affiliates as of any date of
determination, exceeds ten percent (10%) of all Eligible Accounts, but only to
the extent of such excess;
(u) that is payable in any currency other than Dollars; or
(v) that is otherwise 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 any other information
available to Agent, Agent shall in its reasonable credit judgment determine
which Inventory of any Credit Party shall be "Eligible Inventory" for purposes
of this Agreement. In determining whether any particular Inventory constitutes
Eligible Inventory, Agent shall not include any such Inventory to which any of
the exclusionary criteria set forth below applies. Agent reserves the right, at
any time and from time to time after the Closing Date in its reasonable credit
judgment, to adjust any such criteria, to establish new criteria, to adjust
advance rates, and to establish and modify Reserves with respect to Eligible
Inventory, in each case subject to the approval of Supermajority Revolving
Lenders in the event any such adjustments or the establishment of such new
criteria or Reserves have the effect of making more credit available. Eligible
Inventory shall not include any Inventory of any Credit Party that:
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(a) is not owned by such Credit Party 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 such Credit Party's performance with respect to such Inventory), except
the Liens in favor of Agent, on behalf of itself and Lenders, and Permitted
Encumbrances that are subordinate thereto;
(b) (i) is not located on premises owned or leased by or at a public
warehouse or outside processing facility used by a Credit Party, in each case
located within the United States of America and referenced in Disclosure
Schedule (3.2); provided, that Inventory located in the United Kingdom shall not
be deemed ineligible solely pursuant to this clause (i) (A) if such Inventory is
located on premises leased by a Credit Party and (B) to the extent that the
aggregate book value of such Inventory does not exceed $2,000,000 at any time,
(ii) is located at a public warehouse or outside processing facility, unless (A)
the warehouseman or processor has executed a bailee letter or access agreement
in form and substance reasonably acceptable to Agent or (B) Agent has determined
the amount of, and is maintaining, a Reserve against the Borrowing Base with
respect to the Inventory located at such public warehouse or outside processing
facility, (iii) is located at one of a Credit Party's owned or leased locations,
unless either (A) the mortgagee or landlord, as applicable, has executed a
mortgagee's waiver or a landlord's waiver, as the case may be, in form and
substance reasonably acceptable to Agent or (B) Agent has determined the amount
of, and is maintaining, a Reserve against the Borrowing Base with respect to the
Inventory located at such owned or leased location, or (iv) is located at any
site if the aggregate book value of Inventory at any such location is less than
$50,000;
(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 with all necessary endorsements, free and
clear of all Liens except those in favor of Agent, on behalf of itself and
Lenders, and Permitted Encumbrances that are subordinate thereto;
(e) in Agent's reasonable determination is excess, obsolete,
unsalable, shopworn, seconds, damaged or unfit for sale;
(f) consists of display items or packing or shipping materials,
manufacturing supplies or replacement parts;
(g) consists of goods that have been returned by the buyer unless
such goods can be resold on pricing terms consistent with sales of new goods of
the same type;
(h) is not of a type held for sale in the ordinary course of such
Credit Party's business;
(i) is not subject to a first priority perfected Lien in favor of
Agent, on behalf of itself and Lenders;
(j) does not comply with any of the representations or warranties
pertaining to Inventory set forth in the Loan Documents;
(k) consists of any costs associated with "freight-in" charges;
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(l) consists of Hazardous Materials or goods that can be transported
or sold only with licenses that are not readily available;
(m) is not covered by casualty insurance reasonably acceptable to
Agent; or
(n) is otherwise unacceptable to Agent in its reasonable credit
judgment.
1.8 Cash Management System. On or prior to the Closing Date, Borrower will
establish and will maintain until the Termination Date, the cash management
system described in Annex C (the "Cash Management System").
1.9 Fees.
(a) Borrower shall pay to GE Capital, individually, the Fees
specified in that certain fee letter of even date herewith 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
shall 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 (i) the Applicable Unused Line Fee Margin (calculated on
the basis of a 360-day year for actual days elapsed) multiplied by (ii) (A) the
Maximum Amount (as it may be reduced from time to time) minus (B) the average
for the period of the daily closing balances of the Revolving Loan and the Swing
Line Loan outstanding during the period for which such Fee is due.
(c) Borrower shall pay to Agent, for the ratable benefit of
Revolving Lenders, the Letter of Credit Fee as provided in Annex B.
1.10 Receipt of Payments. Borrower shall make each payment under this
Agreement not later than 11:00 a.m. (California 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 Business Day of receipt of immediately available funds therefor in the
Collection Account prior to 11:00 a.m. (California time). Payments received
after 11:00 a.m. (California time) on any Business Day or on a day that is not a
Business Day shall be deemed to have been received on the following Business
Day.
1.11 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 first to the Swing Line Loan
and second to the Revolving Loan; (ii) voluntary prepayments shall be applied as
determined by Borrower, subject to the provisions of Section 1.3(a); and (iii)
mandatory prepayments shall be applied as set forth in Sections 1.3(c) and
1.3(d). 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
13
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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: (A) to
Fees and Agent's expenses reimbursable hereunder; (B) to interest on the Swing
Line Loan; (C) to principal payments on the Swing Line Loan; (D) to interest on
the Revolving Credit Advances; (E) to principal payments on the Revolving Credit
Advances 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 outstanding Revolving Credit Advances and Letter of Credit
Obligations; and (F) to all other Obligations, including expenses of Lenders to
the extent reimbursable under Section 11.3.
(b) Agent is authorized to, and may, at its sole election, 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 pay promptly any such amounts
as and when due, even if such charges would cause the aggregate amount of
Revolving Credit Advances and Swing Line Advances outstanding after giving
effect to such charges to exceed 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.
1.12 Loan Account and Accounting. Agent shall maintain a loan account (the
"Loan Account") on its books to record: (a) all Advances; (b) all payments made
by Borrower; and (c) 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
demonstrable 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 for the immediately preceding month. Unless Borrower notifies Agent in
writing of any objection to any such accounting (specifically describing the
basis for such objection) within 30 days after receipt by Borrower thereof, each
and every such accounting shall be deemed final, binding and conclusive on
Borrower (absent demonstrable error) 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.
1.13 Indemnity.
(a) Each Credit Party shall jointly and severally 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 reasonable
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expenses (including reasonable attorneys' fees and reasonable disbursements and
other reasonable costs of investigation or defense, including those incurred
upon any appeal) that 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 reasonable legal costs and reasonable 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 solely from such Indemnified Person's gross
negligence or willful misconduct, as finally determined by a court of competent
jurisdiction; provided further, 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 arises in
connection with a dispute between or among Indemnified Persons or a claim made
by an Indemnified Person against another Indemnified Person that in either case
is not caused by any action or inaction of any Credit Party. 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 THAT 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.
(b) To induce Lenders to provide the LIBOR Rate option on the terms
provided herein, if: (i) any LIBOR Loans are repaid in whole or in part prior to
the last day of any applicable LIBOR Period (whether such repayment is made
pursuant to any provision of this Agreement or any other Loan Document or occurs
as a result of acceleration, by operation of law or otherwise); (ii) Borrower
shall default in payment when due of the principal amount of or interest on any
LIBOR Loan; (iii) Borrower shall default in making any borrowing of, conversion
into or continuation of LIBOR Loans after Borrower has given notice requesting
the same in accordance herewith; or (iv) Borrower shall fail to make any
prepayment of a LIBOR Loan after Borrower has given a notice thereof in
accordance herewith, then Borrower shall indemnify and hold harmless each Lender
from and against all losses, costs and expenses resulting from or arising from
any of the foregoing. Such indemnification shall include any loss (including
loss of margin) or expense arising from the reemployment of funds obtained by it
or from fees payable to terminate deposits from which such funds were obtained.
For the purpose of calculating amounts payable to a Lender under this
subsection, each Lender shall be deemed to have actually funded its relevant
LIBOR Loan through the purchase of a deposit bearing interest at the LIBOR Rate
in an amount equal to the amount of such LIBOR Loan and having a maturity
comparable to the relevant LIBOR Period; provided, that each Lender may fund
each of its LIBOR Loans in any manner it sees fit, and the foregoing assumption
shall be utilized only for the calculation of amounts payable under this
subsection. This covenant shall survive the termination of this Agreement and
the payment of the Notes and all other amounts payable hereunder. As promptly as
practicable under the circumstances, each Lender shall provide Borrower with its
written calculation of all amounts payable pursuant to this Section 1.13(b), and
such calculation shall be binding on the parties hereto unless Borrower shall
object in writing within ten Business Days of receipt thereof, specifying the
basis for such objection in reasonable detail.
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1.14 Access. Each Credit Party that is a party hereto shall, during normal
business hours, from time to time upon one Business Day's prior notice as
frequently as Agent determines to be appropriate: (a) provide Agent and any of
Agent's 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 an Event of Default shall
have occurred and be continuing or if access is necessary to preserve or protect
the Collateral as determined by Agent, each such Credit Party shall provide such
access to Agent and 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 take reasonable actions to 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 reasonably possible under
the circumstances, originals or copies of all books and records that Agent may
request. Each Credit Party shall deliver any document or instrument necessary
for Agent, as it may from time to time reasonably request, to obtain records
from any service bureau or other Person that 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 days' prior written notice of regularly scheduled
audits. Representatives of any Lender may accompany Agent's representatives on
regularly scheduled audits at no charge to Borrower.
1.15 Taxes.
(a) Any and all payments by Borrower hereunder or under the Notes
shall be made, in accordance with this Section 1.15, 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 1.15) 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 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 shall indemnify and, within ten 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 1.15)
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 Forms 4224 (or IRS Forms W-8ECI) or IRS
Forms 1001 (or IRS Forms W-8BEN), or other applicable form, certificate or
document prescribed by the IRS or the United States certifying as to such
Foreign Lender's entitlement to such exemption (a "Certificate of Exemption").
Any foreign Person that seeks to
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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.
1.16 Capital Adequacy; Increased Costs; Illegality.
(a) If any Lender shall have determined that the adoption after the
date hereof of 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) 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 written 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 be final, binding and conclusive on
Borrower (absent demonstrable error) 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 written 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 final, binding and conclusive on Borrower
(absent demonstrable error) for all purposes. Each Lender agrees that, as
promptly as practicable after it becomes aware of any circumstances referred to
above that 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 1.16(b).
(c) Notwithstanding anything to the contrary contained herein, if
the introduction of or any change in any law or regulation (or any change in the
interpretation thereof) shall make it unlawful, or any central bank or other
Governmental Authority shall assert that it is unlawful, for any Lender to agree
to make or to make or to continue to fund or maintain any LIBOR Loan, then,
unless that Lender is able to make or to continue to fund or to maintain such
LIBOR Loan at another branch or office of that Lender without, in that Lender's
opinion, adversely affecting it or its Loans or the income obtained therefrom,
on written notice thereof and written demand therefor by such Lender to Borrower
through Agent, (i) the obligation of such Lender to agree to make or to make or
to continue to fund or maintain LIBOR Loans shall terminate, and (ii) Borrower
shall forthwith prepay in full all outstanding LIBOR Loans owing to such Lender,
together with interest accrued thereon, unless Borrower, within ten Business
Days after the delivery of such notice and demand, converts all such LIBOR Loans
into Index Rate Loans.
(d) (i) Within 15 days after receipt by Borrower of written notice
and
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demand from any Lender (an "Affected Lender") for payment of additional amounts
or increased costs as provided in Sections 1.15(a), 1.16(a) or 1.16(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 reasonably satisfactory to
Agent. If Borrower obtains a Replacement Lender within 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 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.
(ii) 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 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 90 days thereafter, Borrower's rights under
this Section 1.16(d) shall terminate and Borrower shall promptly pay all
increased costs or additional amounts demanded by such Affected Lender pursuant
to Sections 1.15(a), 1.16(a) and 1.16(b).
1.17 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 the 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 party thereto, 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
Schedule of Documents that are required to be delivered on or prior to the
Closing Date, each in form and substance reasonably 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 initial Revolving
Credit Advance and that all Liens upon any of the property of Borrower or any of
its Subsidiaries in favor of any Prior Lender shall be terminated immediately
upon such payment; and (ii) all letters of credit issued or guaranteed by any
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, in each
case as mutually agreed upon by Agent, Borrower and Prior
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Lenders.
(c) Approvals. Agent shall have received (i) reasonably 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
certificate in form and substance reasonably satisfactory to Agent affirming
that no such consents or approvals are required.
(d) Opening Availability. Borrower shall have 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 being paid
currently, and expenses and liabilities being paid in the ordinary course of
business and without acceleration of sales) of at least $7,000,000.
(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 reasonable 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. Without
limiting the generality of the foregoing, the total Indebtedness of Borrower on
a consolidated basis as of the Closing Date (including the Loans) shall not
exceed $162,000,000.
(g) Due Diligence. Agent shall have completed its business and legal
due diligence with results satisfactory to Agent.
2.2 Further Conditions to Each Loan. Except as otherwise expressly
provided herein, no Lender shall be obligated to fund any Loan, convert or
continue any Loan as a LIBOR Loan 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 other Loan Document 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, and Agent or Requisite Revolving
Lenders shall have determined not to make any Loan or incur any Letter of Credit
Obligation so long as such representation or warranty continues to be untrue or
incorrect;
(b) any event or circumstance having a Material Adverse Effect shall
have occurred since the date hereof as determined by Agent or Requisite
Revolving Lenders;
(c) any Default or Event of Default shall have occurred and be
continuing or would result after giving effect to any Loan or the incurrence of
any Letter of Credit Obligation and Agent or Requisite Revolving Lenders shall
have determined not to make any Loan or incur any Letter of Credit Obligation so
long as such Default or Event of Default is continuing;
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(d) Except to the extent Agent has elected to make Overadvances
pursuant to Section 1.1(a)(iii), after giving effect to any Advance (or the
incurrence of any Letter of Credit Obligation), the outstanding principal amount
of the Revolving Loan would exceed the lesser of the Borrowing Base and the
Maximum Amount, in each case less the then outstanding principal amount of the
Swing Line Loan; or
(e) after giving effect to any Swing Line Advance, the outstanding
principal amount of the Swing Line Loan would exceed Swing Line Availability.
The request and acceptance by Borrower of the proceeds of any Loan, the
incurrence of any Letter of Credit Obligations or the conversion or continuation
of any Loan into, or as, a LIBOR Loan, as the case may be, 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 Revolving Credit Advances and Swing Line
Advances 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: (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 business requires such qualification, except
where the failure to be so qualified, individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect; (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, except where the failure to do so, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect;
(e) is in compliance with its charter and bylaws in all material respects; 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; Collateral Locations; FEIN. As of the Closing Date,
the current location of each Credit Party's chief executive office and the
warehouses and premises within which any Collateral is stored or located are set
forth in Disclosure Schedule (3.2), and,
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except as set forth therein, none of such locations has changed within the 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
to which it is a party and the creation of all Liens provided for therein: (a)
are within such Credit Party'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 Credit Party'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 material indenture (including the Senior
Subordinated Note Indenture), mortgage, deed of trust, lease, agreement or other
instrument to which such Credit Party is a party or by which such Credit Party
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 Credit Party 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 shall have been duly
executed and delivered by each Credit Party that is a party thereto and each
such Loan Document shall then constitute a legal, valid and binding obligation
of such Credit Party enforceable against it in accordance with its terms,
subject, as to enforceability, to applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws affecting creditors' rights
generally, and to general principles of equity.
3.4 Financial Statements and Projections. Except for the Projections and
the Fair Salable Balance Sheet, all Financial Statements concerning Borrower and
its Subsidiaries that 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.
(a) Financial Statements. 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 December 31, 1998, and the related statements of
income and cash flows of Borrower and its Subsidiaries for the Fiscal
Years then ended, certified by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP.
(ii) The unaudited balance sheet(s) at April 30, 1999, and the
related statement(s) of income and cash flows of Borrower and its
Subsidiaries for the four Fiscal Months 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
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Related Transactions, was based on the unaudited consolidated and consolidating
balance sheets of Borrower and its Subsidiaries dated April 30, 1999, 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 reflected on the Fair Salable Balance Sheet, and
reflect projections for the five-year period beginning on January 1, 1999, on a
month-by-month basis for the first year 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 of the other information projected therein for the
period set forth therein.
(d) Fair Salable Balance Sheet. The Fair Salable Balance Sheet
delivered on the date hereof and attached hereto as Disclosure Schedule (3.4(d))
was prepared by Borrower on the same basis as the Pro Forma, except that
Borrower's assets are set forth therein at their fair salable values on a going
concern basis and the liabilities set forth therein include all contingent
liabilities of Borrower stated at the reasonably estimated present values
thereof.
3.5 Material Adverse Effect. Between December 31, 1998, and the Closing
Date: (a) no Credit Party has incurred any obligations, contingent or
noncontingent liabilities, liabilities for Charges, long-term leases or unusual
forward or long-term commitments that are not reflected in the Pro Forma and
that, 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 has become binding upon any Credit Party's
assets and no law or regulation applicable to any Credit Party has been adopted
that has had or could reasonably be expected to have a Material Adverse Effect;
and (c) no Credit Party 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 to which such Credit Party is a party that alone or in the
aggregate could reasonably be expected to have a Material Adverse Effect.
Between December 31, 1998, and the Closing Date, no event has occurred that
alone or together with other events could reasonably be expected to have a
Material Adverse Effect.
3.6 Ownership of Property; Liens. As of the Closing Date, the real estate
("Real Estate") listed in Disclosure Schedule (3.6) constitutes all of the real
property owned, leased, subleased, or used by any Credit Party. Each Credit
Party owns good and marketable fee simple title to all of its owned Real Estate,
and valid leasehold interests in all of its leased Real Estate, all as described
in 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 is a lessor, sublessor or assignor as of the Closing Date. Each
Credit Party also has good and marketable title to, or valid leasehold interests
in, all of its personal property and assets, except where the failure to have
such title or interests, individually or in the aggregate, could not reasonably
be expected to have a Material Adverse Effect. As of the Closing Date, none of
the properties and assets of any Credit Party are subject to any Liens other
than Permitted Encumbrances, and there are no facts,
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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 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 right, title and
interest in and to all such Real Estate and other properties and assets, except
where the failure to receive such agreements or documents or take such actions,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect. Disclosure Schedule (3.6) also describes any material
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 Real Estate has suffered any material damage by fire or other casualty
loss that 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 it is
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 are pending or, to any Credit
Party's knowledge, threatened; (b) hours worked by and payment made to employees
of each Credit Party comply with the Fair Labor Standards Act and each other
federal, state, local or foreign law applicable to such matters in all material
respects; (c) all material payments due from any Credit Party for employee
health and welfare insurance have been paid or accrued as a liability on the
books of such Credit Party; (d) except as set forth in Disclosure Schedule
(3.7), no Credit Party is a party to or bound by any material collective
bargaining agreement, management agreement, consulting agreement, employment
agreement, bonus plan or agreement or stock option, restricted stock, stock
appreciation right or any similar plan, agreement or arrangement (and true and
complete copies of any agreements described in Disclosure Schedule (3.7) have
been delivered to Agent or its counsel); (e) there is no organizing activity
involving any Credit Party 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, and no labor organization or
group of employees of any Credit Party has made a pending demand for
recognition; and (g) except as set forth in Disclosure Schedule (3.7), there are
no complaints or charges against any Credit Party 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 of any
individual, except for matters that could not reasonably be expected to have a
Material Adverse Effect.
3.8 Ventures, Subsidiaries and Affiliates; Outstanding Stock and
Indebtedness. Except as set forth in Disclosure Schedule (3.8), no Credit Party
has any Subsidiaries, is engaged in any joint venture or partnership with any
other Person, or is an Affiliate of any other Person. All of the issued and
outstanding Stock of each Credit Party is owned by each of the Stockholders and
in the amounts set forth in Disclosure Schedule (3.8). Except as set forth in
Disclosure Schedule (3.8), there are no outstanding rights to purchase, options,
warrants or similar rights or agreements pursuant to which any Credit Party 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 of each Credit Party as of the Closing
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Date is described in Section 6.3 (including Disclosure Schedule (6.3)).
3.9 Government Regulation. No Credit Party 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. No Credit Party is subject to regulation under the Public Utility Holding
Company Act of 1935, the Federal Power Act, or any other federal or state
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 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 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 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 that was
originally incurred to purchase or carry any Margin Stock or for any other
purpose that might cause any of the Loans or other extensions of credit under
this Agreement to be considered a "purpose credit" within the meaning of
Regulations T, U or X of the Federal Reserve Board. No Credit Party will take or
permit to be taken any action that might cause any Loan Document to violate any
regulation of the Federal Reserve Board.
3.11 Taxes. All material tax returns, reports and statements, including
information returns, required by any Governmental Authority to be filed by any
Credit Party have been filed with the appropriate Governmental Authority (or
extensions obtained) 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 from its respective employees for all periods in material compliance with
all applicable federal, state, local and foreign laws 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 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 in Disclosure Schedule (3.11), no Credit Party 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 their respective
predecessors are 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 has agreed or been requested
to make any adjustment under IRC Section 481(a), by reason of a change in
accounting method or otherwise, that would have a Material Adverse Effect.
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3.12 ERISA.
(a) Disclosure Schedule (3.12) lists (i) for each Multiemployer
Plan, as of its last valuation date, the amount of potential withdrawal
liability of each Credit Party or ERISA Affiliate, calculated according to
information made available pursuant to Section 4221(e) of ERISA, and (ii) all
Plans and separately identifies all Pension Plans, including all Title IV Plans,
Multiemployer Plans, ESOPs and Welfare Plans, including all Retiree Welfare
Plans. Copies of all such listed Plans, together with a copy of the latest
IRS/DOL 5500-series form for each such Plan, have been delivered to Agent.
Except with respect to Multiemployer Plans, each Qualified Plan has been
determined by the IRS to qualify under Section 401 of the IRC, 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 that would cause
the loss of such qualification or tax-exempt status. Each Plan is in material
compliance with the applicable provisions of ERISA and the IRC, including the
timely filing of all reports required under the IRC or ERISA. Neither any Credit
Party nor any ERISA Affiliate has failed to make any material contribution or
pay any material amount due as required by either Section 412 of the IRC or
Section 302 of ERISA or the terms of any such Plan. Neither any Credit Party nor
any ERISA Affiliate has engaged in a "prohibited transaction," as defined in
Section 4975 of the IRC, in connection with any Plan, that 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 any ERISA Affiliate (determined at any time within the last five
years) has been terminated, whether or not in a "standard termination" as that
term is used in Section 4041(b)(1) of ERISA, nor has any Title IV Plan of any
Credit Party or any ERISA Affiliate (determined at any time within the last five
years) with Unfunded 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 (determined at such time); (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 the assets of any Plan, measured on
the basis of fair market value as of the latest valuation date 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 an equivalent rating by another nationally recognized
rating agency.
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 before any Governmental Authority or before any
arbitrator or panel of arbitrators (collectively, "Litigation") that (a)
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
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of any Loan Document or any action taken thereunder, or (b) has a reasonable
risk of being determined adversely to any Credit Party and that, if so
determined, could reasonably be expected to have a Material Adverse Effect.
Except as set forth in Disclosure Schedule (3.13), as of the Closing Date there
is no Litigation pending or threatened that seeks damages in excess of $250,000
or injunctive relief against, or alleges criminal misconduct by, any Credit
Party.
3.14 Brokers. Except as set forth in Disclosure Schedule (3.14), no broker
or finder acting on behalf of any Person brought about the obtaining, making or
closing of the Loans or the Related Transactions, and no Credit Party 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 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, Trademark, Copyright and License owned by any Credit Party
is listed, together with application or registration numbers, as applicable, in
Disclosure Schedule (3.15). Each Credit Party conducts its business and affairs
without infringement of or interference with any Intellectual Property of any
other Person, except for matters that could not reasonably be expected to have a
Material Adverse Effect. Except as set forth in Disclosure Schedule (3.15), no
Credit Party is aware of any infringement or claim of infringement by others of
any Intellectual Property Collateral.
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 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.
3.17 Environmental Matters.
(a) Except as set forth in Disclosure Schedule (3.17), as of the
Closing Date: (i) to the knowledge of any Credit Party, 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
that would not result in Environmental Liabilities that could reasonably be
expected to exceed $250,000; (ii) no Credit Party 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; (iii) the Credit Parties are and have been in
compliance with all Environmental Laws, except for such noncompliance that would
not result in Environmental Liabilities that could reasonably be expected to
exceed $250,000; (iv) the Credit Parties have obtained, and are in compliance
with, all Environmental Permits required by Environmental Laws for the
operations of their respective businesses as presently conducted or as proposed
to be conducted, except where the failure to so obtain or comply with such
Environmental Permits would not result in Environmental Liabilities that could
reasonably be expected to exceed $250,000, and all
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such Environmental Permits are valid, uncontested and in good standing; (v) no
Credit Party 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 that could
reasonably be expected to exceed $250,000, and no Credit Party 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 that seeks
damages, penalties, fines, costs or expenses in excess of $50,000 or injunctive
relief against, or that alleges criminal misconduct by, any Credit Party; (vii)
no notice has been received by any Credit Party 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 any Credit Party being identified
as a "potentially responsible party" under CERCLA or analogous state statutes;
and (viii) the Credit Parties have provided to Agent copies of all existing
environmental reports, reviews and audits and all written information pertaining
to actual or potential Environmental Liabilities, in each case relating to any
Credit Party.
(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 affairs, and (ii) does not have the capacity through the
provisions of the Loan Documents or otherwise to influence any Credit Party'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, 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 maintains
deposit 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 therefor.
3.20 Government Contracts. Except as set forth in Disclosure Schedule
(3.20), as of the Closing Date, no Credit Party 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 (31 U.S.C. Section 3727) or any
similar state 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: (a) the
business relationship of any Credit Party with any customer or group of
customers whose purchases during the preceding 12 months caused them to be
ranked among the five largest customers of such Credit Party; or (b) the
business relationship of any Credit Party with any supplier material to its
operations.
3.22 Agreements and Other Documents. As of the Closing Date, each Credit
Party has
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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 of them are subject, each of which is listed in Disclosure Schedule (3.22):
(a) purchase agreements not terminable by such Credit Party within 60 days
following written notice issued by such Credit Party and involving transactions
in excess of $1,000,000 per annum and forms of chain salon agreements, exclusive
distribution agreements and distributor store agreements; (b) leases of
Equipment having a remaining term of one year or longer and requiring aggregate
rental and other payments in excess of $500,000 per annum; (c) licenses and
permits held by the Credit Parties, the absence of which could be reasonably
likely to have a Material Adverse Effect; (d) instruments and documents
evidencing Indebtedness of such Credit Party the principal amount of which
exceeds $100,000 and any Lien granted by such Credit Party with respect thereto;
and (e) instruments and agreements evidencing the issuance of any equity
securities, warrants, rights or options to purchase equity securities of such
Credit Party.
3.23 Solvency. Both before and after giving effect to: (a) the Loans and
Letter of Credit Obligations to be made or incurred on the Closing Date or such
other date as Loans and Letter of Credit Obligations requested hereunder are
made or incurred; (b) the disbursement of the proceeds of such Loans pursuant to
the instructions of Borrower; (c) 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 is and will be
Solvent; provided, that Credit Parties that, in the aggregate, (i) have less
than $2,000,000 in tangible assets or (ii) contribute less than 5% to the Pro
Forma EBITDA of Borrower for the four full Fiscal Quarters immediately preceding
the date any such solvency determination is to be made shall be excluded from
the scope of the foregoing representation and warranty.
3.24 Year 2000 Representations. Each Credit Party has completed a Year
2000 Assessment and a Year 2000 Corrective Plan, copies of which have been
delivered to Agent.
3.25 Subordinated Debt. As of the Closing Date, Borrower has delivered to
Agent complete and correct copies of the Senior Subordinated Debt Documents. At
the time each Credit Party incurred any Senior Subordinated Debt, such Credit
Party had the corporate power and authority to incur such Indebtedness. The
subordination provisions of the Senior Subordinated Debt Documents are
enforceable against the holders of the Senior Subordinated Notes and the trustee
under the Senior Subordinated Note Indenture by Agent and Lenders. All
Obligations, including the Obligations to pay principal of and interest on the
Loans, constitute "Designated Senior Debt," as that term is defined in the
Senior Subordinated Note Indenture, entitled to the benefits of the
subordination provisions contained in the Senior Subordinated Debt Documents,
and no other Indebtedness of any Credit Party constitutes "Designated Senior
Debt," as that term is defined in the Senior Subordinated Note Indenture. The
principal of and interest on the Notes, all Letter of Credit Obligations and all
other Obligations will constitute "senior debt" as that or any similar term is
or may be used in any other instrument evidencing or applicable to any other
Subordinated Debt. Borrower acknowledges that Agent and each Lender are entering
into this Agreement and are extending the Commitments in reliance upon the
subordination provisions of the Senior Subordinated Debt Documents and this
Section 3.25.
4. FINANCIAL STATEMENTS AND INFORMATION
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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 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 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 an Event of Default
shall have occurred and be continuing, each Lender, to communicate directly with
its independent certified public accountants, including ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 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 (including copies of any issued management letters) with respect to
the business, financial condition and other affairs of any Credit Party.
5. AFFIRMATIVE COVENANTS
Each Credit Party executing this Agreement jointly and severally agrees as
to all Credit Parties 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: (a) do or cause to be done all things necessary to preserve and keep in
full force and effect its corporate existence and its material rights and
franchises; (b) continue to conduct its business substantially as now conducted
or as otherwise permitted hereunder; (c) 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
time to time make, or cause to be made, all necessary or appropriate repairs,
replacements and improvements thereto consistent with industry practices; and
(d) 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 pay and
discharge or cause to be paid and discharged promptly (i) all Charges payable by
it, including 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, and (ii)
lawful claims for labor, materials, supplies and services or otherwise, in each
case before any thereof shall become past due.
(b) Each Credit Party may in good faith contest, by appropriate
proceedings,
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the validity or amount of any Charges, Taxes 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, in accordance with GAAP; (ii) no
Lien shall be imposed to secure payment of such Charges, Taxes or claims 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 or claims; (iii)
none of the Collateral becomes subject to forfeiture or loss as a result of such
contest; (iv) such Credit Party shall promptly pay or discharge such contested
Charges, Taxes 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 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 keep adequate books and
records with respect to its business activities in which 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; Condemnation.
(a) The Credit Parties shall, at their sole cost and expense,
maintain the policies of insurance described in Disclosure Schedule (3.18) as in
effect on the date hereof, including the key man life insurance policy insuring
the life of ▇▇▇ ▇. ▇▇▇▇▇▇▇ in the amount of $1,000,000, or such other policies
of insurance in form and in amounts and with insurers reasonably acceptable to
Agent. If any Credit Party 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 that Agent reasonably deems advisable. Agent shall
have no obligation to obtain insurance for any Credit Party 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 failure to maintain such
insurance or pay any premiums therefor. All sums so disbursed, including
reasonable 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.
(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
reasonable 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, reasonably satisfactory to Agent,
with respect to its insurance policies.
(c) Each Credit Party shall deliver to Agent, in form and substance
reasonably
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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 (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
$500,000, as such Credit Party's true and lawful agent and attorney-in-fact
(which power is coupled with an interest) for the purpose of making, settling
and adjusting claims under such "All Risk" policies of insurance, endorsing the
name of such 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 $500,000 or more,
whether or not 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, (A) apply such proceeds to the reduction of the Obligations
in accordance with Section 1.3(d); provided, that in the case of insurance
proceeds pertaining to any Credit Party other than Borrower, such insurance
proceeds shall be applied to the Loans owing by Borrower, or (B) permit or
require such 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 could not reasonably be expected
to have a Material Adverse Effect and such insurance proceeds do not exceed
$1,000,000 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(d); provided further, that in the case of insurance proceeds
pertaining to any Credit Party other than Borrower, such insurance proceeds
shall be applied to the Loans owing by Borrower. All insurance proceeds that 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 Revolving Loan 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 other than 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: (1) Borrower shall request
a Revolving Credit Advance or release from the cash collateral account to be
made to such Credit Party in the amount requested to be released; (2) 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 (3) 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(d); provided,
that in the case of insurance proceeds pertaining to any Credit Party other than
Borrower, such insurance proceeds shall be applied to the Loans owing by
Borrower.
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(d) Each Credit Party shall, immediately upon learning of the
institution of any proceeding for the condemnation or other taking of any of its
property, notify Agent of the pendency of such proceeding, and agrees that Agent
may participate in any such proceeding, and such Credit Party from time to time
will deliver to Agent all instruments reasonably requested by Agent to permit
such participation. Agent is authorized to collect the proceeds of any
condemnation claim or award and apply them, at the direction of Requisite
Revolving Lenders, to the reduction of the Obligations; provided, that if the
amount of any condemnation is less than $1,000,000, Agent shall permit such
Credit Party to replace, restore, repair or rebuild the property so long as no
Default or Event of Default shall have occurred and be continuing at the time of
any requested release of funds. If the condemned property is to be replaced,
repaired, restored or rebuilt, such replacement, repair, restoration or
rebuilding shall be done with materials and workmanship of substantially as good
a quality as existed before such condemnation or taking. The applicable Credit
Party shall commence the work of replacement, repair, restoration or rebuilding
as soon as practicable and proceed diligently with it until completion. Plans
and specifications for any such repair or restoration shall be reasonably
satisfactory to Agent and shall be submitted to Agent prior to commencement of
the work and shall be subject to the reasonable approval of Agent, which
approval shall not be unreasonably delayed.
5.5 Compliance with Laws. Each Credit Party shall 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, and those promulgated by the Federal Trade Commission and the Food and
Drug Administration, 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.
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 that, 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 that is necessary to correct any information
in such Disclosure Schedule or representation that 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 Revolving 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 conduct its business
and affairs without infringement of or interference with any Intellectual
Property of any other Person, except to the extent that the failure to so
conduct its business, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
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
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compliance with all Environmental Laws and Environmental Permits other than
noncompliance that could not reasonably be expected to have a Material Adverse
Effect; (b) implement any and all investigation, remediation, removal and
response actions that are reasonably 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 that is reasonably likely to
result in Environmental Liabilities in excess of $50,000; 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 $250,000, in each case whether or not the
Environmental Protection Agency or any Governmental Authority has taken or
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 Environmental Liability arising thereunder, or a Release of
Hazardous Materials on, at, in, under, above, to, from or about any of its Real
Estate, that, in each case, could reasonably be expected to have a Material
Adverse Effect, then each Credit Party shall, upon Agent's written request and
subject to any applicable restrictions in any leases covering any leased Real
Estate, (i) cause the performance of such environmental audits, including
subsurface sampling of soil and groundwater, and preparation of such
environmental reports, in each case at Borrower's expense, as Agent may from
time to time reasonably request, all of which shall be conducted by reputable
environmental consulting firms reasonably acceptable to Agent and shall be in
form and substance reasonably 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 deems reasonably appropriate,
including subsurface sampling of soil and groundwater. Borrower shall reimburse
Agent for the reasonable 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 use its best efforts to obtain a landlord's agreement,
mortgagee agreement or bailee letter, as applicable, from the lessor of each
leased property, mortgagee of owned property or bailee with respect to any
warehouse, processor or converter facility or other location where Collateral
with a fair market value in excess of $50,000 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,
owned or used 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 leased, acquired or used), the Eligible
Inventory at that location shall, in Agent's reasonable 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 and
no Inventory of any Credit Party shall be shipped to a processor or converter
under arrangements established after
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the Closing Date without the prior written consent of Agent (which consent, in
Agent's discretion, may be conditioned upon the exclusion from the Borrowing
Base of Eligible Inventory at that location or the establishment of Reserves
reasonably 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 timely and fully
pay and perform its material 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 to, at such Credit Party's
reasonable expense and upon reasonable 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 effectively the
provisions and purposes of this Agreement or any other Loan Document.
5.11 Year 2000 Problems. On or prior to September 30, 1999, each Credit
Party shall complete Year 2000 Corrective Actions. On or before October 31,
1999, each Credit Party shall complete Year 2000 Implementation Testing. On or
before November 15, 1999, each Credit Party shall eliminate all Year 2000
Problems, except where the failure to correct the same could not reasonably be
expected to have a Material Adverse Effect, individually or in the aggregate.
6. NEGATIVE COVENANTS
Each Credit Party executing this Agreement jointly and severally agrees as
to all Credit Parties that, without the prior written consent of Agent and
Requisite Revolving Lenders, from and after the date hereof until the
Termination Date:
6.1 Mergers, Subsidiaries, Etc. No Credit Party shall directly or
indirectly, by operation of law or otherwise, (a) form or acquire any
Subsidiary; provided, that Borrower may form wholly-owned Domestic Subsidiaries
solely for the purpose of acquiring assets pursuant to a Permitted Acquisition
or serving as a vehicle into which existing Subsidiaries of Borrower may be
merged, in each case subject to satisfaction of each of the following
conditions: (i) Agent shall receive at least 10 Business Days' prior written
notice of the proposed formation of any such Domestic Subsidiary, which notice
shall include a reasonably detailed description of the purposes therefor; (ii)
on or prior to the date of formation of any such Domestic Subsidiary, (A) Agent
will be granted a first priority perfected Lien in the capital Stock of such
Domestic Subsidiary, and Borrower and such Domestic Subsidiary shall have
executed such documents and taken such actions as may be reasonably required by
Agent in connection therewith, (B) such Domestic Subsidiary shall become a
Guarantor under the Subsidiary Guaranty and shall have executed such other
Collateral Documents as may be reasonably required by Agent to evidence the
grant by such Domestic Subsidiary of a first priority perfected Lien in its
assets, subject only to Permitted Encumbrances, and (C) Agent shall have
received, in form and substance reasonably satisfactory to Agent, copies of the
formation documents and all opinions, certificates, and other documents
reasonably requested by Agent; and (iii) at the time of formation of any such
Domestic Subsidiary and after giving effect thereto, no Default or Event of
Default shall have occurred and be continuing, 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; provided, that (i) any
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Subsidiary of Borrower may be merged into Borrower so long as Borrower is the
survivor and (ii) any Subsidiary of Borrower may be merged into any Guarantor so
long as such Guarantor is the survivor. Notwithstanding the foregoing, any
Credit Party may acquire all or substantially all of the assets or capital Stock
of any Person (the "Target") (in each case, a "Permitted Acquisition") subject
to the satisfaction of each of the following conditions:
(i) Agent shall receive at least 10 Business Days' prior
written notice of such proposed Permitted Acquisition, which notice shall
include a reasonably detailed description of such proposed Permitted
Acquisition;
(ii) at least 85% of the assets involved in such Permitted
Acquisition (determined on an aggregate fair market value basis) shall be
located within the United States or Canada and such Permitted Acquisition shall
only involve assets comprising a business, or those assets of a business, of the
type engaged in by Borrower and its Subsidiaries as of the Closing Date (which,
for purposes hereof, consists of the manufacture and distribution of personal
care or salon products and businesses or activities directly related thereto),
and which business would not subject Agent or any Lender to regulatory or third
party approvals in connection with the exercise of its rights and remedies under
this Agreement or any other Loan Documents other than approvals applicable to
the exercise of such rights and remedies with respect to such Credit Party prior
to such Permitted Acquisition;
(iii) such Permitted Acquisition shall be consensual and shall
have been approved by the Target's board of directors;
(iv) no additional Indebtedness, Guaranteed Indebtedness,
contingent obligations or other liabilities shall be incurred, assumed or
otherwise be reflected on a consolidated balance sheet of Borrower after giving
effect to such Permitted Acquisition, except (A) Loans made hereunder in
connection with such Permitted Acquisition, (B) Indebtedness secured by Liens
consisting of purchase money security interests or Capital Leases encumbering
assets of the Target involved in such Permitted Acquisition and permitted in
clause (k) of the definition of Permitted Encumbrances, (C) unsecured
indemnification obligations customarily provided in connection with transactions
of the type represented by such Permitted Acquisition, (D) ordinary course trade
payables, accrued expenses and other unsecured Indebtedness of the Target, and
(E) unsecured seller carry-back financing incurred in connection with such
Permitted Acquisition;
(v) the sum of all amounts payable in connection with all
Permitted Acquisitions (including all transaction costs and all Indebtedness,
liabilities and contingent obligations incurred or assumed in connection
therewith or otherwise reflected on a consolidated balance sheet of Borrower
after giving effect thereto, but excluding ordinary course trade payables and
other current liabilities incurred in the ordinary course by the Targets the
subject thereof to the extent that such trade payables and other current
liabilities reflect normal payment terms and do not, in the aggregate, exceed
the aggregate fair market value of the current assets of such Targets involved
in such Permitted Acquisitions) shall not in the aggregate exceed $10,000,000
during any Fiscal Year;
(vi) the Target shall not have incurred an operating loss for
the trailing
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12-month period preceding the date of the Permitted Acquisition, as
determined based upon the Target's financial statements for its most recently
completed fiscal year and its most recent interim financial period completed
within 60 days prior to the date of consummation of such Permitted Acquisition;
provided, that the aggregate compensation expense incurred by the Target for
such 12- month period with respect to (A) principal Stockholder-employees of the
Target and (B) family members of such Stockholder-employees who are employees of
the Target, in each case to be terminated in connection with such Permitted
Acquisition, shall be excluded for purposes of making such determination;
(vii) the business and assets acquired in such Permitted
Acquisition shall be free and clear of all Liens (other than Permitted
Encumbrances);
(viii)at or prior to the closing of any Permitted Acquisition,
Agent will be granted a first priority perfected Lien (subject to Permitted
Encumbrances) in all assets acquired pursuant thereto or in the assets and
capital Stock of the Target, as applicable, and such Credit Party and the Target
shall have executed such documents and taken such actions as may be required by
Agent in connection therewith;
(ix) concurrently with delivery of the notice referred to in
clause (i) above, Borrower shall have delivered to Agent, in form and substance
satisfactory to Agent:
(A) a pro forma consolidated balance sheet, income
statement and cash flow statements of Borrower and its Subsidiaries (the
"Acquisition Pro Forma"), based on recent financial statements, that shall be
complete and shall fairly present in all material respects the assets,
liabilities, financial condition and results of operations of Borrower and its
Subsidiaries in accordance with GAAP consistently applied, but taking into
account such Permitted Acquisition and the funding of all Loans in connection
therewith, and such Acquisition Pro Forma shall reflect that (1) average daily
Net Borrowing Availability for the 30-day period preceding the consummation of
such Permitted Acquisition would have exceeded $9,000,000 on a pro forma basis
(after giving effect to such Permitted Acquisition and all Loans funded in
connection therewith as if made on the first day of such period) and (2) on a
pro forma basis, no Event of Default shall have occurred and be continuing or
would result after giving effect to such Permitted Acquisition and Borrower
would have been in compliance with the financial covenants set forth in Annex G
for the four quarter period reflected in the Compliance Certificate most
recently delivered to Agent pursuant to Annex E prior to the consummation of
such Permitted Acquisition (after giving effect to such Permitted Acquisition
and all Loans funded in connection therewith as if made on the first day of such
period);
(B) updated versions of the most recently delivered
Projections covering the one year period commencing on the date of such
Permitted Acquisition and otherwise prepared in accordance with the Projections
(the "Acquisition Projections") and based upon financial data for the four full
Fiscal Quarters most recently ended, taking into account such Permitted
Acquisition; and
(C) a certificate of the chief financial officer of
Borrower or, in the event such officer is not available, chief accounting
officer of Borrower, to the effect that: (1) Borrower (after taking into
consideration all rights of contribution and indemnity Borrower
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has against each of its Subsidiaries) will be Solvent upon the consummation of
the Permitted Acquisition; (2) the Acquisition Pro Forma presents fairly in all
material respects the financial condition of Borrower (on a consolidated basis)
as of the date thereof after giving effect to the Permitted Acquisition; (3) the
Acquisition Projections are reasonable estimates of the future financial
performance of Borrower subsequent to the date thereof based upon the historical
performance of Borrower and the Target and show that Borrower shall continue to
be in compliance with the financial covenants set forth in Annex G for the three
year period thereafter; and (4) Borrower has completed its due diligence
investigation with respect to the Target and such Permitted Acquisition, which
investigation was conducted in a manner similar to that which would have been
conducted by a prudent purchaser of a comparable business and the results of
which investigation were delivered to Agent;
(x) within 15 days following consummation of such Permitted
Acquisition, Agent shall have received copies of the acquisition agreement and
related agreements and instruments, and all opinions, certificates, Lien search
results and other documents reasonably requested by Agent; and
(xi) at the time of such Permitted Acquisition and after
giving effect thereto, no Default or Event of Default shall have occurred and be
continuing.
Notwithstanding the foregoing, the Accounts and Inventory of the
Target acquired in any such Permitted Acquisition shall not be included in
Eligible Accounts and Eligible Inventory without the prior written consent of
Agent and Requisite Revolving Lenders.
6.2 Investments; Loans and Advances. Except as otherwise expressly
permitted by this Section 6, no Credit Party shall 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) each Credit Party may hold investments
comprised of notes payable, or stock or other securities issued by Account
Debtors to such Credit Party 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 all Credit
Parties does not exceed $1,000,000; (b) each Credit Party may maintain its
existing investments in its Subsidiaries as of the Closing Date; (c) so long as
no Default or Event of Default shall have occurred and be continuing and no
Advances are outstanding, Borrower may make investments up to $25,000,000 in the
aggregate, subject to Control Letters in favor of Agent, for the benefit of
Agent and Lenders, or otherwise subject to a perfected security interest in
favor of Agent, for the benefit of Agent and 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 Rating 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 $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 30 days from the date of creation thereof with A
Rated Banks, and (v) mutual funds that invest solely in
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one or more of the investments described in clauses (i) through (iv) above; (d)
the Credit Parties collectively may make other investments not exceeding
$750,000 in the aggregate at any time outstanding; (e) accounts receivable that
arise in the ordinary course of business and are payable on standard terms; (f)
deposits for utilities, security deposits, leases and similar prepaid expenses
incurred in the ordinary course of business; (g) investments consisting of
non-cash consideration received in connection with sales of assets permitted
under Section 6.8; and (h) Borrower may make investments consisting of minority
interests in corporations in an amount not to exceed $2,000,000 at any one time;
provided, that (i) no Default or Event of Default shall have occurred and be
continuing or would result after giving effect to any such investment and (ii)
average daily Net Borrowing Availability for the 30-day period immediately
preceding any such investment would have exceeded $9,000,000 (after giving
effect to any such investment as if made on the first day of such period).
Without limiting the generality of the foregoing, Agent may, on an ad hoc basis,
permit investments in joint ventures in an aggregate amount not to exceed
$2,000,000 subject to such terms and conditions as it may, in its sole
discretion, require.
6.3 Indebtedness.
(a) Except as otherwise expressly permitted by this Section 6, no
Credit Party shall create, incur, assume or permit to exist any Indebtedness,
except (without duplication) (i) Indebtedness secured by purchase money security
interests or Capital Leases permitted in clause (k) of the definition of
Permitted Encumbrances, (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 that do not have the effect of increasing
the principal amount thereof or changing the amortization thereof (other than to
extend the same) and that are otherwise on terms and conditions no less
favorable to any Credit Party, Agent or any Lender, as reasonably determined by
Agent, than the terms of the Indebtedness being refinanced, amended or modified,
(v) Subordinated Debt; provided, that Borrower may not incur Subordinated Debt
in the form of Indebtedness evidenced by Additional Notes unless (A) no Default
or Event of Default, and no "Default" or "Event of Default" under and as defined
in the Senior Subordinated Note Indenture, shall have occurred and be continuing
or would result after giving effect to the issuance of any Additional Notes, and
(B) not less than 1 Business Day prior to the incurrence of any such
Subordinated Debt, Borrower has delivered to Agent projections in form and
substance acceptable to Agent demonstrating same, (vi) Indebtedness consisting
of unsecured intercompany loans and advances made by Borrower to any other
Credit Party that is a Guarantor or by any such Guarantor to Borrower; provided,
that: (A) Borrower shall have executed and delivered to each such Guarantor, and
each such Guarantor 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
Guarantor or by such Guarantor to Borrower, which Intercompany Notes shall be in
form and substance reasonably satisfactory to Agent and shall be pledged and
delivered to Agent pursuant to the applicable Pledge Agreement or Security
Agreement as additional collateral security for the Obligations; (B) each Credit
Party shall record all intercompany transactions on its books and records in a
manner reasonably satisfactory to Agent; (C) the obligations of Borrower under
any such Intercompany Notes shall be subordinated to the Obligations of Borrower
hereunder as provided in the Subsidiary Guaranty and the obligations of each
other Credit Party under any such
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Intercompany Notes shall, at the request of Agent, be subordinated to the
Obligations of such Credit Party hereunder in a manner reasonably satisfactory
to Agent; and (D) in the case of any such intercompany loan or advance made by
Borrower, (1) Borrower shall be Solvent, both before and after giving effect to
such intercompany loan or advance, (2) no Default or Event of Default shall have
occurred and be continuing or would result after giving effect to any such
proposed intercompany loan or advance, (3) Borrower shall have Net Borrowing
Availability of not less than (a) 10% multiplied by (b) the average daily
Borrowing Availability for the 30-day period immediately preceding the date of
such intercompany loan or advance, both before and after giving effect to such
intercompany loan or advance, and (4) the aggregate balance of all such
intercompany loans or advances shall not exceed $25,210,000 at any time, and
(vii) other unsecured Indebtedness not to exceed $500,000 in aggregate principal
amount at any one time outstanding.
(b) No Credit Party shall, 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).
(c) Notwithstanding the foregoing, if any restrictions contained in
this Section 6.3 would cause Borrower to violate Section 4.08 of the Senior
Subordinated Note Indenture as in effect on the Closing Date, then such
restriction shall be deemed amended to the extent necessary to avoid such
violation.
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 enter into or be a party to any
transaction with any other Credit Party or any Affiliate thereof except in the
ordinary course of business and pursuant to the reasonable requirements of such
Credit Party's business and upon fair and reasonable terms that are no less
favorable to such Credit Party than would be obtained in a comparable arm's
length transaction with a Person not an Affiliate of such Credit Party. In
addition, if any such transaction or series of related transactions involves
payments in excess of $500,000 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 in Disclosure Schedule (6.4(a)).
(b) No Credit Party shall enter into any lending or borrowing
transaction with any employees of any Credit Party, except loans to its
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 $100,000 to any employee and up to
a maximum of $500,000 in the aggregate at any one time outstanding; provided,
that for purposes of computing the foregoing amounts in this clause (b), loans
by Borrower to ▇▇▇ ▇. ▇▇▇▇▇▇▇ in the form of premiums advanced pursuant to
split-dollar agreements with ▇▇▇ ▇. ▇▇▇▇▇▇▇ under compensation arrangements
between Borrower and ▇▇▇ ▇. ▇▇▇▇▇▇▇ shall be excluded.
(c) No Credit Party shall modify any employment agreements set forth
in
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Disclosure Schedule (6.4(a)) in any material respect or pay compensation to
any of its employees party to any such employment agreements not provided for
therein without the prior written consent of Agent and Requisite Revolving
Lenders, which consent shall not be unreasonably withheld.
6.5 Capital Structure and Business. No Credit Party shall (a) make any
changes in any of its business objectives, purposes or operations that could in
any way materially 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 in 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; provided, that Borrower may issue (i) any
options to acquire shares of its common Stock pursuant to its stock option
plans, (ii) shares of its common Stock pursuant to the exercise of rights under
its stock option plans, (iii) shares of its common Stock pursuant to the
exercise of rights under warrants, and (iv) shares of its Series A Junior
Participating Preferred Stock pursuant to the terms of the Shareholder Rights
Plan adopted by it in February 1999, in each case as in effect as of the Closing
Date and set forth in Disclosure Schedule (3.8), and (v) shares of its Stock,
warrants or other securities convertible into Stock subject to the requirements
of Section 1.3(b)(iii) , or (c) amend its charter or bylaws in a manner that
would materially adversely affect Agent or Lenders or such Credit Party's duty
or ability to repay the Obligations; provided, that any Credit Party may change
its jurisdiction of incorporation or organization to the State of Arizona on 15
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 Agent
and Lenders, in any Collateral, has been completed or taken. No Credit Party
shall engage in any business other than the businesses currently engaged in by
it (which, for purposes hereof, consists of the manufacture and distribution of
personal care or salon products and businesses or activities directly related
thereto).
6.6 Guaranteed Indebtedness. No Credit Party shall create, incur, assume
or permit to exist any Guaranteed Indebtedness except (a) by endorsement of
instruments or items of payment for deposit to the general account of any Credit
Party, and (b) for Guaranteed Indebtedness incurred for the benefit of any other
Credit Party if the primary obligation is expressly permitted by this Agreement.
6.7 Liens. No Credit Party shall 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 Liens in existence
on the date hereof and summarized on Disclosure Schedule (6.7) and other
Permitted Encumbrances. In addition, no Credit Party shall become a party to any
agreement, note, indenture or instrument or take any other action that 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 that
prohibit Liens upon the assets that are subject thereto.
6.8 Sale of Stock and Assets. No Credit Party shall 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 its Accounts, other
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than: (a) the sale of Inventory in the ordinary course of business; (b) the
sale, transfer, conveyance or other disposition by a Credit Party of Equipment,
Fixtures or Real Estate that is obsolete or no longer used or useful in such
Credit Party's business and having a value not exceeding $500,000 in any single
transaction or $1,000,000 in the aggregate in any Fiscal Year; (c) other
Equipment and Fixtures having a value not exceeding $500,000 in any single
transaction or $1,000,000 in the aggregate in any Fiscal Year; (d) the sale by
Ft. Pitt Acquisition, Inc. of its interest in and to the ▇▇▇▇▇▇▇ trademark for
not less than $300,000; (e) the sale by Borrower of its fee-owned interest in
the Real Estate located in Duncanville, Texas in an arm's length transaction for
cash consideration; and (f) sales, transfers or other dispositions of assets
pursuant to which assets are transferred between Guarantors or from any
Guarantor to Borrower. With respect to any disposition of assets or other
properties permitted pursuant to clauses (b), (c) and (d) 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 that could result in the
imposition of a Lien under Section 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 set forth in Annex G (the "Financial Covenants").
6.11 Hazardous Materials. No Credit Party shall 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 that could not reasonably be
expected to have a Material Adverse Effect.
6.12 Sale-Leasebacks. No Credit Party shall engage in any sale-leaseback,
synthetic lease or similar transaction involving any of its assets if the
aggregate of all payments payable in any Fiscal Year for all Credit Parties in
connection with any such transaction on a consolidated basis would exceed
$150,000.
6.13 Cancellation of Indebtedness. No Credit Party shall cancel any claim
or debt owing to it, except for reasonable consideration negotiated on an arm's
length basis and (a) in the ordinary course of its business consistent with past
practices or (b) in connection with the settlement of litigation to which it is
a party or other good faith disputes in which it is directly involved.
6.14 Restricted Payments. No Credit Party shall make any Restricted
Payment, except (a) intercompany loans and advances between Borrower and
Guarantors to the extent permitted by Section 6.3, (b) dividends and
distributions by Subsidiaries of Borrower paid to Borrower, (c) employee loans
permitted under Section 6.4(b), (d) scheduled payments of interest with
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respect to the Senior Subordinated Notes to the extent permitted pursuant to the
subordination provisions of the Senior Subordinated Debt Documents, (e) payments
with respect to other Subordinated Debt to the extent permitted pursuant to the
subordination provisions governing such Subordinated Debt, (f) purchases,
redemptions, retirements or acquisitions of shares of capital Stock of Borrower,
or options or warrants to purchase shares of such capital Stock, held by
officers, directors or employees of Borrower or any of its Subsidiaries pursuant
to compensation plans or arrangements as in effect as of the Closing Date and
set forth in Disclosure Schedule (3.8) in connection with the death, disability
or termination of employment of any such officer, director or employee, and (g)
other purchases, redemptions, retirements or acquisitions of shares of capital
Stock of Borrower; provided, that (i) no Default or Event of Default shall have
occurred and be continuing or would result after giving effect to any purchase,
redemption, retirement or acquisition pursuant to clause (f) or (g) above, (ii)
average daily Net Borrowing Availability for the 30-day period immediately
preceding any purchase, redemption, retirement or acquisition pursuant to clause
(f) or (g) above would have exceeded $9,000,000 (after giving effect to any such
purchase, redemption, retirement or acquisition as if made on the first day of
such period), and (iii) the sum of all amounts payable in connection with any
purchase, redemption, retirement or acquisition pursuant to clause (g) above
shall not in the aggregate exceed $3,000,000 at any time. Notwithstanding the
foregoing, if any restrictions contained in this Section 6.14 would cause
Borrower to violate Section 4.08 of the Senior Subordinated Note Indenture as in
effect on the Closing Date, then such restriction shall be deemed amended to the
extent necessary to avoid such violation.
6.15 Change of Corporate Name or Location; Change of Fiscal Year. No
Credit Party shall (a) change its corporate name or (b) change its chief
executive office, 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 each case without at least 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 Agent and
Lenders, in any Collateral and to provide access and other rights as against
third parties in accordance with the requirements of Section 5.9, has been
completed or taken; provided, that (i) with respect to a change in location of
such Credit Party's chief executive office, principal place of business,
corporate office or location of its records concerning the Collateral, any such
new location shall be in the continental United States of America, and (ii) with
respect to a change in location at which any Collateral is held or stored, any
such new location may only be located outside of the continental United States
of America if the aggregate fair market value of all Collateral located outside
of the continental United States of America after giving effect to any such
change in location (excluding, for purposes of this clause (ii), assets located
outside of the continental United States of America that are acquired pursuant
to a Permitted Acquisition or Eligible Inventory located in the United Kingdom)
would not exceed $500,000. Without limiting the generality of the foregoing, no
Credit Party shall change its name, identity or corporate structure in any
manner that 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 except upon 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 Agent and
Lenders, in any Collateral, has been completed or taken. No Credit Party shall
change its Fiscal Year unless approved by Agent in writing,
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which approval shall not be unreasonably withheld or delayed.
6.16 No Impairment of Intercompany Transfers. No Credit Party shall
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 and the Senior Subordinated Debt Documents) that 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 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 Leases. During any Fiscal Year, no Credit Party shall enter into any
operating lease for Equipment or Real Estate if the aggregate annual rental
payments payable in any given Fiscal Year (each such Fiscal Year, a "Reference
Year") under any such operating lease, when taken together with the aggregate
annual rental payments payable in the same Reference Year under all other such
operating leases entered into by any Credit Party during such Fiscal Year, would
exceed $750,000 on a consolidated basis; provided, that (a) any such lease
existing as of the Closing Date, together with any extension, modification, or
amendment thereof, and any lease replacing any such lease if the replacement
lease contains substantially the same terms as the lease being replaced, and (b)
a third party distribution/logistics/warehousing agreement to be entered into by
Borrower in furtherance of its strategic centralization efforts as announced by
Borrower in connection with the release of its financial results for the Fiscal
Quarter ending September 30, 1998, which agreement shall be in form and
substance reasonably satisfactory to Agent, shall not be included for purposes
of making the foregoing determination.
6.19 Changes and Other Matters Relating to Subordinated Debt. No Credit
Party shall change or amend the terms of any Subordinated Debt, including the
Senior Subordinated Debt, or any indenture or agreement in connection therewith,
if the effect of such amendment is to: (a) increase the interest rate on such
Subordinated Debt; (b) change the dates upon which payments of principal or
interest are due on such Subordinated Debt other than to extend such dates; (c)
change any default or event of default other than to delete or make less
restrictive any default provision therein, or add any covenant with respect to
such Subordinated Debt; (d) change the redemption or prepayment provisions of
such Subordinated Debt other than to extend the dates therefor or to reduce the
premiums payable in connection therewith; (e) grant any security or collateral
to secure payment of such Subordinated Debt; or (f) change or amend any other
term if such change or amendment would materially increase the obligations of
such Credit Party thereunder or confer additional material rights on the holder
of such Subordinated Debt in a manner adverse to any Credit Party, Agent or any
Lender. In addition, Borrower will not designate any Indebtedness other than the
Obligations as "Designated Senior Debt," as that term is defined in the Senior
Subordinated Note Indenture. Notwithstanding anything to the contrary in this
Section 6.19 or in any other provision of this Agreement or any other Loan
Document, Borrower shall be entitled to issue the Additional Notes pursuant to,
and subject to all the requirements of, the Senior Subordinated Note Indenture
and the other Senior Subordinated Debt Documents, the proceeds of which shall be
used by Borrower to prepay the Loans in
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accordance with Section 1.3(b)(iii).
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 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 Date; provided, that the provisions of Section
11, the payment obligations under Sections 1.15 and 1.16, 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) shall fail 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) shall fail to pay or reimburse Agent
or Lenders for any expense reimbursable hereunder or under any other Loan
Document within ten 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 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 ten 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 30 days or more
following the earlier of (i) receipt by such Credit Party of written notice of
such failure or (ii) such Credit Party's knowledge of such failure.
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(e) A default or breach shall occur under any other agreement,
document or instrument to which any Credit Party is a party that is not cured
within any applicable grace period therefor, and such default or breach (i)
involves the failure to make any payment when due in respect of any Indebtedness
(other than the Obligations) of any Credit Party in excess of $1,500,000 in the
aggregate, including the Senior Subordinated Notes or (ii) causes, or permits
any holder of such Indebtedness or a trustee to cause, Indebtedness or a portion
thereof in excess of $1,500,000 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) (i) Any information contained in any Borrowing Base Certificate
shall be untrue or incorrect in any material respect, or (ii) 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;
provided, that for purposes of clause (i) above and without limiting the same,
any misstatement or error contained in any Borrowing Base Certificate that, if
corrected, would cause the actual Net Borrowing Availability as of the date of
such Borrowing Base Certificate to be (A) less than zero or (B) more than
$50,000 below the Net Borrowing Availability as represented therein shall be
deemed to be material.
(g) Assets of any Credit Party with a fair market value of $500,000
or more shall be attached, seized, levied upon or subjected to a writ or
distress warrant, or come within the possession of any receiver, trustee,
custodian or assignee for the benefit of creditors of any Credit Party and such
condition continues for 60 days or more.
(h) A case or proceeding shall have been commenced against any
Credit Party seeking a decree or order in respect of such Credit Party (i) under
the Bankruptcy Code or any other applicable federal, state or foreign bankruptcy
or other similar law, (ii) appointing a custodian, receiver, liquidator,
assignee, trustee or sequestrator (or similar official) for such Credit Party or
for any substantial part of such Credit Party's assets, or (iii) ordering the
winding-up or liquidation of the affairs of such Credit Party, and such case or
proceeding shall remain undismissed or unstayed for 60 days or more or a final
and non-appealable decree or order granting the relief sought in such case or
proceeding shall be entered by a court of competent jurisdiction over such case
or proceeding.
(i) Any Credit Party shall (i) file a petition seeking relief under
the Bankruptcy Code or any other applicable federal, state or foreign bankruptcy
or other similar law, (ii) consent to or fail to contest in a timely and
appropriate manner the institution of proceedings thereunder or the filing of
any such petition or the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee or sequestrator (or similar official)
for such Credit Party or for any substantial part of such Credit Party's assets,
(iii) make an assignment for the benefit of creditors, (iv) take any corporate
action in furtherance of any of the foregoing, or (v) admit in writing its
inability to, or shall be generally unable to, pay its debts as such debts
become due.
(j) A final judgment or judgments for the payment of money in excess
of
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$1,000,000 in the aggregate at any time outstanding shall be rendered against
any Credit Party and the same (i) shall not have been discharged or execution
thereof stayed or bonded pending appeal within 60 days after the entry thereof,
or (ii) shall not have been discharged prior to the expiration of any such stay;
provided, that if (A) the liability of such Credit Party under any such judgment
is adequately insured against under a policy of insurance satisfying the
requirements of Section 5.4, (B) the insurer thereunder has accepted tender of
such Credit Party's claim with respect thereto without any reservation of
rights, and (C) the failure to discharge such judgment or obtain such a stay or
bond within such time period could not reasonably be expected to have or result
in a Material Adverse Effect, then no Event of Default shall be deemed to have
occurred hereunder until such time as the failure to discharge such judgment or
obtain such a stay could reasonably be expected to have or result in a Material
Adverse Effect.
(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 Lien created under any Loan Document shall cease to be a valid and
perfected first priority Lien (except as otherwise permitted herein or therein)
in any of the Collateral purported to be covered thereby except, with respect to
the loss of perfection or priority only, to the extent any such loss results
from the negligence of Agent, any Lender, or any of their respective agents or
representatives.
(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 Credit Party generating more than 20% of
Borrower's consolidated revenues for the Fiscal Year preceding such event and
such cessation or curtailment continues for more than 60 days.
(n) Any material default or breach by any Credit Party shall occur
and be continuing under any agreement set forth in Disclosure Schedule (8.1(n))
or any such agreement shall be terminated for any reason.
8.2 Remedies.
(a) If any Default or Event of Default shall have occurred and be
continuing, Agent may (and at the written request of Requisite Revolving
Lenders, shall), without notice, suspend the Revolving Loan facility with
respect to further Advances or the incurrence of further Letter of Credit
Obligations, whereupon any further Advances and the incurrence of further Letter
of Credit Obligations shall be made or incurred in Agent's sole discretion (or
in the sole discretion of Requisite Revolving 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 Revolving 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.
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(b) If any Event of Default shall have occurred and be continuing,
Agent may (and at the written request of Requisite Revolving 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; or (iii) exercise any
rights and remedies provided to Agent under the Loan Documents or at law or in
equity, including all remedies provided under the Code; provided, 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.
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 Agent's replevy, attachment or levy upon, the Collateral or any
bond or security that 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 consent to any Lender's assignment of, or
sale of participations in, at any time or times, the Loan Documents, Loans,
Letter of Credit Obligations or 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 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 by the assigning Lender 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 of all other Lenders 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 shall give rise to a direct
obligation of
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Borrower to the assignee and that the assignee shall 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, if any, in exchange for the Notes 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; provided, 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 or pursuant to applicable law). Solely for
purposes of Sections 1.13, 1.15, 1.16 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 respective 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
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in compliance with the representations contained in Section 3.4(c).
(e) Any 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); provided, that such 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 1.16(a),
increased costs under Section 1.16(b), an inability to fund LIBOR Loans under
Section 1.16(c), or withholding taxes in accordance with Section 1.15(a).
9.2 Appointment of Agent.
(a) 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.
(b) If Agent shall request instructions from Requisite Revolving
Lenders, Supermajority Revolving 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 Revolving Lenders, Supermajority Revolving 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 (i) if such action would, in the opinion of Agent, be contrary to law
or the terms of this Agreement or any other Loan Document, (ii) if such action
would, in the opinion of Agent, expose Agent to Environmental Liabilities or
(iii) if Agent shall not first be indemnified to its satisfaction against any
and all liability and expense that 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 Revolving Lenders, Supermajority
Revolving Lenders or all affected Lenders, as applicable.
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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 limiting 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 by it in
good faith 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) 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.
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9.6 Indemnification. Lenders agree to indemnify Agent (to the extent not
reimbursed by Credit Parties and without limiting the obligations of Credit
Parties 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 that 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 to be taken by Agent in connection
therewith; provided, 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
wilful 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 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
30 days' prior written notice thereof to Lenders and Borrower. Upon any such
resignation, Requisite Revolving Lenders shall have the right to appoint a
successor Agent. If no successor Agent shall have been so appointed by Requisite
Revolving Lenders and shall have accepted such appointment within 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 within 30 days after the date
such notice of resignation was given by the resigning Agent, such resignation
shall become effective and Requisite Revolving Lenders shall thereafter perform
all the duties of Agent hereunder until such time, if any, as Requisite
Revolving Lenders appoint a successor Agent as provided above. Any successor
Agent appointed by Requisite Revolving 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 acting as Agent under this Agreement and the other
Loan Documents. Agent may be removed at the written direction of the holders
(other than Agent) of 80% or more of the Commitments (excluding Agent's
Commitment); provided, that in so doing, such Lenders shall be deemed to have
waived and released any and all claims they may have against Agent.
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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, and subject to the provisions of Section 9.9(f), 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 offset 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 at 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 that are not paid when due. Any
Lender or holder of any Note exercising a right to offset 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 offset or otherwise received with each other Lender or holder in accordance
with their respective Pro Rata Shares. Each Lender's obligation under this
Section 9.8 shall be in addition to and not in limitation of its obligations to
purchase a participation in an amount equal to its Pro Rata Share of the Swing
Line Loans under Section 1.1. Borrower and each Guarantor agrees, to the fullest
extent permitted by law, that (a) any Lender or holder may exercise its right to
offset with respect to amounts in excess of its Pro Rata Share of the
Obligations and may sell participations in such amounts so offset 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 setoff, 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
setoff amount or payment otherwise received is thereafter recovered from the
Lender that has exercised the right of setoff, the purchase of participations by
that Lender shall be rescinded and the purchase price restored without interest.
9.9 Advances; Non-Funding Lenders; Information; Actions in Concert.
(a) Advances; Payments.
(i) Revolving Lenders shall refund or participate in the Swing
Line Loan in accordance with clauses (iii) and (iv) of Section 1.1(b). If the
Swing Line Lender declines to make a Swing Line Loan or if Swing Line
Availability is zero, Agent shall notify Revolving Lenders promptly after
receipt of a Notice of Revolving Credit Advance and in any event prior to 11:00
a.m. (California time) on the date such Notice of Revolving Credit 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 1:00 p.m. (California
time) on the requested funding date, in the case of an Index Rate Loan, and not
later than 10:00 a.m. (California time) on the requested funding date, in the
case of a LIBOR Loan. 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
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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 Business Day of each calendar week or more
frequently as aggregate cumulative payments in excess of $2,000,000 are received
with respect to the Loans (other than the Swing Line Loan) (each, a "Settlement
Date"), Agent shall 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 shall 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 11:00 a.m. (California 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 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 setoff,
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
setoff, 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
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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 setoff, 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, or to
purchase any participation in any Swing Line Loan to be made or purchased by it
on the date specified therefor shall not relieve any other Revolving Lender
(each such other Revolving Lender, an "Other Lender") of its obligations to make
such Advance or purchase such participation on such date, but neither any Other
Lender nor Agent shall be responsible for the failure of any Non-Funding Lender
to make an Advance, or to purchase a participation required hereunder.
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 Revolving Lenders" or "Supermajority Revolving
Lenders" hereunder) for any voting or consent rights under or with respect to
any Loan Document.
(e) Dissemination of Information. Agent shall 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, 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.
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 setoff) without first
obtaining the prior written consent of Agent and Requisite Revolving 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.
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10. 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.
1. MISCELLANEOUS
1.1 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. Any letter of interest, commitment letter, fee letter
(other than the GE Capital Fee Letter) or confidentiality agreement 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.
1.2 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, any of the Notes or any other Loan Document, 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
Revolving Lenders, Supermajority Revolving 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 Revolving Lenders.
(b) No amendment, modification, termination or waiver of or consent
with respect to any provision of this Agreement that (i) increases the
percentage advance rates set forth in the definition of the Borrowing Base, (ii)
makes less restrictive the nondiscretionary criteria for exclusion from Eligible
Accounts and Eligible Inventory set forth in Sections 1.6 and 1.7 or (iii)
amends the definitions of "Applicable EBITDA Multiple" or "Pro Forma EBITDA" if
the result of any such amendment has the effect of making more credit available
shall be effective unless the same shall be in writing and signed by Agent,
Supermajority Revolving Lenders, and Borrower. No amendment, modification,
termination or waiver of or consent with respect to any provision of this
Agreement that 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
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Revolving 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 Revolving 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 Revolving Lenders and Borrower.
(c) No amendment, modification, termination or waiver shall, unless
in writing and signed by Agent and each Lender directly affected thereby: (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 that 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 Revolving Lenders" or "Supermajority
Revolving 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.
(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 Revolving 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 in this clause (i) and in clauses (ii) and (iii) below
being referred to as a "Non-Consenting Lender"),
(ii) requiring the consent of Supermajority Revolving Lenders,
the consent of Requisite Revolving Lenders is obtained, but the consent of
Supermajority Revolving Lenders is not obtained, or
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(iii) requiring the consent of Requisite Revolving Lenders,
the consent of Revolving Lenders holding 51% or more of the aggregate Revolving
Loan Commitments is obtained, but the consent of Requisite Revolving 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 Lenders for an amount equal to the
principal balance of all Loans held by such Non-Consenting Lenders 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 1.13),
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.
1.3 Fees and Expenses. Borrower shall reimburse Agent and, with respect
to syndication expenses, GE Capital, for all reasonable out-of-pocket expenses
incurred in connection with the negotiation, preparation and syndication 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 reasonable 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;
(b) any amendment, modification or waiver of, consent with respect
to, or termination of, 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 herewith or therewith, 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
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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; provided further, that Borrower shall not be required to
so reimburse Agent or any Lender in connection with any action (i) between any
Credit Party and Agent or any Lender on this Agreement or any other Loan
Document pending before a court of competent jurisdiction, (ii) that has not
been voluntarily dismissed or dismissed pursuant to a settlement thereof, and
(iii) in which a final, non-appealable judgment or order shall have been entered
in favor of such Credit Party containing an express finding that such Credit
Party is the prevailing party;
(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; and
(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 reasonable
attorneys' and other reasonable 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 connection with or relating to any of the events or
actions described in this Section 11.3, all of which shall be payable, on
demand, by Borrower to Agent. Without limiting the generality of the foregoing,
such reasonable 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.
1.4 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 or any other Loan Document shall not waive, affect or diminish any
right of Agent or such Lender thereafter to demand strict compliance and
performance herewith or therewith. Any suspension or waiver of 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
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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.
1.5 Remedies. Agent's and Lenders' rights and remedies under this
Agreement shall be cumulative and nonexclusive of any other rights and remedies
that 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.
1.6 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
or any other Loan Document shall be prohibited by or invalid under applicable
law, such provision shall be ineffective only to the extent of such prohibition
or invalidity without invalidating the remainder of such provision or the
remaining provisions of this Agreement or such other Loan Document.
1.7 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.
1.8 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 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 advice of Agent's or
such Lender's counsel, is 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) that ceases to be
confidential through no fault of Agent or any Lender.
1.9 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 LOAN DOCUMENTS AND THE OBLIGATIONS SHALL BE GOVERNED BY,
AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
NEW YORK APPLICABLE TO CONTRACTS MADE AND
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PERFORMED IN THAT STATE (WITHOUT REGARD TO THE CONFLICT OF LAW PROVISIONS
THEREOF) 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 ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ 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; PROVIDED FURTHER, THAT NOTHING IN
THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE AGENT FROM BRINGING SUIT
OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION (INCLUDING ANY
JURISDICTION IN WHICH THE COLLATERAL IS LOCATED) 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 AND EACH LENDER EXPRESSLY SUBMITS AND
CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY
SUCH COURT, AND EACH SUCH PERSON HEREBY WAIVES ANY OBJECTION THAT SUCH PERSON
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, COMPLAINT 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 DAYS AFTER DEPOSIT IN THE UNITED STATES MAIL, PROPER POSTAGE PREPAID.
1.10 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
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 Business Day after deposit with a reputable overnight courier
with all charges prepaid; or (d) when delivered, if
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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 in 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
in Annex I to receive copies shall in no way adversely affect the effectiveness
of such notice, demand, request, consent, approval, declaration or other
communication.
1.11 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.
1.12 Counterparts. This Agreement may be executed in any number of
separate counterparts, each of which shall collectively and separately
constitute one agreement.
1.13 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.
1.14 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 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. Each
Credit Party consents to the publication by Agent or any 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.
1.15 Reinstatement. This Agreement shall remain in full force and effect
and continue
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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.
1.16 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.
1.17 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.
[Remainder of Page Intentionally Left Blank]
62
68
IN WITNESS WHEREOF, this Agreement has been duly executed as of the
date first written above.
"Borrower"
STYLING TECHNOLOGY CORPORATION
By:_____________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Executive Vice President, Chief Financial
Officer and Treasurer
GENERAL ELECTRIC CAPITAL
CORPORATION, as Agent and a Lender
By:_____________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Duly Authorized Signatory
Revolving Loan
Commitment (including
a Swing Line Commitment
of $10,000,000):
$90,000,000
[Remainder of Page Intentionally Left Blank]
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69
The following Persons are signatories to this Agreement in their
capacity as Credit Parties and not as Borrowers.
U.K. ABBA PRODUCTS, INC.
By:_____________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Vice President and Treasurer
EUROPEAN TOUCH, LTD. II
By:_____________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Vice President and Treasurer
BEAUTY PRODUCTS INC.
By:_____________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Vice President and Treasurer
COSMETICS INTERNATIONAL INC.
By:_____________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Vice President and Treasurer
FT. PITT ACQUISITION, INC.
By:_____________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Vice President and Treasurer
FT. PITT-FRAMESI, LTD.
By:_____________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Vice President and Treasurer
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70
[Signatures Continued]
STYLING TECHNOLOGY NAIL CORPORATION
By:_____________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Vice President and Treasurer
STYL INSTITUTE, INC.
By:_____________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Vice President and Treasurer
STYLING TECHNOLOGY (UK) LIMITED
By:_____________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Secretary
STYLING TECHNOLOGY EXPORT CORPORATION
By:_____________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Vice President and Treasurer
65
71
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 references in the following definitions to Sections, Exhibits,
Schedules or Annexes shall refer to Sections, Exhibits, Schedules or Annexes of
the Agreement:
"Account Debtor" shall mean any Person who may become obligated to
any other Person under, with respect to, or on account of, an Account.
"Accounting Changes" shall have the meaning assigned to it in Annex
G.
"Accounts" shall mean all "accounts," as such term is defined in the
Code, now owned or hereafter acquired by any Person, 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),
whether arising out of goods sold or services rendered by it or from any other
transaction (including any such obligations that may be characterized as an
account or contract right under the Code), (b) all of such Person's rights in,
to and under all purchase orders or receipts for goods or services, (c) all of
such Person'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 such Person under all purchase orders and contracts for
the sale of goods or the performance of services or both by such Person or in
connection with any other transaction (whether or not yet earned by performance
on the part of such Person), including the right to receive the proceeds of said
purchase orders and contracts, and (e) all collateral security and guaranties of
any kind given by any other Person with respect to any of the foregoing.
"Additional Notes" shall have the meaning assigned to it in the
Senior Subordinated Note Indenture.
"Advance" shall mean any Revolving Credit Advance or Swing Line
Advance, as the context may require.
"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, ten percent (10%) or more of the Stock
having ordinary voting power in the election of directors of such Person, (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 or (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
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otherwise; provided, that the term "Affiliate" shall specifically exclude Agent
and each Lender.
"Agent" shall mean GE Capital, in its capacity as Agent for Lenders,
or its successor appointed pursuant to Section 9.7.
"Agreement" shall mean the Credit Agreement by and among Borrower,
the other Credit Parties party thereto, GE Capital, as Agent and a 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 in accordance
with the terms thereof.
"Appendices" shall have the meaning assigned to it in the recitals
to the Agreement.
"Applicable EBITDA Multiple" shall mean 1.25.
"Applicable L/C Margin" shall mean the per annum fee 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, the Applicable Unused Line Fee Margin, the Applicable Revolver Index
Margin, and the Applicable Revolver LIBOR Margin.
"Applicable Revolver 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).
"Applicable Revolver LIBOR Margin" shall mean the per annum interest
rate from time to time in effect and payable in addition to the LIBOR Rate
applicable to the Revolving Loan, as determined by reference to Section 1.5(a).
"Applicable Senior Leverage Multiple" shall mean, as of any date of
determination, the maximum Senior Leverage Ratio covenant level for Borrower and
its Subsidiaries set forth in Annex G as of such date.
"Applicable Total Leverage Multiple" shall mean, as of any date of
determination, the maximum Total Leverage Ratio covenant level for Borrower and
its Subsidiaries set forth in Annex G as of such date.
"Applicable Unused Line Fee Margin" shall mean the per annum fee
payable in respect of Borrower's non-use of available funds pursuant to Section
1.9(b), as determined by reference to Section 1.5(a).
"Assignment Agreement" shall have the meaning assigned to it in
Section 9.1(a).
"Bankruptcy Code" shall mean the provisions of title 11 of the
United States Code, 11 U.S.C. Sections 101 et seq.
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73
"Borrower" shall have the meaning assigned to it in the preamble to
the Agreement.
"Borrower Accounts" shall have the meaning assigned to it in Annex
C.
"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 lowest of:
(a) (i) 80% of the book value of Eligible Accounts; plus
(ii) 65% of the book value of Eligible Inventory valued at the
lower of cost (determined on a first-in, first-out basis) or market; plus
(iii) the Applicable EBITDA Multiple multiplied by Pro Forma
EBITDA of Borrower for the four full Fiscal Quarters immediately preceding such
date;
(b) the Applicable Senior Leverage Multiple multiplied by Pro Forma
EBITDA of Borrower for the four full Fiscal Quarters immediately preceding such
date; and
(c) (i) (A) the Applicable Total Leverage Multiple multiplied by (B)
Pro Forma EBITDA of Borrower for the four full Fiscal Quarters immediately
preceding such date, minus (ii) (A) the Funded Debt of Borrower on a
consolidated basis as of such date of determination minus (B) the outstanding
balance of the Obligations as of such date of determination;
with respect to each of clauses (a) through (c) above, less any Reserves
established by Agent at such time in its reasonable credit judgment.
"Borrowing Base Certificate" shall mean a certificate to be executed
and delivered from time to time by Borrower 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 States of
California or New York and in reference to LIBOR Loans shall mean any such day
that is also a LIBOR Business Day.
"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 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
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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 Collateral Account" shall have the meaning assigned to it in
Annex B.
"Cash Equivalents" shall have the meaning assigned to it in Annex B.
"Cash Management System" shall have the meaning assigned to it in
Section 1.8.
"Change of Control" means any of the following: (a) any Person
(other than ▇▇▇ ▇. ▇▇▇▇▇▇▇) or group of Persons (within the meaning of the
Securities Exchange Act) 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 50% 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) a majority of
individuals who as of the Closing Date 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 a majority of the directors then
still in office who either were directors as of the Closing Date or whose
election or nomination for election were previously so approved) cease for any
reason other than death or disability to be members of the board of directors of
Borrower; or (c) any "Change of Control," as that term is defined in the Senior
Subordinated Note Indenture.
"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 Person, (d) any Person's
ownership or use of any properties or other assets, or (e) any other aspect of
any Person's business.
"Chattel Paper" shall mean any "chattel paper," as such term is
defined in the Code, now owned or hereafter acquired by any Person, wherever
located.
"Closing Date" shall mean June 22, 1999.
"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, that
in the event that, by reason of mandatory provisions of law, any or all of the
attachment, perfection or priority of, or remedies with respect to, Agent's or
any Lender's Lien on any Collateral is governed by the Uniform Commercial Code
as enacted and in effect in a jurisdiction other than the State of New York, the
term "Code" shall mean the Uniform Commercial Code as enacted and in effect in
such other jurisdiction solely for purposes of the provisions thereof relating
to such attachment, perfection, priority or remedies and for purposes of
definitions related to such provisions.
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75
"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 Agent and Lenders, to secure the
Obligations.
"Collateral Documents" shall mean the Security Agreement, the Pledge
Agreement, the Guaranties, the Patent, Trademark and Copyright Security
Agreement and all similar agreements entered into guaranteeing payment of, or
granting a Lien upon property as security for payment of, the Obligations, as
each such agreement may be amended, supplemented, restated or otherwise modified
from time to time in accordance with the terms thereof.
"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, ABA No. 021 001 033, or such other account as may be designated
in writing by Agent as the "Collection Account."
"Commitments" shall mean (a) as to any Lender, such Lender's
Revolving Loan Commitment (including without duplication the Swing Line Lender's
Swing Line Commitment as a subset of its Revolving Loan Commitment) as set forth
on Annex J to the Agreement or in the most recent Assignment Agreement executed
by such Lender and (b) as to all Lenders, the aggregate of all Lenders'
Revolving Loan Commitments (including without duplication the Swing Line
Lender's Swing Line Commitment as a subset of its Revolving Loan Commitment),
which aggregate commitment shall be Ninety Million Dollars ($90,000,000) on the
Closing Date, and, with respect to each of clauses (a) and (b), as such
Commitments may be adjusted from time to time in accordance with the Agreement.
"Commitment Termination Date" shall mean the earliest of (a) June
22, 2004, (b) the date of termination of Lenders' obligations to make Advances
and to 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, 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 termination of the
Revolving Loan Commitment and the Swing Line Commitment, in each case in
accordance with the provisions of Section 1.3(a).
"Compliance Certificate" shall have the meaning assigned to it in
Annex E.
"Contracts" shall mean all contracts, undertakings, or agreements
(other than rights evidenced by Chattel Paper, Documents or Instruments) in or
under which such Person 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" shall mean a letter agreement between Agent and (a)
the issuer of
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uncertificated securities with respect to uncertificated securities in the name
of any Credit Party, (b) 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,
(c) 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, as
applicable, disclaims or subordinates any security interest in the applicable
financial assets, acknowledges the Lien of Agent, on behalf of Agent 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 Person under any written agreement granting any right
to use any Copyright or Copyright registration.
"Copyrights" shall mean all of the following property now owned or
existing or hereafter adopted or acquired by any Person: (a) all copyrights and
General Intangibles of like nature (whether registered or unregistered), 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, or any territory thereof, or any other country or any political
subdivision thereof; and (b) all extensions or renewals thereof.
"Credit Parties" shall mean Borrower and each of its Subsidiaries
and each other Person that may from time to time become a party to the Agreement
in such capacity.
"Default" shall mean any event that, 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).
"Disbursement Account" shall have the meaning assigned to it in
Annex C.
"Disclosure Schedules" shall mean the Schedules prepared by Borrower
and denominated as Disclosure Schedules (1.4) through (8.1(n)) 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 Person, wherever located.
"Dollars" or "$" shall mean lawful currency of the United States of
America.
"Domestic Subsidiary" shall mean, with respect to any Person, any
Subsidiary of such Person other than a Foreign Subsidiary of such Person.
"EBITDA" shall mean, with respect to any Person for any fiscal
period, without duplication, an amount equal to (a) consolidated net income of
such Person for such period, minus (b) the sum of (i) income tax credits, (ii)
interest income, (iii) gain from extraordinary items for such period, (iv) any
aggregate net gain during such period arising from the sale,
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exchange or other disposition of assets by such Person outside of the ordinary
course of business (including any fixed assets, whether tangible or intangible,
all inventory sold in conjunction with the disposition of fixed assets and all
securities), and (v) any other non-cash gains that 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, plus (c) the sum of (i) any provision for income taxes,
(ii) Interest Expense, (iii) loss from extraordinary items for such period, (iv)
any aggregate net loss during such period arising from the sale, exchange or
other disposition of assets by such Person outside of the ordinary course of
business (including any fixed assets, whether tangible or intangible, all
inventory sold in conjunction with the disposition of fixed assets and all
securities), (v) the amount of non-cash charges (including depreciation and
amortization) for such period, (vi) amortized debt discount for such period, 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. For purposes of this
definition, the following items shall be excluded in determining consolidated
net income of a Person: (A) 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; (B) 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; (C) the
undistributed 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; (D) 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; (E) any write-up of any
asset; (F) any net gain from the collection of the proceeds of life insurance
policies; (G) any net gain arising from the acquisition of any securities, or
the extinguishment, under GAAP, of any Indebtedness, of such Person; (H) 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 (I) 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.
"Eligible Inventory" shall have the meaning assigned to it in
Section 1.7.
"Environmental Laws" shall mean all applicable federal, state, local
and foreign laws, statutes, ordinances, codes, rules, standards and regulations,
now or hereafter in effect, and any applicable judicial or administrative
interpretation thereof, including any applicable judicial or administrative
order, consent decree, order or judgment, imposing 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
▇-▇
▇▇
▇.▇.▇. 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.); 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, 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 Person, wherever located,
including all such Person's machinery and equipment, including processing
equipment, conveyors, machine tools, data processing and computer equipment with
software and peripheral equipment, 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, 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.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, and any regulations promulgated thereunder.
"ERISA Affiliate" shall mean, with respect to any Credit Party, any
trade or business (whether or not incorporated) that, 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.
"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
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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 30 days; (g) any other event or condition that 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 that 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.
"Fair Labor Standards Act" shall mean the provisions of the Fair
Labor Standards Act, 29 U.S.C. Sections 201 et seq.
"Fair Salable Balance Sheet" shall mean a balance sheet of Borrower
prepared in accordance with Section 3.4(d).
"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 in its sole
discretion, which determination shall be final, binding and conclusive (absent
manifest error).
"Federal Reserve Board" shall mean the Board of Governors of the
Federal Reserve System.
"Fees" shall mean any and all fees payable to Agent or any Lender
pursuant to the Agreement or any of the other Loan Documents.
"Financial Covenants" shall have the meaning assigned to it in
Section 6.10.
"Financial Statements" shall mean the consolidated and consolidating
income statements, statements of cash flows and balance sheets of Borrower
delivered in accordance with Section 3.4 and Annex E.
"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
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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 Charge Coverage Ratio" shall mean, with respect to any Person
for any fiscal period, the ratio of (a) (i) Pro Forma EBITDA minus (ii) Capital
Expenditures paid by such Person in cash minus (iii) Taxes paid in cash or
accrued by such Person to (b) Fixed Charges, in each case for such period. In
computing Fixed Charges for any fiscal period, interest and principal 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.
"Fixed Charges" shall mean, with respect to any Person for any
fiscal period, (a) the aggregate of all Interest Expense paid or accrued during
such period, plus (b) regularly scheduled payments of principal paid or payable
with respect to Indebtedness during such period.
"Fixtures" shall mean all "fixtures," as such term is defined in the
Code, now owned or hereafter acquired by any Person, wherever located.
"Foreign Subsidiary" shall mean, with respect to any Person, any
Subsidiary of such Person that is not organized under the laws of the United
States of America or the District of Columbia.
"Fuhrer Debt" shall mean the Indebtedness evidenced by (a) that
certain Promissory Note dated June 5, 1990, made by Ft. Pitt Acquisition, Inc.
and Ft. Pitt-Framesi, Ltd., collectively, as makers, in favor of ▇▇▇▇▇ ▇▇▇▇▇▇
International, Inc. and Framesi of U.S.A., Inc., collectively, as payee, in the
original principal amount of $2,986,010.03 and (b) that certain Promissory Note
dated June 5, 1990, made by Ft. Pitt Acquisition, Inc. and Ft. Pitt-Framesi,
Ltd., collectively, as makers, in favor of ▇▇▇▇▇ ▇▇▇▇▇▇ International, Inc. and
Framesi of U.S.A., Inc., collectively, as payee, in the original principal
amount of $1,400,000.
"Funded Debt" shall mean, with respect to any Person, without
duplication, all Indebtedness of such Person for borrowed money evidenced by
notes, bonds, debentures or similar evidences of Indebtedness that 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" shall mean General Electric Capital Corporation, a New
York corporation.
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"GE Capital Fee Letter" shall have the meaning assigned to it in
Section 1.9(a).
"General Intangibles" shall mean all "general intangibles," as such
term is defined in the Code, now owned or hereafter acquired by any Person,
including all right, title and interest that such Person may now or hereafter
have in or under any Contracts, Licenses, Copyrights, Trademarks and Patents and
all applications therefor and reissues, extensions or renewals thereof,
interests in partnerships, joint ventures and other business associations,
permits, inventions (whether or not patented or patentable), 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 and certificated
securities, chooses in action, deposit, checking and other bank accounts, rights
to receive tax refunds and other payments, rights to receive dividends,
distributions, cash, instruments and other property in respect of or in exchange
for pledged shares or other equity interests, rights of indemnification, all
books and records, correspondence, credit files, invoices and other papers,
including all tapes, cards, computer runs and other papers and documents in the
possession or under the control of such Person or any computer bureau or service
company from time to time acting for such Person.
"Goods" shall mean any "goods," as such term is defined in the Code,
now owned or hereafter acquired by any Person.
"Goodwill" shall mean all goodwill, trade secrets, proprietary or
confidential information, technical information, procedures, formulae, quality
control standards, designs, operating and training manuals, customer lists, and
other General Intangibles now or hereafter owned or acquired by any Person.
"Governmental Authority" shall mean any nation or government, any
state 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
obligation of such Person guaranteeing any indebtedness, lease, dividend, or
other obligation ("primary obligation") of any other Person (the "primary
obligor") in any manner, including any obligation or arrangement of such Person
to (a) purchase or repurchase any such primary obligation, (b) 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) 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) 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
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respect of which such Guaranteed Indebtedness is incurred 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 Subsidiary Guaranty and
any other guaranty executed by any Guarantor in favor of Agent, for the benefit
of Agent and Lenders, in respect of the Obligations.
"Guarantors" shall mean each Domestic Subsidiary of Borrower and
each other Person, if any, that executes a guaranty or other similar agreement
in favor of Agent, for the benefit of Agent and Lenders, in connection with the
transactions contemplated by the Agreement and the other Loan Documents.
"Hazardous Material" shall mean any substance, material or waste
that is regulated by, or forms the basis of liability now or hereafter under,
any Environmental Laws, including any material or substance that is (a) defined
as a "solid waste," "hazardous waste," "hazardous material," "hazardous
substance," "extremely hazardous waste," "restricted hazardous waste,"
"pollutant," "contaminant," "hazardous constituent," "special waste," "toxic
substance" or other similar term or phrase under any Environmental Laws, or (b)
petroleum or any fraction or by-product thereof, asbestos, polychlorinated
biphenyls (PCB's), or any radioactive substance.
"Indebtedness" shall mean, with respect to any Person, 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 months or
more, but excluding obligations to trade creditors incurred in the ordinary
course of business that are not overdue by more than six 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 1.13.
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"Index Rate" shall mean, for any day, a floating rate equal to the
higher of (a) the rate publicly quoted from time to time by The Wall Street
Journal as the "base rate on corporate loans at large U.S. money center
commercial banks" (or, if The Wall Street Journal ceases quoting a base rate of
the type described, the highest per annum rate of interest published by the
Federal Reserve Board in Federal Reserve statistical release H.15 (519) entitled
"Selected Interest Rates" as the Bank prime loan rate or its equivalent), and
(b) the Federal Funds Rate plus 50 basis points per annum. Each change in any
interest rate provided for in the Agreement based upon the Index Rate shall take
effect at the time of such change in the Index Rate.
"Index Rate Loan" shall mean a Loan or any portion thereof bearing
interest by reference to the Index Rate.
"Initial Notes" shall have the meaning assigned to it in the Senior
Subordinated Note Indenture.
"Instruments" shall mean any "instrument," as such term is defined
in the Code, now owned or hereafter acquired by any Person, wherever located,
including all certificated securities, all certificates of deposit, and all
notes and other 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,
Copyrights, Trademarks and the Goodwill associated with any of the foregoing.
"Intellectual Property Collateral" shall mean all of the right,
title and interest of any Credit Party, whether presently existing or hereafter
arising or acquired, in, to and under the following:
(a) each Patent owned and Patent application filed by such Person;
(b) each Patent License to which such Person is a party (or the
assignee of a party);
(c) each Trademark owned and Trademark application filed by such
Person;
(d) each Trademark License to which such Person is a party (or the
assignee of a party);
(e) each Copyright owned and Copyright application filed by such
Person;
(f) each Copyright License to which such Person is a party;
(g) the Goodwill associated with each Trademark and Trademark
application, and each of such Person's Trademarks licensed under any Trademark
License; and
(h) all Proceeds of the foregoing, including (i) any and all
proceeds of any insurance, indemnity, warranty or guaranty payable to any Person
from time to time with respect to any of the foregoing, (ii) any and all
payments (in any form whatsoever) made or due and
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payable to any Person from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of the
foregoing by any Governmental Authority (or any Person acting under color of
Governmental Authority), (iii) any claim of any Person against third parties for
(A) past, present or future infringement of any Patent or Patent License, (B)
past, present or future infringement of any Copyright, Copyright License, (C)
past, present or future infringement or dilution of any Trademark or Trademark
License, or (D) injury to the Goodwill associated with any Trademark or
Trademark License, (iv) any recoveries by any Person against third parties with
respect to any litigation or dispute concerning any of the foregoing, and (v)
any and all other amounts from time to time paid or payable under or in
connection with any of the foregoing, upon disposition or otherwise.
"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 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" shall mean (a) as to any Index Rate Loan,
the first Business Day of each month to occur while such Loan is outstanding,
and (b) as to any LIBOR Loan, the last day of the applicable LIBOR Period;
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 that has then accrued under the Agreement.
"Inventory" shall mean any "inventory," as such term is defined in
the Code, now owned or hereafter acquired by any Person, wherever located,
including inventory, merchandise, goods and other personal property that are
held by or on behalf of such Person for sale or lease or are furnished or are to
be furnished under a contract of service, or that constitute raw materials, work
in process, finished goods, returned goods, or materials or supplies of any
kind, nature or description used or consumed or to be used or consumed in such
Person's business or in the processing, production, packaging, promotion,
delivery or shipping of the same, including other supplies.
"Investment Property" shall mean all "investment property," as such
term is defined in Section 9-115 of the Code in those jurisdictions in which
such definition has been adopted, now owned or hereafter acquired by any Person,
wherever located, including (a) all securities, whether certificated or
uncertificated, including stocks, bonds, interests in limited liability
companies, partnership interests, treasuries, certificates of deposit, and
mutual fund shares, (b) all securities entitlements of such Person, including
the rights of such Person 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 such
account, (c) all securities accounts of such Person, (d) all commodity contracts
held by such Person, and (e) all commodity accounts held by such Person.
"IRC" shall mean the Internal Revenue Code of 1986 and any
regulations
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promulgated thereunder.
"IRS" shall mean the Internal Revenue Service.
"L/C Issuer" shall have the meaning assigned to it 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 pages of the Agreement and, if any such Lender shall decide to assign
all or any portion of the Obligations, any assignee of such Lender.
"Letter of Credit Fee" shall have the meaning assigned to it in
Annex B.
"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 that
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.
"LIBOR Business Day" shall mean a Business Day on which banks in the
City of London are generally open for interbank or foreign exchange
transactions.
"LIBOR Loan" shall mean a Loan or any portion thereof bearing
interest by reference to the LIBOR Rate.
"LIBOR Period" shall mean, with respect to any LIBOR Loan, each
period commencing on a LIBOR Business Day selected by Borrower pursuant to the
Agreement and ending one, two or three months thereafter, as selected by
Borrower's irrevocable notice to Agent as set forth in Section 1.5(e); provided,
that the foregoing provision relating to LIBOR Periods is subject to the
following:
(a) if any LIBOR Period would otherwise end on a day that is not a
LIBOR Business Day, such LIBOR Period shall be extended to the next succeeding
LIBOR Business Day unless the result of such extension would be to carry such
LIBOR Period into another calendar month in which event such LIBOR Period shall
end on the immediately preceding LIBOR Business Day;
(b) any LIBOR Period that would otherwise extend beyond the
Commitment Termination Date shall end two LIBOR Business Days prior to such
date;
(c) any LIBOR Period that begins on the last LIBOR Business Day of a
calendar month (or on a day for which there is no numerically corresponding day
in the calendar
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month at the end of such LIBOR Period) shall end on the last LIBOR Business Day
of a calendar month;
(d) Borrower shall select LIBOR Periods so as not to require a
payment or prepayment of any LIBOR Loan during a LIBOR Period for such Loan; and
(e) Borrower shall select LIBOR Periods so that there shall be no
more than five separate LIBOR Loans in existence at any one time.
"LIBOR Rate" shall mean for each LIBOR Period, a rate of interest
determined by Agent equal to:
(a) the offered rate for deposits in United States Dollars for the
applicable LIBOR Period that appears on Telerate Page 3750 as of 11:00 a.m.
(London time) on the second full LIBOR Business Day preceding the first day of
such LIBOR Period; divided by
(b) a number equal to 1.0 minus the aggregate (but without
duplication) of the rates (expressed as a decimal fraction) of reserve
requirements in effect on the day that is two LIBOR Business Days prior to the
beginning of such LIBOR Period (including basic, supplemental, marginal and
emergency reserves under any regulations of the Federal Reserve Board or other
Governmental Authority having jurisdiction with respect thereto, as now and from
time to time in effect) for Eurocurrency funding (currently referred to as
"Eurocurrency Liabilities" in Regulation D of the Federal Reserve Board) that
are required to be maintained by a member bank of the Federal Reserve System.
If such interest rates shall cease to be available from Telerate News Service,
the LIBOR Rate shall be determined from such financial reporting service or
other information as shall be mutually acceptable to Agent and Borrower.
"License" shall mean any Copyright License, Patent License,
Trademark License or other license of rights or interests now held or hereafter
acquired by any Person.
"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
1.12.
"Loan Documents" shall mean the Agreement, the Notes, the Collateral
Documents and all other agreements, instruments, documents and certificates
identified in the Schedule of Documents executed and delivered to, or in favor
of, Agent or any Lender and
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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 thereby. 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 or
Loan Document as the same may be in effect at any and all times such reference
becomes operative.
"Loans" shall mean the Revolving Loan and the Swing Line 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 the Credit Parties considered as a whole, (b) Borrower's ability to pay any
of the Loans or any of the other Obligations in accordance with the terms of the
Agreement, (c) the Guarantors' ability, taken as a whole, to pay their
respective Obligations under the Guaranties, (d) the Collateral or Agent's
Liens, for the benefit of Agent and Lenders, on the Collateral or the priority
of such Liens, or (e) Agent's or any Lender's rights and remedies under the
Agreement and the other Loan Documents. Without limiting the generality of the
foregoing, any event or occurrence adverse to one or more Credit Parties that,
as of any date of determination, results or could reasonably be expected to
result in costs or liabilities or loss of revenues on a consolidated basis in
any quarterly period in excess of 25% of the average pro forma quarterly
revenues for the four full Fiscal Quarters immediately preceding such date of
determination shall be deemed to constitute a Material Adverse Effect.
"Maximum Amount" shall mean, at the time any determination thereof
is to be made, the amount at such time equal to the Revolving Loan Commitment of
all Lenders.
"Maximum Lawful Rate" shall have the meaning assigned to it in
Section 1.5(f).
"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, or 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 (a) the Maximum Amount and (b) the Borrowing Base,
in each case less the sum of the Revolving Loan and Swing Line Loan then
outstanding.
"Non-Funding Lender" shall have the meaning assigned to it in
Section 9.9(a)(ii).
"Notes" shall mean, collectively, the Revolving Notes and the Swing
Line Note.
"Notice of Conversion/Continuation" shall have the meaning assigned
to it in
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Section 1.5(e).
"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 that accrues after the commencement of any case or proceeding by or
against any Credit Party in bankruptcy, whether or not allowed in such case or
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.
"Overadvance" shall have the meaning assigned to it in Section
1.1(a)(iii).
"Patent License" shall mean rights under any written agreement now
owned or hereafter acquired by any Person granting any right with respect to any
invention on which a Patent is in existence.
"Patents" shall mean all of the following property in which any
Person now holds or hereafter acquires any interest: (a) all letters patent of
the United States or of 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 or any territory thereof, or any other country, and (b) all
reissues, continuations, continuations-in-part, divisions or extensions thereof.
"Patent, Trademark and Copyright Security Agreement" shall mean the
Patent, Trademark and Copyright Security Agreement of even date herewith made in
favor of Agent, for the benefit of Agent and Lenders, by each Credit Party
signatory thereto, as the same may be amended, supplemented, restated or
otherwise modified from time to time in accordance with the terms thereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Pension Plan" shall mean a Plan described in Section 3(2) of ERISA.
"Permitted Acquisition" shall have the meaning assigned to it in
Section 6.1.
"Permitted Encumbrances" shall mean the following encumbrances: (a)
Liens for taxes or assessments or other governmental Charges not yet due and
payable or that are being contested in accordance with Section 5.2(b) of the
Agreement; (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
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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 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 $250,000 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) thereto, so long as the same do not materially impair the use, value, or
marketability of such Real Estate; (i) Liens existing on the Closing Date and
listed in Disclosure Schedule (6.7) and Liens securing any refinancings of the
Indebtedness secured by any such Closing Date Liens so long as such refinancings
are permitted under the Agreement and such Liens do not encumber any assets not
encumbered by such Closing Date Liens; (j) presently existing or hereafter
created Liens in favor of Agent, for the benefit of Agent and Lenders; (k) Liens
(i) created after the Closing Date 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, or (ii) consisting of purchase money
security interests or Capital Leases encumbering assets of a Target involved in
a Permitted Acquisition, involving the incurrence of an aggregate amount of
purchase money Indebtedness and Capital Lease Obligations of not more than
$2,000,000 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 the
proceeds thereof and such Indebtedness is incurred within 20 days following such
purchase and does not exceed 100% of the purchase price of the subject assets);
(l) Liens arising from precautionary filings of financing statements
contemplated by Section 9-408 of the Code made by lessors against any Credit
Party, as a lessee, with respect to leases of personal property permitted by the
Agreement; (m) leases or subleases under which any Credit Party is a lessee that
are permitted by the Agreement; and (n) Liens in favor of the "Trustee," as that
term is defined under the Senior Subordinated Note Indenture, pursuant to
Section 7.07 of the Senior Subordinated Note Indenture.
"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, that any Credit Party or any ERISA Affiliate
maintains, contributes to or has an obligation to contribute to on behalf of
participants who are or were employed by any Credit Party.
"Pledge Agreement" shall mean the Pledge Agreement of even date
herewith executed by each Credit Party signatory thereto in favor of Agent, for
the benefit of Agent and Lenders, pledging all Stock owned or held by it and all
Intercompany Notes owing to or held by
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it, as the same may be amended, supplemented, restated or otherwise modified
from time to time in accordance with the terms thereof.
"Prior Lender Agreement" shall mean that certain Credit Agreement
dated as of June 30, 1998, by and among Borrower, the lenders party thereto,
NationsBank, N.A., as administrative agent, and BankBoston, N.A., as
documentation agent, as the same may have been amended, restated, supplemented
or otherwise modified from time to time.
"Prior Lenders" shall mean, collectively, NationsBank, N.A.,
BankBoston, N.A., and each other lender party to the Prior Lender Agreement.
"Prior Lender Obligations" shall mean all obligations of the Credit
Parties to any Prior Lender pursuant to the Prior Lender Agreement and all other
agreements, instruments or documents executed and delivered to, or in favor of,
any Prior Lender in connection therewith or the transactions contemplated
thereby, in each case as the same may have been amended, restated, supplemented
or otherwise modified from time to time.
"Proceeds" shall mean "proceeds," as such term is defined in the
Code, including (a) any and all proceeds of any insurance, indemnity, warranty
or guaranty payable to any Person 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 Person 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 Person 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
Person 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" shall mean the financial statements attached as
Disclosure Schedule (3.4(b)) to the Agreement.
"Pro Forma EBITDA" shall mean, with respect to any Person for any
fiscal period, EBITDA of such Person, adjusted to (a) include the pro forma
EBITDA of any business acquired by such Person during such period as if acquired
at the beginning of such period after giving effect to adjustments for any
expenses that have been or will be eliminated under ownership by such Person or
any of its Subsidiaries of such acquired business, as determined by such Person
and approved by Requisite Revolving Lenders in their reasonable credit judgment;
provided, that the approval of Requisite Revolving Lenders shall not be required
(i) for inclusion in the Borrowing Base of the pro forma EBITDA of any Target
acquired pursuant to a Permitted Acquisition or (ii) with respect to adjustments
thereto for aggregate compensation expense with respect to (A) principal
Stockholder-employees of any Target and (B) family members of such
Stockholder-employees who are employees of such Target, in each case to be
terminated in connection with a Permitted Acquisition, and expenses directly
related thereto, (b) exclude the pro forma EBITDA of any business disposed of
during such period as if disposed of at the beginning of
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such period, and (c) exclude specific one-time cash expenses related to
Borrower's strategic centralization and reengineering plan as announced by
Borrower in connection with the release of its financial results for the Fiscal
Quarter ending September 30, 1998.
"Projections" shall mean 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
Subsidiary-by-Subsidiary or division-by-division 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 the Revolving Loan (including the Swing Line
Loan as a subset of the Swing Line Lender's Revolving Loan), the percentage
obtained by dividing (i) the Revolving Loan Commitment (including the Swing Line
Commitment as a subset of the Swing Line Lender's Revolving Loan Commitment) of
such Lender, by (ii) the aggregate Revolving Loan 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 such Lender, by (ii) the outstanding principal
balance of the Loans held by all Lenders, in each case as such percentages may
be adjusted by assignments permitted pursuant to Section 9.1.
"Qualified Plan" shall mean a Pension Plan that is intended to be
tax-qualified under Section 401(a) of the IRC.
"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 and the Fuhrer Debt on the Closing Date.
"Refunded Swing Line Loan" shall have the meaning assigned to it in
Section 1.1(b)(iii).
"Related Transactions" shall mean the initial borrowing under the
Revolving Loan on the Closing Date, the Refinancing, 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 and
all other documents executed in connection with the Related Transactions.
"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.
"Requisite Revolving Lenders" shall mean (a) Lenders having more
than sixty-six and two-thirds percent (66 2/3%) of the Revolving Loan
Commitments of all Lenders, or (b) if the Revolving Loan Commitments have been
terminated, more than sixty-six and two-thirds percent (66 2/3%) of the
aggregate outstanding amount of the Revolving Loan (with the Swing Line Loan
being attributed to the Lender making such Loan) and Letter of Credit
Obligations.
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"Reserves" shall mean (a) reserves established by Agent from time to
time against Eligible Inventory pursuant to Section 5.9, (b) reserves
established pursuant to Section 5.4(c), and (c) such other reserves against the
Borrowing Base or Borrowing Availability that Agent may, in its reasonable
credit judgment, establish from time to time. Without limiting the generality of
the foregoing, Reserves established to ensure the payment of accrued Interest
Expenses or Indebtedness shall be deemed to be a reasonable exercise of Agent's
credit judgment.
"Restricted Payment" shall mean, with respect to any Person and
without duplication: (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 such Person's Stock; (b) any payment on
account of the purchase, redemption, defeasance, sinking fund or other
retirement of such 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 of such Person; (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 and consistent with customary business
practices 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 its Affiliates.
"Retiree Welfare Plan" shall mean, at any time, a Welfare Plan 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 Revolving Loan Commitment.
"Revolving Loan" shall mean, at any time, (a) the aggregate amount
of Revolving Credit Advances outstanding to Borrower plus (b) 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 Loan Commitment" shall mean (a) as to any Revolving
Lender, the aggregate commitment of such Revolving Lender to make Revolving
Credit Advances (including without duplication Swing Line Advances as a subset
of the Swing Line Lender's Revolving Loan Commitment) or incur Letter of Credit
Obligations as set forth in Annex J 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
(including without duplication Swing Line Advances as a subset of the Swing Line
Lender's Revolving Loan
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Commitment) or incur Letter of Credit Obligations, which aggregate commitment
shall be Ninety Million Dollars ($90,000,000) on the Closing Date, as such
amount may be adjusted, if at all, from time to time in accordance with the
Agreement.
"Revolving Note" shall have the meaning assigned to it in Section
1.1(a)(ii).
"Schedule of Documents" 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.
"Securities Act" shall mean the provisions of the Securities Act of
1933, 15 U.S.C. Sections 77a et seq.
"Securities Exchange Act" shall mean the provisions of the
Securities Exchange Act of 1934, 15 U.S.C. Sections 78a et seq.
"Security Agreement" shall mean the Security Agreement of even date
herewith entered into by and among Agent, for the benefit of Agent and Lenders,
and each Credit Party signatory thereto, as the same may be amended,
supplemented, restated or otherwise modified from time to time in accordance
with the terms thereof.
"Senior Leverage Ratio" shall mean, with respect to any Person as of
any date of determination, on a consolidated basis, the ratio of (a) the
outstanding balance of the Obligations as of such date of determination to (b)
Pro Forma EBITDA for the four full Fiscal Quarters immediately preceding such
date of determination.
"Senior Subordinated Debt" shall mean all Indebtedness of any Credit
Party incurred pursuant to the Senior Subordinated Debt Documents.
"Senior Subordinated Debt Documents" shall mean the Senior
Subordinated Notes, the Senior Subordinated Note Indenture, and all other
agreements, instruments or documents executed and delivered in connection
therewith or the transactions contemplated thereby, in each case as the same may
have been amended, restated, supplemented or otherwise modified from time to
time.
"Senior Subordinated Note Indenture" shall mean that certain
Indenture dated as of June 23, 1998, by and among Borrower, as issuer, the
Subsidiaries of Borrower party thereto, as guarantors, and State Street Bank and
Trust Company of California, N.A., as trustee, as the same may have been
amended, restated, supplemented or otherwise modified from time to time.
"Senior Subordinated Notes" shall mean those certain 10 7/8% Senior
Subordinated Notes due 2008 issued or to be issued by Borrower pursuant to the
Senior Subordinated Note Indenture in the maximum aggregate principal amount of
up to $125,000,000, consisting of the Initial Notes issued thereunder on June
23, 1998, in the aggregate principal amount of $100,000,000 and any Additional
Notes to be issued thereunder in the maximum aggregate principal amount of up to
$25,000,000.
"Solvent" shall mean, with respect to any Person on a particular
date, that on such date: (a) the fair value of the property of such Person is
greater than the total amount of liabilities,
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including contingent liabilities, of such Person; (b) the present fair salable
value of the assets of such Person is not less than the amount that will be
required to pay the probable liability of such Person on its debts as they
become absolute and matured; (c) 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 (d) 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. The amount of contingent liabilities (such as litigation,
guaranties and pension plan liabilities) at any time shall be computed as the
amount that, in light of all the facts and circumstances existing at the time,
represents the amount that can be reasonably be expected to become an actual or
matured liability.
"Stock" shall mean all shares, options, warrants, general or limited
partnership interests, membership interests, investments in joint ventures or
other equivalents (regardless of how designated) of or in a corporation,
partnership, limited liability company 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).
"Stockholder" shall mean, with respect to any Person, each holder of
Stock of such Person.
"Subordinated Debt" shall mean the Senior Subordinated Debt and any
other 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 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 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 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 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 50% or of which any such Person is a general
partner or may exercise the powers of a general partner.
"Subsidiary Guaranty" shall mean the Continuing Guaranty of even
date herewith executed by each Domestic Subsidiary of Borrower in favor of
Agent, for the benefit of Agent and Lenders, as the same may be amended,
supplemented, restated or otherwise modified from time to time in accordance
with the terms thereof.
"Supermajority Revolving Lenders" shall mean Lenders having (a) 80%
or more of the Revolving Loan Commitments of all Lenders, or (b) if the
Revolving Loan Commitments have been terminated, 80% or more of the aggregate
outstanding amount of the Revolving Loan (with the Swing Line Loan being
attributed to the Lender making such Loan) and Letter of Credit Obligations.
"Swing Line Advance" shall have the meaning assigned to it in
Section 1.1(b)(i).
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"Swing Line Availability" shall have the meaning assigned to it in
Section 1.1(b)(i).
"Swing Line Commitment" shall mean, as to the Swing Line Lender, the
commitment of the Swing Line Lender to make Swing Line Advances as set forth in
Annex J, which commitment constitutes a subfacility of the Revolving Loan
Commitment of the Swing Line Lender.
"Swing Line Lender" shall mean GE Capital.
"Swing Line Loan" shall mean at any time, the aggregate amount of
Swing Line Advances outstanding to Borrower.
"Swing Line Note" shall have the meaning assigned to it in Section
1.1(b)(ii).
"Taxes" shall mean taxes, levies, imposts, deductions, Charges or
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 by any political
subdivision thereof.
"Termination Date" shall mean the date on which (a) the Loans have
been indefeasibly repaid in full, (b) all other Obligations under the Agreement
and the other Loan Documents have been completely discharged, (c) Letter of
Credit Obligations have been terminated, replaced, guaranteed or cash
collateralized in accordance with Annex B, and (d) Borrower shall not have any
further right to borrow any monies under the Agreement.
"Third Party Interactives" shall mean all Persons with whom any
Credit Party exchanges data electronically in the ordinary course of business,
including customers, suppliers, third-party vendors, subcontractors,
processors-converters, shippers and warehousemen.
"Title IV Plan" shall mean a Pension Plan (other than a
Multiemployer Plan) that is covered by Title IV of ERISA and that 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.
"Total Leverage Ratio" shall mean, with respect to any Person as of
any date of determination, on a consolidated basis, the ratio of (a) Funded Debt
as of such date of determination to (b) Pro Forma EBITDA for the four full
Fiscal Quarters immediately preceding such date of determination.
"Trademark License" shall mean rights under any written agreement
now owned or hereafter acquired by any Person granting any right to use any
Trademark.
"Trademarks" shall mean all of the following property now owned or
existing or hereafter adopted or acquired by any Person: (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), all 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
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or territory thereof, or any other country or any political subdivision thereof;
(b) all 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 years following a
transaction that 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.
"Welfare Plan" shall mean a Plan described in Section 3(1) of ERISA.
"Year 2000 Assessment" shall mean a comprehensive written assessment
of the nature and extent of each Credit Party's Year 2000 Problems and Year 2000
Date-Sensitive Systems/Components, including Year 2000 Problems regarding data
exchanges with Third Party Interactives.
"Year 2000 Corrective Actions" shall mean, as to each Credit Party,
all actions necessary to eliminate such Person's Year 2000 Problems, including
computer code enhancements and revisions, upgrades and replacements of Year 2000
Date-Sensitive Systems/Components, and coordination of such enhancements,
revisions, upgrades and replacements with Third Party Interactives.
"Year 2000 Corrective Plan" shall mean, with respect to each Credit
Party, a comprehensive plan to eliminate all of its Year 2000 Problems,
including (a) computer code enhancements or revisions, (b) upgrades or
replacements of Year 2000 Date-Sensitive Systems/Components, (c) test and
validation procedures, (d) an implementation time line and budget, and (e)
designation of specific employees who will be responsible for planning,
coordinating and implementing each phase or subpart of the Year 2000 Corrective
Plan.
"Year 2000 Date-Sensitive System/Component" shall mean, as to any
Person, any system software, network software, applications software, data base,
computer file, embedded microchip, firmware or hardware that accepts, creates,
manipulates, sorts, sequences, calculates, compares or outputs calendar-related
data accurately; such systems and components shall include mainframe computers,
file server/client systems, computer workstations, routers, hubs, other
network-related hardware, and other computer-related software, firmware or
hardware and information processing and delivery systems of any kind and
telecommunications systems and other communications processors, security
systems, alarms, elevators and HVAC systems.
"Year 2000 Implementation Testing" shall mean, as to each Credit
Party, (a) the performance of test and validation procedures regarding Year 2000
Corrective Actions on a unit basis and on a systemwide basis, (b) the
performance of test and validation procedures regarding data exchanges among the
Credit Parties' Year 2000 Date-Sensitive Systems/Components and data exchanges
with Third Party Interactives, and (c) the design and implementation of
additional Year 2000 Corrective Actions, the need for which has been
demonstrated by test and validation procedures.
"Year 2000 Problems" shall mean, with respect to each Credit Party,
limitations on the
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capacity or readiness of any such Credit Party's Year 2000 Date-Sensitive
Systems/Components to accurately accept, create, manipulate, sort, sequence,
calculate, compare or output calendar date information with respect to calendar
year 1999 or any subsequent calendar year beginning on or after January 1, 2000
(including leap year computations), including exchanges of information among
Year 2000 Date-Sensitive Systems/Components of the Credit Parties and exchanges
of information among the Credit Parties and Year 2000 Date-Sensitive
Systems/Components of Third Party Interactives and functionality of peripheral
interfaces, firmware and embedded microchips.
Rules of construction with respect to accounting terms used in the
Agreement or any of 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"; the
word "or" is not exclusive; 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.
▇-▇▇
▇▇
▇▇▇▇▇ ▇ (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 (each, an "L/C Issuer")) for Borrower's account and
guaranteed by Agent; provided, 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) $5,000,000 (the
"L/C Sublimit"), (ii) the Maximum Amount less the aggregate outstanding
principal balance of the Revolving Credit Advances and the Swing Line Loan, and
(iii) the Borrowing Base less the aggregate outstanding principal balance of the
Revolving Credit Advances and the Swing Line Loan. No such Letter of Credit
shall have an expiry date that 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 that is later than
the Commitment Termination Date.
(b) Advances Automatic; Participations.
(i) 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) 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 Default described in Sections 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 (A) 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 Revolving Loan Commitments) of the Letter
of Credit Obligations in respect of all Letters of Credit then outstanding and
(B) 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
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undivided interest and participation in such Revolving Lender's Pro Rata Share
(based on the Revolving Loan 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.
(i) 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 Agent and
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, for the benefit of Agent 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.
(ii) 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 (A) provide cash collateral therefor in
the manner described above, (B) cause all such Letters of Credit and guaranties
thereof to be canceled and returned, or (C) 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
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.
(iii) 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, and in such order as
Agent may elect, as shall be or shall become due and payable by 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.
(iv) 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 Agent or Lenders in respect thereof, any funds remaining
in the Cash Collateral Account shall be applied to other Obligations then 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.
▇-▇
▇▇▇
(▇) Fees and Expenses. Borrower agrees to pay (i) to Agent, for the
benefit of Agent and Revolving Lenders, as compensation to such Lenders for
Letter of Credit Obligations incurred hereunder, (A) all reasonable costs and
expenses incurred by Agent or any Revolving Lender on account of such Letter of
Credit Obligations, and (B) 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 daily average of the maximum amount available from time to time to be
drawn under the applicable Letter of Credit during such month, which Fee shall
be paid to Agent, for the benefit of Agent and Revolving Lenders, in arrears, on
the first day of each month and on the Commitment Termination Date, and (ii) to
any L/C Issuer, on demand, such reasonable 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 two Business Days' 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:
(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, setoff, defense or other
right that 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
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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 that does not comply with the terms of such Letter of Credit or such
guaranty;
(v) any other circumstance or event whatsoever that 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, reasonable costs, charges and expenses (including
reasonable attorneys' fees and allocated costs of internal counsel) that 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 for: (A) the form, validity, sufficiency, accuracy,
genuineness or legal effect of any document issued by any party in connection
with the application for and issuance 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) 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, that may prove to be invalid or ineffective for any reason; (C) 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) errors, omissions, interruptions or delays in transmission or
delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether
or not they may be in cipher; (E) errors in interpretation of technical terms;
(F) 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) the credit of the proceeds of any drawing under any
Letter of Credit or guaranty thereof; and (H) 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.
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(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.
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ANNEX C (SECTION 1.8)
TO
CREDIT AGREEMENT
CASH MANAGEMENT SYSTEM
Borrower shall, and shall cause its Subsidiaries to, establish and
maintain the cash management system described below:
(a) On or before the Closing Date and until the Termination Date,
Borrower shall (i) establish lock boxes ("Lock Boxes") at a United States Post
Office postal station with one or more of the banks set forth in 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, and (ii) deposit and cause its Subsidiaries to deposit or cause to be
deposited promptly, and in any event no later than the second 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 one or more
bank accounts in Borrower's name or any such Subsidiary's name (each, a
"Borrower Account" and collectively, the "Borrower Accounts") at a bank
identified in Disclosure Schedule (3.19) as a bank at which such Borrower
Accounts are maintained (each, a "Relationship Bank").
(b) Borrower shall establish, in its name, an account (the "Master
Disbursement Account") at a bank reasonably acceptable to Agent into which Agent
shall, from time to time, deposit proceeds of Revolving Credit Advances and
Swing Line Advances made to Borrower pursuant to Section 1.1 for use by Borrower
solely in accordance with the provisions of Section 1.4. Borrower shall transfer
amounts received in the Master Disbursement Account into (i) one or more
accounts (collectively, the "Disbursement Accounts") established by the
applicable Credit Party, in its name, at the banks identified in Disclosure
Schedule (3.19) as maintaining such Disbursement Accounts, which banks shall be
reasonably acceptable to Agent, or (ii) the Collection Account. Borrower shall
not, and shall not cause or permit any Subsidiary thereof to, accumulate or
maintain cash in the Master Disbursement Account, any Disbursement Account or
any payroll account as of any date of determination in excess of checks
outstanding against such account as of such date, amounts necessary to meet
minimum balance requirements and amounts necessary to support anticipated
operating expenses for the one week period immediately following such date
consistent with historical operating needs.
(c) On or before the Closing Date (or such later date as Agent shall
consent to in writing), each bank where the Master Disbursement Account or a
Disbursement Account is maintained and all other Relationship Banks shall have
entered into tri-party blocked account agreements with Agent, for the benefit of
Agent and Lenders, and Borrower and Subsidiaries thereof, as applicable, in form
and substance reasonably 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 are
held by such bank as agent or bailee-in-possession for Agent, on behalf of
itself and 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 and for returned checks or other
items of payment, and (iii) from and after the Closing Date, with respect to
banks at which a Borrower Account is maintained, such bank agrees to forward all
amounts in each Borrower Account to the Collection Account through daily
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sweeps from such Borrower Account into the Collection Account.
(d) So long as no Default or Event of Default shall have occurred
and be continuing, Borrower may amend Disclosure Schedule (3.19) to add or
replace a Relationship Bank, Lock Box or Borrower Account or to replace the
Master Disbursement Account or a Disbursement Account; provided, that (i) Agent
shall have consented in writing (which consent shall not be unreasonably
withheld or delayed) in advance to the opening of such account or Lock Box with
the relevant bank and (ii) prior to the time of the opening of such account or
Lock Box, Borrower or its Subsidiaries, as applicable, and such bank shall have
executed and delivered to Agent a tri-party blocked account agreement, in form
and substance reasonably 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 30 days following notice from Agent
that the creditworthiness of any bank maintaining an account is no longer
acceptable in Agent's reasonable judgment, or as promptly as practicable and in
any event within 60 days following notice from Agent that the operating
performance, funds transfer or availability procedures or performance with
respect to accounts or Lock Boxes of the bank maintaining 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.
(e) The Lock Boxes, Borrower Accounts, Master Disbursement Account
and Disbursement Accounts 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.
(f) All amounts deposited in the Collection Account shall be deemed
received by Agent in accordance with Section 1.10 and shall be applied (and
allocated) by Agent in accordance with Section 1.11. 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.
(g) 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 Agent and Lenders, all checks, cash and other items of payment
received by Borrower or any such Related Person, and (ii) within two Business
Day after receipt by Borrower or any such Related Person of any checks, cash or
other items of payment, deposit the same into a Borrower Account. Borrower and
each Related Person acknowledges and agrees that all cash, checks or other 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.
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ANNEX D (SECTION 2.1(a))
TO
CREDIT AGREEMENT
SCHEDULE OF DOCUMENTS
[See attached]
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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 the
following:
(a) Monthly Financials. Within (i) 45 days after the end of each
Fiscal Month (other than a Fiscal Month ending as of the end of any Fiscal
Quarter) during the period from the Closing Date through January 31, 2000, and
(ii) 30 days after the end of each Fiscal Month (other than a Fiscal Month
ending as of the end of any Fiscal Quarter) during the period from February 1,
2000, and thereafter, financial information regarding Borrower and its
Subsidiaries, certified by the Chief Financial Officer of Borrower, or, in the
event such officer is not available, the Chief Accounting Officer of Borrower,
consisting of consolidated and consolidating: (A) unaudited balance sheets as of
the close of such Fiscal Month and the related statements of income and cash
flows for that portion of the Fiscal Year ending as of the close of such Fiscal
Month; (B) 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 (C) a summary of the outstanding balance of all Intercompany
Notes as of the last day of such Fiscal Month. Such financial information shall
be accompanied by (1) a statement in reasonable detail (each, a "Compliance
Certificate") showing the calculations used in determining compliance with each
financial covenant set forth in Annex G that is tested on a monthly basis, and
(2) the certification of the Chief Financial Officer of Borrower or, in the
event such officer is not available, the Chief Accounting Officer of Borrower,
that (a) such financial information presents fairly in all material respects 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 Fiscal
Month and for that portion of the Fiscal Year ending as of the end of such
Fiscal Month and (b) any other information presented is true, correct and
complete in all material respects and that, to such officer's knowledge, 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. Within 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, or, in the event such officer is not available, the Chief Accounting
Officer of Borrower, including (i) unaudited balance sheets as of the close of
such Fiscal Quarter and the related statements of income and cash flows 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 and
for the Fiscal Month ending as of the end of 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
Compliance Certificate in respect of each of the financial covenants set forth
in Annex G that is tested on a quarterly basis and (B) the certification of the
Chief Financial Officer of Borrower or, in the event such officer is not
available, the Chief Accounting Officer of Borrower, that (1) such financial
information presents fairly in all material respects in accordance with GAAP
(subject to normal year-end adjustments) the financial position, results of
operations and statements of cash flows of
▇-▇
▇▇▇
▇▇▇▇▇▇▇▇ and its Subsidiaries, on both a consolidated and consolidating basis,
as at the end of such Fiscal Quarter and for that portion of the Fiscal Year
ending as of the end of such Fiscal Quarter, (2) any other information presented
is true, correct and complete in all material respects and that, to such
officer's knowledge, 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.
(c) Operating Plan. As soon as available, but not later than 45 days
after the end of each Fiscal Year, an annual operating plan for Borrower,
approved by the Board of Directors of Borrower, for the following year, which
will be prepared on a consolidated basis and will (i) include a statement of all
of the material assumptions on which such plan is based, (ii) include monthly
balance sheets and a monthly budget for the following Fiscal Year and (iii)
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. Within 90 days after the end of each
Fiscal Year, audited Financial Statements for Borrower and its Subsidiaries on a
consolidated and 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 and certified
without qualification by an independent certified public accounting firm of
national standing or otherwise reasonably 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, (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 adopted 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 all material respects 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
Fiscal Year and for the period then ended, and that, to such officer's
knowledge, 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.
(e) Management Letters. Within five 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.
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(f) Default Notices. Except as otherwise provided in paragraph (h)
below, as soon as practicable, and in any event within five Business Days after
an executive officer of Borrower has actual knowledge of the existence of any
Default, Event of Default or other event that 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. 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 adverse changes
or developments in the business of any such Person.
(h) Subordinated Debt and Equity Notices. As soon as practicable,
copies of all material written notices given or received by any Credit Party
with respect to any Subordinated Debt or Stock of such Person, and, within two
Business Days after any Credit Party obtains knowledge of any matured or
unmatured event of default with respect to any Subordinated Debt, notice of such
event of default.
(i) Supplemental Schedules. Supplemental disclosures, if any,
required by Section 5.6.
(j) Litigation. Promptly upon learning thereof, written notice of
any Litigation commenced or threatened against any Credit Party that (i) seeks
damages in excess of $500,000, (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. Disclosure of losses or casualties required
by Section 5.4.
(l) Lease Default Notices. Copies of (i) any and all default notices
received under or with respect to any leased location or public warehouse where
Collateral with a fair market value in excess of $50,000 in the aggregate is
located, and (ii) such other notices or documents as Agent may request in
writing in its reasonable discretion.
(m) Lease Amendments. Copies of all material amendments to real
estate leases for any leased premises of any Credit Party.
(n) Other Documents. 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, reasonably request in writing.
ANNEX F (SECTION 4.1(b))
TO
CREDIT AGREEMENT
COLLATERAL REPORTS
E-3
109
Borrower shall deliver or cause to be delivered the following:
(a) To Agent, as soon as available and in any event no later than
(i) during the period from the Closing Date through January 31, 2000, the last
Business Day of each Fiscal Month and (ii) during the period from February 1,
2000, and thereafter, the fifteenth calendar day of each Fiscal Month (together
with a copy of all or any part of the following reports requested by any Lender
in writing after the Closing Date), the following reports, each of which shall
be prepared by Borrower as of the last day of the immediately preceding Fiscal
Month; provided, that if (A) a Default or an Event of Default shall have
occurred and be continuing, (B) as of any date of determination, average daily
Net Borrowing Availability for the 30-day period immediately preceding such date
shall be less than $5,000,000, or (C) Agent in good faith believes that a
Default or an Event of Default is imminent or deems its rights or interests in
the Collateral insecure, then such reports shall be delivered for such periods
and as frequently as Agent shall request:
(1) a Borrowing Base Certificate with respect to Borrower,
accompanied by such supporting detail and documentation as shall be requested in
writing by Agent in its reasonable discretion;
(2) with respect to each Credit Party, 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 in
writing by Agent in its reasonable discretion;
(3) with respect to each Credit Party, a monthly 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 in writing by Agent in
its reasonable discretion; and
(4) a rollforward of the Accounts of each Credit Party,
accompanied by such supporting detail and documentation as shall be requested in
writing by Agent in its reasonable discretion.
(b) 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 to Borrower's
general ledger and monthly Financial Statements delivered pursuant to Annex E,
in each case accompanied by such supporting detail and documentation as shall be
requested in writing by Agent in its reasonable discretion.
(c) 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
material government contracts of any Credit Party subject to the Federal
Assignment of Claims Act of 1940; 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 in the prior Fiscal Quarter.
(d) Borrower, at its own expense, shall deliver to Agent the results
of each physical verification, if any, that 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
F-1
110
the written request of Agent, conduct, and deliver the results of, such physical
verifications as Agent may require).
(e) Borrower, at its own expense, shall deliver to Agent such
appraisals of its consolidated assets as Agent may request in writing at any
time after the occurrence and during the continuance of a Default or an Event of
Default, such appraisals to be conducted by an appraiser, and in form and
substance, reasonably satisfactory to Agent.
(f) 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 writing in its reasonable discretion.
F-2
111
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:
Fiscal Year Ending Capital Expenditures
------------------ --------------------
December 31, 1999 $4,900,000
December 31, 2000,
and thereafter $3,000,000
(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 four full Fiscal
Quarters then ended (or with respect to the Fiscal Quarters ending on or before
September 30, 1999, the period commencing on January 1, 1999, and ending on the
last day of such Fiscal Quarter) of not less than the following:
1.35 for each of the Fiscal Quarters ending in the Fiscal Year
ending December 31, 1999;
1.50 for each of the Fiscal Quarters ending in the Fiscal Year
ending December 31, 2000;
1.75 for each of the Fiscal Quarters ending in the Fiscal Year
ending December 31, 2001;
2.00 for each of the Fiscal Quarters ending in the Fiscal Year
ending December 31, 2002; and
2.25 for each Fiscal Quarter thereafter.
(c) Maximum Senior Leverage Ratio. Borrower and its Subsidiaries
shall have on a consolidated basis at the end of each Fiscal Quarter ending
during the periods set forth below a Senior Leverage Ratio as of the last day of
such Fiscal Quarter and for the four full Fiscal Quarters then ended of not more
than the following:
2.75 during the period from the Closing Date through December
30, 1999;
2.50 during the period from December 31, 1999, through
December 30, 2000;
2.25 during the period from December 31, 2000, through
December 30, 2001;
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112
and
2.00 from December 31, 2001, and thereafter.
(d) Maximum Total Leverage Ratio. Borrower and its Subsidiaries
shall have on a consolidated basis at the end of each Fiscal Quarter ending
during the periods set forth below, a Total Leverage Ratio as of the last day of
such Fiscal Quarter and for the four full Fiscal Quarters then ended of not more
than the following:
5.75 during the period from the Closing Date through December
30, 1999;
5.25 during the period from December 31, 1999, through
December 30, 2000;
4.75 during the period from December 31, 2000, through
December 30, 2001;
4.25 during the period from December 31, 2001, through
December 30, 2002; and
3.75 from December 31, 2002, and thereafter.
(e) Maximum Accounts Payable to Inventory Ratio. Borrower and its
Subsidiaries shall have on a consolidated basis at the end of each Fiscal Month,
a ratio of accounts payable to Inventory of not more than 0.50.
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, that the agreement of Requisite Revolving Lenders to any required
amendments of such provisions shall be sufficient to bind all Lenders.
"Accounting Changes" means (i) changes in accounting principles required by the
promulgation of any rule, regulation, pronouncement or opinion of the Financial
Accounting Standards Board of the American Institute of Certified Public
Accountants (or any successor thereto or any agency with similar functions);
(ii) changes in accounting principles concurred in by Borrower's certified
public accountants; (iii) purchase accounting adjustments under A.P.B. 16 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 (iv) 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 Revolving Lenders agree upon the
required amendments, then after appropriate amendments have been executed and
the underlying Accounting
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113
Change with respect thereto has been implemented, any reference to GAAP
contained in the Agreement or in 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 Revolving Lenders cannot agree upon the required
amendments within 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.
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114
ANNEX H (SECTION 1.1(d))
TO
CREDIT AGREEMENT
LENDERS' WIRE TRANSFER INFORMATION
H-1
115
ANNEX I (SECTION 11.10)
TO
CREDIT AGREEMENT
NOTICE ADDRESSES
(A) If to Agent or GE Capital, at
General Electric Capital Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Account Manager (Styling Technology Corporation)
▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
General Electric Capital Corporation ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Corporate Counsel Attention: ▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇ Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇ Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
(B) If to Borrower, at
Styling Technology Corporation
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
With copies to:
▇'▇▇▇▇▇▇, Cavanagh, Anderson, ▇▇▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
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116
ANNEX J (ANNEX A - "COMMITMENTS")
TO
CREDIT AGREEMENT
COMMITMENTS AS OF THE CLOSING DATE
Commitments Lender(s)
Revolving Loan Commitment
(including a Swing Line Commitment
of $10,000,000):
$90,000,000 GE Capital
J-1
117
SCHEDULE (1.1)
TO
CREDIT AGREEMENT
AGENT REPRESENTATIVE
▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇/▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
General Electric Capital Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇