Exhibit 10.1
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REVOLVING CREDIT AGREEMENT
Dated as of September 28, 2004
By and Between
▇▇▇▇▇▇ ▇▇▇▇▇▇ INTERNATIONAL INC.
as Borrower
and
HSBC BANK USA,
NATIONAL ASSOCIATION
as Lender
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TABLE OF CONTENTS
SECTION HEADING PAGE
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SECTION 1. DEFINITIONS........................................................................... 1
SECTION 2. REVOLVING CREDIT FACILITY............................................................. 9
Section 2.1. Commitment to Lend.................................................................... 9
Section 2.1A. Conversion Options....................................................................10
Section 2.2. Interest..............................................................................10
Section 2.3. Repayments and Prepayments............................................................11
SECTION 3. INDEMNITY FOR CHANGES IN CIRCUMSTANCES................................................11
SECTION 4. FEES AND PAYMENTS.....................................................................11
Section 4.1. Revolving Credit Commitment Fees......................................................11
Section 4.2. Payments..............................................................................12
SECTION 5. REPRESENTATIONS AND WARRANTIES........................................................12
SECTION 6. CONDITIONS PRECEDENT..................................................................15
Section 6.1. Closing Conditions....................................................................15
Section 6.2. Conditions to All Borrowings..........................................................16
SECTION 7. COVENANTS.............................................................................16
Section 7.1. Affirmative Covenants.................................................................16
Section 7.2. Negative Covenants....................................................................18
Section 7.3. Financial Covenants...................................................................19
SECTION 8. EVENTS OF DEFAULT; ACCELERATION.......................................................20
SECTION 9. SETOFF................................................................................21
SECTION 10. CHANGE IN CIRCUMSTANCES...............................................................22
Section 10.1. Change of Law.........................................................................22
Section 10.2. Unavailability of Deposits or Inability to Ascertain, or
Inadequacy of, LIBOR...............................................................22
Section 10.3. Increased Cost and Reduced Return.....................................................22
Section 10.4. Lending Offices.......................................................................23
Section 10.5. Discretion of Bank as to Manner of Funding............................................23
SECTION 11. EXPENSES AND INDEMNIFICATION..........................................................24
Section 11.1. Expenses..............................................................................24
Section 11.2. Indemnification.......................................................................24
Section 11.3. Survival..............................................................................25
SECTION 12. SURVIVAL OF COVENANTS, ETC............................................................25
SECTION 13. ASSIGNMENT............................................................................25
SECTION 14. NOTICES, ETC..........................................................................25
SECTION 15. GOVERNING LAW.........................................................................26
SECTION 16. HEADINGS..............................................................................26
SECTION 17. COUNTERPARTS..........................................................................26
SECTION 18. ENTIRE AGREEMENT, ETC.................................................................26
SECTION 19. WAIVER OF JURY TRIAL..................................................................26
SECTION 20. CONSENTS, AMENDMENTS, WAIVERS, ETC....................................................27
SECTION 21. SEVERABILITY..........................................................................27
SECTION 22. EXTENSION OF TERMINATION DATE.........................................................27
Signature Pages..........................................................................................28
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Revolving Credit Agreement
This REVOLVING CREDIT AGREEMENT (this "Agreement") is made as of September
28, 2004, by and between ▇▇▇▇▇▇ ▇▇▇▇▇▇ INTERNATIONAL INC. (the "Borrower"), a
Delaware corporation having its principal place of business at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, and HSBC BANK USA, NATIONAL ASSOCIATION, having an
office at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, as lender ("Bank").
WHEREAS, the Borrower has requested that Bank provide extensions of credit
to the Borrower in the form of loans;
WHEREAS, Bank is willing to extend credit to the Borrower in the form of
loans on the terms and subject to the conditions set forth in this Agreement;
NOW, THEREFORE, the Borrower hereby agrees with Bank as follows:
SECTION 1. DEFINITIONS.
Certain capitalized terms are defined below:
ABN AMRO LEUMI CREDIT AGREEMENT: The unsecured Revolving Credit Agreement,
dated as of August 14, 2002, by and among the Borrower, ABN AMBRO Bank N.V., as
administrative agent, ABN AMBRO Bank N.V. as a lender and Bank Leumi USA, as a
lender, as amended by the First Amendment to Revolving Credit Agreement dated
May 28, 2003, the Second Amendment to Revolving Credit Agreement dated as of
November 24, 2003 and the Third Amendment to Revolving Credit Agreement dated as
of September 13, 2004, and as the same may be amended from time to time.
Agreement: See preamble, which term shall include this Agreement and the
schedules and exhibits hereto, all as amended and in effect from time to time.
Antwerp Diamond Bank Line: Collectively, the $25,000,000 unsecured line of
credit given to the Borrower by Antwerp Diamond Bank and the $15,000,000
unsecured line of credit given to the Borrower's wholly-owned Subsidiary, ▇▇▇▇▇▇
▇▇▇▇▇▇ Belgium (LKB) NV.
Bank: HSBC Bank USA, National Association, its successors and assigns.
Base Rate: With respect to Base Rate Loans hereunder, the higher of (i) the
annual rate of interest announced from time to time by Bank at its head office
as its "base rate" for U. S. dollar loans and (ii) one-half of one percent
(1/2%) above the Federal Funds Effective Rate.
Base Rate Loans: Loans bearing interest calculated by reference to the Base
Rate.
Borrower: See preamble.
Borrowing: The total of Loans of a single type advanced, continued for an
additional Interest Period, or converted from a different type into such type by
Bank pursuant to this Agreement on a single date and, in the case of LIBOR Rate
Loans, for a single Interest Period.
Business Day: Any day on which banks in New York, New York, are open for
business generally, and, in the case of LIBOR Rate Loans, also a day which is a
LIBOR Business Day.
Capital Expenditures: With respect to any Person for any period, the
aggregate amount of all expenditures (whether paid in cash or accrued as a
liability) by such Person during that period for the acquisition or leasing
(pursuant to a Capitalized Lease) of fixed or capital assets or additions to
property, plant or equipment (including replacements, capitalized repairs, and
improvements) which should be capitalized on the balance sheet of such Person in
accordance with GAAP.
Capitalized Leases: Leases under which the Borrower is the lessee or
obligor, the discounted, future rental payment obligations under which are
required to be capitalized on the combined balance sheet of the Borrower in
accordance with GAAP.
Charter Documents: In respect of any entity, the certificate or articles of
incorporation or organization and the by-laws of such entity, or other
constitutive documents of such entity.
Code: The Internal Revenue Code of 1986, as amended, and any successor
statute thereto.
Commitment: The obligation of Bank to make Loans to the Borrower up to an
aggregate outstanding principal amount not to exceed $30,000,000, as such amount
may be reduced from time to time or terminated according to the terms of this
Agreement.
Consent: In respect of any person or entity, any permit, license or
exemption from, approval, consent of, registration or filing with any local,
state or federal governmental or regulatory agency or authority, required under
applicable law.
Contingent Obligations: As to any Person, any obligation of such Person
guaranteeing any Indebtedness, leases, dividends or other obligations ("primary
obligations") of any other Person (the "primary obligor") in any manner, whether
directly or indirectly, including, without limitation, any obligation of such
Person, whether or not contingent, (i) to purchase any such primary obligation
or any property constituting direct or indirect security therefor, (ii) to
advance or supply funds (x) for the purchase or payment of any such primary
obligation or (y) to maintain working capital or equity capital of the primary
obligor or otherwise to maintain the net worth or solvency of the primary
obligor, (iii) to purchase property, securities or services primarily for the
purpose of assuring the owner of any such primary obligation of the ability of
the primary obligor to make payment of such primary obligation or (iv) otherwise
to assure or hold harmless the holder of such primary obligation against loss in
respect thereof; provided, however, that the term Contingent Obligation shall
not include endorsements of instruments for deposit or collection in the
ordinary course of business. The amount of any Contingent Obligation shall be
deemed to be an amount equal to the stated or determinable amount of the primary
obligation in respect of
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which such Contingent Obligation is made or, if not stated or determinable, the
maximum reasonably anticipated liability in respect thereof (assuming such
Person is required to perform thereunder) as determined by such Person in good
faith from time to time.
Controlled Group: All members of a controlled group of corporations and all
trades or businesses (whether or not incorporated) under common control which,
together with the Borrower, are treated as a single employer under Section 414
of the Code.
Conversion Request: A Notice given by the Borrower to Bank of the
Borrower's election to convert or continue a Loan therewith in accordance with
Section 2.1A hereof.
Current Liabilities: As determined in accordance with GAAP, consistently
applied, and shall include, as of the date of determination thereof: (i) all
Indebtedness payable on demand or maturing within one year after such date
without any option on the part of the obligor to extend, renew or maintain as
non-current beyond such year; (ii) final maturities, installments and
prepayments of Indebtedness required to be made within one year after such date
(in each case, except as set forth in the proviso below); and (iii) all other
items (including taxes accrued as estimated and reserves for deferred income
taxes) that in accordance with GAAP would be included on a balance sheet as
current liabilities, provided, however, Current Liabilities shall not include:
(A) the portion of the Note to the extent that the same is required to be paid
within one year after such date; (B) any portion of any other committed bank
debt unless (and only to the extent) such amount is required to be repaid within
nine months of such date of determination; and (C) the Pegasus Liabilities.
Default: An event or act which, with the giving of Notice and/or the lapse
of time, would become an Event of Default.
Domestic Lending Office: Initially, the office of Bank designated as such
by Notice to the Borrower; thereafter, such other office of Bank, if any,
located within the United States that will be making or maintaining Base Rate
Loans as designated by Notice to Borrower.
Drawdown Date: In respect of any Loan, the date on which such Loan is made
to the Borrower, and the date on which any Loan is converted or continued in
accordance with Section ▇.▇▇ hereof.
Duly Authorized Officer: The President of the Borrower or other officer or
employee of any such party who is authorized by such party's Board of Directors
or an executive committee of such Board of Directors.
EBITDA: For any period, the sum of Net Income plus Interest Expense, plus
income tax expense, plus depreciation and amortization expense to the extent
such expense was deducted in arriving at Net Income for such period.
Environmental Claim: Any investigation, notice, violation, demand,
allegation, action, suit, injunction, judgment, order, consent decree, penalty,
fine, lien, proceeding or claim (whether administrative, judicial or private in
nature) arising (a) pursuant to, or in connection with an
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actual or alleged violation of, any Environmental Law, (b) in connection with
any Hazardous Material, (c) from any abatement, removal, remedial, corrective or
response action in connection with a Hazardous Material, Environmental Law or
order of a governmental authority or (d) from any actual or alleged damage,
injury, threat or harm to health, safety, natural resources or the environment.
Environmental Laws: All laws pertaining to environmental matters, including
without limitation, the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response Compensation and Liability Act of 1980, the
Superfund Amendments and Reauthorization Act of 1986, the Federal Clean Water
Act, the Federal Clean Air Act, the Toxic Substances Control Act, in each case
as amended, and all rules, regulations, judgments, decrees, orders and licenses
arising under all such laws.
ERISA: The Employee Retirement Income Security Act of 1974, as amended, and
all rules, regulations, judgments, decrees, and orders arising thereunder.
Eurocurrency Reserve Rate: For any day with respect to a LIBOR Rate Loan,
the maximum rate (expressed as a decimal) at which any lender subject thereto
would be required to maintain reserves under Regulation D of the Board of
Governors of the Federal Reserve System (or any successor or similar regulations
relating to such reserve requirements) against "Eurocurrency Liabilities" (as
that term is used in Regulation D), if such liabilities were outstanding. The
Eurocurrency Reserve Rate shall be adjusted automatically on and as of the
effective date of any change in the Eurocurrency Reserve Rate.
Event of Default: Any of the events listed in Section 8 hereof.
Extraordinary Items of Income: Items which under GAAP are required to be
accounted for as "extraordinary items" and items which the Borrower, in
accordance with GAAP, accounts for as the "cumulative effect of a change in
accounting principles."
Federal Funds Effective Rate: For any day, the rate per annum equal to the
average of the quotations for such day on overnight federal funds transactions
received by Bank from three funds brokers of recognized standing selected by
Bank in good faith.
Financials: In respect of any period, the balance sheet of the Borrower as
at the end of such period, and the related statement of income and combined
statement of cash flow for such period, each setting forth in comparative form
the figures for the previous comparable fiscal period, all in reasonable detail
and prepared in accordance with GAAP.
GAAP: Generally accepted accounting principles consistent with those
adopted by the Financial Accounting Standards Board and its predecessor, (i)
generally, as in effect from time to time, and (ii) for purposes of determining
compliance by the Borrower with its financial covenants set forth herein, as in
effect for the fiscal year therein reported in the most recent Financials
submitted to Bank prior to execution of this Agreement.
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Guarantors: Each Subsidiary set forth on Schedule I hereto, or subsequently
added as a party to the Guaranty Agreement pursuant to Section 7.1(i) hereof.
Guaranty Agreement: The guaranty agreement provided by the Guarantors
substantially in the form attached hereto as Exhibit A.
Hazardous Materials: Any substance, chemical, compound, product, solid,
gas, liquid, waste, byproduct, pollutant, contaminant or material which is
hazardous or toxic, and includes, without limitation, (a) asbestos,
polychlorinated biphenyls and petroleum (including crude oil or any fraction
thereof) and (b) any material classified or regulated as "hazardous" or "toxic"
or words of like import pursuant to Environmental Law.
Indebtedness: For any Person (without duplication) (a) all indebtedness of
such Person for borrowed money, whether current or funded, or secured or
unsecured, (b) all indebtedness for the deferred purchase price of property or
services, (c) 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 a default are limited to repossession or sale of such
property), (d) all indebtedness secured by a purchase money mortgage or other
Lien to secure all or part of the purchase price of property subject to such
mortgage or Lien, (e) all obligations under leases which shall have been or must
be, in accordance with GAAP, recorded as Capitalized Leases in respect of which
such Person is liable as lessee, (f) any liability in respect of banker's
acceptances, (g) any indebtedness, whether or not assumed, secured by Liens on
property acquired by such Person at the time of acquisition thereof, (h) all
obligations under any so-called "synthetic lease" transaction entered into by
such Person, (i) all obligations under any so-called "asset securitization"
transactions entered into by such Person, and (j) all Contingent Obligations, it
being understood that the term "Indebtedness" shall not include trade payables
and accrued expenses arising in the ordinary course of business.
Inspection: See Section 7.1(g).
Interest Expense: With reference to any period, the sum of all net interest
charges (including imputed interest charges with respect to Capitalized Lease
Obligations and all amortization of debt discount and expense) of the Borrower
and its Subsidiaries for such period determined on a consolidated basis in
accordance with GAAP.
Interest Payment Date: (a) As to any Base Rate Loan, the tenth day of the
calendar month following the calendar month which includes the Drawdown Date
thereof, and (b) as to any LIBOR Rate Loan in respect of which the Interest
Period is (i) three (3) months or less, the last day of such Interest Period and
(ii) more than three (3) months, the date that is three (3) months from the
first day of such Interest Period and, quarterly thereafter, including the last
day of such Interest Period.
Interest Period: With respect to each Loan (a) initially, the period
commencing on the Drawdown Date of such Loan and ending on the last day of one
of the periods set forth below, as selected by the Borrower in a Loan Request
(i) for any Base Rate Loan, the last day of the
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calendar month; and (ii) for any LIBOR Rate Loan, 1, 2, 3, 4, 5, 6, 9 or 12
months; and (b) thereafter, each period commencing on the last day of the
immediately preceding Interest Period applicable to such Loan and ending on the
last day of one of the periods set forth above, as selected by the Borrower in a
Conversion Request or a Loan Request; provided that all of the foregoing
provisions relating to Interest Periods are subject to the following:
(a) if any Interest Period with respect to a LIBOR Rate Loan would
otherwise end on a day that is not a LIBOR Business Day, that Interest
Period shall be extended to the next succeeding LIBOR Business Day unless
the result of such extension would be to carry such Interest Period into
another calendar month, in which event such Interest Period shall end on
the immediately preceding LIBOR Business Day;
(b) if any Interest Period with respect to a Base Rate Loan would end
on a day that is not a Business Day, that Interest Period shall end on the
next succeeding Business Day;
(c) if the Borrower shall fail to give Notice as provided in Section
2.1A, the Borrower shall be deemed to have requested a conversion of the
affected LIBOR Rate Loan to a Base Rate Loan, and the continuance of all
Base Rate Loans as Base Rate Loans on the last day of the then current
Interest Period with respect thereto;
(d) any Interest Period relating to any LIBOR Rate Loan 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 month at the end
of such Interest Period) shall end on the last LIBOR Business Day of a
calendar month; and
(e) any Interest Period relating to any LIBOR Rate Loan that would
otherwise extend beyond the Maturity Date shall end on the Maturity Date.
Lending Office: See Section 10.4 hereof.
LIBOR Business Day: Any day on which commercial banks are open for
international business (including dealings in U.S. dollar deposits) in London.
LIBOR Lending Office: Initially, the office of Bank designated as such by
Notice to the Borrower thereby; thereafter, such other office of Bank, if any,
that shall be making or maintaining LIBOR Rate Loans and designated by Notice to
the Borrower.
LIBOR Rate: For any Interest Period with respect to a LIBOR Rate Loan
hereunder, the per annum interest rate equal to (i) the London Interbank Offered
Rate shown on the display designated as "RMEY" to subscribers of the Reuters
Monitor Money Rates Service, or any successor page thereto, as at 11:00 a.m.
(London time) two LIBOR Business Days prior to the applicable Interest Period,
for deposits of United States Dollars in an amount equal to such LIBOR Rate Loan
for a period equal to the applicable Interest Period, divided by (ii) a number
equal to 1.00 minus the Eurocurrency Reserve Rate, if applicable.
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LIBOR Rate Loans: Loans bearing interest calculated by reference to the
LIBOR Rate.
LIBOR Rate Margin: One and sixty/one-hundredths of one percent (1.60%) per
annum.
Liens: Any encumbrance, mortgage, pledge, hypothecation, charge,
restriction or other security interest of any kind securing any obligation of
any entity or person.
Loan: Any loan made or to be made to the Borrower pursuant to Section 2
hereof.
Loan Documents: This Agreement, the Note and the Guaranty Agreement, in
each case as from time to time amended or supplemented.
Loan Request: See Section 2.1(b).
Material Domestic Subsidiary: Any Subsidiary organized under the laws of
any state of the United States in which the Borrower or its Subsidiaries have
invested $1,000,000 or more (or the foreign currency equivalent thereof).
Materially Adverse Effect: Any materially adverse effect on the financial
condition or business operations of the Borrower or material impairment of the
ability of the Borrower to perform its obligations hereunder or under any of the
other Loan Documents.
Maturity Date: The Termination Date, or such earlier date upon which all of
the Obligations may become due and payable pursuant to the terms hereof.
Net Income: The net income (or deficit) of the Borrower, after deduction of
all expenses, taxes and other proper charges, determined in accordance with
GAAP, after eliminating therefrom all Extraordinary Items of Income.
Note: See Section 2.1(c).
Notice or Notices: All requests, demands and other communications, in
writing (including telecopy communications), sent by registered or certified
mail, return receipt requested, overnight delivery service, telecopy or hand
delivery to the other party at that party's Principal Office.
Obligations: All indebtedness, obligations and liabilities of the Borrower
to pay principal or interest of the Loans, all fees and charges payable
hereunder, and all other payment obligations of the Borrower or any of its
Subsidiaries arising under or directly in relation to any Loan Document, in each
case whether now existing or hereinafter arising, due or to become due, direct
or indirect, absolute or contingent, and howsoever evidenced, held or acquired.
Pegasus: Pegasus Overseas Ltd., a company organized under the laws of the
Bahamas, which is a subsidiary of the Borrower.
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Pegasus Liabilities: The obligations and liabilities of Pegasus and its
affiliates to the General Electric Company and its affiliates pursuant to an
agreement between the parties for sourcing and high pressure, high temperature
processing of gem diamonds.
Person: Any individual, partnership, corporation, association, trust, joint
venture, unincorporated organization, and any government, governmental
department or agency or political subdivision thereof.
Principal Office: With respect to each party, the following addresses:
For Bank:
HSBC Bank USA, National Association
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Senior Vice President
Telecopier Number: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone Number: (▇▇▇) ▇▇▇-▇▇▇▇
For the Borrower:
▇▇▇▇▇▇ ▇▇▇▇▇▇ International Inc.
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopier Number: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone Number: (▇▇▇) ▇▇▇-▇▇▇▇
Release: Any spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, dumping, disposing or migration into
the environment.
Requirement of Law: In respect of any person or entity, any law, treaty,
rule, regulation or determination of an arbitrator, court, or other governmental
authority, in each case applicable to or binding upon such person or entity or
affecting any of its property.
Subsidiary: In respect of any Person, any business entity of which such
Person at any time owns or controls directly or indirectly more than fifty
percent (50%) of the outstanding shares of stock having voting power, regardless
of whether such right to vote depends upon the occurrence of a contingency.
Tangible Net Worth: The excess of (i) all assets of the Borrower determined
in accordance with GAAP over (ii) all liabilities of the Borrower determined in
accordance with GAAP, minus (iii) the sum of (A) the book value all intangibles
determined in accordance with GAAP, including, without limitation, good will,
patents and intellectual property, and (B) any write-up in the book value of
assets since the most recent audited Financials in existence on the date hereof.
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Termination Date: December 1, 2006, or such later date as may be extended
pursuant to Section 22 hereof.
Total Dollar Outstandings: At any time of reference thereto, the sum of
Loans outstanding at such time.
Total Funded Debt: At any time the same is to be determined, the aggregate
of all Indebtedness of the Borrower and its Subsidiaries at such time, including
all Indebtedness of any other Person which is directly or indirectly guaranteed
by the Borrower or any of its Subsidiaries or which the Borrower or any of its
Subsidiaries has agreed (contingently or otherwise) to purchase or otherwise
acquire or in respect of which the Borrower or any of its Subsidiaries has
otherwise assured a creditor against loss.
Working Capital: At any time, current assets of the Borrower in accordance
with GAAP less Current Liabilities.
SECTION 2. REVOLVING CREDIT FACILITY.
Section 2.1. Commitment to Lend. (a) Upon the terms and subject to the
conditions of this Agreement, Bank agrees to lend to the Borrower such sums that
the Borrower may request, from the date hereof until but not including the
Termination Date, provided that the sum of the outstanding principal amount of
all Loans (after giving effect to all amounts requested) shall not exceed the
Commitment. LIBOR Rate Loans shall be in the minimum aggregate amount of
$300,000 or whole multiples of $100,000 in addition thereto.
(b) The Borrower shall give to Bank, written Notice in the form of Exhibit
B attached hereto of each Loan requested to be made hereunder (a "Loan Request")
(i) no later than 12:00 noon, New York time, on the proposed Drawdown Date of
any Base Rate Loan and (ii) no less than three (3) LIBOR Business Days prior to
the proposed Drawdown Date of any LIBOR Rate Loan. Each such Notice shall
specify (A) the principal amount of the Loan requested, (B) the proposed
Drawdown Date of such Loan (which must be a Business Day or a LIBOR Business
Day, as the case may be), (C) the Interest Period for such Loan and (D) whether
such Loan shall be a Base Rate Loan or a LIBOR Rate Loan. Each Loan Request
shall be irrevocable and binding on the Borrower and shall obligate the Borrower
to accept the Loan requested from Bank on the proposed Drawdown Date. Subject to
the foregoing, so long as Bank's Commitment is then in effect and the applicable
conditions set forth in Section 6.2 hereof have been met, Bank shall advance the
amount requested to the Borrower's bank account as designated on the applicable
Loan Request (or such other account as Bank may designate) in immediately
available funds not later than the close of business on such Drawdown Date.
(c) The obligation of the Borrower to repay Bank the principal of the
respective Loans and interest accrued thereon shall be evidenced by a promissory
note (a "Note") substantially in the form of Exhibit C attached hereto, dated as
of the date hereof and completed with appropriate insertions. The Note shall be
executed and delivered by the Borrower and payable to the order of Bank, in form
and substance satisfactory to Bank, in a principal amount equal to the
Commitment.
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Section 2.1A. Conversion Options. (a) The Borrower may elect from time to
time to convert any outstanding Loan from a Base Rate Loan to a LIBOR Rate Loan
or from a LIBOR Rate Loan to a Base Rate Loan, provided that (i) with respect to
any such conversion of a LIBOR Rate Loan to a Base Rate Loan, the Borrower shall
give Bank at least three (3) Business Days prior written Notice of such
election; (ii) with respect to any such conversion of a LIBOR Rate Loan into a
Base Rate Loan, such conversion shall only be made on the last day of the
Interest Period with respect thereto; (iii) with respect to any such conversion
of a Base Rate Loan to a LIBOR Rate Loan, the Borrower shall give Bank at least
three (3) LIBOR Business Days prior written Notice of such election; and (iv) no
Loan may be converted into a LIBOR Rate Loan when any Default or Event of
Default has occurred and is continuing. On the date on which such conversion is
being made, Bank shall take such action as is necessary to transfer such Loans
to its Domestic Lending Office or its LIBOR Lending Office, as the case may be.
All or any part of the outstanding Loans may be converted as provided herein,
provided that any partial conversions shall be in an aggregate principal amount
of $300,000 or a whole multiple of $100,000 in addition thereto. Each Conversion
Request relating to the conversion of a Loan to a LIBOR Rate Loan shall be
irrevocable by the Borrower.
(b) Any Base Rate Loan or LIBOR Rate Loan may be continued as such upon the
expiration of an Interest Period with respect thereto by compliance by the
Borrower with the Notice provisions contained in Section 2.1A(a); provided that
no LIBOR Rate Loan may be continued as such when any Default or Event of Default
has occurred and is continuing, but shall be automatically converted to a Base
Rate Loan on the last day of the first Interest Period relating thereto ending
during the continuance of any Default or Event of Default. In the event that the
Borrower fails to provide any such Notice with respect to the continuation of
any LIBOR Rate Loan as such, then such LIBOR Rate Loan shall be automatically
converted to a Base Rate Loan on the last day of the first Interest Period
relating thereto.
(c) Any conversion to or from LIBOR Rate Loans shall be in such amounts and
be made pursuant to such elections so that, after giving effect thereto, (i) the
aggregate principal amount of all LIBOR Rate Loans having the same Interest
Period shall not be less than $300,000 or a whole multiple of $100,000 in
addition thereto.
Section 2.2. Interest. So long as no Event of Default is continuing, each
Base Rate Loan shall bear interest for the period commencing with the Drawdown
Date thereof and ending on the last day of the Interest Period with respect
thereto at a rate per annum equal to the Base Rate and each LIBOR Rate Loan
shall bear interest for the period commencing with the Drawdown Date thereof and
ending on the last day of the Interest Period with respect thereto at a rate per
annum equal to the sum of (i) the LIBOR Rate determined for such Interest Period
plus (ii) the LIBOR Rate Margin. The Borrower promises to pay interest on each
Loan in arrears on each Interest Payment Date with respect thereto. While an
Event of Default is continuing and Bank shall have exercised its rights pursuant
to Section 8.1(2) hereof or in the case of an Event of Default under clause (h)
or (i) of Section 8.1, amounts payable under any of the Loan Documents shall
bear interest (compounded monthly and payable on demand in respect of overdue
amounts) at a rate per annum which is equal to the Base Rate plus two percent
(2%) until such amount is paid in full or (as the case may be) such Event of
Default has been cured or waived in writing by Bank (after as well as before
judgment).
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Section 2.3. Repayments and Prepayments. The Borrower hereby agrees to pay
to Bank, no later than the Maturity Date, the entire unpaid principal of and
interest on the Loans. The Borrower may elect to prepay the outstanding
principal of all or any part of any Loan, without premium or penalty, provided
that (a) any full or partial prepayment of the outstanding amount of any LIBOR
Rate Loans pursuant to this Section 2.3 may be made only on the last day of the
Interest Period relating thereto, and (b) any such prepayments of LIBOR Rate
Loans shall be in a minimum amount of $300,000 or a whole multiple of $100,000
in addition thereto. The Borrower shall give Bank Notice of the date and amount
of any proposed prepayment pursuant to this Section 2.3 (y) no less than three
(3) LIBOR Business Days prior to any such proposed prepayment of any LIBOR Rate
Loans, and (z) no later than 10:00 a.m., New York time, on the date of any such
prepayment of any Base Rate Loan. The Borrower shall be entitled to reborrow
before the Termination Date such amounts, upon the terms and subject to the
conditions of this Agreement. Each repayment or prepayment of principal of any
Loan shall be accompanied by payment of the unpaid interest accrued to such date
on the principal being repaid or prepaid and shall be applied, in the absence of
instruction by the Borrower, first to the principal of Base Rate Loans and then
to the principal of LIBOR Rate Loans. If at any time the aggregate amount of
Loans outstanding shall exceed the Commitment, the Borrower shall immediately
pay the amount of such excess to Bank for application to the Loans. The Borrower
may elect to reduce or terminate the Commitment by a minimum principal amount of
$100,000 or an integral multiple thereof of the amount reduced or, as the case
may be, terminated, upon Notice to Bank given by 10:00 a.m., New York time, at
least two (2) Business Days prior to the date of such reduction or termination.
The Borrower shall not be entitled to reinstate the respective Commitment
following such reduction or termination.
SECTION 3. INDEMNITY FOR CHANGES IN CIRCUMSTANCES, ETC.
The Borrower agrees to indemnify Bank and to hold it harmless from and
against any loss, cost or expense (including loss of anticipated profits) that
Bank may sustain or incur as a consequence of (i) default by the Borrower in
payment of the principal amount of or any interest on any LIBOR Rate Loans as
and when due and payable, including any such loss, cost or expense arising from
interest or fees payable by Bank to lenders of funds obtained by it in order to
maintain its LIBOR Rate Loans or the cost of breaking any swaps or other hedging
agreements, (ii) default by the Borrower in making a borrowing or conversion
after the Borrower has given (or is deemed to have given) a Loan Request or
Conversion Request relating thereto in accordance with Section 2.1A, and (iii)
the making of any payment of a LIBOR Rate Loan or the making of any conversion
of any such Loan to a Base Rate Loan on a day that is not the last day of the
applicable Interest Period with respect thereto, including interest or fees
payable by Bank to lenders of funds obtained by it in order to maintain any such
Loans or the cost of breaking any swaps or other hedging agreements.
SECTION 4. FEES AND PAYMENTS.
Section 4.1. Revolving Credit Commitment Fees. The Borrower shall pay to
Bank a commitment fee at the rate per annum equal to one-fourth of one percent
(1/4 of 1%) (computed on the basis of a year of 360 days and the actual number
of days elapsed) on the average daily
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unused Commitment. Such commitment fee shall be payable quarter-annually in
arrears on the last Business Day of each November, February, May and August in
each year (commencing on the first such date occurring after the date hereof)
and on the Termination Date, unless the Commitment is terminated in whole on an
earlier date, in which event the commitment fee for the period to the date of
such termination in whole shall be paid on the date of such termination.
Section 4.2. Payments. All payments to be made by the Borrower hereunder or
under any of the other Loan Documents shall be made in U.S. Dollars in
immediately available funds at Bank's Principal Office, without set-off or
counterclaim and without any withholding or deduction whatsoever. The Bank shall
be entitled to charge any account of the Borrower with Bank for any sum due and
payable by the Borrower to Bank hereunder or under any of the other Loan
Documents. If any payment hereunder is required to be made on a day which is not
a Business Day, it shall be paid on the immediately succeeding Business Day,
with interest and any applicable fees adjusted accordingly. All computations of
interest or fees payable hereunder shall be made by Bank on the basis of actual
days elapsed and on a 360-day year.
SECTION 5. REPRESENTATIONS AND WARRANTIES.
The Borrower represents and warrants to Bank on the date hereof, on the
date of any Loan Request:
(a) the Borrower and each Subsidiary is duly organized, validly
existing, and in good standing under the laws of its jurisdiction of
incorporation and is duly qualified and in good standing in every other
jurisdiction where it is doing business (except where the failure to so
qualify in any such jurisdiction would not have a Materially Adverse
Effect), and the execution, delivery and performance by the Borrower and
each Subsidiary of the Loan Documents to which it is a party (i) are within
its corporate authority, (ii) have been duly authorized, (iii) do not
conflict with or contravene its Charter Documents;
(b) upon execution and delivery thereof, each Loan Document shall
constitute the legal, valid and binding obligation of each of the Borrower
and Guarantors party thereto, enforceable in accordance with its terms;
(c) the Borrower and each of its Subsidiaries has good and marketable
title to all its material properties, subject only to Liens permitted
hereunder, and possesses all assets, including intellectual properties,
franchises and Consents, adequate for the conduct of its business as now
conducted, without known conflict with any rights of others. The Borrower
and its Subsidiaries maintain insurance with financially responsible
insurers and copies of the Borrower's primary Jewelers Block Policy and a
schedule of other insurance policies have been previously delivered to
Bank, covering such risks and in such amounts and with such deductibles as
are customary in the Borrower's business and are adequate;
(d) the Borrower has provided to Bank its Financials for the fiscal
year ended May 31, 2004, and for the fourth quarter then ended, as filed
with the Securities and
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Exchange Commission, and such Financials are complete and correct and
fairly present the position of the Borrower in accordance with GAAP applied
consistent with the annual financial statements of the Borrower as filed
with the Securities and Exchange Commission as at such date and for such
period in accordance with GAAP consistently applied;
(e) since May 31, 2004, there has been no material adverse change of
any kind in the business or financial condition of the Borrower which would
have a Materially Adverse Effect;
(f) there are no legal or other proceedings or investigations pending
or, to the knowledge of the Borrower, threatened against the Borrower
before any court, tribunal or regulatory authority which would, if
adversely determined, alone or together, have a Materially Adverse Effect;
(g) the execution, delivery and performance of its obligations, and
the exercise of its rights under the Loan Documents by the Borrower and
each Guarantor, including borrowing under this Agreement (i) do not require
any Consents (other than the Consent of Antwerp Diamond Bank in connection
with the Antwerp Diamond Bank Line and the Consent of the agent and each of
the lenders under the ABN AMBRO LEUMI Credit Agreement), to the Borrower
borrowing up to $30,000,000 from time to time from Bank on an unsecured
basis, guaranteed by such Subsidiaries of the Borrower as Bank may require;
and (ii) are not and will not be in conflict with or prohibited or
prevented by (A) any Requirement of Law, or (B) any Charter Document,
corporate minute or resolution, instrument, agreement or provision thereof,
in each case binding on it or affecting its property other than for which
the Consents referred to in clause (i) above were obtained and are in full
force and effect;
(h) the Borrower and each Guarantor is not in violation of (i) any
Charter Document, corporate minute or resolution, (ii) any instrument or
agreement, in each case binding on it or affecting its property, or (iii)
any Requirement of Law, in a manner which could have a Materially Adverse
Effect, including, without limitation, all applicable federal and state tax
laws, ERISA and Environmental Laws;
(i) all information furnished by or on behalf of the Borrower or any
of its Subsidiaries in writing to Bank for purposes of or in connection
with this Agreement, or any transaction contemplated herein, is true and
accurate in all material respects and not incomplete by omitting to state
any fact necessary to make such information (taken as a whole) not
misleading in light of the circumstances under which such information was
provided;
(j) all proceeds of Loans shall be used by the Borrower for working
capital purposes and other general corporate purposes of the Borrower and
its Subsidiaries and no part of the proceeds of any Loan or other extension
of credit hereunder will be used by the Borrower or any Subsidiary thereof
to purchase or carry any margin stock (within the meaning of the
Regulations of the Board of Governors of the Federal Reserve System) or
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to extend credit to others for the purpose of purchasing or carrying any
margin stock and neither the making of any Loan or other extension of
credit hereunder nor the use of the proceeds thereof will violate or be
inconsistent with the provisions of the Regulations of the Board of
Governors of the Federal Reserve System and any successor to all or any
portion of such regulations relating to Margin Stock; Margin Stock (as
defined above) constitutes less than 25% of the value of those assets of
the Borrower and its Subsidiaries that are subject to any limitation on
sale, pledge or other restriction hereunder;
(k) the Borrower and each of its Subsidiaries has timely filed or
caused to be timely filed all tax returns required to be filed by the
Borrower and/or any of its Subsidiaries and the Borrower and each of its
Subsidiaries has paid all taxes, assessments and other governmental charges
payable by them other than taxes, assessments and other governmental
charges which are not delinquent, and other than those contested in good
faith and for which adequate reserves have been established in accordance
with GAAP and as to which no Lien exists;
(l) the Borrower and each other member of its Controlled Group has
fulfilled its obligations under the minimum funding standards of, and is in
compliance in all material respects with, ERISA and the Code to the extent
applicable to it and, other than a liability for premiums under Section
4007 of ERISA, has not incurred any liability to the PBGC or a Plan under
Title IV of ERISA and the Borrower and its Subsidiaries have no unaccrued
contingent liabilities with respect to any post-retirement benefits under a
welfare plan, as defined in Section 3(i) of ERISA, other than liability for
continuation coverage described in article 6 of Title 1 of ERISA;
(m) Schedule I correctly sets forth, as of the Closing Date, each
Subsidiary of the Borrower, its respective jurisdiction of organization and
the percentage ownership (direct and indirect) of the Borrower in each
class of capital stock or other equity interests of each of its
Subsidiaries and also identifies the direct owner thereof;
(n) the Borrower and each of its Subsidiaries is in compliance with
all applicable Environmental Laws and the requirements of any permits
issued under such Environmental Laws; there are no pending or, to the best
knowledge of the Borrower and its Subsidiaries after due inquiry,
threatened Environmental Claims, including any such claims (regardless of
materiality) for liabilities under CERCLA relating to the disposal of
Hazardous Materials, against the Borrower or any of its Subsidiaries or any
real property, including leaseholds, owned or operated by the Borrower or
any of its Subsidiaries; there are no facts, circumstances, conditions or
occurrences on any real property, including leaseholds, owned or operated
by the Borrower or any of its Subsidiaries that, to the best knowledge of
the Borrower and its Subsidiaries after due inquiry, could reasonably be
expected (i) to form the basis of an Environmental Claim against the
Borrower or any of its Subsidiaries or any such real property, or (ii) to
cause any such real property to be subject to any restrictions on the
ownership, occupancy, use or transferability of such real property by the
Borrower or any of its Subsidiaries under any applicable Environmental Law;
Hazardous Materials have not been Released on or from any real property,
including leaseholds, owned or operated by the Borrower or any of its
Subsidiaries where such
-14-
Release, individually, may reasonably be expected to require in excess of
$50,000 in response costs under any applicable Environmental Law; and
(o) neither the Borrower nor any Subsidiary is an "investment company"
or a company "controlled" by an "investment company" within the meaning of
the Investment Company Act of 1940, as amended, or a "public utility
holding company" within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
SECTION 6. CONDITIONS PRECEDENT.
Section 6.1. Closing Conditions. In addition to the making of the foregoing
representations and warranties and the delivery of the Loan Documents and such
other documents and the taking of such actions as Bank may require at or prior
to the time of executing this Agreement, the obligation of Bank to make the
initial Loan is subject to the satisfaction of the following further conditions
precedent:
(a) all proceedings in connection with the transactions contemplated
hereby shall be in form and substance satisfactory to Bank and Bank shall
have received all information and documents as it may have reasonably
requested, including without limitation, the Charter Documents and good
standing certificate of the Borrower and the resolutions of the boards of
directors of the Borrower and the Guarantors authorizing the transactions
contemplated hereby;
(b) Bank shall have received the Note in the amount of the Commitment;
(c) the Borrower and the Guarantors shall have provided certificates
of incumbency and specimen signatures as to the officers authorized to sign
the Loan Documents;
(d) Bank shall have received a legal opinion covering customary
matters in an unsecured credit facility, satisfactory in form and substance
to it, from counsel to the Borrower;
(e) Bank shall have received evidence of all hazard, property and
liability insurance maintained by the Borrower and copies of the primary
Jewelers Block insurance policy and such insurance shall be in such amounts
and of such types as shall be satisfactory to it;
(f) no material adverse change shall have occurred in the business or
financial condition of the Borrower since May 31, 2004;
(g) Bank shall have received all appropriate documentation evidencing
that the Consents referred to in Section 5(g) have been obtained and are in
full force and effect; and
-15-
(h) all legal matters incident to the execution and delivery of the
Loan Documents should be satisfactory to Bank and its legal counsel.
Section 6.2. Conditions to All Borrowings. The obligation of Bank to make
any Loan is subject to the satisfaction of the following further conditions
precedent:
(a) each of the representations and warranties of the Borrower to Bank
herein, in any of the other Loan Documents or any documents, certificate or
other paper or Notice in connection herewith shall be true and correct in
all material respects as of the time made or claimed to have been made,
except for representations and warranties that are made as of a certain
date, which shall be true and correct in all material respects as of such
date;
(b) no Default or Event of Default shall be continuing;
(c) Bank shall have received the most recent audited Financials of the
Borrower and quarterly unaudited Financials; and
(d) there shall have been no change in the business, assets, financial
condition of the Borrower since the date of the most recently delivered
Financial Statements which would have a Materially Adverse Effect.
SECTION 7. COVENANTS.
Section 7.1. Affirmative Covenants. The Borrower agrees that so long as
there are any Loans outstanding and until the termination of the Commitment and
the payment and satisfaction in full of all the Obligations, the Borrower will
comply with its obligations as set forth throughout this Agreement and will:
(a) furnish Bank: (i) as soon as available but in any event within one
hundred and twenty (120) days after the close of each fiscal year, its
audited and unqualified Financials for such fiscal year, certified by the
Borrower's outside accountants; (ii) as soon as available but in any event
within sixty (60) days after the end of each fiscal quarter, unaudited
Financials for such fiscal quarter certified by its chief financial
officer; (iii) together with the items required pursuant to clauses (i) and
(ii) above, a certificate of the Borrower submitted by its Duly Authorized
Officer thereof, in form and substance satisfactory to Bank, setting forth
computations demonstrating compliance with the Borrower's financial
covenants set forth herein, and certifying that no Default or Event of
Default has occurred, or if it has, the actions taken by the Borrower with
respect thereto; (iv) promptly upon their becoming available, and in any
event within fifteen (15) days of filing with the Securities and Exchange
Commission, one copy of each financial statement, report, notice or proxy
statement sent by the Borrower to public securities holders generally, and
each regular or periodic report (i.e., Forms 10-K, 10-Q and 8-K),
registration statement or prospectus, and all amendments thereto, filed by
the Borrower with the Securities and Exchange Commission; and (v) promptly
upon their becoming available, and in any event within fifteen (15) days of
entering into, any amendment or
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waiver of or under the ABN AMRO LEUMI Credit Agreement or the Antwerp
Diamond Bank Line.
(b) keep true and accurate books of account in accordance with GAAP,
maintain its current fiscal year;
(c) (i) maintain its corporate existence, business and material
assets, (ii) keep its business and assets adequately insured, (iii)
maintain its chief executive office in the United States, (iv) continue to
engage in substantially the same lines of business, (v) comply with all
Requirements of Law, including ERISA and Environmental Laws, the violation
of any of which would have a Materially Adverse Effect and (vi) conduct
annual physical inventory counts;
(d) notify Bank promptly in writing of (i) the occurrence of any
Default or Event of Default, (ii) any non-compliance with ERISA or any
Environmental Law or proceeding in respect thereof which could have a
Materially Adverse Effect, (iii) any change of address and (iv) any
pending, or to the knowledge of the Borrower, threatened, litigation or
similar proceeding affecting the Borrower, which litigation or proceeding
could reasonably be expected to result in the imposition of a liability
upon the Borrower in excess of $250,000, or any material adverse change in
any such litigation or proceeding previously reported;
(e) use the proceeds of the Loans solely for working capital purposes
and other general corporate purposes and not use the Loans for the carrying
of "margin security" or "margin stock" within the meaning of Regulations U
and X of the Board of Governors of the Federal Reserve System, 12 C.F.R.
Parts 221 and 224;
(f) pay all taxes (including sales and withholding taxes) and other
obligations as and when due except where contested in good faith and by
appropriate proceedings for which the Borrower shall have set aside
adequate reserves;
(g) permit Bank, and each of its duly authorized representatives and
agents to visit and inspect (an "Inspection") any of its property,
corporate books and financial records annually, to examine and make copies
of its books of accounts and other financial records, and to discuss its
affairs, finances and accounts with, and to be advised as to the same by,
its officers, employees and independent public accountants (and by this
provision the Borrower hereby authorizes such accountants to discuss with
Bank the finances and affairs of the Borrower and its Subsidiaries) at such
reasonable times and intervals as Bank may designate, provided, however, if
a Default or Event of Default has occurred and is continuing, Bank may
conduct an Inspection at any time;
(h) cooperate with Bank, take such action, execute such documents, and
provide such information as Bank may from time to time request in order
further to effect the transactions contemplated by and the purposes of the
Loan Documents; and
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(i) cause each Material Domestic Subsidiary created after the date
hereof to become a Guarantor under the Guaranty Agreement.
Section 7.2. Negative Covenants. The Borrower agrees that so long as there
are any Loans outstanding and until the termination of the Commitment and the
payment and satisfaction in full of all the Obligations, the Borrower will not:
(a) create, incur or assume any Indebtedness other than (i)
Indebtedness to Bank, (ii) up to $30,000,000 in unsecured Indebtedness
under the ABN AMBRO LEUMI Credit Agreement, (iii) up to $40,000,000 in
unsecured Indebtedness under lines of credit from Antwerp Diamond Bank,
including guaranties by Subsidiaries of the Borrower (including, without
limitation, Material Domestic Subsidiaries) in connection with such
Indebtedness, (iv) up to one billion one hundred million Yen in unsecured
Indebtedness to ABN AMRO Bank N.V., Tokyo branch, including guaranties by
Subsidiaries of the Borrower (including, without limitation, Material
Domestic Subsidiaries) in connection with such Indebtedness, (v) current
liabilities of the Borrower not incurred through the borrowing of money or
the obtaining of credit on an open account customarily extended, (vi)
Indebtedness in respect of taxes or other governmental charges contested in
good faith and by appropriate proceedings and for which adequate reserves
have been taken and (vii) other unsecured Indebtedness not in excess of
$250,000;
(b) create or incur any Liens on any of the property or assets of the
Borrower or its Subsidiaries except (i) Liens granted by Pegasus in favor
of GE Superabrasives Ireland ("GESI") on inventories of gem diamonds
purchased by Pegasus from GESI for processing; (ii) Liens securing taxes or
other governmental charges not yet due; (iii) deposits or pledges made in
connection with social security obligations; (iv) Liens of carriers,
warehousemen, mechanics and materialmen, less than 120 days old as to
obligations not yet due; and (v) easements, rights-of-way, zoning
restrictions and similar minor Liens which individually and in the
aggregate do not have a Materially Adverse Effect;
(c) make any investments which in the aggregate exceeds $150,000 in
any one fiscal year, other than investments in: (i) marketable obligations
of the United States maturing within one (1) year, (ii) certificates of
deposit, bankers' acceptances and time and demand deposits of Bank or of
United States banks having total assets in excess of $1,000,000,000, (iii)
investments in Northbank Diamonds Ltd., (iv) Subsidiaries or other equity
investments existing on the date hereof, (v) investments by Pegasus (net of
related contra-accounts and credits) in inventory of gem diamonds not to
exceed $8,000,000 at any one time outstanding, (vi) investments by the
Borrower after the date hereof in Subsidiaries and joint ventures in the
ordinary course of Borrower's business, provided, however, that the
aggregate amount of such additional investments, at any one time
outstanding shall not exceed 10% of the Tangible Net Worth of the Borrower
and its Subsidiaries on a consolidated basis or (vii) such other
investments as Bank may from time to time approve in writing;
-18-
(d) merge or consolidate with any other party (other than with
Subsidiaries of the Borrower so long as the Borrower is the survivor), or
enter into any stock acquisitions; enter into any wholly new lines of
business or otherwise materially change the conduct of the Borrower's
business as presently conducted; or effect any significant change in the
Borrower's accounting practices or treatment except as may be permitted or
required by GAAP;
(e) purchase, lease or otherwise acquire assets other than in the
ordinary course, consistent with the past practices of the Borrower; or
dispose of or sell assets other than (i) the sale of inventory and excess
or obsolete equipment and other assets in the ordinary course of business
and (ii) prior to the occurrence of a Default or an Event of Default, the
sale of assets (other than inventory) on arms-length terms for fair value,
provided that, in the case of Section 7.2(e) (ii) the amount of such assets
sold or disposed of, when combined with all other such sales or other
dispositions of assets, shall not exceed $500,000 in the aggregate during
any fiscal year of the Borrower.
(f) make any repurchases of any capital stock or other securities of
the Borrower in excess of $2,000,000 in the aggregate during any fiscal
year of the Borrower;
(g) conduct transactions with Subsidiaries of the Borrower or other
affiliates on anything other than an arm's length basis and in the ordinary
course of business consistent with the past practices of the Borrower; or
(h) make, or become obligated to make any Capital Expenditures, except
that during any fiscal year the Borrower and its Subsidiaries may make, or
become obligated to make, Capital Expenditures so long as the aggregate
amount of such Capital Expenditures (net of proceeds from the sale of
capital or fixed assets) does not exceed in the fiscal year ended May 31,
2005 $3,000,000 and does not exceed $1,500,000 in any subsequent fiscal
year.
Section 7.3. Financial Covenants. The Borrower agrees that so long as there
are any Loans outstanding and until the termination of the Commitment and the
payment and satisfaction in full of all the Obligations, the Borrower will have
or maintain, on a consolidated basis with its Subsidiaries:
(a) as of the end of each of its fiscal quarters, Working Capital of
not less than Eighty Million Dollars ($80,000,000);
(b) as of the end of each of its fiscal quarters, Tangible Net Worth
of not less than Eighty-five Million ($85,000,000);
(c) as of the end of each of its fiscal quarters, a ratio of Total
Funded Debt to Tangible Net Worth of not more than 1.50 to 1.00; and
(d) as of the end of each of its fiscal years, a ratio of EBITDA to
Interest Expense of not less than 1.25 to 1.00.
-19-
SECTION 8. EVENTS OF DEFAULT; ACCELERATION.
Section 8.1. Events of Default. If any of the following events ("Events of
Default") shall occur:
(a) the Borrower shall fail to pay when due and payable any principal
of the Loans;
(b) the Borrower shall fail to pay interest on the Loans, any fee or
any other sum due under any of the Loan Documents when required to be made
hereby;
(c) the Borrower shall fail to perform any term, covenant or agreement
contained in Sections 7.1(e), 7.2 (other than 7.2(c)(v)) and 7.3, provided,
however, with regard to Section 7.3, if on any date (the "Compliance Date")
not later than 30 days after the earlier of (i) delivery by Bank to the
Borrower of a Notice with respect to such default, or (ii) the date on
which the Borrower first obtains actual knowledge of any such default,
there shall have been contributed to the capital of the Borrower a sum in
cash in immediately available funds (and as evidenced by such written
instruments or documents as shall be reasonably satisfactory to Bank, upon
satisfaction of which, such contribution shall be considered an addition to
Net Income for the period tested), in an amount which, after giving effect
thereto, would enable the Borrower to meet the requirements as in effect on
the Compliance Date of the covenants of Section 7.3 giving rise to the
default, then no Event of Default shall be deemed to have occurred under
this Section 8.1(c) with respect to such default without any further action
by Bank or the Borrower;
(d) the Borrower shall fail to perform any other term, covenant or
agreement contained in the Loan Documents within thirty (30) days after
Bank has given Notice of such failure to the Borrower, provided, however,
that if such failure is cured within such period there shall be no Event of
Default under this clause (d);
(e) any representation or warranty of the Borrower in the Loan
Documents or in any certificate or Notice given in connection therewith
shall have been false or misleading in any material respect at the time
made or deemed to have been made;
(f) any of the Borrower or its Subsidiaries shall be in default (after
any applicable period of grace or cure period) under any agreement or
agreements evidencing a Capitalized Lease or Indebtedness in excess of
$100,000 owing to any Person, or any affiliate thereof, or shall fail to
pay such amounts thereunder when due, or within any applicable period of
grace;
(g) any of the Loan Documents shall be terminated or otherwise cease
to be in full force and effect;
(h) any of the Borrower or its Subsidiaries (i) shall make an
assignment for the benefit of creditors, (ii) shall be adjudicated bankrupt
or insolvent, (iii) shall seek the appointment of, or be the subject of an
order appointing, a trustee, liquidator or receiver
-20-
as to all or part of its assets, (iv) shall commence, approve or consent
to, any case or proceeding under any bankruptcy, reorganization or similar
law and, in the case of an involuntary case or proceeding, such case or
proceeding is not dismissed within sixty (60) days following the
commencement thereof, or (y) shall be the subject of an order for relief in
an involuntary case under federal bankruptcy law;
(i) any of the Borrower or its Subsidiaries shall be unable to pay its
debts as they mature;
(j) there shall remain undischarged for more than thirty (30) days any
final judgment or execution action against the Borrower or any of its
Subsidiaries that, together with other final judgments and execution
actions against the Borrower or any such Subsidiary exceeds $100,000 in the
aggregate;
THEN, or at any time thereafter:
(1) In the case of any Event of Default under clause (h) or (i), (A)
the Commitment shall automatically terminate and Bank shall be relieved of
all further obligations, as provided herein, to make Loans to the Borrower,
and (B) the entire unpaid principal amount of the Loans, all interest
accrued and unpaid thereon, all accrued and unpaid fees, and all other
amounts payable hereunder and under the other Loan Documents shall
automatically become forthwith due and payable, without presentment,
demand, protest or Notice of any kind, all of which are hereby expressly
waived by the Borrower; and
(2) In the case of any Event of Default other than (h) and (i), Bank
may, by Notice to the Borrower, (A) terminate its Commitment, (B) and/or
declare the unpaid principal amount of the Loans, all interest accrued and
unpaid thereon, all accrued and unpaid fees and all other amounts payable
hereunder and under the other Loan Documents to be forthwith due and
payable, without presentment, demand, protest or further Notice of any
kind, all of which are hereby expressly waived by the Borrower.
No remedy herein conferred upon Bank is intended to be exclusive of any
other remedy and each and every remedy shall be cumulative and in addition to
every other remedy hereunder, now or hereafter existing at law.
SECTION 9. SETOFF.
Any deposits or other sums credited by or due from Bank to the Borrower (in
whatever currency denominated) may, from and after an Event of Default, be
applied to or set off by Bank against any principal, interest and any other
amounts due and payable from the Borrower to Bank in respect of the Obligations
at any time without Notice to the Borrower, or compliance with any other
procedure imposed by statute or otherwise, all of which are hereby expressly
waived by the Borrower. The Bank agrees to notify the Borrower promptly after
such setoff.
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SECTION 10. CHANGE IN CIRCUMSTANCES.
Section 10.1. Change of Law. Notwithstanding any other provisions of this
Agreement or the Note, if at any time any change in applicable law or regulation
or in the interpretation thereof makes it unlawful for Bank to make or continue
to maintain any LIBOR Rate Loans or to perform its obligations as contemplated
hereby, Bank shall promptly give notice thereof to the Borrower and Bank's
obligations to make or maintain LIBOR Rate Loans under this Agreement shall be
suspended until it is no longer unlawful for it to make or maintain LIBOR Rate
Loans. The Borrower shall prepay on demand the outstanding principal amount of
any such affected LIBOR Rate Loans, together with all interest accrued thereon
and all other amounts then due and payable to Bank under this Agreement;
provided, however, subject to all of the terms and conditions of this Agreement,
the Borrower may then elect to borrow the principal amount of the affected LIBOR
Rate Loans from Bank by means of Base Rate Loans from Bank.
Section 10.2. Unavailability of Deposits or Inability to Ascertain, or
Inadequacy of, LIBOR. If on or prior to the first day of any Interest Period for
any Borrowing of LIBOR Rate Loans:
(a) Bank determines that deposits in U.S. Dollars (in the applicable
amounts) are not being offered to it in the interbank eurodollar market for
such Interest Period, or that by reason of circumstances affecting the
interbank eurodollar market adequate and reasonable means do not exist for
ascertaining the applicable LIBOR, or
(b) Bank determines that the making or funding of LIBOR Rate Loans
become impracticable,
then Bank shall forthwith give notice thereof to the Borrower, whereupon until
Bank notifies the Borrower that the circumstances giving rise to such suspension
no longer exist, the obligations of Bank to make LIBOR Rate Loans shall be
suspended.
Section 10.3. Increased Cost and Reduced Return. (a) If, on or after the
date hereof, the adoption of any applicable law, rule or regulation, or any
change therein, or any change in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by Bank (or its Lending
Office) with any request or directive (whether or not having the force of law)
of any such authority, central bank or comparable agency:
(i) shall subject Bank (or its Lending Office) to any tax, duty
or other charge with respect to its LIBOR Rate Loans or the Note or
its obligation to make LIBOR Rate Loans or shall change the basis of
taxation of payments to Bank (or its Lending Office) of the principal
of or interest on its LIBOR Rate Loans or any other amounts due under
this Agreement or any other Loan Document in respect of its LIBOR Rate
Loans, or its obligation to make LIBOR Rate Loans (except for changes
in the rate of tax on the overall net income of Bank or its Lending
Office imposed by the jurisdiction in which Bank's principal executive
office or Lending Office is located); or
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(ii) shall impose, modify or deem applicable any reserve, special
deposit or similar requirement (including, without limitation, any
such requirement imposed by the Board of Governors of the Federal
Reserve System, but excluding with respect to any LIBOR Rate Loans any
such requirement included in an applicable Eurocurrency Reserve Rate)
against assets of, deposits with or for the account of, or credit
extended by, Bank (or its Lending Office) or shall impose on Bank (or
its Lending Office) or on the interbank market any other condition
affecting its LIBOR Rate Loans or the Note, or its obligation to make
LIBOR Rate Loans;
and the result of any of the foregoing is to increase the cost to Bank (or its
Lending Office) of making or maintaining any LIBOR Rate Loan or to reduce the
amount of any sum received or receivable by Bank (or its Lending Office) under
this Agreement or under any other Loan Document with respect thereto, by an
amount deemed by Bank to be material, then, within 30 days after demand by Bank,
the Borrower shall be obligated to pay to Bank such additional amount or amounts
as will compensate Bank for such increased cost or reduction.
(b) If, after the date hereof, Bank shall have determined that the
adoption of any applicable law, rule or regulation regarding capital
adequacy, or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration
thereof, or compliance by Bank (or its Lending Office) with any request or
directive regarding capital adequacy (whether or not having the force of
law) of any such authority, central bank or comparable agency, has had the
effect of reducing the rate of return on Bank's capital as a consequence of
its obligations hereunder to a level below that which Bank could have
achieved but for such adoption, change or compliance (taking into
consideration Bank's policies with respect to capital adequacy) by an
amount deemed by Bank to be material, then from time to time, within 30
days after demand by Bank, the Borrower shall pay to Bank such additional
amount or amounts as will compensate Bank for such reduction.
(c) A certificate of Bank claiming compensation under this Section
10.3 and setting forth the additional amount or amounts to be paid to it
hereunder shall be conclusive if reasonably determined. In determining such
amount, Bank may use any reasonable averaging and attribution methods.
Section 10.4. Lending Offices. The Bank may, at its option, elect to make
its Loans hereunder at the branch, office or affiliate specified on the
appropriate signature page hereof (each a "Lending Office") for each type of
Loan available hereunder or at such other of its branches, offices or affiliates
as it may from time to time elect and designate in a Notice to the Borrower.
Section 10.5. Discretion of Bank as to Manner of Funding. Notwithstanding
any other provision of this Agreement, Bank shall be entitled to fund and
maintain its funding of all or any part of the Loans in any manner it sees fit,
it being understood, however, that for the purposes of this Agreement all
determinations hereunder with respect to LIBOR Rate Loans shall be made as
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if Bank had actually funded and maintained each LIBOR Rate Loan through the
purchase of deposits in the interbank eurodollar market having a maturity
corresponding to such Loan's Interest Period and bearing an interest rate equal
to LIBOR for such Interest Period.
SECTION 11. EXPENSES AND INDEMNIFICATION.
Section 11.1. Expenses. The Borrower agrees to pay (i) the reasonable costs
of producing this Agreement, the other Loan Documents and the other agreements
and instruments mentioned herein (including, without limitation, reasonable
attorneys' fees and costs), (ii) any taxes (including any interest and penalties
in respect thereto) payable by Bank (other than taxes based upon Bank's net
income) on or with respect to the transactions contemplated by this Agreement
(the Borrower hereby agreeing to indemnify Bank with respect thereto), (iii) the
reasonable legal fees, expenses and disbursements incurred in connection with
the preparation or interpretation of the Loan Documents and other instruments
mentioned herein, each closing hereunder, any amendments, modifications,
approvals, consents or waivers hereto or hereunder, or the cancellation of any
Loan Document upon payment in full in cash of all of the Obligations or pursuant
to any terms of such Loan Document for providing for such cancellation, (iv) the
reasonable fees, expenses and disbursements of Bank or any of its affiliates
incurred by Bank or such affiliate in connection with the preparation or
interpretation of the Loan Documents and other instruments mentioned herein, (v)
all reasonable out-of-pocket expenses (including without limitation attorneys'
fees and costs, which attorneys may be employees of Bank, and consulting,
accounting, appraisal, investment banking and similar professional fees and
charges) incurred by Bank in connection with (A) the enforcement of or
preservation of rights under any of the Loan Documents against the Borrower or
its Subsidiaries or the administration thereof after the occurrence of a Default
or Event of Default and (B) any litigation, proceeding or dispute whether
arising hereunder or otherwise, in any way related to Bank's relationship with
the Borrower or any of its Subsidiaries.
Section 11.2. Indemnification. The Borrower agrees to indemnify and hold
harmless Bank and its respective affiliates (the "Indemnified Parties") from and
against any and all claims, actions and suits whether groundless or otherwise
("Claims"), and from and against any and all liabilities, losses, damages and
expenses of every nature and character ("Losses") arising out of this Agreement
or any of the other Loan Documents or the transactions contemplated hereby
including, without limitation, (i) any actual or proposed use by the Borrower or
any of its Subsidiaries of the proceeds of any of the Loans, (ii) the reversal
or withdrawal of any provisional credits granted by Bank upon the transfer of
funds from lock box, bank agency or concentration accounts or in connection with
the provisional honoring of checks or other items, (iii) the Borrower or any of
its Subsidiaries entering into or performing this Agreement or any of the other
Loan Documents or (iv) with respect to the Borrower and its Subsidiaries and
their respective properties and assets, the violation of any Environmental Law,
the presence, disposal, escape, seepage, leakage, spillage, discharge, emission,
release or threatened release of any toxic substances, oil or hazardous
materials or other chemicals or substances regulated by Environmental Laws
("Hazardous Substances") or any action, suit, proceeding or investigation
brought or threatened with respect to any Hazardous Substances (including, but
not limited to, claims with respect to wrongful death, personal injury or damage
to property), or (v) any sales, use, transfer, documentary and stamp taxes (but
excluding any taxes based upon or measured by
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the income or profits of Bank) and any recording and filing fees paid by Bank
and which arise by reason of the transactions contemplated hereby or by any of
the Loan Documents, in each case including, without limitation, the reasonable
fees and disbursements of counsel and allocated costs of internal counsel
incurred in connection with any such investigation, litigation or other
proceeding; provided, however, that the Borrower shall not be obligated to
indemnify any Indemnified Party for Claims or Losses arising out of (i) gross
negligence or willful misconduct of the Indemnified Party, or (ii) any breaches
by the Indemnified Party of its obligations under this Agreement or any of the
Loan Documents. In litigation, or the preparation therefor, Bank and its
respective affiliates shall be entitled to select its own counsel reasonably
acceptable to the Borrower and, in addition to the foregoing indemnity, the
Borrower agrees to pay promptly the reasonable fees and expenses of such
counsel. If, and to the extent that the obligations of the Borrower under this
Section 11.2 are unenforceable for any reason, the Borrower hereby agrees to
make the maximum contribution to the payment in satisfaction of such obligations
which is permissible under applicable law.
Section 11.3. Survival. The covenants contained in this Section 11 shall
survive payment or satisfaction in full of all other Obligations.
SECTION 12. SURVIVAL OF COVENANTS, ETC.
All covenants, agreements, representations and warranties made herein, in
the Note, in any of the other Loan Documents or in any documents or other papers
delivered by or on behalf of the Borrower or any of its Subsidiaries pursuant
hereto shall be deemed to have been relied upon by Bank, notwithstanding any
investigation heretofore or hereafter made by Bank, and shall survive the making
by Bank of any of the Loans, as herein contemplated, and shall continue in full
force and effect so long as any amount due under this Agreement or the Note or
any of the other Loan Documents remains outstanding or Bank has any obligation
to make any Loans and for such further time as may be otherwise expressly
specified in this Agreement. All statements contained in any certificate
delivered to Bank at any time by or on behalf of the Borrower or any of its
Subsidiaries pursuant hereto or in connection with the transactions contemplated
hereby shall constitute representations and warranties by the Borrower or such
Subsidiary hereunder.
SECTION 13. ASSIGNMENT.
The Borrower shall not assign or transfer any of its rights or obligations
under any of the Loan Documents without the prior written Consent of Bank.
SECTION 14. NOTICES, ETC.
Except as otherwise expressly provided in this Agreement, all Notices and
other communications made or required to be given pursuant to this Agreement or
the Note shall be addressed to such party's Principal Office or such other
address for Notice as such party shall have last furnished in writing to the
Person giving Notice.
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SECTION 15. GOVERNING LAW.
THIS AGREEMENT AND, EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED THEREIN, EACH
OF THE OTHER LOAN DOCUMENTS ARE CONTRACTS UNDER THE LAWS OF THE STATE OF NEW
YORK AND SHALL FOR ALL PURPOSES BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF SAID STATE OF NEW YORK (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS
OR CHOICE OF LAW). THE BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE
STATE OF NEW YORK OR ANY FEDERAL COURT SITTING THEREIN AND CONSENTS TO THE
NONEXCLUSIVE JURISDICTION OF SUCH COURT AND SERVICE OF PROCESS IN ANY SUCH SUIT
BEING MADE UPON THE BORROWER BY MAIL AT THE ADDRESS SPECIFIED IN SECTION 14. THE
BORROWER HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE
VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN
INCONVENIENT COURT.
SECTION 16. HEADINGS.
The captions in this Agreement are for convenience of reference only and
shall not define or limit the provisions hereof.
SECTION 17. COUNTERPARTS.
This Agreement and any amendment hereof may be executed in several
counterparts and by each party on a separate counterpart, each of which when
executed and delivered shall be an original, and all of which together shall
constitute one instrument. In proving this Agreement it shall not be necessary
to produce or account for more than one such counterpart signed by the party
against whom enforcement is sought.
SECTION 18. ENTIRE AGREEMENT, ETC.
The Loan Documents and any other documents executed in connection herewith
or therewith express the entire understanding of the parties with respect to the
transactions contemplated hereby. Neither this Agreement nor any term hereof may
be changed, waived, discharged or terminated, except as provided in Section 20.
SECTION 19. WAIVER OF JURY TRIAL.
THE BORROWER HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY
ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT,
THE NOTE OR ANY OF THE OTHER LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER
OR THEREUNDER OR THE PERFORMANCE OF WHICH RIGHTS AND
-26-
OBLIGATIONS. Except as prohibited by law, the Borrower hereby waives any right
it may have to claim or recover in any litigation referred to in the preceding
sentence any special, exemplary, punitive or consequential damages or any
damages other than, or in addition to, actual damages. The Borrower (i)
certifies that Bank has not and that no representative, or attorney of Bank has,
represented, expressly or otherwise, that Bank would not, in the event of
litigation, seek to enforce the foregoing waivers and (ii) acknowledges that
Bank has been induced to enter into this Agreement, the other Loan Documents to
which it is a party by, among other things, the waivers and certifications
contained herein.
SECTION 20. CONSENTS, AMENDMENTS, WAIVERS, ETC.
Any Consent or approval required or permitted by this Agreement to be given
by Bank may be given, and any term of this Agreement, the other Loan Documents
or any other instrument related hereto or mentioned herein may be amended, and
the performance or observance by the Borrower or any of its Subsidiaries of any
terms of this Agreement, the other Loan Documents or such other instrument or
the continuance of any Default or Event of Default may be waived (either
generally or in a particular instance and the retroactively or prospectively)
with, but only with, the written Consent of the Borrower and the written Consent
of Bank. No course of dealing or delay or omission on the part of Bank in
exercising any right shall operate as a waiver thereof or otherwise be
prejudicial thereto. No Notice to or demand upon the Borrower shall entitle the
Borrower to other or further Notice or demand in similar or other circumstances.
SECTION 21. SEVERABILITY.
The provisions of this Agreement are severable and if any one clause or
provision hereof shall be held invalid or unenforceable in whole or in part in
any jurisdiction, then such invalidity or unenforceability shall affect only
such clause or provision, or part thereof, in such jurisdiction, and shall not
in any manner affect such clause or provision in any other jurisdiction, or any
other clause or provision of this Agreement in any jurisdiction.
SECTION 22. EXTENSION OF TERMINATION DATE.
The Borrower may annually request that the Commitment be extended for an
additional one-year period by providing notice of such request to Bank no later
than 60 days prior to November 30 of each year, commencing November 30, 2005. If
Bank agrees to extend its Commitment, it will notify the Borrower, in writing,
of its decision to do so on or before the October 31 following such request and
Bank's Commitment will be extended for an additional one-year period from the
then existing Termination Date. If Bank declines the Borrower's request for a
commitment extension Commitment will terminate on the then existing Termination
Date.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as of
the date first above written.
▇▇▇▇▇▇ ▇▇▇▇▇▇ INTERNATIONAL INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President and Chief Financial Officer
HSBC BANK USA, NATIONAL ASSOCIATION
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Senior Vice President
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Exhibit A
GUARANTY
This Guaranty Agreement (the "Guaranty") dated as of this ____ day of
September, 2004, from each of the parties who have executed this Guaranty (being
herein referred to collectively, as the "Guarantors" and individually, as a
"Guarantor") in favor of HSBC BANK USA, NATIONAL ASSOCIATION ("Bank").
WITNESSETH THAT:
WHEREAS, ▇▇▇▇▇▇ ▇▇▇▇▇▇ International Inc., a Delaware corporation,
(the"Borrower") and Bank have entered into the Revolving Credit Agreement, dated
as of September __, 2004 (such Revolving Credit Agreement as the same may be
amended, modified, supplemented, restated and/or replaced from time to time
being hereinafter referred to as the "Bank Credit Agreement"), pursuant to which
Bank has agreed, subject to certain terms and conditions, to extend credit and
make certain other financial accommodations to the Borrower;
WHEREAS, Bank shall be hereinafter referred to as the "Guaranteed
Creditor";
WHEREAS, pursuant to the Bank Credit Agreement, Bank has required, among
other things, that each Guarantor provide to the Guaranteed Creditor its payment
guarantee of the credit facilities under the Bank Credit Agreement;
WHEREAS, the Borrower provides each Guarantor that is a subsidiary of the
Borrower (whether directly or indirectly) with substantial financial,
management, administrative, and technical support, and each Guarantor will
benefit, directly or indirectly, from credit and other financial accommodations
extended by the Guaranteed Creditor to the Borrower;
WHEREAS, as to each Guarantor that is not a subsidiary of the Borrower, it
is in the best business interest of such Guarantor and its stockholders that the
Borrower receive credit and other financial accommodations extended by the
Guaranteed Creditor because of the mutual business interests and endeavors of
the Borrower and such Guarantor;
NOW, THEREFORE, for and in consideration of the benefits accruing to each
Guarantor, the receipt and sufficiency are hereby acknowledged, each Guarantor
hereby makes the following representations and warranties to the Guaranteed
Creditor and hereby covenants and agrees with the Guaranteed Creditor as
follows:
Section 1. All capitalized terms used herein without definition shall have
the same meanings herein as such terms have in the Bank Credit Agreement.
Section 2. Each Guarantor hereby jointly and severally guarantees to the
Guaranteed Creditor, the due and punctual payment when due of (a) any and all
indebtedness, obligations, and liabilities of whatsoever kind and nature of the
Borrower under the Bank Credit Agreement and the Note (whether arising before or
after the filing of a petition in bankruptcy), whether direct or indirect,
absolute or contingent, due or to become due, and whether now existing or
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hereafter arising and howsoever held, evidenced, or acquired, and whether
several, joint, or joint and several (the "Bank Obligations"), (b) any and all
reasonable expenses and charges, legal or otherwise, suffered or incurred by the
Guaranteed Creditor, in collecting or enforcing any of such indebtedness,
obligations, or liabilities or in realizing on or protecting or preserving any
security therefor, if any (all of the foregoing being hereinafter referred to as
the "Guaranteed Indebtedness"). In case of failure by the Borrower to punctually
pay any Guaranteed Indebtedness, each Guarantor hereby jointly and severally
agrees to make such payment or to cause such payment to be made punctually as
and when the same shall become due and payable, whether at stated maturity, by
acceleration or otherwise. All payments hereunder by any Guarantor shall be made
in immediately available and freely transferable funds in Dollars without
set-off, counterclaim or other defense or withholding or deduction of any
nature. Notwithstanding anything in this Guaranty to the contrary, the right of
recovery against a Guarantor under this Guaranty shall not exceed $1.00 less
than the amount which would render such Guarantor's obligations under this
Guaranty void or voidable under applicable law, including fraudulent conveyance
law.
Section 3. Each Guarantor further jointly and severally agrees to pay on
demand all reasonable out of pocket expenses, legal and/or otherwise (including
court costs and reasonable attorneys' fees), paid or incurred by the Guaranteed
Creditor in endeavoring to collect the Guaranteed Indebtedness or any part
thereof, or in enforcing or endeavoring to enforce any Guarantor's obligations
hereunder, or any part thereof, or in protecting, defending or enforcing this
Guaranty in any litigation, bankruptcy or insolvency proceedings or otherwise.
Section 4. Each Guarantor agrees that, upon demand, such Guarantor shall
pay to the Guaranteed Creditor the full amount of the indebtedness hereby
guaranteed then due (subject to the right of recovery from such Guarantor
pursuant to the last sentence of Section 2 above) whether or not any one or more
of the other Guarantors shall then or thereafter pay any amount whatsoever in
respect to their obligations hereunder, provided, however, that the aggregate
amount payable by the Guarantors shall in no event exceed the amount due and
owing to the Guaranteed Creditor by the Borrower, plus any amounts payable under
Section 3 above.
Section 5. Each Guarantor agrees that such Guarantor will not exercise or
enforce any right of exoneration, contribution, reimbursement, recourse or
subrogation available to such Guarantor against any Person liable for payment of
the indebtedness hereby guaranteed, or as to any security therefor, unless and
until the full amount owing and payable to the Guaranteed Creditor of the
Guaranteed Indebtedness has been fully paid and satisfied and the commitment by
the Guaranteed Creditor to extend any Guaranteed Indebtedness shall have expired
or otherwise terminated. The payment by any Guarantor of any amount or amounts
to the Guaranteed Creditor pursuant hereto shall not in any way entitle any such
Guarantor, either at law, in equity or otherwise, to any right, title or
interest (whether by way of subrogation or otherwise) in and to the Guaranteed
Indebtedness or any part thereof or any collateral security therefor, if any, or
any other rights or remedies in any way relating thereto or in and to any
amounts theretofore, then or thereafter paid or applicable to the payment
thereof howsoever such payment may be made and from whatsoever source such
payment may be derived unless and until all of the Guaranteed Indebtedness and
all costs and expenses suffered or incurred by the Guaranteed Creditor in
enforcing this Guaranty have been paid and satisfied in full and each of the
commitments by the
-2-
Guaranteed Creditor to extend any Guaranteed Indebtedness shall have expired or
otherwise terminated and unless and until such payment in full and termination,
any payments made by any Guarantor hereunder and any other payments from
whatsoever source derived on account of or applicable to the Guaranteed
Indebtedness or any part thereof shall be held and taken to be merely payments
to the Guaranteed Creditor reducing pro tanto the indebtedness hereby
guaranteed.
Section 6. This Guaranty is a continuing, absolute and unconditional
guaranty of payment and not merely of collection, and shall remain in full force
and effect as against each Guarantor until all of the Guaranteed Indebtedness
shall be fully paid and satisfied and the commitment by the Guaranteed Creditor
to extend any Guaranteed Indebtedness shall have expired or have been
terminated. The Guaranteed Creditor may at any time or from time to time release
any Guarantor from its obligations hereunder or effect any compromise with any
Guarantor and no such release or compromise shall in any manner impair or
otherwise affect the obligations hereunder of the other Guarantors. No release,
compromise, or discharge of any one or more of the Guarantors shall release,
compromise or discharge the obligations of the other Guarantors hereunder.
Section 7. In case of the dissolution, liquidation or insolvency (howsoever
evidenced) of, or the institution of voluntary bankruptcy or receivership
proceedings against the Borrower or the institution of involuntary bankruptcy
proceedings against the Borrower that are not dismissed within sixty (60) days
following the commencement thereto, all of the Guaranteed Indebtedness relating
to the Borrower which is then existing shall immediately become due or accrued
and payable from the Guarantors. All payments received from the Borrower or on
account of the Guaranteed Indebtedness from whatsoever source, shall be taken
and applied as payment on the indebtedness hereby guaranteed, and this Guaranty
shall apply to and secure any ultimate balance that shall remain owing to the
Guaranteed Creditors.
Section 8. The liability hereunder shall in no way be affected or impaired
by (and the Guaranteed Creditor is hereby expressly authorized to make from time
to time, without notice to any of the Guarantors), any sale, pledge, surrender,
compromise, settlement, release, renewal, extension, impairment, indulgence,
alteration, substitution, exchange, change in, modification or other disposition
of any of the Guaranteed Indebtedness, either express or implied, or of any Loan
Document or any other contract or contracts evidencing any thereof, or of any
security or collateral therefor or any guaranty thereof. The liability hereunder
shall in no way be affected or impaired by any acceptance or release by the
Guaranteed Creditor of any security for or other guarantors upon any of the
Guaranteed Indebtedness, or by any failure, neglect or omission on the part of
the Guaranteed Creditor to realize upon or protect any of the Guaranteed
Indebtedness, or any collateral or security therefor, if any, (including,
without limitation, impairment of collateral and failure to perfect security
interest in any collateral), or to exercise any lien upon or right of
appropriation of any moneys, credits or property of the Borrower or any
Guarantor, possessed by the Guaranteed Creditor, toward the liquidation of the
Guaranteed Indebtedness, or by any application of payments or credits thereon.
In order to hold any Guarantor liable hereunder, there shall be no obligation on
the part of the Guaranteed Creditor, at any time, to resort for payment to the
Borrower or to any other Guarantor, or to any other Person, its property or
estate, or resort to any collateral, security, property, liens or other rights
or
-3-
remedies whatsoever, and the Guaranteed Creditor shall have the right to enforce
this Guaranty against any Guarantor irrespective of whether or not other
proceedings or steps are pending seeking resort to or realization upon or from
any of the foregoing are pending.
Section 9. All diligence in collection or protection, and all presentment,
demand, protest and/or notice, as to any and everyone, whether or not the
Borrower or the Guarantors or others, of dishonor and of default and of
non-payment and of the creation and existence of any and all of said Guaranteed
Indebtedness, and of any security and collateral therefor, and of the acceptance
of this Guaranty, and of any and all extensions of credit and indulgence
hereunder, are expressly waived.
Section 10. The Guarantors waive any and all defenses, claims and
discharges of the Borrower, or any other obligor or guarantor, pertaining to the
Guaranteed Indebtedness, except the defense of discharge by irrevocable payment
in full. Without limiting the generality of the foregoing, the Guarantors will
not assert, plead or enforce against the Guaranteed Creditor any defense of
waiver, release, discharge in bankruptcy, statute of limitations, res judicata,
statute of frauds, anti-deficiency statute, fraud, incapacity, minority, usury,
illegality or unenforceability which may be available to the Borrower or any
other Person liable in respect of any of the Guaranteed Indebtedness, or any
set-off available against the Guaranteed Creditor to the Borrower or any such
other Person, whether or not on account of a related transaction. The Guarantors
agree that the Guarantors shall be and remain jointly and severally liable for
any deficiency remaining after foreclosure or other realization on any lien or
security interest, if any, securing the Guaranteed Indebtedness, whether or not
the liability of the Borrower or any other obligor for such deficiency is
discharged pursuant to statute or judicial decision.
Section 11. If any payment applied by the Guaranteed Creditor to the
indebtedness hereby guaranteed is thereafter set aside, recovered, rescinded or
required to be returned for any reason (including, without limitation, the
bankruptcy, insolvency or reorganization of the Borrower or any other obligor),
the Guaranteed Indebtedness to which such payment was applied shall for the
purposes of this Guaranty be deemed to have continued in existence,
notwithstanding such application, and this Guaranty shall be enforceable as to
such of the Guaranteed Indebtedness as fully as if such application had never
been made.
Section 12. The liability of the Guarantors under this Guaranty is in
addition to and shall be cumulative with all other liabilities of the Guarantors
after the date hereof to the Guaranteed Creditor as a guarantor of the
indebtedness hereby guaranteed, without any limitation as to amount, unless the
instrument or agreement evidencing or creating such other liability specifically
provides to the contrary.
Section 13. Any invalidity or unenforceability of any provision or
application of this Guaranty shall not affect other lawful provisions and
applications hereof, and to this end the provisions of this Guaranty are
declared to be severable. Without limiting the generality of the foregoing, any
invalidity or unenforceability against any Guarantor of any provision or
application of the Guaranty shall not affect the validity or enforceability of
the provisions or application of this Guaranty as against the other Guarantors.
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Section 14. Any demand for payment on this Guaranty or any other notice
required or desired to be given hereunder to any Guarantor shall be in writing
(including, without limitation, notice by telecopy) and shall be given to the
relevant party at its address or telecopier number set forth on the appropriate
signature page hereof, or such other address or telecopier number as such party
may hereafter specify by notice to Bank given by United States certified or
registered mail or by telecopy. Each such notice, request or other communication
shall be effective (i) if given by telecopier, when such telecopy is transmitted
to the telecopier number specified in this Section and a confirmation of such
telecopy has been received by the sender, or (ii) if given by mail, 5 days after
such communication is deposited in the mail, certified or registered with return
receipt requested, addressed as aforesaid.
Section 15. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED ACCORDING TO
THE LAW OF THE STATE OF NEW YORK (without regard to principles of conflicts of
laws) in which state it shall be performed by the Guarantors and may not be
waived, amended, released or otherwise changed except by a writing signed by
Bank. This Guaranty and every part thereof shall be effective upon delivery to
the Guaranteed Creditor, without further act, condition or acceptance by the
Guaranteed Creditor, shall be binding upon the Guarantors and upon the legal
representatives, successors and assigns of the Guarantors, and shall inure to
the benefit of the Guaranteed Creditor, their successors, legal representatives
and assigns. The Guarantors waive notice of the Guaranteed Creditor's acceptance
hereof. This Guaranty may be executed in counterparts and by different parties
hereto on separate counterparts each of which shall be an original, but all
together to be one and the same instrument.
Section 20. Each Guarantor hereby submits to the nonexclusive jurisdiction
of the United States District Court for the Southern District of New York and of
any State court sitting in New York City, for purposes of all legal proceedings
arising out of or relating to this Guaranty or the transactions contemplated
hereby. Each Guarantor irrevocably waives, to the fullest extent permitted by
law, any objection which it may now or hereafter have to the laying of the venue
of any such proceeding brought in such a court and any claim that any such
proceeding brought in such court has been brought in an inconvenient forum. EACH
GUARANTOR AND, BY ACCEPTING THE BENEFITS OF THIS AGREEMENT, THE GUARANTEED
CREDITOR HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
[SIGNATURE PAGES TO GUARANTY AGREEMENT TO FOLLOW]
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IN WITNESS WHEREOF, the Guarantors have caused this Guaranty to be executed
and delivered as of the date first above written.
GUARANTORS:
▇▇▇▇▇▇ ▇▇▇▇▇▇ JAPAN INC.
Address:
------------------------
--------------------------------- By: ------------------------------
--------------------------------- Its: -----------------------------
---------------------------------
Telecopier No.
-------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇ EUROPE INC.
Address:
------------------------
--------------------------------- By: ------------------------------
--------------------------------- Its: -----------------------------
---------------------------------
Telecopier No.
-------------------
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SCHEDULE I
TO
▇▇▇▇▇▇ ▇▇▇▇▇▇ INTERNATIONAL INC.
REVOLVING CREDIT AGREEMENT
DATED SEPTEMBER __, 2004
--------------------------------------------------------------------------------
Subsidiary Guarantors:
▇▇▇▇▇▇ ▇▇▇▇▇▇ EUROPE INC.
▇▇▇▇▇▇ ▇▇▇▇▇▇ JAPAN INC.
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EXHIBIT B
, 200
------------- -
HSBC Bank USA, National Association
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention:
Re: ADDITIONAL BORROWING UNDER REVOLVING CREDIT
Ladies and Gentlemen:
We refer to our Promissory Note dated September __, 2004, payable to your
order in the face principal sum of $30,000,000 (the "Note"). We hereby request a
borrowing from you under our revolving credit in the amount of $____________,
which borrowing shall be made against and evidenced by the Note. The borrowing
shall be delivered to our bank account no. [_____/_____] with you. We promise to
pay such borrowing in accordance with the Note or upon termination of the
Agreement or acceleration of the advances in accordance with the Agreement as
hereinafter described.
In order to induce you to make the advance hereby requested, we hereby
certify to you that as of the date hereof, each of our representations and
warranties (except for representations and warranties that are made as of a
certain date, which shall be true and correct in all material respects as of
such date) in the Revolving Credit Agreement dated as of September __, 2004,
currently in effect by and among ▇▇▇▇▇▇ ▇▇▇▇▇▇ INTERNATIONAL INC. and HSBC BANK
USA, National Association (the "Agreement") remains true and correct and we are
in full compliance with all of the terms and conditions of the Agreement.
We hereby certify that the proceeds of this borrowing will be used solely
for general working capital purposes in our business as presently conducted in
the ordinary course.
▇▇▇▇▇▇ ▇▇▇▇▇▇ INTERNATIONAL INC.
By:
----------------------------------
Authorized Signature
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EXHIBIT C
PROMISSORY NOTE
New York, New York
$30,000,000.00 September , 2004
--
On December 1, 2006, FOR VALUE RECEIVED, the undersigned, ▇▇▇▇▇▇ ▇▇▇▇▇▇
INTERNATIONAL INC., a Delaware corporation (the "Borrower") promises to pay to
the order of HSBC BANK USA, National Association at its principal office at ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ the principal sum of Thirty Million
Dollars ($30,000,000.00), or such lesser amount as may be advanced to the
Borrower hereon pursuant to the Agreement hereinafter identified.
The Borrower hereby promises to pay interest (computed on the basis of a
year of 360 days for the actual number of days elapsed) on the principal amount
from time to time remaining unpaid hereon from the date hereof until paid at the
rates, and payable in the manner and on the dates, specified in the Agreement.
All loans made by the payee hereof against this Note, and all payments made
by the Borrower on account of the unpaid principal amount hereof, shall be
recorded on the books and records of the holder hereof and endorsed hereon prior
to any transfer hereof, and the Borrower agrees that in any action or proceeding
instituted to collect or enforce collection of this Note, the amount shown as
owing on this Note on the books and records of the holder hereof shall be deemed
prima facie correct.
This Note is issued under the terms and provisions of Revolving Credit
Agreement bearing even date herewith by and between the Borrower and HSBC BANK
USA, National Association (the "Agreement"), and this Note and the holder hereof
are entitled to all of the benefits provided for by said Agreement or referred
to therein, including the ability of Bank to accelerate the payment of the Note
upon the occurrence of an Event of Default, to which Agreement reference is
hereby made for a statement thereof.
This Note shall be construed in accordance with, and governed by, the
internal laws of the State of New York.
The Borrower hereby promises to pay all costs and expenses (including
attorneys' fees) suffered or incurred by the holder hereof in collecting this
Note or in enforcing any rights in any collateral therefor. The Borrower hereby
waives presentment for payment and notice of dishonor.
▇▇▇▇▇▇ ▇▇▇▇▇▇ INTERNATIONAL INC.
By:
----------------------------------
Its:
-----------------------------
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