Exhibit 99.1
REVOLVING CREDIT AND TERM LOAN AGREEMENT
dated as of June 7, 2001
among
GOLDEN BOOKS PUBLISHING COMPANY, INC.,
A DEBTOR AND DEBTOR-IN-POSSESSION
AS BORROWER,
-----------
THE FINANCIAL INSTITUTIONS PARTY HERETO,
AS LENDERS,
----------
and
THE CIT GROUP/BUSINESS CREDIT, INC.,
AS AGENT,
--------
and
FOOTHILL CAPITAL CORPORATION,
AS CO-AGENT
-----------
and
AS DOCUMENTATION AGENT
----------------------
$40,000,000
REVOLVING CREDIT AND TERM LOAN AGREEMENT
THIS REVOLVING CREDIT AND TERM LOAN AGREEMENT, dated as of June 7,
2001 among GOLDEN BOOKS PUBLISHING COMPANY, INC., a Delaware corporation and a
debtor and debtor-in-possession under Chapter 11 of the Bankruptcy Code (as
hereinafter defined) (the "Borrower"), the financial institutions from time to
time party hereto (collectively, the "Lenders" and individually, a "Lender"), in
each case including CIT (as defined below), THE CIT GROUP/BUSINESS CREDIT, INC.
("CIT"), as Agent for the Lenders (in such capacity, the "Agent"), and FOOTHILL
CAPITAL CORPORATION ("Foothill") as Co-Agent and as Documentation Agent (in such
capacities, the "Co-Agent").
BACKGROUND
WHEREAS, the Borrower has filed in the United States Bankruptcy Court
for the District of Delaware (the "Bankruptcy Court") a voluntary petition for
relief under Chapter 11 of the Bankruptcy Code (as hereinafter defined);
WHEREAS, Golden Books Family Entertainment, Inc. ("Parent"), Golden
Books Home Video, Inc. ("Video"), LRM Acquisition Corp. ("LRM"), ▇▇▇▇▇ ▇▇▇▇▇
Enterprises, Inc. ("▇▇▇▇▇") and SLE Productions, Inc. ("SLE") have each filed in
the Bankruptcy Court voluntary petitions for relief under Chapter 11 of the
Bankruptcy Code and each is a debtor and debtor-in-possession;
WHEREAS, the Borrower has requested that the Lenders and CIT as agent
for such Lenders provide to the Borrower a debtor-in-possession revolving credit
line of credit for loans and letters of credit, in an aggregate amount not to
exceed $34,500,000 and a debtor-in-possession term loan in the amount of
$5,500,000 secured by the Collateral (as defined below), the proceeds of which
are to be used, in each case, to repay in full all indebtedness under the
Existing Credit Facilities (as defined below) on the Final Financing Order Date
and for other working capital and general corporate purposes, including payment
of administrative claims;
WHEREAS, as a condition of making the financial accommodations set
forth herein, the Parent, Video, LRM, ▇▇▇▇▇ and SLE (Parent, Video, LRM, ▇▇▇▇▇
and SLE, each a "Guarantor" and, collectively, the Guarantors") have each agreed
to guaranty all the Obligations of the Borrower hereunder and in connection
herewith in the case of the Parent secured by certain assets; and
WHEREAS, the Lenders have agreed to make available to the Borrower a
debtor-in-possession credit facility upon the terms and conditions set forth in
this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and intending to be legally bound hereby, the parties hereto agree as
follows:
ARTICLE 1.
DEFINITIONS; CONSTRUCTION
1.01. Certain Definitions. In addition to other words and terms
defined elsewhere in this Agreement, as used herein the following words and
terms shall have the following meanings, respectively, unless the context hereof
clearly requires otherwise:
"Accountant's Opinion" shall have the meaning given that term in
Section 7.01(a) hereof.
"Accounts" shall mean, with respect to any Person, all of such
Person's now existing and future: (a) accounts receivable (whether or not
specifically listed on schedules furnished to the Lenders), and any and all
instruments, documents, contract rights, chattel paper, general intangibles,
including, without limitation, all accounts created by or arising from any of
such Person's sales of goods or rendition of services to its customers, and all
accounts arising from sales or rendition of services made under any of such
Person's trade names or styles, whether or not presently in effect, or through
any of such Person's divisions; (b) unpaid seller's rights (including
rescission, replevin, reclamation and stoppage in transit) relating to the
foregoing or arising therefrom; (c) rights to any goods represented by any of
the foregoing, including rights to returned or repossessed goods; (d) reserves
and credit balances arising hereunder; (e) guarantees or collateral for any of
the foregoing; (f) insurance policies or rights relating to any of the
foregoing; and (g) cash and non-cash proceeds of any and all of the foregoing.
"Additional Authorized Party" shall have the meaning set forth in
Section 2.03(b) hereof.
"Affiliate" of a Person shall mean any other Person (other than a
Subsidiary) which, directly or indirectly, is in control of, is controlled by,
or is under common control with, such Person. For purposes of this definition,
"control" of a Person means the power, directly or indirectly, either to (a)
vote 20% or more of the securities having ordinary voting power for the election
of directors of such Person or (b) direct or cause the direction of the
management and policies of such Person whether by contract or otherwise.
"Agent" shall have the meaning given to that term in the introductory
paragraph of this Agreement.
"Agent Account" shall mean an account in the name of the Agent
designated by the Agent to the Borrower from time to time into which the
Borrower shall make all payments to the Agent, for the account of the Agent or
the Lenders, as the case may be, under this Agreement.
"Agent Advances" shall have the meaning given to that term in Section
11.08 hereof.
"Agreed Administrative Expense Claim Priorities" shall have the
meaning set forth in the Orders for the term "Superpriority Claims".
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"Agreement" shall mean this Revolving Credit and Term Loan Agreement,
as amended, modified, supplemented or restated from time to time.
"Appraised Value" shall mean the appraised orderly liquidation value
as determined by an appraiser acceptable to the Agent and the Co-Agent and using
methodology acceptable to the Agent and the Co-Agent.
"Assignment and Acceptance" shall mean an assignment and acceptance
entered into by a Lender and an assignee, and accepted by the Agent,
substantially in the form of Exhibit D hereto.
"Availability" shall mean the maximum amount available to be drawn
under the Current Commitment at such time after taking into account all
outstanding Pre-Petition Loans (other than the term loan under the Existing
Credit Facilities), all outstanding Revolving Loans and Letter of Credit
Exposure.
"Bank" shall mean The Chase Manhattan Bank, its successors or any
other bank designated by the Agent to the Borrower from time to time that is
reasonably acceptable to the Borrower.
"Bankruptcy Code" means the United States Bankruptcy Code (11
U.S.C. ss. 101 et. seq.), as amended, and any successor statute.
"Bankruptcy Court" has the meaning specified in the recitals to this
Agreement.
"Benefit Plan" shall mean a defined benefit plan as defined in Section
3(35) of ERISA that is subject to Title IV of ERISA (other than a Multiemployer
Plan) and in respect of which the Borrower or any ERISA Affiliate is or within
the immediately preceding six (6) years was an "employer" as defined in Section
3(5) of ERISA.
"Board" means the Board of Governors of the Federal Reserve System of
the United States.
"Book Value" shall mean as to any Inventory in respect of which such
amount is to be determined, the lower of (i) cost (as reflected in the general
ledger of the Borrower) or (ii) market value (both cost (calculated on a first
in, first out basis) and market value being determined in accordance with GAAP).
"Borrower" shall have the meaning given that term in the introductory
paragraph to this Agreement.
"Borrower Licensor Agreements" shall mean Material Contracts pursuant
to which the Borrower is a licensor of any trademarks, copyrights or other
intellectual property, all as set forth on Schedule 1.01(E).
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"Borrowing Base" shall mean an amount equal to the difference between:
(A) the sum of
(i) the lesser of:
(a) eighty percent (80%) of Eligible Accounts Receivable of
the Children's Publishing Group (which will be subject to (x) a
dilution reserve of up to eighteen percent (18%) and (y) the
Cumulative Dilution Reserve) and
(b) during the following time periods, an amount equal to:
(w) from December 1 of each year to January 14 of the following
year, the collections with respect to Accounts of the Children's
Publishing Group and Video for the immediately preceding 90 day
period; (x) from January 15 to July 31 of each year, the
collections with respect to Accounts of the Children's Publishing
Group for the immediately preceding 90 day period; (y) from August
1 to September 14 of each year, the collections with respect to
Accounts of the Children's Publishing Group for the immediately
preceding 150 day period; and (z) from September 15 to November 30
of each year, the collections with respect to Accounts of the
Children's Publishing Group and Video for the immediately
preceding 150 day period;
plus
----
(ii) the least of (x) sixty percent (60%) of the Book Value of
Eligible Inventory and (y) eighty percent (80%) of the Appraised
Value of Eligible Inventory, and (z) $12,500,000, and
(B) the sum of
(i) Letter of Credit Exposure
plus
----
(ii) a block reserve of $1,000,000
plus
----
(iii) the Carve-out Reserve
plus
----
(iv) any additional reserves, if applicable, as the Agent and the
Co-Agent in their sole discretion deem appropriate upon any
defaults in the performance or observance of any conditions or
covenants contained herein or in any other Loan Documents or with
respect to royalties which may be payable at a future date in
connection with the disposition of Inventory pursuant to the
exercise of remedies under the Loan Documents
plus
----
(v) such other reserves as the Agent, in its sole discretion, may
deem appropriate, including, without limitation, prior to the
Final Financing Order Date all proceeds from Swing Collateral
unless the Interim Order provides the Lenders with a priming lien
in SN First Priority Collateral up to an aggregate amount of
$5,000,000 in replacement and substitution for the Swing
Collateral.
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"Borrowing Base Certificate" shall have the meaning given that term in
Section 4.04(a) hereof.
"Budget" shall have the meaning given that term in Section 7.01(e).
"Building Equipment" shall mean all machinery, apparatus, equipment,
personal property and fixtures of every kind and nature whatsoever now or
hereafter located in, on or about the Premises, or attached to or used or usable
in connection with the operation or maintenance of the Premises, or any part
thereof, and now owned or hereafter acquired.
"Business Day" shall mean a day other than a Saturday, Sunday or other
day on which banking institutions are authorized or obligated to close in New
York, New York.
"Business Plan" shall mean the budget of the Borrower which contains,
inter alia, projected consolidating balance sheets, income statements,
Availability and cash flow statements of the Borrower, Parent and Affiliates on
a monthly basis for such fiscal year.
"Capital Expenditures" means, with respect to any Person, all
expenditures by such Person which should be capitalized in accordance with GAAP,
including all such expenditures with respect to fixed or capital assets
(including, without limitation, expenditures for maintenance and repairs which
should be capitalized in accordance with GAAP) and, without duplication, the
amount of all Capitalized Leases incurred by such Person.
"Capitalized Lease" shall mean any lease which is required under GAAP
to be capitalized on the balance sheet of the lessee.
"Capitalized Lease Obligations" shall mean the aggregate amount which
is required under GAAP to be reported as a liability on the balance sheet of a
Person as lessee under a Capitalized Lease.
"Carve-Out Expenses" has the meaning set forth in the Orders for the
term "Carve-out".
"Carve-Out Reserve" means (i) from the Closing Date until the Final
Financing Order Date an amount equal to $333,000, (ii) from the Final Financing
Order Date and for the thirty subsequent calendar days thereafter an amount
equal to $333,500, and (iii) from the thirtieth calendar day after the Final
Financing Order Date until all of the Obligations are indefeasibly paid in full
hereunder an amount equal to $500,000.
"Change of Control" shall mean (a) any person or group of persons
(within the meaning of Section 13 or 14 of the Securities Exchange Act of 1934,
as amended) shall have acquired beneficial ownership (within the meaning of Rule
13d-3 promulgated by the Securities and Exchange Commission under said Act) of
50% or more of the voting power of the then outstanding common stock of the
Parent; or (b) during any period of 12 consecutive calendar months commencing on
the Closing Date, individuals who were directors of the Parent on the first day
of
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such period shall cease to constitute a majority of the board of directions
of the Parent, provided that a director who has resigned or is replaced during
such time shall not be included in any determination of whether a change of
control default has occurred pursuant to this clause (b) to the extent such
director is replaced by a successor director elected by a majority of those
directors who were directors at the commencement of such period.
"Chapter 11 Cases" means the cases under Chapter 11 of the Bankruptcy
Code commenced on the Filing Date by the Borrower and the Guarantors pending in
the Bankruptcy Court.
"Chattel Paper" shall have the meaning given to that term in the UCC.
"Children's Publishing Group" shall mean the division of the Borrower
known as "Children's Publishing" and which includes, without limitation, "Little
Golden Books", storybooks, coloring/activity books, puzzles, educational
workbooks, reference books, novelty books, chapter books and electronic
storybooks.
"CIT" shall have the meaning given to that term in the introductory
paragraph to this Agreement.
"Closing Date" shall mean the date on or after the date hereof upon
which all the conditions set forth in Section 5.01 hereof have either been met
to the Agent's satisfaction or waived by the Agent.
"Co-Agent" shall have the meaning given to that term in the
introductory paragraph of this Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
any successor statute of similar import, and regulations thereunder, in each
case as in effect from time to time. References to sections of the Code shall be
construed also to refer to any successor sections.
"Collateral" shall mean all of the property (tangible and intangible)
of any Person purported to be subject to the Lien purported to be created by (i)
any Security Document heretofore or hereafter executed by such Person as
security for all or any part of the Obligations or (ii) any Lien granted by an
order of the Bankruptcy Court.
"Collateral Assignment of Licenses" shall mean the Collateral
Assignment of Licenses substantially in the form of Exhibit B-3 hereto, dated
the date hereof, made by the Borrower in favor of the Agent for the benefit of
the Lenders.
"Collective Bargaining Agreements" shall have the meaning given to
that term in Section 5.01(c)(xx) hereof.
"Credit Extension" shall mean (a) the making of any Loan by a Lender
or the Agent on behalf of the Lenders or (b) the issuance, increase in the
Stated Amount, or extension of the
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expiration date of any Letter of Credit which CIT or any Lender assists the
Borrower in opening or establishing.
"Cumulative Dilution Reserve" shall mean, from September through
January of each year, a cumulative dilution reserve of 5% of domestic sales (net
of sales credits, returns, discounts, allowances, and returns and discounts
reserves) of Children's Publishing Group for such September, October and
November and subject to any other adjustment which the Agent may reasonably
impose.
"Current Commitment" shall have the meaning given to that term in
Section 2.01 hereof.
"Daily Reports" shall have the meaning given to that term in Section
7.01(f) hereof.
"Designated Borrowing Officer" shall mean (a) the Chairman, President,
Chief Financial Officer, Chief Administrative Officer or Vice President of
Accounting or Controller of the Borrower or (b) such other officer as shall be
designated from time to time in writing by the Borrower to the Agent prior to
such designation.
"Designated Financial Officer" of a Person shall mean the individual
designated from time to time by the Board of Directors or governing body
performing like functions of such Person to be the Chief Financial Officer, Vice
President of Accounting, Controller or Director of Credit of such Person (and
any individual designated from time to time by the Board of Directors or
governing body performing like functions of such Person to act in lieu of the
Chief Financial Officer, Vice President of Accounting or Controller).
"DIC Purchase Agreement" shall have the meaning set forth in Section
5.01(o).
"Disbursement Account" shall mean the deposit account in the name of
the Borrower maintained at a bank in the United States designated by the
Borrower to the Agent into which there shall be deposited proceeds of Loans and
funds disbursed to the Borrower by the Agent.
"Dollar," "Dollars" and the symbol "$" shall mean lawful money of the
United States of America.
"EBITDA" shall mean, for any period, the sum of (i) the consolidated
Net Income of the Parent before consolidated interest expense and provision for
taxes of the Parent and its Subsidiaries and without giving effect to: (x) any
extraordinary gains or losses, or gains or losses from sales of assets other
than from sales of inventory in the ordinary course of business, and (y) any
nonrecurring cash charges incurred by the Parent in connection with
restructuring (including, without limitation, severance payments, employee
costs, professional fees and external consulting services) plus (ii) all
amortization of intangibles and depreciation deducted for such period in
calculating Net Income.
"Eligible Accounts Receivable" shall mean the gross amount of Accounts
(excluding Accounts relating to the Borrower's operations in the United
Kingdom), that at all times continue
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to be acceptable to the Agent in the exercise of its reasonable business
judgment, less, without duplication, the sum of the following items:
(a) any returns, discounts, claims, credits and allowances of any nature
(whether issued, owing, granted or outstanding) except for discounts and
allowances made in the ordinary course of business for prompt payment, all
of which discounts and allowances are reflected in the calculation of the
face value of each respective invoice related thereto;
(b) any Accounts which are not subject to the first priority and perfected
security interest of the Agent for the benefit of the Lenders; and
(c) reserves for (i) sales to the United States of America or to any
agency, department or division thereof; (ii) foreign sales (which term
excludes sales to residents of the United States) except to the extent the
Borrower or Video, as the case may be, has credit insurance acceptable to
the Agent; (iii) accounts that remain unpaid more than sixty (60) days from
the due date or one hundred and fifty (150) days from invoice date; (iv)
contras; (v) sales to any Subsidiary, or to any company affiliated with the
Borrower in any way; (vi) ▇▇▇▇ and hold (deferred shipment) or consignment
sales; (vii) except as may otherwise be agreed to in writing by Agent,
sales to any customer which is (A) insolvent, (B) the debtor in any
bankruptcy, insolvency, arrangement, reorganization, receivership or
similar proceedings under any federal or state law that is not approved in
writing in advance by the Agent or (C) negotiating, or has called a meeting
of its creditors for purposes of negotiating, a compromise of its debts;
(viii) all sales to any customer if fifty percent (50%) or more of either
(1) all outstanding invoices or (2) the aggregate dollar amount of all
outstanding invoices, are unpaid more than sixty (60) days from the due
date or one hundred and fifty (150) days from invoice date; (ix)
receivables payable in cash to the extent such cash receivables exceed ten
percent (10%) of the total gross amount of Eligible Accounts Receivable
(and then only the amount of such excess shall be subtracted hereunder);
and (x) any other reserves deemed necessary by the Agent in its reasonable
business judgment and which are customary in scope and application either
in the commercial finance industry or in the lending practices of the Agent
based upon the good faith assessment of the Agent.
"Eligible Inventory" shall mean raw material and finished goods
Inventory of the Borrower which at the time of determination meets all the
following qualifications:
(i) it is lawfully owned by the Borrower and not subject to any
Lien, other than a first priority Lien in favor of the Agent, prior to
the Final Financing Order Date a second priority lien in favor of the
Pre-Petition Agent, a third priority lien in favor of the purchaser
under the DIC Purchase Agreement and the fourth priority lien of the
Trustee in connection with the Senior Notes, that secures the payment
of the Obligations and it is not held on consignment and may be
lawfully sold;
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(ii) it is (A) located at one of the Borrower's locations listed
on Schedule 1.01(A) hereto or (B) located in other locations in the
continental United States as the Agent shall have approved in writing
from time to time;
(iii) it is determined in the reasonable judgment of the Agent to
be, when taken as a whole, substantially similar in quality and mix to
the Inventory maintained by the Borrower in recent historical
operations prior to the Closing Date;
(iv) it is Inventory that has been valued after deducting the
aggregate amount of reserves for:
(1) rejected, defective, damaged, aged or otherwise
unsalable Inventory;
(2) Inventory to be returned to suppliers;
(3) Inventory in-transit to third parties (other than the
Borrower's agents or warehouses);
(4) supplies;
(5) consignment Inventory;
(6) rent (in an amount equal to one month's rent) for each
location listed on Schedule 1.01(A) (including warehouses)
for which the Agent has requested and not received a
Landlord Waiver;
(7) slow moving or obsolete Inventory; and
(8) other reserves required by the Agent in the exercise of
its reasonable business judgment;
(v) the Agent has received a consent in form and substance
satisfactory to the Agent providing for the sale by the Agent on
behalf of the Lenders at such times and under the circumstances
specified in the Loan Documents of any Inventory containing or
utilizing in any way any intellectual property not owned by the
Borrower;
(vi) the Agent has received a sublicense from the Borrower in
form and substance satisfactory to the Agent to the sale by the Agent
on behalf of the Lenders at such times and under the circumstances
specified in the Loan Documents of any Inventory not owned by the
Borrower containing or utilizing in any way any intellectual property;
and
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(vii) it is Inventory 100% owned by the Borrower and with respect
to which no third party has any ownership claim (for purposes hereof,
the right to a royalty payment shall not alone constitute an ownership
interest), unless such Inventory complies with clauses (v) and (vi)
above.
"Entertainment Group" shall have the meaning set forth for that term
in the Security Agreement made the date hereof by the Borrower in favor of the
Agent for the benefit of the Lenders.
"Entry Date" means the date the Interim Financing Order is entered.
"Environmental Actions" shall mean any complaint, summons, citation,
notice, assessment, directive, order, claim, litigation, investigation,
proceeding, judgment, letter or other communication from any Governmental
Authority or any third party, involving a Release (i) from or onto any of the
properties presently or formerly owned or leased by the Borrower or its
Subsidiaries or (ii) from or onto any facilities which received Hazardous
Materials from the Borrower or its Subsidiaries, or involving any violation of
any Environmental Law.
"Environmental Law" shall mean all federal, state and local laws,
statutes, ordinances and regulations, now or hereafter in
effect relating to the regulation and protection of human health, safety, the
environment and natural resources. Environmental Laws include but are not
limited to the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended (42 U.S.C.ss.9601 et seq.) ("CERCLA"); the Hazardous
Material Transportation Act, as amended (49 U.S.C.ss.180 et seq.); the Resource
Conservation and Recovery Act, as amended (42 U.S.C. ss. 6901 et seq.)
("RCRA"); the Toxic Substance Control Act, as amended (15 U.S.C. ss. 2601 et
seq.); the Clean Air Act, as amended (42 U.S.C. ss. 7401 et seq.); the Federal
Water Pollution Control Act, as amended (33 U.S.C. ss. 1251 et seq.); and
their state and local counterparts or equivalents.
"Environmental Liabilities and Costs" shall mean all liabilities,
monetary obligations, Remedial Actions, losses, damages, punitive damages,
consequential damages, treble damages, costs and expenses (including all
reasonable fees, disbursements and expenses of counsel, expert and consulting
and costs of investigation and feasibility studies), fines, penalties, sanctions
and interest incurred as a result of any Environmental Action relating to any
environmental condition, violation of Environmental Law, Remedial Actions or a
Release of Hazardous Materials from or onto (i) any property presently or
formerly owned by the Borrower or any of its Subsidiaries or (ii) any facility
which received Hazardous Materials generated by the Borrower or any of its
Subsidiaries.
"Environmental Lien" shall mean any Lien securing Environmental
Liabilities and Costs incurred by a Governmental Authority.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, and any successor statute of similar import, and regulations
thereunder, in each case as in effect from time to time. References to sections
of ERISA shall be construed also to refer to any successor sections.
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"ERISA Affiliate" shall mean any (i) corporation which is a member of
the same controlled group of corporations (within the meaning of Section 414(b)
of the Code) as the Borrower, (ii) partnership or other trade or business
(whether or not incorporated) under common control (within the meaning of
Section 414(c) of the Code) with the Borrower, or (iii) member of the same
affiliated service group (within the meaning of Section 414(m) of the Code) as
the Borrower, any corporation described in clause (i) above or any partnership
or trade or business described in clause (ii) above.
"Event of Default" shall mean any of the Events of Default described
in Section 9.01 hereof.
"Existing Credit Facilities" shall mean that certain Revolving Credit
and Term Loan Agreement, dated as of January 25, 2000, among CIT, Foothill, the
Borrower, its Parent and certain of its subsidiaries and affiliate as
guarantors, CIT as agent and Foothill as co-agent, as amended to the date
hereof.
"Existing Letters of Credit" shall mean all letters of credit opened
or caused to be opened under the Existing Credit Facilities.
"Facility Termination Date" shall mean the date that this Agreement is
terminated in accordance with Sections 10.20A, 10.20B, 10.20C and 10.20D.
"Fee Letter" shall mean the letter between the Borrower and the Agent
of even date herewith regarding certain fees, as same may be amended, modified,
or supplemented from time to time hereafter.
"Filing Date" means the date on which the Chapter 11 Cases are
commenced.
"Final Financing Order" means an order of the Bankruptcy Court in
form, scope and substance acceptable to the Agent and the Lenders approving this
Agreement and the other Loan Documents (and, among other matters, providing for
the priority pursuant to Section 364(d)(1) of the Bankruptcy Code in SN First
Priority Collateral (as defined in the Intercreditor Agreement) to the extent of
$5,000,000 (as a replacement and substitute for the Swing Collateral) plus 50%
of the amount by which the Revolving Loans exceed the Borrowing Base (such 50%
not to exceed $3,000,000 plus interest) as such order may be amended, modified
or supplemented from time to time with the express written consent of the Agent,
the Lenders and the Borrower and the approval of the Bankruptcy Court, which
order shall be in full force and effect, was not objected to with respect to the
question of whether the Agent or any Lender is a good faith lender under Section
364(e) of the Bankruptcy Code, or has not been vacated, modified (without the
express written consent of the Agent as set forth hereinbefore), reversed, or
stayed.
"Final Financing Order Date" means the date (which shall be no later
than thirty (30) days after the Entry Date) on which the Final Financing Order
shall have been duly entered by the Bankruptcy Court.
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"GAAP" shall mean generally accepted accounting principles as such
principles shall be in effect in the United States at the relevant date as
consistently applied by Borrower as of the date hereof.
"Goods" shall have the meaning given to that term in the UCC.
"Governmental Authority" shall mean any nation or government, any
federal, state, city, town, municipality, county, local or other political
subdivision thereof or thereto and any department, commission, board, bureau,
instrumentality, agency or other entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
"Guarantee" of or by any Person shall mean any obligation of such
Person guaranteeing any Indebtedness of any other Person (the "primary
obligor"), directly or indirectly through an agreement (i) to purchase or pay
(or advance or supply funds for the purchase or payment of) such Indebtedness or
to purchase (or to advance or supply funds for the purchase of) any security for
the payment of such Indebtedness, (ii) to purchase property, securities or
services for the purpose of assuring the owner of such Indebtedness against
loss, or (iii) to maintain working capital, equity capital or other financial
statement condition or liquidity of the primary obligor so as to enable the
primary obligor to pay such Indebtedness; provided, however, that the term
Guarantee shall not include endorsements for collection or deposit, in either
case in the ordinary course of business.
"Guarantor" shall mean each of the Parent, Video, LRM, ▇▇▇▇▇ and SLE
and each direct or indirect domestic Subsidiary of the Parent now existing or
hereafter created or acquired.
"Guaranty" shall mean a guaranty in the form of Exhibit F attached
hereto.
"Hazardous Materials" shall mean (i) any element, compound or chemical
that is defined, listed or otherwise classified as a contaminant, pollutant,
toxic pollutant, hazardous substance, extremely hazardous substance, toxic
substance, hazardous waste, or special waste under any Environmental Law; (ii)
petroleum and its refined fractions; (iii) any polychlorinated biphenyls in
amounts or concentrations regulated under the Environmental Laws; (iv) any
flammable, explosive or radioactive materials regulated under the Environmental
Laws; and (v) any other raw materials used or stored by the Borrower, building
components (including but not limited to asbestos_containing materials) and
manufactured products containing Hazardous Materials within the meaning of
clauses (i)-(iv).
"Improvements" shall mean, with respect to any Premises, all
buildings, structures and other improvements now or hereafter existing, erected
or placed on or under the Premises, or in any way used in connection with the
use, enjoyment, occupancy or operation of the Premises or any portion thereof;
and all fixtures of every kind and nature whatsoever now or hereafter owned by
the Borrower and used or procured for use in connection with such Premises.
"Indebtedness" shall mean as to any Person (i) indebtedness for
borrowed money; (ii) indebtedness for the deferred purchase price of property or
services (other than current trade payables incurred in the ordinary course of
business and payable in accordance with customary
12
practices); (iii) indebtedness evidenced by bonds, debentures, notes or other
similar instruments (other than performance, surety and appeal or other similar
bonds arising in the ordinary course of business); (iv) obligations and
liabilities secured by a Lien upon property owned by such Person, whether or not
owing by such Person and even though such Person has not assumed or become
liable for the payment thereof; (v) obligations and liabilities directly or
indirectly Guaranteed by such Person; (vi) obligations or liabilities created or
arising under any conditional sales contract or other title retention agreement
with respect to property used and/or acquired by such Person, even though the
rights and remedies of the lessor, seller and/or lender thereunder are limited
to repossession of such property; (vii) Capitalized Lease Obligations; (viii)
all liabilities in respect of letters of credit, acceptances and similar
obligations created for the account of such Person; (ix) net liabilities of such
Person under interest rate cap agreements, interest rate swap agreements,
foreign currency exchange agreements and other hedging agreements or
arrangements calculated on a basis reasonably satisfactory to the Agent and in
accordance with accepted practice; and (x) intercompany loans and advances from
the Borrower to any Subsidiary or Affiliate.
"Indemnified Parties" shall have the meaning given to that term in
Section 10.06 hereof.
"Indenture" shall mean that certain Indenture between Borrower, the
guarantors party thereto and HSBC Bank USA as trustee, dated as of January 25,
2000, as amended and supplemented.
"Instrument" shall have the meaning given to that term in the UCC.
"Intercreditor Agreement" shall mean that certain Intercreditor
Agreement dated as of January 25, 2000, by and among the Agent and the Trustee.
"Interim Amount" shall mean the maximum amount of Indebtedness the
Borrower may incur pursuant to the Interim Financing Order.
"Interim Financing Order" means the order of the Bankruptcy Court
substantially in the form attached hereto as Exhibit G, as such order may be
amended, modified, or supplemented from time to time with the express written
consent of the Agent, the Lenders and the Borrower and the approval of the
Bankruptcy Court, which order shall be in full force and effect, was not
objected to with respect to the question of whether the Agent or any Lender is a
good faith lender under Section 364(e) of the Bankruptcy Code, or has not been
vacated, modified (without the express written consent of the Agent as set forth
hereinbefore), reversed, or stayed.
"Interim Financing Order Date" means the date (which shall be
no later than three (3) Business Days after the Filing Date unless the Agent
consents to an extension thereof) on which each of the following shall have
occurred: (i) the Interim Financing Order shall have been duly entered by the
Bankruptcy Court and shall be in full force and effect, and (ii) the Agent shall
have determined that all conditions set forth in Section 5.1 shall have been
duly satisfied or waived by the Agent (treating the Interim Financing Order Date
as the date on which the initial Revolving Loan is funded).
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"Inventory" shall mean, with respect to a Person, all goods and
merchandise of such Person including, but not limited to, all finished goods,
work-in-process, materials and supplies of every nature used or usable in
connection with the shipping, storing, advertising or sale of such goods and
merchandise, whether now owned or hereafter acquired and all such property, the
sale or disposition of which would give rise to Accounts or cash, and all
documents of title or other documents representing them.
"Landlord Waiver" shall mean a landlord waiver in the form attached
hereto as Exhibit I.
"L/C Notice" shall have the meaning given to that term in Section
3.01(b) hereof.
"Lease" shall mean any lease of real property to which the Borrower is
a party as lessee or lessor.
"Lenders" shall have the meaning given to that term in the
introductory paragraph to this Agreement.
"Letters of Credit" shall have the meaning given to that term in
Section 3.01(a) hereof.
"Letter of Credit Application" shall have the meaning given to that
term in Section 3.01(a) hereof.
"Letter of Credit Cash Collateral Account" shall mean the deposit
account maintained at the Bank or such other bank as the Agent may select, which
deposit account shall be under the sole dominion and control of the Agent in
accordance with any relevant terms and conditions of this Agreement, the
Security Agreement and any other Related Document.
"Letter of Credit Exposure" shall mean, at any time, the sum at such
time of (a) the aggregate amount of all Unreimbursed Draws under Letters of
Credit (whether or not such Letters of Credit are then outstanding) and all
unreimbursed draws under all Existing Letters of Credit and (b) the aggregate
Undrawn Letter of Credit Availability under all outstanding Letters of Credit
and all Existing Letters of Credit.
"Letter of Credit Fee" shall have the meaning given to that term in
Section 2.08(f) hereof.
"Letter of Credit Guaranty" shall mean the guaranty delivered by CIT
to the Letter of Credit Issuer, guaranteeing the Borrower's reimbursement
obligations under a reimbursement agreement, Letter of Credit Application or
other like document.
"Letter of Credit Issuer" shall mean the issuer of the Letters of
Credit, which shall be the Bank or The Dai_Ichi Kangyo Bank, Limited, New York
Branch.
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"License" shall mean any license naming the Borrower as licensee or
licensor.
"Lien" shall mean any mortgage, deed of trust, pledge, lien, security
interest, charge or other encumbrance or security arrangement of any nature
whatsoever, including but not limited to any conditional sale or title retention
arrangement, and any assignment, deposit arrangement or lease intended as, or
having the effect of, security.
"Loan" shall mean, as the case may be, any Revolving Loan or Term
Loan. "Loan Account" shall have the meaning given to that term in Section
2.08(a) hereof.
"Loan Documents" shall have the meaning given to that term in the
definition of "Related Documents" set forth in this Section 1.01 hereof.
"Loan Party" shall mean each of the Borrower and the Guarantors, and
collectively, "Loan Parties."
"Loans" shall mean, collectively, the Revolving Loans and the Term
Loan.
"Lock Box Accounts" shall have the meaning set forth in Section
7.13(a) hereof.
"Lock Box Agreements" shall mean the agreements, in form and substance
reasonably satisfactory to the Agent, among the Lock Box Banks, the Borrower and
the Agent delivered to the Agent pursuant to Section 7.13 hereof as such
agreements may be modified and supplemented and in effect from time to time.
"Lock Box Banks" shall have the meaning set forth in Section 7.13(a)
hereof.
"LRM" means LRM Acquisition Corp., a Delaware corporation which is
wholly owned by the Parent.
"Majority Lenders" shall mean, at any time, Lenders who represent in
the aggregate at least sixty-six and two-thirds percent (66-2/3%) of the sum of
the aggregate Revolving Loan Commitments plus the aggregate unpaid principal
amount of the Term Loan as of such date.
"Material Adverse Effect" shall mean a material adverse effect upon
(i) the business, operations, condition (financial or otherwise), or properties
of the Borrower, (ii) the ability of the Borrower to perform its obligations
hereunder or under any other Related Document, (iii) the Lien arising under the
Related Documents on any Collateral, (iv) the legality, validity or
enforceability of this Agreement or any Related Document or the Lien arising
under any Related Document or (v) the aggregate value of the property included
in the calculation of the Borrowing Base.
"Material Contract" means each contract or agreement (including all
amendments and modifications thereto) to which the Borrower is a party which is
material to the business, operations,
15
condition (financial or otherwise), performance, or properties of the Borrower,
including, without limitation, the Indenture, the Required License Consents and
the Borrower Licensor Agreements.
"Maximum Line of Credit" shall mean $40,000,000.
"Minority Lenders" shall have the meaning given to that term in
Section 10.03(b) hereof.
"Monthly Reports" shall have the meaning given to that term in Section
7.01(g) hereof.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA and subject to Title IV of ERISA which is, or within
the immediately preceding six (6) years was, contributed to by the Borrower or
any ERISA Affiliate.
"Net Income" shall mean the net income of such Person as determined in
accordance with GAAP.
"Net Proceeds" shall mean the amount of proceeds received by the
Borrower pursuant to a sale, net of taxes and reasonable expenses directly
incurred in connection with such sale.
"Notes" shall mean the Revolving Credit Notes and the Term Loan Notes.
"Notice of Borrowing" shall have the meaning given to that term in
Section 2.03(b) hereof.
"Notices" shall have the meaning given to that in Section 10.05
hereof.
"Obligations" shall mean all indebtedness, obligations and liabilities
of the Borrower to any Lender or the Agent incurred under or related to this
Agreement, the Notes or any other Related Document, whether such indebtedness,
obligations or liabilities are direct or indirect, secured or unsecured, joint
or several, absolute or contingent, due or to become due, whether for payment or
performance, now existing or hereafter arising, including without limitation
those which are described in either of the following clauses (i) or (ii):
(i) All indebtedness, obligations (including Reimbursement
Obligations) and liabilities of any nature whatsoever, including
amounts due under Section 10.06 and Section 11.08 hereof and similar
agreements contained in the other Related Documents, from time to time
arising under or in connection with or evidenced or secured by this
Agreement, the Notes, the Letters of Credit or any other Related
Document, including but not limited to the principal amount of Loans
outstanding, together with interest thereon (including, without
limitation, all interest that accrues after the commencement of any
case, proceeding or other action relating to the bankruptcy,
insolvency or reorganization of the Borrower), the amount of the
Letter of Credit Exposure, together with interest thereon and all
expenses, fees and indemnities hereunder or under any other Related
Document. Without limitation,
16
such amounts include all Loans and interest thereon and the amount of
all Letter of Credit Exposure whether or not such Loans were remade or
any Letters of Credit to which such Letter of Credit Exposure relates
were issued in compliance with the terms and conditions hereof or in
excess of any Lender's obligation to lend and arrange for the issuance
of Letters of Credit hereunder or any Lender's obligation to
participate therein. If and to the extent any amounts in any account
(including the Agent Account, the Lock Box Account, the Letter of
Credit Cash Collateral Account), or otherwise constituting Collateral
are applied to Obligations hereunder, and any Lender or the Agent is
subsequently obligated to return or repay any such amounts to any
Person for any reason, the amount so returned or repaid shall be
deemed a Loan hereunder and shall constitute an Obligation.
(ii) All indebtedness, obligations and liabilities from time to
time arising under or in connection with any account from time to time
maintained by the Borrower or by any Lender or the Agent pursuant to
the terms of this Agreement or any Related Document, including but not
limited to all reimbursement obligations, service charges and interest
in connection with any overdrafts or returned items from time to time
arising in connection with any such account, or arising under or in
connection with any cash management services or other services from
time to time performed by any Lender or the Agent pursuant to or in
connection with this Agreement or any other Related Document.
"Office" when used in connection with the Agent shall mean its office
located at 1211 Avenue of the Americas, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ or at such
other office or offices of the Agent as may be designated in writing from time
to time by the Agent to the Borrower and when used in connection with the Bank
or the Letter of Credit Issuer shall mean the office of such entity designated
in writing from time to time by the Agent to the Borrower. In the event The
Chase Manhattan Bank shall be the Bank or the Letter of Credit Issuer, the
Office for such entity shall until further written notice from the Agent to the
Borrower be its office located at ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇.
"Operating Lease Obligations" shall mean all obligations and
indebtedness of the Borrower and its Subsidiaries in respect of leases of
property (whether real, personal or mixed) other than Capitalized Lease
Obligations.
"Orders" shall mean and refer to the Interim Financing Order and the
Final Financing Order.
"Other Taxes" shall have the meaning given to that term in Section
2.13 hereof.
"Parent" shall mean Golden Books Family Entertainment, Inc.
"Parent Guaranty" shall mean the guaranty, substantially in the form
of Exhibit F hereto, dated of even date herewith by Parent in favor of the Agent
on behalf of the Lenders.
17
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
successor thereto.
"Permitted Investments" shall mean (a) cash investments in
intellectual property solely to the extent contained in the Budget; (b)
reasonable loans and advances to employees for moving and travel expenses or as
salary advances, standard industry trade credit extended to customers, purchases
of inventory, purchases of supplies, payment of royalties, grants of licenses
(in each case incurred or extended in the ordinary course of business and
consistent with past practice); (c) repurchase agreements having maturities of
not more than seven (7) days from the date of acquisition which are entered into
with a bank or trust company organized under the laws of the United States of
America or any state thereof and having capital, surplus and undivided profits
of at least $500,000,000; and (d) such other investments as may be approved by
the Majority Lenders from time to time; provided that all of the foregoing
Permitted Investments and all permutations thereof and proceeds therefrom are
subject to a first priority lien in favor of the Agent for the benefit of the
Lenders.
"Permitted Liens" shall have the meaning given that term in Section
8.01 hereof.
"Person" shall mean an individual, corporation, partnership, limited
liability company, limited liability partnership, trust, unincorporated
association, joint venture, joint_stock company, government (including political
subdivisions), Governmental Authority or agency, or any other entity.
"Plan" shall mean an employee benefit plan defined in Section 3(3) of
ERISA in respect of which the Borrower or any ERISA Affiliate is, or within the
immediately preceding six (6) years was, an "employer" as defined in Section
3(5) of ERISA.
"Pledge Agreements" shall mean the Pledge Agreements substantially in
the form of Exhibit B-4 hereto, dated the date hereof, made by the Parent, the
Borrower, and ▇▇▇▇▇ in favor of the Agent for the benefit of the Lenders.
"Potential Default" shall mean any event, occurrence or condition
which, with notice or passage of time, or any combination of the foregoing,
would constitute an Event of Default.
"Premises" shall mean all real property owned in fee by the Borrower
described in Schedule 1.01(B) hereto, as well as all of the easements, rights,
privileges and appurtenances (including air rights) thereunto belonging or in
any way appertaining, and all of the estate, right, title, interest, claim or
demand whatsoever of the Borrower therein and in the streets and ways adjacent
thereto, either at law or in equity, in possession or expectancy, now or
hereafter acquired, and as used herein and in any mortgages shall, unless the
context otherwise requires, be deemed to include the Improvements and Building
Equipment on such Premises.
"Pre-Petition Agent" shall mean the agent under and as defined in the
Existing Credit Facilities.
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"Pre-Petition Loans" means all outstanding Obligations under and as
defined in the Existing Credit Facilities.
"Prime Loan" shall mean a Loan bearing interest at the Regular Rate.
"Prime Rate" shall mean the interest rate per annum publicly announced
from time to time by The Chase Manhattan Bank, New York, as its Prime Rate, such
interest rate to change automatically from time to time effective as of the
announced effective date of each change in the Prime Rate. The Prime Rate is not
intended to be the lowest rate of interest charged by the Bank to its borrowers.
"Pro Rata Share" shall mean, with respect to any Lender, a fraction
(expressed as a percentage), the numerator of which shall be the amount of such
Lender's Revolving Credit Commitment and the denominator of which shall be the
aggregate amount of all of the Lenders' Revolving Credit Commitments, as
adjusted from time to time in accordance with the provisions of Section 10.13
hereof, provided that, if the Revolving Credit Commitments have been terminated,
the numerator shall be the unpaid amount of such Lender's Loans and its interest
in the Letter of Credit Exposure and the denominator shall be the aggregate
amount of all unpaid Loans and Letter of Credit Exposure.
"Real Estate" shall mean all estate, right, title and interest of the
Borrower in, to and under any and all of the following described property,
whether now held or hereafter acquired: (i) the Premises; (ii) all of the
Borrower's interests, if any, in and to all rents, royalties, issues, profits,
revenue, income and other benefits of the Premises and all Leases of the
Premises or portions thereof now or hereafter entered into by the Borrower as
lessor and all right, title and interest of the Borrower thereunder, including,
without limitation, cash or securities deposited thereunder to secure
performance by the lessees of their obligations thereunder, whether such cash or
securities are to be held until the expiration of the terms of such leases or
applied to one or more of the installments of rent coming due immediately prior
to the expiration of such terms, including any guaranties of such leases; (iii)
all of the Borrower's interests, if any, in and to all proceeds of the
conversion, voluntary or involuntary, of any of the foregoing into cash or
liquidated claims, including, without limitation, proceeds of insurance and
condemnation awards, and all rights of the Borrower to refunds of real estate
taxes and assessments; and (iv) the real property leased by the Borrower.
"Register" shall have the meaning given that term in Section 10.13(c)
hereof.
"Regular Rate" shall mean, for any day, the Prime Rate.
"Reimbursement Obligation" shall mean the obligations of the Borrower
to reimburse CIT or the Lenders for amounts payable by CIT or the Lenders under
a Letter of Credit Guaranty in respect of any payment made under any Letter of
Credit issued by the Letter of Credit Issuer, together with interest thereon and
all reasonable fees and expenses related thereto.
"Related Documents" or "Loan Documents" shall mean this Agreement, the
Notes, the Orders, the Letters of Credit, each Letter of Credit Application, the
Letter of Credit Guaranty,
19
the Intercreditor Agreement, the Lock Box Agreements, the Fee Letter, each
Security Document, each Assignment and Acceptance and the other documents,
instruments and agreements referred to in Section 5.01 hereof, and all other
instruments, agreements and documents from time to time delivered in connection
with or otherwise relating to any Related Document.
"Release" shall mean any spilling, leaking, pumping, pouring,
emitting, emptying, injection, discharging, injecting, escaping, leaching,
dumping or disposing (including abandonment, or discarding of barrels,
containers and other closed receptacles containing any regulated Hazardous
Materials) of a Hazardous Material into the indoor or outdoor environment or
onto or from any property presently or formerly owned or operated by the
Borrower or any of its Subsidiaries, or at any disposal facility that received
Hazardous Materials generated by the Borrower or any of its Subsidiaries.
"Remedial Action" shall mean all actions taken to (i) monitor, assess,
evaluate, investigate, clean up, remove, remedy, treat, contain or in any other
way address Hazardous Materials in the indoor or outdoor environment; (ii)
prevent or minimize a Release or threatened Release of Hazardous Materials so
that the Release or threatened Release does not migrate or endanger or threaten
to endanger public health or welfare or the environment; or (iii) perform
pre_remedial studies and investigations and post_remedial operation and
maintenance activities, or any other actions authorized by 42 U.S.C. Section
9601.
"Reportable Event" shall mean any of the events described in Section
4043(b) of ERISA (other than events for which the notice requirements have been
waived or events described in PBGC Regulation 4043.35 that occurred prior to the
date hereof).
"Required License Consents" shall have the meaning set forth in
Section 7.16 hereof.
"Revolving Credit Commitment" shall mean, with respect to each Lender,
the amount set forth on Schedule 1.01(C) to this Agreement or assigned to such
Lender in accordance with Section 10.13 hereof, as such amounts may be reduced
from time to time pursuant to the terms of this Agreement, and "Revolving Credit
Commitments" shall, collectively, mean the aggregate amount of the Revolving
Credit Commitments of all the Lenders, the maximum amount of which shall not
exceed $34,500,000.
"Revolving Credit Notes" shall mean the promissory notes,
substantially in the form of Exhibit A-1 hereto, executed and delivered by the
Borrower to the Lenders to evidence the Revolving Loans under this Agreement, as
modified or restated from time to time and any promissory note or notes issued
in exchange or replacement thereof, including all extensions, renewals,
refinancings or refundings thereof in whole or part.
"Revolving Credit Termination Date" shall have the meaning given that
term in Section 2.01 hereof.
"Revolving Loan" or "Revolving Loans" shall mean any and all loan or
loans made (or deemed made, in the case of Letters of Credit) by the Lenders or
by the Agent on behalf of the
20
Lenders to the Borrower pursuant to Section 2.01(b) of this Agreement, or made
as a result of charges made to the Loan Account, in each case pursuant to the
terms of this Agreement.
"Security Agreement" shall mean the Security Agreements substantially
in the form of Exhibit B-1 hereto, dated of even date herewith, made by the
Borrower and each Guarantor in favor of the Agent, for the benefit of the
Lenders, as modified and supplemented and in effect from time to time.
"Security Agreement - Trademarks" shall mean the Security Agreement
and Mortgage - Trademarks and Copyrights, substantially in the form of Exhibit
B-2 hereto, dated of even date herewith, made by the Borrower and by each
Guarantor in favor of the Agent, for the benefit of the Lenders, as modified and
supplemented and in effect from time to time.
"Security Agreements" shall mean, collectively, the Security
Agreements and the Security Agreement - Trademarks.
"Security Documents" shall mean, collectively, the Security
Agreements, the Collateral Assignment of Licenses and Pledge Agreements executed
and delivered by the Loan Parties, and all Uniform Commercial Code financing
statements required by this Agreement and the Security Agreements to be filed
with respect to the security interests in personal property created pursuant to
such agreements, the Parent Guaranty, the Video Guaranty, each other Guaranty by
each other Guarantor and all other documents and agreements executed and
delivered by one or more Loan Parties connection with any of the foregoing
documents.
"Senior Notes" means those certain 10.75% Senior Notes due 2004 of the
Borrower issued pursuant to the Indenture.
"Senior Notes Collateral" shall mean the property of the Borrower,
Video, and the other guarantors of the Senior Notes covered by the Senior Notes
Collateral Agreements.
"Senior Notes Collateral Agreements" shall mean that certain Security
Agreement dated as of January 25, 2000, between Borrower, Video, the other
guarantors of the Senior Notes and the Trustee and the other Collateral
Agreements (as defined in the Indenture as in effect on the date hereof).
"Settlement Period" shall have the meaning set forth in Section 2.03
hereof.
"▇▇▇▇▇" means ▇▇▇▇▇ ▇▇▇▇▇ Enterprises, Inc., a California company
which is wholly owned by the Borrower.
"SLE" means SLE Productions, Inc., a California company which is
wholly owned by ▇▇▇▇▇.
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"Stated Amount" shall mean, with respect to a Letter of Credit, the
face amount thereof, drawn or undrawn, regardless of the existence or
satisfaction of any conditions or limitations on drawing.
"Subsidiary" shall mean, with respect to any Person, any corporation,
limited or general partnership, limited liability company, limited liability
partnership, trust, association or other business entity of which an aggregate
of more than 50% of the outstanding stock or other interests entitled to vote in
the election of the board of directors of such corporation (irrespective of
whether, at the time, stock of any other class or classes of such corporation
shall have or might have voting power by reason of the happening of any
contingency), managers, trustees or other controlling persons, or an equivalent
controlling interest therein, of such Person is, at the time, directly or
indirectly, owned or controlled by such Person and/or one or more Subsidiaries
of such Person.
"Swing Account" shall mean the bank account at the Swing Bank,
#1000200116, which is subject to a blocked account agreement and into which
payments for the Accounts of the Entertainment Group and Video are deposited.
"Swing Bank" shall mean ▇▇▇▇▇▇▇ Bank in Racine, Wisconsin.
"Swing Collateral" shall have the meaning set forth in the
Intercreditor Agreement.
"Taxes" shall have the meaning given to that term in Section 2.13
hereof.
"Term Loan" shall mean, collectively, the term loan in a principal
amount not to exceed $5,500,000 made by the Lenders pursuant to, and repayable
in accordance with, the provisions of this Agreement.
"Term Loan Commitment" shall mean, with respect to each Lender, its
obligation to make a Term Loan to the Borrower in the amount set forth on
Schedule 1.01(D) to this Agreement or assigned to such Lender in accordance with
Section 10.13 hereof, as such amounts may be reduced from time to time pursuant
to the terms of this Agreement and "Term Loan Commitments" shall, collectively,
mean the aggregate amount of the Term Loan Commitments of all the Lenders.
"Term Loan Notes" shall mean the promissory notes, substantially in
the form of Exhibit A-2 hereto, executed and delivered by the Borrower to the
Lenders to evidence the Term Loan under this Agreement, as modified or restated
from time to time and any promissory note or notes issued in exchange or
replacement thereof, including all extensions, renewals, refinancings or
refundings thereof in whole or part.
"Termination Event" shall mean any of the following events that is
reasonably expected to result in a Material Adverse Effect: (i) a Reportable
Event with respect to any Benefit Plan other than in connection with any event
scheduled in Schedule 6.09 hereto; (ii) the withdrawal of the Borrower or any
ERISA Affiliate from a Benefit Plan during a plan year in which the Borrower or
any ERISA Affiliate was a "substantial employer" as defined in Section 4001
(a)(2) of ERISA; (iii) the imposition of an obligation on the Borrower or any
ERISA Affiliate under Section
22
4041 of ERISA to provide affected parties written notice of intent to terminate
a Benefit Plan in a distress termination described in Section 4041 (c) of ERISA;
or (iv) the institution by the PBGC of proceedings to terminate a Benefit Plan.
"Trustee" shall mean HSBC Bank USA.
"UCC" shall mean the Uniform Commercial Code, as amended, in effect in
the State of New York on the date hereof.
"Undrawn Letter of Credit Availability" shall mean with respect to a
Letter of Credit, or an Existing Letter of Credit, at any time, the maximum
amount available to be drawn under such Letter of Credit or Existing Letter of
Credit at such time, regardless of the existence or satisfaction of any
conditions or limitations on drawing.
"Unreimbursed Draws" shall mean with respect to a Letter of Credit or
Existing Letter of Credit, at any time, the aggregate amount at such time of all
payments made by the Letter of Credit Issuer or payments made by CIT or the
Lenders under a Letter of Credit Guaranty in respect of such payments under such
Letter of Credit or Existing Letter of Credit, to the extent not repaid by the
Borrower, provided that Unreimbursed Draws shall not include any such payments
that have been charged to the Loan Account and constitute a Revolving Loan
pursuant to the terms of this Agreement.
"Unused Line Fee" shall have the meaning given to that term in Section
2.08(e) hereof.
"Video" shall mean Golden Books Home Video, Inc.
"Video Guaranty" shall mean the guaranty, substantially in the form of
Exhibit F hereto, dated of even date herewith by Video in favor of the Agent on
behalf of the Lenders.
"Weekly Reports" shall have the meaning given to that term in Section
7.01(e) hereof.
1.02. Construction. Unless the context of this Agreement otherwise
clearly requires, references to the plural include the singular, to the singular
include the plural, and to the part include the whole; "or" has the inclusive
meaning represented by the phrase "and/or." References in this Agreement to
"determination" by the Agent shall mean the reasonable good faith estimates by
the Agent (in the case of quantitative determinations)or the reasonable good
faith beliefs by the Agent (in the case of qualitative determinations). The
words "hereof," "herein," "hereunder" and similar terms in this Agreement refer
to this Agreement as a whole and not to any particular provision of this
Agreement. The section and other headings contained in this Agreement and the
Table of Contents preceding this Agreement are for reference purposes only and
shall not control or affect the construction of this Agreement or the
interpretation thereof in any respect. Section, subsection and exhibit
references are to this Agreement unless otherwise specified.
23
1.03. Accounting Principles. Except as otherwise provided in this
Agreement, all computations and determinations as to accounting or financial
matters and all financial statements to be delivered pursuant to this Agreement
shall be made and prepared in accordance with GAAP (including principles of
consolidation where appropriate), and all accounting or financial terms shall
have the meanings ascribed to such terms by GAAP. Notwithstanding the definition
of GAAP contained in this Agreement, no change in GAAP that would affect the
method or calculation of any covenants, restrictions or standards or definitions
of terms used herein shall be given effect in such calculations until such
covenants, restrictions or standards or definitions are amended in a manner
satisfactory to the Borrower and the Majority Lenders so as to reflect such
change in GAAP.
ARTICLE 2.
THE LOANS
2.01. The Loans.
---------
(a) Subject to the terms and conditions and relying upon, as
applicable, the representations and warranties herein set forth, each Lender
severally agrees to make a Term Loan to the Borrower, on the Final Financing
Order Date, in a principal amount that will not exceed the amount of such
Lender's Term Loan Commitment. The proceeds of the Term Loan shall be used
solely to repay in full the term loan under the Existing Credit Facilities. The
Term Loan shall mature as provided in Section 2.07 hereof.
(b) Subject to the terms and conditions and relying upon the
representations and warranties herein set forth, each Lender severally agrees to
make Revolving Loans to the Borrower at any time and from time to time on or
after the date hereof and through but not including, the Revolving Credit
Termination Date, in an aggregate principal amount for the Borrower not
exceeding at any one time its Pro Rata Share of the Current Commitment at such
time. The "Current Commitment" at any time shall be equal to the lesser of (A)
$34,500,000 minus all Pre-Petition Loans (other than the term loan under the
Existing Credit Facilities) and (B) (i) until the Final Financing Order Date,
the Borrowing Base plus $3,000,000 minus all Pre-Petition Loans (other than the
term loan under the Existing Credit Facilities) and (ii) on and after the Final
Financing Order Date, the Borrowing Base plus $6,000,000. On the Final Financing
Order Date, notwithstanding the amount of the Borrowing Base calculated on such
date, all revolving loans then remaining outstanding under the Existing Credit
Facilities shall become Revolving Loans hereunder. No Lender shall have an
obligation to make Revolving Loans hereunder or arrange for the issuance of
Letters of Credit which, when added to the aggregate amount of all outstanding
and contemporaneous Revolving Loans and the Letter of Credit Exposure at such
time, would cause the aggregate amount of all Revolving Loans and the Letter of
Credit Exposure at any time to exceed the Current Commitment at such time. The
"Revolving Credit Termination Date" means the date on which the Revolving Credit
Commitment of each Lender expires, which initially shall be one (1) year from
the Closing Date. Within the limits of time and amount set forth in this Section
2.01, and subject to the provisions of this Agreement, the Borrower may borrow,
repay and reborrow hereunder.
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2.02. Notes.
-----
(a) The obligation of the Borrower to repay the unpaid principal
amount of the Term Loan made to it by each Lender and to pay interest thereon
shall be evidenced by a Term Loan Note dated the date of this Agreement in the
principal amount of such Lender's Term Loan Commitment with the blanks
appropriately filled in. An executed Term Loan Note for each Lender shall be
delivered by the Borrower to the Agent on the date of the execution and delivery
of this Agreement.
(b) The obligation of the Borrower to repay the unpaid principal
amount of the Revolving Loans made to it by each Lender and to pay interest
thereon shall be evidenced by a Revolving Credit Note dated the date of this
Agreement in the principal amount of such Lender's Revolving Credit Commitment
with the blanks appropriately filled in. An executed Revolving Credit Note for
each Lender shall be delivered by the Borrower to the Agent on the date of the
execution and delivery of this Agreement.
2.03. Notice of Borrowing; Making of Loans.
------------------------------------
(a) Each Lender hereby agrees to extend to the Borrower an
aggregate principal amount of the Term Loan equal to such Lender's Term Loan
Commitment. Such Term Loan shall be made on the Final Financing Order Date and
shall be used solely to repay the term loans under the Existing Credit
Facilities.
(b) Whenever the Borrower desires the Lenders to make a Revolving
Loan, the Borrower shall provide notice to the Agent of such proposed borrowing
(a "Notice of Borrowing"), each such notice to be given not later than 12:00
noon (New York City time) on the date of such proposed borrowing, in the case of
a borrowing consisting of Prime Loans, setting forth: (a) the date, which shall
be a Business Day, on which such borrowing is to occur, (b) the principal amount
of the Revolving Loan being borrowed and (c) the account information where such
Revolving Loan is to be received. Such notice shall be given by telephone or in
writing by either a Designated Borrowing Officer or such other authorized
officer of Borrower as listed in an officer's certificate delivered on the
Closing Date (each an "Additional Authorized Party"), provided that, if
requested by the Agent, any such telephonic notice shall be confirmed in writing
by delivery to the Agent, on or before the date on which such Revolving Loan is
to be made, of a written notice substantially in the form of Exhibit E hereto
containing the original or facsimile signature of a Designated Borrowing Officer
or Additional Authorized Party, as the case may be. Except for a Notice of
Borrowing when the Agent will fund the related Revolving Loan pursuant to
Section 2.03(f) hereof, the Agent shall provide each Lender with prompt notice
of each Notice of Borrowing. Except as otherwise provided in Section 2.03(f)
hereof, on the date specified in such notice, each Lender shall, subject to the
terms and conditions of this Agreement, make its Pro Rata Share of such
Revolving Loan in immediately available funds by wire transfer to the Agent at
its Office not later than 1:30 p.m. (New York City time). Unless the Agent
determines in the exercise of its reasonable business judgment that any
applicable conditions in Section 5.02 hereof have not been satisfied, the Agent
shall make the funds so received from the Lenders available to the Borrower not
later than 2:30 p.m. (New York City time) on the date specified in such notice
in
25
immediately available funds by (i) depositing such proceeds in the Disbursement
Account of the Borrower if such Disbursement Account is located at the Bank or
(ii) initiating a wire transfer of same day funds to the Disbursement Account if
such Disbursement Account is not located at the Bank.
(c) The Agent and each Lender shall be entitled to rely
conclusively on each Designated Borrowing Officer's authority to request a
Revolving Loan on behalf of the Borrower until the Agent receives written notice
to the contrary. The Agent and the Lenders shall have no duty to verify the
authenticity of the signature appearing on any written Notice of Borrowing and,
with respect to an oral request for a Revolving Loan, the Agent and the Lenders
shall have no duty to verify the identity of any Person representing himself as
a Designated Borrowing Officer.
(d) The Agent and the Lenders shall not incur any liability to
the Borrower in acting upon any telephonic notice referred to above which the
Agent and the Lenders believe in good faith to have been given by a Designated
Borrowing Officer or for otherwise acting in good faith under this Section 2.03
and, upon the funding of a Revolving Loan by the Lenders (or by the Agent on
behalf of the Lenders) in accordance with this Agreement pursuant to any such
telephonic notice, the Borrower shall have effected a Revolving Loan hereunder.
(e) Each Notice of Borrowing pursuant to this Section 2.03 shall
be irrevocable and the Borrower shall be bound to make a borrowing in accordance
therewith.
(f)(i) Except as otherwise provided in this subsection 2.03(f),
all Revolving Loans under this Agreement shall be made by the Lenders
simultaneously and proportionately to their Pro Rata Shares, it being understood
that no Lender shall be responsible for any default by any other Lender in that
other Lender's obligation to make a Revolving Loan requested hereunder nor shall
the Revolving Credit Commitment of any Lender be increased or decreased as a
result of the default by any other Lender in that other Lender's obligation to
make a Revolving Loan requested hereunder.
(ii) Notwithstanding any other provision of this Agreement,
and in order to reduce the number of fund transfers among the Borrower, the
Lenders and the Agent, the Borrower, the Lenders and the Agent agree that the
Agent may (but shall not be obligated to), and the Borrower and the Lenders
hereby irrevocably authorize the Agent to, fund, on behalf of the Lenders,
Revolving Loans pursuant to Section 2.01 hereof, subject to the procedures for
settlement set forth in subsection 2.03(g) hereof; provided, however, that (a)
the Agent shall in no event fund such Revolving Loans if the Agent shall have
received written notice from any Lender on the Business Day prior to the day of
the proposed Revolving Loan that one or more of the conditions precedent
contained in Section 5.02 hereof will not be satisfied on the day of the
proposed Revolving Loan, and (b) the Agent shall not otherwise be required to
determine that, or take notice whether, the conditions precedent in Section 5.02
hereof have been satisfied.
(iii) Unless (A) the Agent has notified the Lenders that the
Agent, on behalf of the Lenders, will fund a particular Revolving Loan pursuant
to subsection 2.03(f)(ii) hereof, or (B) the Agent shall have been notified by
any Lender on the Business Day prior to the day
26
of a proposed Revolving Loan that such Lender does not intend to make available
to the Agent such Lender's Pro Rata Share of the Revolving Loan requested on
such day, the Agent may assume that such Lender has made such amount available
to the Agent on such day and the Agent, in its sole discretion, may, but shall
not be obligated to, cause a corresponding amount to be made available to the
Borrower on such day. If the Agent makes such corresponding amount available to
the Borrower and such corresponding amount is not in fact made available to the
Agent by such Lender, the Agent shall be entitled to recover such corresponding
amount on demand from such Lender together with interest thereon, for each day
from the date such payment was due until the date such amount is paid to the
Agent, at the customary rate set by the Agent for the correction of errors among
banks for three Business Days and thereafter at the Regular Rate. During the
period in which such Lender has not paid such corresponding amount to the Agent,
notwithstanding anything to the contrary contained in this Agreement or any
other Related Document, the amount so advanced by the Agent to the Borrower
shall, for all purposes hereof, be a Revolving Loan made by the Agent for its
own account. Upon any such failure by a Lender to pay the Agent, the Agent shall
promptly thereafter notify the Borrower of such failure and the Borrower shall
immediately pay such corresponding amount to the Agent for its own account.
(iv) Nothing in this subsection 2.03(f) shall be deemed to
relieve any Lender from its obligation to fulfill its Revolving Credit
Commitment hereunder or to prejudice any rights that the Agent or the Borrower
may have against any Lender as a result of any default by such Lender hereunder.
(g)(i) With respect to all periods for which the Agent has funded
Revolving Loans pursuant to subsection 2.03(f) hereof, within fifteen (15) days
after the last day of each calendar month, or such shorter period as it may from
time to time select (any such month or shorter period being herein called a
"Settlement Period"), the Agent shall notify each Lender of the average daily
unpaid principal amount of the Revolving Loans outstanding during such
Settlement Period. In the event that such amount is greater than the average
daily unpaid principal amount of the Revolving Loans outstanding during the
Settlement Period immediately preceding such Settlement Period (or, if there has
been no preceding Settlement Period, the amount of the Revolving Loans made on
the date of such Lender's initial funding), each Lender shall promptly make
available to the Agent its Pro Rata Share of the difference in immediately
available funds. In the event that such amount is less than such average daily
unpaid principal amount, the Agent shall promptly pay over to each other Lender
its Pro Rata Share of the difference in immediately available funds. In
addition, if the Agent shall so request at any time when a Potential Default or
an Event of Default shall have occurred and be continuing, or any other event
shall have occurred as a result of which the Agent shall determine that it is
desirable to present claims against the Borrower for repayment, each Lender
shall promptly remit to the Agent or, as the case may be, the Agent shall
promptly remit to each Lender, sufficient funds to adjust the interests of the
Lenders in the then outstanding Revolving Loans to such an extent that, after
giving effect to such adjustment, each Lender's interest in the then outstanding
Revolving Loans will be equal to its Pro Rata Share thereof. The obligations of
each Lender under this subsection 2.03(g) shall be absolute and unconditional.
Each Lender shall only be entitled to receive interest on its Pro Rata Share of
the Revolving Loans which have been funded by such Lender.
27
(vi) In the event that any Lender fails to make any payment
required to be made by it pursuant to subsection 2.03(g)(i) hereof, the Agent
shall be entitled to recover such corresponding amount on demand from such
Lender together with interest thereon, for each day from the date such payment
was due until the date such amount is paid to the Agent, at the customary rate
set by the Agent for the correction of errors among banks for three Business
Days and thereafter at the Regular Rate. During the period in which such Lender
has not paid such corresponding amount to the Agent, notwithstanding anything to
the contrary contained in this Agreement or any other Related Document, the
amount so advanced by the Agent to the Borrower shall, for all purposes hereof,
be a Revolving Loan made by the Agent for its own account. Upon any such failure
by a Lender to pay the Agent, the Agent shall promptly thereafter notify the
Borrower of such failure and the Borrower shall immediately pay such
corresponding amount to the Agent for its own account. Nothing in this
subsection 2.03(g)(ii) shall be deemed to relieve any Lender from its obligation
to fulfill its Revolving Credit Commitment hereunder or to prejudice any rights
that the Borrower or the Agent may have against any Lender as a result of any
default by such Lender hereunder. The Agent shall consult with the Borrower
about the possible replacement of a defaulting Lender and the Borrower may
recommend other potential lenders to the Agent, but the determination whether to
replace a defaulting Lender and with whom to replace such defaulting Lender
shall be made by the Agent in its sole discretion.
2.04. Reduction of Revolving Credit Commitment; Mandatory Prepayment;
---------------------------------------------------------------
Optional Prepayment.
-------------------
(a) Optional Reduction of the Revolving Credit Commitment.
Subject to Section 2.04(e) hereof, the Borrower may at any time or from time to
time and without penalty or premium reduce the Revolving Credit Commitments of
the Lenders to an amount not less than the sum of the unpaid principal amount of
all Revolving Loans then outstanding plus the principal amount of all Revolving
Loans not yet made as to which notice has been given by the Borrower under
Section 2.03 hereof plus the Letter of Credit Exposure at such time plus the
Stated Amount of all Letters of Credit not yet issued as to which a request has
been made unless the request is withdrawn and the Letter of Credit is not issued
by the Letter of Credit Issuer under Section 3.01 hereof. Any reduction shall be
in an amount which is an integral multiple of $5,000,000. Reduction of the
Revolving Credit Commitments of the Lenders shall be made by providing not less
than two (2) Business Days' written notice (which notice shall be irrevocable)
to such effect to the Agent (which notice the Agent shall promptly transmit to
each Lender). Reductions of the Revolving Credit Commitments of the Lenders are
irrevocable and may not be reinstated. Each such reduction shall reduce the
Revolving Credit Commitment of each Lender proportionately in accordance with
its Pro Rata Share.
(b) Mandatory Prepayment.
--------------------
(i) Exceeding Current Commitment. Subject to Section 2.04(c)
hereof, if at any time the Current Commitment is less than the aggregate unpaid
principal amount of the Revolving Loans then outstanding plus the Letter of
Credit Exposure at such time, the Borrower shall prepay an amount not less than
the amount of such difference or, if the Revolving Loans then outstanding are
less than the amount of such difference, provide cash collateral to the
28
Agent in an amount equal to 105% of such difference, which cash collateral shall
be deposited and held in the Letter of Credit Cash Collateral Account until such
time as such excess no longer exists. Any such prepayment will not otherwise
reduce the Revolving Credit Commitments of the Lenders. Concurrently with any
notice of reduction of the Revolving Credit Commitments of the Lenders, the
Borrower shall give notice to the Agent of any mandatory prepayment which notice
shall specify a prepayment date no later than the effective date of such
reduction of the Revolving Credit Commitments of the Lenders.
(ii) Other Mandatory Prepayments. From and after the Final
Financing Order Date, the Agent shall on each Business Day apply funds deposited
in the Agent Account to the payment, in whole or in part, of the Obligations
outstanding. Prior to the Final Financing Order Date all such funds shall be
applied to the Pre-Petition Loans. To the extent that sale proceeds referred to
in Section 8.04 hereof are required to be a mandatory prepayment, such
prepayment shall be deemed to be made under this subsection (ii).
(c) Optional Prepayment. The Borrower may at any time or from
time to time prepay, in whole or in part, any or all Loans then outstanding,
together with all interest thereon accrued but unpaid.
(d) Prepayment Penalty. All prepayments of Loans under this
Section 2.04 shall be without premium or penalty.
2.05. Interest Rate.
-------------
(a) If the aggregate amount of outstanding Revolving Loans,
Pre-Petition Loans (other than the term loan under the Existing Credit
Facilities), and Letter of Credit Exposure is equal to or less than the
Borrowing Base, each Revolving Loan shall bear interest at a rate per annum for
each day until paid equal to the Regular Rate plus one and one-half of one
percent (1.50%) for such day. If the aggregate amount of outstanding Revolving
Loans, Pre-Petition Loans (other than the term loan under the Existing Credit
Facilities) and Letter of Credit Exposure exceeds the Borrowing Base, then the
portion of such outstanding amount of Revolving Loans in excess of the Borrowing
Base (with Letter of Credit Exposure being deemed for these purposes to be
within the Borrowing Base) shall bear interest at a rate per annum equal to the
Regular Rate plus three percent (3.00%) for such day.
(b) The Term Loan shall bear interest at a rate per annum equal
to the Regular Rate plus two percent (2.00%).
2.06. Interest Payment Dates. The Borrower shall pay interest on the
unpaid principal amount of each Loan from the date of such Loan until such
principal amount shall be paid in full, which interest shall be payable monthly
in arrears on the first day of each month, commencing June 1, 2001. After
maturity of any principal amount of any Loan (by acceleration, at scheduled
maturity or otherwise), interest on such amount shall be due and payable on
demand.
29
2.07. Amortization.
------------
(a) The principal amount of the Term Loan shall be repaid to the
Lenders by the Borrower as follows:
Principal Payment Date Amount
December 31, 2001 $2,000,000
March 31, 2002 $ 500,000
June 1, 2002 $3,000,000
provided, however, if this Agreement or the Revolving Credit Commitments are
terminated by either the Agent or the Borrower as provided herein, the Term Loan
shall become immediately due and payable in full on the effective date of such
termination.
(b) To the extent not due and payable earlier pursuant to the
terms of this Agreement, the entire unpaid principal amount of each of the
Revolving Loans shall be due and payable on the Revolving Credit Termination
Date.
2.08. Payments, Default Rates and Fees.
--------------------------------
(a) Time, Place and Manner. All payments and prepayments to be
made in respect of principal, interest, fees or other amounts due from the
Borrower under or in connection with this Agreement, the Notes, the Pre-Petition
Loans or any other Related Document shall be payable at or before 12:00 Noon,
New York City time, on the day when due without presentment, demand, protest or
notice of any kind, all of which are hereby expressly waived. Such payments
shall be made to the Agent for the account of the Agent, or the Lenders, as the
case may be, to the Agent Account in Dollars in funds immediately available at
the Bank's Office without setoff, counterclaim or other deduction of any nature.
The Agent shall maintain a loan account (the "Loan Account") on its books in the
name of the Borrower in which the Borrower will be charged with Loans made by
the Agent or the Lenders to the Borrower hereunder and with any other
Obligations. The Borrower and the Lenders hereby authorize the Agent to, and the
Agent may, from time to time charge the Loan Account with any interest, fees,
expenses and other Obligations that are due and payable under this Agreement,
the Pre-Petition Loans or any Related Document. The Borrower and the Lenders
confirm that any charges which the Agent may so make to the Loan Account as
herein provided will be made as an accommodation to the Borrower and solely at
the Agent's discretion and shall constitute a Revolving Loan to the Borrower
funded by the Agent on behalf of the Lenders and subject to subsections 2.03(f)
and 2.03(g) of this Agreement. Each of the Lenders and the Borrower agree that
the Agent shall have the right to make such charges regardless of whether any
Event of Default or Potential Default shall have occurred and be continuing or
whether any of the conditions precedent in Section 5.02 hereof have been
satisfied. The Loan Account will be credited upon receipt of "good funds" in the
Agent Account with all amounts actually received by the Agent from the Borrower
or others for the account of the Borrower. Interest on all Loans and all fees
that accrue on a per annum basis shall be computed on the basis of the actual
number of days elapsed in the period during which interest or such fee accrues
and a year of 360 days. In computing interest on any Loan, the date of the
making of such Loan shall be included and the date of payment shall be
30
excluded; provided, however, that if a Loan is repaid on the same day in which
it is made, one day's interest shall be paid on such Loan.
(b) Periodic Statements. The Agent shall provide the Lenders and
the Borrower promptly after the end of each calendar month a summary statement
(in the form from time to time used by the Agent) of (A) the opening and closing
daily balances in the Loan Account during such month, (B) the amounts, and dates
of all Loans made during such month, (C) the amounts, dates and applications of
all payments on account of the Loans made during such month and each Lender's
interest in the Loans, (D) the amount of interest accrued on the Loans during
such month, (E) any Letters of Credit issued by the Letter of Credit Issuer
during such month, specifying the Stated Amount thereof, (F) the amount of
charges to the Loan Account or Revolving Loans to be made during such month to
reimburse CIT, the Lenders or the Letter of Credit Issuer for drawings made
under Letters of Credit or payments made by CIT or the Lenders under the Letter
of Credit Guaranty, and (G) the amount and nature of any charges to the Loan
Account made during such month on account of interest, fees and expenses and
other Obligations. All entries on any such statement shall, thirty (30) days
after the same is sent, be presumed to be correct and shall constitute prima
facie evidence of the information contained in such statement, subject to the
Borrower's and each Lender's express right to rebut such presumption by
conclusively demonstrating the existence of any error on the part of the Agent.
(c) Apportionment of Payments. Except as otherwise provided in
this subsection, aggregate principal and interest payments shall be apportioned
among all outstanding Loans to which such payments relate and payments of the
fees required to be paid by the Borrower under this Agreement (and not the Fee
Letter) to the Agent shall be apportioned ratably or to the extent separately
agreed to by the Agent and any Lender. All payments shall be remitted to the
Agent and all such payments and any other amounts, including, without
limitation, proceeds of Collateral received by the Agent from or as to the
Borrower shall be applied subject to the provisions of this Agreement: first, to
pay principal of and interest on any Pre-Petition Loans; second, to pay
principal of and interest on any Loans funded by the Agent on behalf of the
Lenders (including, without limitation, Agent Advances under Section 11.08
hereof) and any fees, expense reimbursements or indemnities then due to the
Agent from the Borrower; third, to pay any fees, expense reimbursements or
indemnities then due to the Lenders or the Letter of Credit Issuer hereunder;
fourth, to pay interest due in respect of the Loans and Unreimbursed Draws under
Letters of Credit; fifth, to pay, prepay, or provide cash collateral if then
required in respect of, principal of Loans and Letter of Credit Exposure; and
sixth, to the payment of any other Obligations due to the Agent, the Co-Agent,
or any Lender by the Borrower. The Agent shall promptly distribute to each
Lender at its primary address set forth on the appropriate signature page
hereof, or at such other address as such Lender may designate in writing, such
funds as it may be entitled to receive. The foregoing apportionment of payments
is solely for the purpose of determining the obligations of the Borrower
hereunder and, notwithstanding such apportionment, any Lender may on its books
and records allocate payments received by it in a manner different from that
contemplated hereby. No such different allocation shall alter the rights and
obligations of the Borrower under this Agreement determined in accordance with
the apportionments contemplated by this Section 2.08(c). To the extent that the
Borrower makes a payment or payments to the Agent or the Agent receives any
payment or other amount, which payment(s) or proceeds or any part thereof are
subsequently
31
invalidated, declared to be fraudulent or preferential, set aside and/or
required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause then, to the
extent of such payment or proceeds received, the Obligations or part thereof
intended to be satisfied shall be revived and continue in full force and effect,
as if such payment or proceeds had not been received by the Agent.
(d) Interest Upon Events of Default. To the extent permitted by
law, after there shall have occurred and so long as there is continuing an Event
of Default pursuant to Section 9.01 hereof, all principal, interest, fees,
indemnities or any other Obligations of the Borrower hereunder or under any Note
or any other Related Document (and including interest accrued under this
subsection 2.08(d)) shall compound on a daily basis as provided in this
subsection 2.08(d) and shall bear interest for each day until paid (before and
after judgment), payable on demand, at a rate per annum of two percent (2%)
above the applicable rates of interest set forth in Section 2.05 or Letter of
Credit Fees set forth in Section 2.08(f), as applicable, for such day, such
interest rate to change automatically from time to time effective as of the
announced effective date of each change in the Prime Rate.
(e) Unused Line Fee. From and after the Closing Date until the
Revolving Credit Termination Date, the Borrower shall pay to the Agent an unused
line fee (the "Unused Line Fee") accruing at the rate of one-half of one percent
(1/2 of 1%) per annum, on the excess, if any, of the aggregate Revolving Credit
Commitments over the sum of the Revolving Loans and Letter of Credit Exposure
(computed on an average daily basis) outstanding from time to time. All Unused
Line Fees shall be payable monthly in arrears on the last day of each month
commencing June 30, 2001. Promptly following the Agent's receipt of Unused Line
Fee, the Agent shall pay to each Lender its Pro Rata Share of the amount of the
Unused Line Fee.
(f) Letter of Credit Fees. From and after the Closing Date until
the Revolving Credit Termination Date, the Borrower shall pay to the Agent a
letter of credit fee (the "Letter of Credit Fee") at a rate equal to two percent
(2%) per annum on the average daily outstanding balance of issued and
outstanding Letters of Credit for the immediately preceding month payable in
arrears on the first day of each succeeding month. The Borrower shall also pay
the customary letter of credit fees and charges of CIT and the Letter of Credit
Issuer for the administration, issuance, amendment and processing of any Letters
of Credit issued by the Letter of Credit Issuer. Promptly following the Agent's
receipt of any Letter of Credit Fees described above, the Agent shall pay to
each Lender its Pro Rata Share of the amount of the Letter of Credit Fees
received by the Agent.
(g) Fee Letter. The Borrower shall pay all fees and other amounts
required to be paid pursuant to the Fee Letter, including, without limitation,
the $500,000 transaction fee due upon the earlier of the entry of the Final
Financing Order or 90 calendar days following the entry of the Interim Financing
Order.
(h) Administrative Fee. The Borrower shall pay to the Agent, for
its own account, a non-refundable administrative fee of $75,000 on January 20,
2002 and on each anniversary thereof.
32
(i) All fees under this Agreement and the other Related Documents
may be charged to the Borrower's Loan Account and are non-refundable under all
circumstances (except for a computational error agreed to by the Borrower and
the Agent).
2.09. Use of Proceeds. The Borrower hereby covenants, represents and
warrants that the proceeds of the Loans will be used (i) on the Final Financing
Order Date to repay the Pre_Petition Loans under the Existing Credit Facilities
outstanding on the Final Financing Order Date, and (ii) for other working
capital and general corporate purposes, including payment of administrative
claims, all as limited by and to the extent set forth in the Budget furnished by
the Borrower to the Lenders as set forth in Section 7.01(e). The Borrower hereby
covenants, represents and warrants that the Letters of Credit will be used for
general corporate purposes, including but not limited to payroll and
payroll-related taxes, workers compensation insurance and general liability
insurance programs.
2.10. Reserve Requirements; Capital Adequacy Circumstances.
----------------------------------------------------
(a) Notwithstanding any other provision of this Agreement, if any
change in applicable law or regulation or in the interpretation or
administration thereof by any Governmental Authority charged with the
interpretation or administration thereof (whether or not having the force of
law) shall impose any tax on or change the basis of taxation of payments to the
Letter of Credit Issuer or any Lender or any Affiliate of a Lender or of any
amounts payable hereunder (other than any franchise tax and taxes imposed on the
overall net income of the Letter of Credit Issuer or such Lender or such
Affiliate by any Governmental Authority, including those for the jurisdiction in
which the Letter of Credit Issuer or such Lender or such Affiliate has its
principal office or by any political subdivision or taxing authority therein),
or shall impose, modify or deem applicable any reserve, special deposit or
similar requirement against assets of, deposits with or for the account of or
credit extended by the Letter of Credit Issuer or such Lender or Affiliate of
such Lender (except any such reserve requirement that is reflected in Reserve
Requirements) or shall impose on the Letter of Credit Issuer or such Lender or
such Affiliate any other condition affecting this agreement or any Letter of
Credit Issuer and the result of any of the foregoing shall be to increase the
cost to the Letter of Credit Issuer or such Lender of or issuing any Letter of
Credit or to reduce the amount of any sum received or receivable by the Letter
of Credit Issuer or such Lender hereunder (whether of principal, interest or
otherwise) in respect thereof by an amount deemed by the Letter of Credit Issuer
or such Lender to be material, then the Borrower shall pay to the Letter of
Credit Issuer or such Lender such additional amount or amounts as will
compensate the Letter of Credit Issuer or such Lender for such additional costs
incurred or reduction suffered. Any amount or amounts payable by the Borrower to
the Letter of Credit Issuer or any Lender in accordance with the provisions of
this Section 2.10(a) shall be paid by the Borrower to the Letter of Credit
Issuer or such Lender within ten (10) days after receipt by the Borrower from
the Letter of Credit Issuer or such Lender of a statement setting forth in
reasonable detail the amount or amounts due and the basis for the determination
from time to time of such amount or amounts, which statement shall be conclusive
and binding absent manifest error.
(b) If the Letter of Credit Issuer or any Lender shall have
reasonably 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
33
Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the Letter of Credit
Issuer or by such Lender (or any lending office of such Lender) or by any
Affiliate of such Lender, as the case may be, 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 the effect of reducing the
rate of return on the Letter of Credit Issuer's or such Lender's capital or on
the capital of such Lender's Affiliate, as the case may be, as a consequence of
the Letter of Credit Issuer's obligations or such Lender's obligations under
this Agreement and the Related Documents to a level below that which the Letter
of Credit Issuer or such Lender or such Lender's Affiliate, as the case may be,
could have achieved but for such adoption, change or compliance (taking into
consideration the Letter of Credit Issuer's or such Lender's policies or such
Lender's Affiliate's policies, as the case may be, with respect to capital
adequacy) by an amount deemed by the Letter of Credit Issuer or such Lender to
be material, then, from time to time, the Borrower shall reimburse the Letter of
Credit Issuer or such Lender for such reduction. Any amount or amounts payable
by the Borrower to the Letter of Credit Issuer or any Lender in accordance with
the provisions of this Section 2.10(b) shall be paid by the Borrower to the
Letter of Credit Issuer or such Lender within ten (10) days after receipt by the
Borrower from the Letter of Credit Issuer or such Lender of a statement setting
forth (i) in reasonable detail the amount or amounts due, (ii) the basis for the
determination from time to time of such amount or amounts and (iii) that such
amount(s) have been determined in good faith, which statement shall be
conclusive and binding absent manifest error.
(c) The Letter of Credit Issuer or any Lender may demand
compensation for any increased costs or reduction in amounts received or
receivable or reduction in return on capital with respect to any period;
provided that the Letter of Credit Issuer or such Lender shall provide to the
Borrower a certificate setting forth in reasonable detail the basis on which
such demand is made. The protection of this Section 2.10 shall be available to
the Letter of Credit Issuer or any Lender regardless of any possible contention
of the invalidity or inapplicability of the law, rule, regulations, guideline or
other change or condition which shall have occurred or been imposed.
2.11. Indemnity. The Borrower shall indemnify each Lender against any
loss or expense that such Lender actually sustains or incurs as a consequence of
any failure by the Borrower to fulfill on the date of any borrowing hereunder
the applicable conditions set forth in Article 5. A certificate of any Lender
setting forth in reasonable detail any amount or amounts that such Lender is
entitled to receive pursuant to this Section 2.11 and the basis for the
determination of such amount or amounts shall be delivered to the Borrower and
shall be conclusive and binding absent manifest error.
2.12. Sharing of Setoffs. Each Lender agrees that if it shall,
through the exercise of a right of banker's lien, setoff or counterclaim against
the Borrower or other security or interest arising from, or in lieu of, such
secured claim, received by such Lender under any applicable bankruptcy,
insolvency or other similar law or otherwise, or by any other means, obtain
payment (voluntary or involuntary) in respect of any Obligation as a result of
which the aggregate unpaid amount of the Obligations owing to it shall be
proportionately less than the aggregate unpaid amount of the Obligations owing
to any other Lender, it shall simultaneously purchase from such other Lender at
face value a participation in the Obligations owing to such other Lender, so
that the
34
aggregate unpaid amount of the Obligations and participations in Obligations
held by each Lender shall be in the same proportion to the aggregate unpaid
amount of all Obligations owing to such Lender prior to such exercise of
banker's lien, setoff or counterclaim or other event was to the aggregate unpaid
amount of all Obligations outstanding prior to such exercise of banker's lien,
setoff or counterclaim or other event; provided that if any such purchase or
purchases or adjustments shall be made pursuant to this Section 2.12 and the
payment giving rise thereto shall thereafter be recovered, such purchase or
purchases or adjustments shall be rescinded to the extent of such recovery and
the purchase price or prices or adjustments restored without interest. The
Borrower expressly consents to the foregoing arrangements and agrees that any
Lender holding a participation in an Obligation deemed to have been so purchased
may exercise any and all rights of banker's lien, setoff or counterclaim with
respect to any and all moneys owing by the Borrower to such Lender by reason
thereof as fully as if such Lender had made a loan directly to the Borrower in
the amount of such participation.
2.13. Taxes.
-----
(a) All payments made by the Borrower hereunder, under the Notes
or under any Loan Document will be made without setoff, counterclaim, deduction
or other defense. All such payments shall be made free and clear of and without
deduction for any present or future income, franchise, sales, use, excise, stamp
or other taxes, levies, imposts, deductions, charges, fees, withholdings,
restrictions or conditions of any nature now or hereafter imposed, levied,
collected, withheld or assessed by any jurisdiction (whether pursuant to United
States Federal, state, local or foreign law) or by any political subdivision or
taxing authority thereof or therein, and all interest, penalties or similar
liabilities, excluding taxes on the overall net income of the Lenders or the
Letter of Credit Issuer (such nonexcluded taxes are hereinafter collectively
referred to as the "Taxes"). If the Borrower shall be required by law to deduct
or to withhold any Taxes from or in respect of any amount payable hereunder, (i)
the amount so payable shall be increased to the extent necessary so that after
making all required deductions and withholdings (including Taxes on amounts
payable to the Lenders or the Letter of Credit Issuer pursuant to this sentence)
the Lenders or the Letter of Credit Issuer receive an amount equal to the sum
they would have received had no such deductions or withholdings been made, (ii)
the Borrower shall make such deductions or withholdings, and (iii) the Borrower
shall pay the full amount deducted or withheld to the relevant taxation
authority in accordance with applicable law. Whenever any Taxes are payable by
the Borrower, as promptly as possible thereafter, the Borrower shall send the
Lenders, the Letter of Credit Issuer and the Agent an official receipt showing
payment. In addition, the Borrower agrees to pay any present or future taxes,
charges or similar levies which arise from any payment made hereunder (other
than related to the net income of a Lender) or from the execution, delivery,
performance, recordation or filing of, or otherwise with respect to, this
Agreement, the Notes, the Letters of Credit or any other Loan Document
(hereinafter referred to as "Other Taxes").
(b) The Borrower will indemnify the Lenders and the Letter of
Credit Issuer for the amount of Taxes or Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts
payable under this Section 2.13) paid by any Lender or the Letter of Credit
Issuer and any liability (including penalties, interest and expenses for
nonpayment, late payment or otherwise) arising therefrom or with respect
thereto, whether or not
35
such Taxes or Other Taxes were correctly or legally asserted. This
indemnification shall be paid within 30 days from the date on which such Lender
or such Letter of Credit Issuer makes written demand.
(c) Each Lender which is a foreign person (i.e., a Person other
than a United States Person for United States Federal income tax purposes)
hereby agrees that:
(i) it shall, no later than the Closing Date (or, in the
case of a Lender which becomes a party hereto pursuant to Section 10.13 hereof
after the Closing Date, the date upon which such Lender becomes a party hereto)
deliver to the Borrower through the Agent:
(1) two accurate and complete signed originals of
Internal Revenue Service Form W-8ECI, or
(2) two accurate and complete signed originals of
Internal Revenue Service Form W-8BEN,
in each case indicating that such Lender is on the date of delivery thereof
entitled to receive payments of principal, interest, fees, and other amounts
under this Agreement for the account of its lending installation under this
Agreement free from withholding of United States Federal income tax;
(ii) if at any time such Lender changes its lending
installation or installations or selects an additional lending installation it
shall, at the same time or reasonably promptly thereafter, deliver to the
Borrower through the Agent in replacement for, or in addition to, the forms
previously delivered by it hereunder:
(1) if such changed or additional lending installation
is located in the United States, two accurate and complete signed originals
of Form W-8ECI, or
(2) otherwise, two accurate and complete signed
originals of Form W-8BEN,
in each case indicating that such Lender is on the date of delivery thereof
entitled to receive payments of principal, interest, fees, and other amounts
under this Agreement for the account of such changed or additional lending
installation under this Agreement free from withholding of United States Federal
income tax; and
(iii) it shall, promptly upon the Borrower's reasonable
request to that effect, deliver to the Borrower such other forms or similar
documentation as may be required from time to time by any applicable law,
treaty, rule or regulation in order to establish such Lender's tax status for
withholding purposes.
(d) If the Borrower fails to perform its obligations under this
Section 2.13, the Borrower shall indemnify the Lenders and the Letter of Credit
Issuer for any incremental taxes, interest or penalties that may become payable
as a result of any such failure.
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ARTICLE 3.
LETTERS OF CREDIT5
5.1. Letters of Credit.
-----------------
(a) General. In order to assist the Borrower in establishing or
opening standby letters of credit, which shall not have expiration dates that
exceed one year from the date of issuance (the "Letters of Credit") with the
Letter of Credit Issuer, the Borrower has requested CIT to join in the
applications for such Letters of Credit, and/or guarantee payment or performance
of such Letters of Credit and any drafts or acceptances thereunder through the
issuance of a Letter of Credit Guaranty, thereby lending CIT's credit to that of
the Borrower. These arrangements shall be handled by CIT subject to the terms
and conditions set forth below. CIT shall have no obligation to arrange for the
issuance of Letters of Credit on or after the Facility Termination Date or
which, when added to the aggregate amount of all outstanding and contemporaneous
Revolving Loans and the Letter of Credit Exposure at such time, would cause the
amount of all Revolving Loans and the Letter of Credit Exposure at any time to
exceed the Current Commitment at such time. In addition, CIT shall not be
required to be the issuer of any Letter of Credit. The Borrower will be the
account party for any application for a Letter of Credit, which shall be a
computer transmission system approved by CIT and the Letter of Credit Issuer or
such other written form or computer transmission system or such other form as
may from time to time be approved by the Letter of Credit Issuer and CIT, and
shall be duly completed in a manner acceptable to CIT, together with such other
certificates, agreements, documents and other papers and information as the
Letter of Credit Issuer or CIT may request (the "Letter of Credit Application").
In the event of any conflict between the terms of the Letter of Credit
Application and this Agreement, for purposes of this Agreement, the terms of
this Agreement shall control.
(i) The aggregate Letter of Credit Exposure shall not exceed
two million five hundred thousand Dollars ($2,500,000). In addition, changes or
modifications of the Letters of Credit by the Borrower and/or the Letter of
Credit Issuer of the terms and conditions thereof shall in all respects be
subject to the prior approval of CIT in the exercise of its reasonable
discretion, provided, however, that (x) the expiry date of all Letters of Credit
shall be no later than 15 days prior to the Revolving Credit Termination Date
unless on or prior to 15 days prior to the Revolving Credit Termination Date
such Letters of Credit shall be cash collateralized in an amount equal to at
least 105% of the Stated Amount of such Letters of Credit and (y) the Letters of
Credit and all documentation in connection therewith shall be in form and
substance satisfactory to CIT and the Letter of Credit Issuer.
(ii) The Agent shall have the right, without notice to the
Borrower, to charge the Loan Account with the amount of any and all
indebtedness, liability or obligation of any kind (including indemnification for
breakage costs, capital adequacy and reserve requirement charges) incurred by
the Agent, CIT or the Lenders under the Letter of Credit Guaranty at the earlier
of (x) payment by CIT or the Lenders under the Letter of Credit Guaranty, and
(y) with respect to any Letter of Credit which is not cash collateralized as
provided in this Agreement, the occurrence of an Event of Default. Any amount
charged to the Loan Account shall be deemed a Revolving Loan
37
hereunder made by the Lenders to the Borrower, funded by the Agent on behalf of
the Lenders and subject to sections 2.03(f) and (g) hereof. Any charges, fees,
commissions, costs and expenses charged to CIT for the account of the Borrower
by the Letter of Credit Issuer in connection with or arising out of Letters of
Credit issued pursuant to this Agreement or out of transactions relating thereto
will be charged to the Loan Account in full when charged to or paid by CIT and
any such charges by CIT to the Loan Account shall be conclusive and binding on
the Borrower and the Lenders absent manifest error. Each of the Lenders and the
Borrower agrees that the Agent shall have the right to make such charges
regardless of whether any Event of Default or Potential Default shall have
occurred and be continuing or whether any of the conditions precedent in Section
5.02 hereof have been satisfied.
(iii) The Borrower agrees to unconditionally indemnify the
Agent, CIT and each Lender and to hold the Agent, CIT and each Lender harmless
from any and all loss, claim or liability incurred by the Agent, CIT or any such
Lender arising from any transactions or occurrences relating to Letters of
Credit established or opened for the Borrower's account and any drafts or
acceptances thereunder, and all Obligations thereunder, including any such loss
or claim due to any action taken by the Letter of Credit Issuer, other than for
any such loss, claim or liability arising out of the gross negligence or willful
misconduct of the Agent, CIT or any Lender as determined by a final judgment of
a court of competent jurisdiction.
(iv) The Borrower further agrees to hold the Agent, CIT and
each Lender harmless from any errors or omission, negligence or misconduct by
the Letter of Credit Issuer (unless such Letter of Credit Issuer shall be, in
such instance, the Agent, CIT or such Lender). The Borrower's unconditional
obligation to the Agent, CIT and each Lender hereunder shall not be modified or
diminished for any reason or in any manner whatsoever, other than as a result of
the Agent's, CIT's or such Lender's gross negligence or willful misconduct as
determined by a final judgment of a court of competent jurisdiction. The
Borrower agrees that any charges incurred by CIT for the Borrower's account by
the Letter of Credit Issuer shall be conclusive and binding on the Borrower
absent manifest error and may be charged to the Loan Account in accordance with
the provisions of this Agreement.
(v) None of the Agent, CIT, the Letter of Credit Issuer or
any of the Lenders shall be responsible for the existence, character, quality,
quantity, condition, packing, value or delivery of the goods purporting to be
represented by any documents; any difference or variation in the character,
quality, quantity, condition, packing, value or delivery of the goods from that
expressed in the documents; the validity, sufficiency or genuineness of any
documents or of any endorsements thereof even if such documents should in fact
prove to be in any or all respects invalid, insufficient, fraudulent or forged;
the time, place, manner or order in which shipment is made; partial or
incomplete shipments, or failure or omission to ship any or all of the goods
referred to in the Letters of Credit or documents; any deviation from
instructions; delay, default, or fraud by the shipper and/or anyone else in
connection with any such goods or the shipping thereof; or any breach of
contract between the shipper or vendors and the Borrower. Furthermore, without
being limited by the foregoing, none of the Agent, CIT, the Letter of Credit
Issuer or any of the Lenders shall be responsible for any act or omission with
respect to or in connection with any goods covered by Letters of Credit.
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(vi) The Borrower agrees that any action taken by the Agent,
CIT, the Letter of Credit Issuer or any Lender, if taken in good faith, under or
in connection with the Letters of Credit, the guarantees, the drafts or
acceptances or the goods purported to be represented by any documents, shall be
binding on the Borrower (with respect to the Letter of Credit Issuer, the Agent,
CIT and the Lenders) and shall not put the Agent, CIT or the Lenders in any
resulting liability to the Borrower, except for any action taken by the Agent,
CIT, the Letter of Credit Issuer or any Lender which is grossly negligent or the
result of willful misconduct. In furtherance thereof, CIT shall have the full
right and authority to clear and resolve any questions of non_compliance of
documents; to give any instructions as to acceptance or rejection of any
documents or goods; to execute any and all steamship or airways guaranties (and
applications therefore), indemnities or delivery orders; to grant any extensions
of the maturity of, time of payment for, or time of presentation of, any drafts,
acceptances, or documents; and to agree to any amendments, renewals, extensions,
modifications, changes or cancellations of any of the terms or conditions of any
of the applications, Letters of Credit, drafts or acceptances; all in CIT's sole
name, and the Letter of Credit Issuer shall be entitled to comply with and honor
any and all such documents or instruments executed by or received solely from
CIT, all without any notice to or any consent from the Borrower.
(vii) Without CIT's express consent in writing or through a
computer transmission, the Borrower agrees: (x) not to execute any applications
for steamship or airway guaranties, indemnities or delivery orders; to grant any
extensions of the maturity of, time of payment for, or time of presentation of,
any drafts, acceptances or documents; or to agree to any amendments, renewals,
extensions, modifications, changes or cancellations of any of the terms or
conditions of any of the applications, Letters of Credit, drafts or acceptances;
and (y) after the occurrence of an Event of Default which is not cured within
any applicable grace period, if any, or waived by the Agent, not to (A) clear
and resolve any questions of non_compliance of documents, or (B) give any
instructions as to acceptances or rejection of any documents or goods.
(viii) The Borrower agrees that any necessary and material
import, export or other license or certificates for the import or handling of
Inventory required to be obtained by the Borrower will have been timely
procured; all foreign and domestic governmental laws and regulations applicable
to the Borrower in regard to the shipment and importation of Inventory or the
financing thereof will have been timely and fully complied with, and any
certificates in that regard that CIT may at any time reasonably request will be
promptly furnished. In this connection, the Borrower represents and warrants
that all shipments made under any such Letters of Credit are in compliance with
the laws and regulations of the countries in which the shipments originate and
terminate except where all instances of such non_compliance taken together will
not have a Material Adverse Effect. As between the Borrower, on the one hand,
and the Agent, CIT, the Lenders and the Letter of Credit Issuer, on the other
hand, the Borrower assumes all risk, liability and responsibility for, and
agrees to pay and discharge, all present and future local, state, federal or
foreign taxes, duties, or levies. As between the Borrower, on the one hand, and
the Agent, CIT, the Lenders and the Letter of Credit Issuer, on the other hand,
any embargo, restriction, laws, customs or regulations of any country, state,
city, or other political subdivision, where such Inventory is or may be located,
or wherein payments are to be made, or herein drafts may be drawn, negotiated,
accepted, or paid, shall be solely the Borrower's risk, liability and
responsibility.
39
(ix) Upon any payments made to the Letter of Credit Issuer
under the Letter of Credit Guaranty, CIT or the Lenders, as the case may be,
shall, without prejudice to its rights under this Agreement (including that such
unreimbursed amounts shall constitute Revolving Loans hereunder), acquire by
subrogation any rights, remedies, duties or obligations granted or undertaken by
the Borrower to the Letter of Credit Issuer in any Letter of Credit Application,
any standing agreement relating to Letters of Credit or otherwise, all of which
shall be deemed to have been granted to the Agent and apply in all respects to
the Agent and shall be in addition to any rights, remedies, duties or
obligations contained herein.
(x) In the event that the Borrower is required to provide
cash collateral for any Letter of Credit in accordance with this Agreement, the
Borrower shall deposit such cash collateral in the Letter of Credit Cash
Collateral Account, which cash collateral shall be held in the Letter of Credit
Cash Collateral Account until either all Obligations have been paid in full in
cash or cash collateral is no longer required under the terms of this Agreement.
(xi) On the Final Financing Order Date all outstanding
Existing Letters of Credit shall automatically be and become Letters of Credit
hereunder for all purposes.
(b) Request for Issuance. The Borrower may from time to time,
upon notice (an "L/C Notice") not later than 12:00 noon, New York City time, at
least three Business Days in advance, request CIT to assist the Borrower in
establishing or opening a Letter of Credit by delivering to the Agent, with a
copy to the Letter of Credit Issuer, a Letter of Credit Application, together
with any necessary related documents. CIT shall not provide support, pursuant to
the Letter of Credit Guaranty, if the Agent shall have received written notice
from the Majority Lenders on the Business Day immediately preceding the proposed
issuance day for such Letter of Credit that one or more of the conditions
precedent in Section 5.02 hereof will not have been satisfied on such date, and
neither CIT nor the Agent shall otherwise be required to determine that, or take
notice whether, the conditions precedent set forth in Section 5.02 hereof have
been satisfied.
3.02. Participations.
--------------
(a) Purchase of Participations. Immediately upon the issuance by
the Letter of Credit Issuer of any Letter of Credit in accordance with the
procedures set forth in Section 3.01 hereof, each Lender (other than CIT) shall
be deemed to have irrevocably and unconditionally purchased and received from
CIT, without recourse or warranty, an undivided interest and participation, to
the extent of such Lender's Pro Rata Share, in all obligations of CIT with
respect to such Letter of Credit (including, without limitation, all Undrawn
Letter of Credit Availability and Reimbursement Obligations of the Borrower with
respect thereto, pursuant to the Letter of Credit Guaranty or otherwise).
(b) Sharing of Letter of Credit Payments. In the event that CIT
makes any payment in respect of the Letter of Credit Guaranty and the Borrower
shall not have repaid such amount to the Agent for the account of CIT, the Agent
shall charge the Loan Account in the amount of the Reimbursement Obligation, in
accordance with Section 3.01(a)(ii) hereof.
40
(c) Obligations Irrevocable. The obligations of a Lender to make
payments to the Agent for the account of the Agent or CIT with respect to a
Letter of Credit shall be irrevocable, not subject to any qualification or
exception whatsoever and shall be made in accordance with, but not subject to,
the terms and conditions of this Agreement under all circumstances, including,
without limitation, any of the following circumstances:
(i) any lack of validity or enforceability of this Agreement
or any of the other Related Documents;
(ii) the existence of any claim, set off, defense or other
right which the Borrower may have at any time against a beneficiary named
in a Letter of Credit or any transferee of any Letter of Credit (or any
Person for whom any such transferee may be acting), the Agent, Letter of
Credit Issuer, any Lender, or any other Person, whether in connection with
this Agreement, any Letter of Credit, the transactions contemplated herein
or any unrelated transactions (including any underlying transactions
between the Borrower or any other party and the beneficiary named in any
Letter of Credit);
(iii) any draft, certificate or any other document presented
under the Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(iv) the surrender or impairment of any security for the
performance or observance of any of the terms of any of the Related
Documents;
(v) any failure by the Agent to provide any notices required
pursuant to this Agreement relating to Letters of Credit; or
(vi) the occurrence of any Event of Default or Potential
Default.
ARTICLE 4
BORROWING BASE
4.01. Condition of Lending and Assisting in Establishing or Opening
Letters of Credit. CIT and the other Lenders shall have no obligation to make a
Revolving Loan or assist in establishing or opening a Letter of Credit to the
extent that the aggregate unpaid principal amount of the Revolving Loans and the
Letter of Credit Exposure exceeds, or after giving effect to a requested Credit
Extension would exceed, the Current Commitment at such time.
4.02. Mandatory Prepayment. Concurrently with the delivery of any
Borrowing Base Certificate, the Borrower shall give notice to the Agent of any
mandatory prepayment pursuant to Section 2.04(b)(i) hereof, which notice shall
specify a prepayment date no later than the earlier of (x) the date on which
such Borrowing Base Certificate is given and (y) the date on which such
Borrowing Base Certificate is required to be provided to the Lenders.
41
4.03. Rights and Obligations Unconditional. Without limitation of any
other provision of this Agreement, the rights of the Agent, CIT and the Lenders
and the obligations of the Borrower under this Article 4 are absolute,
unconditional and the Agent, CIT and the Lenders shall not be deemed to have
waived the condition set forth in Section 4.01 hereof or their right to payment
in accordance with Section 4.02 hereof in any circumstance whatever, including
but not limited to circumstances wherein the Agent or the Lenders (knowingly or
otherwise) make an advance hereunder in excess of the Borrowing Base.
4.04. Borrowing Base Certificate.
--------------------------
(a) By 12:00 noon, New York City time three (3) Business Days
after the Saturday of each week if a part of a Weekly Report which contains a
calculation of ineligibles with respect to Accounts and Inventory on a monthly
basis, or five (5) Business Days after the last day of the preceding month if a
part of a Monthly Report (and on any other date on which the Agent reasonably
requests), the Borrower shall furnish to the Agent a certificate ("Borrowing
Base Certificate") in the form provided to the Borrower by the Agent, certified
as true and correct by a Designated Financial Officer, setting forth the
Borrowing Base and the other information required therein as of the Borrower's
close of business on the Saturday of the preceding week, together with such
other information with respect to the Accounts and Inventory of the Borrower as
the Agent may reasonably request.
(b) In the event of any dispute about the eligibility of any
asset for inclusion in the Borrowing Base or the valuation thereof, the Agent's
good faith judgment shall control, but the Agent agrees to consult with the
Borrower concerning any such dispute.
(c) The Borrowing Base set forth in a Borrowing Base Certificate
shall be effective from and including the date such Borrowing Base Certificate
is duly received by the Agent to but not including the date on which a
subsequent Borrowing Base Certificate is duly received by the Agent, unless the
Agent disputes the eligibility of any asset for inclusion in the Borrowing Base
or the valuation thereof by notice of such dispute to the Borrower, in which
case the value of such asset shall, at the discretion of the Borrower, either
not be included in the Borrowing Base or be included in the Borrowing Base with
a value reasonably acceptable to the Agent.
(d) Each Borrowing Base Certificate shall be accompanied by an
accounts receivable aging report and a perpetual inventory report, each
containing such detail and such other and further information as the Agent may
reasonably request from time to time.
4.05. General Provisions. Notwithstanding anything to the
contrary in this Article 4, in no event shall any single element of value or
asset be counted twice in determining the Borrowing Base.
4.06. Implementation of Additional Reserves. In the event the
Borrower is in breach of any covenants hereunder, the Agent and Co-Agent may in
their sole discretion implement additional reserves under (B)(iv) of the
definition of "Borrowing Base". The amount of such
42
additional reserves shall be determined in the sole discretion of the Agent and
the Co-Agent acting in good faith.
ARTICLE 5
CONDITIONS OF EFFECTIVENESS, LETTER OF CREDIT
ISSUANCE AND LENDING
5.01 Conditions Precedent to Effectiveness. This Agreement shall
become effective as of the Business Day when each of the following conditions
precedent shall have been satisfied and the obligation of any Lender to make the
initial Loan(s) hereunder or the obligation of CIT or any Lender to assist the
Borrower in obtaining the issuance of the initial Letter of Credit hereunder
shall be subject to the satisfaction of the following conditions precedent,
unless the Agent agrees that any one or more of the following conditions
precedent may be satisfied post-closing:
(a) Payment of Fees, Etc. The Borrower shall have paid all fees,
costs, expenses and taxes then payable by the Borrower including, without
limitation, those due and payable pursuant to Sections 2.08 and 10.06
hereof. The Borrower shall have paid to counsel to the Agent all reasonable
fees and other reasonable client charges due to such counsel on the Closing
Date for which counsel has invoiced Borrower.
(b) Representations and Warranties; No Event of Default. The
representations and warranties contained in Article 6 of this Agreement and
in each other Loan Document and certificate or other writing delivered to
the Agent, the Lenders or the Letter of Credit Issuer pursuant hereto or
thereto or prior to the Closing Date shall be correct in all material
respects on and as of the Closing Date as though made on and as of such
date (except to the extent such representation or warranty expressly
relates to an earlier period); and no Potential Default or Event of Default
shall have occurred and be continuing on the Closing Date or would result
from this Agreement becoming effective in accordance with its terms.
(c) Delivery of Documents. The Agent shall have received on or
before the Closing Date the following, each in form and substance
satisfactory to the Agent and the Co-Agent and, unless indicated otherwise,
dated the Closing Date:
(i) Revolving Credit Notes and Term Loan Notes, each
payable to the order of each Lender, duly executed by the Borrower;
(ii) the Security Agreements, duly executed by the Borrower
and the Parent;
(iii) the Pledge Agreements, duly executed by the appropriate
parties thereto and delivery of the stock certificates, and executed stock
powers, for the stock pledged thereunder;
43
(iv) appropriate financing statements on Form UCC_1 and the
appropriate forms for recording liens on trademarks and copyrights all duly
executed by the Borrower and, in the Agent's sole discretion, to be filed
in such office or offices as may be necessary or, in the opinion of the
Agent, desirable to perfect the security interests purported to be created
by the Security Documents (including with respect to any liens on
trademarks and copyrights recorded in any federal registry maintained for
such purpose), all in form and substance satisfactory to the Agent;
(v) copies of (x) all effective financing statements which
name as debtor the Borrower or any other entity requested by the Agent, tax
liens and judgment liens and which are filed in the offices referred to in
paragraph (iii) above, together with copies of such financing statements,
none of which, except as otherwise agreed to in writing by the Agent, shall
cover any of the Collateral; and (y) searches with respect to trademarks
and copyrights as to which the Agent has been granted a lien pursuant to
the Security Documents;
(vi) the Parent Guaranty and the Video Guaranty, and a
Guaranty executed by each other direct or indirect domestic subsidiary of
the Parent;
(vii) a copy of the resolutions adopted by the Board of
Directors of each of the Loan Parties, certified as of the Closing Date by
authorized officers thereof, authorizing (A) the borrowings hereunder
and/or the transactions contemplated by the Loan Documents to which the
Borrower or such Loan Party is or will be a party, and (B) the execution,
delivery and performance by the Borrower or such Loan Party of each Loan
Document and the execution and delivery of the other documents to be
delivered by the Borrower or such Loan Party in connection therewith;
(viii) a certificate of an authorized officer of each of the
Loan Parties, certifying the names and true signatures of the officers of
such Person authorized to sign each Loan Document to which the Borrower or
such Loan Party is or will be a party and the other documents to be
executed and delivered by the Borrower or such Loan Party in connection
therewith, together with evidence of the incumbency of such authorized
officers;
(ix) a certificate, as of a recent date, of the appropriate
official(s) of the state of organization of each Loan Party, and solely for
the Borrower, the appropriate official(s) in each of the parenthetically
noted states of foreign qualification of the Borrower (Arkansas, Indiana,
New York, North Carolina and Wisconsin), certifying as to the subsistence
in good standing of, and (where such state customarily so indicates) the
payment of taxes by, such Person in such states and listing all
organizational documents of such Person on file with such official(s),
together with confirmation by telephone or telegram (where available) on
the Closing Date from such official(s) as to such matters and copies of
each certified certificate of authority (or similar document of the
Borrower) from each foreign state where such Person is qualified to do
business;
(x) a copy of the organizational documents of the Borrower
and each Loan Party certified as of a recent date by the appropriate
official(s) of the state of
44
organization of such Person and as of the Closing Date by an authorized
officer of such Loan Party, as applicable;
(xi) a copy of (i) the certificate of incorporation of any
Loan Party and all amendments thereto, and (ii) the by-laws of each Loan
Party, and all amendments thereto;
(xii) a certificate of the Designated Financial
Officer of the Borrower certifying as to the matters set forth in
subsection (b) of this Section 5.01;
(xiii) a copy of the financial statements and cash flow
projections referred to in Section 6.07 hereof and a balance sheet of the
Borrower as of December 31, 2000 certified by a Designated Financial
Officer of the Borrower;
(xiv) a Borrowing Base Certificate current as of the
close of business on a date not earlier than June 1, 2001, certified by
the Designated Financial Officer of the Borrower;
(xv) a certificate of an authorized officer of the
Borrower, certifying the names and true signatures of those officers of
the Borrower, as applicable, that are authorized to provide Notices of
Borrowing and all other notices under this Agreement and the Loan
Documents;
(xvi) a copy of each Material Contract and the Borrower
Licensor Agreements, all certified as a true, complete and correct copy
thereof by the Designated Financial Officer of the Borrower;
(xvii) the Collateral Assignment of Licenses and
appropriate acknowledgments thereto;
(xviii) a certificate of insurance evidencing insurance
on the property of the Borrower as is required by Section 7.07 hereof,
naming the Agent as additional insured and loss payee, using a long form
loss payee endorsement, for all insurance maintained by the Borrower;
(xix) copies, certified as true and correct by a
Designated Financial Officer of the Borrower, of any collective
bargaining agreements or other similar agreement or arrangements covering
the employees of the Borrower or any of its Subsidiaries (collectively,
the "Collective Bargaining Agreements");
(xx) such other agreements, instruments, approvals,
and other documents as the Agent may reasonably request; and
45
(xxi) such opinions of counsel for the Borrower as the
Agent or any Lender shall request, each such opinion to be in a form,
scope, and substance reasonably satisfactory to the Agent, the Lenders
and their respective counsel.
(d) Proceedings; Receipt of Documents. All proceedings in
connection with the transactions contemplated by this Agreement and the
Related Documents and all documents incidental thereto, shall be
satisfactory to the Agent, the Co-Agent and their special counsel, and
the Agent, Co-Agent and such special counsel shall have received all such
information and such counterpart originals or certified or other copies
of such documents, in form and substance reasonably satisfactory to the
Agent and the Co-Agent, as the Agent, Co-Agent or such special counsel
may reasonably request.
(e) Cash Management System. The cash management system of the
Borrower shall be satisfactory to the Agent (including with respect to the
segregation from the accounts of the Borrower amounts received by the
Borrower which are not the property of the Borrower other than accounts
which may as a matter of law belong to employees, amounts payable for sales
taxes and the like). In addition, the Agent shall have received Lock Box
Agreements in form and substance satisfactory to the Agent.
(f) Lien Priority. The Lien in favor of the Agent pursuant to
the Related Documents shall be a valid and perfected first priority Lien
on the Collateral, which shall be subject to no other Liens except for
Permitted Liens. The Agent and the Lenders shall continue to have
priority in the first $5,000,000 of Swing Collateral.
(g) Legal Restraints/Litigation. On the Closing Date, except as
set forth on Schedule 6.06 hereto, there shall be no (1) litigation,
investigation or proceeding (judicial or administrative) pending or, to the
knowledge of the Borrower, threatened, against the Borrower or its
Subsidiaries, or their assets, by any agency, division or department of any
county, city, state or federal government arising out of the transactions
contemplated by the Loan Documents, (2) injunction, writ or restraining
order restraining or prohibiting the transactions contemplated pursuant to
the transactions contemplated by the Loan Documents, or (3) suit, action,
investigation or proceeding (judicial or administrative) pending or, to the
knowledge of the Borrower, threatened against the Borrower or its
Subsidiaries, or its assets, which could have a Material Adverse Effect.
(h) Absence of Material Adverse Change. Other than the filing
of the Chapter 11 Cases, the Agent shall be satisfied that there is an
absence of any material adverse change since December 31, 2000 in the
financial condition, business, assets or operations of the Borrower (it
being understood and agreed that any significant adverse change in the
terms, conditions, assumptions or projections (to the extent projections
have been delivered and deemed acceptable by the Agent and then there is
an adverse change which affects such previously delivered projections)
supplied to the Agent by the Borrower may be construed by the Agent as a
material adverse change).
46
(i) Pay-off of Existing Credit Facilities. The Agent shall be
satisfied in all respects with (1) the repayment in full of the Existing
Credit Facilities or (2) the partial repayment of the Existing Credit
Facilities, the plan for repayment in full thereof, and the provision by
the Borrower of adequate protection liens as set forth in the Interim
Order.
(j) Minimum Availability. Upon making the Revolving Loans on the
Closing Date, the Borrower shall have Availability in an amount no less
than $3,000,000.
(k) Financial Reports and Projections. The Agent shall have
received the preliminary balance sheet and income statement for the fiscal
period ended March 31, 2001, and the most recent Budget, and shall have
been satisfied, in its sole discretion, with its review thereof.
(l) First Day Pleadings. The Agent and the Lenders shall have
received all "first day" pleadings filed or to be filed with the
Bankruptcy Court in connection with the Chapter 11 Cases, and been
satisfied with all such pleadings, including, without limitation, any
pleadings concerning the payment of claims which arose or accrued prior
to the Filing Date.
(m) There shall have been no objections to the Interim Financing
Order by the United States trustee or any creditors or interested parties,
which remain subject to appeal.
(n) Interim Financing Order. The Interim Financing Order shall
have been entered by the Bankruptcy Court and the Agent shall have
received a certified copy of same, and such order shall be in full force
and effect and shall not have been reversed, stayed, modified or amended
absent the prior written consent of the Agent, the Lenders and the Loan
Parties.
(o) Sale to DIC. The Agent shall have received an executed
copy of a purchase agreement in form and substance satisfactory to the
Agent and Co-Agent between (1) the Borrower, its parent or subsidiaries
or affiliates and (2) DIC GB Acquisition Corp. or its designees (the "DIC
Purchase Agreement").
(p) DIC Financing. The Agent shall have received executed
copies of commitment letters in form and substance satisfactory to the
Agent and Co-Agent providing for financing for the acquisition by DIC GB
Acquisition Corp. of the assets and business of Borrower and the
Guarantors.
(q) Consents and Abilities. The Agent shall have received a
certificate from the Borrower to the effect that to the best of Borrower's
knowledge, it has no reason to believe that it will not be able to
effectuate the transfer of assets, in each case pursuant to the DIC
Purchase Agreement.
47
5.02. Conditions Precedent to Revolving Loans and Letters of Credit
and to Loans in excess of the Interim Amount. In addition to the requirements
of Section 5.01 hereof, the obligation of (x) each Lender to make any Loan
after the initial Loans in connection with the Interim Financing (as defined
in the Interim Financing Order), (y) CIT or any Lender to assist the Borrower
in obtaining the issuance of any Letter of Credit or (z) any Lender to make any
loan in an amount up to the Current Commitment is, in each case, subject to the
fulfillment, in a manner satisfactory to the Agent, of each of the following
conditions precedent:
(a) Payment of Fees, Etc. The Borrower shall have paid all fees,
costs, expenses and taxes then payable by the Borrower pursuant to Sections
2.08 and 10.06 hereof.
(b) Representations and Warranties; No Event of Default. The
following statements shall be true, and the submission by the Borrower to
the Agent of a Notice of Borrowing with respect to a Revolving Loan and
the Borrower's acceptance of the proceeds of such Revolving Loan, or the
submission by the Borrower to the Agent and the Letter of Credit Issuer of
an L/C Notice with respect to a Letter of Credit and the issuance of such
Letter of Credit shall be deemed to be a representation and warranty by the
Borrower on the date of such Revolving Loan and the date of the issuance of
such Letter of Credit, as the case may be, that, (i) the representations
and warranties contained in Article 6 of this Agreement and in each other
Loan Document and certificate or other writing delivered to the Agent, the
Lenders and the Letter of Credit Issuer pursuant hereto on or prior to the
date of such Revolving Loan or Letter of Credit are correct in all material
respects on and as of such date as though made on and as of such date
(except for representations and warranties which relate to a specific
date), and (ii) no Potential Default or Event of Default has occurred and
is continuing or would result from the making of the Revolving Loan to be
made on such date or the issuance of the Letter of Credit to be issued on
such date.
(c) Borrowing Notice. The Agent shall have received a Notice of
Borrowing pursuant to Section 2.03 hereof no later than 12:00 noon (New
York City time) on the date of a proposed borrowing or an L/C Notice and a
Letter of Credit Application pursuant to Section 3.01 hereof not later than
12:00 noon (New York City time) three Business Days prior to the proposed
date of issuance of a Letter of Credit.
(d) Financing Orders. The Interim Financing Order (if prior to
the Final Financing Order Date) or the Final Financing Order (if after the
Final Financing Order Date), as the case may be, is in form and substance
satisfactory to the Agent and the Lenders, shall be in full force and
effect and shall not have been reversed, stayed, modified or amended,
except for such modifications, and amendments mutually agreed to by the
Borrower, the Agent and the Lenders.
(e) Licensor Consents. With respect to Loans, the Agent and the
Lenders shall be satisfied that the consents from licensors permit the
Agent and the Lenders, notwithstanding whether any license agreement is in
default or has been terminated, to take possession of, transfer or sell, or
cause the Borrower to transfer or sell, inventory in which the Agent and
the Lenders have been granted herein first priority, perfected security
interests,
48
including, without limitation, the out-of-the ordinary course sale of
any such inventory under section 363(b) of the Bankruptcy Code, without any
restriction whatsoever which might be otherwise applicable to and contained
in any licensing agreements subject only to the obligation to pay earned
royalties for inventory actually sold or disposed of hereunder at the
applicable percentage of sales royalty rate as may be contained in the
applicable license agreements, if any; provided, however, that no royalties
shall be payable which are based on, or constitute, a minimum, past due or
guaranteed royalty rate or otherwise compute the applicable earned royalty
rate using criteria other than a percentage of sales for the actual
inventory sold as aforesaid.
(f) Absence of Material Adverse Change. Since December 31, 2000,
other than the filing of the Chapter 11 Cases, the Agent shall be
satisfied that there is an absence of any material adverse change in the
financial condition, business, assets or operations of the Borrower (it
being understood and agreed that any significant adverse change in the
terms, conditions, assumptions or projections (to the extent projections
have been delivered and deemed acceptable by the Agent and then there is
an adverse change which affects such previously delivered projections)
supplied to the Agent by the Borrower may be construed by the Agent as a
material adverse change).
ARTICLE 6
REPRESENTATIONS AND WARRANTIES
The Borrower hereby represents and warrants to the Agent, the Co-Agent
and the Lenders as follows:
6.01. Organization, Good Standing, Etc. Each of the Loan Parties (i)
is a corporation duly organized, validly existing and in good standing under the
laws of the state of its organization, (ii) has all requisite power and
authority to conduct its business as now conducted and as presently contemplated
and (in the case of the Borrower), subject to Bankruptcy Court approval, to make
the borrowings hereunder and to consummate the transactions contemplated hereby
and (iii) is duly qualified to do business and is in good standing in each
jurisdiction in which the character of the properties owned or leased by it or
in which the transaction of its business makes such qualification necessary,
except, with respect to this clause (iii), where all instances of such failure
to qualify taken together will not have a Material Adverse Effect.
6.02. Authorization, Etc. The execution, delivery and performance by
each of the Loan Parties of each Loan Document to which it is a party, (i) has
been duly authorized by all necessary corporate action, (ii) does not and will
not contravene its certificate of incorporation or by-laws, any other applicable
law or any contractual restriction binding on or otherwise affecting it or any
of its properties or result in a default under any agreement or instrument to
which such Loan Party is a party or by which such Loan Party or its properties
may be subject, (iii) does not and will not result in or require the creation of
any Lien (other than pursuant to any such Loan Document or the Orders) upon or
with respect to any of its properties, and (iv) does not and will not result in
any
49
suspension, revocation, impairment, forfeiture or nonrenewal of any permit,
license, authorization or approval applicable to its operations or any of its
properties.
6.03. Governmental Approvals. Except for Bankruptcy Court approval, no
authorization, consent, approval, license, exemption or other action by, and no
registration, qualification, designation, declaration or filing with, any
Governmental Authority is or will be necessary in connection with the execution
and delivery by each of the Loan Parties of the Loan Documents to which it is a
party, consummation of the transactions therein contemplated, performance of or
compliance with the terms and conditions thereof or to ensure the legality,
validity, enforceability and admissibility in evidence thereto, except for the
filings and recordings in respect of the Liens created pursuant to the Security
Documents.
6.04. Enforceability of Loan Documents. This Agreement is, and each
other Loan Document to which any Loan Party is or will be a party, when
delivered hereunder, will be, a legal, valid and binding obligation of such Loan
Party, enforceable, subject to Bankruptcy Court approval, against such Loan
Party in accordance with its terms, except to the extent that the enforceability
thereof may be limited by applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or similar laws generally affecting
creditors' rights and by equitable principles (regardless of whether enforcement
is sought in equity or at law).
6.05. Subsidiaries and Affiliates. Schedule 6.05 hereto is a complete
and correct description of the name, jurisdiction of incorporation and ownership
of the outstanding capital stock of each Subsidiary and each Affiliate of the
Parent in existence on the Closing Date and of all membership interests,
partnership interests or joint venture interests owned directly or indirectly by
the Parent. All shares of such stock and all other equity interests owned by the
Parent or one or more of its Subsidiaries, as indicated in such Schedule, are
owned free and clear of all Liens, except for the Liens in favor of the Agent
that secure payment of the Obligations, the Liens of the Trustee, and the Liens
created pursuant to the DIC Purchase Agreement. There are no options, warrants
or other rights to acquire shares of capital stock of any Subsidiary of the
Borrower. Each of the Parent, Borrower and each other Loan Party may not form a
Subsidiary without the consent of the Agent, which consent shall not be
unreasonably withheld.
6.06. Litigation. Except as set forth on Schedule 6.06 hereto, there
is no pending or, to the knowledge of the Borrower, threatened action, suit or
proceeding requesting damages in an amount in excess of $100,000 affecting the
Borrower, any Subsidiaries or any other Loan Party before any court or other
Governmental Authority or any arbitrator in existence on the Closing Date other
than claims made in connection with the Chapter 11 Cases. There is no pending
or, to the knowledge of the Borrower, threatened action, suit or proceeding
affecting the Borrower, any of its Subsidiaries or any other Loan Party before
any court or other Governmental Authority or any arbitrator which may have a
Material Adverse Effect.
50
6.07. Financial Condition.
-------------------
(a) Historical Statements. The Borrower has heretofore
furnished to the Lenders (i) a balance sheet of the Parent and its Consolidated
Subsidiaries for the fiscal years ended December 25, 1999 and December 31, 2000
and the related statements of operations and cash flows for the respective
fiscal year then ended, as, in the case of the December 31, 1999 financials,
examined and reported on by Ernst & Young LLP, independent certified public
accountants, and as, in the case, of the December 31, 2000 financials, certified
by a Designated Financial Officer of the Parent and (ii) a balance sheet and
related statements of operations and cash flows of the Parent and its
Consolidated Subsidiaries for and as of the end of the three month period ended
March 31, 2001, as certified by a Designated Financial Officer of the Parent.
Such financial statements (including the notes thereto) present fairly, in all
material respects, the financial condition of the Parent and its Consolidated
Subsidiaries as of the end of such fiscal year and such three month period and
the results of its operations and the cash flows for the fiscal year and such
three month period then ended, all in conformity with GAAP applied on a basis
consistent with that of the preceding fiscal year except as disclosed therein
and subject, in the case of the interim financials, to customary year-end
adjustments. Except as disclosed in the schedules hereto, the Parent and its
Consolidated Subsidiaries do not have any material contingent liabilities
(including liabilities for taxes), unusual forward or long term commitments or
unrealized or anticipated losses from unfavored commitments.
(b) The Borrower has heretofore furnished to the Lenders cash
flow projections of the Parent and its Consolidated Subsidiaries for the period
ending July 31, 2001 and such projections have been prepared in accordance with
the standard set forth in the second sentence of Section 6.17 hereof.
6.08. Compliance with Law, Etc. None of the Loan Parties is in
violation of its certificate of incorporation, its by_laws, any law (including
but not limited to violations pertaining to the conduct of its business or the
use, maintenance or operation of the real and personal properties owned or
possessed by it) or, other than as a result of the filing of the Chapter 11
Cases, any term of any material agreement or instrument binding on or otherwise
affecting it or any of its properties, except, in the case of violations of law,
where all such violations taken together will not have a Material Adverse
Effect.
6.09. ERISA. (i) Except as disclosed on Schedule 6.09 hereto, each Plan
is in substantial compliance with the applicable provisions of ERISA and the
Code, (ii) no Termination Event has occurred or is reasonably expected to occur
with respect to any Benefit Plan, (iii) the most recent annual report (Form 5500
Series) with respect to each Plan, including Schedule B (Actuarial Information)
thereto, copies of which have been filed with the Internal Revenue Service, is
complete and correct in all material respects and fairly presents the funding
status of such Benefit Plan, and since the date of such report there has been no
material adverse change in such funding status, (iv) no Benefit Plan had an
accumulated or waived funding deficiency or permitted decreases which would
create a deficiency in its funding standard account within the meaning of
Section 412 of the Code at any time during the previous 60 months, and (v) no
Lien imposed under the Code or ERISA exists or is likely to arise on account of
any Benefit Plan within the meaning of Section 412 of the Code. Except as
disclosed on Schedule 6.09 hereto, neither the Borrower nor any of its ERISA
Affiliates
51
has incurred any withdrawal liability under ERISA with respect to any
Multiemployer Plan (which is unpaid as of the date hereof), and the Borrower is
not aware of any facts indicating that the Borrower or any of its ERISA
Affiliates may in the future incur any such withdrawal liability. Except as
required by Section 4980B of the Code or as disclosed on Schedule 6.09, the
Borrower does not maintain a welfare plan (as defined in Section 3(1) of ERISA)
which provides benefits or coverage after a participant's termination of
employment. Neither the Borrower nor any of its ERISA Affiliates have incurred
any liability under the Worker Adjustment and Retraining Notification Act (which
is unpaid as of the date hereof). All Plans in existence on the Closing Date are
set forth on Schedule 6.09 hereto.
6.10. Taxes, Etc. Except as set forth on Schedule 6.10, all tax
returns required to be filed by the Parent and its Subsidiaries have been
properly prepared, executed and filed. Except for pre-petition taxes listed on
Schedule 6.10, all taxes, assessments, fees and other governmental charges upon
the Parent and its Subsidiaries or upon any of their respective properties,
income, sales or franchises which are shown thereon as due and payable have been
paid, unless payment thereof is being contested in good faith by appropriate
proceedings which stay the imposition of any penalty, fine or Lien resulting
from the non_payment thereof and with respect to which adequate reserves
therefor are being maintained. The reserves and provisions for taxes, if any, on
the books of the Borrower and the Parent are adequate for all open years and for
its current fiscal period. Except as set forth on Schedule 6.10, the Borrower
does not know of any proposed additional assessment or basis for any material
assessment for additional taxes (whether or not reserved against). The federal
income tax liabilities of the Borrower and its Subsidiaries have been finally
determined by the Internal Revenue Service, or the time for audit has expired,
for all fiscal periods ending on or prior to December 28, 1996 and all such
liabilities (including all deficiencies assessed following audit) have been
satisfied.
6.11. Regulation T, U or X. The Borrower is not and will not be
engaged in the business of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning of Regulation T, U or X issued by the
Board), and no proceeds of any Loan will be used to purchase or carry any margin
stock or to extend credit to others for the purpose of purchasing or carrying
any margin stock.
6.12. Nature of Business. The Borrower is not engaged in any business
other than the manufacture, production, distribution, licensing and marketing of
books and other media and entertainment products.
6.13. Adverse Agreements, Etc. None of the Loan Parties is a party to
any agreement or instrument, or subject to any charter or other corporate or
partnership restriction or any judgment, order, regulation, ruling or other
requirement of a court or other Governmental Authority or regulatory body, which
has a Material Adverse Effect, or, to the best knowledge of the Borrower, is
reasonably likely to have a Material Adverse Effect.
6.14. Holding Company and Investment Company Acts. Neither the
Borrower nor any of its Subsidiaries is (i) a "holding company" or a "subsidiary
company" of a "holding company" or an "affiliate" of a "holding company", as
such terms are defined in the Public Utility Holding
52
Company Act of 1935, as amended, or (ii) an "investment company" or an
"affiliated person" or "promoter" of or "principal underwriter" of or for an
"investment company", as such terms are defined in the Investment Company Act of
1940, as amended.
6.15. Permits, Etc. Each Loan Party has all material permits,
licenses, authorizations and approvals required for it lawfully to own and
operate its business except where the failure to have such permits, licenses,
authorizations and approvals would not have a Material Adverse Effect.
6.16. Priority, Title. Each Loan Party granting Collateral is the
holder of all right, title and interest in and to such Collateral with full
right to pledge, sell, consign, transfer and create Liens therein. Other than as
provided in the DIC Purchase Agreement, no Person has any right of first
refusal, option or other preferential right to purchase any Collateral. The
Borrower will at its expense forever warrant and, at the Agent's request, defend
the same from any and all claims and demands of any other Person other than the
Permitted Liens; and the Borrower will not grant, create or permit to exist any
Lien upon the Collateral, or any proceeds thereof, in favor of any other Person
other than Permitted Liens. Each Loan Party has good and marketable title to all
of its properties and assets, free and clear of all Liens except Permitted Liens
and the Liens granted by the Security Documents.
6.17. Full Disclosure. The representations or warranties made by the
Borrower under this Agreement and the other Loan Documents, taken as a whole,
are not false or misleading in any material respect and the Loan Documents, the
schedules and exhibits thereto and the certificates, reports, statements and
other documents or information furnished to the Agent or the Lenders in
connection herewith or therewith or with the consummation of the transactions
contemplated hereby and thereby, taken as a whole, do not contain any material
misstatement of fact or omit to state a material fact or any fact necessary to
make the statements contained herein or therein not misleading. To the extent
the Borrower furnishes any projections of the financial position and results of
operations of the Borrower for, or as at the end of, certain future periods,
such projections were believed at the time furnished to be reasonable, have been
or will have been prepared on a reasonable basis and in good faith by the
Borrower, and have been or will be based on assumptions believed by the Borrower
to be reasonable at the time made and upon the best information then available
to the Borrower.
6.18. Operating Lease Obligations. On the Closing Date, (i) the Loan
Parties do not have any obligations as lessee for the payment of rent for any
(A) Lease other than the Operating Lease Obligations respecting real property
and (B) other Operating Lease Obligations with aggregate annual rental payments
of greater than $500,000, all as set forth in Schedule 6.18 hereto and the
Capital Lease Obligations set forth in Schedule 6.29 hereto and (ii) the Loan
Parties do not have any personal property leases providing for total rent
payments in 2001 in excess of $1,250,000 in the aggregate.
6.19. Environmental Matters. Except as disclosed on Schedule 6.19
hereto, (i) none of the operations of any Loan Party is the subject of any
federal, state or local investigation to determine whether any Remedial Action
is needed to address the presence, disposal, Release or
53
threatened Release of Hazardous Materials; (ii) the operations of the Loan
Parties are in material compliance with all Environmental Laws; (iii) there
has been no Release at any of the properties owned or operated by any Loan Party
or any predecessor in interest or title, or, to the knowledge of any Loan Party,
at any disposal or treatment facility which received Hazardous Materials
generated by any Loan Party or any predecessor in interest or title which is
reasonably likely to result in Environmental Liabilities and Costs of $150,000
or more; (iv) no Environmental Actions have been asserted against any Loan Party
or any predecessor in interest or title nor does any Loan Party have knowledge
or notice of any threatened or pending Environmental Action against any Loan
Party or any predecessor in interest or title which, if adversely determined, is
reasonably likely to result in Environmental Liabilities and Costs of $150,000
or more; (v) the Loan Parties have obtained all permits, approvals,
authorizations and licenses required by Environmental Laws necessary for the
Borrower's or such Loan Parties' operations, and all such permits, approvals,
authorizations and licenses are in effect and the Loan Parties are in material
compliance with all terms and conditions of such permits, approvals,
authorizations and licenses; (vi) to the knowledge of the Borrower and its
Subsidiaries, no Environmental Actions have been asserted against any facilities
that may have received Hazardous Materials generated by any Loan Party or any
predecessor in interest or title which, if adversely determined, is reasonably
likely to result in Environmental Liabilities and Costs of $150,000 or more.
6.20. Schedules. All of the information which is required to be
scheduled to this Agreement is set forth on the Schedules attached hereto, is
correct and accurate and does not omit to state any information material
thereto.
6.21. Insurance. The Parent and its Subsidiaries keep their
properties adequately insured and maintain (i) insurance to such extent and
against such risks, including fire, as is customary with companies in the same
or similar businesses, (ii) workers compensation insurance in the amount
required by applicable law, (iii) public liability insurance in the amount
customary with companies in the same or similar business against claims for
personal injury or death on properties owned, occupied or controlled by it, and
(iv) such other insurance as may be required by law or by the Loan Documents.
Schedule 6.21 hereto sets forth a list of all insurance maintained by the Parent
and its Subsidiaries on the Closing Date.
6.22. Chief Executive Offices. The headquarters and chief executive
offices of each Loan Party are located at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇.
6.23. Security Documents. The Orders and the Security Documents
create and grant to the Agent, for the benefit of the Lenders, a legal, valid
and perfected first priority Lien on the Collateral subject to no other Liens
except for Permitted Liens.
6.24. Financial Accounting Practices, Etc.
------------------------------------
(a) The Parent and its Subsidiaries make and keep books, records
and accounts which, in reasonable detail, accurately and fairly reflect their
respective transactions and dispositions of their respective assets and maintain
a system of internal accounting controls sufficient to provide reasonable
assurances that (i) transactions are executed in accordance with management's
54
general or specific authorization, (ii) transactions are recorded as necessary
(A) to permit preparation of financial statements in conformity with GAAP except
as previously disclosed to the Agent and (B) to maintain accountability for
assets, and (iii) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(b) The Borrower and its Subsidiaries maintain a system of
internal procedures and controls sufficient to provide reasonable assurance
that the information required to be set forth in each Borrowing Base
Certificate (including, without limitation, information relating to the
identification of assets which are Inventory and the valuation thereof) is
accurate in all material respects.
6.25. No Material Adverse Change. Other than the filing of the
Chapter 11 Cases, since December 31, 2000, there has not occurred any material
adverse change or any event which could have a Material Adverse Effect with
respect to any Loan Party (other than the filing of the Chapter 11 cases).
6.26. Real Estate; Leases.
-------------------
(a) Schedule 6.26 hereto sets forth a complete and accurate
description and list as of the Closing Date of the location, by state and street
address, of all Real Estate owned by any Loan Party under the heading "Fee
Properties" and all Real Estate leased by any Loan Party under the heading
"Leased Properties", together with, in the case of Real Estate that is owned, a
statement as to whether such Real Estate is the subject of a contract of sale
(and, if so, a statement as to the status of such sale). A true, correct and
complete legal description for each such owned property has been previously
delivered to the Agent and a copy of each Lease has been previously delivered to
the Agent.
(b) With respect to Real Estate or interests in Real Estate, each
Loan Party has (i) good and marketable fee title to all of its real property, if
any, which is listed on Schedule 6.26 under the heading "Fee Properties" and
will have good and marketable fee title to such other Real Estate title to which
it may acquire after the Closing Date, and (ii) good and valid title to the
leasehold estates in all of the Real Estate leased by it and which is listed in
Schedule 6.26 under the heading "Leased Properties" and will have good and valid
title to leasehold estates in such other Real Estate to which it may lease after
the Closing Date, in each case free and clear of all mortgages, liens, security
interests, easements, covenants, rights-of-way and other similar restrictions of
any nature whatsoever, except Permitted Liens.
(c) Schedule 6.26 hereto sets forth, with respect to each Lease,
the commencement date, termination date, renewal options (if any) and annual
base rents. Each such Lease is valid and enforceable in accordance with its
terms in all material respects and is in full force and effect. Except for the
landlord waivers required to be delivered pursuant to this Agreement, no consent
or approval of any landlord or other third party in connection with the Leases
is necessary for the Borrower or any other Loan Party to enter into and execute
the Loan Documents, except as set forth on Schedule 6.26 hereto. Except with
respect to the filing of the Chapter 11 Cases: no Loan
55
Party nor, to the knowledge of the Borrower, any other party to any Lease is
in default of its obligations thereunder and no Loan Party has at any time
delivered or received any notice of default which remains uncured under any
such Lease and, as of the Closing Date, no event has occurred which, with the
giving of notice or the passage of time, or both, would constitute a default
under any such Lease, except for defaults the consequence of which in the
aggregate would have no Material Adverse Effect.
(d) All permits required to have been issued to a Loan Party
with respect to the Real Estate owned or leased by such Loan Party to enable
such property to be lawfully occupied and used for all of the purposes for
which it is currently occupied and used (separate and apart from any other
properties), have been lawfully issued and are in full force and effect, other
than such permits which if not obtained, would not have a Material Adverse
Effect, and all such Real Estate complies in all material respects with all
applicable legal and insurance requirements.
(e) No Loan Party has received any notice, nor does the
Borrower have any knowledge, of any pending, threatened or contemplated
condemnation proceeding affecting any Real Estate owned or leased by any Loan
Party.
(f) No portion of any Real Estate owned or leased by any Loan
Party has suffered any damage by fire or other casualty loss which has not
heretofore been completely repaired and restored to its condition existing prior
to such casualty or which if not repaired or restored is not reasonably likely
to result in a Material Adverse Effect.
6.27. Location of Bank Accounts. Schedule 6.27 hereto sets forth a
complete and accurate list as of the Closing Date of all deposit and other
accounts, maintained by the Borrower and its Subsidiaries together with a
description thereof (i.e., the bank at which such deposit or other account is
maintained and the account number and the purpose thereof).
6.28. No Event of Default. No event has occurred and is continuing,
and no condition exists, which constitutes an Event of Default or Potential
Default.
6.29. Capitalized Leases. As of the Closing Date, Capitalized Lease
Obligations of the Borrower and its respective Subsidiaries which are set forth
on Schedule 6.29 hereto do not exceed $0 in the aggregate.
6.30. Tradenames. Schedule 6.30 hereto sets forth a complete and
accurate list as of the Closing Date of all tradenames used by the Borrower and
its Subsidiaries, all prior names and all names which were
predecessors-in-interest, in each case within the last five years. All tradename
authorizations material to the business have been duly filed in the necessary
jurisdictions.
6.31. Licenses. All royalty advances have been made in accordance
with the applicable license and no arrearages exist in connection therewith
other than as set forth on Schedule 6.31.
56
6.32. Inventory. There is no location at which the Borrower has any
Inventory (except for Inventory in transit) other than (i) those locations
listed on Schedule 1.01(A) hereto and (ii) any other locations approved in
writing by the Agent pursuant to the definition of "Eligible Inventory".
Schedule 1.01(A) hereto contains a true, correct and complete list, as of the
Closing Date, of the names and addresses of each warehouse at which Inventory
and any other personal property of the Borrower or any other Loan Party is
stored. None of the receipts received by the Borrower from any warehouse states
that the goods covered thereby are to be delivered to bearer or to the order of
a named Person or to a named Person and such named Person's assigns.
6.33. Intellectual Property. The Borrower and its Subsidiaries and
each of the other Loan Parties own, control or license or otherwise have the
right to use all material licenses, permits, patents, patent applications,
patent rights, trademarks, trademark applications, trademark rights, service
marks, trade names, trade name rights, copyrights, copyright applications,
franchises, authorizations and other intellectual property rights that are
necessary for the operations of their respective businesses and, to the
knowledge of the Borrower, such Subsidiary or such Loan Party, without
infringement upon, conflict with or adverse action to the rights of any other
Person with respect thereto. To the best knowledge of the Borrower and each
other Loan Party, no slogan or other advertising device, product, process,
method, substance, part or other material now employed, or now contemplated to
be employed, by the Borrower or any other Loan Party infringes upon, conflicts
with or is adverse to any rights owned by any other Person, and no claim, action
or litigation regarding any of the foregoing is pending or threatened, except
for such infringements and conflicts which could not have, individually or in
the aggregate, a Material Adverse Effect. To the knowledge of the Loan Parties,
no patent, invention, device, application, principle or any statute, law, rule,
regulation, standard or code is pending or proposed, which, individually or in
the aggregate, could have a Material Adverse Effect.
6.33A Copyrights. The Borrower, its Subsidiaries and each of the
other Loan Parties have registered all its respective copyrightable material
with the United States Copyright Office.
6.34. Material Contracts. Set forth in Schedule 6.34 hereto is a
complete and accurate list as of the Closing Date of all Material Contracts of
the Borrower and its Subsidiaries, showing the parties and subject matter
thereof and amendments and modifications thereto. Each such Material Contract
(i) is in full force and effect and is binding upon and enforceable against the
Borrower or its Subsidiaries, as the case may be, and, to the Borrower's
knowledge, all other parties thereto in accordance with its terms, (ii) has not
been otherwise amended or modified in any material respect, and (iii) except
with respect to the filing of the Chapter 11 Cases, there exists no default
under any Material Contract by the Borrower or any of its Subsidiaries or, to
the Borrower's knowledge, any other party thereto which has not been cured or
waived.
6.35. Labor Relations; Collective Bargaining Agreements.
-------------------------------------------------
(a) Set forth on Schedule 6.35 hereto is a list of all
Collective Bargaining Agreements between or applicable to the Borrower or any
of its Subsidiaries and any union, labor organization or other bargaining
agent in respect of the employees of the Borrower or any of its Subsidiaries.
57
(b) Neither the Borrower nor any Subsidiary is engaged in any
activity which, to their knowledge, constitutes an unfair labor practice that is
reasonably likely to have a Material Adverse Effect. There is (i) no significant
unfair labor practice complaint pending against the Borrower or any of its
Subsidiaries or, to the best knowledge of the Borrower or any of its
Subsidiaries, threatened against any of them, before the National Labor
Relations Board, and no significant grievance or significant arbitration
proceeding arising out of or under any Collective Bargaining Agreement is now
pending against the Borrower or any of its Subsidiaries or, to the best
knowledge of the Borrower or any of its Subsidiaries, threatened against any of
them, (ii) no significant strike, labor dispute, slowdown or stoppage is pending
against the Borrower or any of its Subsidiaries or, to the best knowledge of the
Borrower or any of its Subsidiaries, threatened against the Borrower or any of
its Subsidiaries, and (iii) to the best knowledge of the Borrower or any of its
Subsidiaries, no union representation question existing with respect to the
employees of the Borrower or any of its Subsidiaries, except (with respect to
any matter specified in clause (i), (ii) or (iii) herein above, either
individually or in the aggregate) such as is not reasonably likely to have a
Material Adverse Effect.
6.36. Accounts. The chief executive office of the Borrower and the
location of its books and records are set forth on Schedule 6.36 hereto. Each
Account is based on an actual and bona fide sale and delivery of goods or
rendition of services to customers, made by the Borrower in the ordinary course
of its business; such Accounts are, and the Goods and Inventory sold to create
such Accounts were, the exclusive property of the Borrower and such Accounts are
not, and such Goods and Inventory were not, subject to any Lien, consignment
arrangement, encumbrance, security interest or financing statement whatsoever,
other than Permitted Liens; the invoices evidencing such Accounts are in the
name of the Borrower; the customers of the Borrower have accepted the goods or
services, owe, and are obligated to pay, the full amounts stated in the invoices
according to their terms, without dispute, offset, defense, counterclaim or
contra, except for disputes, returns and other matters arising in the ordinary
course of business. No amount payable to the Borrower under or in connection
with any Account is evidenced by any Instrument or Chattel Paper which has not
been delivered to the Agent.
6.37. Appointment of Trustee or Examiner; Liquidation . No order has
been entered (i) for the appointment of a Chapter 11 trustee or examiner with
enlarged powers with respect to the operation of the Borrower's business beyond
those set forth in subsections 1106(a)(3) and 1106(a)(4) of the Bankruptcy Code,
or (ii) to convert all of the Chapter 11 Cases to a Chapter 7 case or to dismiss
any Chapter 11 Cases.
ARTICLE 7
AFFIRMATIVE COVENANTS
So long as any principal of or interest on the Loans or the
Reimbursement Obligations or any other Obligations (whether or not due) shall
remain unpaid or the Lenders shall have any Revolving Credit Commitment
hereunder, the Borrower, unless the Majority Lenders shall otherwise consent in
writing, will:
58
7.01. Reporting Requirements. Furnish to the Agent and the Co-Agent:
(a) Fiscal Year End Statements. As soon as practicable and in any
event within ninety (90) days after the close of each fiscal year of the
Borrower, a consolidated statement of operations and cash flows of the
Borrower for such fiscal year and a balance sheet of the Borrower as of the
close of such fiscal year, and notes to each, all in reasonable detail,
setting forth in comparative form the corresponding figures for the
preceding fiscal year, which consolidated statements and balance sheet
shall be audited and accompanied by an opinion of independent certified
public accountants of recognized national standing selected by the Borrower
and reasonably satisfactory to the Agent. Except with respect to fiscal
years of 1998, 1999 and 2000, the opinion of such accountants (the
"Accountant's Opinion") shall be without a "going concern" qualification or
like qualification or exception or qualification arising out of the scope
of the audit with respect to such statements and balance sheet being
prepared in compliance with GAAP and shall in any event contain a written
statement of such accountants substantially to the effect that (i) such
accountants examined such statements and balance sheet in accordance with
generally accepted auditing standards and accordingly made such tests of
accounting records and such other auditing procedures as such accountants
considered necessary in the circumstances and (ii) in the opinion of such
accountants such statements and balance sheet present fairly, in all
material respects, the financial position of the Borrower as of the end of
such fiscal year and the results of its operations and the changes in its
financial position for such fiscal year, in conformity with GAAP (except
for changes in application in which such accountants concur). A copy of the
Accountant's Opinion shall be delivered to the Agent and each Lender and
signed by such independent public accountants. Each set of statements and
balance sheets delivered pursuant to this Section 7.01(a) shall be
accompanied by (1) a certificate or report dated the date of such
statements and balance sheet by the accountants who certified or reported
on such statements and balance sheet stating in substance that they have
reviewed this Agreement and that in making the examination necessary for
their certification of such statements and balance sheet they did not
become aware of any Event of Default or Potential Default, or if they did
become so aware, such certificate or report shall state the nature and
period of existence thereof, if determinable and (2) a certificate dated
the date of the delivery of such statements and balance sheet by the
Designated Financial Officer of the Borrower stating in substance that he
has reviewed this Agreement and that in making the examination necessary
for this certification, he did not become aware of any Event of Default or
Potential Default, or if he did become so aware, such certificate shall
state the nature and period of existence thereof if determinable in form
and substance satisfactory to the Agent.
(b) Quarterly Statements. Other than the 10-Q for March 31, 2001
which will be delivered no later than ten Business Days after the filing
of the 10-K, as soon as practicable and in any event within forty-five
(45) days after the close of each of the first three fiscal quarters of
each of the Borrower's fiscal years, unaudited consolidated statements of
operations and cash flows of the Borrower as of the close of such fiscal
quarter and a balance sheet of the Borrower as of the close of such
fiscal quarter, and notes to each, all in reasonable detail setting forth
in comparative form the corresponding figures for the
59
corresponding fiscal quarter for the preceding fiscal year, which
statements and balance sheet shall be certified by a Designated Financial
Officer of the Borrower as presenting fairly, in all material respects, the
financial position of the Borrower as of the end of such quarter and the
results of its operations and the changes in its financial position for
such quarter, in conformity with GAAP applied in a manner consistent except
as otherwise disclosed therein with that of the most recent audited
financial statements furnished to the Lenders, subject to year_end
adjustments. Each set of statements and balance sheets delivered pursuant
to this Section 7.01(b) shall be accompanied by a certificate of a
Designated Financial Officer of the Borrower dated the date of delivery of
such statements and balance sheet stating that he has reviewed this
Agreement and that to the best of his knowledge he did not become aware of
any Event of Default or Potential Default, or if he did become so aware,
such certificate shall state the nature and period of existence thereof, if
determinable, in form and substance satisfactory to the Agent.
(c) Monthly Statements. As soon as practicable and in any
event within thirty (30) days after the end of each fiscal month of the
Borrower (other than the last month of each of the first three fiscal
quarters of the Borrower) unaudited statements of operations and cash
flows for the Borrower for such fiscal month and for the period from the
beginning of such fiscal year to the end of such fiscal month, and an
unaudited balance sheet of the Borrower as of the end of such fiscal
month, all in reasonable detail, setting forth in comparative form the
corresponding figures for the same periods during the preceding fiscal
year, and accompanied by (1) a certificate of a Designated Financial
Officer of the Borrower (A) stating that such statements present fairly,
in all material respects, the financial position of the Borrower as of the
end of such fiscal month and the results of its operations and cash flows
for such fiscal month, applied in a manner consistent with prior practice,
and, subject to year_end adjustments, and (2) a certificate of the
Designated Financial Officer of the Borrower stating that he has reviewed
this Agreement and that to the best of his knowledge he did not become
aware of any Event of Default or Potential Default, or if he did become
so aware, such certificate shall state the nature and period of existence
thereof, if determinable.
(d) Monthly Inventory Report. As soon as practicable and in any
event within five (5) Business Days after the end of each fiscal month
(including the fiscal month in which this Agreement is executed), the
Borrower shall furnish to the Lenders a monthly inventory report in form
and substance reasonably satisfactory to the Agent and certified by a
Designated Financial Officer of the Borrower.
(e) Weekly Reports. As soon as practicable and in any event
within three (3) Business Days after the end of each week (including the
week in which this Agreement is executed) unless a Monthly Report is to be
furnished in such week, the Borrower shall furnish to the Lenders weekly
inventory reports, a weekly rollforward of the 13 week cash flow and
sources and uses budget (the "Budget") of the Borrower and Guarantors, and
a weekly Borrowing Base Certificate (collectively, "Weekly Reports"), each
as of the Borrower's close of business on the Saturday of the preceding
week and in form and
60
substance reasonably satisfactory to the Agent and
certified by a Designated Financial Officer of the Borrower.
(f) Daily Reports. Each Business Day, the Borrower shall furnish
to the Lenders a daily rollforward of receivables which includes daily
sales and collections (collectively, "Daily Reports"), each as of the
Borrower's close of business on the preceding Business Day and in form
and substance reasonably satisfactory to the Agent and certified by a
Designated Financial Officer of the Borrower.
(g) Business Plan. The Business Plan for the fiscal year 2002
shall be delivered to the Agent on or before December first of 2001 and
such Business Plan shall be in form and substance satisfactory to the
Agent, the Co-Agent and the Lenders in all respects, in their sole
discretion.
(h) Monthly Reports. As soon as practicable and in any event
within five (5) Business Days after the end of each month (including the
month in which this Agreement is executed) the Borrower shall furnish to
the Lenders weekly sales reports, weekly inventory reports, a Borrowing
Base Certificate which contains a calculation of ineligibles with respect
to Accounts and Inventory on a monthly basis, a monthly royalty report
(which report shall include royalty advance payments by licensor,
inventories associated with each license, and a certification by the
Designated Financial Officer that (i) all royalty payments are current in
accordance with the terms of the respective licenses and historical
practices of the Borrower which reflect normal industry practice and
(ii) all royalty agreements are in full force and effect except for those
that may have expired at the end of the term thereof) and a monthly
computation and listing of the Required License Consents and all other
licensor consents obtained pursuant to Section 7.18 (all of the foregoing,
collectively, "Monthly Reports"), each as of the Borrower's close of
business on the last day of the preceding month and in form and substance
reasonably satisfactory to the Agent and certified by a Designated
Financial Officer of the Borrower.
(i) Default Statement. As soon as possible, and in any event
within three (3) days after the occurrence of a Potential Default or an
Event of Default or a Material Adverse Effect, the written statement of
the Designated Financial Officer of the Borrower, setting forth the
details of the Potential Default or Event of Default, Material Adverse
Effect and the action which the Borrower proposes to take with respect
thereto.
(j) Shareholder, Creditor and Accountant Information. Promptly
upon their becoming available, a copy of (1) all reports, financial
statements or other information delivered by the Borrower or the Parent
to its shareholders or the Securities Exchange Commission, (2) all
reports, proxy statements, financial statements and other information
generally distributed by the Borrower to its creditors or the financial
community in general, and (3) any accountant's management letters and any
audit or other reports submitted to the Borrower by independent
accountants in connection with any annual, interim or special audit of
the Borrower.
61
(k) ERISA Events. (1) As soon as possible and in any event
(A) within thirty (30) days after the Borrower or any of its ERISA
Affiliates knows or has reason to know that any Termination Event
described in clause (i) of the definition of Termination Event with
respect to any Benefit Plan has occurred, and (B) within twenty (20) days
after the Borrower or any of its ERISA Affiliates knows or has reason to
know that any other Termination Event with respect to any Benefit Plan
has occurred, or that the Borrower or any of its ERISA Affiliates has
failed to make a required installment to a Benefit Plan within the
meaning of Section 412(m) of the Code, a statement of the Designated
Financial Officer of the Borrower describing such Termination Event and
the action, if any, which the Borrower or such ERISA Affiliate proposes
to take with respect thereto, (2) promptly and in any event within three
(3) Business Days after receipt thereof by the Borrower or any of its
ERISA Affiliates from the PBGC, copies of each notice received by the
Borrower or any of its ERISA Affiliates of the PBGC's intention to
terminate any Plan or to have a trustee appointed to administer any Plan,
(3) promptly and in any event within 30 days after the filing thereof
with the Internal Revenue Service, copies of each Schedule B (Actuarial
Information) to the annual report (Form 5500 Series) with respect to each
Benefit Plan, (4) promptly and in any event within five Business Days
after receipt thereof by the Borrower or any of its ERISA Affiliates from
a sponsor of a Multiemployer Plan or from the PBGC, a copy of each notice
received by the Borrower or any of its ERISA Affiliates concerning the
imposition or amount of withdrawal liability under Section 4202 of ERISA
in excess of $10,000 or indicating that such Multiemployer Plan may enter
reorganization status under Section 4241 of ERISA, (5) promptly, and in
any event within ten (10) days after the Borrower or any of its ERISA
Affiliates is required to send a notice of a plant closing or mass layoff
(as defined in the Worker Adjustment and Retraining Notification Act),
and (6) promptly and in any event within 30 days after the Borrower or
any ERISA Affiliate takes action to establish a Benefit Plan or commence
contributions to a Multiemployer Plan, a statement of the Designated
Financial Officer of the Borrower describing such Benefit Plan or
Multiemployer Plan.
(l) Environmental Events. Promptly after, and in any event
within five (5) days after, an officer of the Borrower learns of any of
the following, notice thereof:
(A) the receipt by the Borrower or any of its Subsidiaries
of notification that any real or personal property of the Borrower or such
Subsidiary is subject to any Environmental Lien;
(B) notice of violation of any Environmental Law which could
reasonably be expected to subject the Borrower or any of its Subsidiaries
to Environmental Liabilities and Costs of $100,000 or more; or
(C) notice of the commencement of any Environmental Action
by the Borrower or any of its Subsidiaries of any Environmental Law,
which if adversely determined, could reasonably be expected to subject
the Borrower or any of its Subsidiaries to Environmental Liabilities and
Costs of $100,000 or more.
62
(m) Actions; Suits. Promptly after the commencement thereof but
in any event not later than three (3) days after service of process with
respect thereto on, or the obtaining of knowledge thereof by the Borrower
or any of its Subsidiaries, notice of each action, suit or proceeding
involving the Borrower or any of its Subsidiaries before any court or
other Governmental Authority or other regulatory body or any arbitrator
which could have a Material Adverse Effect.
(n) Investigations. Promptly after submission to any Governmental
Authority all documents and information furnished to such Governmental
Authority in connection with any investigation of the Borrower or any of
its Subsidiaries other than routine inquiries by such Governmental
Authority.
(o) Material Contracts. As soon as available, and in any event
within five (5) Business Days after (1) receipt or delivery thereof,
copies of any material notices that the Borrower receives or delivers in
connection with any Material Contract, (2) the Borrower enters into a
Material Contract, a copy of such Material Contract, and (3) the Borrower
executes any amendment or modification to a Material Contract, a copy of
such amendment or modification.
(p) Aging Report. Within five (5) Business Days after the end of
each month, a receivables aging report.
(q) Inventory Appraisals. Simultaneous with the delivery of the
quarterly statements required under (b) hereinabove, if requested by the
Agent, and within forty-five days after the end of each fiscal year, an
appraisal of the Borrower's inventory as of the end of the immediately
preceding fiscal quarter performed by an appraiser acceptable to the Agent
and Co-Agent and using methodology acceptable to the Agent and Co-Agent.
(r) Asset Appraisals. If requested by the Agent each year
hereafter, an appraisal of the Borrower's assets as of December 31 of the
prior year performed by an appraiser acceptable to the Agent and using
methodology acceptable to the Agent.
(s) Promptly upon request, such other information concerning the
condition or operations, financial or otherwise, of the Parent, the
Borrower or any of their respective Subsidiaries as the Agent or any Lender
from time to time may reasonably request.
(t) Promptly after filing, all pleadings, schedules, reports
and other materials and documents filed or to be filed by the Borrower
with the Bankruptcy Court in connection with the Chapter 11 Cases and any
matter over which the Bankruptcy Court retained jurisdiction.
(u) Promptly, and in any event within three (3) days, after a
Designated Borrowing Officer knows of any matters (whether or not arising
in the ordinary course of business) materially affecting the value,
enforceability or collectibility of any Account in
63
excess of $500,000 and of all material customer disputes, offsets,
defenses, counterclaims, returns, rejections and all reclaimed or
repossessed merchandise or goods, notice thereof.
(u) Within one Business Day of any submission to the United
States Patent and Trademark Office and the United States Copyright
Office, copies of all trademark applications and applications for
copyright registration for new intellectual property, including all
necessary executed assignments and power of attorneys to perfect the
Agent's Lien therein.
7.02. Compliance with Laws, Etc. Comply, and cause each of its
Subsidiaries to comply, with all applicable laws, rules, regulations and orders
(including, without limitation, Environmental Laws and compliance in respect of
their businesses, or use, maintenance or operation of real and personal
properties owned or leased by them), such compliance to include, without
limitation, (i) paying before the same become delinquent all taxes, assessments
and governmental charges or levies imposed upon it or upon its income or profits
or upon any of its properties, and (ii) paying all lawful claims which if unpaid
might become a Lien or charge upon any of its properties, except to the extent
contested in good faith by proper proceedings which stay the imposition of any
penalty, fine or Lien resulting from the non_payment thereof and with respect to
which adequate reserves in accordance with GAAP have been set aside for the
payment thereof, except, in the case of all such non_compliance (other than
non_compliance in the payment of federal, state and local taxes which, if
unpaid, could result in a Lien on any Collateral or any other non_compliance
that may result in a Lien on Collateral), where all such instances of
non_compliance taken together will not have a Material Adverse Effect.
7.03. Preservation of Existence, Etc. Maintain and preserve its
existence, rights and privileges, and become or remain duly qualified and in
good standing in each jurisdiction in which the character of the properties
owned or leased by them or in which the transaction of their business makes such
qualification necessary, except where all instances of such failure to qualify
or remain in good standing or such failure to maintain rights and privileges
taken together will not have a Material Adverse Effect.
7.04. Keeping of Records and Books of Account. Keep, and cause each
of its Subsidiaries to keep, adequate records and books of account, with
complete entries made in accordance with generally accepted accounting
principles consistently applied.
7.05. Inspection Rights. Permit, and cause each of its Subsidiaries
to permit, the Agent or any Lender, or any agents or representatives thereof or
such professionals or other Persons as the Agent may designate (i) to examine
and inspect the books and records of the Borrower and take copies and extracts
therefrom (except for employee-related documents to the extent prohibited by
applicable law) at reasonable times and during normal business hours, (ii) to
verify materials, leases, notes, receivables, deposit accounts and other assets
of the Borrower from time to time, and (iii) to enter upon the Borrower's
premises or any other properties on or in which any of the Borrower's
Collateral, including, but not limited to Inventory for the purpose of
conducting appraisals and/or valuations, provided that, in the absence of a
continuing Event of Default, all such
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action described in clauses (i) through (iii) above shall be conducted at
reasonable times, during normal business hours and upon reasonable prior notice
to Borrower.
7.06. Maintenance of Properties, Etc. Maintain and preserve, and cause
each Loan Party and each of its Subsidiaries to maintain and preserve, all of
their properties (including all real estate leased or owned by them and all
equipment) which are necessary or useful in the proper conduct of their business
in good working order and condition, ordinary wear and tear excepted, making any
and all repairs and replacements when and where necessary, and comply, and cause
each of its Subsidiaries to comply, at all times with the provisions of all
Leases to which each of them is a party as lessee or under which each of them
occupies property, so as to prevent any loss or forfeiture thereof or
thereunder.
7.07. Maintenance of Insurance. Maintain, and cause each of its
Subsidiaries to maintain, with responsible and reputable insurance companies or
associations, insurance (including, without limitation, comprehensive general
liability, hazard and business interruption insurance) with respect to their
properties (including all Real Estate leased or owned by them) and business, in
such amounts and covering such risks, as is required by any Governmental
Authority or other regulatory body having jurisdiction with respect thereto or
as is carried generally in accordance with sound business practice by companies
in similar businesses similarly situated and in any event in amount, adequacy
and scope reasonably satisfactory to the Agent. All policies covering the
Collateral are to be made payable to the Agent, in case of loss, under a
standard non_contributory "lender" or "secured party" clause and are to contain
such other provisions as the Agent may require to fully protect the Agent's
interest in the Collateral and to any payments to be made under such policies.
All original policies or true copies thereof are to be delivered to the Agent,
premium prepaid, with the loss payable and additional insured endorsement in the
Agent's favor, and shall provide for not less than thirty (30) days prior
written notice to the Agent of the exercise of any right of cancellation. At the
Borrower's request, or if the Borrower fails to maintain such insurance, the
Agent may arrange for such insurance, but at the Borrower's expense and without
any responsibility on the Agent's part for: obtaining the insurance, the
solvency of the insurance companies, the adequacy of the coverage, or the
collection of claims. Upon the occurrence and during the continuance of an Event
of Default, the Agent shall have the sole right, in the name of the Agent and
the Borrower, to file claims under any insurance policies, to receive, receipt
and give acquittance for any payments that may be payable thereunder, and to
execute any and all endorsements, receipts, releases, assignments, reassignments
or other documents that may be necessary to effect the collection, compromise or
settlement of any claims under any such insurance policies.
7.08. Environmental. Comply, and cause each of its Subsidiaries to
comply in all material respects, with the requirements of all Environmental Laws
and provide to the Agent all material documents relating to such compliance that
the Agent may reasonably request; not cause or permit the Collateral or any
property or facility owned, operated or occupied by the Borrower or its
Subsidiaries to be used for any activities involving, directly or indirectly,
the use, generation, treatment, storage, release or disposal of any Hazardous
Materials except in material compliance with applicable Environmental Laws or a
permit issued under any applicable Environmental Law; and promptly notify the
Agent of any Release of Hazardous Materials in excess of any reportable quantity
and take any Remedial Actions required to ▇▇▇▇▇ such Release; provided, however,
that
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Borrower and its Subsidiaries may use all lawful means to challenge or
contest any requirement of a governmental regulatory authority relating to said
Remedial Actions. On behalf of the Borrower and its Subsidiaries, the Borrower
hereby agrees to defend (with counsel satisfactory to the Agent), indemnify, and
hold harmless the Agent, the Lenders, their employees, agents, officers, and
directors, from and against any claims, demands, penalties, fines, liabilities
(including strict liability), settlements, damages, costs, or expenses
(including, without limitation, reasonable attorney and consultant fees,
investigation and laboratory fees, court costs, and litigation expenses) and
Environmental Liabilities and Costs (collectively, "Environmental Losses")
arising out of (i) any Release, or threatened Release on any property presently
or formerly owned or occupied by the Borrower or its Subsidiaries (or their
predecessors in interest or title) or at any disposal facility which received
Hazardous Materials generated by the Borrower or its Subsidiaries; (ii) any
violation of Environmental Laws; (iii) any Environmental Actions; (iv) any
personal injury (including wrongful death) or property damage (real or personal)
arising out of or related to exposure to Hazardous Materials used, handled,
stored, generated, transported or deposited by the Borrower or its Subsidiaries
(or any predecessor in interest or title); and/or (v) the breach of any
representation or warranty made by the Borrower in Section 6.19 hereof or the
breach of any covenant made by any of the Borrower in this Section 7.08. This
environmental indemnity shall survive the repayment of the Obligations and
discharge or release of any security interest granted under the Loan Documents;
provided, however, that this indemnity shall not apply to any Environmental
Losses (a) arising from any negligent or wilful misconduct of the Agent, the
Lenders or any of their employees, agents, officers and directors or (b) arising
from any actions, omissions, events or conditions occurring after the
terminations of the Loans, the foreclosure of any mortgages or the issuance of a
deed in lieu of foreclosure.
7.09. Further Assurances. Do, execute, acknowledge and deliver, and
cause its Subsidiaries, whether now existing or hereafter created, to do,
execute, acknowledge and deliver, at the sole cost and expense of the Borrower
all such further acts, security agreements, Guaranties, deeds, conveyances,
mortgages, assignments, estoppel certificates, financing statements, notices of
assignment, transfers and assurances (including reports, reviews and appraisals)
as the Agent may reasonably require from time to time in order (a) to carry out
more effectively the purposes of this Agreement or any other Related Document,
(b) to subject to valid and perfected first priority Liens all of the Collateral
(subject to Permitted Liens), (c) to perfect and maintain the validity,
effectiveness and priority of any of the Related Documents and the Liens
intended to be created thereby, (d) to better assure, convey, grant, assign,
transfer and confirm unto the Agent, the Lenders and the Letter of Credit Issuer
the rights now or hereafter intended to be granted to the Agent, the Lenders and
the Letter of Credit Issuer under this Agreement, any Loan Document or any other
instrument under which the Borrower or any Subsidiary may be or may hereafter
become bound to convey, mortgage or assign to the Agent, the Lenders and the
Letter of Credit Issuer, and (e) to comply fully, or to cause full compliance,
with applicable law in respect of the Real Estate and all transactions related
to the Real Estate, and will at all times provide the Agent with reasonable
satisfactory evidence of such compliance and notify the Agent of the information
reported in connection with such compliance.
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7.10. Borrowing Base. Maintain all Revolving Loans and Letters of
Credit in compliance with the then current Borrowing Base plus $3,000,0000 prior
to the Final Financing Order Date and $6,000,000 thereafter.
7.11. Change in Collateral; Collateral Records. Give the Agent not
less than thirty (30) days' prior written notice of any change in the location
of any Collateral, other than to locations, that as of the date hereof, are
known to the Agent and at which the Agent has filed financing statements and
otherwise fully perfected its Liens thereon. Except with respect to Collateral
which is sold in the ordinary course of business, the Borrower shall also advise
the Agent promptly of any other change in the location of any Collateral. The
Borrower shall also advise the Agent promptly, in sufficient detail, of any
material adverse change relating to the type, quantity or quality of the
Collateral or the security interests granted therein. The Borrower agrees to
execute and deliver to the Agent for the benefit of the Agent from time to time,
solely for the Agent's convenience in maintaining a record of the Collateral,
such written statements and schedules as the Agent may reasonably require,
designating, identifying or describing the Collateral. The Borrower's failure,
however, to promptly give the Agent such statements or schedules shall not
affect, diminish, modify or otherwise limit the Agent's security interest in the
Collateral.
7.12. Financial Accounting Practices, Etc.
-----------------------------------
(a) Make and keep books, records and accounts which, in
reasonable detail, accurately and fairly reflect the transactions and maintain a
system of internal accounting controls sufficient to provide reasonable
assurances that (i) transactions are executed in accordance with management's
general or specific authorization, (ii) transactions are recorded as necessary
(A) to permit preparation of financial statements in conformity with GAAP and
(B) to maintain accountability for assets, and (iii) the recorded accountability
for assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(b) Maintain a system of internal procedures and controls
sufficient to provide reasonable assurance that the information required to be
set forth in each Borrowing Base Certificate (including, without limitation,
information relating to the identification of assets which are Eligible
Inventory as provided herein and the valuation thereof) is accurate in all
material respects.
7.13. Lock Box Accounts and Blocked Accounts.
--------------------------------------
(a) On or prior to the Closing Date, establish lock box bank
accounts (the "Lock Box Accounts") in accordance with lock box agreements and
arrangements which shall be satisfactory to the Agent hereunder in the name of
the Agent with a bank or banks mutually satisfactory to the Borrower and the
Agent (the "Lock Box Banks") to be designated as the Lock Box Accounts. The Lock
Box Accounts on the Closing Date are identified on Schedule 7.13 hereto. The
only bank accounts of the Borrower which are permitted at any time not to be
lock box accounts are separately designated on Schedule 7.13, including any
blocked accounts. The Borrower shall instruct its customers to remit payment of
all Accounts (other than Accounts of the Entertainment Group) on which such
customers are debtors directly to the appropriate Lock Box Accounts, and the
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Borrower shall promptly deposit in the Lock Box Accounts all amounts
nevertheless or otherwise remitted to the Borrower on the Accounts (other than
Accounts of the Entertainment Group) and all other amounts received by the
Borrower in respect of any Collateral (except for Collateral constituting
proceeds of out-of-the-ordinary course of business sales of SN First Priority
Collateral (as such term is defined in the Intercreditor Agreement) as to which
the proceeds have been segregated for the benefit of the holders of Senior Notes
pursuant to Section 4.18 of the Indenture), whether from a disposition of assets
or otherwise, on or after the Closing Date; provided, however, that monies
generated from operations in the United Kingdom may be used to fund such
operations in the ordinary course with any excess funds to be remitted to the
Lock Box Accounts. Only monies due and owing to the Borrower, and not monies
which are the property of any other entity (except for employee-related amounts,
amounts payable for sales taxes and the like), shall be in any bank account of
the Borrower. The Borrower shall promptly deposit in the Swing Account all
amounts remitted to the Borrower on the Accounts of the Entertainment Group on
or after the Closing Date. The Borrower shall ensure that all amounts remitted
to Video shall be deposited in the Swing Account, and send notice to Sony Music
Entertainment, Inc. that all payments to be made by Sony Music Entertainment,
Inc. to Video shall be made by wire transfer direct to the Swing Account.
(b) The Agent shall credit (based on one (1) collection Business
Day) all amounts deposited in the Lock Box Accounts pursuant to this Section
7.13 which are "good funds" in New York City to the repayment of Revolving Loans
and to the repayment of other outstanding Obligations due and payable from time
to time. The Lock Box Accounts and any blocked accounts are, and shall remain,
under the sole dominion and control of the Agent (except for any blocked account
containing solely proceeds in excess of (x) the $5,000,000 of priming liens
granted to the Agent pursuant to the Interim Financing Order and (y) the
$8,000,000 plus interest of priming liens granted to the Agent pursuant to the
Final Financing Order of out-of-the-ordinary course of business sales of SN
First Priority Collateral (as such term is defined in the Intercreditor
Agreement) as to which the proceeds have been segregated for the benefit of the
holders of Senior Notes pursuant to Section 4.18 of the Indenture). Subject to
subsection (a) above, the Borrower acknowledges and agrees that (A) the Borrower
has no right of withdrawal from any Lock Box Account and (B) the funds on
deposit in any Lock Box Account shall continue to be Collateral for all of the
Obligations.
7.14. Additional Subsidiaries. If a Person shall become a Subsidiary
of the Borrower after the Closing Date, notify the Agent promptly after such
Person becomes a Subsidiary of the Borrower and promptly, and in any event
within ten (10) Business Days of such Person becoming a Subsidiary, cause such
Subsidiary to execute and deliver a Guaranty, Security Agreements, Pledge
Agreements and all other documents required in connection therewith as needed to
perfect a Lien on all of its assets, all in form and substance satisfactory to
the Agent, in respect of the Obligations and to deliver proof of corporate
action, incumbency of officers, opinions of counsel and other documents as the
Agent may reasonably request.
7.15. ERISA. Upon the Agent's request, deliver to the Agent a copy of
each Plan and for each such Plan (a) that is a "single employer plan" (as
defined in Section 4001(a)(15) of ERISA), the most recently completed actuarial
valuation prepared therefore by such Plan's regular enrolled actuary and the
Schedule B, "Actuarial Information" to the IRS Form 5500 (Annual Report) most
recently filed with the Internal Revenue Service and (b) that is a
"multiemployer plan" (as
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defined in Section 4001(a)(3) of ERISA), each of the documents referred to in
clause (a) either in the possession of the Borrower or reasonably available
thereto from the sponsor or trustees of such Plan.
7.16. Right to Sell Inventory. Cause the Agent to at all times have
the right (when it has such right under the Loan Documents) to sell Inventory
using intellectual property licensed by the Borrower pursuant to either a court
order and/or written consents from licensors (the "Required License Consents").
7.17. Intellectual Property. Take the following steps with regard to
its intellectual property:
(a) Notify the Agent of any intellectual property developed or
otherwise acquired by the Borrower, the Parent or any Subsidiary within (i) five
(5) Business Days for copyrights and (ii) thirty (30) Business Days for
trademarks of the acquisition of same, and deliver at the same time to the Agent
appropriate documentation to perfect in favor of the Agent liens on such
intellectual property.
(b) Register all copyrightable material with the United States
Copyright Office immediately upon acquisition thereof or its
creation/development and concurrently record an assignment thereof to the Agent
for the benefit of the Lenders.
(c) Register its ownership interest in all after-acquired copyrights
immediately upon acquisition thereof and concurrently record an assignment
thereof to the Agent for the benefit of the Lenders.
(d) Register with the United States Copyright Office all
after-acquired licensing agreements where the license grants the Borrower the
right to use certain copyrights and concurrently record an assignment thereof to
the Agent for the benefit of the Lenders.
(e) Maintain the registration of its internet domain name with an
accredited register of the Internet Corporation for Assigned Names and Numbers
and to the extent possible record an assignment thereof to the Agent for the
benefit of the Lenders.
(f) Ensure that each copyright and trademark registration is renewed
and that all necessary actions are taken to preserve its copyright and trademark
registrations, including, without limitation, affidavits of use and applications
for renewal except, where it determines that any such registration has
negligible economic value and it has no legal right to renew or maintain such
registration.
7.18. Licensor Consents. Ensure that each new licensing agreement it
enters into following the Closing Date that has either pro forma annualized
sales in excess of $500,000 or actual annual sales in excess of $500,000 permits
the Agent and the Lenders (notwithstanding whether any license agreement is in
default or has been terminated) to take possession of, transfer or sell, or
cause the Borrower to transfer or sell, any inventory in which the Agent and the
Lenders have been granted
69
security interests without any restriction whatsoever which might be otherwise
applicable to and contained in any licensing agreements subject only to the
obligation to pay earned royalties for inventory actually sold or disposed of
hereunder at the applicable percentage of sales royalty rate as may be
contained in the applicable license agreements, if any or contains a
consent for the Agent to sell inventory which is reasonably acceptable to the
Agent; provided, however, that no royalties shall be payable in connection with
any such possession, transfer or sale which are based on, or constitute, a
minimum, past due or guaranteed royalty rate or otherwise compute the applicable
earned royalty rate using criteria other than a percentage of sales for the
actual inventory sold as aforesaid.
7.19. Liens. Notwithstanding anything to the contrary contained
herein or elsewhere:
(i) The Liens granted to the Agent and the Lenders shall be
deemed valid and perfected by entry of the Interim Financing Order and the Final
Financing Order, as the case may be, which entry of the Interim Financing Order
shall have occurred on or prior to the Closing Date. The Agent and the Lenders
shall not be required to file any financing statements, mortgages, notices of
lien or similar instruments in any jurisdiction or filing office, or to take
possession of any Collateral or to take any other action in order to validate or
perfect the Liens granted by or pursuant to this Agreement, the Interim
Financing Order, the Final Financing Order or any other Loan Document. If the
Agent shall, in its sole discretion, from time to time elect to file any such
financing statements, mortgages, notices of lien or similar instruments, take
possession of any Collateral or take any other action to validate or perfect all
or any portion of the Liens granted to the Agent and the Lenders, all such
documents and actions shall be deemed to have been filed or recorded or taken at
the time and on the date of entry of the Interim Financing Order or the Final
Financing Order, whichever is earlier.
(ii) The Liens, lien priorities, administrative expense claim
priorities and other rights and remedies granted to the Agent and the Lenders
pursuant to this Agreement, the other Loan Documents, the Interim Financing
Order or the Final Financing Order (specifically including, but not limited to,
the existence, perfection and priority of the Liens provided for herein and
therein, and the administrative expense claim priority provided herein and
therein) shall be governed by the Orders and shall not be modified, altered or
impaired in any manner by any other financing or extension of credit or
incurrence of debt by the Borrower (pursuant to Section 364 of the Bankruptcy
Code or otherwise), or by dismissal or conversion to cases under Chapter 7 of
the Bankruptcy Code of the Chapter 11 Cases, or by any other act or omission
whatsoever.
7.20. Payment of Pre-Petition Loans. Until such time the Pre-Petition
Loans (other than the term loan under the Existing Credit Facilities) have been
repaid in full, Borrower shall pay to the Agent all proceeds received from any
source whatsoever (except for proceeds of SN First Priority Collateral under and
as defined in the Intercreditor Agreement (but including Swing Collateral) and
proceeds received by Borrower that constitute premium payment for purposes of
continuation coverage pursuant to Section 4980B of the Code).
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ARTICLE 8
NEGATIVE COVENANTS
So long as any principal of or interest on the Loans or the
Reimbursement Obligations or any Obligations (whether or not due) shall remain
unpaid or any Lender shall have any Revolving Credit Commitment hereunder, the
Borrower will not, without the prior written consent of the Agent and the
Majority Lenders:
8.01. Liens, Etc. Create or suffer to exist, or permit any of its
Subsidiaries or any other Loan Party to create or suffer to exist, any Lien upon
or with respect to any of their properties, rights or other assets, whether now
owned or hereafter acquired, or assign or otherwise transfer, or permit any of
its Subsidiaries to assign or otherwise transfer, any right to receive income,
other than the following Liens (to the extent, with respect to the Borrower or
any of its assets or properties (x) if created, incurred or assumed by the
Borrower on or after the Filing Date are approved and authorized by the
Bankruptcy Court and (y) if created, incurred or assumed by the Borrower before
the Filing Date are valid, perfected and non-avoidable in accordance with
applicable law) ("Permitted Liens"):
(a) Liens created pursuant to the Loan Documents or the Interim
Financing Order or the Final Financing Order;
(b) Liens existing on the date hereof, as set forth in Schedule
8.01 hereto;
(c) Liens for taxes, assessments or governmental charges or
levies to the extent that the payment thereof shall not be required by
Section 7.02 hereof;
(d) Liens created by operation of law other than Environmental
Liens, such as liens of materialmen, mechanics, carriers, warehousemen,
suppliers, and other similar liens, arising in the ordinary course of
business which secure amounts not overdue for a period of more than
thirty (30) days or which are being contested in good faith by
appropriate proceedings;
(e) deposits, pledges or Liens (other than Liens arising under
ERISA) securing (1) obligations incurred in respect of workers'
compensation, unemployment insurance or other forms of governmental
insurance or benefits, (2) the performance of bids, tenders, leases,
contracts (other than for the payment of money) and statutory obligations,
or (3) obligations on surety or appeal bonds, but only to the extent
such deposits, pledges or Liens are incurred or otherwise arise in the
ordinary course of business and secure obligations which are not past due;
(f) restrictions on the use of Real Estate and minor
irregularities in the title thereto which (1) do not secure obligations
for the payment of money, other than those created pursuant to the Loan
Documents or are permitted under clauses (b) and (j) of this Section
8.01 or (2) do not materially impair the value of such Real Estate or its
use by the Borrower or any of its Subsidiaries in the normal conduct of
such Person's business;
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(g) purchase money Liens on or purchase money security interests
in equipment or Real Estate acquired or held in the ordinary course of its
business securing Indebtedness, provided that the Indebtedness secured by
such Liens or security interests shall not exceed the aggregate principal
amount of $100,000 per annum;
(h) Liens securing Capitalized Leases to the extent permitted
under Section 8.13;
(i) [Intentionally left blank];
(j) Liens on Real Estate of the Borrower which secure
Indebtedness incurred by the Borrower;
(k) [Intentionally left blank];
(l) Liens upon any property or assets of any Subsidiary of the
Borrower existing at the time such Subsidiary is acquired by, merged into
or consolidated with the Borrower in accordance with the terms of this
Agreement, provided that such Liens were not created in contemplation of
any such acquisition, merger or consolidation;
(m) pre-existing Liens upon any property or assets existing at
the time such property or assets are acquired by the Borrower, provided
that such Liens were not created in contemplation of such acquisition;
(n) Liens created pursuant to the Senior Notes Collateral
Agreement; and
(o) renewals and replacements of the Liens described in clauses
(b), (g), (f), (l), (m) and (n) of this Section 8.01, provided that any
such renewal or replacement Lien shall be limited to the property or
assets covered by the Lien renewed or replaced and the Indebtedness
secured by any such renewal or replacement Lien shall be in an amount not
greater than the amount of Indebtedness secured by the Lien renewed or
replaced.
8.02. Indebtedness. Create, incur or suffer to exist, or permit
any of its Subsidiaries or any Subsidiary of Parent to create, incur or suffer
to exist, any Indebtedness, other than:
(a) Indebtedness created hereunder or under the Notes or any
Letter of Credit;
(b) Indebtedness existing on the date hereof, as set forth in
Schedule 8.02 hereto (such schedule shall not include indebtedness under the
Existing Credit Facilities), and any extension of maturity, refinancing or other
modification of the terms thereof, provided, however, that such extension,
refinancing or modification (A) is pursuant to terms that are not less favorable
to the Borrower and its Subsidiaries than the terms of the Indebtedness being
extended, refinanced or modified, and (B) after giving effect to the extension,
refinancing or modification of such Indebtedness, the amount of such
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Indebtedness outstanding is not greater than the amount of such Indebtedness
outstanding immediately prior to such extension, refinancing or modification;
(c) Indebtedness in connection with Capitalized Leases;
(d) Indebtedness under surety, performance or appeal bonds
incurred in the ordinary course of business;
(e) To the extent the same constitutes Indebtedness, Indebtedness
secured by Liens or security interests permitted by Section 8.01 hereof;
(f) To the extent same shall constitute Indebtedness, Collective
Bargaining Agreements or extensions or renewals of same; and
(g) Indebtedness representing loans to the Guarantors not to
exceed on an aggregate net basis (reflecting the netting of amounts
advanced against payments received) at any time the sum of $5,000,000
(such loans only to be made to the extent necessary or advisable in
connection with the operation of Video or the Parent, respectively as
Chapter 11 Debtors (but not for any purpose for which the Borrower would
be restricted by the terms of this Agreement or the Orders).
8.03. Guarantees, Etc. Become liable, or permit any of its
Subsidiaries or any Subsidiary of Parent to become liable, under any Guarantee
in connection with any Indebtedness of any other Person, other than:
(a) guaranties by endorsement of negotiable instruments for
deposit or collection in the ordinary course of business; and
(b) guaranties existing on the date hereof, as set forth in
Schedule 8.03 hereto, but not any renewal or other modification thereof.
8.04. Merger, Consolidation, Sale of Assets, Etc.
-------------------------------------------
(a) Merge or consolidate with any Person, or permit any of its
Subsidiaries or any Subsidiary of Parent to merge or consolidate with any Person
(except that any Subsidiary of the Borrower may be merged with or into Borrower
or any wholly-owned Subsidiary of Borrower, or be liquidated, wound up or
dissolved, or all or any part of its business, property or assets may be
conveyed, sold, leased, transferred or otherwise disposed of, in one transaction
or a series of transactions, to Borrower or any wholly-owned Subsidiary of
Borrower); and
(b) Sell, assign, lease or otherwise transfer or dispose of, or
permit any of its Subsidiaries or any Subsidiary of Parent to sell, assign,
lease or otherwise transfer or dispose of, whether in one transaction or in a
series of related transactions, any of their properties, rights or other assets
whether now owned or hereafter acquired to any Person other than sales of
Inventory in the ordinary course of business, provided that the Borrower and its
Subsidiaries may dispose of,
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to the extent the same is not Collateral, obsolete or worn_out property and
property not used or deemed useful by the Borrower in the ordinary course
of business.
8.05. Change in Nature of Business. Make, or permit its Subsidiaries
or any Subsidiary of Parent to make, any change in the nature of its business as
carried on at the date hereof except for changes that will not fundamentally and
substantively alter the character of its business from that conducted by the
Borrower on the Closing Date.
8.06. Loans, Advances and Investments, Etc. Make, or permit any of
its Subsidiaries or any Subsidiary of Parent to make, any loan or advance
(the term "advance" not to refer to a royalty payment or a payment to a packager
of creative products) to any Person or purchase or otherwise acquire, or permit
any of its Subsidiaries or any Subsidiary of Parent to purchase or otherwise
acquire, any capital stock, properties, assets or obligations of, or any
interest in, any Person, other than:
(a) Permitted Investments;
(b) receivables owing to the Borrower or any of its Subsidiaries
or any Subsidiary of Parent if created or acquired in the ordinary course
of business and payable or dischargeable in accordance with the customary
trade terms of the Borrower or its applicable Subsidiary or the applicable
Subsidiary of Parent as the case may be;
(c) investments existing on the date hereof as set forth in
Schedule 8.06 hereto; and
(d) deposits made in the ordinary course of business consistent
with past practices to secure the performance of leases, supply
arrangements and contracts and not to exceed $750,000 in the aggregate
and to employees for travel expenses not in excess of $200,000 per annum.
8.07. Dividends, Distributions, Prepayments, Etc. Declare or pay any
dividends or distributions; pay any management fees; purchase or otherwise
acquire for value any of its capital stock now or hereafter outstanding; return
any capital to stockholders or make any other payment or distribution of assets
to its stockholders; or permit Parent or any of Parent's Subsidiaries to do any
of the foregoing other than the declaration and payment of dividends by a
Subsidiary to the Borrower; or permit any of its Subsidiaries or any Subsidiary
of Parent to purchase or otherwise acquire for value any stock of Parent, the
Borrower or any other Subsidiary of Parent; or make or permit Parent or any of
Parent's Subsidiaries to make any payment or prepayment of principal of,
premium, if any, or interest on, or redeem, defease or otherwise retire, any
other Indebtedness of the Borrower, Parent or any Subsidiary of Parent before
its scheduled due date; or make any payment or prepayment of principal of,
premium, if any, or interest on the Senior Notes (other than payment-in-kind
interest or cash interest permitted under Section 9.01(p)) or any other
Indebtedness prior to the indefeasible payment in full of all Obligations and
the termination of the Revolving Credit Commitments.
74
8.08. Federal Reserve Regulations. Permit any Loan or the proceeds of
any Loan under this Agreement to be used for any purpose which violates or is
inconsistent with the provisions of Regulations T, U or X of the Board of
Governors of the Federal Reserve System.
8.09. Transactions with Affiliates. Except as set forth on Schedule
8.09 hereto, enter into or be a party to, or permit Parent or any of Parent's
Subsidiaries to enter into or be a party to, any transaction with any Affiliate
of the Borrower except as otherwise provided herein or in the ordinary course of
business in a manner and to an extent consistent with past practice and
necessary or desirable for the prudent operation of its business for fair
consideration and on terms no less favorable to the Borrower, Parent or the
applicable Subsidiary as are available from unaffiliated third parties.
Notwithstanding the foregoing, the Borrower may advance monies to Parent or
otherwise reimburse Parent for amounts paid by Parent as set forth in Section
8.02(g).
8.10. Environmental. Permit the use, handling, generation, storage,
treatment, Release or disposal of any Hazardous Material at property owned or
leased by the Borrower, Parent or any of Parent's Subsidiaries except in
material compliance with Environmental Laws.
8.11. ERISA.
-----
(a) Engage, or permit any ERISA Affiliate to engage, in any
prohibited transaction described in Section 406 of ERISA or 4975 of the Code for
which a statutory or class exemption is not available or a private exemption has
not previously been obtained from the Department of Labor and that would have a
Material Adverse Effect;
(b) permit, or permit any ERISA Affiliate to permit, any
enforceable Lien from arising under Section 412(n) of the Code;
(c) amend or permit any ERISA Affiliate to amend any Benefit Plan
in a manner that would require security under Section 307 of ERISA; or
(d) request or permit any ERISA Affiliate to request a waiver of
the minimum funding requirements under Section 412 of the Code in respect of any
Benefit Plan.
8.12. Business Plan. The Business Plan for the fiscal year 2002 shall
be delivered to the Agent on or before December 1, 2001 and such plan shall be
in form and substance satisfactory to the Agent and the Lenders in all respects,
in their sole discretion.
8.13. Interim Financing Order; Final Financing Order; Administrative
Expense Claim Priority; Lien Priority; Payments.
(a) The Borrower shall not at any time seek, consent to or suffer
to exist any modification, stay, vacation or amendment of the Interim Financing
Order or the Final Financing Order, as the case may be, except for modifications
and amendments mutually agreed to by the Lenders, the Borrower and the Agent.
75
(b) The Borrower shall not at any time suffer to exist a priority
for any administrative expense claim or unsecured claim against the Borrower
(now existing or hereafter arising of any kind or nature whatsoever, including
without limitation any administrative expense claim of the kind specified in
Sections 503(b) and 507(b) of the Bankruptcy Code) equal or superior to the
priority of the Lenders and the Agent in respect of the Obligations, except for
the Carve-Out Expenses (as limited by the maximum amount thereunder).
(c) The Borrower shall not at any time suffer to exist any Lien
on any properties, assets or rights (including, without limitation, Accounts,
Inventory and other Collateral) of the Borrower having a priority equal or
superior to the Liens granted to the Agent and the Lenders, except for Permitted
Liens.
(d) Prior to the date on which the Obligations have been paid in
full in cash and the Current Commitments have been terminated, the Borrower
shall not pay any Indebtedness which existed pre-petition, except for the
Pre-Petition Loans and those described in the pre-petition payroll application,
the pre-petition royalty application, and the pre-petition common carrier
application provided to CIT's counsel.
8.14. Capital Expenditures. Make, or permit Parent or any of Parent's
Subsidiaries to make, any Capital Expenditures in excess of $350,000 in the
aggregate for Parent and its Subsidiaries during the period beginning June 1,
2001 and ending December 31, 2001.
8.15. Minimum EBITDA. Permit EBITDA at any time, on a cumulative
basis from the beginning of fiscal year 2001, when measured as of the dates set
forth below to be less than the following amounts for the applicable time
period:
Period ended Amount
----------------- ------------
Seven months ended July 31, 2001 ($6,100,000)
Nine months ended September 30, 2001 ($1,600,000)
Twelve months ended December 31, 2001 $4,800,000
Thereafter at the end of each month in the fiscal year 2002, such other required
amounts as set by the Agent and the Co-Agent, in their sole discretion, after
review of the Business Plan for such fiscal year.
ARTICLE 9.
DEFAULTS
9.01. Events of Default. An Event of Default shall mean the
occurrence or existence of one or more of the following events or conditions
(whatever the reason for such Event of Default and whether voluntary,
involuntary or effected by operation of law):
(a) The Borrower shall fail to make any payment of principal
under this Agreement on any Loan or any Reimbursement Obligation when due
or the Borrower shall
76
fail to pay when due any other amount payable under this Agreement or any
other Related Document (including but not limited to the making of deposits
in the Lock Box Accounts or the Letter of Credit Cash Collateral Account)
including any interest or fee due hereunder or under any other Related
Document; or
(b) Any representation or warranty made by the Borrower or any
other Loan Party under this Agreement or any other Related Document or any
statement made by the Borrower or any other Loan Party in any financial
statement, certificate report or document furnished to the Agent or the
Lenders pursuant to or in connection with this Agreement or any other
Related Document, shall prove to have been false or misleading in any
material respect as of the time when made (including by omission of
material information necessary to make such representation, warranty or
statement, in light of the circumstances under which it was made, not
misleading); or
(c) The Borrower shall default in the performance or observance
of any covenant or condition contained in (i) Section 7.01, 7.02, 7.03,
7.05, 7.09, 7.10, 7.11, 7.13, or 7.17 or Article 8 hereof or Section 5 of
the Security Agreement, (ii) Section 7.07 if such default shall have
continued unremedied for a period of five (5) Business Days, or (iii)
Section 7.16 or 7.18 and pursuant to Section 4.06 the Agent is unable to
implement additional reserves against the Borrowing Base as deemed
appropriate by the Agent and the Co-Agent in their sole discretion acting
in good faith or, after implementation, such reserves are unable to be
maintained for any period of five (5) Business Days; or
(d) The Borrower or any other Loan Party shall default in the
performance or observance of any other covenant (exclusive of defaults
pursuant to (a), (b) and (c) hereinabove), agreement or duty under this
Agreement or any other Related Document (in each case, to the extent not
otherwise set forth in this Section 9.01) and such default shall have
continued unremedied for a period of ten (10) days; or
(e) The Borrower or any other Loan Party shall have entered into
any consent or settlement decree or agreement or similar arrangement with a
Governmental Authority or any judgment, order, decree or similar action
shall have been entered against any such Person based on or arising from
the violation of or pursuant to any Environmental Law, or the generation,
storage, transportation, treatment, disposal or Release of any Hazardous
Material and, in connection with any of the foregoing, any such Person
shall incur Environmental Liabilities and Costs which are unstayed, due and
owing in an amount in excess of $500,000; or
(f) The Borrower or any other Loan Party shall fail to pay any
principal or interest on any of its Indebtedness (excluding Indebtedness
evidenced by the Notes) in excess of $100,000, or any interest or premium
thereon, when due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) and such failure shall continue after
the
77
applicable grace period, if any, specified in the agreement or instrument
relating to such Indebtedness, or any other default under any agreement or
instrument relating to any such Indebtedness, or any other event, shall
occur and shall continue after the applicable grace period, if any,
specified in such agreement or instrument, if the effect of such default or
event is to accelerate, or to permit the acceleration to the maturity of
such Indebtedness; or any such Indebtedness in excess of such amount shall
be declared to be due and payable, or required to be prepaid (other than by
a regularly scheduled required prepayment), prior to the stated maturity
thereof; or
(g) Argus Management Corporation shall cease to be engaged by the
Borrower or shall cease to be performing services for the Borrower to such
extent and in such manner reasonably satisfactory to the Agent, or no
substitute crisis management firm which is satisfactory to the Agent has
been engaged or any such substitute shall cease to perform services for the
Borrower to the reasonable satisfaction of the Agent; or
(h) [Intentionally left blank.]
(i) Any material provision of any Loan Document shall at any time
for any reason be declared to be null and void, or the validity or
enforceability thereof shall be contested by the Borrower or any other Loan
Party, or a proceeding shall be commenced by the Borrower or any other Loan
Party, or by any Governmental Authority or other regulatory body having
jurisdiction over the Borrower or any other Loan Party, seeking to
establish the invalidity or unenforceability thereof, or the Borrower or
any other Loan Party shall deny in writing that the Borrower or such other
Loan Party has any liability or obligation purported to be created under
any Loan Document; or
(j) The Security Agreements or any other Security Document, after
delivery thereof pursuant hereto, shall for any reason fail or cease to
create a valid and perfected and, except to the extent permitted by the
terms hereof or thereof, first priority Lien on or security interest in any
Collateral purported to be covered thereby; or
(k) One or more judgments or orders for the payment of money
exceeding any applicable insurance or bond coverage by more than $100,000
in the aggregate shall be rendered against the Borrower or any other Loan
Party and either (i) enforcement proceedings shall have been commenced by
any creditor upon any such judgment or order or (ii) there shall be any
period of five (5) consecutive days during which a stay of enforcement of
any such judgment or order by reason of a pending appeal or otherwise shall
not be in effect unless such judgment or order has been discharged prior to
the expiration of such period; or
(l) Any Guaranty or any provision thereof shall cease to be in
full force and effect, or any Guarantor, or any Person acting for or on
behalf of any Guarantor shall deny or disaffirm such Guarantor's
obligations under the relevant Guaranty, or any Guarantor shall default it
its due performance of any term, covenant or agreement on its part to be
performed or observed pursuant to the relevant Guaranty; or
(m) The Borrower or any of its ERISA Affiliates shall have made a
complete or partial withdrawal from a Multiemployer Plan and as a result of
such complete
78
or partial withdrawal the Borrower or such ERISA Affiliate incurs a
withdrawal liability in an annual amount exceeding $250,000 or a
Multiemployer Plan enters reorganization status under Section 4241 of
ERISA, and, as a result thereof, the Borrower's or such ERISA Affiliate's
annual contribution requirement with respect to such Multiemployer Plan
increases in an annual amount exceeding $250,000; or
(n) Any Termination Event with respect to any Benefit Plan shall
have occurred, and, thirty (30) days after notice thereof shall have been
given to the Borrower by Agent, (i) such Termination Event (if correctable)
shall not have been corrected, and (ii) the then current value of such
Benefit Plan's vested benefits exceeds the then current value of assets
allocable to such benefits in such Benefit Plan by more than $250,000 (or
in the case of a Termination Event involving liability under Section 515,
4062, 4063, 4064, 4069, 4201 or 4204 of ERISA, the liability is in excess
of such amount); or
(o) There shall be a Change of Control; or
(p) There shall be a termination (other than upon the natural
expiration of the term thereof) of any Required License Consent or any
material Borrower Licensor Agreement; or
(q) An order with respect to any of the Chapter 11 Cases shall be
entered by the Bankruptcy Court (i) appointing a Chapter 11 trustee or (ii)
appointing an examiner with enlarged powers relating to the operation of
the Borrower's business beyond those set forth in subsections 1106(a)(3)
and 1106(a)(4) of the Bankruptcy Code; or
(r) An order with respect to the Chapter 11 Cases shall be
entered by the Bankruptcy Court converting any of the Chapter 11 Cases to
Chapter 7 of the Bankruptcy Code; or
(s) An order shall be entered by the Bankruptcy Court confirming
a plan of reorganization in any of the Chapter 11 Cases which does not (x)
contain a provision for termination of all of the Lenders' Commitments and
payment in full in cash of all Obligations and the cash collateralization
or return of all Letters of Credit in a manner satisfactory to the Agent
and the Lenders on or before the effective date of such plan and (y)
provide for the continuation of the Agent's Liens and priorities until such
effective date; or
(t) An order shall be entered by the Bankruptcy Court dismissing
any of the Chapter 11 Cases which does not contain a provision for
termination of all of the Lenders' Commitments and payment in full in cash
of all Obligations and the cash collateralization or return of all Letters
of Credit in a manner satisfactory to the Agent and the Lenders upon such
dismissal; or
(u) An order with respect to any of the Chapter 11 Cases shall be
entered, in each case without the express prior written consent of the
Agent and the Lenders, (i) to revoke, vacate, reverse, stay, modify,
supplement or amend the credit facility herein
79
contemplated, any Loan Document, the Interim Financing Order or the Final
Financing Order, as the case may be, or (ii) to permit any administrative
expense claim or any claim (now existing or hereafter arising, of any kind
or nature whatsoever) to have administrative priority as to the Borrower
equal or superior to the priority of the Lenders and the Agent in respect
of the Obligations, except for allowed administrative expense claims having
priority over the Obligations to the extent set forth in the Orders or
(iii) to grant or permit the grant of a Lien on any Collateral, other than
Permitted Liens hereunder; or
(v) An application for any of the orders described in clause (q),
(r), (s), (t) or (u) above shall be made by the Borrower or any other
Person and such application (if made by any Person other than the Borrower)
is not contested by the Borrower in good faith or the relief requested is
granted in an order that is not stayed pending appeal; or
(w) An order shall be entered by the Bankruptcy Court granting
relief from the automatic stay to the holder or holders of any Liens on any
assets of the Borrower and the aggregate value or property subject to such
Liens is greater than $100,000; or
(x) The Interim Financing Order shall not have occurred within
three (3) Business Days of the Filing Date (unless the Agent consents to an
extension thereof) or the Final Financing Order Date shall not have
occurred by the date which is thirty (30) days after the Entry Date; or
(y) An order in form and substance reasonably satisfactory to the
Lenders approving the bid procedures contemplated by the DIC Purchase
Agreement shall not have been entered by the Bankruptcy Court on or before
June 28, 2001; or
(z) An order in form and substance reasonably satisfactory to the
Lenders approving the sale of the assets of the Borrower to DIC GB
Acquisition Corp. or its designees pursuant to the DIC Purchase Agreement
or to a competing bidder in accordance with the bid procedures order shall
not have been entered by the Bankruptcy Court by the date which is sixty
(60) days after the date of execution of the DIC Purchase Agreement; or
(aa) The Borrower shall attempt to invalidate, reduce or
otherwise impair the Agent's or any Lender's Liens, claims or rights
against the Borrower or to subject any Collateral to assessment pursuant to
Section 506(c) of the Bankruptcy Code or any lien purported to be created
by this Agreement, the Interim Financing Order or the Final Financing Order
in any property shall, for any reason, cease to be valid or any action is
commenced by the Borrower or any Affiliate which contests the validity,
perfection or enforceability of any liens of the Lenders created by this
Agreement, the Interim Financing Order or the Final Financing Order; or
(bb) There shall be any payment on, or application for authority
to pay, any claim or Indebtedness which, other than as described in Section
8.13(d), arose or accrued prior to the Filing Date, without the express
prior written consent of the Agent (which consent shall not be unreasonably
withheld); or
80
(cc) An order shall be entered by the Bankruptcy Court with
respect to the Chapter 11 Cases granting any creditor of the Borrower
relief from the automatic stay which would allow any such creditor to
prosecute and collect from or be paid by the Borrower an amount in excess
of $100,000.
9.02. Consequences of an Event of Default. Notwithstanding the
provisions of Section 362 of the Bankruptcy Code and without order of or
application or motion to the Bankruptcy Court, if an Event of Default shall
occur and be continuing or shall exist the Agent may, and upon the direction
of the Majority Lenders, shall by notice to the Borrower, but subject to any
notice requirements set forth in the Orders,
(a) declare the Revolving Credit Commitment of each Lender and
the Current Commitment terminated, whereupon the Revolving Credit
Commitment of each Lender and the Current Commitment will terminate
immediately without presentment, demand, protest or further notice of any
kind, all of which are hereby expressly waived, and an action therefor
shall immediately accrue; or
(b) declare the unpaid principal amount of the Notes, interest
accrued thereon, the total amount of the Letter of Credit Exposure that is
not cash collateralized in accordance with this Agreement, any fees due
hereunder, and all other amounts owing by the Borrower hereunder or under
the Notes to be immediately due and payable without presentment, demand,
protest or further notice of any kind, all of which are hereby expressly
waived, and an action therefor shall immediately accrue; or
(c) give notice to the Borrower of the occurrence and continuance
of an Event of Default; or
(d) any time when there are no Revolving Loans outstanding,
maintain cash collateral (to the extent the Borrower has or receives cash)
equal to 105% of all outstanding Letters of Credit; or
(e) apply all funds deposited in the Letter of Credit Cash
Collateral Account to the payment in whole or in part, of the Obligations;
or
(f) set-off amounts in the Lock Box Accounts, the Letter of
Credit Cash Collateral Account, or any other account under the dominion and
control of the Agent and apply such amounts to the Obligations of the
Borrower hereunder and under the Related Documents.
9.03. Deposit for Letters of Credit. Upon demand by the Letter of
Credit Issuer after the occurrence of any Event of Default, the Borrower shall
deposit with the Agent for the benefit of the Letter of Credit Issuer with
respect to each Letter of Credit then outstanding cash in an amount equal to the
greatest amount for which such Letter of Credit may be drawn. Such deposits
shall be held by the Agent for the benefit of the Letter of Credit Issuer in the
Letter of Credit Cash
81
Collateral Account as security for, and to provide for the payment of, the
Letter of Credit Exposure and all other Obligations.
9.04. Certain Remedies. If an Event of Default occurs, each of the
Agent and the Lenders may exercise all rights and remedies which it may have
hereunder or under any Security Document or other Related Document or at law or
in equity or otherwise. All such remedies shall be cumulative and not exclusive.
ARTICLE 10
MISCELLANEOUS
10.01. Holidays. Except as otherwise provided herein, whenever any
payment or action to be made or taken hereunder or under any Note shall be
stated to be due on a day which is not a Business Day, such payment or action
shall be made or taken on the next following Business Day and such extension of
time shall be included in computing interest or fees, if any, in connection with
such payment or action.
10.02. Records. The unpaid principal amount of the Notes, the unpaid
interest accrued thereon, the interest rate or rates applicable to such unpaid
principal amount, the duration of such applicability, the Current Commitment,
the Stated Amount of each Letter of Credit, the principal amount of all
Reimbursement Obligations, the Letter of Credit Exposure, Unused Line Fee and
Letter of Credit Fees shall at all times be ascertained from the records of
Agent, which shall be conclusive and binding absent manifest error.
10.03. Amendments and Waivers.
----------------------
(a) No amendment or modification of any provision of this
Agreement or of any Note or of any other Related Document shall be effective
without the written agreement of the Majority Lenders and the Borrower and no
termination or waiver of any provision of this Agreement or of any of the Notes,
or consent to any departure by the Borrower therefrom, shall in any event be
effective without the written concurrence of the Majority Lenders, which the
Majority Lenders shall have the right to grant or withhold at their sole
discretion; except that any amendment, modification, or waiver (i) of any
provision of Article 2 or 3 which amendment, modification or waiver increases
the Revolving Credit Commitment of any Lender, reduces the principal of, or
interest on, any Loan or the Reimbursement Obligations payable to any Lender,
reduces the amount of any fee payable for the account of any Lender, or
postpones or extends any date fixed for any payment of principal of, or interest
or fees on, any Loan or Letter of Credit Exposure payable to any Lender, (ii)
that increases the aggregate amount of the Revolving Credit Commitments, the
advance rates or Term Loan Commitments of the Lenders, (iii) of the definitions
of "Facility Termination Date", "Revolving Credit Termination Date", "Majority
Lenders" or "Pro Rata Shares", (iv) of the definitions of "Eligible Accounts
Receivable", "Eligible Inventory" or "Borrowing Base" if the effect of such
amendment, modification or waiver is to increase the amount available to be
borrowed by the Borrower, (v) of any provision of this Agreement or any Related
Document that would permit Liens on the Collateral or release all or a
substantial portion of Collateral (except as set forth in Sec-
82
tion 11.08 hereof or except as otherwise permitted herein) or (vi) of the
provisions contained in this Section 10.03, shall be effective only if evidenced
by a writing signed by or on behalf of (A) any Lender affected thereby in the
case of the amendments, modifications or waivers described in clause (i) above
or (B) all Lenders in the case of the amendments, definitions or waivers
described in clauses (ii) through (vi) above. No amendment, modification,
termination, or waiver of any provision of Article 11 or any other provision
referring to the Agent shall be effective without the written concurrence of the
Agent. Any waiver or consent shall be effective only in the specific instance
and for the specific purpose for which it was given. No notice to or demand on
the Borrower in any case shall entitle the Borrower to any other or further
notice or demand in similar or other circumstances except to the extent such
notice is expressly required under this Agreement. Any amendment, modification,
waiver or consent effected in accordance with this Section 10.03 shall be
binding on each Lender, each future Lender, and, if signed by the Borrower, on
the Borrower.
(b) Notwithstanding anything to the contrary contained in
subsection 10.03(a), in the event that the Borrower requests that this Agreement
or any other Related Document be amended or otherwise modified in a manner which
would require the unanimous consent of all of the Lenders and such amendment or
other modification is agreed to by the Majority Lenders, then with the consent
of the Borrower and the Majority Lenders, the Borrower and the Majority Lenders
may amend this Agreement without the consent of the Lender or Lenders which did
not agree to such amendment or other modification (collectively the "Minority
Lenders") to provide for (w) the termination of the Revolving Credit Commitment
and/or the Term Loan Commitment of each of the Minority Lenders, (x) the
addition to this Agreement of one or more other Lenders, or an increase in the
Revolving Credit Commitment and/or the Term Loan Commitment of one or more of
the Majority Lenders, so that the Revolving Credit Commitments and/or the Term
Loan Commitment, as applicable, after giving effect to such amendment shall be
in the same aggregate amount as the Revolving Credit Commitments and/or the Term
Loan Commitment, as applicable, immediately before giving effect to such
amendment, (y) if any Loans are outstanding at the time of such amendment, the
making of such additional Loans by such new Lenders or Majority Lenders, as the
case may be, as may be necessary to repay in full the outstanding Loans of the
Minority Lenders immediately before giving effect to such amendment and (z) the
payment of all interest, fees and other Obligations payable or accrued in favor
of the Minority Lenders and such other modifications to this Agreement as the
Borrower and the Majority Lenders may determine to be appropriate.
10.04. No Implied Waiver; Cumulative Remedies. No course of dealing
and no delay or failure of the Lenders or the Agent in exercising any right,
power or privilege under this Agreement, any Note or any other Related Document
shall affect any other or future exercise thereof or exercise of any other
right, power or privilege; nor shall any single or partial exercise of any such
right, power or privilege or any abandonment or discontinuance of steps to
enforce such a right, power or privilege preclude any further exercise thereof
or of any other right, power or privilege. The rights and remedies of the
Lenders or the Agent under this Agreement, the Notes and the other Related
Documents are cumulative and not exclusive of any rights or remedies which the
Lenders or the Agent have thereunder or at law or in equity or otherwise. The
Lenders or the Agent may
83
exercise their rights and remedies against the Borrower and the Collateral
as the Lenders and the Agent may elect, regardless of the existence or
adequacy of any other right or remedy.
10.05. Notices.
-------
(a) All notices, requests, demands, directions and other
communications (collectively "Notices") under the provisions of this Agreement
or any Note shall be in writing and shall be mailed (by certified mail, postage
prepaid and return receipt requested), telecopied, or delivered by recognized
overnight courier and shall be effective (i) if mailed, three (3) days after
being deposited in the mails, (ii) if telecopied, when sent, confirmation
received (with such telecopy properly confirmed by personal delivery or by mail
in accordance with this Section 10.05) and (iii) if delivered, upon delivery
with a receipt therefor. All Notices shall be sent to the applicable party at
the address stated on the signature page hereof together with, in the case of a
letter of credit request and Letter of Credit Application sent pursuant to
Section 3.01(a) hereof, a copy to the Agent at the address for the Agent
provided on the signature page hereof, or in accordance with the last unrevoked
written direction from such party to the other parties hereto.
(b) The Lenders and the Agent may rely, and shall be fully
protected in relying, on any Notice purportedly made by or on behalf of the
Borrower and the Lenders and the Agent shall have no duty to verify the
identity or authority of any Person giving such notice. The preceding sentence
shall apply to all Notices whether or not made in a manner authorized or
required by this Agreement or any other Related Document.
10.06. Expenses; Taxes; Attorneys' Fees; Indemnification. The
Borrower agrees to pay or cause to be paid, on demand, and to save the Agent
(and, in the case of clauses (c) through (m) below, the Lenders) harmless
against liability for the payment of all reasonable out-of-pocket expenses,
regardless of whether the transactions contemplated hereby are consummated,
including but not limited to reasonable fees and expenses of counsel for the
Agent and, in the case of clauses (c) through (m) below, the Lenders),
accounting, due diligence, periodic field audits, appraisals, investigations,
monitoring of assets, syndication, miscellaneous disbursements, examination,
travel, lodging and meals, incurred by the Agent (and, in the case of clauses
(c) through (m) below, the Lenders) from time to time arising from or relating
to: (a) the negotiation, preparation, execution, delivery, performance and
administration of this Agreement and the other Related Documents, (b) any
requested amendments waivers or consents to this Agreement or the other Related
Documents whether or not such documents become effective or are given, (c) the
preservation and protection of any of the Agent's, and the Lenders' rights under
this Agreement or the other Related Documents, (d) the defense of any claim or
action asserted or brought against the Agent or the Lenders by any Person that
arises from or relates to this Agreement, any other Related Document, the
Agent's or the Lenders' claims against the Borrower, or any and all matters in
connection therewith, (e) the commencement or defense of, or intervention in,
any court proceeding arising from or related to this Agreement or any other
Related Document, (f) the filing of any petition, complaint, answer, motion or
other pleading by the Agent or the Lenders, or the taking of any action in
respect of the Collateral or other security, in connection with this Agreement
or any other Related Document, (g) the protection, collection, lease, sale,
taking possession of or liquidation of, any Collateral or other security in
connection with this Agreement or any other Related Document, (h) any attempt to
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enforce any Lien on any Collateral or other security in connection with this
Agreement or any other Related Document, (i) any attempt to collect from the
Borrower, (j) the receipt of any advice with respect to any of the foregoing,
(k) all Environmental Liabilities and Costs arising from or in connection with
the past, present or future operations of the Borrower or its Subsidiaries
involving any damage to real or personal property or natural resources or harm
or injury alleged to have resulted from any Release of Hazardous Materials on,
upon or into such property, (l) any costs or liabilities incurred in connection
with the investigation, removal, cleanup and/or remediation of any Hazardous
Materials present or arising out of the operations of any facility of the
Borrower or any of its Subsidiaries, or (m) any costs or liabilities incurred in
connection with any Environmental Lien. Without limitation of the foregoing or
any other provision of any Related Document: (x) the Borrower agrees to pay all
stamp, document, transfer, recording or filing taxes or fees (including, without
limitation, mortgage recording taxes) and similar impositions now or hereafter
determined by the Agent or any of the Lenders to be payable in connection with
this Agreement or any other Related Document, and the Borrower agrees to save
the Agent and the Lenders harmless from and against any and all present or
future claims, liabilities or losses with respect to or resulting from any
omission to pay or delay in paying any such taxes, fees or impositions, and (y)
if the Borrower either fails to perform any covenant or agreement contained
herein or in any other Related Document, the Agent may itself perform or cause
performance of such covenant or agreement, and the expenses of the Agent
incurred in connection therewith shall be reimbursed on demand by the Borrower.
The Borrower agrees to indemnify and defend the Agent and the Lenders and their
directors, officers, agents, employees and affiliates (collectively, the
"Indemnified Parties") from, and hold each of them harmless against, any and all
losses, liabilities, claims, damages, costs or expenses of any nature whatsoever
(including reasonable attorneys' fees and amounts paid in settlement) incurred
by, imposed upon or asserted against any of them arising out of or by reason of
any investigation, litigation or other proceeding or claim brought or threatened
relating to, or otherwise arising out of or relating to, the execution of this
Agreement or any other Related Document, the transactions contemplated hereby or
thereby or any Loan or proposed Loan or Letter of Credit or proposed Letter of
Credit hereunder (including, but without limitation, any use made or proposed to
be made by the Borrower or any of its Affiliates of the proceeds of any thereof,
or the delivery or use or transfer of or the payment or failure to pay under any
Loan or Letter of Credit) but excluding any such losses, liabilities, claims,
damages, costs or expenses to the extent finally judicially determined to have
resulted from the gross negligence or willful misconduct of the Indemnified
Party. No claim may be made by the Borrower, any Lender or other Person against
the Agent, the Co-Agent, any Lender, or the affiliates, directors, officers,
employees, or agents of any of them for any special, indirect, consequential or
punitive damages in respect of any claim for breach of contract or any other
theory of liability arising out of or related to the transactions contemplated
by this Agreement or any other Loan Document, or any act, omission or event
occurring in connection therewith, and the Borrower and each Lender hereby
waive, release and agree not to ▇▇▇ upon any claim for such damages, whether or
not accrued and whether or not known or suspected to exist in its favor.
10.07. Application. Except to the extent, if any, expressly set forth
in this Agreement or in the Related Documents, the Agent and the Lenders shall
have the right to apply any payment received or applied by it in connection with
the Obligations to such of the Obligations then due and payable as it may elect.
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10.08. Severability. The provisions of this Agreement are intended to
be severable. If any provision of this Agreement shall be held invalid or
unenforceable in whole or in part in any jurisdiction such provision shall, as
to such jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without in any manner affecting the validity or enforceability
thereof in any other jurisdiction or the remaining provisions hereof in any
jurisdiction.
10.09. Governing Law. This Agreement and each of the Notes shall be
deemed to be contracts entered into in the State of New York and governed by the
laws of the State of New York, without regard to choice of law principles, and
for all purposes, other than as governed by the Bankruptcy Code, shall be
governed by and construed and enforced in accordance with the laws of said
State.
10.10. Prior Understandings. This Agreement supersedes all prior
understandings and agreements, whether written or oral, among the parties hereto
relating to the transactions provided for herein.
10.11. Duration; Survival. All representations and warranties of the
Borrower contained herein or made in connection herewith shall survive the
making of the Loans and the issuance of any Letter of Credit and shall not be
waived by the execution and delivery of this Agreement, the Notes or any other
Related Document, any investigation by or knowledge of the Agent, or the
Lenders, the making of any Loan or the issuance of any Letter of Credit
hereunder, or any other event whatsoever. All covenants and agreements of the
Borrower contained herein shall continue in full force and effect from and after
the date hereof so long as the Borrower may borrow hereunder and until the
Obligations have been paid in full and no Letters of Credit remain outstanding.
Without limitation, it is understood that all obligations of the Borrower to
make payments to or indemnify the Agent, and the Lenders (including, without
limitation, obligations arising under Section 10.06 hereof) shall survive the
payment in full of the Notes and all Reimbursement Obligations and of all other
obligations of the Borrower thereunder and hereunder.
10.12. Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts each
of which, when so executed, shall be deemed an original, but all such
counterparts shall constitute but one and the same instrument.
10.13. Assignments; Participations.
---------------------------
(a) Each Lender may with the written consent of the Agent, which
consent shall not be unreasonably withheld, assign to one or more commercial
banks or other financial institutions a portion of its rights and obligations
under this Agreement (including, without limitation, a portion of its Revolving
Credit Commitment, a portion of its Term Loan Commitment, the Loans owing to it
and its rights and obligations as a Lender with respect to Letters of Credit)
and the other Related Documents; provided, however, that (i) each such
assignment shall be in a principal amount of not less than $10,000,000 and in
multiples of $5,000,000 in excess thereof (or the remainder of such Lender's
Revolving Credit Commitment, Term Loan Commitment or Term Loan), (ii) no such
assignment shall be made, other than by CIT, and (iii) the parties to each such
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assignment shall execute and deliver to the Agent, for its acceptance and
recording in the Register (as hereinafter defined), an Assignment and
Acceptance. Upon such execution, delivery, acceptance and recording, from and
after the effective date specified in each Assignment and Acceptance, (A) the
assignee thereunder shall be a party hereto and to the other Related Documents
and, to the extent that rights and obligations hereunder have been assigned to
it pursuant to such Assignment and Acceptance, have the rights and obligations
(including, without limitation, the obligation to participate in Letters of
Credit) of a Lender hereunder and thereunder and (B) the assigning Lender shall,
to the extent that rights and obligations hereunder have been assigned by it
pursuant to such Assignment and Acceptance, relinquish its rights and be
released from its obligations under this Agreement.
(b) By executing and delivering an Assignment and Acceptance, the
assignor and the assignee thereunder confirm to and agree with each other and
the other parties hereto as follows: (i) other than as provided in such
Assignment and Acceptance, the assigning lender makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
any other Related Document or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement or any other Related
Document furnished pursuant hereto; (ii) the assigning Lender makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of the Borrower or any of its Subsidiaries or the
performance or observance by the Borrower of any of its obligations under this
Agreement or any other Related Document furnished pursuant hereto; (iii) such
assignee confirms that it has received a copy of this Agreement and the other
Related Documents, together with such other documents and information it has
deemed appropriate to make its own credit analysis and decision to enter into
such Assignment and Acceptance; (iv) such assignee will, independently and
without reliance upon the assigning Lender, the Agent or any Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement and the other Related Documents; (v) such assignee appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers under this Agreement and the other Related Documents as are
delegated to the Agent by the terms thereof together with such powers as are
reasonably incidental thereto; and (vi) such assignee agrees that it will
perform in accordance with their terms all of the obligations which by the terms
of this Agreement and the other Related Documents are required to be performed
by it as a Lender.
(c) The Agent shall maintain at its address referred to on the
signature page hereto, a copy of each Assignment and Acceptance delivered to and
accepted by it and a register for the recordation of the names and addresses of
the Lenders and the Revolving Credit Commitment and Term Loan Commitment of, and
principal amount of the Loans owing to and the participation interest in the
Letters of Credit of, each Lender from time to time (the "Register"). The
entries in the Register shall be conclusive and binding for all purposes, absent
manifest error, and the Borrower, the Agent and the Lenders may treat each
Person whose name is recorded in the Register as a Lender hereunder for all
purposes of this Agreement. The Register shall be available for inspection by
the Borrower and any Lender at any reasonable time and from time to time upon
reasonable prior notice.
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(d) Upon its receipt of an Assignment and Acceptance executed by
an assigning Lender and an assignee Lender (together with the Note(s) subject to
such assignment), the Agent shall, if such Assignment and Acceptance has been
completed and is in substantially the form of Exhibit D hereto, (i) accept such
Assignment and Acceptance, (ii) give prompt notice thereof to the Borrower and
(iii) record the information contained therein in the Register. Within five
Business Days after its receipt of such notice, the Borrower, at its own
expense, shall execute and deliver to the Agent in exchange for any surrendered
Note a new Note to the order of such assignee Lender in an aggregate principal
amount equal to the Revolving Credit Commitment and/or, the Term Loan
Commitment, as applicable, assumed by it pursuant to such Assignment and
Acceptance, and a new Note to the order of the assigning Lender in an aggregate
principal amount equal to the Revolving Credit Commitment and/or the Term Loan
Commitment, as applicable, retained by it hereunder, in each case prepared by
the Agent. Such new Notes shall be in an aggregate principal amount equal to the
aggregate principal amount of such surrendered Note, shall be dated the date of
the Agent's acceptance of such assignment and acceptance and shall otherwise be
in substantially the form of Exhibit A-1 or A-2 hereto, as applicable.
(e) Each Lender may sell participations to one or more banks or
other entities in or to all or a portion of its rights and obligations under
this Agreement and the other Related Documents (including, without limitation,
all or a portion of its Revolving Credit Commitment and/or Term Loan Commitment,
and the Loans owing to it and its participation in Letters of Credit); provided
that (i) such Lender's obligations under this Agreement (including, without
limitation, its Revolving Credit Commitment hereunder) and the other Related
Documents shall remain unchanged; (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations,
and the Borrower, the Agent and the other Lenders shall continue to deal solely
and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and the other Related Documents; and (iii) a
participant shall not be entitled to require such Lender to take or omit to take
any action hereunder except (A) action directly effecting an extension of the
maturity dates or decrease in the principal amount of the Loans or Reimbursement
Obligations, or (B) action directly effecting an extension of the due dates of
or a decrease in the rate of interest payable on the Loans or the fees payable
under this Agreement, or (C) actions directly effecting a release of all or a
substantial portion of the Collateral (except as set forth in Section 11.08
hereof or any Related Document).
(f) Notwithstanding the foregoing provisions of this Section
10.13, each Lender may at any time sell, assign, transfer, or negotiate all or
any part of its rights and obligations under this Agreement and the Related
Documents to any Affiliate of such Lender.
10.14. Successors and Assigns. This Agreement and the other Related
Documents shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns except that the Borrower may not
assign or transfer any of its rights hereunder or thereunder without the prior
written consent of all of the Lenders.
10.15. Confidentiality. Upon delivering to any Lender, or the Agent,
or permitting any Lender, or the Agent to inspect, any written information
pursuant to this Agreement or the other Related Documents, each Lender, and the
Agent shall treat such information as confidential. Subject
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to the other provisions of this Section 10.15, each Lender and the Agent may
disclose confidential information to its officers, directors, employees,
attorneys, accountants or other professionals engaged by any Lender and the
Agent only after determining that such third party has been instructed to hold
such information in confidence to the same extent as if it were a Lender.
Notwithstanding the foregoing, the provisions of this Section 10.15 shall not
apply to information within any one of the following categories or any
combination thereof: (i) information the substance of which, at the time of
disclosure by any Lender or the Agent, has been disclosed to or is known to any
creditor (other than information as to which such creditor is then under an
obligation of nondisclosure), or any Person including by virtue of any filings
with the Bankruptcy Court other than (A) a director, officer, employee or agent
of any of the Borrower or a professional engaged by the Borrower or (B) a Person
who is then under an obligation of nondisclosure (otherwise than as a
consequence of a wrongful act of any Lender or the Agent), (ii) information
which any Lender or the Agent had in its possession prior to receipt thereof
from the disclosing party, or (iii) information received by any Lender or the
Agent from a third party having no obligations of nondisclosure with respect
thereto. Nothing contained in this Section 10.15 shall prevent any disclosure:
(x) believed in good faith by any Lender and Agent to be required by any law or
guideline or interpretation or application thereof by any Governmental
Authority, arbitrator or grand jury charged with the interpretation or
administration thereof or compliance with any request or directive of any
Governmental Authority, arbitrator or grand jury (whether or not having the
force of law), (y) determined by counsel for any Lender, or the Agent to be
necessary or advisable in connection with enforcement or preservation of rights
under or in connection with this Agreement or any other Related Document or (z)
of any information which has been made public by a Person other than any Lender,
or Agent. The Lenders and the Agent shall have the right to disclose any
confidential information described in this Section 10.15 to the Letter of Credit
Issuer and to an assignee or prospective assignee or to a participant or
prospective participant in Loans hereunder, provided that the assigning or
selling Lender shall have obtained from such assignee or prospective assignee or
participant or prospective participant a written agreement to hold such
information in confidence to the same extent as if it were a Lender.
10.16. Waiver of Jury Trial. BY ITS EXECUTION AND DELIVERY OF THIS
AGREEMENT, EACH OF THE AGENT, EACH LENDER AND THE BORROWER HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN
CONNECTION WITH, THIS AGREEMENT, THE NOTE OR ANY OTHER RELATED DOCUMENT, ANY OF
THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY OR ANY COURSE OF CONDUCT, COURSE
OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE AGENT, THE
LENDERS, OR THE BORROWER IN CONNECTION HEREWITH OR THEREWITH. THIS PROVISION IS
A MATERIAL INDUCEMENT FOR THE AGENT, AND THE LENDERS TO ENTER INTO THIS
AGREEMENT.
10.17. Right of Setoff. Upon the occurrence and during the
continuance of any Event of Default any Lender, the Agent and the Letter of
Credit Issuer may, and is hereby authorized to, at any time from time to time,
without notice to the Borrower (any such notice being expressly waived by the
Borrower) and to the fullest extent permitted by law, set off and apply any and
all
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deposits (general or special, time or demand, provision or final) at any time
held and other Indebtedness at any time owing by such Lender, the Agent or the
Letter of Credit Issuer to or for the credit or the account of the Borrower
against any and all Obligations of the Borrower now or hereafter existing under
the Loan Documents, irrespective of whether or not any Lender, the Agent and the
Letter of Credit Issuer shall have made any demand hereunder or thereunder and
although such Obligations may be contingent or unmatured. Each Lender, the Agent
and the Letter of Credit Issuer agrees promptly to notify the Borrower after any
such setoff and application made by such Lender, the Agent or the Letter of
Credit Issuer; provided, however, that the failure to give such notice shall not
affect the validity of such setoff and application. The rights of each Lender,
the Agent and the Letter of Credit Issuer under this Section 10.17 are in
addition to the other rights and remedies (including, without limitation, other
rights of setoff under applicable law or otherwise) which such Lender, the Agent
or the Letter of Credit Issuer may have.
10.18. Headings. Section headings herein are included for convenience
of reference only and shall not constitute a part of this Agreement for any
other purpose.
10.19. Consent to Jurisdiction. To the extent that the Borrower has
or hereafter may acquire any immunity from jurisdiction of any court or from any
legal process (whether through service or notice attachment prior to judgment,
attachment in aid of execution or otherwise) with respect to itself or its
property, the Borrower hereby irrevocably waives such immunity in respect of its
obligations under this Agreement and the other Loan Documents.
10.20A Termination of this Agreement. This Agreement shall terminate
as of the Revolving Credit Termination Date.
10.20B Termination Upon an Event of Default. Notwithstanding the
foregoing, and subject to Section 9.02 hereof, the Agent may, and if required by
the Majority Lenders to do so shall, terminate this Agreement immediately upon
the occurrence of an Event of Default.
10.20C Termination Upon Confirmation of Plan of Reorganization.
Notwithstanding the foregoing, this Agreement shall terminate upon the entry of
an order by the Bankruptcy Court confirming a plan of reorganization in the
Chapter 11 Cases; provided that if the provisions of such order are satisfactory
to the Agent and the Lenders, then termination hereunder shall occur on such
date when such plan of reorganization is deemed effective.
10.20D Termination Upon Sale. Notwithstanding the foregoing, this
Agreement shall terminate upon the sale of assets of any of the Loan Parties
pursuant to the DIC Purchase Agreement or to any other purchaser. All proceeds
of any such sale up to the total amount of Obligations outstanding shall be paid
directly to the Agent for the account of the Agent, the Co-Agent and the Lenders
for application to the payment in full of the Obligations.
10.20E Maturity of Obligations Upon Termination. All Obligations
shall become due and payable as of any termination under this Agreement and,
pending a final accounting, if the Agent determines in its good faith judgment
that there is a reasonable basis for doing so, the Agent may withhold any
balances in the Borrower's account (unless supplied with an indemnity
satisfactory
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to the Agent) to cover all of the Obligations then due and payable hereunder.
All of the Lenders' and the Agent's rights, liens and security interests shall
continue after any termination until payment in full of all Loans and other
amounts then due and payable hereunder at the date of such termination.
10.21 Security Documents. Notwithstanding anything else contained
herein or in the other Loan Documents, the grants of lien and lien priorities
set forth in the Orders will govern with respect to any inconsistencies between
the Orders and any Loan Documents.
ARTICLE 11.
THE AGENT
11.01. Appointment. Each Lender (and each subsequent holder of any
Note by its acceptance thereof) hereby irrevocably appoints and authorizes CIT,
in its capacity as Agent (i) to receive on behalf of each Lender any payment of
principal of or interest on the Notes outstanding hereunder and all other
amounts accrued hereunder for the account of the Lenders and paid to the Agent,
and, subject to Section 2.03 hereof, to distribute promptly to each Lender its
pro rata share of all payments so received, (ii) to distribute to each Lender
copies of all material notices and agreements received by the Agent and not
required to be delivered to each Lender pursuant to the terms of this Agreement,
provided that the Agent shall not have any liability to the Lenders for the
Agent's inadvertent failure to distribute any such notice or agreements to the
Lenders, and (iii) subject to Section 10.03 hereof, to take such action as the
Agent deems appropriate on its behalf to administer the Loans, Letters of Credit
and the Loan Documents and to exercise such other powers delegated to the Agent
by the terms hereof or the Loan Documents (including, without limitation, the
power to give or to refuse to give notices, waivers, consents, approvals and
instructions and the power to make or to refuse to make determinations and
calculations) together with such powers as are reasonably incidental thereto to
carry out the purposes hereof and thereof. As to any matters not expressly
provided for by this Agreement and the other Loan Documents (including, without
limitation, enforcement or collection of the Notes), the Agent shall not be
required to exercise any discretion or take any action, but shall be required to
act or to refrain from acting (and shall be fully protected in so acting or
refraining from acting) upon the instructions of the Majority Lenders, and such
instructions of the Majority Lenders shall be binding upon all Lenders and all
holders of Notes; provided, however, that the Letter of Credit Issuer shall not
be required to refuse to honor a drawing under any Letter of Credit and the
Agent shall not be required to take any action which, in the reasonable opinion
of the Agent, exposes the Agent to liability or which is contrary to this
Agreement or any Loan Document or applicable law.
11.02. Nature of Duties. The Agent and the Co-Agent shall have no
duties or responsibilities except those expressly set forth in this Agreement or
in the Related Documents. The duties of the Agent and the Co-Agent shall be
mechanical and administrative in nature. The Agent and the Co-Agent shall not
have by reason of this Agreement or any Related Document a fiduciary
relationship in respect of any Lender. Nothing in this Agreement or any of the
Related Documents, express or implied, is intended to or shall be construed to
impose upon the Agent and the Co-Agent any obligations in respect of this
Agreement or any of the Related Documents except as expressly set forth herein
or therein. Each Lender shall make its own independent investigation of the
financial condition and affairs of the Borrower in connection with the making
and the continuance of the
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Loans hereunder and with the issuance of the Letters of Credit and shall make
its own appraisal of the creditworthiness of the Borrower and the value of the
Collateral, and the Agent and the Co-Agent shall have no duty or responsibility,
either initially or on a continuing basis, to provide any Lender with any credit
or other information with respect thereto, whether coming into its possession
before the initial Credit Extension hereunder or at any time or times
thereafter, provided that, upon the reasonable request of a Lender, the Agent
shall provide to such Lender any documents or reports delivered to the Agent by
the Borrower pursuant to the terms of this Agreement or any Related Document. If
the Agent seeks the consent or approval of the Majority Lenders to the taking or
refraining from taking any action hereunder, the Agent shall send notice thereof
to each Lender. The Agent shall promptly notify each Lender any time that the
Majority Lenders have instructed the Agent to act or refrain from acting
pursuant hereto.
11.03. Rights, Exculpation, Etc. The Agent, the Co-Agent and their
respective directors, officers, agents or employees shall not be liable for any
action taken or omitted to be taken by it or them under or in connection with
this Agreement or the other Loan Documents, except for their own gross
negligence or willful misconduct as determined by a final judgment of a court of
competent jurisdiction. Without limiting the generality of the foregoing, the
Agent (i) may treat the payee of any Note as the holder thereof until the Agent
receives written notice of the assignment or transfer thereof, pursuant to
Section 10.13 hereof, signed by such payee and in form satisfactory to the
Agent; (ii) may consult with legal counsel (including, without limitation,
counsel to the Agent or counsel to the Borrower), independent public
accountants, and other experts selected by it and shall not be liable for any
action taken or omitted to be taken in good faith by it in accordance with the
advice of such counsel, accountants or experts; (iii) makes no warranty or
representation to any Lender and shall not be responsible to any Lender for any
statements, certificates, warranties or representations made in or in connection
with this Agreement or the other Loan Documents; (iv) shall not have any duty to
ascertain or to inquire as to the performance or observance of any of the terms,
covenants or conditions of this Agreement or the other Loan Documents on the
part of any Person, the existence or possible existence of any Potential Default
or Event of Default, or to inspect the Collateral or other property (including,
without limitation, the books and records) of any Person; (v) shall not be
responsible to any Lender for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or the other
Loan Documents or any other instrument or document furnished pursuant hereto or
thereto; and (vi) shall not be deemed to have made any representation or
warranty regarding the existence, value or collectibility of the Collateral, the
existence, priority or perfection of the Agent's Lien thereon, or the Borrowing
Base or any certificate prepared by the Borrower in connection therewith, nor
shall the Agent be responsible or liable to the Lenders for any failure to
monitor or maintain the Borrowing Base or any portion of the Collateral. The
Agent shall not be liable for any apportionment or distribution of payments made
by it in good faith pursuant to Section 2.08(c) hereof, and if any such
apportionment or distribution is subsequently determined to have been made in
error the sole recourse of any Lender to whom payment was due but not made shall
be to recover from other Lenders any payment in excess of the amount which they
are determined to be entitled. The Agent may at any time request instructions
from the Lenders with respect to any actions or approvals which by the terms of
this Agreement or of any of the Related Documents the Agent is permitted or
required to take or to grant, and if such instructions are promptly requested,
the Agent shall be absolutely entitled to refrain from taking any action or to
withhold any approval under any of the Related Documents until it shall have
received
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such instructions from the Majority Lenders. Without limiting the foregoing, no
Lender shall have any right of action whatsoever against the Agent as a result
of the Agent acting or refraining from acting under this Agreement, any Note, or
any of the other Related Documents in accordance with the instructions of the
Majority Lenders.
11.04. Reliance. The Agent shall be entitled to rely upon any written
notices, statements, certificates, orders or other documents or any telephone
message believed by it in good faith to be genuine and correct and to have been
signed, sent or made by the proper Person, and with respect to all matters
pertaining to this Agreement or any of the Related Documents and its duties
hereunder or thereunder, upon advice of counsel selected by it.
11.05. Indemnification. To the extent that the Agent is not
reimbursed and indemnified by the Borrower in accordance with this Agreement,
the Lenders will reimburse and indemnify the Agent for and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses, advances or disbursements of any kind or nature whatsoever
which may be imposed on, incurred by, or asserted against the Agent in any way
relating to or arising out of this Agreement or any of the Related Documents or
any action taken or omitted by the Agent under this Agreement or any of the
Related Documents, on a pro rata basis, including, without limitation, advances
and disbursements made pursuant to Section 11.08 hereof; provided, however, that
no Lender shall be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses, advances
or disbursements for which there has been a final judicial determination that
such resulted from the Agent's gross negligence or willful misconduct. The
obligations of the Lenders under this Section 11.05 shall survive the payment in
full of the Loans and Reimbursement Obligations and the termination of this
Agreement.
11.06. CIT Individually. With respect to its Pro Rata Share of the
Revolving Credit Commitments hereunder, the Loans made by it and the Notes
issued to or held by it, CIT shall have and may exercise the same rights and
powers hereunder and is subject to the same obligations and liabilities as and
to the extent set forth herein for any other Lender or holder of a Note. The
terms "Lenders" or "Majority Lenders" or any similar term shall, unless the
context clearly otherwise indicates, include CIT in its individual capacity as a
Lender or one of the Majority Lenders. CIT and its Affiliates may accept
deposits from, lend money to, and generally engage in any kind of banking, trust
or other business with the Borrower or any of its Subsidiaries as if it were not
acting as Agent pursuant hereto without any duty to account to the Lenders. The
Lenders acknowledge and agree that The Dai-Ichi Kangyo Bank, Limited, New York
Branch, as the Letter of Credit Issuer, is an Affiliate of the Agent, and may
take actions which are not in the interests of, or may have an adverse effect
on, the Lenders, or may omit to take actions which would be in the interests of,
or would have a favorable effect on, the Lenders, and the Lenders will not
assert any claim against the Agent based on actions or omissions by the Letter
of Credit Issuer and will not assert any such actions or omissions as a defense
or offset to the Lenders' obligations hereunder.
11.07. Successor Agent.
---------------
(a) The Agent may resign from the performance of all its
functions and duties hereunder and under the other Related Documents at any time
by giving at least thirty (30)
93
Business Days' prior written notice to the Borrower and each Lender. Such
resignation shall take effect upon the acceptance by a successor Agent of
appointment pursuant to clauses (b) and (c) herein below or as otherwise
provided below.
(b) Upon any such notice of resignation, the Majority Lenders
shall appoint a successor Agent who shall be reasonably satisfactory to the
Borrower. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations under
this Agreement and the other Related Documents. After any Agent's resignation
hereunder as the Agent, the provisions of this Article 11 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was Agent
under this Agreement and the other Related Documents.
(c) If a successor Agent shall not have been so appointed within
said thirty (30) Business Day period, the retiring Agent, with the consent of
the Borrower, shall then appoint a successor Agent who shall serve as Agent
until such time, if any, as the Majority Lenders, with the consent of the
Borrower, appoint a successor Agent as provided above.
11.08. Collateral Matters.
------------------
(a) The Agent may from time to time, make such disbursements and
advances ("Agent Advances") which the Agent, in its sole discretion, deems
necessary or desirable to preserve or protect the Collateral or any portion
thereof, to enhance the likelihood or maximize the amount of repayment by the
Borrower of the Loans and other Obligations or to pay any other amount
chargeable to the Borrower pursuant to the terms of this Agreement, including,
without limitation, costs, fees and expenses as described in Section 10.06
hereof; provided that the consent of the Co-Agent shall be required for any
proposed Agent Advances which when added to any currently outstanding Agent
Advances would result in an aggregate outstanding amount of Agent Advances in
excess of $500,000. Such Agent Advances may be in excess of (x) the Borrowing
Base or (y) the Current Commitment. The Agent Advances shall be repayable on
demand and be secured by the Collateral and shall constitute Revolving Loans and
Obligations hereunder. The Agent shall notify each Lender and the Borrower in
writing of each such Agent Advance, which notice shall include a description of
the purpose of such Agent Advance. Without limitation to its obligations
pursuant to Section 11.05 hereof, each Lender agrees that it shall make
available to the Agent, upon the Agent's demand, in Dollars in immediately
available funds, the amount equal to such Lender's Pro Rata Share of each such
Agent Advance which is in excess of the Borrowing Base. If such funds are not
made available to the Agent by such Lender the Agent shall be entitled to
recover such funds, on demand from such Lender together with interest thereon,
for each day from the date such payment was due until the date such amount is
paid to the Agent, at the customary rate set by the Agent for the correction of
errors among banks for three (3) Business Days and thereafter at the Regular
Rate.
(b) The Lenders hereby irrevocably authorize the Agent, at its
option and in its discretion, to release any Lien granted to or held by the
Agent upon any Collateral: upon termination of the Revolving Credit Commitments
and payment and satisfaction of all Loans, Pre-Petition Loans, Reimbursement
Obligations, other Letter of Credit Exposure (whether or not due)
94
and other Obligations which have matured and which the Agent has been notified
in writing are then due and payable; or constituting property being sold or
disposed of if the Borrower certifies to the Agent that the sale or disposition
is made in compliance with Section 8.04(b) hereof (and the Agent may rely
conclusively on any such certificate, without further inquiry); or constituting
property in which the Borrower owned no interest at the time the Lien was
granted or at any time thereafter.
(c) Without in any manner limiting the Agent's authority to act
without any specific or further authorization or consent by the Majority Lenders
(as set forth in Section 11.08(b) hereinabove), each Lender agrees to confirm in
writing, upon request by the Agent, the authority to release Collateral
conferred upon the Agent under Section 11.08(b) hereinabove. So long as no Event
of Default is then continuing, upon receipt by the Agent of confirmation from
the Majority Lenders of its authority to release any particular item or types of
Collateral, and upon at least five (5) Business Days' prior written request by
the Borrower the Agent shall (and is hereby irrevocably authorized by the
Lenders to) execute such documents as may be necessary to evidence the release
of the Liens granted to the Agent for the benefit of the Lenders upon such
Collateral; provided, however, that (i) the Agent shall not be required to
execute any such document on terms which, in the Agent's opinion, would expose
the Agent to liability or create any obligations or entail any consequence other
than the release of such Liens without recourse or warranty and (ii) such
release shall not in any manner discharge, affect or impair the Obligations or
any Lien upon (or obligations of the Borrower in respect of) all interests in
the Collateral retained by the Borrower.
(d) The Agent and the Co-Agent shall have no obligation
whatsoever to any Lenders to assure that the Collateral exists or is owned by
the Borrower or is cared for, protected or insured or has been encumbered or
that the Lien granted to the Agent pursuant to the Security Documents has been
properly or sufficiently or lawfully created, perfected, protected or enforced
or is entitled to any particular priority, or to exercise at all or in any
particular manner or under any duty of care, disclosure or fidelity, or to
continue exercising, any of the rights, authorities and powers granted or
available to the Agent in this Section 11.08 or in any of the Related Documents,
it being understood and agreed that in respect of the Collateral, or any act,
omission or event related thereto, the Agent may act in any manner it may deem
appropriate, in its sole discretion, given the Agent's own interest in the
Collateral as one of the Lenders and that the Agent shall have no duty or
liability whatsoever to any other Lender.
95
IN WITNESS WHEREOF, the parties hereto, by their officers
thereunto duly authorized, have executed and delivered this Agreement as of
the date first above written.
BORROWER: GOLDEN BOOKS PUBLISHING COMPANY, INC.,
a debtor and debtor-in-possession
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Title: Chief Financial Officer
Address for Notices:
-------------------
Golden Books Publishing Company, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to (for information purposes only):
-----------------
--------------
Attention:
--------------
Telephone:
--------------
Telecopier:
-------------
AGENT: THE CIT GROUP/BUSINESS CREDIT, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President
96
Address for Notices:
-------------------
The CIT Group/Business Credit, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Regional Manager
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to (for information purposes only):
▇▇▇▇ ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
CO-AGENT AND
DOCUMENTATION AGENT: FOOTHILL CAPITAL CORPORATION
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: Vice President
LENDER: THE CIT GROUP/BUSINESS CREDIT, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President
LENDER: FOOTHILL CAPITAL CORPORATION
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: Vice President
97
TABLE OF CONTENTS
Page
ARTICLE 1. DEFINITIONS; CONSTRUCTION.........................................2
1.01. Certain Definitions ...........................2
1.02. Construction .................................24
1.03. Accounting Principles.........................24
ARTICLE 2. THE LOANS.........................................................24
2.01. The Loans......................................24
2.02. Notes..........................................25
2.03. Notice of Borrowing; Making of Loans...........26
2.04. Reduction of Revolving Credit Commitment;
Mandatory Prepayment; Optional Prepayment......29
2.05. Interest Rate..................................30
2.06. Interest Payment Dates.........................30
2.07. Amortization...................................30
2.08. Payments, Default Rates and Fees...............31
2.09. Use of Proceeds................................33
2.10. Reserve Requirements; Capital Adequacy
Circumstances................................. 34
2.11. Indemnity......................................35
2.12. Sharing of Setoffs.............................35
2.13. Taxes..........................................36
ARTICLE 3. LETTERS OF CREDIT.................................................38
3.01. Letters of Credit..............................38
3.02. Participations.................................41
ARTICLE 4. BORROWING BASE....................................................42
4.01. Condition of Lending and Assisting in
Establishing or Opening Letters of Credit......42
4.02. Mandatory Prepayment...........................43
4.03. Rights and Obligations Unconditional...........43
4.04. Borrowing Base Certificate.....................43
4.05. General Provisions.............................44
4.06. Implementation of Additional Reserves..........44
ARTICLE 5. CONDITIONS OF EFFECTIVENESS, LETTER OF CREDIT ISSUANCE
AND LENDING.......................................................44
i
5.01. Conditions Precedent to Effectiveness..........44
5.02. Conditions Precedent to Revolving Loans and
Letters of Credit and to Loans in excess of the
Interim Amount.................................49
ARTICLE 6. REPRESENTATIONS AND WARRANTIES....................................50
6.01. Organization, Good Standing, Etc...............50
6.02. Authorization, Etc.............................51
6.03. Governmental Approvals.........................51
6.04. Enforceability of Loan Documents...............51
6.05. Subsidiaries and Affiliates....................51
6.06. Litigation.....................................52
6.07. Financial Condition............................52
6.08. Compliance with Law, Etc.......................52
6.09. ERISA..........................................52
6.10. Taxes, Etc.....................................53
6.11. Regulation T, U or X...........................53
6.12. Nature of Business.............................54
6.13. Adverse Agreements, Etc........................54
6.14. Holding Company and Investment Company Acts....54
6.15. Permits, Etc...................................54
6.16. Priority, Title................................54
6.17. Full Disclosure................................54
6.18. Operating Lease Obligations....................55
6.19. Environmental Matters..........................55
6.20. Schedules......................................55
6.21. Insurance......................................55
6.22. Chief Executive Offices........................56
6.23. Security Documents.............................56
6.24. Financial Accounting Practices, Etc............56
6.25. No Material Adverse Change.....................56
6.26. Real Estate; Leases............................56
6.27. Location of Bank Accounts......................57
6.28. No Event of Default............................58
6.29. Capitalized Leases.............................58
6.30. Tradenames.....................................58
6.31. Licenses.......................................58
6.32. Inventory......................................58
6.33. Intellectual Property..........................58
6.33A Copyrights.....................................58
6.34. Material Contracts.............................59
6.35. Labor Relations; Collective Bargaining
Agreements.....................................59
6.36. Accounts.......................................59
ii
6.37. Appointment of Trustee or Examiner;
Liquidation....................................60
ARTICLE 7. AFFIRMATIVE COVENANTS.............................................60
7.01. Reporting Requirements.........................60
7.02. Compliance with Laws, Etc......................65
7.03. Preservation of Existence, Etc.................66
7.04. Keeping of Records and Books of Account........66
7.05. Inspection Rights..............................66
7.06. Maintenance of Properties, Etc.................66
7.07. Maintenance of Insurance.......................66
7.08. Environmental..................................67
7.09. Further Assurances.............................68
7.10. Borrowing Base.................................68
7.11. Change in Collateral; Collateral Records.......68
7.12. Financial Accounting Practices, Etc............69
7.13. Lock Box Accounts and Blocked Accounts.........69
7.14. Additional Subsidiaries........................70
7.15. ERISA..........................................70
7.16. Right to Sell Inventory........................70
7.17. Intellectual Property..........................70
7.18. Licensor Consents..............................71
7.19. Liens..........................................71
7.20. Payment of Pre-Petition Loans..................72
ARTICLE 8. NEGATIVE COVENANTS................................................72
8.01. Liens, Etc.....................................72
8.02. Indebtedness...................................74
8.03. Guarantees, Etc................................75
8.04. Merger, Consolidation, Sale of Assets, Etc.....75
8.05. Change in Nature of Business...................75
8.06. Loans, Advances and Investments, Etc...........76
8.07. Dividends, Distributions, Prepayments, Etc.....76
8.08. Federal Reserve Regulations....................76
8.09. Transactions with Affiliates...................76
8.10. Environmental..................................77
8.11. ERISA..........................................77
8.12. Business Plan..................................77
8.13. Interim Financing Order; Final Financing Order;
Administrative Expense Claim Priority; Lien
Priority; Payments.............................77
8.14. Capital Expenditures...........................78
8.15. Minimum EBITDA.................................78
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ARTICLE 9. DEFAULTS..........................................................78
9.01. Events of Default..............................78
9.02. Consequences of an Event of Default............83
9.03. Deposit for Letters of Credit..................83
9.04. Certain Remedies...............................84
ARTICLE 10. MISCELLANEOUS....................................................84
10.01. Holidays.......................................84
10.02. Records........................................84
10.03. Amendments and Waivers.........................84
10.04. No Implied Waiver; Cumulative Remedies.........85
10.05. Notices........................................86
10.06. Expenses; Taxes; Attorneys' Fees;
Indemnification................................86
10.07. Application....................................87
10.08. Severability...................................88
10.09. Governing Law..................................88
10.10. Prior Understandings...........................88
10.11. Duration; Survival.............................88
10.12. Counterparts...................................88
10.13. Assignments; Participations....................88
10.14. Successors and Assigns.........................90
10.15. Confidentiality................................91
10.16. Waiver of Jury Trial...........................91
10.17. Right of Setoff................................92
10.18. Headings.......................................92
10.19. Consent to Jurisdiction........................92
10.20A Termination of this Agreement..................92
10.20B Termination Upon an Event of Default...........92
10.20C Termination Upon Confirmation of Plan of
Reorganization.................................92
10.20D Termination Upon Sale..........................93
10.20E Maturity of Obligations Upon Termination.......93
ARTICLE 11. THE AGENT........................................................93
11.01. Appointment....................................93
11.02. Nature of Duties...............................94
11.03. Rights, Exculpation, Etc.......................94
11.04. Reliance.......................................95
11.05. Indemnification................................95
11.06. CIT Individually...............................95
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11.07. Successor Agent................................96
11.08. Collateral Matters.............................96
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EXHIBITS:
Exhibit A-1 - Form of Revolving Credit Note
Exhibit A-2 - Form of Term Loan Note
Exhibit B-1 - Forms of Security Agreement
Exhibit B-2 - Forms of Security Agreement and Mortgage - Copyrights and
Trademarks
Exhibit B-3 - Form of Collateral Assignment of Licenses
Exhibit B-4 - Forms of Pledge Agreement
Exhibit C - Form of Borrowing Base Certificate
Exhibit D - Form of Assignment and Acceptance
Exhibit E - Form of Notice of Borrowing
Exhibit F - Form of Guaranty
Exhibit G - Interim Financing Order
SCHEDULES:
Schedule 1.01(A) - Inventory Locations
Schedule 1.01(B) - Premises
Schedule 1.01(C) - Revolving Credit Commitment Amount
Schedule 1.01(D) - Term Loan Commitment Amount
Schedule 1.01(E) - Borrower Licensor Agreement
Schedule 1.01(F) - Required Sublicenses
Schedule 1.01(G) - Block Reserve financial Benchmarks
Schedule 6.05 - Description of Subsidiaries and Affiliates
Schedule 6.06 - Litigation
Schedule 6.09 - Pension Plans
Schedule 6.10 - Taxes
Schedule 6.18 - Operating Lease Obligations
Schedule 6.19 - Environmental Matters
Schedule 6.21 - Insurance
Schedule 6.26 - Real Property Owned and Leased
Schedule 6.27 - Location of Bank Accounts
Schedule 6.29 - Capital Lease Obligations
Schedule 6.30 - Tradenames
Schedule 6.31 - Disputed Royalty Advances
Schedule 6.34 - Material Contracts
Schedule 6.35 - List of Collective Bargaining Agreements
Schedule 6.36 - Location of Books and Records
Schedule 7.13 - Lock Box Accounts
Schedule 8.01 - Existing Liens
Schedule 8.02 - Indebtedness
Schedule 8.03 - Guarantees
Schedule 8.06 - Investments
Schedule 8.09 - Transactions with Affiliates
vi