POSTPETITION CREDIT AGREEMENT
$68,785,306
among
CONVERSE INC.,
a Debtor and Debtor-in-Possession,
as Borrower,
EACH OF THE FINANCIAL INSTITUTIONS
INITIALLY A SIGNATORY HERETO,
TOGETHER WITH THOSE ASSIGNEES
PURSUANT TO SECTION 13.6 HEREOF,
as Lenders,
and
BANKERS TRUST COMPANY,
as Agent
Dated as of January 22, 2001
TABLE OF CONTENTS
Page
ARTICLE IDefinitions........................................................................... 2
1.1 General Definitions........................................ 2
1.2 Accounting Terms and Determinations........................ 31
1.3 Other Definitional Terms................................... 32
ARTICLE IIConditions Precedent................................................................. 32
2.1 Initial Loans.............................................. 32
2.2 All Loans.................................................. 33
ARTICLE IIIThe Loans........................................................................... 35
3.1 Commitment and Delivery of Revolving Notes................. 35
3.2 Determination of Borrowing Base............................ 35
3.3 Borrowings; Notices of Borrowings.......................... 36
3.4 Alternate Periodic Settlements Among Lenders............... 37
3.5 Mandatory Payment; Voluntary Reductions of
Commitments................................................ 39
3.6 Payments and Computations.................................. 40
3.7 Maintenance of Account..................................... 42
3.8 Loan Disbursement Account.................................. 42
3.9 Statement of Account....................................... 42
3.10 Taxes...................................................... 42
3.11 Sharing of Payments........................................ 44
3.12 Priority and Liens......................................... 45
3.13 Payment of Obligations..................................... 46
3.14 No Discharge; Survival of Claims........................... 46
ARTICLE IVLetters of Credit and Acceptances.................................................... 46
4.1 Letter of Credit Issuances................................. 46
4.2 Acceptances................................................ 48
4.3 Lenders' Participation..................................... 51
4.4 Definition of Obligations.................................. 51
4.5 Indemnification............................................ 52
4.6 Certain Waivers............................................ 52
4.7 Limitation on Liability; Authority of Lender............... 53
4.8 Covenants of Borrower...................................... 53
4.9 Rights and Remedies of Lenders............................. 54
ARTICLE VRepresentations and Warranties........................................................ 54
5.1 Corporate Existence; Qualification; Power;
Licenses and Permits....................................... 54
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5.2 Corporate and Governmental Authorization;
Contravention.............................................. 54
5.3 Binding Effect............................................. 55
5.4 Information................................................ 55
5.5 No Material Adverse Change................................. 55
5.6 Litigation and Judgments................................... 55
5.7 ERISA...................................................... 56
5.8 Taxes...................................................... 56
5.9 Subsidiaries............................................... 57
5.10 Not an Investment Company.................................. 58
5.11 No Conflicting Requirements................................ 58
5.12 Debt....................................................... 58
5.13 Title to Properties and Assets; Collateral................. 58
5.14 Compliance with Law........................................ 60
5.15 Compliance with Environmental Laws......................... 60
5.16 Security Interests and Liens............................... 61
5.17 Labor Relations............................................ 62
5.18 UCC Filing Information..................................... 62
5.19 Fictitious Business Names.................................. 63
5.20 Use of Proceeds............................................ 63
5.21 Margin Security............................................ 63
5.22 No Event of Default........................................ 63
5.23 Status of Accounts......................................... 63
5.24 Survival of Representations................................ 63
5.25 Affiliate Transactions..................................... 63
5.26 Accuracy and Completeness of Information................... 63
5.27 Representations Upon Execution............................. 64
5.28 The Orders................................................. 64
5.29 Bank Accounts.............................................. 64
5.30 Assets and Operations of Subsidiaries...................... 64
ARTICLE VIAffirmative Covenants................................................................ 65
6.1 Information................................................ 65
6.2 Payment of Obligations..................................... 68
6.3 Maintenance of Property; Insurance......................... 69
6.4 Compliance with Laws....................................... 70
6.5 Inspection of Property, Books and Records;
Change of Name, Principal Place of Business,
Location of Collateral, Etc................................ 70
6.6 Compliance with Credit Documents........................... 70
6.7 Corporate Existence........................................ 71
6.8 ERISA...................................................... 71
6.9 Environmental Matters...................................... 73
6.10 Collateral Records......................................... 73
6.11 Security Interests......................................... 74
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6.12 Taxes...................................................... 75
6.13 Use of Proceeds............................................ 75
6.14 Collection of Accounts..................................... 76
6.15 Notice; Credit Memoranda; and Returned Goods............... 76
6.16 Trademarks................................................. 76
6.17 Patents.................................................... 76
6.18 License of Borrower's Name................................. 77
ARTICLE VIINegative Covenants and Financial Covenants.......................................... 77
7.1 Debt and Guarantees........................................ 77
7.2 Restricted Payments........................................ 77
7.3 Investments................................................ 78
7.4 Negative Pledge............................................ 78
7.5 Consolidations, Mergers and Sales of Assets................ 78
7.6 Capital Expenditures....................................... 79
7.7 Transactions with Affiliates............................... 79
7.8 Restrictions on Foreign Subsidiary Support................. 79
7.9 Environmental Matters...................................... 80
7.10 Amendments to Certificates of Incorporation
and By-Laws................................................ 80
7.11 No Prohibited Transactions Under ERISA..................... 80
7.12 No Additional Bank Accounts................................ 81
7.13 No Additional Subsidiaries................................. 81
7.14 Reclamation Claims; Bankruptcy Code
Section 546(g) Agreements.................................. 81
7.15 No Acquisition of Real Property............................ 81
7.16 Chapter 11 Claims.......................................... 81
7.17 Application to the Bankruptcy Court........................ 81
7.18 Modifications to Interim Order or Final Order.............. 81
7.19 Principal Amount of Revolving Loans........................ 82
7.20 No Additional Retail Stores................................ 82
7.21 Operations and Assets of Subsidiaries...................... 82
7.22 Certain Payments........................................... 82
ARTICLE VIIIInterest, Fees and Expenses........................................................ 82
8.1 Interest on LIBOR Rate Loans............................... 82
8.2 Interest on Prime Rate Loans............................... 83
8.3 Notice of Rollover and Notice of Conversion................ 83
8.4 Interest After Event of Default............................ 85
8.5 Reimbursement of Expenses.................................. 85
8.6 Unused Line Fee............................................ 85
8.7 Letter of Credit Fees; Acceptance Commissions.............. 86
8.8 Fees; Expenses............................................. 87
8.9 Authorization to Charge Account............................ 88
8.10 Indemnification in Certain Events.......................... 88
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8.11 Waiver of Certain Prepetition Fees......................... 88
ARTICLE IXPowers of Attorney................................................................... 88
9.1 Appointment as Attorney-in-Fact............................ 88
9.2 Limitation on Exercise of Power............................ 89
ARTICLE XEvents of Default and Remedies........................................................ 89
10.1 Events of Default.......................................... 89
10.2 Acceleration............................................... 91
10.3 Remedies................................................... 92
10.4 Automatic Stay............................................. 93
ARTICLE XITermination of the Revolving Credit Commitments...................................... 94
ARTICLE XIIThe Agent........................................................................... 94
12.1 Appointment of Agent....................................... 94
12.2 Nature of Duties of Agent.................................. 95
12.3 Lack of Reliance on Agent.................................. 95
12.4 Certain Rights of the Agent................................ 95
12.5 Reliance by Agent.......................................... 96
12.6 Indemnification of Agent................................... 96
12.7 The Agent in its Individual Capacity....................... 96
12.8 Holders of Notes........................................... 96
12.9 Successor Agent............................................ 96
12.10 Collateral Matters......................................... 97
12.11 Actions with Respect to Defaults........................... 98
12.12 Delivery of Information.................................... 99
ARTICLE XIIIMiscellaneous...................................................................... 99
13.1 Waivers.................................................... 99
13.2 JURY TRIAL................................................. 99
13.3 GOVERNING LAW.............................................. 99
13.4 Venue; Service of Process; Waiver of
Damages.................................................... 99
13.5 Notices.................................................... 01
13.6 Assignability.............................................. 101
13.7 Information................................................ 104
13.8 Indemnification............................................ 104
13.9 Entire Agreement; Successors and Assigns................... 105
13.10 Amendments, Etc............................................ 105
13.11 Nonliability of Agent and Lenders.......................... 106
13.12 Independent Nature of Lenders' Rights...................... 106
13.13 Counterparts............................................... 106
13.14 Effectiveness.............................................. 106
13.15 Severability............................................... 106
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13.16 Headings Descriptive....................................... 107
13.17 Maximum Rate............................................... 107
13.18 Right of Setoff............................................ 107
13.19 Confidentiality............................................ 108
13.20 Absence of Prejudice to the Prepetition Agent or
the Prepetition Lenders with Respect to Matters
before the Bankruptcy Court................................ 108
13.21 Consent to Certain Agreements.............................. 108
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ANNEXES
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Annex I - List of Lenders and Commitment Amounts
vii
EXHIBITS
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Exhibit A - Form of Assignment and Acceptance
Exhibit B - Form of Letter of Credit Request
Exhibit C - Form of Patent Security Agreement
Exhibit D - Form of Pledge Agreement
Exhibit E - Form of Revolving Note
Exhibit F - Form of Security Agreement
Exhibit G - Form of Trademark Security Agreement
Exhibit H - Form of Opinions of Borrower's General and Special Counsel
Exhibit I - Form of Notice of Borrowing
Exhibit J - Form of Lockbox Agreement
Exhibit K - Form of Concentration Account Agreement
Exhibit L - Form of Compliance Certificate
Exhibit M - Form of Borrowing Base Certificate
Exhibit N - Form of Notice of Rollover
Exhibit O - Form of Notice of Conversion
Exhibit P - Form of Interim Order
Exhibit Q - Initial Monthly Budget
Exhibit R - Initial Weekly Budget
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SCHEDULES
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Schedule A - Closing Document List
Schedule B - Outstanding Letters of Credit
Schedule C - Proprietary Rights Schedule
Schedule D - Disclosure Schedule
Schedule E - Liens
Schedule F - Existing Bank Accounts
Schedule G - Outstanding Debt of Foreign Subsidiaries
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POSTPETITIION CREDIT AGREEMENT
------------------------------
THIS POSTPETITION CREDIT AGREEMENT is entered into as of January 22,
2001 (as amended, supplemented or otherwise modified from time to time, this
"Credit Agreement" or this "Agreement"), among CONVERSE INC., a Delaware
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corporation ("Borrower"), a debtor and a debtor-in-possession in a case pending
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under Chapter 11 of the Bankruptcy Code, each of those financial institutions
identified as Lenders on Annex I hereto (together with each of their successors
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and assigns, referred to individually as a "Lender" and collectively as the
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"Lenders") and BANKERS TRUST COMPANY ("BTCo"), acting in the manner and to the
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extent described in Article 12 hereof (in such capacity, the "Agent").
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INTRODUCTORY STATEMENT
----------------------
On January 22, 2001 (the "Filing Date"), the Borrower filed a voluntary
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petition with the Bankruptcy Court initiating the Case and has continued in the
possession of its assets and in the management of its business pursuant to
Sections 1107 and 1108 of the Bankruptcy Code.
The Borrower has applied to the Lenders for a revolving credit, letter
of credit and acceptance facility in an aggregate principal amount not to exceed
$68,785,306.
The proceeds of the Loans will be used to repay all of the Prepetition
Revolving Credit Obligations outstanding on the Filing Date, to pay certain
other pre-Filing Date claims that are authorized by the Bankruptcy Court to the
extent permitted under Section 7.22 and to provide working capital for, and for
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other general corporate purposes of, the Borrower, in all cases subject to the
terms of this Agreement and the Orders.
To provide security for the repayment of the Loans, the reimbursement of
any draft drawn under a Letter of Credit and for any Acceptance Obligations and
the payment of the other Obligations of the Borrower hereunder, under the other
Credit Documents and under the Orders, the Borrower shall provide to the Agent
and the Lenders, pursuant to this Agreement and the Orders, the following (each
as more fully described herein):
(a) with respect to the Obligations of the Borrower hereunder and
under the other Credit Documents, an allowed administrative expense claim
in the Case pursuant to Section 364(c)(1) of the Bankruptcy Code having
priority over all administrative expenses of the kind specified in
Sections 503(b) and 507(b) of the Bankruptcy Code;
(b) a Lien, pursuant to Section 364(c)(2) and (c)(3) of the
Bankruptcy Code, upon all present and after acquired property of the
Borrower (excluding however, capital stock of any Foreign Subsidiary,
which Foreign Subsidiary constitutes a "Controlled Foreign Corporation"
within the meaning of Section 951 of the Internal Revenue Code,
constituting 35% of the combined voting power of all
classes of capital stock of such Foreign Subsidiary entitled to vote),
which perfected Lien shall be a first priority lien with respect to all
such property of the Borrower that is not subject to any valid and
perfected Lien as of the Filing Date and shall be junior in priority to
valid and perfected liens, if any, existing on the Filing Date (other than
those described in clause (c) below); and
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(c) a perfected first priority, senior priming Lien, pursuant to
Section 364(d)(1) of the Bankruptcy Code, upon (i) all property of the
Borrower (including, without limitation, accounts receivable, chattel
paper, contracts, documents, equipment, general intangibles, instruments,
inventory, trademarks and trademark licenses and real property) that is
subject to the Liens securing the Prepetition Revolving Credit Obligations
and any Liens granted after the Filing Date to provide adequate protection
in respect of the Prepetition Revolving Credit Obligations, and (ii) all
property of the Borrower (including, without limitation, accounts
receivable, chattel paper contracts, documents, equipment, general
intangibles, instruments, inventory, trademarks and trademark licenses and
real property) that is subject to Liens securing the Prepetition Note
Purchase Obligations and any Liens granted after the Filing Date to
provide adequate protection in respect of the Prepetition Note Purchase
Obligations, which Lien in favor of the Agent and the Lenders shall be
senior in all respects to all of the Liens securing the Prepetition
Revolving Credit Obligations, the Prepetition Note Purchase Obligations
and to any Liens granted after the Filing Date to provide adequate
protection in respect of either thereof.
All of the claims and the Liens granted hereunder and pursuant to the
Orders in the Case to the Agent and the Lenders shall be subject to the Carve-
Out to the extent provided in Section 3.12(a).
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NOW, THEREFORE, the Borrower, the Lenders and the Agent hereby agree as
follows:
ARTICLE I
Definitions
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1.1 General Definitions. As used herein, the following terms,
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including capitalized terms used but not defined in the Introductory Statement,
shall have the meanings herein specified (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):
Acceptance shall mean a draft of the Borrower accepted by an Accepting
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Bank pursuant to Article 4 hereof.
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2
Acceptance Commission shall mean, with respect to any Acceptance, the
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fees and commissions payable to the Agent for the benefit of the Lenders by the
Borrower under and pursuant to Section 8.7 hereof.
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Acceptance Date shall have the meaning given to it in Section 13.6(c)
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hereof.
Acceptance Letter of Credit shall mean any commercial letter of credit
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under which the Issuing Bank has agreed to refinance the Borrower's obligations
with respect to a drawing thereunder by means of the creation and discounting of
an Acceptance by the Issuing Bank.
Acceptance Obligations shall mean, at any time, without duplication,
----------------------
(i) the sum of the face amount of all Acceptances outstanding as of such time
plus (ii) the aggregate amount of all payments made by each Lender to an
----
Accepting Bank with respect to its participation in Acceptances as provided in
Article 4 for which the Borrower is obligated to and has not at such time
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reimbursed the Lenders whether by payment to the Lenders (as contemplated by
Section 4.2 hereof) or otherwise.
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Accepting Bank shall mean Deutsche Bank or any other bank or financial
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institution approved by the Agent in writing to create Acceptances for the
account of the Borrower.
Accepting Bank Agreement shall that certain Acceptance Credit
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Agreement, executed on or about May 31, 2000, between LaSalle Bank National
Association and Converse Inc., as amended, restated, supplemented or otherwise
modified as of the date hereof, or any other agreement approved by the Agent in
writing between an Accepting Bank and the Borrower for the purpose of creating
Acceptances for the account of the Borrower.
Accounts shall mean all of the Borrower's accounts, whether now
--------
existing or existing in the future, including, without limitation, all (i)
accounts receivable (whether or not specifically listed on schedules furnished
to the Agent), including, without limitation, all accounts created by or arising
from all of the Borrower's sales of goods or rendition of services made under
any of the Borrower's trade names or styles, or through any of the Borrower's
divisions; (ii) unpaid or unexercised seller's rights (including any right of
rescission, replevin, reclamation and stopping in transit) relating to the
foregoing or arising therefrom; (iii) rights to any goods represented by any of
the foregoing, including returned or repossessed goods; (iv) reserves and credit
balances held by the Borrower with respect to any such accounts receivable or
account debtors; (v) guarantees or collateral for any of the foregoing; (vi)
insurance policies; or (vii) rights relating to any of the foregoing.
3
Acknowledgment Agreement shall mean any acknowledgment agreement
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required to be delivered by the Borrower to the Agent pursuant to which any
mortgagee or lessor of property on which Collateral is stored or otherwise
located, or pursuant to which any warehouseman, filler, processor or packer of
any Inventory acknowledges the Liens and security interests of the Agent and, in
the case of any real property leased by the Borrower or subject to a mortgage
executed by the Borrower, provides the Agent access to such real property for a
reasonable period of time to assemble, complete and sell any Collateral located
thereon.
Adjusted LIBOR Rate shall mean, with respect to each Interest Period
-------------------
for any LIBOR Rate Loan, the rate obtained by dividing (i) the LIBOR Rate for
such Interest Period by (ii) a percentage equal to 1 minus the stated maximum
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rate (stated as a decimal) of all reserves required to be maintained against
Eurocurrency liabilities as specified in Regulation D (or against any other
category of liabilities which includes deposits by reference to which the
interest rate on LIBOR Loans is determined or any category of extensions of
credit or other assets which includes loans by a non-United States office of any
Lender to United States residents).
Adjusted Total Commitment shall mean, for any date on or after the
-------------------------
first Amortization Date, the greater of (x) the sum of (i) the outstanding
principal balance of Revolving Loans, plus (ii) the aggregate Letter of Credit
----
Obligations, plus (iii) the aggregate Acceptance Obligations, in each case, as
----
of the immediately preceding Amortization Date (or if such date is an
Amortization Date, as of such date) or (y) the amount listed opposite the
immediately preceding Amortization Date (or if such date is an Amortization
Date, listed opposite such date) in the definition of Projected Commitments.
Affiliate shall mean (i) a Controlling Person or any Person which is
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controlled by or is under common control with a Controlling Person and (ii) any
other Person who is a director, officer or member of management of the Borrower,
any of its Subsidiaries or any Controlling Person. For purposes of this Credit
Agreement, control of a Person shall mean the power, direct or indirect, (a) to
vote ten percent (10%) or more of the outstanding stock or other ownership
interests having ordinary voting power for the election of directors of such
Person or (b) to direct or cause the direction of the management and policies of
such Person whether by contract or otherwise.
Agent shall mean BTCo as provided in the preamble to this Credit
-----
Agreement or any successor to BTCo.
4
Amortization Date shall mean each date listed under the caption
-----------------
"Amortization Date" in the definition of Projected Commitments.
Ancillary Documents shall mean the Proprietary Rights Collateral
-------------------
Documents, the Security Agreement, the Pledge Agreements, the Mortgages and the
Collateral Assignments.
Apollo shall mean Apollo Advisors, L.P. and Lion Advisors, L.P., both
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Delaware limited partnerships.
Applicable Lending Office shall mean, with respect to each Lender,
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such Lender's LIBOR Lending Office in the case of a LIBOR Rate Loan, and such
Lender's Domestic Lending Office in the case of a Prime Rate Loan.
Asset Disposition shall mean any sale, transfer, lease, license, grant
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of right to use, assignment or other disposition of any asset (including
Proprietary Rights) by the Borrower or any Subsidiary thereof, excluding,
however, (i) any sale or disposition of Inventory in the ordinary course of
business by a Borrower or Subsidiary, (ii) any license or grant of right to use
any Proprietary Rights existing prior to January 1, 2001, and (iii) any
extension or renewal of any license or grant of right to use any Proprietary
Rights or any substitution of any licensee under such license or grant of right
to use, in each case covering the same goods in the same territories and
otherwise on substantially the same terms as the then existing license or grant
of right to use.
Assignment and Acceptance shall mean an assignment and acceptance
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agreement entered into by an assigning Lender and an assignee Lender, and
accepted by the Agent, in accordance with Section 13.6 hereof, in the form
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attached hereto as Exhibit A.
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Auditors shall mean a nationally-recognized firm of independent public
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accountants selected by the Borrower and satisfactory to the Agent in its
reasonable discretion. For purposes of this Credit Agreement, any of the
current so-called "Big Four" firms of independent public accountants shall be
deemed to be satisfactory to the Agent.
Bankruptcy Code shall mean the Bankruptcy Reform Act of 1978, as
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heretofore and hereafter amended, and codified as 11 U.S.C. Section 101 et seq.
-- ---
Bankruptcy Court shall mean the United States Bankruptcy Court for the
----------------
District of Delaware or any other court having jurisdiction over the Case from
time to time.
5
Beneficial Owner is used as defined in Rule 13d-3 promulgated by the
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Securities and Exchange Commission under the Exchange Act.
Benefit Plan shall mean a defined benefit plan as defined in Section
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3(35) of ERISA (other than a Multiemployer Plan) 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.
Borrower shall mean Converse Inc., a Delaware corporation, a debtor
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and debtor-in-possession.
Borrowing Base shall mean an amount equal to the sum of
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(1) eighty-five percent (85%) of the then Eligible Accounts
Receivable; plus
----
(2) the lesser of (i) $40,000,000 and (ii) the sum of (1)
---
sixty-five percent (65%) of the then Eligible Inventory, plus (2) an
amount equal to sixty-five percent (65%) of the face amount of any
Letter of Credit issued to support the purchase of finished goods
Inventory which, in the determination of the Agent in the exercise of
its Permitted Discretion, would constitute Eligible Inventory when
title thereto passes to the Borrower ("Eligible L/C Inventory");
----------------------
provided, that from and after April 1, 2001, the advance rate with
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respect to Eligible Inventory and Eligible L/C Inventory shall be
sixty percent (60%); plus
----
(3) sixty percent (60%) of the then Eligible Retail Inventory;
plus
----
(4) the lesser of (i) $12,000,000 or (ii) sixty-five percent
(65%) of Borrower's annual Royalty Income, based on a rolling twelve
month period; minus
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(5) the Fixed Asset Reserve; minus
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(6) the outstanding Prepetition Revolving Credit Obligations; minus
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6
(7) the amount of the Carve-Out (assuming for this purpose that
an Event of Default has occurred).
Agent at any time (upon one (1) Business Days' notice to Borrower) in
the exercise of its Permitted Discretion shall be entitled to (i) establish and
increase or decrease reserves against Eligible Accounts Receivable, Eligible
Inventory, Eligible L/C Inventory, Eligible Retail Inventory, or the Borrowing
Base, (ii) reduce the advance rates under clauses (A), (B), (C) and (E) above or
----------- --- --- ---
(following any such reduction) restore the advance rates under to any level
equal to or below the advance rates stated in clauses (A), (B), (C) and (E)
----------- --- --- ---
above, (iii) impose additional restrictions (or eliminate the same) to the
standards of eligibility set forth in the respective definitions of "Eligible
Accounts Receivable", "Eligible Inventory", "Eligible L/C Inventory", or
"Eligible Retail Inventory"or the Borrowing Base and (iv) establish and increase
or decrease a reserve in the amount of interest payable by Borrower, including
interest on Loans, Letter of Credit Obligations and Acceptance Obligations.
Borrowing Base Certificate shall have the meaning given to such term
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in Section 6.1 hereof.
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BT Affiliate shall mean any affiliate of Bankers Trust Company,
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including but not limited to BT Commercial Corporation, New York Branch and
Deutsche Bank AG, New York Branch, which has agreed to act in any capacity in
connection with this Agreement.
BTCo shall have the meaning given such term in the preamble to this
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Credit Agreement.
BTCo Account shall have the meaning given to such term in Section
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3.6(c) hereof.
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Budgeted Amount shall mean, for every Monthly Accounting Period, the
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aggregate amount of all Projected Cash Disbursements as set forth in the Initial
Monthly Budget for such Monthly Accounting Period.
Business Day shall mean (a) for all portions of the Loans, Letter of
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Credit Obligations or Acceptance Obligations on which interest accrues based
upon the Prime Lending Rate, any day other than a Saturday, Sunday or public
holiday or the equivalent for banks in New York, New York (and, with respect to
Letter of Credit Obligations or Acceptance Obligations, a public holiday or the
equivalent for banks in the domicile of the
7
applicable Issuing Bank or Accepting Bank, if other than New York, New York);
and (b) for portions of the Loans, Letter of Credit Obligations or Acceptance
Obligations on which interest accrues based upon the LIBOR Rate, the days
described in the immediately preceding subclause (a) for the definition of
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Business Day, but excluding therefrom any day on which commercial banks are not
open for dealing in Dollar deposits in the London (England, U.K.) interbank
market.
Capital Lease shall mean any lease of property, real or personal, the
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obligation of the lessee in respect of which is required in accordance with GAAP
to be capitalized on the balance sheet of the lessee.
Carve-Out shall have the meaning set forth in Section 3.12(a).
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Carryforward Reduction shall mean, with respect to any Monthly
----------------------
Accounting Period set forth in the Initial Monthly Budget during which the
amount of Cash Disbursements exceeds the Budgeted Amount for such period, an
amount equal to (i) the Cash Disbursements for such Monthly Accounting Period,
minus (ii) the Budgeted Amount, each as reported pursuant to Section 6.1(g).
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Case shall mean the Chapter 11 case of the Borrower pending in the
----
Bankruptcy Court.
Cash Collateral shall mean have the meaning set forth in Section
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363(a) of the Bankruptcy Code.
Cash Disbursements shall mean, for any Monthly Accounting Period, the
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aggregate amount of all actual cash disbursements for such period, excluding
cash disbursements for Inventory.
Cash Equivalents shall mean, as to any Person, (i) direct obligations
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of the United States or any agency thereof, or obligations guaranteed by the
United States or any agency thereof, (ii) commercial paper rated in the highest
grade by a nationally recognized credit rating agency, (iii) time deposits with,
including certificates of deposit issued by, the Agent or any office located in
the United States of any bank or trust company the senior debt securities of
which are rated in one of the two highest categories by a nationally recognized
credit rating agency, provided in each case that such securities or other
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obligations described in subsections (i), (ii) and (iii) above mature within one
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year from the date of acquisition thereof by the Borrower or a Subsidiary, (iv)
repurchase obligations with a term of not more than ten (10) days of underlying
securities of the type described in clause (i) entered into with any bank of the
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type described in clause (iii), (v) investments in money market funds
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8
that are registered under the Investment Company Act of 1940, as amended, which
have net assets of at least $100,000,000 and at least eighty-five percent (85%)
of whose assets consist of securities and other obligations of the type
described in clauses (i) through (iv) above and (vi) investments in any other
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money market mutual fund the underlying assets of which are rated at least AAA
or the equivalent by Standard & Poor's Corporation or at least AAA or the
equivalent thereof by ▇▇▇▇▇'▇ Investors Service, Inc., including, without
limitation, any such mutual fund managed or advised by the Agent or any Lender.
All such Cash Equivalents must be denominated solely for payment in U.S.
Dollars.
Casualty Loss shall have the meaning given to such term in Section 6.3
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hereof.
Change in Control shall mean the occurrence of any of the following:
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(i) the sale or other transfer of all or substantially all of the assets of the
Borrower to any person other than Apollo, any account managed by Apollo for so
long as it exercises power of disposition and voting with respect thereto (a
"Controlled Account"), or an Affiliate of Apollo or of a Controlled Account,
-------------------
(ii) any transaction (including a merger or consolidation) the result of which
is that any "person" or "group" (within the meaning of Section 13(d) and
14(d)(2) of the Exchange Act) becomes the Beneficial Owner of more than thirty-
five percent (35%) (calculated on a fully diluted basis) of the voting power of
all classes of Voting Stock of the Borrower and/or warrants or options to
acquire such Voting Stock and, at such time, such person or group is the
Beneficial Owner of a greater percentage of the voting power of the Voting Stock
of the Borrower than that which is then beneficially owned (calculated on a
fully diluted basis) by Apollo or a Controlled Account or an Affiliate of Apollo
or of a Controlled Account, (iii) the adoption of a plan relating to the
liquidation or dissolution of the Borrower and (iv) the first day on which a
majority of the members of the Board of Directors of the Borrower cease to be
Continuing Directors (meaning the directors of the Borrower on the date hereof
and each other director, if such director's nomination for election to the Board
of Directors of the Borrower is recommended by a majority of the Continuing
Directors at the time of such nomination or election).
Claim has the meaning set forth in Section 101(5) of the Bankruptcy
-----
Code.
Closing shall mean the execution and delivery of this Credit Agreement
-------
and the execution and/or delivery of the other documents identified on the
Closing Documents List, and the satisfaction of the other conditions precedent
to the Initial Credit Event set forth in Article 2 hereof.
---------
Closing Date shall mean the date on which the Closing occurs.
------------
9
Closing Fee shall have the meaning given to such term in Section
----------- -------
8.8(b) hereof.
------
Closing Documents List shall mean the Closing Documents List attached
----------------------
hereto as Schedule A.
----------
Code shall have the meaning given to it in Section 1.3 hereof.
---- -----------
Collateral shall mean any and all assets and rights and interests in
----------
or to property of the Borrower pledged from time to time as security for the
Obligations pursuant to the Ancillary Documents, the Orders or the terms hereof
whether now owned or hereafter acquired, including, without limitation, (i) all
of the Accounts, Inventory, Equipment, Intellectual Property, Intangibles and
Real Estate of the Borrower, as defined in any Security Agreement, any Mortgage,
any Pledge Agreement or any Proprietary Rights Collateral Document (excluding
any property expressly excluded from the pledge or grant under any Ancillary
Document) and (ii) all of the rights and interest of the Borrower assigned to
the Agent for the benefit of the Lenders pursuant to the Collateral Assignments,
if any, all as more particularly described in the Orders.
Collateral Management Fee shall have the meaning given to such term in
-------------------------
Section 8.8(a) hereof.
--------------
Commitments of any Lender shall mean the Revolving Credit Commitment
-----------
of such Lender.
Compliance Certificate shall have the meaning given to such term in
----------------------
Section 6.1(c) hereof.
--------------
Concentration Account shall have the meaning given to such term in
---------------------
Section 3.6(c) hereof.
--------------
Concentration Account Agreement shall have the meaning given to such
-------------------------------
term in Section 3.6(c) hereof.
--------------
Confirmation Order shall mean an order of the Bankruptcy Court
------------------
confirming a Reorganization Plan in the Case.
Consolidated Capital Expenditures shall mean, for any period, the
---------------------------------
additions to property, plant and equipment and other capital expenditures of the
Borrower and its Consolidated Subsidiaries for such period, as the same are (or,
in accordance with
10
GAAP, would be) set forth in the consolidated statement of cash flows of the
Borrower and its Consolidated Subsidiaries for such period.
Consolidated Subsidiary of any Person shall mean at any date any
-----------------------
Subsidiary or other entity the accounts of which in accordance with GAAP would
be consolidated with those of such Person in its consolidated financial
statements as of such date.
Contractual Obligations shall mean, with respect to any Person, any
-----------------------
term or provision of any securities issued by such Person, or any indenture,
mortgage, deed of trust, contract, undertaking, document, instrument or other
agreement to which such Person is a party or by which it or any of its
properties is bound or to which it or any of its properties is subject.
Controlling Person means any Person that is in control of the Borrower
------------------
or any of its Subsidiaries (such control being the power to direct or cause the
direction of the management and policies of the Borrower or any such Subsidiary,
whether through the ownership of voting stock, by contract or otherwise).
Convert, Conversion and Converted each shall refer to a conversion of
---------------------------------
Loans of one Type into Loans of another Type pursuant to Section 8.3 hereof.
-----------
Credit Agreement shall mean this Postpetition Credit Agreement, as the
----------------
same may be modified, amended, extended, restated or supplemented from time to
time.
Credit Documents shall mean, collectively, this Credit Agreement, the
----------------
Notes, each Letter of Credit, each Acceptance, each of the Ancillary Documents,
and all other documents, agreements, instruments, opinions and certificates
executed and delivered in connection herewith or therewith, as the same may be
modified, amended, extended, restated or supplemented from time to time.
Credit Parties shall mean, collectively, the Borrower and any other
--------------
parties to the Credit Documents (other than the Lenders and the Agent).
Cumulative Carryforward shall mean, with respect to any Monthly
-----------------------
Accounting Period, the difference of (i) the aggregate Permitted Carryforwards
from all prior Monthly Accounting Periods, minus (ii) the aggregate Carryforward
-----
Reductions from all prior Monthly Accounting Periods; provided that if such
--------
difference is less than zero, the Cumulative Carryforward shall be deemed to be
zero.
11
Debt shall mean of any Person at any date, without duplication, (a)
----
all obligations of such Person and its Consolidated Subsidiaries for borrowed
money, (b) all obligations of such Person and its Consolidated Subsidiaries
evidenced by bonds, debentures, notes or other similar instruments, (c) all
obligations of such Person and its Consolidated Subsidiaries to pay the deferred
purchase price of property or services, except non-intercompany trade accounts
payable arising in the ordinary course of business representing the deferred
purchase price of property or services and having a maturity equal to or less
than 360 days, (d) all obligations of such Person and its Consolidated
Subsidiaries under Capital Leases, (e) all contingent or non-contingent
obligations of such Person and its Consolidated Subsidiaries to reimburse any
Person in respect of amounts paid or payable (currently or in the future, on a
contingent or non-contingent basis) under a letter of credit or similar
instrument, (f) all Debt of others secured by a Lien on any asset of such Person
or a Consolidated Subsidiary and (g) all Debt of others Guaranteed by such
Person or a Consolidated Subsidiary.
Default shall mean an event, condition or default which with the
-------
giving of notice, the passage of time or both would be an Event of Default.
Defaulting Lender shall have the meaning given to such term in Section
----------------- -------
3.4(b) hereof.
-----
Depositary Account shall have the meaning given to such term in
------------------
Section 3.6(b)(i) hereof.
----------------
Deutsche Bank shall mean Deutsche Bank AG, New York Branch.
-------------
Deutsche Bank Affiliate shall mean any affiliate of Deutsche Bank AG,
-----------------------
New York Branch, including but not limited to BT Commercial Corporation, New
York Branch and Bankers Trust Company, which has agreed to act in any capacity
in connection with this Agreement.
Discount Rate shall mean, with respect to any Acceptance, the
-------------
applicable discount rate of the applicable Accepting Bank (determined by such
Accepting Bank on the date of discount prior to 12:00 noon, New York time) for
bankers acceptances having maturities comparable to the maturity of such
Acceptance and with face amounts equal to the face amount thereof.
DOL shall mean the United States Department of Labor and any successor
---
department or agency.
12
Domestic Lending Office shall mean, with respect to any Lender, the
-----------------------
office of such Lender specified by such Lender to the Borrower and the Agent as
its "Domestic Lending Office" from time to time.
Eligible Accounts Receivable shall mean the aggregate face amount of
----------------------------
such Borrower's Accounts that conform to the warranties contained herein and at
all times continue to be acceptable to the Agent in its Permitted Discretion,
less the aggregate amount of all returns, discounts, claims, credits, charges
and allowances of any nature (whether issued, owing, granted or outstanding),
and less the aggregate amount of all reserves established or required to be
established by the Agent from time to time for slow paying accounts, foreign
sales, ▇▇▇▇ and hold (or deferred shipment) transactions and the Lenders'
charges as set forth in this Credit Agreement. Unless otherwise approved in
writing by the Agent, no Account shall be deemed to be an Eligible Account
Receivable if:
(2) it arises out of a sale made by the Borrower to an
Affiliate (other than an Affiliate of Apollo which would not otherwise be an
Affiliate of Borrower but for the relationship to Apollo); or
(3) the Account is unpaid more than sixty (60) days after the
original due date specified in the related invoice or the Account is unpaid more
than one hundred twenty (120) days after the initial date of such invoice, based
on Borrower's reasonable estimate thereof, and subject to reserves established
by the Agent with respect thereto in its Permitted Discretion; or
(4) the Account, when aggregated with all other Accounts of
such account debtor, exceeds fifteen percent (15%) in face value of all Accounts
of the Borrower then outstanding, to the extent of such excess, unless such
Account is supported by an irrevocable letter of credit or other form of
financial support in form and substance satisfactory to the Agent, issued by a
financial institution satisfactory to the Agent and which, following any request
therefor by Agent, has been endorsed in blank and delivered to the Agent; or
(5) (i) the account debtor is also a creditor of the Borrower
or of its Subsidiaries, in each case to the extent of the amount owed by the
Borrower or such Subsidiary to the account debtor, (ii) the account debtor has
disputed its liability on, or the account debtor has made any claim with respect
to, such Account, in each case which has not been resolved, but the subject
Account shall be excluded from Eligible Accounts Receivable only to the extent
of any amount with respect to which the account debtor has disputed its
liability or has made a claim or (iii) the Account otherwise is or may become
subject to any right of setoff by the account debtor, to the extent of the
amount of such setoff; or
13
(6) the account debtor has commenced a voluntary case under
the federal bankruptcy laws, as now constituted or hereafter amended, or
made an assignment for the benefit of creditors, or if a decree or order
for relief has been entered by a court having jurisdiction in the premises
in respect to the account debtor in an involuntary case under the federal
bankruptcy laws, as now constituted or hereafter amended, or if any other
petition or other application for relief under the federal bankruptcy laws
has been filed by or against the account debtor, or if the account debtor
has failed, suspended business, ceased to be solvent, or consented to or
suffered a receiver, trustee, liquidator or custodian to be appointed for
it or for all or a significant portion of its assets or affairs; or
(7) the sale is to an account debtor outside of the United
States, Canada or Puerto Rico, unless the account debtor thereon has
supplied the Borrower with an irrevocable letter of credit or other form of
financial support in form and substance satisfactory to the Agent, issued
by a financial institution satisfactory to the Agent and which, following
any request therefor by the Agent, has been endorsed in blank and delivered
to the Agent; or
(8) the sale to the account debtor is on a ▇▇▇▇-and-hold,
guaranteed sale, sale-and-return, sale on approval or consignment basis or
made pursuant to any other written agreement providing for repurchase or
return; or
(9) the Agent believes, in its Permitted Discretion, that
collection of such Account is insecure or that such Account may not be paid
by reason of the account debtor's financial inability to pay; or
(10) the account debtor is the United States of America or any
department, agency or instrumentality thereof, unless the Borrower duly
assigns its rights to payment of such Account to the Agent pursuant to the
Assignment of Claims Act of 1940, as amended (31 U.S.C. sec. 3727 et seq.);
-- ---
or
(11) the goods giving rise to such Account have not been
shipped and delivered to and accepted by the account debtor or the services
giving rise to such Account have not been performed by the Borrower and
accepted by the account debtor or the Account otherwise does not represent
a final sale; or
(12) the Account exceeds a credit limit determined by the
Agent, in its Permitted Discretion, to the extent such Account exceeds such
limit; or
14
(13) fifty percent (50%) or more, in face amount, of other
Accounts from the same account debtor are not deemed Eligible Accounts
Receivable hereunder; or
(14) the Account does not comply with all applicable legal
requirements, including, without limitation, applicable provisions of the
Federal Consumer Credit Protection Act, the Federal Truth in Lending Act and
Regulation Z of the Board of Governors of the Federal Reserve System, in each
case as amended; or
(15) the Account is not owned by the Borrower free and clear of
any Liens (other than Liens in favor of the Agent) or is one in which the Agent
does not have a first prior perfected security interest; or
(16) the Account does not constitute a valid and binding
obligation of the applicable account debtor in accordance with its terms; or
(17) the Agent, in the exercise of its Permitted Discretion,
determines it to be ineligible.
In addition to the foregoing, Eligible Accounts Receivable shall
include such Accounts for which Borrower shall request approval and that the
Agent approves in advance, in writing, and in its Permitted Discretion, which
approval shall not prevent the Agent from time to time from revoking such
approval in the exercise of its Permitted Discretion.
Eligible Inventory shall mean:
------------------
(18) the gross amount of the Borrower's Inventory, valued at
the lower of cost (on a FIFO basis) or market, which (i) is owned solely by the
Borrower and with respect to which the Borrower has good, valid and marketable
title; (ii) is either (A) stored on property that is not a retail location of
the Borrower and that is either (x) owned or leased by the Borrower or (y) owned
or leased by a warehouseman that has contracted with the Borrower to store
Inventory on such warehouseman's property or by a filler, processor or packer of
the Borrower (provided that, with respect to Inventory stored on property leased
--------
by the Borrower, the Borrower shall have delivered in favor of the Agent an
Acknowledgment Agreement, except that no Acknowledgment Agreement shall be
required with respect to the Charlotte, North Carolina warehouse leased by the
Borrower (the "Charlotte Warehouse") as a prerequisite to the inclusion of the
---------------------
Inventory therein as "Eligible Inventory" so long as (1) Borrower has notified
the landlord of the Charlotte Warehouse of the Lender's security interest in the
Collateral at such facility and directed such landlord to send all notices with
respect to the Charlotte Warehouse, including without limitation, notices of
non-payment, late payment or default under the lease, to Agent, and provided
15
Agent with proof of such notice and (2) the rent on such location is paid
in advance and, upon request, evidence of such rental payments is provided
to Agent, and, with respect to Inventory stored on property owned or leased
by a warehouseman, filler, processor or packer, the Borrower shall have
delivered to the Agent Acknowledgment Agreements executed by the
warehouseman) or (B) finished goods in transit to a domestic location of
Borrower, and which are being imported (or have been imported) by Borrower
for which payment is to be effected by either (1) the presentment of a
Letter of Credit issued (or deemed issued) pursuant to this Agreement or
(2) such other method agreed to between the Borrower and the seller thereof
pursuant to an open account purchase order, so long as, (x) the Agent is
named as consignee on the applicable ▇▇▇▇ of lading or other similar
document of title, (y) such ▇▇▇▇ of lading or document has been delivered
to the Agent (or a Person designated by the Agent to act as its agent for
such purpose) and (z) the Inventory is covered by insurance acceptable to
the Agent; (iii) is subject to a valid, enforceable and perfected first
priority Lien in favor of the Agent except, with respect to Eligible
Inventory stored at sites described in clause (ii)(A)(y) above, for Liens
----------------
for normal and customary warehouseman filler, packer and processor charges
and provided such Eligible Inventory is not subject to any other Lien or
consignment arrangement other than Liens in favor of the Agent; (iv) is
located in the United States, Canada or Puerto Rico or, with respect to
Inventory described in (ii)(B) above, is in transit to a domestic location;
-----
(v) is not obsolete, damaged, defective, slow moving, unmerchantable, work-
in-process, unsalable or otherwise capable of sale only at a price
materially less than the original cost of such item and which otherwise
conforms to the warranties contained herein and which at all times
continues to be acceptable to the Agent in its Permitted Discretion; and
(vi) is not financed by letters of credit (including Letters of Credit),
(19) less any goods otherwise included in Eligible Inventory
----
pursuant to the preceding clause (a) that are returned or rejected by the
---------
Borrower's customers and goods in transit to third parties (other
than to the Borrower's agents, warehouses, fillers, processors or packers
that comply with clause (a)(ii)(B) above), and
----------------
(20) less any Inventory that the Agent determines in its
----
Permitted Discretion to be ineligible.
In addition to the foregoing, Eligible Inventory shall include such
items of Borrower's Inventory for which the Borrower shall request approval and
that the Agent approves in advance, in writing, and in its Permitted Discretion,
which approval shall not prevent the Agent from time to time from revoking such
approval in the exercise of its Permitted Discretion.
Eligible L/C Inventory shall have the meaning given thereto in clause
---------------------- ------
(B)
--
16
of the definition of "Borrowing Base" contained herein.
Eligible Retail Inventory shall mean Borrower's Inventory which would
-------------------------
otherwise constitute Eligible Inventory but for the fact that it is located at a
retail location of the Borrower; provided, however, that no Acknowledgment
--------
Agreement shall be required with respect to retail locations leased by Borrower
as a prerequisite to the inclusion of the inventory thereon as Eligible Retail
Inventory.
Environmental Law shall mean any federal, state or local law, statute,
-----------------
ordinance, or regulation pertaining to health, industrial hygiene, or the
environmental conditions on, under or about any real property owned, operated or
leased by the Borrower or any Subsidiary thereof.
Equity Offering Proceeds shall mean the aggregate amount of cash
------------------------
received by the Borrower from a public offering or private placement of equity
securities (including, without limitation, common stock, preferred stock and
warrants and options to acquire the same) of such Borrower minus, but without
-----
duplication, all underwriting discounts and commissions, placement fees and
other professional fees, expenses and taxes incurred in connection with such
offering or placement. For purposes of this definition, if any such discounts,
commissions, fees, expenses or taxes payable in connection with such offering or
placement are not known as of the date of the distribution of the proceeds
thereof, then such discounts, commissions, fees, expenses or taxes shall be
estimated in good faith by the Borrower and such estimated amounts shall be
deducted from the calculation of Equity Offering Proceeds.
ERISA shall mean the Employee Retirement Income Security Act of 1974,
-----
as amended from time to time, and any successor statute thereto and all final or
temporary regulations promulgated thereunder, and all published, generally
applicable rulings entitled to precedential effect.
ERISA Affiliate shall mean any (i) corporation which is or was at any
---------------
time during the immediately preceding six (6) years a member of the same
controlled group of corporations (within the meaning of Section 414(b) of the
Internal Revenue Code) as the Borrower; (ii) partnership or other trade or
business (whether or not incorporated) at any time during the immediately
preceding six years under common control (within the meaning of Section 414(c)
of the Internal Revenue Code) with the Borrower; and (iii) member of the same
affiliated service group (within the meaning of Section 414(m) of the Internal
Revenue Code) as the Borrower, any corporation described in clause (i) above, or
----------
any partnership or trade or business described in clause (ii) above.
----------
17
Event(s) of Default shall have the meaning provided for in Section
------------------- -------
10.1 of this Credit Agreement.
----
Exchange Act shall mean the Securities Exchange Act of 1934, as
------------
amended.
Excluded Taxes shall mean income, franchise and branch profits taxes
--------------
(including any privilege or intangible taxes to the extent measured by income or
calculated in a manner similar to franchise or branch profits taxes) imposed on
the Agent (or Deutsche Bank) or any Lender (or an office, branch or agency of
the Agent or a Lender) by any governmental authority in a jurisdiction in which
the Agent or any Lender is organized or has its principal or registered office
or is acting for purposes of this Credit Agreement (other than any jurisdiction
in which the Agent or such Lender has become subject to taxation as a result of
entering into or performing its obligations under this Credit Agreement).
Expenses shall mean all present and future expenses reasonably
--------
incurred by or on behalf of the Agent in connection with this Credit Agreement
or any of the other Credit Documents or the Case or any of the transactions
contemplated hereby or thereby, whether incurred heretofore or hereafter, which
expenses shall include, without being limited to, the cost of record searches,
reasonable counsel fees, all costs and expenses incurred by the Agent in opening
bank accounts, depositing checks, receiving and transferring funds, and any
charges imposed on the Agent due to "insufficient funds" of deposited checks and
the Agent's standard fee relating thereto, costs of the Agent (including
internal and external collateral examination staff) in conducting field
examinations, reasonable fees and expenses of accountants, appraisers or other
experts or advisors retained by or for the benefit of the Agent, title insurance
search fees (but not including any premiums for title insurance except in
connection with enforcement of the Agent's Liens), real estate survey costs,
fees and taxes relative to the filing of financing statements, costs of
preparing and recording Collateral Assignments, Proprietary Rights Collateral
Documents, Mortgages, the Security Agreement, the costs, fees and expenses of
any audit, appraisal or similar business analysis performed by or for the
benefit of the Agent and all expenses, costs and fees set forth in Article 8
---------
hereof.
Expiration Date means December 31, 2001.
---------------
Federal Funds Rate shall mean, for any period, a fluctuating interest
------------------
rate per annum equal, for each day during such period, to the weighted average
of the rates on overnight Federal Funds transactions with members of the Federal
Reserve System arranged by Federal Funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day that is a Business Day, the average of the quotations for
18
such day on such transactions received by the Agent from three (3) Federal Funds
brokers of recognized standing selected by it.
Fees shall mean the Closing Fee, the Unused Line Fee, each Fixed Asset
----
Reserve Fee, the Letter of Credit Fees and the Acceptance Commissions, and the
Collateral Management Fee payable hereunder.
Filing Date shall have the meaning set forth in the Introductory
-----------
Statement.
Final Order shall mean an order of the Bankruptcy Court entered in the
-----------
Case after a final hearing under Bankruptcy Rule 4001(c)(2) granting final
approval of this Credit Agreement and the other Credit Documents, granting the
Liens and Super-priority Claims described in the Introductory Statement in favor
of the Agent and the Lenders, and including authorization by the Bankruptcy
Court of the repayment in full by the Borrower of the Prepetition Revolving
Credit Obligations, which order shall be substantially in the form of, and
containing substantially similar provisions to, the Interim Order and otherwise
in form and substance satisfactory to the Agent.
Financials shall have the meaning given to it in Section 5.4 hereof.
---------- -----------
Financial Statements shall mean the consolidated and consolidating
--------------------
balance sheets, consolidated and consolidating statements of operations,
consolidated statements of changes in cash flows and consolidated statements of
changes in stockholders' equity of the Borrower and its Consolidated
Subsidiaries for the period specified prepared in accordance with GAAP and
consistent with prior practices.
Fixed Asset Reserve shall mean (i) from the Closing Date until May 31,
-------------------
2001, $2,895,000 plus the Net Cash Proceeds of any Asset Disposition received
----
after January 1, 2001, and (ii) thereafter, $8,895,000 plus the Net Cash
----
Proceeds of any Asset Disposition received after January 1, 2001.
Fixed Asset Reserve Fee shall have the meaning given to such term in
-----------------------
Section 8.8(c) hereof.
-------------
Foreign Lender shall mean any Lender organized under the laws of a
--------------
jurisdiction outside of the United States.
Foreign Subsidiary shall mean any direct or indirect Subsidiary of the
------------------
Borrower that is (x) either not incorporated in the United States or does not
--
have material
19
assets (excluding the stock of other Foreign Subsidiaries) or operations in the
United States and (y) listed as a "Foreign Subsidiary" on Schedule D.
----------
Fourteenth Amendment shall have the meaning given to such term in
--------------------
Section 8.8(b) hereof.
Funded Debt shall mean, with respect to any Person, all Debt of such
-----------
Person which by the terms of the agreement governing, or instrument evidencing,
such Debt matures more than one year from, or is directly or indirectly
renewable or extendable at the option of the debtor under a revolving credit or
similar agreement obligating the lender or lenders to extend credit over a
period of more than one year from, the date of creation thereof, including
current maturities of long-term Debt, revolving credit and short-term Debt
extendable beyond one year at the option of the debtor and, in respect of the
Borrower, including the Loans outstanding hereunder, but excluding Acceptances
and Letters of Credit.
Funding Bank shall have the meaning given to such term in Section 8.10
------------ ------------
hereof.
GAAP shall mean generally accepted accounting principles in the United
----
States of America, as in effect from time to time.
Guarantee by any Person shall mean any obligation, contingent or
---------
otherwise, of such Person directly or indirectly guaranteeing any Debt or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Debt or other obligation (whether arising by virtue of
partnership arrangements, by agreement to keep-well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain financial statement
conditions or otherwise) or (ii) entered into for the purpose of assuring in any
other manner the obligee of such Debt or other obligation of the payment thereof
or to protect such obligee against loss in respect thereof (in whole or in
part), provided that the term Guarantee shall not include endorsements for
--------
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
Hazardous Substance shall mean those substances included within the
-------------------
definitions of "hazardous substances", "hazardous materials", "toxic
substances", or "solid waste" under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section 9601 et
--
seq., the Resource Conservation and Recovery Act of 1976, 42 U.S.C. Section 6901
---
et seq. and the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801
-- ---
et seq., and in the regulations promulgated
-- ---
20
Highest Lawful Rate shall mean, at any given time during which any
-------------------
Obligations shall be outstanding hereunder, the maximum nonusurious interest
rate, if any, that at any time or from time to time may be contracted for,
taken, reserved, charged or received on the indebtedness under this Credit
Agreement, under the laws of the State of New York (or the law of any other
jurisdiction whose laws may be mandatorily applicable notwithstanding other
provisions of this Credit Agreement and the other Credit Documents), or under
applicable federal laws which may presently or hereafter be in effect and which
allow a higher maximum nonusurious interest rate than under New York (or such
other jurisdiction's) law, in any case after taking into account, to the extent
permitted by applicable law, any and all relevant payments or charges under this
Credit Agreement and any other Credit Documents executed in connection herewith,
and any available exemptions, exceptions and exclusions.
Initial Monthly Budget shall mean the monthly operating budget of the
----------------------
Borrower attached hereto as Exhibit Q; provided that the Agent hereby expressly
--------
reserves the right to object to the payment of any claim in the Case regardless
of whether the payment of such claim is provided for in the Initial Monthly
Budget.
Initial Weekly Budget shall mean the thirteen-week operating budget of
---------------------
the Borrower attached hereto as Exhibit R; provided that the Agent hereby
--------
expressly reserves the right to object to the payment of any claim in the Case
regardless of whether the payment of such claim is provided for in the Initial
Weekly Budget.
Initial Credit Event shall have the meaning given to it in Section 2.1
-------------------- -----------
hereof.
Insurance Proceeds shall mean the proceeds of any insurance or any
------------------
judgments or settlements made in lieu thereof resulting from a casualty with
respect to the Collateral or any part thereof.
Interest Period shall mean for any LIBOR Rate Loan the period
---------------
commencing on the date of such borrowing and ending on the last day of the
period selected by the Borrower pursuant to the provisions below. The duration
of each such Interest Period shall be one (1), two (2), three (3) or six (6)
months, in each case as the Borrower may, in an appropriate Notice of Borrowing,
Notice of Rollover or Notice of Conversion, select; provided, however, that the
-------- -------
Borrower may not select any Interest Period that ends after the Expiration Date;
and provided, further, that after giving effect to any borrowing hereunder,
-------- -------
21
unless the Agent shall otherwise consent, there may not be more than 5 Interest
Periods in effect. Whenever the last day of any Interest Period would otherwise
occur on a day other than a Business Day, the last day of such Interest Period
shall be extended to occur on the next succeeding Business Day, provided, that
-------- ----
if such extension would cause the last day of such Interest Period to occur in
the next following calendar month, the last day of such Interest Period shall
occur on the next preceding Business Day.
Interim Advances shall have the meaning given to it in Section 3.2(c)
---------------- --------------
hereof.
Interim Advance Period shall have the meaning given to it in Section
---------------------- -------
3.2(c) hereof.
------
Interim Order shall mean an order of the Bankruptcy Court entered in
-------------
the Case after a hearing conducted in accordance with Bankruptcy Rule 4001(c),
authorizing and approving the transactions contemplated by this Credit Agreement
and the other Credit Documents and the application of proceeds as set forth
herein and granting the Liens and Super-priority Claims described in the
Introductory Statement in favor of the Agent and the Lenders, substantially in
the form of Exhibit P hereto, or otherwise in form and substance satisfactory to
---------
the Agent.
Internal Revenue Code shall mean the Internal Revenue Code of 1986, as
---------------------
amended from time to time, and any successor statute thereto and all final or
temporary regulations promulgated thereunder and published, and generally
applicable rulings entitled to precedential effect to the extent such
regulations or rulings by their effective dates are applicable hereto.
Internal Revenue Service shall mean the Internal Revenue Service and
------------------------
any successor agency.
Inventory shall mean all of the Borrower's inventory, including
---------
without limitation: (i) all raw materials, work in process, parts, components,
assemblies, supplies and materials used or consumed in the Borrower's business;
(ii) all goods, wares and merchandise, finished or unfinished, held for sale or
lease or leased or furnished or to be furnished under contracts of service; and
(iii) all goods returned or repossessed by the Borrower.
Investment shall mean any investment in any Person, whether by means
----------
of share purchase, capital contribution, loan, advance, time deposit or
otherwise.
22
Issuing Bank shall mean Deutsche Bank, any Deutsche Bank Affiliate or
------------
any other bank or financial institution approved by the Agent in writing to
issue Letters of Credit for the account of the Borrower.
Issuing Bank Agreement shall that certain Master Letter of Credit
----------------------
Agreement, dated as of May 12, 2000, between LaSalle Bank National Association
and Converse Inc., as amended, restated, supplemented or otherwise modified as
of the date hereof, or any other agreement approved by the Agent in writing
between an Issuing Bank and the Borrower for the purpose of issuing Letters of
Credit for the account of the Borrower.
L/C Facing Fee shall have the meaning given to it in Section 8.7(a)
-------------- --------------
hereof.
Leased Real Property shall mean all of the real property leased by the
--------------------
Borrower at any time, including, without limitation, all of the material real
property leased by the Borrower as of the date of this Credit Agreement as set
forth on Schedule D hereto.
----------
Leases shall have the meaning given to such term in Section 5.13(a)
------ ---------------
hereof.
Lender shall have the meaning provided in the preamble to this Credit
------
Agreement.
Letter of Credit Fees shall mean the fees payable to the Agent for the
---------------------
benefit of the Lenders by the Borrower under and pursuant to Section 8.7(a)
--------------
hereof.
Letter of Credit Obligations shall mean, at any time, the sum of,
----------------------------
without duplication, (i) the aggregate undrawn amount of all Letters of Credit
outstanding at such time, plus (ii) the aggregate amount of all drawings under
----
Letters of Credit for which the Issuing Bank is entitled to be and has not at
such time been reimbursed, plus (iii) the aggregate amount of all payments made
----
by each Lender to the Issuing Bank with respect to its participation in Letters
of Credit as provided in Article 4 for which the Borrower is obligated to and
---------
have not at such time reimbursed the Lenders, whether by payment to the Lenders,
by way of a Revolving Loan (as contemplated by Section 4.1 hereof) or otherwise.
-----------
Letter of Credit Request shall mean a request for the issuance of a
------------------------
Letter of Credit executed by the Borrower in the form of Exhibit B hereto.
---------
Letters of Credit shall mean all letters of credit (whether commercial
-----------------
or stand-by and whether for the purchase of inventory, equipment or otherwise)
issued by any Issuing Bank for the account of the Borrower in accordance with
Article 4 hereof.
---------
23
LIBOR Lending Office shall mean, with respect to any Lender, such
--------------------
office or such affiliate of such Lender as such Lender may specify from time to
time to the Borrower and the Agent (or, if no such office is specified, its
Domestic Lending Office).
LIBOR Rate shall mean, with respect to the Interest Period for each
----------
LIBOR Rate Loan comprising part of the same borrowing, an interest rate per
annum equal to the rate (rounded upward to the nearest whole multiple of one-
sixteenth (1/16) of one percent (1%) per annum, if such rate is not such a
multiple) of the offered quotation, if any, to first class banks in the LIBOR
market by Deutsche Bank for U.S. dollar deposits of amounts in immediately
available funds comparable to the principal amount of the LIBOR Rate Loan for
which the LIBOR Rate is being determined with maturities comparable to the
Interest Period for which such LIBOR Rate will apply as of approximately 10:00
a.m. (New York time) two (2) Business Days prior to the commencement of such
Interest Period.
LIBOR Rate Loan shall mean a Loan that bears interest as provided in
---------------
Section 8.1 hereof.
-----------
LIBOR Rate Margin shall mean three and one-half percent (3.50%) per
-----------------
annum.
Lien shall mean, with respect to any asset, any mortgage, lien,
----
pledge, charge, security interest or encumbrance of any kind in respect of such
asset. For the purposes of this Credit Agreement, the Borrower or any
Subsidiary shall be deemed to own subject to a Lien any asset which it has
acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, Capital Lease or other title retention agreement
relating to such asset.
Loan Account shall have the meaning given to it in Section 3.7 hereof.
------------ -----------
Loan Disbursement Account shall have the meaning given to it in
-------------------------
Section 3.8 hereof.
-----------
Loans shall mean the Revolving Loans made from time to time hereunder.
-----
Lockbox Agreements shall have the meaning given to such term in
------------------
Section 3.6(b)(ii) hereof.
------------------
Lockbox Bank shall have the meaning given to such term in Section
------------ -------
3.6(b)(ii) hereof.
----------
24
Lockboxes shall have the meaning given to such term in Section
--------- -------
3.6(b)(i) hereof.
---------
Material Adverse Change shall mean a material adverse change (i) in
-----------------------
the business, operations, results of operations, assets, liabilities or
condition (financial or otherwise) of the Borrower and its Consolidated
Subsidiaries taken as a whole, or (ii) in the value of a material portion of the
Inventory or Accounts or in the value of the Collateral taken as a whole or the
amount which the Agent and the Lenders would be likely to receive (after giving
consideration to delays in payment and costs of enforcement) in the liquidation
of such Collateral.
Material Adverse Effect shall mean a material adverse effect on (i)
-----------------------
the business, operations, results of operations, assets, liabilities or
condition (financial or otherwise) of the Borrower and its Consolidated
Subsidiaries taken as a whole, (ii) the value of a material portion of the
Inventory or Accounts or the value of the Collateral taken as a whole or the
amount which the Agent and the Lenders would be likely to receive (after giving
consideration to delays in payment and costs of enforcement) in the liquidation
of such Collateral, (iii) the Borrower's ability to perform its obligations
under the Credit Documents or (iv) the rights and remedies of the Agent or the
Lenders hereunder.
Maximum Budget Amount shall have the meaning given to such term in
---------------------
Section 7.22 hereof.
------------
Monthly Accounting Period shall mean a fiscal monthly accounting
-------------------------
period of the Borrower.
Mortgage shall mean, with respect to real property owned by the
--------
Borrower, each mortgage or deed of trust executed and delivered on the date
hereof or hereafter delivered from time to time pursuant to the terms hereof,
and with respect to real property leased by the Borrower, each leasehold
mortgage or leasehold deed of trust, if any, executed and delivered on the date
hereof or hereafter delivered from time to time pursuant to the terms hereof, as
any of the same may be amended, modified, supplemented, extended or renewed from
time to time.
Multiemployer Plan shall mean a "multiemployer plan" as defined in
------------------
Section 4001(a)(3) of ERISA and (i) which is, or within the immediately
------------------
preceding six (6) years was, contributed to by the Borrower or any ERISA
Affiliate or (ii) with respect to which the Borrower or any ERISA Affiliate may
incur any liability.
25
Net Cash Proceeds shall mean, with respect to any Asset Disposition,
-----------------
the aggregate amount of cash received by the Borrower (including cash payments
received in respect of deferred payment pursuant to any note or installment
receivable or otherwise and state or federal income tax refunds attributable to
such Asset Disposition, but in each case only as and when received) in respect
of such Asset Disposition, minus all fees, commissions, expenses (including, in
-----
the case of a license or grant of right to use Proprietary Rights, expenses
incurred in connection with the creation and continuation of such licensing or
similar arrangement) and taxes incurred in connection with such Asset
Disposition. For purposes of this definition, if taxes or other expenses
payable in connection with any Asset Disposition are not known as of the date of
such Asset Disposition, then such fees, commissions, expenses or taxes shall be
estimated by the Borrower, in good faith, and, with the consent of the Agent,
such estimated amounts shall be deducted therefrom.
Noteholders shall mean DDJ Canadian High Yield Fund, B III Capital
-----------
Partners, L.P., Foothill Partners III, L.P., Libra Investments, Inc., and any
successors thereto or assignees thereof.
Note Purchase Agreements shall mean the Note Purchase Agreements dated
------------------------
as of September 16, 1998 between Borrower and each of the Noteholders pursuant
to which Borrower has issued its secured notes in an aggregate principal amount
of up to $28,642,687, each as amended, supplemented or otherwise modified prior
to the Filing Date.
Notes shall mean the Revolving Notes.
-----
Notice of Borrowing shall have the meaning given to such term in
-------------------
Section 3.3(b) hereof.
--------------
Notice of Conversion shall have the meaning given to such term in
--------------------
Section 8.3(b) hereof.
--------------
Notice of Rollover shall have the meaning given to such term in
------------------
Section 8.3(a) hereof.
--------------
Obligations shall mean the Loans, any other loans and advances or
-----------
extensions of credit made or to be made by any Lender to the Borrower, or to
others for the Borrower's account pursuant to the terms and provisions of this
Credit Agreement, together with interest thereon, including, without limitation,
any reimbursement obligation or indemnity of the Borrower on account of Letters
of Credit (including, without limitation, the Letter of Credit Obligations), any
amounts payable under or in respect of the Acceptances (including, without
limitation, the Acceptance Obligations), and any and all indebtedness,
26
liabilities and obligations which may at any time be owing by the Borrower to
any Lender pursuant to the Orders, this Credit Agreement or any other Credit
Document, whether now in existence or incurred by the Borrower from time to time
hereafter, whether unsecured or secured by pledge, Lien upon or security
interest in any of the Borrower's assets or property or the assets or property
of any other Person, whether such indebtedness, liabilities or obligations are
absolute or contingent, joint or several, matured or unmatured, direct or
indirect and whether the Borrower is liable to such Lender for such
indebtedness, liabilities or obligations as principal, surety, endorser,
guarantor or otherwise. Obligations shall also include any other indebtedness,
liabilities and obligations owing to any Lender by the Borrower under the
Orders, this Credit Agreement, the Credit Documents, the Borrower's liability to
any Lender pursuant to this Credit Agreement as maker or endorser of any
promissory note or other instrument for the payment of money, the Borrower's
liability to any Lender pursuant to this Credit Agreement or any other Credit
Document under any instrument of guaranty or indemnity, or arising under any
guaranty, endorsement or undertaking which any Lender may make or issue to
others for the Borrower's account pursuant to this Credit Agreement or any other
Credit Document, including any accommodation extended with respect to
applications for Letters of Credit, or any Lender's acceptance of drafts or
endorsement of notes or other instruments for the Borrower's account and
benefit.
Orders shall mean the Interim Order and the Final Order.
------
OSHA shall mean the Occupational Safety and Health Act, as amended
----
from time to time, and any successor statute thereto and all final or temporary
regulations promulgated thereunder, and all published, generally applicable
rulings entitled to precedential effect.
Other Taxes shall have the meaning given to such term in Section
----------- -------
3.10(b) hereof.
-------
Owned Real Property shall mean the real property owned by the Borrower
-------------------
at any time, including, without limitation, all of the material real property
owned by the Borrower as of the date of this Credit Agreement as set forth on
Schedule D hereto.
----------
Patent Security Agreements shall mean, collectively, the Post-Petition
--------------------------
Patent Security Agreements executed by the Borrower in favor of the Agent in the
form attached hereto as Exhibit C.
---------
PBGC shall mean the Pension Benefit Guaranty Corporation and any
----
Person succeeding to the functions thereof.
27
Permitted Carryforward shall mean, for any Monthly Accounting Period
----------------------
during which the Budgeted Amount for such Monthly Accounting Period exceeds the
Cash Disbursements for such Monthly Accounting Period, an amount equal to (i)
the Budgeted Amount for such Monthly Accounting Period minus (ii) the Cash
-----
Disbursements for such Monthly Accounting Period, each as reported pursuant to
Section 6.1(g).
--------------
Permitted Discretion shall mean the Agent's judgment exercised in good
--------------------
faith and not in an irrational manner based upon its consideration of any factor
which the Agent believes in good faith could affect the value of any Inventory
or Accounts or the amount which the Agent and the Lenders would be likely to
receive (after giving consideration to delays in payment and costs of
enforcement) in the liquidation of such Collateral. In exercising such
judgment, the Agent may consider such factors which are already included in or
tested by the definition of Eligible Accounts Receivable, Eligible Inventory,
Eligible L/C Inventory, Eligible Retail Inventory, or the Borrowing Base, as
well as any of the following: (i) changes in collection history and dilution
with respect to the Accounts, (ii) changes in levels of backlog of firm purchase
orders and demand for, and pricing of, Inventory, (iii) changes in any
concentration of risk with respect to Accounts and Inventory and (iv) any other
factors that change the credit risk of lending to the Borrower on the security
of the Accounts and Inventory.
Permitted Expenses shall mean, collectively, (i) fees required to be
------------------
paid to the Office of the United States Trustee pursuant to 28 U.S.C. Section
1930(a), (ii) so long as no Default or Event of Default shall have occurred and
be continuing, compensation for services rendered or reimbursement of expenses
incurred that are permitted to be paid by the Bankruptcy Court under Sections
330 or 331 of the Bankruptcy Code to professionals retained pursuant to an order
of the Bankruptcy Court by the Borrower or any official committee appointed
pursuant to Section 1102 of the Bankruptcy Code, (iii) Permitted Prepetition
Claim Payments, and (iv) following the occurrence and during the continuance of
a Default or an Event of Default, the Carve-Out.
Permitted Investments shall mean (i) Cash Equivalents, (ii) securities
---------------------
distributed in connection with the confirmation of a plan of reorganization
following the bankruptcy of any Person indebted to the distributee at the time
such bankruptcy is filed, and (iii) such other investments as the Agent may
approve in its sole discretion.
Permitted Liens shall mean, without duplication:
---------------
(21) Liens existing on the Filing Date and listed on Schedule E;
----------
28
(22) Liens for taxes, assessments, governmental charges or levies
not yet due or which are being contested in good faith and by appropriate
proceedings if adequate reserves with respect thereto are maintained on the
books of the Borrower or the appropriate Subsidiary, as the case may be, in
accordance with GAAP;
(23) statutory Liens of landlords and carriers', or other
warehousemen's, mechanics', materialmen's, repairmen's or other like Liens
arising in the ordinary course of business which are not overdue for a
period of more than sixty (60) days or which are being contested in good
faith and by appropriate proceedings in a manner which will not jeopardize
or diminish the interest of the Lenders or the Agent in any of the
Collateral subject to the Ancillary Documents or interfere with the
ordinary conduct of the business of the Borrower or any Subsidiary;
(24) pledges or deposits and Liens (other than any Lien imposed
by ERISA) under bonds required in connection with workers compensation,
unemployment insurance and other social security legislation;
(25) Liens (other than any Lien imposed by ERISA or by
Environmental Laws) incurred on deposits to secure the performance of
tenders, bids, trade contracts (other than for borrowed money), leases,
statutory obligations, surety and appeal bonds, performance and return-of-
money bonds and other obligations of a like nature incurred in the ordinary
course of business;
(26) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which do not
substantially detract from the value of the property subject thereto or
interfere with the ordinary conduct of the business of the Borrower or any
Subsidiary;
(27) Liens created pursuant to the Prepetition Credit Documents,
the Note Purchase Agreements, and the "Ancillary Documents" (as defined in
the Note Purchase Agreements); and
(28) Liens created pursuant to this Agreement, the other Credit
Documents and the Orders.
Permitted Prepetition Claim Payment shall mean, so long as no Default
-----------------------------------
or Event of Default shall have occurred and be continuing, any payment, to the
extent permitted under Section 7.22, approved by an order of the Bankruptcy
------------
Court (as adequate protection or otherwise) on account of any Claim arising or
deemed to have arisen prior to the Filing Date in respect of (i) prepetition
employee wages, salaries, sick pay, vacation pay (including
29
"personal days"), holiday pay, and other accrued compensation, (ii) obligations
to reimburse prepetition employee business expenses (including travel, lodging,
moving, and relocation expenses), (iii) obligations to make payments for which
employee payroll deductions were made, (iv) obligations to make prepetition
contributions and pay benefits under employee benefit plans, (v) all costs and
expenses incident to the payments and contributions described in (i) through
(iv) (including, without duplication payroll-related taxes, brokers' fees and
processing costs), (vi) obligations to retail or wholesale customers incurred in
the ordinary course of business (including honoring obligations arising from
deposits, prepayments, gift certificates, warranties, refunds, returns,
exchanges, frequent buyer programs and other credit balances), (vii) obligations
under the Borrower's or any Subsidiary's self-insured workers' compensation
program, (viii) without duplication of any of the foregoing, employee
withholding taxes, sales, use and excise and other similar trust fund amounts,
(ix) undisputed prepetition sales and use tax obligations owing to the
appropriate taxing authorities, (x) customs import duties and related expenses
(including freight, storage, port charges and brokers' fees), (xi) various
insurance policies and bonds necessary to the operation of the Borrower's
business including, but not limited to, workers' compensation insurance,
automobile insurance, fiduciary liability insurance, criminal liability
insurance, directors' and officers' liability insurance, general liability
insurance, property insurance, marine insurance, and performance and guarantee
bonds and all fees related thereto (including, but not limited to, brokers' fees
and insurance premium finance obligations), (xii) common carriers that ship,
transport or otherwise deliver goods of the Borrower and that are, as of the
Filing Date, in possession of the Borrower's goods, (xiii) obligations, if any,
of that certain Warehousing Services Phase-Out and Early Termination Agreement
with Fabius Europe B.V., (xiv) critical goods and services of vendors and
suppliers referred to in the "Motion of Debtor and Debtor in Possession Pursuant
to Section 105 of the Bankruptcy Code for Authorization to Pay Prepetition
Claims of Critical Vendors" in the amounts specified therein, provided that such
--------
payments shall not exceed $500,000 in the aggregate, (xv) any payment on account
of the Prepetition Revolving Credit Obligations applied in accordance with
Section 3.6, or (xvi) other obligations of the Borrower agreed to by the
-----------
Borrower and the Agent in writing.
Permitted Variance shall mean, with respect to the Budgeted Amount for
------------------
any Monthly Accounting Period, an amount equal to fifteen percent (15%) of such
Budgeted Amount.
Person shall mean any individual, sole proprietorship, partnership,
------
joint venture, trust, unincorporated organization, association, corporation,
limited liability company, institution, entity, party or government (including
any division, agency or department thereof), and, as applicable, the successors,
heirs and assigns of each.
30
Plan shall mean any "employee benefit plan" as defined in Section 3(3)
----
of ERISA, maintained or contributed to by the Borrower or with respect to which
the Borrower may incur liability.
Pledge Agreement shall mean, collectively, the Post-Petition Pledge
----------------
Agreement executed by the Borrower and the Subsidiary Pledge Agreements executed
by certain Subsidiaries of the Borrower in favor of the Agent, in the form
attached hereto as Exhibit D.
---------
Prepetition Agent shall mean BT Commercial Corporation, in its
-----------------
capacity as Agent for the Prepetition Lenders under the Prepetition Credit
Agreement.
Prepetition Credit Agreement shall mean the Credit Agreement, dated as
----------------------------
of May 21, 1997, among the Borrower, the Prepetition Lenders and the Prepetition
Agent, as amended, supplemented or otherwise modified prior to the Filing Date.
Prepetition Credit Documents shall mean the "Credit Documents", as
----------------------------
defined in the Prepetition Credit Agreement.
Prepetition Lenders shall mean, collectively, the several banks,
-------------------
financial institutions and other entities from time to time parties to the
Prepetition Credit Agreement.
Prepetition Note Purchase Obligations shall mean the aggregate
-------------------------------------
principal amount of the loans and other obligations under or pursuant to the
Note Purchase Agreements, and all accrued but unpaid interest and fees, costs
and other charges payable to the Noteholders under or pursuant to the Note
Purchase Agreement and the "Ancillary Documents" (as defined in the Note
Purchase Agreements).
Prepetition Revolving Credit Obligations shall mean the aggregate
----------------------------------------
outstanding principal amount of the loans and other obligations (including
acceptances, letters of credit and foreign exchange contract obligations
outstanding as of the Filing Date) under or pursuant to the Prepetition Credit
Agreement and the Prepetition Credit Documents, and all accrued but unpaid
interest and fees, costs and other charges payable to the Prepetition Agent
under or pursuant to the Prepetition Credit Agreement and the Prepetition Credit
Documents.
Prime Lending Rate shall mean the rate which Deutsche Bank announces
------------------
from time to time as its prime lending rate, as in effect from time to time.
The Prime Lending Rate is a reference rate and does not necessarily represent
the lowest or best rate actually charged to any customer. Deutsche Bank and
Deutsche Bank Affiliates may
31
make commercial loans or other loans at rates of interest at, above or below the
Prime Lending Rate.
Prime Rate Loan shall mean a Loan that bears interest as provided in
---------------
Section 8.2 hereof.
-----------
Projected Cash Disbursements shall mean, for any Monthly Accounting
----------------------------
Period, the aggregate amount of all projected cash disbursements for such
period, excluding projected cash disbursements for Inventory during such period,
as set forth in the Initial Monthly Budget, and further excluding any projected
cash disbursement in respect of a claim, the payment of which requires the
approval of the Bankruptcy Court, unless and until such approval is received.
Projected Commitments shall mean, for each date listed below, the
---------------------
amount listed opposite such date:
Amortization Projected
Date Commitment
---- ----------
March 31, 2001 $ 65,000,000
April 30, 2001 $ 55,000,000
May 31, 2001 $ 35,000,000
June 30, 2001 $ 25,000,000
July 31, 2001 $ 20,000,000
August 31, 2001 $ 10,000,000
October 31, 2001 $ 5,000,000
December 31, 2001 $ 0
Proportionate 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
Total Revolving Loan Commitments.
Proprietary Rights shall have the meaning given to such term in
------------------
Section 5.13(b) hereof.
---------------
Proprietary Rights Collateral Documents shall mean the Trademark
---------------------------------------
Security Agreements and the Patent Security Agreements.
32
Real Estate shall mean, collectively, the Owned Real Property and the
-----------
Leased Real Property.
Register shall have the meaning given to it in Section 13.6(e) hereof.
-------- ---------------
Regulation U shall mean Regulation U of the Board of Governors of the
------------
Federal Reserve System, as in effect from time to time.
Regulation X shall mean Regulation X of the Board of Governors of the
------------
Federal Reserve System, as in effect from time to time.
Remedial Work shall have the meaning give to it in Section 6.9(b)
------------- --------------
hereof.
Reorganization Plan shall mean a plan of reorganization in the Case.
-------------------
Reportable Event shall mean any of the events described in Section
----------------
4043 of ERISA and the regulations thereunder.
Required Lenders shall mean, at any time, subject to the provisions
----------------
set forth in Section 13.10 hereof, Lenders holding more than fifty percent (50%)
-------------
of the then aggregate unpaid principal amount of the Revolving Notes or, if no
such principal amount is then outstanding, Lenders having more than fifty
percent (50%) of the Total Commitments then in effect.
Retiree Health Plan shall mean an "employee welfare benefit plan"
-------------------
within the meaning of Section 3(1) of ERISA that provides health care benefits
to persons after termination of employment, other than as required by Section
601 of ERISA.
Revolving Credit Commitment of any Lender shall mean the amount set
---------------------------
forth opposite such Lender's name on Annex I hereto, as such annex may be
-------
amended from time to time, under the heading Revolving Credit Commitment, as
such amount may be reduced from time to time pursuant to the terms of this
Credit Agreement.
Revolving Loans shall have the meaning given to such term in Section
--------------- -------
3.2(a) hereof, which Loan may be a LIBOR Rate Loan or a Prime Rate Loan.
------
Revolving Note shall mean a promissory note of the Borrower payable to
--------------
the order of any Lender, in the form of Exhibit E hereto, evidencing the
---------
aggregate indebtedness of the Borrower to such Lender resulting from the
Revolving Loans made by such Lender (including any Revolving Loans made pursuant
to Section 4.1 hereof to reimburse any
-----------
33
Issuing Bank for drawings under any Letter of Credit and Revolving Loans made
pursuant to Section 4.2 hereof to repay an Accepting Bank with respect to any
-----------
Acceptance) or acquired by such Lender from another Lender pursuant to Section
-------
13.6 hereof.
----
Rollover shall have the meaning given to such term in Section 8.3(a)
-------- --------------
hereof.
Royalty Income shall mean the amount of royalty income earned by
--------------
Borrower, determined in accordance with GAAP, as reflected on Borrower's monthly
income statements, paid to Borrower by licensees of certain of Borrower's
registered trademarks, pursuant to license agreements between Borrower and such
licensees, and which agreements shall be assigned to Agent pursuant to the
Trademark Security Agreement.
Security Agreement shall mean the Postpetition Security Agreement
------------------
between the Agent and the Borrower, in the form attached hereto as Exhibit F.
---------
Settlement Period shall have the meaning given to such term in Section
----------------- -------
3.4(a) hereof.
------
Structures shall mean all plants, offices, manufacturing facilities,
----------
warehouses, administration buildings and related facilities of the Borrower
located at the Owned Real Property.
Subsidiary shall mean, with respect to any Person, a corporation,
----------
partnership or other entity of which shares of stock or other ownership
interests having ordinary voting power (other than stock or such other ownership
interests having such power only by reason of the happening of a contingency) to
elect a majority of the board of directors or other persons performing similar
functions are at the time, directly or indirectly through one or more
intermediaries, or both, owned or controlled, by such Person. Unless otherwise
expressly indicated to the contrary herein, all references to a "Subsidiary" or
to "Subsidiaries" in this Credit Agreement shall refer to a Subsidiary or
Subsidiaries of the Borrower.
Super-priority Claim shall mean a claim against the Borrower in the
--------------------
Case which is an administrative expense claim having priority over any or all
administrative expenses of the kind specified in Sections 503(b) or 507(b) of
the Bankruptcy Code.
Supplemental Monthly Budget shall mean any monthly budget delivered
---------------------------
pursuant to Section 6.1(e); provided that the Agent hereby expressly reserves
-------------- --------
the right to object to the payment of any claim in the Case regardless of
whether the payment of such claim is provided for in any Supplemental Monthly
Budget.
34
Supplemental Weekly Budget shall mean any weekly budget delivered
--------------------------
pursuant to Section 6.1(f); provided that the Agent hereby expressly reserves
-------------- --------
the right to object to the payment of any claim in the Case regardless of
whether the payment of such claim is provided for in any Supplemental Weekly
Budget.
Taxes shall mean any federal, state, local or foreign income, sales,
-----
use, transfer, payroll, property, occupancy, franchise or other tax, levy,
impost, fee, imposition, stamp, duty, assessment or similar charge, deduction or
withholding of any kind, together with any additions to tax and interest and
penalties thereon and any other liabilities with respect thereto.
Termination Date shall mean the earliest to occur of (i) the
----------------
Expiration Date, (ii) the effective date of a Reorganization Plan confirmed by
the Bankruptcy Court pursuant to the Confirmation Order or (iii) the termination
of the Commitments in accordance with the terms hereof.
Termination Event shall mean (i) a Reportable Event with respect to
-----------------
any Benefit Plan or Multiemployer Plan which is likely to constitute grounds for
termination of such Benefit Plan or Multiemployer Plan; (ii) the withdrawal
(within the meaning of Section 4063 of ERISA) of the Borrower or any ERISA
Affiliate from a Benefit Plan during a plan year in which such entity was a
"substantial employer" as defined in Section 4001(a)(2) of ERISA; (iii) the
providing of notice of intent to terminate a Benefit Plan in a distress
termination described in Section 4041(c) of ERISA; (iv) the institution by the
PBGC of proceedings to terminate a Benefit Plan or Multiemployer Plan; (v) any
event or condition (a) described in Section 4042(a) of ERISA and which could
reasonably be expected to constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Benefit Plan
or Multiemployer Plan, or (b) described in Section 4041A(a) of ERISA and that
could reasonably be expected to result in termination of a Multiemployer Plan
pursuant to Section 4041A of ERISA; or (vi) the partial or complete withdrawal
within the meaning of Sections 4203 and 4205 of ERISA, of any Borrower or any
ERISA Affiliate from a Multiemployer Plan.
Total Commitments shall mean the aggregate of the Revolving Credit
-----------------
Commitments of all Lenders from time to time.
Trademark Security Agreements shall mean, collectively, each of the
-----------------------------
Post-Petition Trademark Security Agreements executed by the Borrower in favor of
the Agent in the form attached hereto as Exhibit G.
---------
35
Type shall mean, with respect to any Loan, whether such Loan is a
----
LIBOR Rate Loan or a Prime Rate Loan.
Unused Line Fee shall mean that fee payable by the Borrower to the
---------------
Agent for the account of the Lenders pursuant to Section 8.6 hereof.
-----------
Voting Stock shall mean stock of the Borrower of the class or classes
------------
having general voting power under ordinary circumstances to elect at least a
majority of the board of directors of the Borrower (irrespective of whether or
not at the time stock of any other class or classes shall have or might have
voting power by reason of the happening of any contingency).
1.2 Accounting Terms and Determinations. Unless otherwise defined or
specified herein, all accounting terms shall be construed herein and all
accounting determinations for purposes of determining compliance with Sections
--------
7.6 hereof and otherwise to be made under this Credit Agreement shall be made in
---
accordance with GAAP, applied on a basis consistent with the most recent audited
consolidated financial statements of the Borrower and its Consolidated
Subsidiaries for the fiscal year ended January 1, 2000. All Financial Statements
required to be delivered hereunder from and after the Closing Date and all
financial records shall be maintained in accordance with GAAP. The parties
hereto agree, however, that in the event that any change in accounting
principles from those used in the preparation of the most recent audited
financial statements of the Borrower and its Consolidated Subsidiaries for the
fiscal year ended January 1, 2000 is hereafter occasioned by the promulgation of
rules, regulations, pronouncements and opinions by or required by the Financial
Accounting Standards Board or Accounting Principles Board of the American
Institute of Certified Public Accountants (or successors thereto or agencies
with similar functions) and results in any change in the method of calculation
of financial covenants, standards or terms found in this Credit Agreement, such
financial covenants, standards or terms (other than in respect of Financial
Statements to be delivered hereunder) shall be computed without giving effect to
such change in accounting principles, and the certificates required to be
delivered pursuant to Section 6.1 hereof demonstrating compliance with the
-----------
covenants contained herein shall include calculations setting forth the
adjustments necessary to demonstrate how the Borrower is in compliance with the
financial covenants without giving effect to such change in accounting
principles. If the Borrower shall change its method of inventory accounting from
the first-in-first-out method to the last-in-first-out method, all calculations
necessary to determine compliance with the covenants contained herein shall be
made as if such method of inventory accounting had not been so changed.
1.3 Other Definitional Terms. Terms not otherwise defined herein
------------------------
which are defined in the Uniform Commercial Code as in effect in the State of
New York
36
(the "Code") shall have the meanings given them in the Code. The words "hereof",
----
"herein" and "hereunder" and words of similar import when used in this Credit
Agreement shall refer to this Credit Agreement as a whole and not to any
particular provision of this Credit Agreement, and references to Article,
Section, Annex, Schedule, Exhibit and like references are references to this
Credit Agreement unless otherwise specified.
ARTICLE II
Conditions Precedent
--------------------
1.4 Initial Loans. The obligation of the Lenders to make the initial
-------------
Loans, or, if earlier, to cause the initial issuance of Letters of Credit or the
creation of Acceptances hereunder (the first one to occur being hereinafter
referred to as the "Initial Credit Event") is subject to the satisfaction of, or
--------------------
waiver of, immediately prior to or concurrently with the making of such Loans or
such issuance, the following conditions precedent:
(1) Closing Documents. The Lenders shall have received on or
-----------------
prior to the Closing Date each of the documents and certificates set forth in
the Closing Documents List.
(2) Budget. The Lenders and the Agent shall have received the
------
Initial Monthly Budget and the Initial Weekly Budget, each in form and substance
satisfactory to the Agent.
(3) Legal Opinions. The Lenders shall have received on the
--------------
Closing Date the opinions of counsel to the Borrower reasonably satisfactory to
the Agent, dated the Closing Date in substantially the form of Exhibit H.
---------
(4) Fees. The Agent and the Lenders shall have received payment
----
in full of the Fees (as applicable), the Expenses and all other fees and
expenses (or an irrevocable authorization to pay such fees out of the proceeds
of the Loans) referred to in Article 8 hereof which are payable to them on or
---------
before the date of the Initial Credit Event.
(5) Interim Order. At the time of the Initial Credit Event, but
-------------
in any event no later than fifteen (15) days after the Filing Date, the Agent
shall have received a copy of the Interim Order approving the Credit Documents
and granting the Super-priority Claim status and Liens described in Section 3.12
------------
and finding that the Lenders are extending credit to the Borrower in good faith
within the meaning of Section 364(e) of the Bankruptcy Code, which Interim Order
(i) shall be in form and substance satisfactory to the Agent, (ii)
37
shall have been entered upon an application of the Borrower satisfactory in form
and substance to the Agent, (iii) shall be in full force and effect and (iv)
shall not have been stayed, reversed, vacated, rescinded, modified or amended in
any respect and, if the Interim Order is the subject of a pending appeal in any
respect, neither such Initial Credit Event nor the performance by the Borrower
of any of its obligations hereunder or under the other Credit Documents or under
any other instrument or agreement referred to herein shall be the subject of a
presently effective stay pending appeal.
(6) First Day Orders. All orders submitted to the Bankruptcy
----------------
Court on or about the Filing Date shall be in form and substance reasonably
satisfactory to the Agent.
(7) Corporate and Judicial Proceedings. All corporate and
----------------------------------
judicial proceedings and all instruments and agreements in connection with the
transactions among the Borrower, the Agent and the Lenders contemplated by this
Credit Agreement shall be satisfactory in form and substance to the Agent, and
the Agent shall have received all information and copies of all documents and
papers, including records of corporate and judicial proceedings, which the Agent
may have requested in connection therewith, such documents and papers where
appropriate to be certified by proper corporate, governmental or judicial
authorities.
(8) Information. The Agent shall have received such information
-----------
(financial or otherwise) as may be requested by the Agent.
(9) Insurance. The Agent shall have received evidence in form
---------
and substance satisfactory to it that all of the requirements of Section 6.3(b)
--------------
shall have been satisfied.
(10) No Material Adverse Change. Since October 28, 2000, there
--------------------------
shall have been no Material Adverse Change, except as has been disclosed to the
Agent in writing prior to the Closing Date.
(11) Governmental Approvals. Borrower shall have obtained or made
----------------------
all governmental approvals and filings necessary for the consummation of the
transactions contemplated hereby.
(12) Other. The Borrower shall have executed and delivered to the
-----
Agent all documents which the Agent determines are necessary to consummate the
lending arrangements contemplated hereby.
38
1.5 All Loans. On the date of the making of any Loan,
---------
the issuance of any Letter of Credit or the creation of any Acceptance
(including the Initial Credit Event), both before and after giving effect
thereto and to the application of the proceeds therefrom, the following
statements shall be true to the satisfaction of the Agent (and each request for
borrowing under the Revolving Loan, request for a Letter of Credit and request
for an Acceptance and the acceptance by the Borrower of the proceeds of such
Loan, the issuance of such Letter of Credit or the creation of an Acceptance
shall constitute a representation and warranty by the Borrower that on the date
of such Loan, such issuance of such Letter of Credit or such creation of such
Acceptance before and after giving effect thereto and to the application of the
proceeds therefrom, such statements are true):
(1) Representations and Warranties. The representations and
------------------------------
warranties contained in this Credit Agreement and the other Credit Documents are
true and correct in all material respects on and as of the date of such Loan,
such issuance of such Letter of Credit or such creation of such Acceptance as
though made on and as of such date, except to the extent that such
representations expressly relate solely to an earlier date (in which case such
representations and warranties shall have been true and accurate on and as of
such earlier date).
(2) No Default or Event of Default. No event, condition or
------------------------------
default has occurred and is continuing, or would result from such Loan, the
issuance of any Letter of Credit or the creation of such Acceptance or the
application of the proceeds thereof, which would constitute a Default or an
Event of Default under this Credit Agreement.
(3) No Material Adverse Change. No Material Adverse Change
--------------------------
or event or development which could reasonably be expected to have a Material
Adverse Effect shall have occurred since October 28, 2000, except as has been
disclosed to the Agent in writing prior to the Closing Date.
(4) Bankruptcy Court Approval. The Interim Order shall be
-------------------------
in full force and effect and shall not have been stayed, reversed, vacated,
rescinded, modified or amended in any respect and, if the date of such requested
Loan, request for a Letter of Credit or request for an Acceptance is more than
forty (40) days after the Closing Date or if the amount of such requested Loan,
Letter of Credit or Acceptance when added to the amount of all outstanding
Obligations, would exceed the maximum amount authorized pursuant to the Interim
Order, the Final Order shall have been entered, which Final Order shall be in
full force and effect and shall not have been stayed, reversed, vacated,
rescinded or, without the consent of the Required Lenders, modified or amended
in any respect and, if the Interim Order or the Final Order, as the case may be,
is the subject of a pending appeal in any respect, neither the making of such
Loan, the issuance of such Letter of Credit, the creation
39
of such Acceptance nor the performance by the Borrower of any of its obligations
hereunder or under the Credit Documents or under any other instrument or
agreement referred to herein or therein shall be the subject of a then effective
stay pending appeal.
(5) Notice of Borrowing. The delivery of a Notice of Borrowing
-------------------
in the form of Exhibit I which shall contain a certification by an executive
---------
officer of the Borrower to the effect that (i) the proposed loan and the
intended use thereof are consistent with the terms of this Agreement and are to
be used solely for expenditures, and in amounts permitted under Section 7.22,
------------
(ii) the Borrower has observed or performed all of its covenants and other
agreements, and satisfied in all material respects every condition, contained in
this Credit Agreement and the other Credit Documents to be observed, performed
or satisfied by the Borrower, and (iii) that no Default or Event of Default has
occurred and is continuing.
ARTICLE III
The Loans
---------
1.6 Commitment of Revolving Notes. On the terms and conditions
-----------------------------
set forth in this Credit Agreement, each of the Lenders severally agrees to lend
to the Borrower, at any time or from time to time on or after the Closing Date
and before the Termination Date, such Lender's Proportionate Share of the
Revolving Loans as may be requested by the Borrower. The Borrower hereby agrees
to execute and deliver to each of the Lenders a Revolving Note to evidence the
maximum Revolving Loan which may be extended to the Borrower by such Lender. The
actual principal amount outstanding under the Revolving Notes at any time shall
equal and be determined in accordance with the then outstanding principal
balance of the Revolving Loans as set forth in the Loan Account of the Borrower.
1.7 Determination of Borrowing Base
-------------------------------
(1) The Lenders severally agree, subject to the terms and
conditions of this Credit Agreement, from time to time, to make revolving loans
and advances to the Borrower. Such loans and advances to the Borrower (each a
"Revolving Loan" and collectively the "Revolving Loans") shall not in the
-------------- ---------------
aggregate exceed the lesser of (i) the Total Commitments then in effect, minus
-----
the aggregate Letter of Credit Obligations, minus the aggregate Acceptance
-----
Obligations, and (ii) an amount equal to the Borrowing Base, minus the aggregate
-----
Letter of Credit Obligations, minus the aggregate Acceptance Obligations.
-----
40
(2) No Lender shall be obligated at any time to make available
to the Borrower its Proportionate Share of any requested Revolving Loan if such
amount plus its Proportionate Share of all Revolving Loans, its Proportionate
----
Share of all Letter of Credit Obligations and its Proportionate Share of all
Acceptance Obligations then outstanding would exceed such Lender's Revolving
Credit Commitment at such time. The aggregate balance of Revolving Loans
outstanding, plus the aggregate amount of all Letter of Credit Obligations
----
outstanding plus the aggregate amount of all Acceptance Obligations shall not at
----
any time exceed the lesser of (i) the Borrowing Base and (ii) the Total
Commitments then in effect. No Lender shall be obligated to make available, nor
shall the Agent make available, any Revolving Loans to the Borrower to the
extent such Revolving Loan when added to the then outstanding Revolving Loans,
all Letter of Credit Obligations of the Borrower and all Acceptance Obligations
of the Borrower would cause the aggregate outstanding Revolving Loans, all
Letter of Credit Obligations of the Borrower and all Acceptance Obligations of
the Borrower to exceed the lesser of the (i) Borrowing Base and (ii) the Total
Commitments then in effect. The Borrower shall promptly repay to the Lenders
from time to time the full amount of the excess, if any, of (i) the amount of
all Revolving Loans, Letter of Credit Obligations outstanding and Acceptance
Obligations outstanding over (ii) the lesser of (A) the Total Commitments and
(B) the Borrowing Base.
(3) Notwithstanding the provisions of subsection (b) above to
the contrary, in the event the Borrower is unable to comply with (i) the
Borrowing Base limitations set forth in Section 3.2(a) or (ii) the conditions
--------------
precedent to the making of a Loan, the issuance of a Letter of Credit or the
creation of an acceptance set forth in Section 2.2, the Lenders authorize the
-----------
Agent in its sole discretion, to make advances ("Interim Advances") to the
----------------
Borrower for a period commencing on the date Agent first receives a Notice of
Borrowing requesting an Interim Advance until the earlier of (i) the seventh
(7th) Business Day after such date, (ii) the date the Borrower is again able to
comply with the Borrowing Base limitations and the conditions precedent set
forth in Section 2.2, or obtains an amendment or waiver with respect thereto or
-----------
(iii) the date the Required Lenders instruct the Agent to cease making Interim
Advances (in each case, the "Interim Advance Period"). The Agent shall not, in
----------------------
any event, make any Interim Advance if at such time the aggregate amount of all
such Interim Advances outstanding would exceed $5,000,000. An Interim Advance
shall cease to be an Interim Advance if the unsatisfied conditions or events
which cause such advance to be an Interim Advance shall thereafter be satisfied.
1.8 Borrowings; Notices of Borrowings.
---------------------------------
(1) Each Revolving Loan of each Lender shall be made pursuant to
a single borrowing which borrowing shall, unless otherwise specifically provided
herein, consist entirely of Loans of the same Type; provided, however, that
-------- -------
the Borrower may, at its
41
option, request more than one borrowing of a Revolving Loan on a single day; and
provided, further, that the right of the Borrower to choose LIBOR Rate Loans is
-------- -------
subject to the provisions of Section 8.3(c) hereof.
--------------
(2) Each request for borrowings hereunder shall be made on
notice in the form attached hereto as Exhibit I from the Borrower to the Agent
---------
(the "Notice of Borrowing"), given not later than 12:00 noon (New York time) on
-------------------
the Business Day on which the proposed borrowing consisting of Prime Rate Loans
is requested to be made and on the third Business Day prior to the date of any
proposed borrowing consisting of LIBOR Rate Loans is requested to be made. Each
Notice of Borrowing shall be given by either telephone, telecopy, telex, or
cable, and, if requested by the Agent, confirmed in writing if by telephone,
specifying (i) the requested date of such borrowing, (ii) the Type of Loans
comprising such borrowing, (iii) the aggregate amount of such requested
borrowing and (iv) in the case of a borrowing consisting of LIBOR Rate Loans,
the Interest Period for each Loan comprising such borrowing, all of which shall
be specified in such manner as is necessary to comply with all limitations on
Revolving Loans outstanding hereunder (including, without limitation,
availability under the Borrowing Base). Each Notice of Borrowing shall be
irrevocable by and binding on the Borrower. Unless the provisions of Section 3.4
-----------
hereof are applicable, the Agent shall give to each Lender prompt notice of each
Notice of Borrowing by telecopy, telex or cable. Unless the provisions of
Section 3.4 hereof are applicable, no later than 2:00 p.m. (New York time)
-----------
on the date of borrowing specified in each Notice of Borrowing (unless such
Notice of Borrowing specifies the Closing Date as the date of any such
borrowing, in which case no later than 12:00 noon (New York time) on the Closing
Date), each Lender will make available for the account of its Applicable Lending
Office to the Agent at the address of the Agent set forth on Annex I hereto, in
-------
immediately available funds, its Proportionate Share of such borrowing requested
to be made. Unless the Agent shall have been notified by any Lender prior to the
date of borrowing that such Lender does not intend to make available to the
Agent its portion of the borrowing to be made on such date, the Agent may assume
that such Lender will make such amount available to the Agent at such time or at
the end of the Settlement Period (as defined below) to the extent that the
provisions of Section 3.4 hereof are applicable and the Agent may, in reliance
-----------
upon such assumption, make available the amount of the borrowing to be provided
by such Lender. Upon fulfillment of the conditions set forth in Article 2
---------
hereof for such borrowing, the Agent will make such funds available to the
Borrower by depositing such funds into the Loan Disbursement Account.
1.9 Alternate Periodic Settlements Among Lenders.
--------------------------------------------
(1) In order to administer the Prime Rate Loans in an efficient
manner and to minimize the transfer of funds between the Agent and the Lenders,
the
42
Lenders hereby instruct the Agent, and the Agent may (but is not obligated to)
(i) make available, on behalf of the Lenders, the full amount of all Prime Rate
Loans requested by the Borrower without giving each Lender prior notice of the
proposed borrowing, of such Lender's Proportionate Share thereof or the other
matters covered by the Notice of Borrowing and without requiring that the
Borrower give the Agent a written Notice of Borrowing prior to such borrowing
and (ii) if the Agent has made any such amounts available as provided in
clause (i), upon repayment of Prime Rate Loans by the Borrower, apply such
----------
amounts repaid directly to the amounts made available by the Agent in accordance
with clause (i) and not yet settled as described below; provided that the Agent
----------
shall not advance funds as described in clause (i) above if the Agent has
----------
actually received prior to such borrowing (x) an officers' certificate from the
Borrower pursuant to and in accordance with Section 6.1(h) that a Default or
--------------
Event of Default is in existence or (y) a Notice of Borrowing from the Borrower
wherein the certification provided therein states that the conditions to the
making of the requested Loans have not been satisfied (which certification shall
be given in the event such conditions are not satisfied) or (z) a written notice
from any Lender that the conditions to such borrowing have not been satisfied,
which officers' certificate, Notice of Borrowing or notice, in each case, shall
not have been rescinded. If the Agent advances Prime Rate Loans on behalf of the
Lenders, as provided in the immediately preceding sentence, the amount of each
Lender's Proportionate Share of Prime Rate Loans shall be computed weekly rather
than daily and shall be adjusted upward or downward on the basis of the amount
of outstanding Prime Rate Loans as of 4:00 p.m. (New York time) on the Business
Day immediately preceding the date of each computation; provided, however, that
-------- -------
the Agent retains the absolute right at any time or from time to time to make
the aforedescribed adjustments at intervals more frequent than weekly. The Agent
shall deliver to each of the Lenders after the end of each week, or such lesser
period or periods as the Agent shall determine, a summary statement of the
amount of outstanding Prime Rate Loans for such period (such week or lesser
period or periods being hereafter referred to as a
"Settlement Period"). If the summary statement is sent by the Agent and
------------------
received by the Lenders prior to 11:00 a.m. (New York time) each Lender shall
make the transfers described in the next succeeding sentence no later than 2:00
p.m. (New York time) on the day such summary statement was sent; and if such
summary statement is sent by the Agent and received by the Lenders after 11:00
a.m. (New York time), each Lender shall make such transfers no later than 2:00
p.m. (New York time) on the next succeeding Business Day. If in any Settlement
Period, the amount of a Lender's Proportionate Share of the Prime Rate Loans is
more than such Lender's Proportionate Share of the Prime Rate Loans for the
previous Settlement Period, such Lender shall forthwith (but in no event later
than the time set forth in the next preceding sentence) transfer to the Agent by
wire transfer in immediately available funds the amount of the increase; and, on
the other hand, if the amount of a Lender's Proportionate Share of the Prime
Rate Loans in any Settlement Period is less than the amount of such Lender's
Proportionate Share of Prime Rate Loans for the previous Settlement Period, the
Agent shall forthwith (but in no event later
43
than the time set forth in the next preceding sentence) transfer to such Lender
by wire transfer in immediately available funds the amount of the decrease. The
obligation of each of the Lenders to transfer such funds shall be irrevocable
and unconditional and without recourse to or warranty by the Agent. Each of the
Agent and the Lenders agree to ▇▇▇▇ their respective books and records at the
end of each Settlement Period to show at all times the dollar amount of their
respective Proportionate Shares of the outstanding Prime Rate Loans. Because the
Agent on behalf of the Lenders may be advancing and/or may be repaid Prime Rate
Loans prior to the time when the Lenders will actually advance and/or be repaid
Prime Rate Loans, interest with respect to Prime Rate Loans shall be allocated
by the Agent to each Lender (including the Agent) in accordance with the amount
of Prime Rate Loans actually advanced by and repaid to each Lender (including
the Agent) during each Settlement Period and shall accrue from and including the
date such Loans are advanced by the Agent to but excluding the date such Loans
are repaid by the Borrower in accordance with Section 3.5 hereof or, if later,
-----------
actually settled by the applicable Lender as described in this Section 3.4.
-----------
(2) If the amounts described in Section 3.3 hereof or this
-----------
Section 3.4 are not in fact made available to the Agent by a Lender (such Lender
-----------
being hereinafter referred to as a "Defaulting Lender") and the Agent has made
-----------------
such amount available to the Borrower, the Agent shall be entitled to recover
such corresponding amount on demand from such Defaulting Lender. If such
Defaulting Lender does not pay such corresponding amount forthwith upon the
Agent's demand therefor, the Agent shall promptly notify the Borrower and the
Borrower shall immediately (but in no event later than five (5) Business Days
after such demand) pay such corresponding amount to the Agent. The Agent shall
also be entitled to recover from such Defaulting Lender and the Borrower, (x)
interest on such corresponding amount in respect of each day from the date such
corresponding amount was made available by the Agent to the Borrower to the date
such corresponding amount is recovered by the Agent, at a rate per annum equal
to either (i) if paid by such Defaulting Lender, the overnight Federal Funds
Rate or (ii) if paid by the Borrower, the then applicable rate of interest,
calculated in accordance with Section 8.1 or Section 8.2 hereof, plus (y) in
----------- ----------- ----
each case, an amount equal to any costs (including legal expenses) and losses
incurred as a result of the failure of such Defaulting Lender to provide such
amount as provided in this Credit Agreement. Nothing herein shall be deemed to
relieve any Lender from its obligation to fulfill its commitments hereunder or
to prejudice any rights which the Borrower may have against any Lender as a
result of any default by such Lender hereunder, including, without limitation,
the right of the Borrower to seek reimbursement from any Defaulting Lender for
any amounts paid by the Borrower under clause (y) above on account of such
----------
Defaulting Lender's default.
(3) The failure of any Lender to make the Revolving Loan to be
made by it as part of any borrowing shall not relieve any other Lender of its
obligation, if
44
any, hereunder to make its Revolving Loan on the date of such borrowing, but no
Lender shall be responsible for the failure of any other Lender to make the Loan
to be made by such other Lender on the date of any borrowing.
(4) The Revolving Loans made by each Lender shall be evidenced
by Revolving Notes with appropriate insertions as to the date and principal
amount, payable to the order of each Lender.
(5) Each Lender shall be entitled to earn interest at the then
applicable rate of interest, calculated in accordance with Article 8 hereof, on
---------
outstanding Revolving Loans which it has funded to the Agent.
(6) Notwithstanding the obligation of the Borrower to send
written confirmation of a Notice of Borrowing made by telephone if and when
requested by the Agent, in the event that the Agent agrees to accept a Notice of
Borrowing made by telephone, such telephonic Notice of Borrowing shall be
binding on the Borrower whether or not written confirmation is sent by the
Borrower or requested by the Agent. The Agent may act prior to the receipt of
any requested written confirmation, without any liability whatsoever, based upon
telephonic notice believed by the Agent in good faith to be from the Borrower or
its agents. The Agent's records of the terms of any telephonic Notices of
Borrowing shall be conclusive on the Borrower in the absence of gross negligence
or willful misconduct on the part of the Agent in connection therewith.
1.10 Mandatory Payment; Voluntary Reductions of Commitments.
------------------------------------------------------
(1) The aggregate balance of Revolving Loans, plus all Letter
----
of Credit Obligations outstanding plus all Acceptance Obligations at any time in
----
excess of the lesser of (i) the Borrowing Base and (ii) the Total Commitments,
shall be immediately due and payable without the necessity of any notice or
demand.
(2) On the Termination Date, the Revolving Credit Commitment of
each Lender shall automatically reduce to zero and may not be reinstated. In
addition, on the Termination Date, the Borrower shall pay the Revolving Loans
and all other Obligations in full.
(3) If on any Amortization Date the Total Commitments exceed the
Adjusted Total Commitments, then on such Amortization Date, the Revolving Credit
Commitment of each Lender shall automatically reduce to an amount equal to the
product of (x) the Adjusted Total Commitment as of such Amortization Date,
multiplied by (y) such Lender's Proportionate Share determined immediately prior
to such reduction. Such
45
reduction shall constitute a permanent reduction of the Total Commitment and
each Lender's Revolving Credit Commitment and may not be reinstated. Upon any
such reduction, Annex I shall be deemed to be amended to reflect the reduction
in the Total Commitment and the Revolving Credit Commitment.
(4) If the Borrower shall make any Asset Disposition (x) the
Borrower shall make a prepayment of the Revolving Loans in an amount equal to
the Net Cash Proceeds received in connection with such Asset Disposition, (y)
the Revolving Credit Commitment of each Lender shall automatically reduce by an
amount equal to such Lender's Proportionate Share of such Net Cash Proceeds, and
(z) such Revolving Credit Commitments may not be reinstated.
(5) If the Borrower shall receive any Equity Offering Proceeds,
(x) the Borrower shall make a prepayment of the Revolving Loans in an amount
equal to the amount of such Equity Offering Proceeds received, (y) the Revolving
Credit Commitment of each Lender shall automatically reduce by an amount equal
to such Lender's Proportionate Share of such Equity Offering Proceeds, and (z)
such Revolving Credit Commitments may not be reinstated.
(6) The Borrower may reduce or terminate the Total Commitments
at any time and from time to time in whole or in part without premium or
penalty; provided, however, that the minimum amount and increments of any such
-------- -------
reduction shall be equal to $1,000,000; and provided, further, that once reduced
-------- -------
the amount of any such reductions in the Total Commitments may not be
reinstated.
1.11 Payments and Computations.
-------------------------
(1) The Borrower shall make each payment hereunder and under the
Notes not later than 12:00 noon (New York time) on the day when due. Unless
otherwise agreed to in writing, all payments which the Borrower is required to
make hereunder or under any other Credit Document shall be added to the
outstanding amount of Revolving Loans. Payments made directly by the Borrower
shall be in U.S. Dollars to the Agent at its address referred to in Section 13.5
------------
hereof in immediately available funds. Not later than one Business Day after
such payment has been made, the Agent will cause to be distributed like funds
relating to the payment of principal, interest, or Fees (other than amounts
payable to the Agent to reimburse the Agent, the Issuing Bank and the Accepting
Bank for Expenses and other fees and expenses payable solely to them pursuant to
Article 8 hereof) ratably to the Lenders, and like funds relating to the payment
---------
of any other amount payable to such Lender, in each case to be distributed and
applied in accordance with the terms of this Section 3.6. The Borrower's
-----------
obligations to the Lenders with respect to such payments shall
46
be discharged by making such payments to the Agent pursuant to this Section 3.6
-----------
or if not timely paid, may be added to the principal amount of the Revolving
Loans outstanding.
(b) (i) From and after the Closing Date the Borrower shall
have established and maintain lockboxes (the "Lockboxes") and depositary
---------
accounts, and shall instruct all account debtors on the Accounts (other
than present or future account debtors located in Canada with respect to
Accounts arising from Borrower's Canadian operations as currently
conducted) to remit all payments to its Lockboxes or shall deposit all
receipts into its depositary accounts. All receipts held in the
Lockboxes at the end of each day and all other amounts received by the
Borrower from any account debtor (other than present or future account
debtors located in Canada with respect to Accounts arising from
Borrower's Canadian operations as currently conducted), in addition to
all other cash received from any other source, including, without
limitation, Asset Dispositions, upon receipt, shall be deposited into a
depositary account opened in the name of the Agent (a "Depositary
----------
Account") at each Lockbox Bank.
-------
(1) Prior to the Closing Date (and otherwise as reasonably
requested by the Agent), the Borrower, the Agent and the financial
institutions selected by the Borrower and acceptable to the Agent (the
"Lockbox Banks") shall enter into a three party agreement in the form of
-------------
Exhibit J hereto (the "Lockbox Agreement"), providing, among other
--------- -----------------
things, the matters described in subsection (b)(i) above.
-----------------
(2) The Borrower may close Lockboxes and/or open new
Lockboxes with the prior written consent of the Agent and subject to
prior execution and delivery to the Agent of Lockbox Agreements
consistent with the provisions of this Section 3.6 and in form and
-----------
substance satisfactory to the Agent and its counsel.
(2) Upon the terms and subject to the conditions set forth in
the Lockbox Agreements, all available amounts held in the Depositary Accounts
shall be wired each Business Day into an account (the "Concentration Account")
---------------------
established pursuant to a concentration account agreement entered into prior to
the Closing Date (and otherwise as reasonably requested by the Agent), among the
Borrower, the Agent and Deutsche Bank substantially in the form of Exhibit K
---------
(the "Concentration Account Agreement"). Subject to the terms and conditions of
-------------------------------
the Concentration Account Agreement, all available funds in the Concentration
Account shall be transferred on every Business Day to an account (the "BTCo
----
Account") maintained by the Agent at Deutsche Bank. All such amounts shall be
-------
47
credited against the Obligations then outstanding, with the balance, if any,
being deposited in the Loan Disbursement Account.
(3) So long as no Event of Default has occurred and is
continuing, all amounts received by the Agent, and all other amounts received by
the Borrower from any account debtor and delivered to the Agent shall be applied
by the Agent in the following order: first, to the payment of any Prepetition
-----
Revolving Credit Obligations (until repaid in full on the date of the entry of
the Final Order) payable to the Prepetition Agent and the Prepetition Lenders
under any of the Prepetition Credit Documents in the order prescribed in Section
3.6(d) of the Prepetition Credit Agreement after the occurrence of an "Event of
Default" thereunder; second, to the payment of any Fees, Expenses or other
------
Obligations due and payable to the Agent under any of the Credit Documents,
including amounts advanced by the Agent on behalf of the Lenders pursuant to
Section 3.4(a); third, to the payment of any Fees, Expenses or other Obligations
-------------- -----
due and payable to the Issuing Bank under any of the Credit Documents; fourth,
------
to the ratable payment of any Fees, Expenses or other Obligations due and
payable to the Lenders under any of the Credit Documents other than those
Obligations specifically referred to in this Section 3.6(d); fifth, to the
-------------- -----
ratable payment of interest due on the Revolving Loans; sixth, to the extent
-----
required under Section 3.5 hereof, to the ratable payment of principal on the
-----------
Revolving Loans; and, seventh, to the ratable payment of principal due on the
--------------- -------
Revolving Loans; with the balance, if any, to be made available to Borrower.
(4) After an Event of Default has occurred and is continuing,
all amounts received by the Agent, and all other amounts received by the
Borrower from any account debtor and delivered to the Agent shall be applied by
the Agent: first, to the Obligations in the order prescribed in steps two
-----
through seven of Section 3.6(d), and second, to the Prepetition Revolving
-------------- ------
Credit Obligations (until repaid in full on the date of the entry of the Final
Order) payable to the Prepetition Agent and the Prepetition Lenders under any of
the Prepetition Credit Documents in the order prescribed in Section 3.6(d) of
the Prepetition Credit Agreement after the occurrence of an "Event of Default"
thereunder; with the balance, if any, to be made available to Borrower.
1.12 Maintenance of Account. The Agent shall maintain an account on
----------------------
its books in the name of the Borrower (the "Loan Account") and in which the
------------
Borrower will be charged with all loans and advances made by the Lenders to the
Borrower or for the Borrower's account, including the Revolving Loans, the
Letter of Credit Obligations, the Acceptance Obligations and with any other
Obligations, including any and all interest, Fees, costs, expenses and
attorney's fees which the Agent may incur in connection with the exercise by or
for the Lenders of any of the rights or powers herein conferred upon the Agent
(other than in connection with any assignments or participations by any Lender)
or in the
48
prosecution or defense of any action or proceeding by or against the Borrower or
the Lenders concerning any matter arising out of, connected with, or relating to
this Credit Agreement, the Case, the Orders or the Accounts, or any Obligations
owing to the Lenders by any Borrower. The Borrower will be credited with all
amounts received by the Lenders from the Borrower or from others for the
Borrower's account. In no event shall prior recourse to any Accounts or other
Collateral be a prerequisite to the Agent's right to demand payment of any
Obligation upon its maturity. Further, it is understood that the Agent shall
have no obligation whatsoever to perform in any respect any of the Borrower's
contracts or obligations relating to the Accounts.
1.13 Loan Disbursement Account. The Borrower has requested, and the
-------------------------
Agent and the Lenders have agreed, that the Loans and any proceeds of each
Acceptance discounted pursuant to Section 4.2 will be advanced to account
-----------
no. ▇▇-▇▇▇-▇▇▇ maintained at Deutsche Bank, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇ in the name of the Borrower (the "Loan Disbursement Account").
-------------------------
1.14 Statement of Account. After the end of each month the Agent
--------------------
shall send the Borrower a statement showing the accounting for the charges,
loans, advances and other transactions occurring between the Lenders and the
Borrower during that month. Absent manifest error, the monthly statements shall
be deemed correct and binding upon the Borrower and shall constitute an account
stated among the Borrower and the Lenders unless the Agent receives a written
statement of the Borrower's exceptions within sixty (60) days after same is
mailed to the Borrower.
1.15 Taxes.
-----
(1) All payments by the Borrower hereunder or under the Notes to
or for the benefit of any Lender or the Agent shall be made in accordance with
Section 3.6 hereof, free and clear of and without deduction, hold back or other
-----------
reduction for all present or future Taxes, deductions, charges or withholdings
by or for the benefit of any governmental taxing authority and all liabilities
with respect thereto, excluding, in the case of each such Lender and the Agent,
Excluded Taxes. If the Borrower shall be required by law to deduct any Taxes
(other than Excluded Taxes) from or in respect of any sum payable hereunder or
under any Note to or for the benefit of any Lender or the Agent, (i) the sum
payable shall be increased as may be necessary so that after making all required
deductions of Taxes (including deductions of Taxes applicable to additional sums
payable under this Section 3.10) such Lender or the Agent, as the case may be,
------------
receives an amount equal to the sum it would have received had no such
deductions been made (based on the applicable rate of tax for the computation of
such deductions), (ii) the Borrower shall make such deductions and (iii) the
Borrower shall pay the full amount so deducted to the relevant taxing authority
49
or other authority in accordance with applicable law; provided, however, that
-------- -------
the Borrower shall be under no obligation to increase the sum payable to any
Foreign Lender by an amount equal to the amount of the United States Tax
required to be withheld under United States law from the sums paid to such
Foreign Lender, (aa) if such withholding is caused solely by the failure to be
engaged in the active conduct of a trade or business in the United States by any
Foreign Lender that has provided a Form W-8 ECI pursuant to Section 3.10(f),
---------------
(bb) if all amounts of interest and fees to be paid to such Foreign Lender
hereunder are not effectively connected with such trade or business within the
meaning of United States Treasury Regulation 1.864-4, or (cc) as provided in
Section 3.10(e) hereof.
---------------
(2) In addition, the Borrower agrees to pay any present or
future stamp, documentary, privilege, intangible or similar taxes or any other
excise or property taxes, charges or similar levies (other than Excluded Taxes)
that arise at any time or from time to time (i) from any payment made under any
Credit Document or (ii) from the execution or delivery by the Borrower or any
Subsidiary of, or from the filing or recording or maintenance of, or otherwise
with respect to, any Credit Document (hereinafter referred to as "Other Taxes").
-----------
(3) The Borrower will indemnify each Lender and the Agent for
the full amount of the Taxes and Other Taxes (other than Excluded Taxes)
(including, without limitation, and without duplication, any Taxes or Other
Taxes imposed by any jurisdiction on amounts payable under this Section 3.10,
------------
subject to the provisions of the proviso set forth in Section 3.10(a)) paid by
---------------
such Lender or the Agent (on its own behalf or on behalf of any Lender), as the
case may be, in respect of payments made or to be made under any Credit
Document, and any liability (including penalties, interest and expenses) arising
solely therefrom or with respect thereto, whether or not such Taxes or Other
Taxes were correctly or legally asserted. Payment of this indemnification shall
be made within thirty (30) days from the date such Lender or the Agent, as the
case may be, makes written demand therefor.
(4) Within thirty (30) days after the date of any payment of
Taxes or Other Taxes, the Borrower shall, upon request of the Agent, furnish to
the Agent, at its address referred to in Section 13.5 hereof, the original or
------------
certified copy of a receipt evidencing payment thereof.
(5) For any period with respect to which any Lender has failed
to provide the Borrower with the appropriate form described in Section 3.10(f)
---------------
(other than if such failure is due to a change in law occurring subsequent to
the date on which a form originally was required to be provided, or if such form
otherwise is not required under Section 3.10(f)), such Lender shall not be
---------------
entitled to indemnification under Section 3.10(a) or (c) with respect to Taxes
--------------- ---
imposed by the United States; provided, however,
-------- -------
that should
50
any Lender become subject to Taxes because of its failure to deliver a form
required hereunder, the Borrower shall take such steps as such Lender shall
reasonably request to assist such Lender to recover such Taxes and deliver such
forms.
(6) Each Foreign Lender agrees that it will deliver to the
Borrower and the Agent prior to the Closing Date (or in the case of an assignee
Lender of an assigning Lender listed on the signature pages hereof prior to the
date of such assignment) (i) two duly completed copies of the United States
Internal Revenue Service Form W-8 BEN or W-8 ECI or successor applicable form.
Each such Foreign Lender shall certify in the case of a Form W-8 BEN or W-8 ECI,
that it is entitled to receive all payments under this Credit Agreement without
deduction or withholding of any United States federal income taxes or specifying
(in such Form or otherwise) the amount of any required deduction or withholding.
Each such Lender also agrees to deliver to the Borrower and the Agent (but only
so long as such Lender is lawfully able to do so) two further copies of the said
Form W-8 BEN or W-8 ECI, or successor applicable forms or other manner of
certification, as the case may be, on or before the date that any such form
expires or becomes obsolete or after the occurrence of any event requiring a
change in the most recent form previously delivered by it to the Borrower.
(7) If a Lender or the Agent determines in its sole discretion
that it has actually received a refund of Taxes or Other Taxes (other than
Excluded Taxes) for which it has been indemnified by the Borrower pursuant
to the provisions of this Section 3.10, such Lender or the Agent, as the case
------------
may be, shall pay to the Borrower an amount that such Lender or the Agent shall
determine, in its sole discretion, is equal to the after-tax benefit of such
refund. Such amount shall be paid, as reasonably practicable, within 90 days
after the date such Lender or the Agent, as the case may be, received such
refund. Any Taxes imposed on a Lender or the Agent as a result of the
disallowance of such refund, and with respect to which such Lender or the Agent
has made a payment to the Borrower pursuant to this Section 3.10(g), shall be
---------------
treated as Taxes for which the Borrower is obligated to indemnify such Lender or
the Agent pursuant to this Section 3.10 without any defenses or exclusions.
------------
Nothing in this Section 3.10(g) shall require any Lender or the Agent to
---------------
disclose or detail the basis of its calculation (including, without limitation,
--------- ------------------
its tax returns) of the amount of such refund to the Borrower or any other
Person.
(8) Without prejudice to the survival of any other agreement of
the Borrower hereunder, the agreements and obligations of the Borrower
contained in this Section 3.10 shall survive the payment in full of all
------------
Obligations hereunder and under the Notes.
1.16 Sharing of Payments. If any Lender shall obtain any payment
-------------------
(whether voluntary, involuntary, through the exercise of any right of set-off or
otherwise) on
51
account of the Loans made by it or its participation in Letters of Credit or
Acceptances in excess of its Proportionate Share of payments on account of the
Loans, Letters of Credit or Acceptances obtained by all the Lenders, such Lender
shall forthwith purchase from the other Lenders such participations in the Loans
made by them or in their participation in Letters of Credit or Acceptances as
shall be necessary to cause such purchasing Lender to share the excess payment
ratably with each of them; provided, however, that if all or any portion of such
-------- -------
excess payment is thereafter recovered from such purchasing Lender, such
purchase from each Lender shall be rescinded and each such Lender shall repay to
the purchasing Lender the purchase price to the extent of such recovery together
with an amount equal to such Lender's ratable share (according to the proportion
of (i) the amount of such Lender's required repayment to (ii) the total amount
so recovered from the purchasing Lender) of any interest or other amount paid or
payable by the purchasing Lender in respect to the total amount so recovered.
The Borrower agrees that any Lender so purchasing a participation from another
Lender pursuant to this Section 3.11 may, to the fullest extent permitted by
------------
law, exercise all of its rights of payment (including the right of set-off) with
respect to such participation as fully as if such Lender were the direct
creditor of the Borrower in the amount of such participation.
1.17 Priority and Liens.
------------------
(1) The Borrower hereby covenants, represents and warrants that,
upon entry of the Interim Order (and the Final Order, as applicable), the
obligations of the Borrower hereunder and under the other Credit Documents, (i)
pursuant to Section 364(c)(1) of the Bankruptcy Code, shall, to the maximum
extent permitted by law, at all times constitute allowed Super-priority Claims,
(ii) pursuant to Sections 364(c)(2) and (3) of the Bankruptcy Code, shall at all
times be secured by a perfected lien on, and security interest in, all present
and after acquired property of the Borrower (excluding however, capital stock of
any Foreign Subsidiary, which Foreign Subsidiary constitutes a "Controlled
Foreign Corporation" within the meaning of Section 951 of the Internal Revenue
Code, constituting 35% of the combined voting power of all classes of capital
stock of such Foreign Subsidiary entitled to vote), which perfected lien shall
be a first priority lien with respect to all property of the Borrower that is
not subject to any valid and perfected liens as of the Filing Date and shall be
junior in priority to valid and perfected liens, if any, as of the Filing Date
(other than those described in clause (iii) below); and (iii) pursuant to
------------
Section 364(d)(1) of the Bankruptcy Code, shall at all times be secured by a
perfected first priority, senior priming lien on all of the property of the
Borrower that secures the Prepetition Revolving Credit Obligations and the
Prepetition Note Purchase Obligations, subject and subordinate in each case with
respect to subclauses (i) through (iii) above, only to (x) following the
-------------- -----
occurrence and during the continuance of a Default or an Event of Default, the
payment (as the same may be due and payable) of professional fees and
disbursements allowed by order of the
52
Bankruptcy Court and incurred by the Borrower and not to exceed $1,000,000 (plus
any unpaid professional fees and disbursements previously incurred, accrued or
invoiced prior to such Default or Event of Default, to the extent subsequently
awarded), (y) the payment of unpaid fees pursuant to 28 U.S.C. Section 1930 and
any fees payable to the Clerk of the Bankruptcy Court, and (z) up to $650,000
for payment of trust fund taxes (collectively, the "Carve-Out"); provided that
--------- --------
the Borrower makes no representation as to the perfection of any Lien on any
Proprietary Rights Collateral to the extent such Proprietary Rights Collateral
is registered, or for which registration has been applied, in a jurisdiction
outside of the United States and such jurisdiction requires a filing or similar
process to perfect such security interest. The Lenders agree that so long as no
Default or Event of Default shall have occurred and be continuing, the Borrower
shall be permitted to pay compensation and reimbursement of expenses allowed and
payable under Sections 330 and 331 of the Bankruptcy Code and orders of the
Bankruptcy Court, as the same may be payable, and the amounts so paid shall not
reduce the Carve-Out.
(2) As to all Collateral, including without limitation, all real
property the title to which is held by the Borrower, or the possession of which
is held by the Borrower pursuant to leasehold interest, the Borrower hereby
assigns and conveys as security, grants a security interest in, hypothecates,
mortgages, pledges and sets over unto the Agent all of the right, title and
interest of the Borrower in all of such Collateral, including without
limitation, all owned real property and in all such leasehold interests,
together in each case with all of the right, title and interest of the Borrower
in and to all buildings, improvements and fixtures related thereto, any lease or
sublease thereof, all general intangibles relating thereto and all proceeds
thereof. The Borrower acknowledges that, pursuant to the Orders, the Liens
granted in favor of the Agent (on behalf of the Lenders) in all of the
Collateral shall be perfected without the recordation of any Code financing
statements, notices of Liens or other instruments of mortgage or assignment. The
Borrower further agrees that (i) the Agent shall have the rights and remedies
set forth in Articles IX and X in respect of the Collateral and (ii) if
----------- -
requested by the Agent, the Borrower shall enter into separate security
agreements, pledge agreements and fee mortgages with respect to such Collateral
on terms reasonably satisfactory to the Agent.
1.18 Payment of Obligations. Subject to Section 10.4, upon the maturity
---------------------- ------------
(by acceleration or otherwise) of any of the Obligations under this Credit
Agreement or any of the other Credit Documents, the Lenders shall be entitled to
immediate payment of such Obligations without further application to, or order
of, the Bankruptcy Court.
1.19 No Discharge; Survival of Claims. The Borrower agrees that to the
--------------------------------
extent its obligations hereunder are not satisfied in full, (a) its obligations
arising hereunder shall not be discharged by the entry of a Confirmation Order
(and the Borrower pursuant to
53
Section 1141(d)(4) of the Bankruptcy Code hereby waives any such discharge) and
(b) the Super-priority Claim granted to the Agent and the Lenders pursuant to
the Orders and described in Section 3.12 and the Liens granted to the Agent
------------
pursuant to the Orders and described in Section 3.12 shall not be affected in
------------
any manner by the entry of a Confirmation Order.
ARTICLE IV
Letters of Credit and Acceptances
---------------------------------
1.20 Letter of Credit Issuances.
--------------------------
(1) Subject to and upon the terms and conditions of this Credit
Agreement, upon the delivery by the Borrower to the Agent of a Letter of Credit
Request at least four (4) Business Days prior to the date of the proposed
issuance of any standby Letter of Credit and at least one (1) Business Day prior
to the date of the proposed issuance of any commercial Letter of Credit (or, in
each case, such shorter period of time to which the Agent and the Issuing Bank
may agree or which may be required by an applicable Issuing Bank Agreement), the
Agent will, from time to time on or after the Closing Date, cause an Issuing
Bank to issue one or more Letters of Credit in an aggregate undrawn amount at
such time outstanding not to exceed, together with the then aggregate unpaid
principal amount of Revolving Loans, all then outstanding Letter of Credit
Obligations and all then outstanding Acceptance Obligations, an amount equal to
the lesser of (i) the Borrowing Base and (ii) the Total Commitments; provided,
--------
however, in no event shall the Agent cause an Issuing Bank to issue a Letter of
-------
Credit if the original undrawn amount thereof, together with all of the then
outstanding Letter of Credit Obligations, plus the then outstanding Acceptance
----
Obligations, shall exceed $25,000,000. Each Letter of Credit shall (i) be in
form, scope and substance satisfactory to the Agent and the applicable Issuing
Bank, (ii) if a commercial letter of credit, have an expiration date not later
than the earlier of (x) one hundred eighty (180) days after its date of issuance
(except to the extent the Agent, the Borrower and the Issuing Bank may otherwise
agree) and (y) the 30/th/ day prior to the Expiration Date, (iii) if a standby
letter of credit, have an expiration date not later than the earlier of (x) one
year after its date of issuance and (y) the 10/th/ Business Day prior to the
Expiration Date, and if an Acceptance Letter of Credit, have an expiration date
which, when taking into consideration the maturity of the Acceptance to be
created thereunder, will not result in such maturity being later than the 30/th/
day prior to the Expiration Date; provided, however, that any Issuing Bank may,
-------- -------
but shall not be obligated to, issue Letters of Credit having a term not
exceeding 90 days beyond the Expiration Date provided that such Letters of
Credit are collateralized by cash in an amount equal to 110% of the face amount
of such Letters of Credit at least 30 days prior to the Expiration Date. Each
payment by an Issuing Bank with respect to
54
drawings under Letters of Credit shall be promptly reimbursed by the Borrower
together with interest thereon at the rate applicable to Prime Rate Loans set
forth in Article 8 hereof, and if not so reimbursed each Lender shall, without
---------
regard to any other provision of this Credit Agreement, any defense that the
Borrower may have to such Borrower's obligation to reimburse such Issuing Bank
in connection with such drawing or any defense the Agent or any Lender may have
in connection with any participation under Section 4.3(a) hereof in such
--------------
obligations in connection with any such Letter of Credit, honor its
Proportionate Share of the Agent's and the Lenders' obligations to reimburse
such Issuing Bank pursuant to this Section 4.1(a), together with interest
------
thereon in accordance with the provisions of Article 8 hereof, and any such
---------
payments so made by the Lenders shall be deemed to be Revolving Loans. In the
event that any provision of any Issuing Bank Agreement shall be inconsistent
with any provision of this Credit Agreement, this Credit Agreement shall
control; provided however, that any Issuing Bank Agreement may impose
-------- -------
requirements or restrictions in addition to, or more stringent than, those
provided for in this Credit Agreement.
For purposes of this Credit Agreement, those currently outstanding
letters of credit described on Schedule B hereof shall be deemed to be Letters
----------
of Credit requested by the Borrower under the terms hereof.
(2) The Borrower may request that a Letter of Credit be
denominated in, and payable in a currency other than U.S. Dollars. For purposes
of calculating facility usage and Letter of Credit Fees under this Credit
Agreement, the original face amount of such Letter of Credit shall be equal to
the U.S. Dollar equivalent (as determined by the Agent) of the face amount of
such Letter of Credit on the date of issuance. Thereafter, so long as such
Letter of Credit shall remain outstanding, the amount of such Letter of Credit
for such purposes shall be recalculated on the first day of each month based
upon the U.S. Dollar equivalent (as determined by the Agent) of the undrawn
amount of such Letter of Credit. In addition to the foregoing, the Agent shall
establish an additional reserve against the Borrowing Base in an amount equal to
ten percent (10%) of the U.S. Dollar equivalent of the outstanding face amount
of any such Letter of Credit as of the date of determination thereof at the
times specified in the two immediately preceding sentences.
1.21 Acceptances
---- -----------
(1) Subject to and upon the terms and conditions of this Credit
Agreement and in accordance with the terms of the related Acceptance Letter of
Credit, the Agent will, from time to time on or after the Closing Date, cause an
Accepting Bank to create one or more Acceptances in an aggregate amount at such
time outstanding not to exceed, together with the then aggregate unpaid
principal amount of Revolving Loans, all then outstanding Letter of Credit
Obligations and all then outstanding Acceptance
55
Obligations, an amount equal to the lesser of (i) the Borrowing Base or (ii) the
Total Commitments; provided, however, in no event shall the Agent cause an
-------- --------
Accepting Bank to create an Acceptance if the amount thereof, together with all
of the then outstanding Letter of Credit Obligations plus the then outstanding
----
Acceptance Obligations shall exceed $25,000,000. Each Acceptance (or group of
related Acceptances) (i) shall be in a face amount not greater than an amount
which, when discounted and net of all Fees payable at the time of creation,
would generate net proceeds equal to the reimbursement obligation owing with
respect to the Acceptance Letter of Credit providing for the creation of such
Acceptance and (ii) shall have a maturity of not more than one hundred twenty
(120) days after such Acceptance is created nor in any event later than 30 days
prior to the Expiration Date.
(2) To enable the applicable Accepting Bank to create
Acceptances, the Borrower shall supply the Agent (or the Accepting Bank, if
required by an applicable Accepting Bank Agreement), prior to or concurrently
with each Letter of Credit Request requesting the issuance of an Acceptance
Letter of Credit, with drafts satisfactory to such Accepting Bank, duly executed
and endorsed (if necessary) by the Borrower. Each such Accepting Bank is hereby
authorized by the Borrower to complete such drafts at the request of the
Borrower, including the payee, amount, date and maturity date thereof, in
accordance with the applicable Acceptance Letter of Credit and any applicable
Accepting Bank Agreement. In the event that any provision of any Accepting Bank
Agreement shall be inconsistent with any provision of this Credit Agreement,
this Credit Agreement shall control; provided however, that any Accepting Bank
-------- -------
Agreement may impose requirements or restrictions in addition to, or more
stringent than, those provided for in this Credit Agreement. In case any
authorized signatory of the Borrower whose signature shall appear on any draft
shall cease to have such authority before the creation of an Acceptance with
respect to such draft, the obligations of the Borrower hereunder and under such
Acceptance shall nevertheless be valid for all purposes as if such authority had
remained in force until such creation.
(3) On the date of the creation of an Acceptance by an Accepting
Bank, the Agent shall cause such Accepting Bank to (i) duly accept the draft(s)
of the Borrower supplied thereby, (ii) discount such Acceptance(s), (iii) give
the Borrower and the Agent telephonic notice (confirmed in writing, which may
include communication by telex or telecopier) of its creation of such
Acceptance, specifying the date, face amount and maturity thereof, and of its
discount thereof, specifying the Discount Rate applicable to such Acceptance and
the amount to be credited to the account of the Borrower and (iv) pay directly
to the applicable Issuing Bank an amount equal to the proceeds of the discount
of such Acceptance (but not in excess of the reimbursement obligations owed to
such Issuing Bank in connection with the related Acceptance Letter of Credit).
The Accepting Bank shall
56
notify the Borrower by telephone of the Discount Rate applicable to any
Acceptance no later than 1:00 P.M. (New York time) on the date of discount
thereof. The Borrower shall have the right not to accept such discount rate
concurrently upon being so notified, and any such refusal thereby to accept such
Discount Rate shall be deemed to be a withdrawal of its request for acceptance
of such Acceptance. An Accepting Bank may, in its sole discretion, create any
number of Acceptances aggregating the amount of Acceptances so requested.
(4) The Borrower hereby unconditionally agrees to pay to the
Agent, for the account of the applicable Accepting Bank, the face amount of each
Acceptance created by such Accepting Bank hereunder, on the maturity date of
such Acceptance (the payment obligation of the Borrower under this Section
-------
4.2(d) with respect to each Acceptance being the "Acceptance Obligation" with
------
respect to such Acceptance) by making payment to the Agent, for the account of
the Accepting Bank, not later than 12:00 noon (New York time), on the due date
thereof, and if not so paid each Lender shall, without regard to any other
provision of this Credit Agreement, any defense that the Borrower may have to
its obligation to make such payment in connection with such Acceptance or any
Lender may have in connection with any participation with any such Acceptance,
honor its Proportionate Share of the Agent's and the Lenders' obligations to
make such payment to the Accepting Bank pursuant to this Section 4.2(d),
------
together with interest in accordance with the provisions of Article 8 hereof,
---------
and any such payments so made by the Lenders shall be deemed to be Revolving
Loans. Acceptance Obligations may not be prepaid except as may be required by
the terms of this Credit Agreement.
(e) (i) The Borrower represents and warrants with
respect to each Acceptance accepted and discounted at its
request, that prior to any request by it that any Accepting Bank
accept and discount Acceptances, the Borrower shall have entered
into one or more bona fide contracts specifically providing for
the transactions to which such Acceptances relate having an
aggregate value not less than the face amount of such
Acceptances; that completion of such transactions is anticipated
to occur on or before the maturity date of such Acceptances; that
the maturity of such Acceptances will be consistent with the
period usually and reasonably necessary to finance transactions
of such kind; that the Borrower will not have outstanding any
other financing of such transactions; that such Acceptances
satisfy the requirements for eligibility for discount under the
Federal Reserve Act, as amended; and that the proceeds from the
discounting of such Acceptance will be used to reimburse an
Issuing Bank for drawings under Acceptance Letters of Credit
issued by such Issuing Bank. The Borrower hereby agrees to
indemnify and hold harmless each Accepting Bank, the Agent and
each Lender with respect to any obligation or liability imposed
on such Accepting
57
Bank, the Agent or any Lender (including, without limitation, the
amount of any penalties and charges and the cost of maintaining
reserves) if any Acceptance created by such Accepting Bank or
participated in by any Lender is determined not to be eligible
for discount by the Federal Reserve pursuant to Section 13 of the
Federal Reserve Act, as amended. The determination of the
Accepting Bank, the Agent or such Lender, as applicable, made in
good faith, as to the amount of any such obligation or liability,
shall be conclusive absent manifest error.
(1) In the event that an Accepting Bank or any Lender
shall have determined (which determination shall, absent manifest
error, be final and conclusive and binding upon all parties
hereto but, with respect to clause (A) below, may be made only by
----------
the applicable Accepting Bank):
(1) at any time, that any draft accepted
pursuant to the terms hereof will be ineligible for
purchase or for discount (or if already purchased or
discounted, should have been ineligible for purchase or
discount) by Federal Reserve Banks; or
(2) at any time, that the creation or
continuance of, or participation in, any Acceptances
has become unlawful by compliance by an Accepting Bank
or such Lender in good faith with any law, governmental
rule, regulation, guideline or order, or that any of
the drafts accepted or participated in by it, at any
time after their respective executions and deliveries
and for any reason, has ceased to be in full force and
effect or has been declared to be null and void by a
court of competent jurisdiction or a regulatory agency
(other than, in the case of a draft, by payment);
then, and in any such event, such Accepting Bank or such Bank shall on such date
give notice (by telephone confirmed in writing) to the Borrower and to the Agent
of such determination. Thereafter the Borrower shall either (x) if the affected
Acceptance is then being created or is required to be created pursuant to an
Acceptance Letter of Credit, agree to pay the reimbursement obligations with
respect to such Acceptance Letter of Credit upon any drawings thereunder as if
such Letter of Credit was not an Acceptance Letter of Credit, or (y) if the
affected Acceptance or Acceptances are then outstanding, in the case of
58
clause (A), indemnify the Accepting Bank and each affected Lender as provided in
----------
Section 4.2(e)(i) and, in the case of clause (B), prepay in full the face amount
----------------- ----------
of each Acceptance so affected.
(5) Notwithstanding anything to the contrary contained herein,
(i) an Accepting Bank shall in no event be required to create an Acceptance
unless (A) such Accepting Bank, in its sole discretion, determines that the
creation of such Acceptance complies with all applicable regulations of the
Board of Governors of the Federal Reserve System of the United States governing
banker's acceptances and shall (if accepted and endorsed by a member bank of the
Federal Reserve System or a bank authorized to create eligible acceptances) be
eligible under such regulations for purchase or, if such Acceptance has a
maturity at the time of discount of not more than one hundred twenty (120) days
sight, exclusive of days of grace, for discount by the Federal Reserve Banks and
(B) the Agent and the applicable Accepting Bank, in their individual discretion,
determine that the creation, discount and rediscount or sale of such Acceptance
is commercially reasonable under current market conditions and would not subject
the Agent or such Accepting Bank to conditions or restrictions (including
reserve or capital adequacy requirements) which the Agent or such Accepting Bank
considers undesirable and would otherwise be in all respects in compliance with
all laws, rules and regulations and (ii) such Accepting Bank shall in no event
create any Acceptance if, prior to the time of the Borrower's request therefor,
the Agent shall notify the Borrower that, in such Accepting Bank's
determination, the creation of an Acceptance would or might cause such Bank to
exceed its limits for aggregate acceptance liability provided for in Section 13
of the Federal Reserve Act, as amended, or otherwise be in violation of any law,
rule or regulation. In the event that the limitations set forth in this
subsection (f) would excuse Deutsche Bank from creating an Acceptance requested
--------------
by the Borrower, the Agent shall be relieved of any obligation which it may have
to cause an Accepting Bank to create such an Acceptance.
1.22 Lenders' Participation.
---- ----------------------
(1) Immediately upon the issuance or amendment by an Issuing Bank of
a Letter of Credit in accordance with the procedures set forth in this Article
-------
4, each Lender shall be deemed to have irrevocably and unconditionally purchased
-
and received from such Issuing Bank, without recourse or warranty, an undivided
interest and participation therein to the extent of such Lender's Proportionate
Share (including, without limitation, all obligations of the Borrower with
respect thereto). Promptly after the issuance of or amendment to any standby
letter of credit, the Issuing Bank shall notify the Agent and the Borrower, in
writing, of such issuance or amendment and such notice shall be accompanied by a
copy of the issuance or amendment. Upon receipt of such notice, the Agent shall
notify the Lenders, in writing of such issuance or amendment and, if requested
59
to do so by a Lender, the Agent shall provide such Lender with copies of
issuances or amendments. With regards to the commercial letters of credit, the
Issuing Bank shall provide the Agent, by facsimile transmission, on the first
Business Day of each week detailing the aggregate daily outstanding commercial
letters of credit for the previous week. The Agent shall in turn promptly supply
the Lenders with a copy of the report.
(2) Immediately upon the creation of any Acceptance by an
Accepting Bank in accordance with the procedures set forth in this Article 4,
---------
each Lender shall be deemed to have irrevocably and unconditionally purchased
and received from such Accepting Bank, without recourse or warranty, an
undivided interest and participation therein to the extent of such Lender's
Proportionate Share (including, without limitation, all obligations of the
Borrower with respect thereto). Each Accepting Bank shall notify the Agent and
the Borrower by facsimile transmission, on the first Business Day of each week
with a report detailing the aggregated daily outstanding Acceptances for the
previous week. The Agent shall in turn promptly supply the Lenders with a copy
of such reports.
1.23 Definition of Obligations. Any indebtedness, liability or
-------------------------
obligation of any sort whatsoever, however arising, whether present or future,
fixed or contingent, secured or unsecured, due or to become due, paid or
incurred, arising or incurred in connection with any Letters of Credit or any
deferred payment obligations, participations, drafts or acceptances thereunder
or arising or incurred in connection with any Acceptance (herein part of the
"Obligations" heretofore defined) shall be incurred solely as an accommodation
to the Borrower and for the Borrower's account. Obligations shall include,
without being limited to: all amounts due or which may become due under any
Letters of Credit or any drafts or acceptances thereunder; all amounts due or
which may become due under any Acceptance; all amounts charged or chargeable to
the Borrower or to the Lenders by the applicable Issuing Bank in respect of any
Letter of Credit, or any correspondent bank which opens, issues or is involved
with such Letters of Credit; all amounts charged or chargeable to the Borrower
or to the Lenders by the applicable Accepting Bank in respect of any Acceptance;
any other bank charges; fees and commissions, duties and taxes, costs of
insurance, and all such other charges and expenses which may pertain to such
Letters of Credit, drafts, acceptances, deferred payment obligations or to the
goods or documents relating thereto or to any Acceptance. The Agent shall have
the right, at any time and without notice to the Borrower, to charge the Loan
Account with the amounts of any and all such Obligations. Any debit balance
which may exist at any time or from time to time in the Borrower's account shall
accrue interest (i) at the rates provided in Section 8.1 or Section 8.2 hereof,
----------- -----------
as applicable, prior to the occurrence and continuance of an Event of Default
and (ii) on and after the occurrence and continuance of an Event of Default
specified in Section 10.1(a) or following written notice to the Borrower of the
---------------
occurrence of any other Event of Default, to and including the date that such
Event of Default is waived, at the rate
60
provided in Section 8.4 hereof.
-----------
1.24 Indemnification. The Borrower hereby agrees to
---------------
unconditionally indemnify each Lender, each Issuing Bank and each Accepting Bank
and hold each of them harmless from any and all loss, claim or liability arising
from any transactions or occurrences relating to Letters of Credit, the
Acceptances, the Collateral relating thereto and any drafts or acceptances
thereunder, and all Obligations thereunder, including any such loss or claims
due to any action taken by any Issuing Bank or any Accepting Bank, except where
such loss, claim or liability is due to the gross negligence or willful
misconduct of the Person seeking indemnification. The Borrower's unconditional
obligation to the Lenders hereunder shall not be modified or diminished for any
reason or in any manner whatsoever. The Borrower agrees that, as among the
Borrower and the Lenders, any charges incurred by the Lenders for the Borrower's
account by an Issuing Bank or an Accepting Bank shall be conclusive on the
Borrower and may be charged to the Loan Account (in the absence of manifest
error).
1.25 Certain Waivers. Neither any Issuing Bank, any Accepting Bank
---------------
nor the Lenders shall be responsible to the Borrower 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 thereon, 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 shipment, or failure or omission to ship
any or all of the goods referred to in the Letters of Credit or the documents
relating thereto; any deviation from instructions; delay, default, or fraud by
the shipper or anyone else in connection with the Collateral or the shipping
thereof; or any breach of contract between the shipper or vendors and the
Borrower. None of the Lenders nor the Agent in their capacity as a Lender or the
Agent under this Credit Agreement shall be responsible to the Borrower for any
action or inaction by any Issuing Bank or by any Accepting Bank. Furthermore,
without being limited by the foregoing, neither the Lenders, the Agent nor any
Issuing Bank shall be responsible for any act or omission with respect to or in
connection with any goods referred to in the Letters of Credit.
1.26 Limitation on Liability; Authority of Lender. The Borrower
--------------------------------------------
agrees that any action taken by the Lenders, or any action taken by any Issuing
Bank, under or in connection with the Letters of Credit, the guaranties, the
drafts or acceptances, or the Collateral or taken by any Accepting Bank in
connection with any Acceptance shall be binding on the Borrower and no resulting
liability shall attach to the Lenders, any such Issuing Bank or any Accepting
Bank other than with respect to any actions taken by such Lender, any such
Issuing Bank or any such Accepting Bank that constitute gross negligence
61
or willful misconduct with respect to its own actions. In determining whether to
pay under any Letter of Credit, the Issuing Bank thereon shall have no
obligation relative to the Lenders other than to confirm that any documents
required to be delivered under such Letter of Credit appear to have been
delivered and that they appear to comply on their face with the requirements of
such Letter of Credit. In furtherance thereof, the Agent shall have the full
right and authority to: clear and resolve any questions of non-compliance of
documents; give any instructions as to acceptance or rejection of any documents
or goods; execute any and all steamship or airway guaranties (and applications
therefor), indemnities or delivery orders; grant any extensions of the maturity
of, time of payment for, or time of presentation of, any drafts, acceptances, or
documents; and 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 the Agent's sole
name (but for the account of the Lenders), and the applicable Issuing Bank shall
be entitled to comply with and honor any and all such documents or instruments
executed by or received solely from the Agent, all without any notice to or any
consent from the Borrower.
1.27 Covenants of Borrower.
---------------------
(1) Without the Agent's prior approval, the Borrower agrees not
to: clear and resolve any questions of non-compliance of documents; give any
instructions as to acceptance or rejection of any non-complying documents or
goods; execute any applications for steamship or airway guaranties, indemnities
or delivery orders; grant any extensions of the maturity of, time of payment
for, or time of presentation of, any drafts, acceptances or documents; or 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.
(2) The Borrower agrees that any necessary import, export or
other licenses or certificates for the import or handling of the Collateral will
have been promptly procured; all foreign and domestic governmental laws and
regulations in regard to the shipment and importation of the Collateral, or the
financing thereof will have been promptly and fully complied with in all
material respects; and copies of any certificates in that regard that the Agent
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 all material respects in accordance with the
laws and regulations of the countries in which the shipments originate and
terminate, and are not prohibited in any material respect by any such laws and
regulations. 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 in respect of any Letters of Credit and the
Collateral relating thereto. Any embargo, restrictions, laws, customs or
regulations of any country,
62
state, city, or other political subdivision, where the Collateral is or may be
located, or wherein payments are to be made, or wherein drafts may be drawn,
negotiated, accepted, or paid, shall, as among the Borrower and the Lenders, be
solely the Borrower's risk, liability and responsibility.
1.28 Rights and Remedies of Lenders. Any rights, remedies, duties or
------------------------------
obligations granted or undertaken by the Borrower to any Issuing Bank or to any
Accepting Bank in any application for Letters of Credit, or any standing
agreement relating to Letters of Credit, any Acceptance or otherwise, shall be
deemed to have been granted to the Lenders and apply in all respects to the
Lenders and shall be in addition to any rights, remedies, duties or obligations
contained herein.
ARTICLE V
Representations and Warranties
------------------------------
In order to induce the Agent and the Lenders to enter into this Credit
Agreement and in order to induce the Lenders to make available the credit
facilities contemplated hereby, the Borrower hereby represents and warrants to
the Agent and the Lenders as follows:
1.29 Corporate Existence; Qualification; Power; Licenses and
-------------------------------------------------------
Permits. The Borrower (i) is a corporation duly incorporated, validly existing
-------
and in good standing under the laws of the jurisdiction of its incorporation,
(ii) is duly qualified and is authorized to do business and is in good standing
in every jurisdiction in which the failure to be so qualified could reasonably
be expected to have a Material Adverse Effect, (iii) subject to the entry by the
Bankruptcy Court of the Interim Order (or the Final Order, when applicable) has
all corporate power and authority required to own its properties and assets and
to carry on its business as now conducted and (iv) has all licenses,
authorizations, consents, approvals, franchises, leases, permits, certificates,
qualifications, easements, rights of way and other rights required to carry on
its business as now conducted which the failure to so have could reasonably be
expected to have a Material Adverse Effect. The Borrower is not in violation of
the terms of any such license, authorization, consent, approval, franchise,
lease, permit, certificate, qualification, easement, right of way or other right
in any such case which would have a Material Adverse Effect.
1.30 Corporate and Governmental Authorization; Contravention. Upon
-------------------------------------------------------
entry by the Bankruptcy Court of the Interim Order (or the Final Order, when
applicable), the execution, delivery and performance by the Borrower of this
Credit Agreement and the other Credit Documents executed in connection herewith
or therewith
63
and the consummation by Borrower of the transactions contemplated hereby and
thereby, (i) are within the Borrower's corporate powers, (ii) have been duly
authorized by all necessary corporate action, (iii) except for the Orders and,
with respect to the Borrower's performance of the Ancillary Documents, filings
required by the Ancillary Documents, do not require action by or in respect of,
or filing with, any governmental body, agency or official, (iv) do not
contravene, or constitute a default under, any provision of any applicable law,
statute, ordinance, regulation, rule, order or other governmental restriction or
of the Articles or Certificates of Incorporation or By-Laws of the Borrower, (v)
do not contravene, or constitute a default under, any agreement, judgment,
injunction, order, decree, indenture, contract, lease, instrument or other
commitment to which the Borrower is a party or by which the Borrower or any of
its assets are bound and which could reasonably be expected to have a Material
Adverse Effect and (vi) will not result in the creation or imposition of any
Lien upon any asset of the Borrower under any existing indenture, mortgage, deed
of trust, loan or credit agreement or other agreement or instrument to which the
Borrower is a party or by which it or any of its assets may be bound or affected
(except as contemplated herein).
1.31 Binding Effect. The Credit Agreement is and, when executed and
--------------
delivered in accordance with the terms of this Credit Agreement, all of the
other Credit Documents are or will be the legal, valid and binding obligations
of the Borrower, and are or will be enforceable against the Borrower in
accordance with their terms and the Orders.
1.32 Information. The Borrower has furnished to the Lenders as of
-----------
the date of this Credit Agreement the following financial statements (the
"Financials") of the Borrower: (i) combined balance sheets as of, and combined
----------
statements of earnings, changes in consolidated shareholders' equity and changes
in consolidated cash flow for the fiscal year ended January 1, 2000 audited by
independent certified public accountants and (ii) unaudited combined balance
sheets as of the end of the most recent fiscal quarter ending prior to the
Closing Date and the related unaudited combined statements of earnings, changes
in shareholders' equity and changes in combined cash flow for the three months
then ended. The Financials are and the historical financial statements to be
furnished to the Lenders in accordance with Section 6.1 hereof will be in
-----------
accordance with the books and records of the Borrower and fairly present the
financial condition of the Borrower at the dates thereof and the results of
operations for the periods indicated (subject, in the case of unaudited
financial statements, to normal year-end adjustments), and such financial
statements have been and will be prepared in conformity with GAAP consistently
applied throughout the periods involved.
1.33 No Material Adverse Change. Since October 28, 2000, there has
--------------------------
been no Material Adverse Change, except as has been disclosed to the Agent in
writing prior to the Closing Date.
64
1.34 Litigation and Judgments. Except as set forth on Schedule D,
------------------------ ----------
there is no (i) injunction, stay, decree, judgment, writ or order issued and
outstanding by any court or arbitrator or any governmental body, agency or
official against the Borrower or any of its Subsidiaries or (ii) action, suit,
proceeding, litigation, contested claim, investigation or arbitration pending,
or to the knowledge of the Borrower threatened, against or affecting the
Borrower or any of its Subsidiaries which, in either case, could reasonably be
expected to have a Material Adverse Effect, or which in any manner impairs the
validity of this Credit Agreement or any of the other Credit Documents.
1.35 Compliance with ERISA. As of the date of this Credit Agreement,
---------------------
and except as set forth on Schedule D, neither the Borrower nor any ERISA
----------
Affiliate maintains or contributes to any Benefit Plan. Each Plan has been and
is being maintained and funded in all material respects in accordance with its
terms and in compliance with all provisions of ERISA and the Internal Revenue
Code applicable thereto. The Borrower and each ERISA Affiliate has fulfilled in
all material respects its obligations related to the minimum funding standards
of ERISA and the Internal Revenue Code for each Plan, is in compliance in all
material respects with the currently applicable provisions of ERISA and of the
Internal Revenue Code relating to the qualification with respect to each Plan
intended to be so qualified and has not incurred any material liability (other
than routine liability for premiums) under Title IV of ERISA. No Termination
Event has occurred which has resulted in liability which either has not been
satisfied or is not reflected on the Borrower's financial statements nor has any
other event occurred that is likely to result in a Termination Event which could
reasonably be expected to have a Material Adverse Effect. No event or events
have occurred in connection with which the Borrower, any ERISA Affiliate, or any
Plan, directly or indirectly, is likely to be subject to any liability under
ERISA, the Internal Revenue Code or any other law, regulation or governmental
order or under any agreement, instrument, statute, rule of law or regulation
pursuant to or under which any such entity has agreed to indemnify or is
required to indemnify any person against liability incurred under, or for a
violation or failure to satisfy the requirements of, any such statute,
regulation or order which could reasonably be expected to have a Material
Adverse Effect. True, correct and complete copies of the following documents
have been made available to the Agent as of the date of this Credit Agreement:
(i) each Plan (or, where any such plan is not in writing, complete description
thereof) (and if applicable, related trust agreements or other funding
instruments) and all amendments thereto, all written interpretations thereof and
written descriptions thereof that have been distributed to employees or former
employees of the Borrower or the ERISA Affiliates, (ii) the most recent
determination letter issued by the Internal Revenue Service with respect to each
Plan, (iii) for the three most recent plan years, Annual Reports on Form 5500
Series required to be filed with any governmental agency for each Plan, (iv) all
actuarial reports prepared for the last three plan years for each Benefit
65
Plan, (v) a listing of all Multiemployer Plans, with the aggregate amount of the
most recent annual contributions required to be made by the Borrower or any
ERISA Affiliate to each such plan and copies of the collective bargaining
agreements requiring such contributions, (vi) any information that has been
provided to the Borrower or any ERISA Affiliate regarding withdrawal liability
under any Multiemployer Plan and (vii) the aggregate amount of the most recent
annual payments made to former employees of the Borrower or any ERISA Affiliate
under any Retiree Health Plan.
1.36 Taxes.
-----
(1) Except as set forth on Schedule D, the Borrower and its
----------
Subsidiaries have timely filed (inclusive of any permitted extensions) with the
appropriate taxing authorities all United States Federal income tax returns and,
except as set forth on Schedule D, all other material tax returns (including,
----------
without limitation, information returns and other material information) in
respect of Taxes required to be filed through the date hereof. The information
filed is complete and accurate in all material respects. All material deductions
taken by the Borrower and its Subsidiaries as reflected in such income tax
returns have been taken in accordance with applicable laws and regulations.
(2) Except as set forth on Schedule D, all Taxes, in respect of
----------
periods beginning prior to the date hereof, have been timely paid, except where
the same are being contested in good faith by appropriate proceedings and
appropriate reserves therefor have been established and maintained in accordance
with GAAP for the accrual thereof as reflected on the audited financial
statements for the Borrower's fiscal year ended January 1, 2000, and, to the
extent such reserves are maintained for periods after January 1, 2000,
consistent with the Borrower's past practice.
(3) Except as set forth in Schedule D, (i) no material
----------
deficiencies for Taxes have been claimed, proposed or assessed by any taxing or
other governmental authority against the Borrower or any of its Subsidiaries
other than such deficiencies of which the Agent has been notified in writing and
which are being contested in good faith by appropriate proceedings, and
appropriate reserves therefor have been established and maintained as reflected
on the audited financial statements for the Borrower's fiscal year ended January
1, 2000 and in accordance with GAAP, and, to the extent such reserves are
maintained for periods after January 1, 2000, consistent with the Borrower's
past practice and (ii) no tax liens have been filed against any of the
Collateral other than Liens permitted under Section 7.4 of this Credit Agreement
------------
of which the Agent has been notified in writing, and which are being contested
in good faith by appropriate proceedings, and appropriate reserves therefor have
been established and maintained as reflected on the audited financial statements
for the Borrower's fiscal year ended January 1, 2000 in accordance with GAAP
66
and, to the extent such reserves are maintained for periods after January 1,
2000, consistent with the Borrower's past practice, and to the extent such liens
have been bonded in a manner reasonably satisfactory to the Agent. Except as set
forth in Schedule D or as otherwise disclosed to the Agent in writing, there are
----------
no pending or, to the best of the Borrower's knowledge, threatened audits,
investigations or claims for or relating to any material liability in respect of
Taxes, and there are no matters under discussion with any governmental
authorities with respect to Taxes which are likely to result in a material
additional liability for Taxes. Except as set forth on Schedule D, for all years
----------
up to and including the fiscal year ended December 31, 1994, either the period
during which any assessments may be made by the Internal Revenue Service has
expired without waiver or extension or the federal income tax returns of the
Borrower and its Subsidiaries have been audited by the Internal Revenue Service
and such audits have been closed.
1.37 Subsidiaries. The only respective direct or indirect
------------
Subsidiaries of the Borrower as of the date of this Credit Agreement are those
listed on Schedule D attached hereto. Except as set forth on such Schedule, the
----------
Borrower is the record owner and Beneficial Owner of all of the shares of
capital stock of each of its Subsidiaries listed on such Schedule as being owned
by such Borrower (other than directors' qualifying shares), there are no
proxies, irrevocable or otherwise, with respect to such shares, and no equity
securities of any of the Subsidiaries are or may become required to be issued by
reason of any options, warrants, scrips, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for, shares of any capital stock of any
Subsidiary, and there are no contracts, commitments, understandings or
arrangements by which any Subsidiary is or may become bound to issue additional
shares of its capital stock or securities convertible or exchangeable for such
shares. All of such respective shares so owned by Borrower are owned by them
free and clear of any Liens, and all such shares are validly issued, fully paid
and non-assessable (except for statutory rights of assessment for wages owed).
1.38 Not an Investment Company. Neither the Borrower nor any of its
-------------------------
Subsidiaries is (i) an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended, (ii) a "holding company" or a "Subsidiary company" of a "holding
company," or an "affiliate" of a "holding company" or of a "Subsidiary company"
of a "holding company," within the meaning of the Public Utility Holding Company
Act of 1935, as amended, or (iii) subject to any other law which purports to
regulate or restrict its ability to borrow money or to consummate the
transactions contemplated by this Credit Agreement or the other Credit Documents
or to perform its obligations hereunder or thereunder.
1.39 No Conflicting Requirements. Neither the Borrower nor any of
---------------------------
its
67
Subsidiaries is in default under any term or provision of any charter, by-law,
mortgage, indenture, agreement, instrument, statute, rule, regulation, judgment,
decree, order, writ, injunction, contract, lease or other commitment to which
any of them is a party or by which any of them is bound such that such
violations or defaults in the aggregate could reasonably be expected to have a
Material Adverse Effect. The Borrower knows of no dispute regarding any
indenture, contract, lease, agreement, instrument or other commitment which
would individually, or when aggregated with other such disputes, be reasonably
likely to have a Material Adverse Effect.
1.40 Debt. The Borrower has no Debt that is senior, pari passu or
---- ---- -----
subordinated in right of payment to its Debt to Lenders hereunder, except for
Debt permitted pursuant to Section 7.1 of this Credit Agreement.
-----------
1.41 Title to Properties and Assets; Collateral.
------------------------------------------
(1) Except for (i) Liens permitted pursuant to Section 7.4
-----------
hereof and (ii) such imperfections of title that represent imperfections of
title or easements of record, if any, which do not materially detract from the
value or interfere with the use of the properties subject thereto or affected
thereby, or otherwise materially impair business operations, the Borrower has
(a) good and marketable fee simple title to the Owned Real Property material to
its business and the Owned Real Property on which a Lien has been granted to the
Agent and valid leasehold interests in all of its Leased Real Property material
to its business and (b) good and marketable title to all of its other material
property and assets owned by the Borrower at any time (including, without
limitation, all of its Accounts and Inventory), other than properties disposed
of in any manner permitted under this Credit Agreement. The Borrower enjoys
peaceful and undisturbed possession of all its material Real Estate and there is
no pending or, to the best of its knowledge, threatened condemnation proceeding
relating to any Real Estate which could reasonably be expected to have a
Material Adverse Effect. The leases with respect to the Leased Real Property,
are referred to collectively as the "Leases." No default exists under any Lease
------
which could reasonably be expected to have a Material Adverse Effect. All of the
Structures and other tangible assets owned, leased or used by the Borrower in
the conduct of its business are (a) insured as required by the terms of this
Credit Agreement and the other Credit Documents, (b) sufficient for the
operation of the business of the Borrower and its Subsidiaries as presently
conducted and (c) in conformity with all applicable laws, ordinances, orders,
regulations and other requirements (including applicable zoning, environmental,
motor vehicle safety, occupational safety and health laws and regulations)
relating thereto, except where the failure to conform could not reasonably be
expected to have a Material Adverse Effect.
68
(2) The Borrower possesses adequate assets, licenses, patents,
patent applications, copyrights, service marks, trademarks, trademark
applications and tradenames to continue to conduct its business as presently
conducted. Schedule C attached hereto sets forth as of the date of this Credit
----------
Agreement (i) all of the federal, state and foreign registrations of the
registered trademarks of the Borrower and all pending applications for any such
registrations and (ii) all of the patents of the Borrower and all pending
applications therefor (collectively, together with all service marks and other
marks and all applications therefor, tradenames and other trade rights of the
Borrower, the "Proprietary Rights"). As of the date of this Credit Agreement,
------------------
the Borrower is the owner of each of the trademarks and patents listed on
Schedule C as indicated on such schedule and except as set forth on such
----------
Schedule and, except pursuant to licenses granted in the ordinary course of
business, no other Person has the right to exploit such patents or use any of
such marks in commerce either in the identical form or in such near resemblance
thereto as may be likely to cause confusion or to cause mistake or to deceive.
As of the date of this Credit Agreement each of the trademarks listed on
Schedule C is a valid and subsisting federally registered trademark of the
----------
Borrower having the registration number and issue date set forth on Schedule C
----------
and each of the patents listed on Schedule C is a valid and subsisting patent of
----------
the Borrower having the patent number and issue date set forth on Schedule C. As
----------
of the date of this Credit Agreement except as disclosed on Schedule C, no
----------
Person has a right to receive any material royalty or similar payment from the
Borrower in respect of any such registered Propriety Rights. As of the date of
this Credit Agreement the Borrower has not granted any material license except
as disclosed on Schedule C hereto or such licenses as were granted in the
----------
ordinary course of the Borrower's business, or sold or otherwise transferred any
interest in any of the Proprietary Rights to any other person. The Borrower is
not aware that the use of any of the material Proprietary Rights by the Borrower
is infringing upon or otherwise violating the rights of any third party in or to
such Proprietary Rights which violation or infringement could reasonably be
expected to result in a material liability to the Borrower, and no proceeding
has been instituted against or notice received by the Borrower that are
presently outstanding alleging that the use of any of the material Proprietary
Rights infringes upon or otherwise violates the rights of any third party in or
to any of the material Proprietary Rights which, if successful, could reasonably
be expected to materially adversely affect the fair market value of any such
material Proprietary Rights or the rights granted therein to the Agent
including, without limitation, the validity, priority or perfection of the
security interest granted therein to the Agent under the Ancillary Documents or
the remedies of the Agent therein or in this Credit Agreement. All of the
material Proprietary Rights of the Borrower and the Subsidiaries are valid and
enforceable rights of the Borrower and the Subsidiaries and will not cease to be
valid and in full force and effect by reason of the execution and delivery of
this Credit Agreement or the Credit Documents or the consummation of the
transactions contemplated hereby or thereby.
69
(3) The capital stock of each Subsidiary (including, without
limitation, each Foreign Subsidiary provided that, for any Foreign Subsidiary
--------
which constitutes a "Controlled Foreign Corporation" within the meaning of
Section 951 of the Internal Revenue Code, the Borrower shall not be required to
pledge hereunder or under the other Credit Documents more than 65% of the
combined voting power of all classes of capital stock of such Foreign Subsidiary
entitled to vote), which is owned directly or indirectly by the Borrower, has
been delivered and pledged to the Agent under the Orders and the Pledge
Agreements. The owners of all such capital stock are parties as pledgors under
the Pledge Agreements, provided that a .01% interest in Converse All Star do
--------
Brasil Industria e Comercio Ltda. and a .2% interest in Calzado Deportivo ▇▇
▇▇▇▇▇▇▇, ▇.▇. de C.V. are owned by parties other than parties to this Agreement
or any Pledge Agreement.
1.42 Compliance with Law. Neither the Borrower nor any of its
------------------
Subsidiaries has violated or failed to comply with any statute, law, ordinance,
regulation, rule or order of any foreign, federal, state or local government or
any other governmental department or agency or any self regulatory organization,
or any judgment, decree or order of any court, applicable to its business or
operations except where the aggregate of all such violations or failures to
comply would not have a Material Adverse Effect. The conduct of the businesses
of the Borrower and each of its Subsidiaries is in conformity with all
securities, commodities, energy, public utility, zoning, building code, health,
OSHA and environmental requirements and all other foreign, federal, state and
local governmental and regulatory requirements and requirements of any self
regulatory organizations, except where the aggregate of all such non-
conformities could not reasonably be expected to have a Material Adverse Effect.
Neither the Borrower nor any of its Subsidiaries has received any notice to the
effect that, or otherwise been advised that, it is not in compliance with, and
neither the Borrower nor any of its Subsidiaries has any reason to anticipate
that any presently existing circumstances are likely to result in the violation
of, any such statute, law, ordinance, regulation, rule, judgment, decree or
order which failure or violation could reasonably be expected to have a Material
Adverse Effect.
1.43 Compliance with Environmental Laws.
----------------------------------
(1) The Borrower and each of its Subsidiaries have complied
with and are currently in compliance with any Environmental Laws, except where
noncompliance could not reasonably be expected to have a Material Adverse
Effect.
(2) No solid or hazardous or toxic wastes or hazardous
substances (as defined in the Comprehensive Environmental Response Compensation
and Liability Act, the Resources Conservation and Recovery Act and the Superfund
Amendments and Reauthorization Act of 1986, as amended or under any successor or
similar law or any
70
applicable state or local law), are processed, discharged, stored, treated,
disposed of, or managed at any facility owned, leased or operated by the
Borrower or any Subsidiary thereof or, at the request or behest of the
Borrower or any Subsidiary thereof, at any adjoining site, so as to require
a license, permit or authorization of any type from any governmental
authority, other than licenses, permits and authorizations which have been
obtained and are in full force and effect or where the failure to obtain
such a license, permit or authorization could not reasonably be expected to
have a Material Adverse Effect. Except as set forth on Schedule D hereto,
----------
as of the date of this Credit Agreement no governmental or private actions
to enforce environmental or pollution control laws are pending against the
Borrower or any Subsidiary thereof, or against or with respect to any
facility owned, operated or leased by the Borrower or any Subsidiary
thereof. Except as disclosed on Schedule D and except where any of the
----------
following, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect: (i) neither the Borrower nor
any of its Subsidiaries has received any complaint, notice of violation,
alleged violation, investigation or advisory action or of potential
liability or of potential responsibility regarding environmental protection
matters or permit compliance, and (ii) neither the Borrower nor any of its
Subsidiaries have any contingent liability of which the Borrower has
knowledge in connection with any release of any hazardous or toxic waste,
substance or constituent, or other substance into the environment, nor has
the Borrower or any Subsidiary received any notice, letter or other
indication of potential liability arising from the disposal of any
hazardous or toxic waste, substance or constituent or other substance into
the environment.
(3) Except as disclosed on Schedule D and other than
----------
any pending workers' compensation claims which individually and in the
aggregate are not significant to the Borrower, no action, suit or
proceeding brought by any employee of the Borrower or any Subsidiary
thereof or any other Person involving (i) a claim for damages in excess of
$100,000 or (ii) claims for damages under $100,000 and which, in either
such case, in the aggregate could reasonably be expected to have a Material
Adverse Effect, in each case based on alleged damage to health caused by
any such hazardous or toxic substance or by any waste or by-product
thereof, is pending before any court or arbitrator or any governmental
body, agency or official.
1.44 Security Interests and Liens. There are no Liens in
----------------------------
favor of third parties with respect to any of the Collateral, including, without
limitation, with respect to the Inventory, wherever located, other than Liens
permitted pursuant to Section 7.4 hereof. To the best of the Borrower's
-----------
knowledge, no lessor, warehouseman, filler, processor or packer of the Borrower
or any of its Subsidiaries (other than Foreign Subsidiaries) has granted any
Lien with respect to the Inventory maintained by the Borrower or any of its
Subsidiaries (other than Foreign Subsidiaries) at the property of any such
lessor, warehousemen, filler, processor or packer. Upon entry by the Bankruptcy
Court of the Interim Order (or the Final)
71
Order, when applicable), the security interests granted pursuant to the Credit
Documents and the Orders constitute and shall at all times constitute the valid
and enforceable first, prior and perfected Liens on the Collateral, subject only
to valid and perfected Liens, if any, as of the Filing Date (other than those
described in Section 3.12(a)(iii)) and to Liens permitted pursuant to Section
-------------------- -------
7.4 hereof and identified on Schedule E hereto as being senior to the Liens
--- ----------
granted pursuant to the Credit Documents and the Orders; provided that the
--------
Borrower makes no representation as to the perfection of any Lien on any
Proprietary Rights Collateral to the extent such Proprietary Rights Collateral
is registered, or for which registration has been applied, in a jurisdiction
outside of the United States and such jurisdiction requires a filing or similar
process to perfect such security interest. The Borrower is or will be at the
time additional Collateral is acquired by it, the absolute owners of the
Collateral with full right to pledge, sell, consign, transfer and create a Lien
therein, free and clear of any and all Liens in favor of third parties, except
for Liens permitted pursuant to Section 7.4 hereof. No consents, filings or
-----------
recordings are required in order to perfect the security interests created by
any of the Credit Documents or the Orders; provided that the Borrower makes no
--------
representation as to the perfection of any Lien on any Proprietary Rights
Collateral to the extent such Proprietary Rights Collateral is registered, or
for which registration has been applied, in a jurisdiction outside of the United
States and such jurisdiction requires a filing or similar process to perfect
such security interest.
1.45 Labor Relations. The Borrower is not engaged in any material
---------------
unfair labor practices which could reasonably be expected to result in a
material liability to the Borrower, materially increase the costs of operations
or materially decrease the revenue generated from the Borrower's operations or
which could otherwise reasonably be expected to have a Material Adverse Effect.
There is (i) no unfair labor practice complaint pending against the Borrower or,
to the best knowledge of the Borrower, threatened against it, before the
National Labor Relations Board, and no material grievance or significant
arbitration proceeding arising out of or under collective bargaining agreements
is so pending against the Borrower or, to the best knowledge of the Borrower,
threatened against it, (ii) no strike, labor dispute, slowdown or stoppage
pending against the Borrower or, to the best knowledge of the Borrower,
threatened against it which, in the case of the items described in the preceding
clauses (i) and (ii) could reasonably be expected to result in a material
----------- ----
liability to the Borrower, materially increase the costs of the Borrower's
operations or materially decrease the revenue generated from the Borrower's
operations or which could otherwise reasonably be expected to have a Material
Adverse Effect and (iii) no union representation question with respect to the
employees of the Borrower and no union organizing activities which
representation question or organizing activity could reasonably be expected to
have a Material Adverse Effect. There are no controversies pending or, to the
best knowledge of the Borrower, threatened between the Borrower and any of its
employees, other than (i) employee grievances and other controversies arising in
the ordinary course of business
72
which could not, in the aggregate, be reasonably expected to have a Material
Adverse Effect and (ii) employee grievances and other controversies arising
outside the ordinary course of business of which the Agent has received written
notice and could not reasonably be expected to have a Material Adverse Effect.
1.46 UCC Filing Information. As of the date of this Credit Agreement
-----------------------
the chief executive office and principal place of business of the Borrower is as
set forth on Schedule D, which office is the place where the Borrower is
----------
"located" for the purposes of Section 9-103(3)(d) of the UCC. As of the date of
this Credit Agreement the places where the Borrower keeps its books, chattel
paper and records concerning its respective Accounts or regularly keeps any
Inventory are also identified on Schedule D. As of the date of this Credit
----------
Agreement there is no jurisdiction located in the United States in which
the Borrower or any of its Subsidiaries have any assets, equipment or Inventory
(except for vehicles, Inventory in transit for processing in the ordinary course
of business, or immaterial items) other than those jurisdictions listed on
Schedule D. Schedule D is a true, correct and complete list as of the date of
---------- ----------
this Credit Agreement of (i) the address of all offices where records and books
of account of the Borrower and each of its Subsidiaries are kept, and (ii) to
the best knowledge of Borrower, the legal names and addresses of each
warehouseman, filler, processor and packer at which Inventory is stored as of
the date of this Credit Agreement. None of the receipts received by the
Borrower from any warehouseman, filler, processor or packer 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 assignees.
1.47 Fictitious Business Names. Neither the nor any of its
-------------------------
Subsidiaries has conducted any material amount of business on or after January
1, 1994 under any corporate or fictitious name other than the corporate name
shown on its or such Subsidiary's Articles or Certificate of Incorporation, as
disclosed on Schedule D or as disclosed to the Agent in writing from time to
----------
time.
1.48 Use of Proceeds. All proceeds of the Loans and all proceeds from
---------------
the discount of the Acceptances have been used only in accordance with Section
-------
6.13 hereof.
----
1.49 Margin Security. The Borrower does not own any margin security
---------------
and none of the loans advanced hereunder have been used for the purpose of
purchasing or carrying any margin securities of for the purpose of reducing or
retiring any indebtedness which was originally incurred to purchase any margin
securities or for any other purpose not permitted by Regulation U or X of the
Board of Governors of the Federal Reserve System.
1.50 No Event of Default. No Default or Event of Default has occurred
-------------------
and is continuing.
73
1.51 Status of Accounts. The Borrower confirms to the Lenders that any
------------------
and all taxes or fees relating to its business, its sales, the Accounts or the
goods relating thereto, are their sole responsibility and that all such material
taxes will be paid by the Borrower when due (unless duly contested and
adequately reserved for) and that none of said taxes or fees (including any
immaterial taxes or fees) is or will become a lien (other than a Permitted Lien)
on or claim against the Accounts. The Borrower's books and records are marked to
reflect the Lenders' interest in the Accounts.
1.52 Survival of Representations. All representations made by the
---------------------------
Borrower in this Credit Agreement and in any other Credit Document executed and
delivered in connection herewith shall survive the execution and delivery hereof
and thereof.
1.53 Affiliate Transactions. Except as set forth on Schedule D hereto,
---------------------- ----------
neither the Borrower nor any Subsidiary is a party to or bound by any agreement
or arrangement (whether oral or written) to which any Affiliate of the Borrower
or any Subsidiary is a party except as permitted pursuant to Section 7.7 hereof.
-----------
1.54 Accuracy and Completeness of Information. All factual information
----------------------------------------
heretofore, contemporaneously or hereafter furnished by or on behalf of the
Borrower or any of its Subsidiaries in writing to the Agent, any Lender or the
Auditors for purposes of or in connection with this Credit Agreement or any
Credit Documents, or any transaction contemplated hereby or thereby, and all
written information heretofore, contemporaneously or hereafter furnished by or
on behalf of the Borrower to the Bankruptcy Court, is or will be true and
accurate in all material respects on the date as of which such information is
dated or certified and not incomplete by omitting to state any material fact
necessary to make such information not misleading at such time. There is no fact
now known to any officer of the Borrower or any of its Subsidiaries which has,
or would have, a Material Adverse Effect which fact has not been set forth
herein, in the Financial Statements, or some certificate, opinion or other
written statement made or furnished by the Borrower to the Agent.
1.55 Representations Upon Execution. The Borrower hereby represents
------------------------------
and warrants as of the date of this Credit Agreement that (i) subject to the
entry by the Bankruptcy Court of the Interim Order (or the Final Order, when
applicable), the execution and delivery of this Credit Agreement (A) are within
the Borrower's corporate powers, (B) have been duly authorized by all necessary
corporate action, (C) require no further action or order by or in respect of or
filing with any governmental body, agency or official, (D) do not contravene or
constitute a default under any provision of any applicable law, statute,
ordinance, regulation, rule, order or other governmental restriction or of the
Articles or
74
Certificates of Incorporation or By-laws of the Borrower, (E) do not cause a
violation of any agreement, judgment, injunction, order, decree, indenture,
contract, lease, instrument or other commitment to which the Borrower is a party
or by which the Borrower or any of its assets are bound and (F) will not result
in the creation or imposition of any Lien upon any asset of the Borrower under
any existing indenture, mortgage, deed of trust, loan or credit agreement or
other agreement or instrument to which the Borrower is a party or by which the
Borrower or any of its assets may be bound and (ii) this Credit Agreement is the
legal, valid and binding obligation of the Borrower, enforceable against the
Borrower in accordance with its terms and the Orders.
1.56 The Orders. As of the date of the Initial Credit Event, the
----------
Interim Order has been entered and has not been stayed, amended, vacated,
reversed, rescinded or otherwise modified in any respect. As of the date of the
making of any subsequent extension of credit hereunder, the Interim Order and/or
the Final Order, as the case may be, have been entered and have not been stayed,
amended (except in accordance with the terms hereof), reversed, vacated,
rescinded or otherwise modified (except in accordance with the terms hereof) in
any respect.
1.57 Bank Accounts. Set forth on Schedule F is a true and correct list
------------- ----------
of all existing bank accounts of the Borrower and its domestic Subsidiaries,
including any checking, savings or other account at any bank or other financial
institution, or any other account where money is or may be deposited or
maintained with any Person, other than the Loan Disbursement Account.
1.58 Assets and Operations of Subsidiaries. No direct or indirect
-------------------------------------
Subsidiary of the Borrower has any material operations or assets located in the
United States, except for shares of capital stock held by such Subsidiaries in
their respective Subsidiaries.
ARTICLE VI
Affirmative Covenants
---------------------
Until termination of the Commitments and payment and satisfaction of
all Obligations due hereunder, the Borrower agrees that, unless the Agent shall
have certified to the Borrower that the Required Lenders shall have otherwise
consented in writing:
1.59 Information. The Borrower will deliver to the Agent and each of
-----------
the Lenders:
75
(1) (i) as soon as available and in any event within ninety (90)
days after the end of each fiscal year of the Borrower, consolidated and
consolidating balance sheets of the Borrower and its Consolidated Subsidiaries
as of the end of such fiscal year and the related consolidated and consolidating
statements of earnings, changes in consolidated shareholders equity and changes
in consolidated cash flow for such fiscal year, setting forth in the case of
each consolidated financial statement in comparative form the figures for the
previous fiscal year, including the previous fiscal year budget; all (except for
the consolidating statements) accompanied by an opinion of the Auditors
unqualified as to scope of audit and stating that such financial statements
present fairly in all material respects the financial position of the Borrower
and its Consolidated Subsidiaries and the results of their operations and cash
flows for such fiscal year in conformity with generally accepted accounting
principles and otherwise reported on in a manner acceptable to the Securities
and Exchange Commission, accompanied by a written statement signed by the
Auditors as to whether in the course of such firm's audit anything of a
financial or accounting nature has come to its attention to cause it to believe
that any Default or Event of Default existed on the date of such statements and
stating whether anything has come to its attention to cause it to believe the
calculation s set forth in the officers certificate delivered pursuant to
subsection (c) below were not prepared in accordance with the terms hereof and
--------------
(ii) as soon as available and in any event within one hundred eighty (180) days
after the end of each fiscal year of the Borrower, a copy of the Auditors'
Management Letter to the Borrower relating to financial statements for such
fiscal year delivered pursuant to clause (i) above;
----------
(2) as soon as available and in any event within forty-five (45) days
after the end of each of the first three (3) quarters of each fiscal year of the
Borrower, consolidated and consolidating balance sheets of the Borrower and its
Consolidated Subsidiaries as of the end of such quarter and the related
consolidated and consolidating statements of earnings, changes in consolidated
shareholders equity and changes in consolidated cash flow for such quarter and
for the portion of the Borrower's fiscal year ended at the end of such quarter,
setting forth in the case of each consolidated financial statement in
comparative form the figures for the corresponding quarter and the corresponding
portion of the Borrower's previous fiscal year, including the previous fiscal
year budget, all certified (subject to normal year-end adjustments) as to
fairness of presentation, GAAP and consistency by the chief financial officer or
the chief accounting officer of the Borrower;
(3) simultaneously with the delivery of each set of financial
statements referred to in subsections (a) and (b) above, (i) a certificate of
--------------- ---
the chief financial officer or the chief accounting officer of the Borrower
setting forth in reasonable detail any calculations required to establish
whether the Borrower was in compliance with the requirements of Section 7.6
-----------
hereof on the date of such financial statements and (ii) a
76
compliance certificate in the form of Exhibit L attached hereto (the "Compliance
--------- ----------
Certificate");
-----------
(4) as soon as available and in any event within thirty (30) days
after the end of each of the first two months of each fiscal quarter (forty-five
(45) days in the case of the last month of each fiscal year of the Borrower),
statements of earnings and consolidated and consolidating balance sheets of the
Borrower and its Consolidated Subsidiaries as of the end of such month, and
related changes in consolidated cash flow for such month and for the portion of
the Borrower's fiscal year ended at the end of such month, all certified
(subject to normal year-end adjustments) as to fairness of presentation, GAAP
and consistency by the chief financial officer or chief accounting officer of
the Borrower;
(5) on (i) February 1, 2001, (ii) the second Business Day of every
Monthly Accounting Period thereafter, and (iii) at such other times as may be
requested by the Agent, a Supplemental Monthly Budget, which budget shall be in
substantially the same form as the Initial Monthly Budget;
(6) (i) on the third Business Day of each fiscal week, a
Supplemental Weekly Budget of the Borrower substantially in the form of the
Initial Weekly Budget, each such Supplemental Weekly Budget showing on a
week-by-week basis the budget for such week and the next succeeding twelve
weeks, together with a comparison by line item of the actual cash receipts and
disbursements to the budgeted amounts for such weekly receipts and disbursements
as set forth in the most recently delivered Supplemental Weekly Budget (or in
the case of the first Supplemental Weekly Budget, the Initial Weekly Budget);
and (ii) upon delivery of any Supplemental Weekly Budget that includes the last
week of any Monthly Accounting Period, a report comparing the projected cash
disbursements during any Monthly Accounting Period included in such Supplemental
Weekly Budget to the Projected Cash Disbursements for any such Monthly
Accounting Period as set forth in the Initial Monthly Budget;
(7) within five Business Days of the end of each Monthly Accounting
Period, a certificate containing, for such Monthly Accounting Period, (i) a
comparison of Cash Disbursements with the Maximum Budget Amount for such Monthly
Accounting Period, and (ii) a calculation of the Permitted Carryforward or
Carryforward Reduction, such certificate to be certified by the Borrower's chief
executive officer, chief financial officer, controller or other senior financial
officer;
(8) within two (2) Business Days of any officer of the Borrower
obtaining knowledge of any Event of Default or any Default, if such Default is
then continuing, a certificate of the chief financial officer or the chief
accounting officer of the
77
Borrower setting forth the details thereof and the action which the Borrower is
taking or proposes to take with respect thereto;
(9) promptly upon the mailing thereof to the shareholders of the
Borrower generally, copies of all financial statements, reports and proxy
statements so mailed;
(10) promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto unless the securities covered
thereby are held or distributed by the Borrower, other than any registration
statement on Form S-3 to the extent that it relates to a secondary offering, and
other than any registration statement on Form S-8 or its equivalent), and
reports on Form 10-K, 10-Q and 8-K (or their equivalents) which the Borrower
shall have filed with the Securities and Exchange Commission;
(11) if and when any ERISA Affiliate (i) gives or is required to give
notice to the PBGC of any Reportable Event with respect to any Plan which could
reasonably be expected to constitute grounds for a termination of such Plan
under Title IV of ERISA, or knows that the plan administrator of any Plan has
given or is required to give notice of any such Reportable Event, a copy of the
notice of such Reportable Event given or required to be given to the PBGC; (ii)
receives notice of complete or partial withdrawal liability under Title IV of
ERISA, a copy of such notice; or (iii) receives notice from the PBGC under Title
IV of ERISA of an intent to terminate or appoint a trustee to administer any
Plan, a copy of such notice;
(12) within two (2) Business Days of any officer of the Borrower
obtaining knowledge of (i) any litigation or proceeding affecting the Borrower
or any Subsidiary in which the amount involved is $1,000,000 or more and is not
covered by insurance or in which injunctive or similar relief is sought, or (ii)
any order, judgment or decree in excess of $1,000,000 which shall have been
entered against the Borrower or any Subsidiary or any of their respective
properties or assets, a certificate of the chief financial officer or accounting
officer of the Borrower setting forth details thereof and the action which the
Borrower is taking or proposes to take with respect thereto;
(13) prompt notice of any notification of a violation of any law or
regulation received by the Borrower or any Subsidiary from any local, state,
federal or foreign governmental authority or agency which violation could
reasonably be expected to have a Material Adverse Effect;
78
(14) prompt notice of any material change in the Borrower's credit and
collection policy;
(15) prompt notice, in reasonable detail, of any material change
relating to the type, quantity or quality of the Inventory, Accounts or any
other material portion of the Collateral, or any event which could have a
material adverse effect on the value of such Collateral or any event affecting
the validity or priority of the security interests granted to the Agent and the
Lenders in such Collateral;
(16) weekly, before 12:00 noon (New York time) on the second Business
Day of each week, and monthly within ten (10) Business Days of the last Business
Day of each month, and at any other time reasonably requested by the Agent, a
borrowing base certificate (the "Borrowing Base Certificate") in substantially
--------------------------
the form of Exhibit M hereto, duly completed, detailing, among other things, the
---------
Borrower's Eligible Accounts Receivable, Eligible Inventory, Eligible L/C
Inventory and Eligible Retail Inventory as of the last day of, as applicable,
such preceding week or month (or as of the date reasonably requested by the
Agent), as applicable, and, in each case, certified by the Borrower's chief
executive officer, chief financial officer, controller or other senior financial
officer. In addition, each monthly Borrowing Base Certificate shall have
attached to it as exhibits the summary accounts receivable aged trial balance
for such month and a summary schedule of Inventory owned by the Borrower. The
Agent may, but shall not be required to, rely on each Borrowing Base Certificate
delivered hereunder as accurately setting forth the available Borrowing Base for
all purposes of this Credit Agreement (including, without limitation, Sections
--------
3.2 and 3.3 hereof) until such time as a new Borrowing Base Certificate is
--- ---
delivered to the Agent in accordance herewith. In the event at any time the
Agent's calculation of the Borrower's Eligible Accounts Receivable, Eligible
Inventory, Eligible L/C Inventory and Eligible Retail Inventory is materially
less than the calculations of the Borrower set forth on the most recent
Borrowing Base Certificate delivered to the Agent, the Agent shall notify the
Borrower of such fact; provided that the Agent shall incur no liability to the
-------- ----
Borrower if the Agent fails to give such notice;
(17) within two (2) Business Days of the chief executive officer,
chief financial officer, chief accounting officer, controller or other senior
financial officer of the Borrower obtaining knowledge of any Material Adverse
Change, a certificate of the chief financial officer or accounting officer of
the Borrower setting forth details thereof and the action which the Borrower is
taking or proposes to take with respect thereto;
(18) promptly after the same is available with a copy to counsel for
the Agent, copies of all pleadings, motions, applications, judicial information,
financial information and other documents filed by or on behalf of the Borrower
with the Bankruptcy
79
Court or the United States Trustee in the Case, or distributed by or on behalf
of the Borrower to any official committee appointed in the Case; and
(19) to the Agent, from time to time such additional information
regarding the financial position or business of the Borrower or any Subsidiary
as the Agent, at the request of any Lender, may reasonably request.
1.60 Payment of Obligations. Except in accordance with the Bankruptcy
----------------------
Code or by an applicable order of the Bankruptcy Court, the Borrower will pay
and discharge, and will cause each of its Subsidiaries to pay and discharge, at
or before maturity, all of their respective material obligations and liabilities
that constitute administrative expenses under Section 503(b) of the Bankruptcy
Code in the Case, except where the same may be contested in good faith by
appropriate proceedings, and will maintain, and will cause each of its
Subsidiaries to maintain, in accordance with GAAP, appropriate reserves for the
accrual of any of the same.
1.61 Maintenance of Property; Insurance.
----------------------------------
(1) The Borrower will keep, and will cause each of its
Subsidiaries to keep, working order and condition (ordinary wear and tear,
casualty and condemnation excepted) and not commit or suffer any waste with
respect to any of its material properties, provided that the foregoing shall not
--------
apply to property of a Foreign Subsidiary, which property is intended to be sold
or otherwise disposed of in connection with the winding down or liquidation of
such Foreign Subsidiary or any of its divisions.
(2) The Borrower agrees to maintain, and to cause each of its
Subsidiaries (other than Foreign Subsidiaries) to maintain, public liability
insurance, third party property damage and replacement cost insurance on the
Collateral under such policies of insurance, with such insurance companies, in
such amounts and covering such risks as are at all times satisfactory to the
Agent. All policies covering the Collateral are to name the Borrower and the
Agent as additional insureds and loss payees in case of loss, as their interests
may appear, and are to contain such other provisions as the Agent may reasonably
require to fully protect the Agent's interest in the Collateral and to any
payments to be made under such policies. Certificates of all insurance policies
are to be delivered to the Agent (with true copies of such policies to be made
available to the Agent) on or prior to the Closing Date, and such policies shall
have all premiums with respect thereto currently paid and contain loss payable
endorsements 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. The Agent shall have the right, in the name of the Agent, the
Borrower or any
80
Subsidiary (other than a Foreign Subsidiary) of the Borrower, to file
claims under such insurance policies, to receive 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. The Borrower
shall provide written notice to the Agent of the occurrence of any of the
following events promptly and in any event within five (5) Business Days
after the occurrence of such event: any material asset or property owned
or used by any Borrower or any of the Borrower's Subsidiaries (other than a
Foreign Subsidiary) (i) is damaged or destroyed, or suffers any other loss
or (ii) is, or the Borrower receives notice of the institution of any
proceeding pursuant to which any such asset or property could reasonably be
expected to be, condemned, confiscated or otherwise taken, in whole or in
part, or the use thereof is otherwise diminished so as to render
impracticable or unreasonable the use of such asset or property for the
purposes to which such asset or property were used immediately prior to
such condemnation, confiscation or taking, by exercise of the powers of
condemnation or eminent domain or otherwise, and in either case the amount
of the damage, destruction, loss or diminution in value is in excess of
$1,000,000 (collectively, a "Casualty Loss"). The Borrower shall
-------------
diligently file and prosecute its claim or claims for any award or payment
in connection with a Casualty Loss. In the event of a Casualty Loss with
respect to any of the Collateral, the Borrower shall pay to the Agent or
deposit in the Concentration Account, promptly upon receipt thereof, any
and all insurance proceeds and payments received by the Borrower or any of
its Subsidiaries (other than a Foreign Subsidiaries) on account of damage,
destruction, loss, condemnation or eminent domain proceedings. The Agent
may, at its election in its sole discretion either (a) apply the proceeds
realized from Casualty Losses to payment of accrued and unpaid interest or
outstanding principal under the Loans or (b) pay such proceeds to the
Borrower to be used to repair, replace or rebuild the asset or property or
portion thereof that was the subject of the Casualty Loss. No settlement on
account of any such Casualty Loss shall be made without the consent of the
Agent. The Agent may participate in any such proceedings and the Borrower
shall deliver to the Agent such documents as may be requested by the Agent
to permit such participation and shall consult with the Agent, its
attorneys and agents in the making and prosecution of such claim or claims.
The Borrower hereby irrevocably authorizes and appoints the Agent its
attorney-in-fact to collect and receive for any such award or payment and
to file and prosecute such claim or claims, which power of attorney shall
be irrevocable and shall be deemed to be coupled with an interest, and the
Borrower shall, upon demand of the Agent, make, execute and deliver any and
all assignments and other instruments sufficient for the purpose of
assigning any such award or payment to the Agent for the benefit of the
Lenders, free and clear of any encumbrances of any kind or nature
whatsoever.
81
1.62 Compliance with Laws. The Borrower will comply, and cause each of
--------------------
its Subsidiaries to comply, with all acts, regulations, orders, directions and
ordinances of any legislative, administrative or judicial body or official,
applicable to the Collateral or any part thereof, or to the operation of their
business (including, without limitation, ERISA and the rules and regulations
thereunder, the Bankruptcy Court and the Orders).
1.63 Inspection of Property, Books and Records; Change of Name,
----------------------------------------------------------
Principal Place of Business, Location of Collateral, Etc. The Borrower will
--------------------------------------------------------
keep, and will cause each of its Subsidiaries to keep, proper books of record
and account in which full, true and correct entries in conformity with GAAP
shall be made of all dealings and transactions in relation to their businesses
and activities; the Borrower shall make no significant change in its accounting
practices except as permitted or required by GAAP. The Borrower shall not have
the right to change its fiscal year. The Borrower agrees that the Agent or its
agents may enter upon the premises of the Borrower or any of its Subsidiaries at
any time and from time to time for the purpose of (i) inspecting the Collateral,
(ii) inspecting and/or copying (at Borrower's expense) any and all records
pertaining thereto, (iii) discussing the affairs, finances and business of the
Borrower with any officers, employees and directors of the Borrower or with the
Auditors and (iv) verifying Eligible Accounts Receivable and/or Eligible
Inventory. Any Lender may accompany the Agent on any such visit at such Lender's
own expense. The Borrower agrees to afford the Agent thirty (30) Business Days
prior written notice of (a) any new or additional location of any Collateral at
which location Collateral having an aggregate value in excess of $1,000,000 will
be located, (b) any change in the location of its chief executive office or any
new or additional places of business from the locations specified in Schedule D
----------
and (c) any change in its corporate name and, in each such case, the Borrower
further agrees to execute in advance of such addition or change and cause to be
filed and/or delivered to the Agent any financing statements or other documents
required by the Agent, all in form and substance satisfactory to the Agent.
1.64 Compliance with Credit Documents. The Borrower will comply, and
--------------------------------
will cause each of its Subsidiaries to comply, with the terms of each of the
Credit Documents.
1.65 Corporate Existence. The Borrower (i) shall maintain its
-------------------
corporate existence, shall maintain in full force and effect all material
licenses, bonds, franchise, leases, qualifications to do business, trademarks,
patents, contracts and other rights necessary for the conduct of its businesses,
(ii) shall continue in, and limit its operations to, the same general lines of
business as that presently conducted by it and reasonable extensions thereof and
(iii) shall comply with all applicable laws and regulations of any federal,
state or local governmental authority, except in each case when noncompliance
with the foregoing would not, in the aggregate, have a Material Adverse Effect;
provided, that nothing in this Section
-------- -------
82
6.7 shall prohibit the Borrower from discontinuing its manufacturing operations
---
and converting to a Person primarily engaged in the licensing of its Proprietary
Rights.
1.66 ERISA. The Borrower shall deliver to the Agent, at the Borrower's
-----
expense, the following information at the times specified below:
(1) within twenty (20) Business Days after the Borrower or any
ERISA Affiliate knows that a Termination Event has occurred which could
reasonably be expected to result in a liability to the Borrower of $1,000,000 or
more, a written statement of the chief financial officer of the Borrower
describing such Termination Event and the action, if any, which the Borrower or
any other entities have taken, are taking or propose to take with respect
thereto, and when known, any action taken or threatened by the Internal Revenue
Service, DOL or PBGC with respect thereto;
(2) within sixty (60) Business Days after the Borrower or any
ERISA Affiliate knows that a prohibited transaction (as defined in Sections 406
of ERISA and 4975 of the Internal Revenue Code) has occurred which could
reasonably be expected to result in a liability to the Borrower of $1,000,000 or
more, a statement of the chief financial officer of the Borrower describing such
transaction and the action which the Borrower or other such entities have taken,
are taking or propose to take with respect thereto;
(3) at any time that Agent may reasonably request, copies of
each annual report (form 5500 series), including Schedule B thereto, filed with
respect to each Benefit Plan;
(4) at any time that Agent may reasonably request, copies of
each actuarial report for any Benefit Plan or Multiemployer Plan and each annual
report for any Multiemployer Plan;
(5) within three (3) Business Days after the filing thereof with
the Internal Revenue Service, a copy of each funding waiver request filed with
respect to any Benefit Plan with respect to any funding of $1,000,000 or more
and all communications received by the Borrower or any ERISA Affiliate with
respect to such request;
(6) within twenty (20) Business Days upon the occurrence
thereof, notification of any increase in the benefits of any existing Plan or
the establishment of any new Plan or the commencement of contributions to any
Plan to which any Borrower or any ERISA Affiliate was not previously
contributing, in either case, which could reasonably be expected to result in an
increase in the annual contributions necessary to satisfy the minimum
83
funding requirements of ERISA or the terms of such Plan to any of the Borrower
of $1,000,000 or more;
(7) within three (3) Business Days after receipt by the Borrower
or any ERISA Affiliate of the PBGC's intention to terminate a Benefit Plan or to
have a trustee appointed to administer a Benefit Plan, in either case which
could reasonably be expected to result in a liability to the Borrower of
$1,000,000 or more, copies of each such notice;
(8) within ten (10) Business Days after receipt by the Borrower
or any ERISA Affiliate of any unfavorable determination letter from the Internal
Revenue Service regarding the qualification of a Plan under Section 401(a) of
the Internal Revenue Code which could reasonably be expected to result in a
liability to the Borrower of $1,000,000 or more, copies of each such letter;
(9) within ten (10) Business Days after receipt by the Borrower
or any ERISA Affiliate of a notice regarding the imposition of withdrawal
liability of $1,000,000 or more under Section 4203, 4204 or 4205 of ERISA,
copies of each such notice;
(10) within ten (10) Business Days after the Borrower or any
ERISA Affiliate fails to make a required installment or any other required
payment of $1,000,000 or more under Section 412 of the Internal Revenue Code on
or before the due date for such installment or payment, a notification of such
failure; and
(11) within ten (10) Business Days after the Borrower or any
ERISA Affiliate knows (a) a Multiemployer Plan has been terminated, (b) the
administrator or plan sponsor of a Multiemployer Plan intends to terminate a
Multiemployer Plan, or (c) the PBGC has instituted or will institute proceedings
under Section 4042 of ERISA to terminate a Multiemployer Plan, in any such case,
which could reasonably be expected to result in a liability to the Borrower of
$1,000,000 or more, a written statement setting forth any such event or
information.
For purposes of this Section 6.8, the Borrower and any ERISA Affiliate
-----------
shall be deemed to know all facts known by the administrator of any Plan of
which such entity is the plan sponsor.
The Borrower shall establish, maintain and operate all Plans to comply
with the applicable provisions of ERISA, Internal Revenue Code, and all other
applicable laws, other than to the extent that the Borrower is in good faith
contesting by appropriate proceedings the validity or application of any such
provision or law, except to the extent
84
failure to so comply could not reasonably be expected to result in the Borrower
incurring a liability, individually or in the aggregate equal to or in excess of
$2,500,000.
1.67 Environmental Matters.
---------------------
(1) The Borrower will use its best efforts to conduct its
business and the businesses of each of its Subsidiaries so as to comply with all
Environmental Laws in all jurisdictions in which any of them is or may at any
time be doing business, except to the extent that the Borrower or any of its
Subsidiaries are contesting, in good faith by appropriate legal proceedings, any
such Environmental Law or interpretation thereof or application thereof and
except where the failure to so comply could not reasonably be expected to have a
Material Adverse Effect; provided, further,that the Borrower and each of its
-------- -------
Subsidiaries shall comply with the order of any court or other governmental body
or applicable jurisdiction relating to such Environmental Laws unless the
Borrower or Subsidiary shall currently be prosecuting an appeal or proceedings
for review and shall have secured a stay of enforcement or execution or other
arrangement postponing enforcement or execution pending such appeal or
proceedings for review. If the Borrower or any Subsidiary of the Borrower shall
(a) receive notice that any violation of any Environmental Law may have been
committed or is about to be committed by the Borrower or any such Subsidiary,
(b) receive notice that any administrative or judicial complaint or order has
been filed or is about to be filed against the Borrower or any such Subsidiary
alleging violations of any Environmental Law or requiring the Borrower or any
such Subsidiary to take any action in connection with the release of Hazardous
Substances into the environment or (c) receive any notice from a federal, state,
or local governmental agency or private party alleging that the Borrower or
Subsidiary may be liable or responsible for costs associated with a response to
or cleanup of a release of a Hazardous Substance into the environment or any
damages caused thereby, the Borrower shall provide the Agent with a copy of such
notice within thirty (30) days after the receipt thereof by the Borrower or such
Subsidiary. The Borrower shall promptly take all actions necessary to prevent
the imposition of any Liens on any of its properties or any of the properties of
any of its Subsidiaries arising out of or related to any environmental matters.
(2) In the event that any investigation, site monitoring,
containment, cleanup, removal, restoration or other remedial work of any kind or
nature (the "Remedial Work") with respect to any real property owned, operated
-------------
or leased by the Borrower or any of its Subsidiaries is required to be performed
by the Borrower or any of the Subsidiaries under any applicable local, state or
federal law or regulation, any judicial order, or by any governmental or
nongovernmental entity or Person because of, or in connection with, the current
or future presence, suspected presence, release or suspected release of a
Hazardous Substance in or into the air, soil, groundwater, surface water or soil
85
vapor on, about, under or within the Property (or any portion thereof), the
Borrower or such Subsidiary shall within thirty (30) days after written demand
for performance thereof by the Agent (or such shorter period of time as may be
required under any applicable law, regulation, order or agreement), commence and
thereafter diligently prosecute to completion, all such Remedial Work unless the
requirement to perform such Remedial Work is being contested in good faith by
the Borrower and to the reasonable satisfaction of the Agent.
1.68 Collateral Records. The Borrower agrees to promptly execute and
------------------
deliver, and to cause each of its Subsidiaries to execute and deliver, to 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, including, without limitation, those described in Section
-------
6.1 of this Credit Agreement, designating, identifying or describing the
---
Collateral pledged to the Lenders hereunder. The Borrower's or any of its
Subsidiaries' failure, however, to promptly give the Agent such statements or
schedules shall not affect, diminish, modify or otherwise limit the Agent's
security interests in the Collateral. In addition, upon the Agent's reasonable
request, the Borrower will make available to the Agent copies of agreements
with, or purchase orders from, the customers of the Borrower and its
Subsidiaries, and copies of invoices to customers, proof of shipment or delivery
and such other documentation and information relating to said Collateral as the
Agent may reasonably require. Failure to provide the Agent with any of the
foregoing shall in no way affect, diminish, modify or otherwise limit the
security interests granted herein. The Borrower hereby authorizes the Agent to
regard its or any of its Subsidiaries' printed name or rubber stamp signature on
assignment schedules or invoices as the equivalent of a manual signature by such
Person's authorized officers or agents.
1.69 Security Interests. The Borrower will defend the Collateral
------------------
against all claims and demands of all Persons at any time claiming the same or
any interest therein. The Borrower agrees to comply, and to cause each of its
Subsidiaries to comply, with the requirements of (i) all state and federal laws
in order to grant to the Agent and the Lenders valid and perfected first
security interests in the Collateral, and (ii) upon request of the Agent, all
laws of jurisdictions outside the United States in order to grant to the Agent
and the Lenders valid and perfected first security interests in the Proprietary
Rights Collateral located outside of the United States, in each case subject
only to Permitted Liens identified on Schedule E as being senior to the Liens
----------
created by the Credit Documents and the Orders. Without limiting the generality
of the foregoing, the Borrower shall promptly, upon the request of any Lender,
at the Borrower's expense, execute, acknowledge and deliver, or cause the
execution, acknowledgment and delivery of, and thereafter register, file or
record, or cause to be registered, filed or recorded, in an appropriate
governmental office, any document or instrument supplemental to or confirmatory
of the Ancillary Documents, the Orders or otherwise deemed by the Agent
necessary or reasonably desirable for the continued
86
validity, perfection and priority of the Liens on the Collateral covered thereby
to the extent required by the immediately preceding sentence. The Agent is
hereby authorized by the Borrower to file any financing statements covering the
Collateral whether or not the Borrower's signatures appear thereon. The Borrower
agrees to do, and to cause each of its Subsidiaries to do, whatever the Agent
may reasonably request, from time to time, by way of: filing notices of liens,
financing statements, fixture filings and amendments, renewals and continuations
thereof; cooperating with the Agent's custodians; keeping stock records; using
best efforts to obtain waivers from landlords and mortgagees and from
warehousemen, fillers, processors and packers and their respective landlords and
mortgagees; paying claims, which might if unpaid, become a Lien on the
Collateral; and performing such further acts as the Agent may reasonably require
in order to effect the purposes of this Credit Agreement, the other Credit
Documents and the Orders. Any and all fees, costs and expenses, of whatever kind
and nature (including any Taxes, attorneys' fees or costs for insurance of any
kind), which the Agent may incur with respect to the Collateral or the
Obligations; in filing public notices; in preparing or filing documents; making
title examinations or rendering opinions; in protecting, maintaining, or
preserving the Collateral or its interest therein; in enforcing or foreclosing
the Liens hereunder, whether through judicial procedures or otherwise; or in
defending or prosecuting any actions or proceedings arising out of or relating
to its transactions with the Borrower or any of its Subsidiaries under this
Credit Agreement, any other Credit Document or the Orders, shall be borne and
paid by the Borrower. If same are not promptly paid by the Borrower, the Agent
may pay same on the Borrower's behalf, and the amount thereof shall be an
Obligation secured hereby and due to the Agent on demand.
1.70 Taxes. The Borrower agrees to pay, when due, and to cause each of
-----
its Subsidiaries to pay when due, all Taxes levied or assessed against the
Borrower, any of its Subsidiaries or any of the Collateral; provided,however
-------- -------
that, unless such Taxes have become a federal tax or ERISA Lien on any of the
assets of such Person, no such Tax need be paid if the same is being contested,
in good faith, by appropriate proceedings promptly instituted and diligently
conducted and if an adequate reserve or other appropriate provision shall have
been made therefor as reflected on the audited financial statements for the
fiscal year ended January 1, 2000 in accordance with GAAP, and, to the extent
such reserves shall be taken thereafter, consistent with the Borrower's past
practice.
1.71 Use of Proceeds.
---------------
(1) The initial advances made to the Borrower under this Credit
Agreement shall be used by the Borrower to pay the costs and expenses
contemplated hereby which are due and payable on the Closing Date, including,
without limitation, the Fees and Expenses pursuant to Article 8 hereof, for
---------
Permitted Expenses, and for working capital and
87
general corporate purposes of the Borrower, in each case to the extent permitted
under Section 7.22; and the proceeds of any subsequent advances made hereunder
------------
shall be used by the Borrower for working capital and general corporate purposes
of the Borrower to the extent permitted under Section 7.22, and to repay
------------
outstanding Prepetition Revolving Credit Obligations on the date of the Final
Order, as provided herein, but neither the initial advance nor any subsequent
advance shall be used for the purpose of making repayments of any other Debt to
any Person or honoring any Guarantee, including, without limitation, any
Prepetition Note Purchase Agreement Obligations or any other obligation to any
Noteholder pursuant to any Note Purchase Agreement or "Ancillary Document" (as
defined therein). Notwithstanding the foregoing, no amounts shall be paid or
used pursuant to this Section 6.13 for, and Permitted Expenses shall not
------------
include, fees and disbursements of the Borrower (including, without limitation,
fees, costs and expenses incurred by professionals including, without
limitation, any professionals retained by the Borrowers), to the extent incurred
to contest in any proceeding or any other action (a)(i) the validity, binding
effect or enforceability of any of the Credit Documents or the amount of the
Loans or the other Obligations outstanding hereunder or (ii) any other rights or
interests of the Agent or any Lender under the Credit Documents, or (b)(i) the
validity, binding effect or enforceability of any of the Prepetition Credit
Documents or the amount of the "Loans" or the other "Obligations" outstanding
thereunder (each as defined therein) or (ii) any other rights or interests of
the Prepetition Agent or any Prepetition Lender under the Prepetition Credit
Documents. Nothing herein shall in any way prejudice or prevent the Agent or any
Lender from objecting, for any reason, to any requests or applications made by
any party for compensation or reimbursement of expenses pursuant to Section 330
or 331 of the Bankruptcy Code for which Borrowers may seek to use proceeds of
the Loans as a Permitted Expense.
(2) In addition, Borrower shall not use any portion of the
proceeds of any loans for the purpose of purchasing or carrying any "margin
stock" (within the meaning of Regulation U or X of the Board of Governors of the
Federal Reserve System) or for any other purpose which violates the provisions
of Regulation U or X of said Board of Governors or for any other purpose in
violation of any applicable statute or regulation, or of the terms and
conditions of this Credit Agreement. The Borrower shall use the proceeds of each
Acceptance solely to reimburse the Issuing Bank of each Acceptance Letter of
Credit for obligations owing to such Issuing Bank on account of drawings
thereunder.
1.72 Collection of Accounts. Unless an Event of Default has occurred
----------------------
and shall not have been waived, the Borrower may and will enforce and collect in
accordance with its credit and collection policy, all amounts owing on the
Accounts, for the Lenders' benefit and on the Lenders' behalf, but at the
Borrower's expense in accordance with the provisions of Section 8.5 hereof; such
-----------
privilege shall terminate automatically, however, upon
88
the occurrence and during the continuance of any Event of Default after notice
from the Agent. Any checks, cash, notes or other instruments or property
received by the Borrower or any Subsidiary with respect to any Accounts shall be
immediately deposited into the collection and concentration accounts maintained
pursuant to Section 3.6 hereof. No checks, drafts or other instruments received
-----------
by the Agent shall constitute final payment unless and until such instruments
have actually been collected.
1.73 Notice; Credit Memoranda; and Returned Goods. The Borrower agrees
--------------------------------------------
to issue credit memos promptly (with copies made available to the Agent upon its
request) upon accepting returns or granting allowances, and may continue to do
so until after the occurrence and during the continuance of an Event of Default
and notice from the Agent. After the occurrence and during the continuance of an
Event of Default and notice from the Agent, the Borrower agrees that all
returned, reclaimed or repossessed merchandise or goods shall be set aside by
the Borrower, marked with the Agent's and the Lenders' name and held by the
Borrower for the Agent's and the Lenders' account as owner and assignee.
1.74 Trademarks. The Borrower shall do and cause to be done all things
----------
necessary to preserve and keep in full force and effect all registrations of
trademarks, service marks and other marks, trade names or other trade rights
unless any of the foregoing is no longer in use or is of immaterial value.
Promptly after obtaining any federal registration of any trademark, trade name
or other trade right or the filing of any application therefor, the Borrower
shall deliver to the Agent for the benefit of the Lenders an undated Trademark
Security Agreement, executed in blank, with respect to each such registration
and application.
1.75 Patents. The Borrower shall do and cause to be done all things
-------
necessary to preserve and keep in full force and effect all patents and patent
applications unless any of the foregoing is no longer in use or of immaterial
value. Promptly after obtaining any federal registration of any patent or the
filing of any application therefor, the Borrower shall deliver to the Agent for
the benefit of the Lenders an undated Patent Security Agreement, executed in
blank, with respect to each such registration or application.
1.76 License of Borrower's Name. The Borrower agrees that, in the
--------------------------
event that it seeks approval of the Bankruptcy Court to license the Borrower's
name in the United States to any Person who is not a Subsidiary of the Borrower,
(a) such approval process shall provide for a bid and auction process, which
process shall provide a reasonable opportunity for higher and better offers to
be made, (b) such bid and auction process shall permit competing proposals to be
submitted in any form, including without limitation proposals for purchase of
all or substantially all of the assets of the Borrower, and (c) the
89
terms and conditions of such bid and auction process shall be acceptable to the
Agent in its sole discretion.
ARTICLE VII
Negative Covenants and Financial Covenants
------------------------------------------
Until termination of the Commitments and payment and satisfaction of
all Obligations due hereunder, the Borrower agrees that, unless the Agent shall
have certified to the Borrower that the Required Lenders shall have otherwise
consented in writing:
1.77 Debt and Guarantees.
-------------------
The Borrower shall not, and shall cause its Subsidiaries not to,
create, incur, assume or permit to be outstanding any Debt or any Guarantee
other than:
(1) Debt incurred pursuant to this Credit Agreement;
(2) Debt consisting of Guarantees of the Debt of any
Foreign Subsidiary to the extent such Debt exists on the date hereof and is
listed in Schedule D; provided no payments may be made on or with respect
----------
to such Debt;
(3) Debt outstanding on the Closing Date and identified on
Schedule D, provided that no payment may be made on or with respect to such
----------
Debt and that no such Debt (other than capital leases identified in
Schedule D to the extent that Schedule D expressly permits refinancing of
---------- ----------
such capital leases) may be refinanced unless, in the case of capital
leases, Schedule D expressly provides for renewal or refinancing of such
----------
Leases; and
(4) Debt of Foreign Subsidiaries to the extent such debt is
listed on Schedule G.
----------
1.78 Restricted Payments. The Borrower will not, directly or
-------------------
indirectly, (i) declare or pay any dividend or make any distribution on its
capital stock or to the holders of its capital stock (other than dividends or
distributions payable in its capital stock or rights to acquire its capital
stock), (ii) redeem, repurchase or otherwise acquire or retire for value, or
permit any Subsidiary to, directly or indirectly, redeem, purchase or otherwise
acquire or
90
retire for value, or permit any Subsidiary to, directly or indirectly, redeem,
purchase or otherwise acquire or retire for value, any capital stock of the
Borrower or its Subsidiaries (except shares acquired upon the conversion thereof
into other shares of capital stock or rights to acquire such capital stock) or
rights to acquire such capital stock, (iii) redeem, repurchase, defease or
otherwise acquire or retire for value or make any payment with respect to, or
permit any Subsidiary to, directly or indirectly, redeem, repurchase, defease or
otherwise acquire or retire for value or make any payment with respect to, Debt
of the Borrower or any of such Subsidiaries (other than (x) Debt incurred
pursuant to this Credit Agreement or the Prepetition Revolving Credit
Obligations to the extent permitted hereunder and (y) in the case of a Foreign
Subsidiary, payments by such Foreign Subsidiary on account of Debt listed on
Schedule G), or (iv) pay or agree to pay any management fee or other payment of
----------
any kind whatsoever to Apollo or any Affiliate of Apollo, nor will the Borrower
permit any of its Subsidiaries to make any such payment to Apollo or any
Affiliate of Apollo.
1.79 Investments. The Borrower will not, and will not permit any of
-----------
its Subsidiaries (other than Foreign Subsidiaries) to, make or acquire any
Investment in any Person other than:
(1) Investments in Subsidiaries existing on the Closing Date and
disclosed on Schedule D; and
----------
(2) Permitted Investments.
1.80 Negative Pledge. Neither the Borrower nor any Subsidiary
---------------
(other than Foreign Subsidiaries) will create, assume or suffer to exist any
Lien on any asset now owned or hereafter acquired by it, except Permitted Liens.
1.81 Consolidations, Mergers and Sales of Assets
-------------------------------------------
(1) The Borrower will not, directly or indirectly, in whole or
in part, enter into any Asset Disposition, other than dispositions of (i)
Inventory (including obsolete Inventory) in the ordinary course of business,
(ii) Accounts supported by letters of credit discounted on a commercially
reasonable basis, (iii) obsolete or worn out equipment in any one-year period
having a value of not more than $100,000, and (iv) other property, plant or
equipment; provided that no such Asset Disposition shall be permitted under
--------
clause (iv) unless (aa) any such Asset Disposition shall be for no less than the
------ ----
fair market value of the applicable asset at the time of such sale, (bb) the
purchase price for the assets sold, conveyed, leased or otherwise transferred in
such transaction shall be paid to the Borrower solely in cash on the closing
date of such transaction, (cc) the proceeds of such transaction shall be used to
prepay the Revolving Loans and to permanently reduce the Commitments to the
extent required by and in accordance with the terms of Section 3.5(d) hereof,
--------------
and (dd)
91
no Default or Event of Default has occurred and is continuing or would result
from such transaction (which requirement may be waived in writing by the Agent
in its good faith discretion).
(2) The Borrower shall continue to maintain the operating
integrity of its business and shall continue to operate only in the same general
types of businesses as now conducted thereby and reasonable extensions thereof,
and shall continue to preserve, renew and keep in full force and effect, its
corporate existence and all material rights, privileges and franchises necessary
or desirable in the normal conduct of its business; provided, that nothing in
--------
this Section 7.5(b) shall prohibit the Borrower from discontinuing its
--------------
manufacturing operations and converting to a Person primarily engaged in the
licensing of its Proprietary Rights.
(3) The Borrower will not, and will not permit any Subsidiary
to, consolidate or merge with or into any other Person.
(4) The Borrower will not, and will not permit any Subsidiary
to, purchase or otherwise acquire all or substantially all of the assets of any
Person or all or substantially all of the capital stock or other ownership
interests of any Person.
1.82 Capital Expenditures. The Borrower shall not make, or commit to
--------------------
make, Consolidated Capital Expenditures, during the term of this Credit
Agreement, in excess of $500,000 in the aggregate.
1.83 Transactions with Affiliates. The Borrower will not, and will
----------------------------
not permit any of its Subsidiaries to, directly or indirectly, pay any funds to
or for the account of, make any Investment (whether by acquisition of stock or
indebtedness, by loan, advance, transfer of property, guarantee or other
agreement to pay, purchase or service, directly or indirectly, any Debt, or
otherwise) in, lease, sell, transfer or otherwise dispose of any assets,
tangible or intangible, to, or participate in, or effect any other transaction
with, or render to or receive any service from, any Affiliate; provided,
--------
however, that the foregoing provisions of this Section 7.7 shall not prohibit,
------- -----------
the Borrower or any Subsidiary from making sales to or purchases from any
Affiliate and, in connection therewith, extending credit or making payments, or
from making payments for services rendered by any Affiliate, or from effecting
any other transactions with an Affiliate, if such sales or purchases are made or
such services are rendered, or such other transactions are effected, on terms
and conditions at least as favorable and reasonable to the Borrower or such
Subsidiary as the terms and conditions which would apply in a similar
transaction on an arm's length basis with a Person not an Affiliate and will not
have a material adverse effect on the Collateral taken as a whole or the
Accounts and Inventory; provided, however, that, notwithstanding the foregoing,
------- -------
the
92
Borrower will not, and will not permit any of its Subsidiaries to, directly or
indirectly, pay or agree to pay any management fee or other payment of any kind
whatsoever to Apollo or any Affiliate of Apollo.
The foregoing restrictions shall not apply to reasonable fees paid to
and indemnity provided on behalf of the Directors and officers of the Borrower
or any of its Subsidiaries in the ordinary course of business and consistent
with past practices.
1.84 Restrictions on Foreign Subsidiary Support. Except for open
------------------------------------------
accounts existing as of January 22, 2001, the Borrower will not permit to exist
any open account sales, transfers by the Borrower of goods of any kind, or any
other financial support, to any Foreign Subsidiary, except the Borrower may, in
the ordinary course of business and consistent with past practice in amounts
similar to those funded historically by the Borrower to such entities or for
such purposes, as applicable, and to the extent permitted under Section 7.22,
------------
fund (a) operating expenses of Calzado Deportivo ▇▇ ▇▇▇▇▇▇▇, ▇.▇., (b) operating
expenses of Converse Japan, Inc., and (c) operating expenses for European
licensing offices.
1.85 Environmental Matters. The Borrower, will not, and will not
---------------------
permit any of the Subsidiaries to, use, generate, manufacture, produce, store,
release, discharge or dispose of, on, under or about any real property owned,
operated or leased by the Borrower or any of its Subsidiaries, or transport to
or from any such property, any Hazardous Substance, or (to the extent within the
Borrower's or any such Subsidiary's control) permit any other person to do so,
where such could reasonably be expected to have a Material Adverse Effect.
1.86 Amendments to Certificates of Incorporation and By-Laws. The
-------------------------------------------------------
Borrower shall not, nor shall it permit any of its Subsidiaries to, alter or
modify their respective Articles or Certificate of Incorporation or By-Laws in
any manner. The Borrower shall not change its corporate name, mailing address,
principal place of business or structure, unless it shall have complied with the
requirements of Section 6.5 hereof.
-----------
1.87 No Prohibited Transactions Under ERISA.
--------------------------------------
The Borrower shall not do any of the following if such action could reasonably
be expected to result in the Borrower incurring a liability, individually or in
the aggregate equal to or in excess of $2,500,000:
(1) Engage, or permit any ERISA Affiliate to engage, in any
prohibited transaction which could result in a civil penalty or excise tax
described in Sections 502(i) of ERISA or 4975 of the Internal Revenue Code for
which a statutory or class exemption is not available or a private exemption has
not been previously obtained from the DOL;
93
(2) permit to exist with respect to any Benefit Plan any
accumulated funding deficiency (as defined in Sections 302 of ERISA and 412 of
the Internal Revenue Code), whether or not waived;
(3) fail, or permit any ERISA Affiliate to fail, to pay timely
required contributions or annual installments due with respect to any waived
funding deficiency to any Benefit Plan;
(4) terminate, or permit any ERISA Affiliate to terminate, any
Benefit Plan;
(5) fail, or permit any ERISA Affiliate to fail, to make any
required contribution or payment to any Multiemployer Plan;
(6) fail, or permit any ERISA Affiliate to fail, to pay any
required installment or any other payment required under Section 412 of the
Internal Revenue Code on or before the due date for such installment or other
payment;
(7) amend, or permit any ERISA Affiliate to amend, a Benefit
Plan resulting in an increase in current liability for the plan year such that
any Borrower or any ERISA Affiliate is required to provide security to such Plan
under Section 401(a)(29) of the Internal Revenue Code; or
(8) withdraw, or permit any ERISA Affiliate to withdraw, from
any Multiemployer Plan.
1.88 No Additional Bank Accounts. The Borrower Will not, and shall
---------------------------
not permit any of its domestic Subsidiaries to, directly or indirectly, open,
maintain or otherwise have any checking, savings or other accounts at any bank
or other financial institution, or any other account where money is or may be
deposited or maintained with any Person, other than the Loan Disbursement
Account and the accounts set forth on Schedule F.
----------
1.89 No Additional Subsidiaries. The Borrower will not, and shall
--------------------------
not permit any of its Subsidiaries to, directly or indirectly, form or acquire
any new Subsidiaries, including Foreign Subsidiaries.
1.90 Reclamation Claims; Bankruptcy Code Section 546(g) Agreements.
-------------------------------------------------------------
Borrower will not, and shall not permit any of its Subsidiaries to, directly or
indirectly, (a) make any payments or transfer any property on account of claims
asserted
94
by an vendors of the Borrower or any of its Subsidiaries for reclamation in
accordance with Section 2-702 of the Code and Section 546(c) of the Bankruptcy
Code or (b) enter into any agreements or file any motion seeking a Bankruptcy
Court order for the return of inventory to any vendor pursuant to Section 546(g)
of the Bankruptcy Code.
1.91 No Acquisition of Real Property. The Borrower shall not, and
-------------------------------
shall not permit any of its Subsidiaries to, directly or indirectly, purchase or
acquire any ownership interest in real property other than the Owned Real
Property.
1.92 Chapter 11 Claims. The Borrower shall not incur, create, assume,
-----------------
suffer to exist or permit any other Super-priority Claim that is pari passu
---- -----
with or senior to the claims of the Agent and the Lenders against the
Borrower hereunder, except for the Carve-Out.
1.93 Application to the Bankruptcy Court. The Borrower shall not apply
-----------------------------------
to the Bankruptcy Court for authority to (a) take any action that is prohibited
by the terms of this Agreement or the other Credit Documents, (b) refrain from
taking any action that is required to be taken by the terms of this Agreement or
the other Credit Documents, or (c) permit any Debt or claim to be pari passu
---- -----
with or senior to the Obligations except for the Carve-Out.
1.94 Modifications to Interim Order or Final Order.
---------------------------------------------
(1) The Borrower shall not consent to any amendment, supplement
or other modification of any of the terms or provisions contained in, or
applicable to, the Interim Order or the Final Order.
(2) The Borrower shall not make any Permitted Prepetition Claim
Payments after the occurrence of and during the continuance of a Default or
Event of Default.
1.95 Principal Amount of Revolving Loans. The Borrower shall not, on
-----------------------------------
any date on or after the first Amortization Date, have Obligations outstanding
in excess of the Projected Commitment for the most recently preceding
Amortization Date (or, if such date is an Amortization Date, for such date).
1.96 No Additional Retail Stores. The Borrower shall not, and shall
---------------------------
not, and shall not permit any of its Subsidiaries to, directly or indirectly, ot
permit any of its Subsidiaries to, directly orindirectly, open any retail store
after the date hereof.
95
1.97 Operations and Assets of Subsidiaries. The Borrower shall not
-------------------------------------
permit any of its Subsidiaries to, directly or indirectly, locate or suffer to
be located any material operations or assets in the United States, except for
shares of capital stock held by such Subsidiaries in their respective
Subsidiaries.
1.98 Certain Payments. The Borrower shall not (x) make any payment
----------------
account of any Claim arising or deemed to have arisen prior to the Filing Date
(including any payments made as adequate protection) unless such payment is both
a Permitted Prepetition Claim Payment and is provided for in the Initial Monthly
Budget, (y) make any payment to Foreign Subsidiaries except payments set forth
in the Initial Monthly Budget and satisfying the requirements of Section 7.8, or
-----------
(z) make any payment (A) except in a manner consistent with the Initial Monthly
Budget or (B) for any Monthly Accounting Period, in excess of the total of (i)
the Budgeted Amount, plus (ii) the Permitted Variance, plus (iii) the Cumulative
---- ----
Carryforward (such total, the "Maximum Budget Amount" for such Monthly
---------------------
Accounting Period).
ARTICLE VIII
Interest, Fees and Expenses
---------------------------
1.99 Interest on LIBOR Rate Loans. Subject to the provisions of
----------------------------
Section 8.4 hereof, interest on LIBOR Rate Loans shall be payable at the end of
-----------
each applicable Interest Period with respect to such LIBOR Rate Loan (or, in the
case of Interest Periods in excess of one month, on every thirtieth (30th) day
from the beginning of such Interest Period, and on the last day of such Interest
Period), at the date of Conversion of such LIBOR Rate Loan (or a portion
thereof) to a Prime Rate Loan and at maturity of such LIBOR Rate Loan at an
interest rate per annum equal during the Interest Period for such LIBOR Rate
Loan to the Adjusted LIBOR Rate for the Interest Period in effect for such LIBOR
Rate Loan plus the LIBOR Rate Margin. The Agent upon determining the Adjusted
----
LIBOR Rate for any Interest Period shall promptly notify the Borrower and the
Lenders by telephone (confirmed promptly in writing) or in writing thereof. Each
determination by the Agent of an interest rate hereunder shall be conclusive and
binding for all purposes, absent manifest error.
1.100 Interest on Prime Rate Loans. Subject to the provisions of
----------------------------
Section 8.4 hereof, interest on Prime Rate Loans shall be payable monthly in
-----------
arrears as of the end of each month at an interest rate per annum equal to the
Prime Lending Rate plus one and one-half percent (1.50%). In the event of any
----
change in said Prime Lending Rate, the rate hereunder shall change, effective as
of the day the Prime Lending Rate changes. The rate hereunder shall be
calculated based on a 360-day year for the actual number of days
96
elapsed.
1.101 Notice of Rollover and Notice of Conversion.
-------------------------------------------
(1) With respect to any borrowing consisting of LIBOR Rate
Loans, the Borrower may, subject to the provisions of Section 8.3(c) and
--------------
provided that no Default or Event of Default has occurred and is continuing,
elect to maintain such borrowing or any portion thereof as consisting of LIBOR
Rate Loans by selecting a new Interest Period for such borrowing, which new
Interest Period shall commence on the last day of the immediately preceding
Interest Period. Each selection of a new Interest Period (a "Rollover") shall
--------
constitute a borrowing and shall be made by notice given not later than 12:00
noon. (New York time) on the third Business Day prior to the date of any such
Rollover relating to LIBOR Rate Loans, by the Borrower to the Agent. Such notice
by the Borrower of a Rollover (a "Notice of Rollover") shall be by telephone,
------------------
telecopy, telex or cable, confirmed immediately in writing if by telephone, in
substantially the form of Exhibit N hereto, specifying (i) the date of such
---------
Rollover, (ii) the Type of Loans subject to such Rollover, (iii) the aggregate
amount of Loans subject to such Rollover and (iv) the duration of the selected
Interest Period, all of which shall be specified in such manner as is necessary
to comply with all limitations on Loans outstanding hereunder. The Borrower may
elect to maintain more than one borrowing consisting of LIBOR Rate Loans by
combining such borrowings into one borrowing and selecting a new Interest Period
pursuant to this Section 8.3(a); provided, however, that each of the borrowings
-------------- -------- -------
so combined shall consist of Loans having Interest Periods ending on the same
date. If the Borrower shall fail to select a new Interest Period for any
borrowing consisting of LIBOR Rate Loans in accordance with this Section 8.3(a),
--------------
or if at the end of any applicable Interest Period a Default or Event of Default
shall exist, the Agent will forthwith so notify the Borrower and the Lenders,
and such Loans will automatically, on the last day of the then existing Interest
Period therefor, convert into Prime Rate Loans.
(2) The Borrower may on any Business Day (provided that no
Default or Event of Default has occurred and is continuing), upon notice (each
such notice, a "Notice of Conversion") given by the Borrower to the Agent, and
--------------------
subject to the provisions of Section 8.3(c), convert the entire amount of or a
--------------
portion of all Loans of one Type comprising the same borrowing into Loans of
another Type; provided, however, that any conversion of any LIBOR Rate Loans
-------- -------
into Loans of another Type shall be made on, and only on, the last day of an
Interest Period for such LIBOR Rate Loans and, upon conversion of any Prime Rate
Loans into Loans of another Type, the Borrower shall pay accrued interest to the
date of conversions on the principal amount converted. Each such Notice of
Conversion shall be given not later than 12:00 noon (New York time) on the
Business Day prior to the date of any proposed conversion into Prime Rate Loans
and on the third Business
97
Day prior to the date of any proposed Conversion into LIBOR Rate Loans. Subject
to the restrictions specified above, each Notice of Conversion shall be by
telephone, telecopy, telex or cable confirmed immediately in writing if by
telephone in substantially the form of Exhibit O hereto specifying (i) the
---------
requested date of such Conversion, (ii) the Type of Loans to be converted, (iii)
the portion of such Type of Loan to be converted, (iv) the Type of Loan such
Loans are to be converted into and (v) if such Conversion is into LIBOR Rate
Loans, the duration of the Interest Period of such Loan. Each Conversion shall
be in an aggregate amount for the Loans of all Lenders of not less than
$5,000,000 or an integral multiple of $1,000,000 in excess thereof. The Borrower
may elect to convert the entire amount of or a portion of all Loans of one Type
comprising more than one borrowing into Loans of another Type by combining such
borrowings into one borrowing consisting of Loans of another Type; provided,
--------
however, that if the borrowings so combined consist of LIBOR Rate Loans, such
-------
Loans shall have Interest Periods ending on the same date.
(3) Anything in subsections (a) and (b) above to the
--------------- ---
contrary,
(1) if the Agent is unable to determine the LIBOR Rate
for LIBOR Rate Loans comprising any requested borrowing, Rollover or
Conversion, the right of the Borrower to select or maintain LIBOR Rate
Loans for such borrowing or any subsequent borrowing shall be suspended
until the Agent shall notify the Borrower and the Lenders that the
circumstances causing such suspension no longer exists, and each Loan
comprising such borrowing shall be a Loan of a Type that is unaffected by
such circumstances, as selected by the Borrower pursuant to this Credit
Agreement; and
(2) if (A) any Lender shall notify the Agent that it
has determined that maintenance of one or more LIBOR Rate Loans would
violate any applicable law, rule, regulation or directive, whether or not
having the force of law, or (B) the Required Lenders shall, at least one
Business Day before the date of any requested borrowing, Rollover or
Conversion, notify the Agent that deposits of a type and maturity
appropriate to match fund any borrowing of LIBOR Loans are not available,
then the right of the Borrower to select LIBOR Rate Loans for such
borrowing shall be suspended until the Agent shall notify the Borrower and
the Lenders that the circumstances causing such suspension no longer exist,
and each Loan comprising such borrowing shall be a Loan of a Type that is
unaffected by such circumstances, as selected by the Borrower pursuant to
this Credit Agreement. The Agent shall give the Borrower notice when the
circumstances causing such suspension no longer exist.
98
(4) The Agent shall give to each Lender prompt notice of any
Notice of Rollover or Notice of Conversion by telecopy, telex or cable. Each
Notice of Rollover and Notice of Conversion shall be irrevocable by and binding
on the Borrower. In the case of any borrowing, Rollover or Conversion that the
related Notice of Borrowing, Notice of Rollover or Notice of Conversion
specifies is to be comprised of LIBOR Rate Loans, the Borrower shall indemnify
each Lender against any loss, cost or expense incurred by such Lender as a
result of any failure to fulfill, on or before the date for such borrowing,
Rollover or Conversion specified in such Notice of Borrowing, Notice of Rollover
or Notice of Conversion, the applicable conditions set forth in Article 2,
including, without limitation, any loss (including loss of anticipated profits),
cost or expense incurred by reason of the liquidation or re-employment of
deposits or other funds acquired by such Lender to fund the Loan to be made by
such Lender as part of such borrowing, Rollover or Conversion.
1.102 Interest After Event of Default. Intereston any amount of
-------------------------------
matured principal under the Loans, and interest on the amount of principal under
the Loans outstanding as of the date an Event of Default specified in Section
-------
10.1(a) hereof occurs or following the date written notice to the Borrower of
-------
the occurrence of any other Event of Default is received by the Borrower, and at
all times thereafter until the earlier of the date upon which (i) all
Obligations have been paid and satisfied in full or (ii) such Event of Default
shall have been waived, shall be payable on demand at a rate equal to the rate
at which the Loans are bearing interest pursuant to Section 8.1 or Section 8.2
----------- ------------
above, as applicable, plus two percent (2.00%). In the event of any change in
----
said applicable interest rate, the rate hereunder shall change, effective as of
the day the applicable interest rate changes, so as to remain two (2.00%)
percent above the then applicable interest rate. The rate hereunder shall be
calculated based on a 360-day year for the actual number of days elapsed.
1.103 Reimbursement of Expenses.
-------------------------
(1) On the Closing Date, the Borrower shall reimburse the
Agent for all Expenses incurred by the Agent on or prior to the Closing Date.
From and after the Closing Date, the Borrower shall promptly reimburse the Agent
for all Expenses of the Agent as the same are incurred by the Agent and upon
receipt of invoices therefor and, if requested by the Borrower, such reasonable
backup materials and information as the Borrower shall reasonably request. In
addition, the Borrower shall reimburse the Agent, any Issuing Bank, any
Accepting Bank and each Lender upon demand for all costs and expenses
(including, without limitation, reasonable attorneys' fees) of each of the
Lenders in connection with (i) the enforcement (whether through negotiations,
legal proceedings or otherwise) of this Credit Agreement, the other Credit
Documents and the Order and (ii) any
99
action or proceeding relating to a court order, injunction or other process or
decree restraining or seeking to restrain the Agent, any Issuing Bank and the
Lenders, or any of them, from paying any amount under any Letter of Credit.
(2) If any payment of principal of, or Conversion or Rollover
of, any LIBOR Rate Loan is made other than on the last day of the Interest
Period for such Loan as a result of a payment, prepayment, Conversion or
Rollover of such Loan or acceleration of the maturity of the Notes pursuant to
Article 10 hereof or for any other reason, the Borrower shall, upon demand by
----------
any Lender (with a copy of such demand to the Agent), pay to the Agent for the
account of such Lender any amounts required to compensate such Lender for any
additional losses, costs or expenses which it may reasonably incur as a result
of such payment, including, without limitation, any loss (including loss of
anticipated profits), cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by any Lender to fund or
maintain such Loan.
1.104 Unused Line Fee. The Borrower shall pay to the Agent for the
----------------
account of the Lenders an unused line fee (the "Unused Line Fee") in an amount
---------------
equal to fifty hundredths of one percent (.50%) per annum on the average unused
portion of the Total Commitments then in effect, accruing from the first day
after the Closing Date and calculated on the basis of a 360-day year for the
actual number of days elapsed. The Unused Line Fee shall be payable monthly in
arrears on the last Business Day of each month after the Closing Date and on the
Termination Date. For purposes of calculating the Unused Line Fee, the aggregate
amount of the then outstanding (i) Revolving Loans, (ii) Letter of Credit
Obligations and (iii) Acceptance Obligations shall constitute usage.
1.105 Letter of Credit Fees; Acceptance Commissions.
---------------------------------------------
(1) The Borrower agrees to pay to the Agent for the account of
the Lenders in the case of each Letter of Credit, a Letter of Credit fee (the
"Letter of Credit Fees") (i) based on the undrawn and outstanding face amount of
---------------------
any such commercial Letter of Credit at a rate per annum equal to two percent
(2.00)% and (ii) based on the undrawn and outstanding face amount of any such
standby Letter of Credit at a rate per annum equal to two percent (2.00%), in
all cases calculated on the basis of a 360-day year for the actual number of
days elapsed. In addition, the Borrower agrees to pay to the Issuing Bank for
the account of the Issuing Bank a facing fee equal to one-half of one percent
(0.50%) on the initial face amount of each commercial or stand-by Letter of
Credit (the "L/C Facing Fee"). The Letter of Credit Fees and the L/C Facing Fees
--------------
shall be payable monthly in arrears on the last Business Day of each month after
the issuance of such Letter of Credit during the term of such Letter of Credit
and on the expiration date of such Letter of Credit. Notwithstanding the
foregoing, all Letter of Credit Fees shall be payable on demand and
100
shall increase to a rate which is two percent (2.00%) above the Letter of Credit
Fee rate that is otherwise applicable to any such Letters of Credit if (i) an
Event of Default set forth in Section 10.1(a) hereof occurs or (ii) the Agent
---------------
gives written notice to the Borrower of any other Event of Default set forth in
Section 10.1, and such increased rate shall remain in effect until such Event of
------------
Default is waived.
(2) The Borrower agrees to pay to the Agent for the account of
the Lenders as and when incurred by the Agent or any Lender, any charges, fees,
costs and expenses charged to the Agent or any Lender for the Borrower's account
by the Issuing Bank (other than any fees charged to the Agent or any Lender
which would be duplicative of the Letter of Credit Fees and the L/C Facing Fee
paid to the Agent for the benefit of the Lenders) in connection with the
issuance of any Letters of Credit by the Issuing Bank. The Borrower further
agrees to pay to the Issuing Bank upon demand for its own account, the Issuing
Bank's customary issuing, administrative and negotiating fees.
(3) The Borrower agrees to pay to the Agent for the account of
the Lenders in the case of each Acceptance, an Acceptance commission (the
"Acceptance Commission") based on the face amount of such Acceptance for the
---------------------
period from the date of acceptance to maturity at a rate per annum equal to two
percent (2.00%) on the basis of a 360-day year for the actual number of days
elapsed. The Acceptance Commissions shall be payable upon the creation of such
Acceptance. Notwithstanding the foregoing, all Acceptance Commissions shall
increase to a rate which is two percent (2.00%) above the Acceptance Commission
rate that is otherwise applicable to any such Acceptance if (i) an Event of
Default set forth in Section 10.1(a) hereof occurs or (ii) the Agent gives
---------------
written notice to the Borrower of any other Event of Default set forth in
Section 10.1 and such increased rate shall remain in effect until such Event of
------------
Default is waived.
(4) The Borrower agrees to pay to the Agent for the account of
the Lenders as and when incurred by the Agent or any Lender, any charges, fees,
costs and expenses charged to the Agent or any Lender for the Borrower's account
by the Accepting Bank (other than any fees charged to the Agent or any Lender
which would be duplicative of the Acceptance Commissions paid to the Agent for
the benefit of the Lenders) in connection with the creation or discount of any
Acceptance by the Accepting Bank. The Borrower further agrees to pay to the
Accepting Bank upon demand for its own account, the Accepting Bank's customary
creation, discounting, administrative and negotiating fees.
1.106 Fees; Expenses. The Borrower agrees to pay the following fees
--------------
in such amounts and at such times as follows:
101
(1) to the Agent for its sole account as a collateral
management fee, an amount equal to $125,000, payable on the Closing Date and on
each anniversary thereof during the term hereof (the "Collateral Management
---------------------
Fee");
---
(2) a nonrefundable closing fee of 150 basis points on the
Total Commitment as of the Closing Date (the "Closing Fee"), payable to the
-----------
Agent for the account of the Lenders (in accordance with their respective
Proportionate Shares), such fee to be fully earned on the Closing Date and to be
payable in two installments as follows:
(i) 100 basis points paid on January 12, 2001 in
connection with the closing of the Fourteenth Amendment to Credit
Agreement, dated as of January 12, 2001, among the Borrower, the
Prepetition Lenders party thereto, and the Agent (the "Fourteenth
----------
Amendment"); and (ii) 50 basis points to be paid on February 28, 2001,
---------
provided that the Borrower shall be entitled to a credit of $200,000
--------
against this fee on account of the fees paid under the Forbearance
Agreement, dated as of October 27, 2000, among the Borrower, the Lenders
party thereto, and the Agent;
(3) on each of February 28, 2001 and April 15, 2001, if the
Fixed Asset Reserve on such date shall not be equal to or greater than
$8,895,000, a nonrefundable fee of $250,000 (each, a "Fixed Asset Reserve Fee"),
-----------------------
payable to the Agent for the account of the Lenders (in accordance with their
respective Proportionate Shares);
(4) upon demand by the Agent after the incurrence thereof, all
reasonable costs and Expenses of the Agent incurred in connection with the
audits, inspection and examination of the Collateral described in this Credit
Agreement, the other Credit Documents and the Orders, and all reasonable legal
fees and Expenses of the Agent in connection with the management of the loan
facility as contemplated hereunder.
1.107 Authorization to Charge Account. The Borrower hereby
-------------------------------
authorizes the Agent to charge the Borrower's Loan Account with the amount of
all payments and Fees and Expenses due hereunder as and when such payments
become due. The Borrower confirms that any charges which the Agent may so make
to the Borrower's Loan Account as herein provided will be made as an
accommodation to the Borrower and solely at the Agent's discretion.
1.108 Indemnification in Certain Events. If after the Closing Date,
---------------------------------
either (i) any change in or in the interpretation of any law or regulation is
introduced, including, without limitation, with respect to reserve requirements,
applicable to Deutsche Bank or any other banking or financial institution from
whom any of the Lenders borrow funds or obtain credit (a "Funding Bank") or any
------------
of the Lenders, or (ii) a Funding Bank or any of the Lenders
102
complies with any future guideline or request from any central bank or
other governmental authority or (iii) a Funding Bank or any of the Lenders
determines that the adoption of any applicable law, rule or regulation regarding
capital adequacy, or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof has or would
have the effect described below, or a Funding Bank or any of the Lenders
complies 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, and in the case of any event set forth in this clause (iii), such
------------
adoption, change or compliance has or would have the direct or indirect effect
of reducing the rate of return on any of the Lenders' capital as a consequence
of its obligations hereunder to a level below that which such Lender could have
achieved but for such adoption, change or compliance (taking into consideration
the Funding Bank's or Lenders' policies with respect to capital adequacy) by an
amount deemed by such Lender to be material, and the result of any of the
foregoing events described in clauses (i), (ii) or (iii) is or results in an
----------- ---- -----
increase in the cost to any of the Lenders of funding or maintaining any such
Lender's Commitments, then the Borrower shall from time to time upon demand by
the Agent (which demand shall be made by the Agent upon the request of any such
Lender), pay to the Agent additional amounts sufficient to indemnify the Lenders
against such increased cost. A certificate as to the amount of such increased
cost shall be submitted to the Borrower by the Lender requesting such additional
amount or increased cost and shall be conclusive absent manifest error.
1.109 Waiver of Certain Prepetition Fees. The 50 basis point fee
----------------------------------
payable pursuant to Section 3.1(ii) of the Fourteenth Amendment, and the
$500,000 fee payable pursuant to Section 3.2 of the Fourteenth Amendment, are
each hereby waived.
ARTICLE IX
Powers of Attorney
------------------
1.110 Appointment as Attorney-in-Fact. The Borrower hereby
-------------------------------
irrevocably authorizes and appoints the Agent or any Person or agent the Agent
may designate as such Borrower's attorney-in-fact, at the Borrower's cost and
expense, to exercise, subject to the limitations set forth in Section 9.2
-----------
hereof, all of the following powers, which being coupled with an interest, shall
be irrevocable until all of the Obligations to the Lenders have been paid and
satisfied in full:
(1) to receive, take, endorse, sign, assign and deliver, all
in the name of the Agent, the Lenders or the Borrower, any and all checks,
notes, drafts, and other documents or instruments relating to the Collateral;
103
(2) to receive, open and dispose of all mail addressed to the
Borrower and to notify postal authorities to change the address for delivery
thereof to such address as the Agent may designate;
(3) to request at any time from customers indebted on
Accounts, in the name of the Agent, the Lenders or the Borrower or that of the
Agent's or Lenders' designee, information concerning the Accounts and the
amounts owing thereon;
(4) to give customers indebted on Accounts notice of the
Lenders' interest therein, and/or to instruct such customers to make payment
directly to the Agent for the Borrower's account;
(5) to take or bring, in the name of the Agent, the Lenders or
the Borrower, all steps, actions, suits or proceedings deemed by the Agent
necessary or desirable to enforce or effect collection of the Accounts; and
(6) to revise, update, amend and otherwise complete the
Trademark Security Agreements and the Patent Security Agreements as the Agent
may determine to be necessary or desirable to, and file, record and register any
or all of the Trademark Security Agreements and the Patent Security Agreements
with the United States Patent and Trademark Office in order to, assign and
transfer the trademarks and patents covered thereby to any Person, including,
without limitation, the Agent or any of the Lenders.
1.111 Limitation on Exercise of Power. Notwithstanding anything
-------------------------------
hereinabove to the contrary, the powers set forth in clauses (b), (d), (e) and
----------- --- ---
(f) above may only be exercised by the Agent on and after the occurrence of an
---
Event of Default which has not been waived by the Agent. The powers set forth in
clauses (a) and (c) above may be exercised by the Agent at any time.
----------- ---
ARTICLE X
Events of Default and Remedies
------------------------------
1.112 Events of Default. The occurrence of any of the following
-----------------
events shall constitute an Event of Default hereunder:
(1) failure of the Borrower to pay (i) any Fees or Expenses or
other Obligations (other than principal or interest) when due, or if the amount
in the Borrower's accounts and the Borrower's Borrowing Base is insufficient to
permit such payment when
104
due, then within two (2) Business Days of when due, in each case whether at
stated maturity, by acceleration, or otherwise or (ii) any principal or interest
when due, whether at stated maturity, by acceleration or otherwise;
(b) (i) failure of the Borrower to perform, comply with or
observe any term, covenant or agreement applicable to it contained in
Sections 6.1 (except in Sections 6.1(e), (f) or (g)), 6.2, 6.3, 6.5, 6.7,
------------ --------------- --- --- --- --- --- ---
6.8, 6.10, 6.11, 6.13, or 6.14 or Article VII hereof;
--- ---- ---- ---- ---- -----------
(1) failure of the Borrower to perform, comply with or
observe any term, covenant or agreement applicable to it in Sections
--------
6.1(e), (f) or (g) and the failure shall continue unremedied until five (5)
------ --- ---
Business Days after the earlier of (x) the date that the Borrower becomes
aware of any such failure or (y) the Agent's delivery of notice to the
Borrower of such failure;
(2) failure of the Borrower or any Subsidiary of the
Borrower to perform, comply with or observe any term, covenant or agreement
applicable to it in any Credit Document or any other agreement, document,
instrument or certificate among the Borrower or any Subsidiary of the
Borrower, the Agent and the Lenders or executed by the Borrower or any
Subsidiary of the Borrower in favor of the Agent or the Lenders (other than
a provision covered by clause (i) or (ii) above) and the failure shall
---------- ----
continue unremedied until ten (10) Business Days after the earlier of (x)
the date that the Borrower or such Subsidiary becomes aware of any such
failure or (y) the Agent's delivery of notice to the Borrower of such
failure;
(2) breach by the Borrower of any representation or warranty
contained in this Credit Agreement (other than under a provision covered by
subsection (a) or (b) above), the other Credit Documents, or any other
-------------- ---
agreement, document, instrument or certificate among the Borrower, the Agent and
the Lenders or executed by the Borrower in favor of the Agent or the Lenders;
(3) (i) the Case shall be dismissed, suspended or converted to
a case under Chapter 7 of the Bankruptcy Code or (ii) a trustee under Chapter 11
of the Bankruptcy Code shall be appointed in the Case;
(4) (i) an order of the Bankruptcy Court shall be entered
granting another Super-priority Claim or Lien pari passu with or senior to that
---- -----
granted (X) to the Agent and the Lenders pursuant to this Credit Agreement, the
other Credit Documents and
105
the Orders or (Y) to the Prepetition Lenders, (ii) an order of a court of
competent jurisdiction shall be entered reversing, staying, vacating or
rescinding either of the Orders, (iii) an order of a court of competent
jurisdiction shall be entered amending, supplementing or otherwise modifying
either of the Orders, (iv) an order of the Bankruptcy Court shall be entered
authorizing the obtaining of credit or the incurring of indebtedness that is
entitled to status as a Super-priority Claim or Lien pari passu with or senior
---- -----
to that granted (X) to the Agent and the Lenders pursuant to this Credit
Agreement, the other Credit Documents and the Orders or (Y) to the Prepetition
Lenders, or (v) an order of the Bankruptcy Court shall be entered which
authorizes the use by the Debtor of the Prepetition Lenders' Cash Collateral
other than as expressly set forth in the Orders;
(5) an order of the Bankruptcy Court shall be entered in the
Case appointing an examiner having enlarged powers relating to the operation of
the Borrower's business (powers beyond those set forth under Sections 1106(a)(3)
and (4) of the Bankruptcy Code) under Section 1106(b) of the Bankruptcy Code;
(6) the Borrower shall make any payments of Debt relating to
pre-Filing Date obligations other than as explicitly consented to by the Agent;
(7) the entry of an order or orders granting relief from the
automatic stay so as to allow a third party or third parties to proceed against
any asset or assets of the Borrower which have a value in excess of $500,000 in
the aggregate;
(8) the filing of any pleading by the Borrower seeking, or
otherwise consenting to, any of the matters set forth in clauses (d) through (h)
----------- ---
above;
(9) there shall occur any event after the Filing Date which
results in a Material Adverse Effect;
(10) the entry of the Final Order shall not have occurred
within forty (40) days after the Filing Date;
(11) the Borrower files any pleading seeking, or otherwise
consenting to, (i) the invalidation, subordination or other challenging of the
liens granted to secure the Obligations or (ii) any relief under Section 506(c)
of the Bankruptcy Code with respect to any property which secures the
Prepetition Revolving Credit Obligations;
(12) a Change in Control shall have occurred; or
(13) (i) any material covenant, agreement or obligation of any
party
106
contained in or evidenced by any of the Credit Documents shall cease to be
enforceable in accordance with its terms, or any party (other than the Agent or
the Lenders) to any Credit Document shall deny or disaffirm its obligations
under any of the Credit Documents, or any Credit Document shall be cancelled,
terminated, revoked or rescinded without the express prior written consent of
the Agent and (ii) any of the Credit Documents shall cease for any reason to be
in full force and effect (other than in accordance with the terms hereof or
thereof) or any action or proceeding shall have been commenced by any Person
(other than the Agent or any Lender) seeking to cancel, revoke, rescind or
disaffirm the obligations of any party to any Credit Document.
1.113 Acceleration. Upon the occurrence of an Event of Default which
------------
has not been waived by the Agent at the direction of the Required Lenders, the
Agent shall, upon the written, telecopied or telex request of the Required
Lenders, and by delivery of written notice to the Borrower from the Agent, take
any or all of the following actions, without prejudice to the rights of the
Agent, any Lender or the holder of any Note to enforce its claims against the
Borrower: (a) declare all or any part of the Obligations to be immediately due
and payable (except with respect to any Event of Default set forth in Sections
--------
10.1(d) through (i) and Sections 10.1(k) and (l) hereof, in which case all
------- --- ---------------- ---
Obligations shall automatically become immediately due and payable without the
necessity of any notice or other demand) without presentment, demand, protest or
any other action or obligation of the Agent or any Lender; and/or (b)
immediately terminate or reduce the Commitments under this Credit Agreement.
In addition, upon demand by the Agent or the Required Lenders after
the occurrence of any Event of Default unless such Event of Default is waived,
the Borrower shall deposit with the Agent for the benefit of the Lenders with
respect to each Letter of Credit then outstanding and each Acceptance then
outstanding promptly upon such demand, cash or Cash Equivalents in an amount
equal to 110% of the greatest amount for which such Letter of Credit may be
drawn and 110% of the face amount of each outstanding Acceptance. Such deposit
shall be held by the Agent for the benefit of the Issuing Banks, the Accepting
Banks and the other Lenders as security for, and to provide for the payment of,
outstanding Letters of Credit and the Acceptance Obligations.
If at any time after acceleration of the maturity of the Loans, the
Borrower shall pay all arrears of interest and all payments on account of
principal of the Loans which shall have become due otherwise than by
acceleration (with interest on principal and, to the extent permitted by law, on
overdue interest, at the rates specified in this Credit Agreement) and all
Events of Default and Defaults (other than nonpayment of principal of and
accrued interest on the Loans and other Obligations due and payable solely by
virtue of acceleration) shall be remedied or waived, then by written notice to
the Borrower, the Required Lenders
107
may elect, in the sole discretion of such Required Lenders, to rescind and annul
the acceleration and its consequences; but such action shall not affect any
subsequent Default or Event of Default or impair any right or remedy consequent
thereon. The provisions of the preceding sentence are intended merely to bind
the Lenders to a decision which may be made at the election of the Required
Lenders; they are not intended to benefit the Borrower and do not give the
Borrower the right to require the Lenders to rescind or annul any acceleration
hereunder, even if the conditions set forth herein are met.
1.114 Remedies. Immediately upon the occurrence of any Event of
--------
Default which has not been waived by the Agent at the direction of the Required
Lenders, and subject to Section 10.4, the Agent may: (a) remove from any
------------
premises where same may be located any and all documents, instruments, files and
records (including the copying of any computer records), and any receptacles or
cabinets containing same, relating to the Accounts, or the Agent may use (at the
expense of the Borrower) such of the supplies or space of the Borrower at the
Borrower's place of business or otherwise, as may be necessary to properly
administer and control the Accounts or the handling of collections and
realizations thereon; (b) bring suit, in the name of the Borrower or the Lenders
and generally shall have all other rights respecting said Accounts, including,
without limitation, the right to: accelerate or extend the time of payment,
settle, compromise, release in whole or in part any amounts owing on any
Accounts and issue credits in the name of the Borrower or the Lenders; (c) sell,
assign and deliver the Accounts and any returned, reclaimed or repossessed
merchandise, with or without advertisement, at public or private sale, for cash,
on credit or otherwise, at the Agent's sole option and discretion, and any
Lender may bid or become a purchaser at any such sale, free from any right of
redemption, which right is hereby expressly waived by the Borrower; (d)
foreclose the security interests created pursuant to the Credit Documents by any
available judicial procedure, or to take possession of any or all of the
Inventory and equipment without judicial process and enter any premises where
any Inventory and equipment may be located for the purpose of taking possession
of or removing the same; and (e) revise, update, amend and otherwise complete
the Trademark Security Agreements as the Agent may determine to be necessary or
desirable to, and file, record and register any or all of the Trademark Security
Agreements and Patent Security Agreements with the United States Patent and
Trademark Office in order to, assign and transfer the trademarks and patents
covered thereby to any Person, including, without limitation, the Agent or any
of the Lenders. The Agent shall have the right, without notice of
advertisement, to sell, lease, or otherwise dispose of all or any part of the
Inventory and equipment, whether in its then condition or after further
preparation or processing, in the name of the Borrower or the Lenders, or in the
name of such other party as the Agent may designate, either at public or private
sale or at any broker's board, in lots or in bulk, for cash or for credit, with
or without warranties or representations, and upon such other terms and
conditions as the Agent in its sole discretion may deem advisable, and the Agent
or any other Lender shall have the right
108
to purchase at any such sale. If any Inventory and equipment shall require
rebuilding, repairing, maintenance or preparation, the Agent shall have the
right, at its option, to do such of the aforesaid as is necessary, for the
purpose of putting the Inventory and equipment in such saleable form as the
Agent shall deem appropriate. The Borrower agrees, at the request of the Agent,
to assemble the Inventory and equipment and to make it available to the Agent at
places which the Agent shall select, whether at the premises of the Borrower or
elsewhere, and to make available to the Agent the premises and facilities of the
Borrower or any Pledgor for the purpose of the Agent's taking possession of,
removing or putting the Inventory and equipment in saleable form. However, if
notice of intended disposition of any Collateral is required by law, it is
agreed that five (5) days notice shall constitute reasonable notification and
full compliance with the law. The Agent shall be entitled to use all Proprietary
Rights and computer software programs and data bases used by the Borrower in
connection with their respective businesses or in connection with the
Collateral. The net cash proceeds resulting from the Agent's exercise of any of
the foregoing rights (after deducting all charges, costs and expenses, including
reasonable attorneys' fees) shall be applied by the Agent to the payment of the
Borrower's Obligations to the Lenders, whether due or to become due, in such
order as the Agent may elect. The net cash proceeds resulting from the Agent's
exercise of any of the foregoing rights against any Collateral (after deducting
all of the Agent's Expenses related thereto) shall be applied by the Agent to
the payment of the Obligations, whether due or to become due, in the order set
forth in Section 3.6(e). The Borrower shall remain liable to the Lenders for any
--------------
deficiencies, and the Lenders in turn agree to remit to the Borrower or its
successors or assigns, any surplus resulting therefrom. The enumeration of the
foregoing rights is not intended to be exhaustive and the exercise of any right
shall not preclude the exercise of any other rights, all of which shall be
cumulative.
1.115 Automatic Stay. Upon the occurrence and during the
--------------
continuation of an Event of Default, after five (5) business days' written
notice by the Agent to the Borrower, the automatic stay provided by Section 362
of the Bankruptcy Code shall be deemed automatically vacated without further
order of the Bankruptcy Court and the Lenders shall be immediately permitted to,
inter alia, pursue any and all of the remedies against the Credit Parties and
----- ----
seek payment in respect of all Obligations and Prepetition Revolving Credit
Obligations.
ARTICLE XI
Termination of the Revolving Credit Commitments
-----------------------------------------------
Except as otherwise provided in Article 10 hereof, the Revolving
----------
Credit Commitments made hereunder shall terminate on the Termination Date and
all then outstanding Loans and Acceptance Obligations shall be immediately due
and payable in full
109
and all outstanding Letters of Credit and Acceptances shall immediately
terminate except as otherwise provided in Section 4.1 hereof. Unless sooner
-----------
demanded, all Obligations shall become due and payable as of any such
termination hereunder or under Article 10 hereof. All of the Agent's and the
----------
Lenders' rights, liens and security interests relating to any cash collateral
securing any outstanding Letters of Credit or Acceptance Obligations provided
for in Section 4.1 and Article 10 hereof shall continue after any termination of
----------- ----------
the Commitments until all Obligations relating to such Letters of Credit and all
Obligations relating to such Acceptances have been paid and satisfied in full.
ARTICLE XII
The Agent
---------
1.116 Appointment of Agent.
--------------------
(1) Each Lender hereby designates Bankers Trust Company as
Agent to act as herein specified. Each Lender hereby irrevocably authorizes, and
each holder of any Note, by the acceptance of such Note, shall be deemed
irrevocably to authorize the Agent to take such action on its behalf under the
provisions of this Credit Agreement and the Notes and any other instruments and
agreements referred to herein and to exercise such powers and to perform such
duties hereunder and thereunder as are specifically delegated to or required of
the Agent by the terms hereof and thereof and such other powers as are
reasonably incidental thereto including, without limitation, the execution,
delivery and performance by the Agent of any application in favor of an Issuing
Bank in connection with the issuance of any Letter of Credit or the execution,
delivery and performance of an application for the creation of an Acceptance or
an Acceptance. The Agent shall hold all Collateral and all payments of
principal, interest, Fees, charges and Expenses received pursuant to this Credit
Agreement or any other Credit Document for the ratable benefit of the Lenders.
The Agent may perform any of its duties hereunder by or through its agents or
employees.
(2) The provisions of this Article 12 are solely for the
----------
benefit of the Agent and the Lenders, and none of the Credit Parties shall have
any rights as a third party beneficiary of any of the provisions hereof (other
than Section 12.10). In performing its functions and duties under this Credit
-------------
Agreement, the Agent shall act solely as agent of the Lenders and does not
assume and shall not be deemed to have assumed any obligation toward or
relationship of agency or trust with or for any Credit Party.
1.117 Nature of Duties of Agent. The Agent shall have
-------------------------
no duties or responsibilities except those expressly set forth in this Credit
Agreement. Neither the Agent
110
nor any of its officers, directors, employees or agents shall be liable for any
action taken or omitted by it as such hereunder or in connection herewith,
unless caused by its or their gross negligence or willful misconduct. The duties
of the Agent shall be mechanical and administrative in nature; the Agent shall
not have by reason of this Credit Agreement a fiduciary relationship in respect
of any Lender; and nothing in this Credit Agreement, expressed or implied, is
intended to or shall be so construed as to impose upon the Agent any obligations
in respect of this Credit Agreement except as expressly set forth herein.
1.118 Lack of Reliance on Agent.
-------------------------
(1) Independently and without reliance upon the Agent, each
Lender, to the extent it deems appropriate, has made and shall continue to make
(i) its own independent investigation of the financial or other condition and
affairs of each Credit Party in connection with the taking or not taking of any
action in connection herewith and (ii) its own appraisal of the creditworthiness
of each Credit Party, and, except as expressly provided in this Credit
Agreement, the 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
making of the Loans or at any time or times thereafter.
(2) The Agent shall not be responsible to any Lender for any
recitals, statements, information, representations or warranties herein or in
any document, certificate or other writing delivered in connection herewith or
for the execution, effectiveness, genuineness, validity, enforceability,
collectibility, priority or sufficiency of this Credit Agreement or the Notes or
the financial or other condition of any Credit Party. The Agent shall not be
required to make any inquiry concerning either the performance or observance of
any of the terms, provisions or conditions of this Credit Agreement or the
Notes, or the financial condition of any Credit Party, or the existence or
possible existence of any Default or Event of Default, unless specifically
requested to do so in writing by any Lender.
1.119 Certain Rights of the Agent. The Agent shall have the right to
---------------------------
request instructions from the Required Lenders by notice to each of the Lenders.
If the Agent shall request instructions from the Required Lenders with respect
to any act or action (including the failure to act) in connection with this
Credit Agreement, the Agent shall be entitled to refrain from such act or taking
such action unless and until the Agent shall have received instructions from the
Required Lenders, and the Agent shall not incur liability to any Person by
reason of so refraining. 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 hereunder in accordance with the instructions of the
Required Lenders. The
111
Agent may give any notice required under Article 10 hereof without the consent
----------
of any of the Lenders unless otherwise directed by the Required Lenders in
writing and will, at the direction of the Required Lenders, give any such notice
required under Article 10.
----------
1.120 Reliance by Agent. The Agent shall be entitled to rely, and
-----------------
shall be fully protected in relying, upon any note, writing, resolution, notice,
statement, certificate, telex, teletype or telecopier message, cablegram,
radiogram, order or other documentary, teletransmission or telephone message
believed by it to be genuine and correct and to have been signed, sent or made
by the proper person. The Agent may consult with legal counsel (including
counsel for the Borrower with respect to matters concerning 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 by it in good faith in
accordance with the advice of such counsel, accountants or experts.
1.121 Indemnification of Agent. To the extent the Agent is not
------------------------
reimbursed and indemnified by the Borrower, each Lender will reimburse and
indemnify the Agent, in proportion to its respective Commitment, for and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses (including counsel fees and disbursements) or
disbursements of any kind or nature whatsoever which may be imposed on, incurred
by or asserted against the Agent in performing its duties hereunder, in any way
relating to or arising out of this Credit Agreement, provided that no Lender
--------
shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the Agent's gross negligence or willful misconduct.
1.122 The Agent in its Individual Capacity. With respect to its
------------------------------------
obligation to lend under this Credit Agreement, the Loans made by it and the
Notes issued to it, and its participation in Letters of Credit and Acceptances
created pursuant hereto issued hereunder, the Agent shall have the same rights
and powers hereunder as any other Lender or holder of a Note or participation
interests and may exercise the same as though it was not performing the duties
specified herein; and the terms "Lenders," "Required Lenders," "holders of
Notes," or any similar terms shall, unless the context clearly otherwise
indicates, include the Agent in its individual capacity. The Agent may accept
deposits from, lend money to, acquire equity interests in, and generally engage
in any kind of banking, trust, financial advisory or other business with the
Borrower or any Affiliate of the Borrower as if it were not performing the
duties specified herein, and may accept fees and other consideration from the
Borrower for services in connection with this Credit Agreement and otherwise
without having to account for the same to the Lenders.
1.123 Holders of Notes. The Agent may deem and treat the payee
----------------
of any
112
Note as the owner thereof for all purposes hereof unless and until a written
notice of the assignment or transfer thereof shall have been filed with the
Agent. Any request, authority or consent of any Person who, at the time of
making such request or giving such authority or consent, is the holder of any
Note, shall be conclusive and binding on any subsequent holder, transferee or
assignee of such Note or of any Note or Notes issued in exchange therefor.
1.124 Successor Agent
---------------
(1) The Agent may, upon five (5) Business Days' notice to the
Lenders and the Borrower, resign at any time (effective upon the appointment of
a successor Agent pursuant to the provisions of this Section 12.9) by giving
------------
written notice thereof to the Lenders and the Borrower. Upon any such
resignation, the Required Lenders shall have the right, upon five (5) days'
notice and approval by the Borrower (which approval shall not be unreasonably
withheld or delayed), to appoint a successor Agent. If no successor Agent shall
have been so appointed by the Required Lenders and accepted such appointment,
within thirty (30) days after the retiring Agent's giving of notice of
resignation, then, upon five (5) days' notice and approval by the Borrower
(which approval shall not be unreasonably withheld or delayed), the retiring
Agent may, on behalf of the Lenders, appoint a successor Agent, which shall be a
bank or a trust company or other financial institution which maintains an office
in the United States, or a commercial bank organized under the laws of the
United States of America or of any State thereof, or any Affiliate of such bank
or trust company or other financial institution which is engaged in the banking
business, having a combined capital and surplus of at least $50,000,000.
(2) 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 Credit Agreement. After any retiring Agent's resignation hereunder as
Agent, the provisions of this Article 12 shall inure to its benefit as to any
----------
actions taken or omitted to be taken by it while it was Agent under this Credit
Agreement.
1.125 Collateral Matters.
------------------
(1) Each Lender authorizes and directs the Agent to enter into
the Ancillary Documents for the benefit of the Lenders. Each Lender hereby
agrees, and each holder of any Note by the acceptance thereof will be deemed to
agree, that, except as otherwise set forth herein, any action taken by the
Required Lenders in accordance with the provisions of this Credit Agreement or
the Ancillary Documents, and the exercise by the
113
Required Lenders of the powers set forth herein or therein, together with such
other powers as are reasonably incidental thereto, shall be authorized and
binding upon all of the Lenders. The Agent is hereby authorized on behalf of all
of the Lenders, without the necessity of any notice to or further consent from
any Lender, from time to time prior to an Event of Default, to take any action
with respect to any Collateral or Ancillary Documents which may be necessary to
perfect and maintain perfected the security interest in and liens upon the
Collateral granted pursuant to the Ancillary Documents.
(2) The Lenders hereby authorize the Agent, at its option and in
its discretion, to release any Lien granted to or held by the Agent upon any
Collateral (i) upon termination of the Commitments and payment and satisfaction
of all of the Obligations at any time arising under or in respect of this Credit
Agreement or the Credit Documents or the transactions contemplated hereby or
thereby or (ii) if approved, authorized or ratified in writing by the Required
Lenders, unless such release is required to be approved by all of the Lenders
hereunder. Upon request by the Agent at any time, the Lenders will confirm in
writing the Agent's authority to release particular types or items of Collateral
pursuant to this Section 12.10.
-------------
(3) The Lenders hereby agree that the Lien granted to the Agent
and the Lenders in any property sold or disposed of in accordance with the
provisions of Section 7.5 hereof shall, if no Default or Event of Default shall
-----------
then exist, be automatically released except to the extent a signed release of
the Agent is required pursuant to Section 7.5; provided, however that Agent's
----------- -------- -------
Lien shall attach to and continue in the proceeds and products of such property
arising from any such sale or disposition and provided, further, that the
-------- -------
proceeds from any such sale or disposition by the Borrower shall be paid to the
Agent for application to the then outstanding Loans.
(4) To the extent, pursuant to the provisions of Section
-------
12.10(b) and (c) hereof, the Agent's execution of a release is required to
------- ---
release its Lien upon any sale and transfer of Collateral which is expressly
permitted pursuant to the terms of this Credit Agreement, or consented to in
writing by the Required Lenders or all of the Lenders, as applicable, 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 herein or pursuant hereto upon the
Collateral that was sold or transferred; provided 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 obligation 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 Liens upon (or obligations of the Borrower in respect of) all
interests
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retained by the Borrower or any Subsidiary of any Borrower, including (without
limitation) the proceeds of the sale, all of which shall continue to constitute
part of the Collateral. In the event of any sale or transfer of Collateral, or
any foreclosure with respect to any of the Collateral, the Agent shall be
authorized to deduct all of the Expenses reasonably incurred by the Agent from
the proceeds of any such sale, transfer or foreclosure.
(5) The Agent shall have no obligation whatsoever to the
Lenders or to any other Person to assure that the Collateral exists or is owned
by the Borrower or is cared for, protected or insured or that the Liens granted
to the Agent herein or pursuant hereto have been properly or sufficiently or
lawfully created, perfected, protected or enforced or are entitled to any
particular priority, or to exercise or to continue exercising at all or in any
manner or under any duty of care, disclosure or fidelity any of the rights,
authorities and powers granted or available to the Agent in this Section 12.10
-------------
or in any of the Ancillary 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 the Lenders, except for
its gross negligence or willful misconduct. The Agent agrees to conduct or cause
to be conducted at least two audits of the Collateral during each year that this
Credit Agreement shall remain in effect.
1.126 Actions with Respect to Defaults. In addition to the Agent's
--------------------------------
right to take actions on its own accord as permitted under this Credit
Agreement, the Agent shall take such action with respect to a Default or Event
of Default as shall be directed by the Required Lenders; provided that until the
-------- ----
Agent shall have received such directions, the Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default or Event of Default as it shall deem advisable and in the best
interests of the Lenders.
1.127 Delivery of Information. The Agent shall not be required to
-----------------------
deliver to any Lender originals or copies of any documents, instruments,
notices, communications or other information received by the Agent from the
Borrower, any Subsidiary of the Borrower, the Required Lenders, any Lender or
any other Person under or in connection with this Credit Agreement or any other
Credit Document except (i) as specifically provided in this Credit Agreement or
any other Credit Document and (ii) as specifically requested from time to time
in writing by any Lender with respect to a specific document, instrument, notice
or other written communication received by and in the possession of the Agent at
the time of receipt of such request and then only in accordance with such
specific request.
ARTICLE XIII
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Miscellaneous
-------------
1.128 Waivers. The Borrower hereby waives due diligence, demand,
-------
presentment and protest and any notices thereof as well as notice of nonpayment.
No delay or omission of the Agent or the Lenders to exercise any right or remedy
hereunder, whether before or after the happening of any Event of Default, shall
impair any such right or shall operate as a waiver thereof or as a waiver of any
such Event of Default. No single or partial exercise by the Agent or the
Lenders of any right or remedy shall preclude any other or further exercise
thereof, or preclude any other right or remedy.
1.129 JURY TRIAL. THE BORROWER, THE AGENT AND THE LENDERS EACH
----------
HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING (INCLUDING
ANY COUNTERCLAIM) ARISING OUT OF THIS CREDIT AGREEMENT, THE CREDIT DOCUMENTS OR
ANY OTHER AGREEMENTS OR TRANSACTIONS RELATED HERETO OR THERETO.
1.130 GOVERNING LAW. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF
-------------
THIS CREDIT AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK
AND, TO THE EXTENT APPLICABLE, THE BANKRUPTCY CODE.
1.131 VENUE; SERVICE OF PROCESS; WAIVER OF DAMAGES.
--------------------------------------------
(1) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS CREDIT
AGREEMENT, THE CREDIT DOCUMENTS, OR ANY OTHER DOCUMENT RELATING HERETO OR
THERETO MAY BE BROUGHT IN THE BANKRUPTCY COURT, AND IF THE BANKRUPTCY COURT DOES
NOT HAVE (OR ABSTAINS FROM) JURISDICTION, ▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇,
▇▇ OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND
ANY APPELLATE COURTS OF ANY THEREOF, AND, BY EXECUTION AND DELIVERY OF THIS
CREDIT AGREEMENT, THE BORROWER HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID
COURTS. THE BORROWER HEREBY IRREVOCABLY WAIVES, IN CONNECTION WITH ANY SUCH
ACTION OR PROCEEDING, (1) ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY
OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR
PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS AND (2) THE RIGHT TO INTERPOSE ANY
116
NONCOMPULSORY SETOFF, COUNTERCLAIM OR CROSS-CLAIM. THE BORROWER IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY
SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR
CERTIFIED MAIL, POSTAGE PREPAID, TO THE BORROWER AT THE ADDRESS SET FORTH IN
SECTION 13.5 HEREOF. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE AGENT OR THE
------------
LENDERS TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE
LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE BORROWER IN ANY OTHER
JURISDICTION, SUBJECT IN EACH INSTANCE TO THE PROVISIONS HEREOF WITH RESPECT TO
RIGHTS AND REMEDIES.
(2) THE BORROWER (1) AGREES THAT NEITHER THE AGENT NOR ANY LENDER
SHALL HAVE ANY LIABILITY TO THE BORROWER (WHETHER SOUNDING IN TORT, CONTRACT OR
OTHERWISE) FOR LOSSES SUFFERED BY THE BORROWER IN CONNECTION WITH, ARISING OUT
OF, OR IN ANY WAY RELATED TO, THE TRANSACTIONS CONTEMPLATED AND THE RELATIONSHIP
ESTABLISHED BY THIS CREDIT AGREEMENT OR ANY OF THE OTHER CREDIT DOCUMENTS, OR
ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION HEREWITH OR THEREWITH, UNLESS
IT IS DETERMINED BY A JUDGMENT OF A COURT THAT IS BINDING ON THE AGENT OR SUCH
LENDER, AS THE CASE MAY BE (WHICH JUDGMENT SHALL BE FINAL AND NOT SUBJECT TO
REVIEW ON APPEAL), THAT SUCH LOSSES WERE THE RESULT OF ACTS OR OMISSIONS ON THE
PART OF THE AGENT OR SUCH LENDER, AS THE CASE MAY BE, CONSTITUTING GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT AND (2) WAIVES, RELEASES AND AGREES NOT TO ▇▇▇
UPON ANY CLAIM AGAINST THE AGENT OR ANY LENDER (WHETHER SOUNDING IN TORT,
CONTRACT OR OTHERWISE), EXCEPT A CLAIM BASED UPON GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT. WHETHER OR NOT SUCH DAMAGES ARE RELATED TO A CLAIM THAT IS SUBJECT
TO THE WAIVER EFFECTED ABOVE AND WHETHER OR NOT SUCH WAIVER IS EFFECTIVE,
NEITHER THE AGENT NOR ANY LENDER SHALL HAVE ANY LIABILITY WITH RESPECT TO, AND
THE BORROWER HEREBY WAIVES, RELEASES AND AGREES NOT TO ▇▇▇ UPON ANY CLAIM FOR,
ANY SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES SUFFERED BY THE
BORROWER IN CONNECTION WITH, ARISING OUT OF, OR IN ANY WAY RELATED TO THE
TRANSACTIONS CONTEMPLATED OR THE RELATIONSHIP ESTABLISHED BY THIS CREDIT
AGREEMENT OR ANY OF THE OTHER CREDIT DOCUMENTS, OR ANY ACT, OMISSION OR EVENT
OCCURRING IN CONNECTION HEREWITH OR THEREWITH, UNLESS IT IS DETERMINED BY A
JUDGMENT OF A COURT THAT
117
IS BINDING ON THE AGENT OR SUCH LENDER, AS THE CASE MAY BE (WHICH JUDGMENT SHALL
BE FINAL AND NOT SUBJECT TO REVIEW ON APPEAL), THAT SUCH DAMAGES WERE THE RESULT
OF ACTS OR OMISSIONS ON THE PART OF THE AGENT OR SUCH LENDER, AS THE CASE MAY
BE, CONSTITUTING GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
1.132 Notices. Except as otherwise provided herein, all notices and
-------
correspondences hereunder shall be in writing and sent by certified or
registered mail, return receipt requested, or by overnight delivery service,
with all charges prepaid, if to the Agent, then to Bankers Trust Company, ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Credit Department, ▇▇▇▇▇
▇. ▇▇▇▇▇▇▇, and if to the Borrower, then to Converse Inc., ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇, Attention: ▇▇▇▇▇ ▇▇▇▇▇▇, or by facsimile
transmission, promptly confirmed in writing sent by first class mail, if to the
Agent at (▇▇▇) ▇▇▇-▇▇▇▇, and if to the Borrower at (▇▇▇) ▇▇▇-▇▇▇▇. All such
notices and correspondence to any of the Lenders shall be sent and confirmed in
a similar manner to the addresses set forth on the signature pages hereto. All
such notices and correspondence shall be deemed given (i) if sent by certified
or registered mail, three (3) Business Days after being postmarked, (ii) if sent
by overnight delivery service, when received at the above stated addresses or
when delivery is refused and (iii) if sent by facsimile transmission, when
receipt of such transmission is acknowledged; provided that notices to the Agent
--------
shall not be effective until received.
1.133 Assignability.
-------------
(1) The Borrower shall not have the right to assign this
Credit Agreement or any interest therein except with the prior written consent
of the Agent and the Lenders.
(2) Any Lender may make, carry or transfer Loans at, to or for
the account of, any of its branch offices or the office of an Affiliate of such
Lender except to the extent such transfer would result in increased costs to the
Borrower (including, without limitation, any increased costs under Section
-------
3.10 hereof).
----
(3) Each Lender may, with the consent of the Agent in its good
faith discretion, but without the consent of any other Lender, assign to one or
more banks or other financial institutions all or a portion of its rights and
obligations under this Credit Agreement and the Notes; provided that no Lender
--------
may assign any portion of its rights or obligations hereunder to any Person that
holds any Debt of the Borrower or any of its Subsidiaries (other than a
Revolving Loan Commitment hereunder or under the Prepetition Credit Agreement)
including, without limitation, any Noteholder; provided further, that
-------- -------
118
(i) for each such assignment, the parties thereto shall execute and deliver to
the Agent, for its acceptance and recording in the Register (as defined below),
an Assignment and Acceptance, together with any Note or Notes subject to such
assignment and a processing and recordation fee of $5,000 to be paid by the
assignee, (ii) no such assignment shall be for less than $10,000,000 of the
Commitments (except any assignment made pursuant to Section 13.7 hereof) and
------------
(iii) any such shall include such Lender's pro rata interest in all Loans
hereunder. Upon such execution and delivery of the Assignment and Acceptance to
the Agent, from and after the date specified as the effective date in the
Assignment and Acceptance (the "Acceptance Date"), (x) the assignee thereunder
---------------
shall be a party hereto, and, to the extent that rights and obligations
hereunder have been assigned to it pursuant to such Assignment and Acceptance,
such assignee shall have the rights and obligations of a Lender hereunder and
(y) the assignor thereunder shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such Assignment and Acceptance,
relinquish its rights (other than any rights it may have pursuant to Section
-------
13.8 hereof which will survive) and be released from its obligations under this
----
Credit Agreement (and, in the case of an Assignment and Acceptance covering all
or the remaining portion of an assigning Lender's rights and obligations under
this Credit Agreement, such Lender shall cease to be a party hereto).
(4) By executing and delivering an Assignment and Acceptance,
the assignee thereunder confirms and agrees 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
Credit Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Credit Agreement, the Notes or any
other instrument or document furnished pursuant hereto, (ii) such assigning
Lender makes no representation or warranty and assumes no responsibility with
respect to the financial condition of the Borrower or any other Credit Parties
or the performance or observance by the Borrower or any other Credit Parties of
any of its obligations under this Credit Agreement or any other instrument or
document furnished pursuant hereto, (iii) such assignee confirms that it has
received a copy of this Credit Agreement, together with copies of the financial
statements referred to in Section 6.1 hereof and such other documents and
-----------
information as 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 Agent, such assigning Lender or any
other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Credit Agreement, (v) such assignee appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers under this Credit Agreement as are delegated to the Agent by the
terms hereof, together with such powers as are reasonably incidental thereto and
(vi) such assignee
119
agrees that it will perform in accordance with their terms all of the
obligations which by the terms of this Credit Agreement are required to be
performed by it as a Lender.
(5) The Agent shall maintain at its address referred to in Section
-------
13.5 hereof 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 Commitments of, and principal amount of the Loans owing to, 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 Credit Agreement.
The Register and copies of each Assignment and Acceptance shall be available for
inspection by the Borrower or any Lender at any reasonable time and from time to
time upon reasonable prior notice.
(6) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender, together with the Note or Notes subject to such assignment,
the Agent shall, if such Assignment and Acceptance has been completed and is in
substantially the form of Exhibit A hereto, (i) accept such Assignment and
---------
Acceptance and (ii) record the information contained therein in the Register.
Within five (5) Business Days after the Agent's acceptance and recordation of
any of such Assignment and Acceptance, the Borrower shall execute and deliver to
the Agent in exchange for the surrendered Note or Notes a new Note or Notes to
the order of the assignee in an amount equal to the Commitment or Commitments
assumed by it pursuant to such Assignment and Acceptance and, if the assigning
Lender has retained a Commitment or Commitments hereunder, a new Note or Notes
to the order of the assigning Lender in an amount equal to the Commitment or
Commitments retained by it hereunder. Such new Note or Notes shall re-evidence
the indebtedness outstanding under the old Note or Notes and shall be in an
aggregate principal amount equal to the aggregate principal amount of such
surrendered Note or Notes, shall be dated the Closing Date and shall otherwise
be in substantially the form of the Note or Notes subject to such assignments.
(7) Each Lender may sell participations (without the consent of the
Agent, the Borrower or any other Lender) to one or more parties in or to all or
a portion of its rights and obligations under this Credit Agreement (including,
without limitation, all or a portion of its Commitments, the Loans owing to it
and the Note or Notes held by it); provided that (i) such Lender's obligations
-------- ----
under this Credit Agreement (including, without limitation, its Commitments to
the Borrower hereunder) shall remain unchanged, (ii) such Lender shall remain
solely responsible to the other parties hereto for the performance of such
obligations, (iii) such Lender shall remain the holder of any such Note for all
purposes of this Credit Agreement, (iv) the Borrower, the Agent, and the other
Lenders shall continue to deal
120
solely and directly with such Lender in connection with such Lender's
rights and obligations under this Credit Agreement and (v) such Lender
shall not transfer, grant, assign or sell any participation under which the
participant shall have rights to approve any amendment or waiver of this
Credit Agreement except to the extent such amendment or waiver would (A)
extend the final maturity date or the date for the payments of any
installment of fees or principal or interest of any Loans or Letter of
Credit reimbursement obligations or Acceptance Obligations in which such
participant is participating, (B) reduce the amount of any installment of
principal of the Loans or Letter of Credit reimbursement obligations or
Acceptance Obligations in which such participant is participating, (C)
except as otherwise expressly provided in this Credit Agreement, reduce the
interest rate applicable to the Loans, or Letter of Credit reimbursement
obligations or Acceptance Obligations in which such participant is
participating, or (D) except as otherwise expressly provided in this Credit
Agreement, reduce any Fees payable hereunder. Notwithstanding the
foregoing, no Lender may grant, sell or assign a participation to any
Person that holds any Debt of the Borrower or its Subsidiaries (other than
a Revolving Loan Commitment hereunder or under the Prepetition Credit
Agreement), including any Noteholder; provided that any Lender that is also
--------
a Prepetition Lender may sell participations to the same extent and to the
same Persons who hold participations under the Prepetition Revolving Credit
Agreement on the date hereof.
(8) Each Lender agrees that, without the prior written
consent of the Borrower and the Agent, it will not make any assignment
hereunder in any manner or under any circumstances that would require
registration or qualification of, or filings in respect of, any Loan, Note
or other Obligation under the securities laws of the United States of
America or of any jurisdiction.
(9) In connection with the efforts of any Lender to
assign its rights or obligations or to participate interests, such Lender
may disclose any information in its possession regarding the Borrower.
1.134 Information. The Borrower hereby agrees that the Agent and
-----------
the Lenders may exchange any information concerning the Borrower, including,
without limitation, information relating to the creditworthiness of the Borrower
in the possession or control of the Agent or the Lenders, as the case may be;
(i) with any of their respective affiliates; provided, however, that any such
-------- -------
exchange, and the nature, manner and extent thereof shall be limited pursuant to
any written confidentiality agreement governing the obligations of the Agent or
the Lenders or such affiliate, as the case may be, with respect to such
information; provided, further, that neither the Agent nor any of the Lenders
-------- --------
shall in any event furnish any such information to any competitor of the
Borrower or any customer of the Borrower or any Person known by the Agent or any
Lender to be contemplating an
121
acquisition of any capital stock or assets of the Borrower or any agent or
affiliate of any of the foregoing, except with the prior written consent of the
Borrower or as required by applicable law or judicial order; (ii) to any
regulatory authority having jurisdiction over the Lender, (iii) to any other
person, in connection with the exercise of the Lender's rights hereunder or
under any of the other Credit Documents.
1.135 Indemnification. The Borrower shall and hereby agrees to
---------------
indemnify, defend and hold harmless the Agent and each of the Lenders and their
respective directors, officers, agents and employees from and against (a) any
and all losses, claims, damages, liabilities, deficiencies, judgments or
expenses incurred by any of them (except to the extent that it is finally
judicially determined to have resulted from their own gross negligence or
willful misconduct) arising out of or by reason of any litigations,
investigations, claims or proceedings which arise out of or are in any way
related to (i) the Case, the Orders, this Credit Agreement or the transactions
contemplated thereby, (ii) any actual or proposed use by the Borrower of the
proceeds of the Loans or (iii) the Agent's or the Lenders' entering into this
Credit Agreement, the other Credit Documents or any other agreements and
documents relating hereto, including, without limitation, amounts paid in
settlement, court costs and the fees and disbursements of counsel incurred in
connection with any such litigation, investigation, claim or proceeding or any
advice rendered in connection with any of the foregoing and (b) any such losses,
claims, damages, liabilities, deficiencies, judgments or expenses incurred in
connection with any remedial or other action taken by the Borrower, any Pledgor
or any of the Lenders in connection with compliance by the Borrower or any
Subsidiaries, or any of their respective properties, with any federal, state or
local environmental laws, acts, rules, regulations, orders, directions,
ordinances, criteria or guidelines. If and to the extent that the obligations
of the Borrower hereunder are unenforceable for any reason, the Borrower hereby
agrees to make the maximum contribution to the payment and satisfaction of such
obligations which is permissible under applicable law. The Borrower shall, upon
demand, pay to the Agent and any Lender all Expenses and all other costs and
expenses (including the reasonable fees and disbursements of counsel and other
professionals) paid or incurred by the Agent or such Lender in (i) enforcing or
defending its rights under or in respect of this Credit Agreement, the other
Credit Documents or any other document or instrument now or hereafter executed
and delivered in connection herewith, (ii) in collecting the Loans, (iii) in
foreclosing or otherwise collecting upon the Collateral or any part thereof and
(iv) obtaining any legal, accounting or other advice in connection with any of
the foregoing. The provisions of this Section 13.8 shall not limit or waive,
------------
and are not intended to limit or waive, any claim which the Borrower has or may
have against any Defaulting Lender.
Without limiting the generality of the foregoing paragraph, the
Borrower will defend, indemnify and hold harmless the Agent and the Lenders, and
their respective
122
employees, agents, officers and directors, from and against any claims, demands,
penalties, fines, liabilities, settlements, damages, costs and expenses of
whatever kind or nature known or unknown, contingent or otherwise, arising out
of, or in any way relating to, the violation of or noncompliance with any
Environmental Laws applicable to any real property owned, leased or operated by
the Borrower, or any orders, requirements or demands of governmental authorities
related thereto, including, without limitation, attorney's and consultant's
fees, investigation and laboratory fees, court costs and litigation expenses,
except to the extent that any of the foregoing arise out of the gross negligence
or willful misconduct of the party seeking indemnification therefor.
The Borrower's obligations under this Section 13.8 shall survive
------------
and termination of the Commitments and the payment in full of the Obligations,
and are in addition to, and not in substitution of, any other of its obligations
set forth in this Credit Agreement.
1.136 Entire Agreement; Successors and Assigns. This Credit
----------------------------------------
Agreement along with the other Credit Documents constitutes the entire agreement
among the Borrower, the Agent and the Lenders, supersedes any prior agreements
among them, and shall bind and benefit the Borrower and the Lenders and their
respective successors and permitted assigns.
1.137 Amendments, Etc. No amendment or waiver of any provision
---------------
of this Credit Agreement or any other Credit Document, nor consent to any
departure by any Credit Party therefrom, shall in any event be effective unless
the same shall be in writing and signed by the Required Lenders, or if the
Lenders shall not be parties thereto, by the parties thereto and consented to by
the Required Lenders, and each such amendment, waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; provided however, that no amendment, waiver or consent shall, unless in
-------- ------- ----
writing and signed by all the Lenders, do any of the following: (i) increase
the Commitments, (ii) except as otherwise expressly provided in this Credit
Agreement, reduce the principal of, or interest on, the Notes, any Letter of
Credit reimbursement obligations, any Acceptance Obligations or any Fees
hereunder (other than Fees that are exclusively for the account of the Agent),
(iii) postpone any date fixed for any payment in respect of principal of, or
interest on, the Notes, any Letter of Credit reimbursement obligations, any
Acceptance Obligations or any Fees hereunder (other than Fees that are
exclusively for the account of the Agent), (iv) change the percentage of the
Commitments, or any minimum requirement necessary for the Lenders or the
Required Lenders to take any action hereunder, (v) amend or waive Sections
--------
3.5(b) or 3.5(d) or this Section 13.10, or change the definition of Asset
------ ------ -------------
Disposition or Required Lenders, (vi) except as otherwise expressly provided in
this Credit Agreement, and other than in connection with the financing,
refinancing, sale or other disposition of any asset of the Borrower permitted
under this Credit Agreement, release any Liens in favor of
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the Lenders on any of the Collateral (except as provided in Section 12.10) or
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(vii) modify the Super-priority Claim status of the Lenders in respect of any
Loans, provided further, that no amendment, waiver or consent affecting the
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rights or duties of the Agent, an Issuing Bank or an Accepting Bank under any
Credit Document shall in any event be effective, unless in writing and signed by
the Agent and/or such Issuing Bank or such Accepting Bank, as applicable, in
addition to the Lenders required hereinabove to take such action.
Notwithstanding any of the foregoing to the contrary, the consent of the
Borrower shall not be required for any amendment, modification or waiver of the
provisions of Article 12 (other than the provisions of Section 12.9 and 12.10).
---------- ------------ -----
In addition, the Borrower and the Lenders hereby authorize the Agent to modify
this Credit Agreement by unilaterally amending or supplementing Annex I from
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time to time in the manner requested by the Borrower, the Agent or any Lender in
order to reflect any assignments or transfers of the Loans as provided for
hereunder; provided, however, that the Agent shall promptly deliver a copy of
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any such modification to the Borrower and each Lender.
1.138 Nonliability of Agent and Lenders. The relationship
---------------------------------
between the Borrower and the Lenders and the Agent shall be solely that of
borrower and lender. Neither the Agent nor any Lender shall have any fiduciary
responsibilities to the Borrower. Neither the Agent nor any Lender undertakes
any responsibility to the Borrower to review or inform the Borrower of any
matter in connection with any phase of the Borrower's business or operations.
1.139 Independent Nature of Lenders' Rights. The amounts payable
-------------------------------------
at any time hereunder to each Lender under such Lender's Note or Notes shall be
a separate and independent debt.
1.140 Counterparts. This Credit Agreement may be executed in any
------------
number of counterparts and by the different parties hereto in separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall together constitute one and the same instrument.
1.141 Effectiveness. This Credit Agreement shall become
-------------
effective on the date on which all of the parties hereto shall have signed a
copy hereof (whether the same or different copies) and shall have delivered the
same to the Agent or, in the case of Lenders who have not so delivered the same
to the Agent, shall have given to the Agent written, telecopied or telex notice
(actually received) at such office that the same has been signed and mailed to
it.
1.142 Severability. In case any provision in or obligation under
------------
this Credit Agreement or the Notes or the other Credit Documents shall be
invalid, illegal or
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unenforceable in any jurisdiction, the validity, legality and enforceability of
the remaining provisions or obligations, or of such provision or obligation in
any other jurisdiction, shall not in any way be affected or impaired thereby.
1.143 Headings Descriptive. The headings of the several
--------------------
sections and subsections of this Credit Agreement, and the Table of Contents,
are inserted for convenience only and shall not in any way affect the meaning or
construction of any provision of this Credit Agreement.
1.144 Maximum Rate. Notwithstanding anything to the contrary
------------
contained elsewhere in this Credit Agreement or in any other Credit Document,
the Borrower, the Agent and the Lenders hereby agree that all agreements among
them under this Credit Agreement and the other Credit Documents, whether now
existing or hereafter arising and whether written or oral, are expressly limited
so that in no contingency or event whatsoever shall the amount paid, or agreed
to be paid, to the Agent or any Lender for the use, forbearance, or detention of
the money loaned to the Borrower and evidenced hereby or thereby or for the
performance or payment of any covenant or obligation contained herein or
therein, exceed the Highest Lawful Rate. If due to any circumstance whatsoever,
fulfillment of any provisions of this Credit Agreement or any of the other
Credit Documents at the time performance of such provision shall be due shall
exceed the Highest Lawful Rate, then, automatically, the obligation to be
fulfilled shall be modified or reduced to the extent necessary to limit such
interest to the Highest Lawful Rate, and if from any such circumstance any
Lender should ever receive anything of value deemed interest by applicable law
which would exceed the Highest Lawful Rate, such excessive interest shall be
applied to the reduction of the principal amount then outstanding hereunder or
on account of any other then outstanding Obligations and not to the payment of
interest, or if such excessive interest exceeds the principal unpaid balance
then outstanding hereunder and such other then outstanding Obligations, such
excess shall be refunded to the Borrower. All sums paid or agreed to be paid to
the Agent or any Lender for the use, forbearance, or detention of the
Obligations and other indebtedness of the Borrower to the Agent or any Lender
shall, to the extent permitted by applicable law, be amortized, prorated,
allocated and spread throughout the full term of such indebtedness until payment
in full so that the actual rate of interest on account of all such indebtedness
does not exceed the Highest Lawful Rate throughout the entire term of such
indebtedness. The terms and provisions of this Section 13.17 shall control
-------------
every other provision of this Credit Agreement and all agreements among the
Borrower, the Agent and the Lenders.
1.145 Right of Setoff. Subject to the Carve-Out, notwithstanding
---------------
the provisions of Section 362 of the Bankruptcy Code and in addition to and not
in limitation of all rights of offset that any Lender or other holder of a Note
may have under applicable law,
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each Lender or other holder of a Note shall, upon the occurrence of any Event of
Default and whether or not such Lender or such holder has made any demand or the
Obligations of any Credit Party are matured, have the right to appropriate and
apply to the payment of the Obligations of such Credit Party all deposits
(general or special, time or demand, provisional or final) then or thereafter
held by and other indebtedness or property then or thereafter owing by such
Lender or other holder. Any amount received as a result of the exercise of such
rights shall be reallocated among the Lenders as set forth in Section 3.11
------------
hereof.
1.146 Confidentiality.
---------------
(1) The Agent and each Lender agree that they shall hold
in confidence in accordance with their respective customary procedure for
handling confidential information of this nature and in accordance with safe and
sound banking practices, any confidential information which has been marked as
"confidential" provided by the Borrower either directly to the Agent or such
Lender or indirectly through the Agent.
(2) Notwithstanding the foregoing paragraph (a), this
-------------
Section shall not apply to: (i) information exchanged among the Agent and the
Lenders or among their employees, officers, accountants, attorneys or
consultants provided that any such Person shall have first been advised of the
-------- ----
confidential nature of such information; (ii) information that has been or is
made public by the Borrower or any third party without breach of this Credit
Agreement or otherwise becomes generally available to the public other than as a
result of a disclosure in violation of this Section 13.19; (iii) information
-------------
that was or becomes available to the Agent, or any Lender from a third party on
a non-confidential basis; (iv) information that is required to be disclosed by
law, including to bank examiners, regulatory authorities and the Bankruptcy
Court; (v) information that is required to be disclosed by any court, agency or
legislative body (by interrogatories, requests for information, oral questions,
subpoena, civil investigative demand or similar process); or (vi) any disclosure
of confidential information to a proposed participant or purchasing bank in
connection with a proposed participation or transfer pursuant to Section 13.6
------------
hereof; provided that such proposed participant or purchasing bank shall have
-------- ----
first agreed to treat such information as confidential as provided in this
Section 13.19.
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1.147 Absence of Prejudice to the Prepetition Agent or the
----------------------------------------------------
Prepetition Lenders with Respect to Matters before the Bankruptcy Court. The
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Agent or any Lender, in its capacity as the Prepetition Agent or a Prepetition
Lender under the Prepetition Credit Agreement shall be free to bring, oppose or
support any matter before the Bankruptcy Court no matter how treated in this
Credit Agreement, and the fact that the Agent (or an Affiliate of the Agent) is
also the Prepetition Agent and a Lender is also a Prepetition Lender
126
shall in no way prejudice the rights of such entities under, or in respect of,
the Prepetition Credit Agreement or hereunder.
1.148 Consent to Certain Agreements. Each Lender that is also a
-----------------------------
Prepetition Lender (such Lenders collectively constituting the "Required
Lenders", as defined in the Prepetition Credit Agreement) hereby consents to the
execution, delivery and performance of the Pledge Agreements, and hereby affirms
that, any provision of any Prepetition Credit Document to the contrary
notwithstanding, no "Default" or "Event of Default" (each as defined therein)
under any Prepetition Credit Document shall occur solely by reason of the
execution and delivery by any Subsidiary of the Borrower of any Pledge
Agreement, or the performance by any such Subsidiary of its obligations
thereunder.
[signature pages to follow]
127
IN WITNESS WHEREOF, the parties hereto have caused this
Postpetition Credit Agreement to be executed and delivered by their proper and
duly authorized officers as of the date set forth above.
BORROWER:
CONVERSE INC.,
as Debtor and Debtor-in-Possession
By:________________________________
Name:
Title:
AGENT:
BANKERS TRUST COMPANY
By:________________________________
Name:
Title:
LENDERS:
BANKERS TRUST COMPANY
By:________________________________
Name:
Title:
GMAC COMMERCIAL CREDIT LLC
By:________________________________
Name:
Title:
POSTPETITION CREDIT AGREEMENT
LA SALLE BANK N.A.
By:________________________________
Name:
Title:
POSTPETITION CREDIT AGREEMENT
BANK OF AMERICA, N.A.
By:________________________________
Name:
Title:
POSTPETITION CREDIT AGREEMENT
▇▇▇▇▇▇▇▇▇ LLC
By:________________________________
Name:
Title:
POSTPETITION CREDIT AGREEMENT
▇▇▇▇▇▇ FINANCIAL, INC.
By:________________________________
Name:
Title:
POSTPETITION CREDIT AGREEMENT
FINOVA CAPITAL CORPORATION
By:________________________________
Name:
Title:
POSTPETITION CREDIT AGREEMENT