Exhibit 10.5(B)
THIRD AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
DATED as of April 7, 1997
between
THE NORTH FACE, INC.
as Borrower,
CERTAIN FINANCIAL INSTITUTIONS
and
▇▇▇▇▇▇ FINANCIAL, INC.,
as Agent and as a Lender
THIRD AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
This THIRD AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT is dated as of
April 7, 1997 and entered into by and among THE NORTH FACE, INC., a Delaware
corporation ("Borrower"), with its principal place of business at ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, the financial institutions listed on the
signature pages hereof, and ▇▇▇▇▇▇ FINANCIAL, INC., a Delaware corporation (in
its individual capacity, "▇▇▇▇▇▇") with offices at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, for itself as a Lender and as agent for any other
Lender (in such capacity, "Agent"). All capitalized terms used herein are
defined in Section 1 of this Agreement.
WHEREAS, Borrower and ▇▇▇▇▇▇ entered into that certain Loan and Security
Agreement dated as of June 7, 1994 (as amended, supplemented or otherwise
modified, the "Original Loan Agreement");
WHEREAS, Borrower, Lenders and Agent entered into that certain Amended and
Restated Loan and Security Agreement dated as of March 1, 1995 (as amended, the
"Restated Loan Agreement");
WHEREAS, Borrower, Lenders and Agent entered into that certain Second Amended
and Restated Loan and Security Agreement dated as of June 21, 1996 (as amended
or modified prior to the date hereof, the "Existing Loan Agreement");
WHEREAS, Borrower, Agent and Lenders desire to amend and restate the Existing
Loan Agreement as provided herein to provide financing for Capital Expenditures,
Letters of Credit and working capital;
WHEREAS, upon the effectiveness of this Agreement as provided herein, this
Agreement shall amend and restate the Existing Loan Agreement in its entirety,
and the security interests and pledges granted to ▇▇▇▇▇▇, as the lender under
the Original Loan Agreement and the other "Loan Documents" (as defined in the
Original Loan Agreement), and granted and/or confirmed to Agent under the
Restated Loan Agreement or the Existing Loan Agreement and the other "Loan
Documents" (as defined in the Restated Loan Agreement or the Existing Loan
Agreement, as applicable) and the perfection thereof, shall remain in full
force;
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, Borrower, Lenders and Agent agree as
follows:
SECTION 1 DEFINITIONS
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1.1 Certain Defined Terms . The following terms used in this Agreement shall
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have the following meanings:
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"Account(s)" means, as to the relevant Person, all "accounts" (as defined in
the UCC) now owned or hereafter created or acquired by such Person, including
all accounts receivable, contract rights and general intangibles relating
thereto, notes, drafts and other forms of obligations owed to or owned by such
Person arising or resulting from the sale of goods or the rendering of services,
all proceeds thereof, all guaranties and security therefor, and all goods and
rights represented thereby or arising therefrom including the right of stoppage
in transit, replevin and reclamation.
"Acquisition" means the acquisition by Borrower of substantially all of the
assets and certain liabilities of Old TNF pursuant to the Purchase Agreement.
"Acquisition Documents" means the Purchase Agreement, the documents listed on
Schedule 1.1(A) to the Original Loan Agreement, and all other agreements and
instruments executed and delivered to transfer to Borrower all of the Purchased
Assets (as defined in the Purchase Agreement).
"Affiliate" means any Person (other than Agent or any Lender): (a) directly or
indirectly controlling, controlled by, or under common control with, Borrower;
(b) directly or indirectly owning or holding five percent (5%) or more of any
equity interest in Borrower; or (c) five percent (5%) or more of whose voting
stock or other equity interest is directly or indirectly owned or held by
Borrower; provided, however, that "Affiliate" shall not include a Whitney
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Investor or any general or limited partner of a Whitney Investor or any Person
controlled by a Whitney Investor, other than Borrower and its Subsidiaries. For
purposes of this definition, "control" (including with correlative meanings, the
terms "controlling", "controlled by" and "under common control with") means the
possession directly or indirectly of the power to direct or cause the direction
of the management and policies of a Person, whether through the ownership of
voting securities or by contract or otherwise.
"Agent" means ▇▇▇▇▇▇ in its capacity as agent for Lenders under the Existing
Agreement and this Agreement and the other Loan Documents and any successor in
such capacity appointed pursuant to subsection 9.2(G).
"Agent's Account" has the meaning assigned to that term in subsection 2.4(A).
"Agreement" means this Third Amended and Restated Loan and Security Agreement,
as it may be amended, supplemented or otherwise modified from time to time.
"Asset Disposition" means the disposition, whether by sale, lease, transfer,
loss, damage, destruction, condemnation or otherwise, of any of the following:
(a) any of the
capital stock of any of Borrower's Subsidiaries, or (b) any or all of the assets
of Borrower or any of its Subsidiaries other than sales of Inventory in the
ordinary course of business.
"Assigned Agreements" means, collectively, the Acquisition Documents, the
Agreement dated as of February 18, 1994 among Old TNF, TNF Europe, Sophia
Limited and ▇▇▇▇-▇▇▇ Derclaye, and the Trademark License Agreement dated as of
August 1, 1992 between Old TNF and TNF Scotland.
"Blocked Account" has the meaning assigned to that term in subsection 5.6.
"Borrower" means the Delaware corporation known as TNF Holdings Company, Inc.
prior to consummation of the Acquisition and The North Face, Inc. thereafter.
"Borrower Stock" means Common Stock and such Preferred Stock, if any, as may be
outstanding from time to time.
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"Borrowing Limit" has the meaning assigned to that term in subsection 2.1(B).
"Budget" means the annual budget for Borrower and its Subsidiaries prepared by
the management of Borrower for the Board of Directors, including consolidated
and consolidating: (a) balance sheets; (b) statements of income; (c) cash flow
statements; and (d) statements of stockholder's equity, all prepared on a
division by division and Subsidiary by Subsidiary basis and otherwise consistent
with Borrower's historical financial statements, together with appropriate
supporting details and a statement of underlying assumptions.
"Business Day" means any day excluding Saturday, Sunday and any day which is a
legal holiday under the laws of the States of Illinois, Pennsylvania, New York,
or California or is a day on which banking institutions located in any such
states are closed.
"Canadian Documents" means, collectively, the Distribution and License
Agreement dated as of January 1, 1995 between TNF Canada and Borrower, the
Security Agreement between TNF Canada and Borrower granting liens to Borrower to
secure all liabilities of TNF Canada to Borrower, all documents necessary to
perfect the Liens thereunder in favor of Borrower and the assignment of the
liens and Borrower's rights against TNF Canada to Agent for the benefit of
Lenders.
"CAPEX Loan" means the outstanding balance of all CAPEX Advances "CAPEX
Advances" means each advance made by Lenders under the CAPEX Loan Commitment
pursuant to subsection 2.1(A).
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"CAPEX Loan Commitment" means (a) as to any Lender, the commitment of such
Lender to make CAPEX Advances as set forth on the signature page of this
Agreement opposite such Lender's signature or in the most recent Lender Addition
Agreement, if any, executed by such Lender and (b) as to all Lenders, the
aggregate commitment of all Lenders to make CAPEX Advances.
"CAPEX Note" or "CAPEX Notes" means each promissory note made by Borrower in
substantially the form of Exhibit B and issued pursuant to subsection 2.1(D).
"Capital Expenditures" means all expenditures for (including deposits), or
contracts for expenditures with respect to, any fixed assets or improvements, or
for replacements, substitutions or additions thereto, which have a useful life
of more than one year, including the direct or indirect acquisition of such
assets by way of increased product or service charges, offset items or
otherwise.
"Capital Lease" means any lease of any property (whether real, personal or
mixed) that, in conformity with GAAP, should be accounted for as a capital
lease.
"Cash Equivalents" means: (a) marketable direct obligations issued or
unconditionally guarantied by the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within six (6) months from the date of acquisition thereof;
(b) commercial paper maturing no more than six (6) months from the date issued
and, at the time of acquisition, having a rating of at least A-1 from Standard &
Poor's Ratings Group or at least P-1 from ▇▇▇▇▇'▇ Investors Service, Inc.; and
(c) certificates of deposit or bankers' acceptances maturing within six (6)
months from the date of issuance thereof issued by, or overnight reverse
repurchase agreements from, any commercial bank organized under the laws of the
United States of America or any state thereof or the District of Columbia having
combined capital and surplus of not less than $250,000,000 and not subject to
setoff rights in favor of such bank.
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"Change in Control" means any Person or "group" (as defined under Section 13d-
3 and Regulation 13D of the Securities and Exchange Act) other than the Investor
Group becomes the beneficial owner, directly or indirectly, of thirty percent or
more of the issued and outstanding voting stock of Borrower.
"Closing Date" means the date on which all conditions set forth in Section 3.1
hereof are satisfied or waived by all Lenders, but not later than April 30,
1997.
"Collateral" means, collectively, (a) all capital stock pledged to Agent for
the benefit of Lenders pursuant to the Pledge Agreement; (b) all property of
Borrower, now owned or hereafter acquired, in which a Lien is granted to Agent
for the benefit of Lenders pursuant to the Original Loan Agreement, the Restated
Loan Agreement, the Existing Loan Agreement, this Agreement and any other Loan
Document; (c) all property of Borrower or any of its Subsidiaries, now owned or
hereafter acquired, in which a Lien is granted to Agent for the benefit of
Lenders pursuant to any Loan Document, including the property of TNF Canada in
which Borrower has been granted a security interest and assigned such security
interest to Agent for the benefit of Lenders; (d) any property or interest
provided in addition to or in substitution for any of the foregoing; and (e) all
proceeds thereof.
"Commitment" or "Commitments" means the commitment or commitments of Lenders
to make Loans as set forth in subsections 2.l(A) and/or 2.1(B) and of Agent to
issue Lender Letters of Credit and purchase risk participations in Underlying
L/C's as set forth in subsection 2.1(E).
"Common Stock" means the Common Stock, par value $.0025 per share, of
Borrower, or any other capital stock of Borrower into which such stock is
reclassified or reconstituted.
"Compliance Certificate" means a certificate duly executed by the chief
executive officer or chief financial officer of Borrower appropriately completed
and in substantially the form of Exhibit A.
"Default" means a condition or event that, after notice or lapse of time or
both, would constitute an Event of Default if that condition or event were not
cured or removed within any applicable grace or cure period.
"Default Rate" has the meaning assigned to that term in subsection 2.2.
"Dilution Reserve" means a reserve against the Borrowing Limit for doubtful
Accounts as shown on Borrower's financial statements.
"Dollars" and "$" means the lawful money of the United States of America.
"Domestic Accounts" means all accounts owing to Borrower or TNF Canada from
account debtors located in the United States or Canada but excluding the
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Intercompany Inventory Account.
"Domestic Subsidiary" means any Subsidiary of Borrower or any of its
Subsidiaries organized in the United States or Canada or having any business
operations in the United States or Canada, including TNF Canada; provided that
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if TNF Canada enters into a Permitted Canadian Financing, TNF Canada and its
Subsidiaries shall no longer be Domestic Subsidiaries.
"EBITDA" means, for any period, without duplication, the total of the
following for Borrower and its Domestic Subsidiaries on a consolidated basis,
each calculated for such period: (1) net income
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determined in accordance with GAAP plus, to the extent included in the
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calculation of net income, (2) the sum of (a) taxes paid or accrued; (b)
Interest Expenses, net of interest income, paid or accrued; (c) depreciation and
amortization; and (d) other non-cash charges (excluding accruals for cash
expenses made in the ordinary course of business), less (or plus, in the case of
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non-cash losses), to the extent included in the calculation of net income, (3)
the sum of (e) the income of any Person (other than wholly-owned Domestic
Subsidiaries of Borrower) in which Borrower or any of its wholly-owned Domestic
Subsidiaries has an ownership interest unless such income is received by
Borrower or such wholly-owned Domestic Subsidiary in a cash distribution; (f)
gains or losses from sales or other dispositions of assets (other than Inventory
in the normal course of business); and (g) extraordinary or non-recurring gains
or non-cash losses, but not net of extraordinary or non-recurring "cash" losses.
"Employee Benefit Plan" means any employee benefit plan within the meaning of
Section 3(3) of ERISA which (a) is maintained for employees of any Loan Party or
any ERISA Affiliate or (b) has at any time within the preceding six (6) years
been maintained for the employees of any Loan Party or any Seller or any current
or former ERISA Affiliate.
"Environmental Laws" means any present or future federal, foreign, state or
local law, rule, regulation or order relating to pollution, waste disposal,
industrial hygiene or the protection of human health or safety, plant life or
animal life, natural resources or the environment.
"Equipment" means, as to the relevant Person, all "equipment" (as defined in
the UCC) now owned or hereafter acquired by such Person including, without
limitation, all machinery, motor vehicles, trucks, trailers, vessels, aircraft
and rolling stock and all parts thereof and all additions and accessions thereto
and replacements therefor.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended
from time to time, and any successor statute and all rules and regulations
promulgated thereunder.
"ERISA Affiliate", as applied to any Loan Party or any Seller, means any
Person who is a member of a group which is under common control with such
Person, who together with such Person is treated as a single employer within the
meaning of Section 414(b) and (c) of the IRC.
"Event of Default" means each of the events set forth in subsection 8.1.
"Existing Loan Agreement" has the meaning set forth in the recitals to this
Agreement.
"Federal Funds Effective Rate" means, for any day, 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 on the
immediately following Business Day by the Federal Reserve Bank of New York or,
if such rate is not published for any Business Day, the average of the
quotations for the day of the requested Loan received by Agent from three
Federal funds brokers of recognized standing selected by Agent.
"Fiscal Year" means each twelve month period ending on the last day of
December in each year.
"Fixed Charge Coverage" means, for any period, Operating Cash Flow divided by
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Fixed Charges.
"Fixed Charges" means, for any period, without duplication, for Borrower and
its Domestic Subsidiaries on a consolidated basis, and each calculated for such
period, (a) Interest Expenses; plus (b) scheduled payments of principal with
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respect to all Indebtedness; plus (c) any provision for (to the extent
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it is greater than zero) income or franchise taxes included in the determination
of net income, excluding any provision for deferred taxes included in net
income; plus (d) payment of deferred taxes accrued in any prior period.
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"Funding Date" means the date of each funding of a Loan or issuance of a Lender
Letter of Credit or an Underlying L/C.
"GAAP" means generally accepted accounting principles in effect in the United
States of America and set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board that are applicable to the circumstances as of the date of
determination.
"Goldwin" means Kabushiki Kaisha Goldwin, a Japanese corporation.
"Goldwin Stock Purchase Agreement" means that certain Stock Purchase Agreement
dated as of December 28, 1993 between Borrower and Goldwin, as amended.
"Hazardous Material" means all or any of the following: (a) substances that
are defined or listed in, or otherwise classified pursuant to, any applicable
laws or regulations as "hazardous substances", "hazardous materials", "hazardous
wastes", "toxic substances" or any other formulation intended to define, list or
classify substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, reproductive toxicity or "EP
toxicity"; (b) oil, petroleum or petroleum derived substances, natural gas,
natural gas liquids or synthetic gas and drilling fluids, produced waters and
other wastes associated with the exploration, development or production of crude
oil, natural gas or geothermal resources; (c) any flammable substances or
explosives or any radioactive materials; and (d) asbestos in any form or
electrical equipment which contains any oil or dielectric fluid containing
levels of polychlorinated biphenyls in excess of fifty parts per million.
"Indebtedness", as applied to any Person, means, without duplication: (a) all
indebtedness for borrowed money; (b) obligations under leases which in
accordance with GAAP constitute Capital Leases; (c) notes payable and drafts
accepted representing extensions of credit whether or not representing
obligations for borrowed money, including reimbursement obligations in respect
of letters of credit; (d) any obligation owed for all or any part of the
deferred purchase price of property or services if the purchase price is due
more than six months from the date the obligation is incurred or is evidenced by
a note or similar written instrument (but excluding any operating leases); and
(e) all indebtedness secured by any Lien on any property or asset owned or held
by that Person regardless of whether the indebtedness secured thereby shall have
been assumed by that Person or is nonrecourse to the credit of that Person (but,
only as to indebtedness which is non-recourse to the credit of such Person, not
in excess of the value of the asset so secured). Notwithstanding the foregoing,
for purposes of calculating the covenants contained in Section 6, Indebtedness
shall not include liabilities of Borrower or any of its Subsidiaries under
Permitted FX Contracts.
"Intangible Assets" means the amount of intangible assets (determined in
conformity with GAAP) of Borrower and its Subsidiaries, including, without
limitation, goodwill, trademarks, tradenames, licenses, organizational costs,
deferred amounts, covenants not to compete, unearned income and restricted
funds.
"Intellectual Property" means, with respect to the applicable Person, all of
such Person's present and future designs, patents, patent rights and
applications therefor, trademarks and registrations or applications therefor,
trade names, trade styles, logos, inventions, copyrights and all applications
and
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registrations therefor, software or computer programs, license rights, trade
secrets, methods, processes, know-how, drawings, specifications, descriptions,
and all memoranda, notes and records with respect to any research and
development, whether now owned or hereafter acquired by such Person, all
goodwill associated with any of the foregoing, and proceeds of all of the
foregoing, including, without limitation, proceeds of insurance policies
thereon.
"Intercompany Inventory Account" means the aggregate amounts (denominated in
Dollars) due to Borrower from TNF Canada for the purchase of Inventory in
accordance with the Canadian Documents.
"Interest Expenses" means, without duplication, for any period, the following
for Borrower and its Domestic Subsidiaries, each calculated for such period:
interest expenses deducted in the determination of net income (excluding (i) the
amortization of fees and costs with respect to the transactions contemplated
hereunder on the Original Closing Date which have been capitalized as
transaction costs; and (ii) interest paid in kind).
"Interest Period" means any interest period applicable to a Loan as determined
pursuant to subsection 2.2(B).
"Interest Rate Determination Date" means each date for calculating the LIBOR
Rate for purposes of determining the interest rate applicable to any LIBOR Rate
Loan pursuant to subsection 2.2 (A) . The Interest Rate Determination Date shall
be the second Business Day prior to the first day of the related Interest Period
for a LIBOR Rate Loan.
"Inventory" means, with respect to the applicable Person, all "inventory" (as
defined in the UCC) now owned or hereafter acquired by such Person, wherever
located including finished goods, raw materials, work in process and other
materials and supplies used or consumed in its business and goods which are
returned to or repossessed by such Person.
"Inventory Sublimit" means $40,000,000 in 1997 and $45,000,000 thereafter.
"Investor Group" means, collectively, the Whitney Investors, Marsden ▇. ▇▇▇▇▇
and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇.
"IRC" means the Internal Revenue Code of 1986, as amended from time to time,
and any successor statute and all rules and regulations promulgated thereunder.
"Lender" or "Lenders" means each financial institution which is a party to
this Agreement, together with its successors and permitted assigns pursuant to
subsection 9.1.
"Lender Addition Agreement" means an agreement among Agent, a Lender and such
Lender's assignee substantially in the form attached hereto as Exhibit E,
delivered to Agent in connection with an assignment of a Lender's interest
hereunder in accordance with subsection 9.1.
"Lender Letter of Credit" has the meaning assigned to that term in subsection
2.1(E), and shall include each Lender Letter of Credit issued under the Existing
Loan Agreement and outstanding on the Closing Date.
"Leverage Ratio" means as of any date of determination, the ratio of (a) the
sum of all long term Indebtedness of Borrower and its Domestic Subsidiaries
(including the current portion thereof but
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excluding any Revolving Loan) outstanding plus the average daily balance of the
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Revolving Loan during the applicable period to (b) EBITDA for such period.
"LIBOR Rate" means, for each Interest Period, a rate of interest equal to:
(a) the rate of interest determined by Agent at which deposits in Dollars
for the relevant Interest Period are offered based on information
presented on the Reuters Screen LIBOR Page as of 11:00 A.M. (London
time) on the day which is two (2) Business Days prior to the first day
of such Interest Period; provided that if at least two such offered
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rates appear on the Reuters Screen LIBOR Page in respect of such
Interest Period, the arithmetic mean of all such rates (as determined
by Agent) will be the rate used; provided further that if Reuters
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ceases to provide LIBOR quotations, such rate shall be the average
rate of interest determined by Agent at which deposits in Dollars are
offered for the relevant Interest Period by Bankers Trust Company and
Chase Manhattan Bank, N.A. (or their respective successors) to prime
banks in the London interbank market as of 11:00 A.M. (London time) on
the applicable Interest Rate Determination Date, divided by
(b) a number equal to 1.0 minus the aggregate (but without duplication)
of the rates (expressed as a decimal fraction) of reserve requirements
in effect on the day which is two (2) Business Days prior to the
beginning of such Interest Period (including, without limitation,
basic, supplemental, marginal and emergency reserves under any
regulations of the Board of Governors of the Federal Reserve System or
other governmental authority having jurisdiction with respect thereto,
as now and from time to time in effect) for Eurocurrency funding
(currently referred to as "Eurocurrency liabilities" in Regulation D
of such Board) which are required to be maintained by a member bank of
the Federal Reserve System;
(such rate to be adjusted to the nearest one sixteenth of one percent (1/16 of
1%) or, if there is no nearest one sixteenth of one percent (1/16 of l%), to the
next higher one sixteenth of one percent (1/16 of 1%).
"LIBOR Rate Loans" means Loans bearing interest at rates determined by
reference to the LIBOR Rate as provided in subsection 2.2(A)(2).
"Lien" means any lien, mortgage, pledge, security interest, charge or
encumbrance of any kind, whether voluntary or involuntary, (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, and any agreement to give any security interest).
"Loan" or "Loans" means an advance or advances under the CAPEX Loan Commitment
or the Revolving Loan Commitment including all loans under the Existing Loan
Agreement outstanding on the Closing Date.
"Loan Documents" means this Agreement, the Original Loan Agreement, the
Existing Loan Agreement, the Notes, the Pledge Agreement, the Trademark and
Patent Agreements, the Canadian Documents, any Mortgages, and all other
instruments, documents and agreements executed by or on behalf of any Loan Party
and delivered concurrently herewith or at any time hereafter to or for Agent or
any Lender in connection with the Loans and other transactions contemplated by
this Agreement, all as amended, restated, supplemented or modified from time to
time.
"Loan Party" means, collectively, Borrower, Borrower's Subsidiaries, and any
other Person (other than Agent or any Lender or a Shareholder) which is or
becomes a party to any Loan Document.
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"Loan Year" has the meaning assigned to that term in subsection 2.3(D).
"Management Stock Plans" means existing or future stock purchase, savings,
option, bonus, stock appreciation, incentive or similar plans approved by
Borrower's Board of Directors for the issuance of stock or options for the
benefit of Borrower's employees, officers, directors or consultants.
"Management Restricted Shares" means shares of Common Stock issued as
"restricted stock" pursuant to Borrower's 1994 Stock Incentive Plan.
"Management Stock Purchase Agreement" means the Stock Purchase and Non-
Competition Agreement dated as of the Original Closing Date among Borrower,
Marsden ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, as amended.
"Material Adverse Effect" means (a) a material adverse effect upon the
business, operations, properties, assets or condition (financial or otherwise)
of Borrower on an individual basis or on Borrower and its Subsidiaries, taken as
a whole or (b) the impairment in any material respect of the ability of any Loan
Party to perform its obligations under any Loan Document to which it is a party
or of Agent or any Lender to enforce or collect any of the Obligations.
"Maximum Revolving Loan Amount" has the meaning assigned to that term in
subsection 2.1(B).
"Mortgage" means any mortgage, deed of trust, leasehold mortgage, leasehold
deed of trust, collateral assignments of leases or other documents under the
laws of any applicable jurisdiction granting Liens on interests in real property
and delivered by any Loan Party to Agent, on behalf of Lenders, with respect to
Mortgaged Property, all in form and substance acceptable to Agent.
"Mortgaged Property" has the meaning assigned to that term in subsection
5.15(a).
"Note" or "Notes" means one or more of the CAPEX Notes or Revolving Notes, or a
combination thereof.
"Obligations" means all obligations, liabilities and indebtedness of every
nature of each Loan Party from time to time owed to Agent or any Lender under
the Loan Documents, including the principal amount of all debts, claims and
indebtedness, accrued and unpaid interest and all fees, costs and expenses,
whether primary, secondary, direct, contingent, fixed or otherwise, heretofore,
now and/or from time to time hereafter owing, due or payable.
"Odyssey Bank" means any of Chemical Bank, The First National Bank of Boston,
or The Hong Kong & Shanghai Banking Corporation Limited or each and all of their
Subsidiaries, successors and assigns.
"Old TNF" means the California corporation that was known as The North Face
prior to the Original Closing Date.
"Operating Cash Flow" means, for any period, (a) EBITDA; less (b) Capital
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Expenditures (but excluding Capital Leases incurred during such period and
Capital Expenditures made with CAPEX Advances).
"Original Closing Date" means June 7, 1994.
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"Original Loan Agreement" has the meaning set forth in the Recitals to this
Agreement.
"Permitted CAPEX Equipment" means Equipment purchased by Borrower after the
Closing Date the purchase price of which will be capitalized in accordance with
GAAP.
"Permitted Canadian Financing" means Indebtedness of TNF Canada to a Person
other than Borrower if (a) no guaranty or other credit support or Liens are
provided by Borrower; (b) the Intercompany Inventory Account and all other
Indebtedness and liabilities of TNF Canada to Borrower are repaid in full from
the initial proceeds; and thereafter (c) further sales of Inventory are made by
Borrower to TNF Canada only for cash in advance, COD, letter of credit or credit
(but at no time may the Intercompany Inventory Account exceed Fifty Thousand
Dollars ($50,000)); (d) no Lender Letters of Credit or Underlying L/C may be
issued for the benefit of TNF Canada; and (e) no Inventory of Borrower shall be
located in Canada.
"Permitted Encumbrances" means the following types of Liens: (a) Liens
(other than Liens relating to Environmental Laws or ERISA) for taxes,
assessments or other governmental charges not yet due and payable; (b) statutory
Liens of landlords, carriers, warehousemen, mechanics, materialmen and other
similar liens imposed by law, which are incurred in the ordinary course of
business for sums not more than thirty (30) days delinquent or which are being
contested in good faith if Borrower has notified Agent of the assertion of such
Liens and, if required by Agent, an adequate reserve against the Borrowing Limit
shall have been made therefor; (c) Liens (other than any Lien imposed by ERISA)
incurred or deposits made in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other types of social
security, statutory obligations, surety and appeal bonds, bids, leases,
utilities, government contracts, trade contracts, licenses of computer software
or hardware, performance and return-of-money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money); (d) easements,
rights-of-way, restrictions, and other similar charges or encumbrances not
interfering in any material respect with the ordinary conduct of the business of
any Loan Party or any of its Subsidiaries; (e) Liens for purchase money
obligations or Capital Leases, provided that (i) the purchase of the asset
--------
subject to any such Lien is permitted under subsection 6.3, (ii) the
Indebtedness secured by any such Lien is permitted under subsection 7.1, and
(iii) such Lien encumbers only the asset so purchased; (f) Liens in favor of
Agent on behalf of Lenders; (g) judgment Liens which do not create an Event of
Default; (h) Liens set forth on Schedule 1.1(B); (i) Liens securing Indebtedness
of TNF Scotland permitted to be incurred under subsection 7.1(d); (j) Liens
securing Indebtedness of TNF Canada to Borrower which have been assigned to
Agent for the benefit of Lenders; and (k) Liens on assets of TNF Canada securing
Permitted Canadian Financing.
"Permitted FX Contracts" means (a) forward currency exchange contracts of TNF
Italy or TNF Europe and (b) forward currency exchange contracts of Borrower or
any other Subsidiary if (i) the settlement date for each such contract is more
than two (2) days after Borrower's or such Subsidiary's entry into such
contract; (ii) the Dollar value of all such contracts does not exceed
$15,000,000; and (iii) the tenor of each such contract does not exceed eighteen
(18) months from Borrower's or such Subsidiary's entry into such contract.
"Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, limited liability companies, joint stock
companies, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations, whether or not
legal entities, and governments and agencies and political subdivisions thereof.
11
"Pledge Agreement" means the Amended and Restated Stock Pledge Agreement
executed and delivered by Borrower concurrently with the delivery of the
Restated Loan Agreement.
"Preferred Stock" means any capital stock of Borrower other than the Common
Stock.
"Prime Rate" means a variable rate of interest per annum equal to the higher
of (a) the rate of interest from time to time published by the Board of
Governors of the Federal Reserve System as the "Bank Prime Loan" rate in Federal
Reserve Statistical Release H.15(519) entitled "Selected Interest Rates" or any
successor publication of the Federal Reserve System reporting the Bank Prime
Loan rate or its equivalent, or (b) the Federal Funds Effective Rate. The
statistical release generally sets forth a Bank Prime Loan rate for each
Business Day. In the event the Board of Governors of the Federal Reserve System
ceases to publish a Bank Prime Loan rate or its equivalent, the term "Prime
Rate" shall mean a variable rate of interest per annum equal to the highest of
the "prime rate", "reference rate", "base rate", or other similar rate announced
from time to time by any of Bankers Trust Company or The Chase Manhattan Bank,
National Association or their successors (with the understanding that any such
rate may merely be a reference rate and may not necessarily represent the lowest
or best rate actually charged to any customer by the any such bank).
"Prime Rate Loans" means Loans bearing interest at rates determined by
reference to the Prime Rate as provided in subsection 2.2(A)(2).
"Pro Forma" means the unaudited consolidated and consolidating balance sheet
of Borrower and its Subsidiaries as of the Original Closing Date annexed as
Schedule 1.1(C) to the Original Loan Agreement.
"Pro Rata Share" means (a) with respect to matters relating to a particular
Commitment of a Lender (including the making or repayment of Loans pursuant to
that Commitment), the percentage obtained by dividing (i) such Commitment of
that Lender by (ii) all such Commitments of all Lenders and (b) with respect to
all other matters, the percentage obtained by dividing (i) the Total Loan
Commitment of a Lender by (ii) the Total Loan Commitments of all Lenders, in
either case as such percentage may be adjusted by assignments permitted pursuant
to subsection 9.1.
"Purchase Agreement" means that certain Purchase and Sale Agreement [Short
Form] dated as of May 25, 1994 among Sellers and Borrower, as purchaser,
including all exhibits and schedules thereto.
"Requisite Lenders" means Lenders having (i) fifty-one percent (51%) or more
of the Total Loan Commitments or, (ii) if the CAPEX Loan Commitments have been
terminated, fifty-one percent (51%) or more of the sum of the Revolving Loan
Commitments and the aggregate outstanding principal amount of the CAPEX Loans,
if any, or (iii) if all Commitments have been terminated fifty-one percent (51%)
or more of the aggregate outstanding principal amount of the Revolving Loan and
the CAPEX Loan.
"Restated Loan Agreement" has the meaning set forth in the recitals to this
Agreement.
"Restricted Junior Payment" means: (a) any dividend or other distribution,
direct or indirect, on account of any shares of any class of stock of Borrower
or any of its Subsidiaries now or hereafter outstanding; (b) any payment or
prepayment of principal of, premium, if any, or interest on, or any redemption,
conversion, exchange, retirement, defeasance, sinking fund or similar payment,
purchase or other acquisition for value, direct or indirect, of any shares of
any class of stock of Borrower or any of its Subsidiaries now or hereafter
outstanding; (c) any payment made to retire, or to obtain the surrender of, any
outstanding warrants, options or other rights to acquire shares of any class of
stock of Borrower or
12
any of its Subsidiaries now or hereafter outstanding; (d) any payment by
Borrower or any of its Subsidiaries of any management fees, director's fees,
guarantee fees or similar fees to any Affiliate, whether pursuant to a
management agreement or otherwise, and (e) fees, salaries or other compensation
to any Shareholder or to the chief executive officer and second most senior
executive officer of Borrower.
"Revolving Loan" means all advances made by Lenders pursuant to subsection
2.1(B) (including those revolving loans under the Existing Loan Agreement which
remain outstanding as Revolving Loans on the Closing Date) and any amounts added
to the principal balance of the Revolving Loan pursuant to this Agreement.
"Revolving Loan Commitment" means (a) as to any Lender, the commitment of such
Lender to make Revolving Loans and to purchase risk participations in Lender
Letters of Credit and Underlying L/C's pursuant to subsection 2.1(D) as set
forth on the signature page of this Agreement opposite such Lender's signature
or in the most recent Lender Addition Agreement, if any, executed by such Lender
and (b) as to all Lenders, the aggregate commitment of all Lenders to make
Revolving Loans and to purchase risk participations in Lender Letters of Credit
and Underlying L/C's pursuant to subsection 2.1(E).
"Revolving Note" or "Revolving Notes" means each promissory note made by
Borrower in substantially the form of Exhibit D and issued pursuant to
subsection 2.1(D).
"Risk Participation Agreement" has the meaning assigned to that term in
subsection 2.1(E).
"Risk Participation Liability" means, as to each Lender Letter of Credit and
each Risk Participation Agreement, all reimbursement obligations of Borrower or
any of its Subsidiaries to the issuer of the Lender Letter of Credit or the
Underlying L/C including: (a) the amount available to be drawn or which may
become available to be drawn; (b) all amounts which have been paid or made
available by the issuing bank to the extent not reimbursed; and (c) all unpaid
interest, fees and expenses with respect thereto.
"Risk Participation Reserve" means, at any time, an amount equal to (a) the
aggregate amount of Risk Participation Liability with respect to all Lender
Letters of Credit, Underlying L/C's and all Risk Participation Agreements
outstanding at such time plus (b) to the extent not included in clause (a), the
----
aggregate amount theretofore paid by Agent or any Lender under Lender Letters of
Credit or Risk Participation Agreements for which Agent or such Lender has not
been reimbursed or which has not been debited to the Loan Account pursuant to
subsection 2.1(E)(2).
"Sellers" means, collectively, Odyssey Holding Inc. and Old TNF as sellers
under the Purchase Agreement.
"Shareholder" means each Person which owns shares of the capital stock of
Borrower, whether beneficially or of record.
"Subsidiary" means, with respect to any Person, any corporation, association
or other business entity of which 50% or more of the total voting power of
shares of stock (or equivalent ownership or controlling interest) entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by that Person or one or more of the other Subsidiaries
of that Person or a combination thereof.
"Tangible Net Worth" means an amount equal to (a) Borrower's and its Domestic
Subsidiaries' net worth; less (b) Borrower's and its Domestic Subsidiaries'
----
Intangible Assets; less (c) Borrower's and its
----
13
Domestic Subsidiaries' prepaid expenses; less (d) all obligations owed to
----
Borrower or any of its Domestic Subsidiaries by an Affiliate of Borrower or any
of its Subsidiaries; and less (e) all loans by Borrower or any of its Domestic
----
Subsidiaries to officers, stockholders or employees of Borrower or any of its
Subsidiaries.
"Term" has the meaning assigned to that term in subsection 2.5.
"Termination Date" means the date this Agreement is terminated as set forth in
subsection 2.5.
"TNF Canada" means The North Face (Canada), Inc., a corporation organized
under the laws of Canada, and a wholly-owned Subsidiary of Borrower.
"TNF Europe" means The North Face (Europe) Limited, a private limited company
incorporated in Scotland under the Companies Acts, formerly known as The North
Face (Scotland) Limited, and a wholly-owned Subsidiary of Borrower.
"TNF Italy" means The North Face (Italy) S.r.l., a limited liability company
formed under the laws of Italy and owned by TNF Europe and Borrower.
"Total Interest Coverage" means, for any period, Operating Cash Flow divided by
----------
Interest Expenses.
"Total Loan Commitment" means the aggregate Commitments of any Lender with
respect to the Revolving Loan Commitment and the CAPEX Loan Commitment.
"Trademark and Patent Agreements" means, collectively, the agreement entitled
Amended and Restated Confirmation and Grant of Security Interest in Trademarks
and Trademark Applications and the agreement entitled Amended and Restated
Confirmation and Grant of Security Interest in Patents, executed and delivered
by Borrower concurrently with the Restated Loan Agreement.
"Transaction Documents" means collectively, the Loan Documents, the Goldwin
Stock Purchase Agreement, the Borrower Stock and the Acquisition Documents and
all other material documents and agreements executed and delivered by Borrower
on the Original Closing Date in connection with the Acquisition, including the
financing thereof.
"UCC" means the Uniform Commercial Code as in effect on the date hereof in the
State of Illinois, as amended from time to time, and any successor statute, or
as in effect in any jurisdiction in which Collateral is located (provided, that
--------
with respect to the shares pledged under the Pledge Agreement, UCC means the
Uniform Commercial Code as in effect in the State of New York).
"Underlying L/C" means a letter of credit issued by a bank under a Risk
Participation Agreement.
"Whitney Investor" means each of ▇.▇. ▇▇▇▇▇▇▇ & Co., Whitney 1990 Equity Fund,
L.P. and Whitney Subordinated Debt Fund, L.P., and any Affiliate of any of them
to which Borrower's Common Stock is transferred.
1.2 Accounting Terms . For purposes of this Agreement, all accounting terms
----------------
not otherwise defined herein shall have the meanings assigned to such terms in
conformity with GAAP. Financial statements and other information furnished to
Agent or any Lender pursuant to subsection 5.1 shall be prepared in accordance
with GAAP as in effect at the time of such preparation. In the event any
"Accounting
14
Changes" (as defined below) shall occur and such changes affect financial
covenants, standards or terms in this Agreement, then Borrower and Lenders agree
to enter into negotiations in order to amend such provisions of this Agreement
so as to equitably reflect such Accounting Changes with the desired result that
the criteria for evaluating the financial condition of Borrower and its
Subsidiaries shall be the same after such Accounting Changes as if such
Accounting Changes had not been made, and until such time as such an amendment
shall have been executed and delivered by Borrower and Requisite Lenders, (A)
all financial covenants, standards and terms in this Agreement shall be
calculated and/or construed as if such Accounting Changes had not been made, and
(B) Borrower shall prepare footnotes to each Compliance Certificate and the
financial statements required to be delivered hereunder that show the
differences between the financial statements delivered (which reflect such
Accounting Changes) and the basis for calculating financial covenant compliance
(without reflecting such Accounting Changes). "Accounting Changes" means: (a)
changes in accounting principles required by GAAP and implemented by Borrower
and/or any of its Subsidiaries; (b) changes in accounting principles recommended
by the certified public accountants for Borrower and/or any of its Subsidiaries
(which certified public accountants have been approved by Requisite Lenders);
and (c) changes in carrying value of Borrower's (or any of its Subsidiaries')
assets, liabilities or equity accounts resulting from (i) the application of
purchase accounting principles (A.P.B. 16 and/or 17 and EITF 88-16 and FASB 109)
to the Acquisition or (ii) as the result of any other adjustments that, in each
case, were applicable to, but not included in, the Pro Forma, except those
adjustments described in Schedule 1.2. All such adjustments resulting from
expenditures made subsequent to the Original Closing Date (including, but not
limited to, capitalization of costs and expenses or payment of pre-Closing Date
liabilities) shall be treated as expenses in the period the expenditures are
made and deducted as part of the calculation of EBITDA in such period.
1.3 Other Definitional Provisions . References to "Sections", "subsections",
-----------------------------
"Exhibits" and "Schedules" shall be to Sections, subsections, Exhibits and
Schedules, respectively, of this Agreement unless otherwise specifically
provided. Any of the terms defined in subsection 1.1 may, unless the context
otherwise requires, be used in the singular or the plural depending on the
reference. In this Agreement, words importing any gender include the other
genders; the words "including," "includes" and "include" shall be deemed to be
followed by the words "without limitation"; references to agreements and other
contractual instruments shall be deemed to include subsequent amendments,
assignments, and other modifications thereto, but only to the extent such
amendments, assignments and other modifications are not prohibited by the terms
of this Agreement or any other Loan Document; references to Persons include
their respective permitted successors and assigns or, in the case of
governmental Persons, Persons succeeding to the relevant functions of such
Persons; and all references to statutes and related regulations shall include
any amendments of same and any successor statutes and regulations.
15
SECTION 2 LOANS AND COLLATERAL
2.1 Loans
-----
(A) CAPEX Line . Subject to the terms and conditions of this Agreement
----------
and in reliance upon the representations and warranties of Borrower and the
other Loan Parties set forth herein and in the other Loan Documents, each Lender
agrees, severally and not jointly, to lend to Borrower its Pro Rata Share of
each CAPEX Advance from time to time requested by Borrower prior to March
31,1998, the aggregate amount of which shall not exceed $5,000,000; provided
--------
that the principal amount of each CAPEX Advance shall not be less than $100,000.
Amounts borrowed under this subsection 2.1(A) and prepaid may not be reborrowed.
-----------------
The principal of the CAPEX Loan shall be repaid in equal quarterly installments
based on five (5) year amortization of the outstanding CAPEX Loan on March 31,
1998 commencing on April 1, 1998, but the outstanding principal balance,
together with all accrued and unpaid interest thereon, shall be due and payable
in full on the Termination Date.
(B) Revolving Loan . Subject to the terms and conditions of this
--------------
Agreement and in reliance upon the representations and warranties of Borrower
herein set forth, each Lender agrees, severally but not jointly, to lend to
Borrower from time to time its Pro Rata Share of the Revolving Loan. The
Revolving Loan Commitment is Sixty Million Dollars ($60,000,000). Amounts
borrowed under this subsection 2.1(B) may be repaid and reborrowed at any time
prior to the earlier of (i) the termination of the Revolving Loan Commitment
pursuant to subsection 8.3 or (ii) the Termination Date. No Lender shall have
any obligation to make advances under this subsection 2.1(B) to the extent any
requested advance would cause the balance of the Revolving Loans then
outstanding to exceed the Maximum Revolving Loan Amount; provided that Lenders
--------
may, in their sole discretion, with the approval of all Lenders elect from time
to time to make advances in excess of the Maximum Revolving Loan Amount or the
Revolving Loan Commitment. If advances in excess of the Maximum Revolving Loan
Amount are made pursuant to the approval of Lenders as set forth in the proviso
to the preceding sentence, then for purposes of subsection 2.4(B)(1), the
Maximum Revolving Loan Amount shall be deemed increased by such amount but only
for so long as Lenders allow such Loans to be outstanding.
(1) "Maximum Revolving Loan Amount" means, as of any date of
determination, the lesser of (a) the Revolving Loan Commitment minus the Risk
Participation Reserve and (b) the Borrowing Limit minus the Risk Participation
Reserve.
(2) "Borrowing Limit" means, as of any date of determination, an
amount equal to the sum of (a) eighty-five percent (85%) of Domestic Accounts of
Borrower; plus (b) the lesser of (1) fifty percent (50%) of Inventory of
----
Borrower located in the United States and Canada (or 75% of such Inventory of
Borrower from April 1 to September 30 of each year) and (2) the Inventory
Sublimit; plus (c) forty-five percent (45%) of the aggregate amount of Risk
----
Participation Liability with respect to all outstanding Lender Letters of Credit
and Risk Participation Agreements used to purchase Inventory; plus (d) eighty-
----
five percent (85%) of Domestic Accounts of TNF Canada; provided that the amounts
--------
available under this clause (d) shall not exceed the unpaid amount of the
Intercompany Inventory Account less reserves for withholding taxes, if any,
----
payable by TNF Canada with respect thereto and shall only be available until TNF
Canada enters into a Permitted Canadian Financing; less (e) the Dilution
----
Reserve; less (f) in each category, such other reserves as Agent in its sole,
----
reasonable discretion elects to establish from time to time; plus (g)
----
$5,000,000. For purposes of calculating the Borrowing Limit, all Accounts and
Inventory of TNF Canada shall be denominated in Dollars, based on the most
recently available conversion rate from Canadian dollars.
(C) Borrowing Mechanics. (1) Prime Rate Loans made on any Funding Date
-------------------
shall be in an aggregate minimum amount of Twenty-five Thousand Dollars
($25,000) and integral multiples of Twenty-
16
five Thousand Dollars ($25,000) in excess of such amount. LIBOR Rate Loans made
on any Funding Date shall be in an aggregate minimum amount of Five Hundred
Thousand Dollars ($500,000) and integral multiples of One Hundred Thousand
Dollars ($100,000) in excess of such amount.
(2) When Borrower desires to borrow under subsection 2.1 (A) or (B)
Borrower shall deliver to Agent a notice of borrowing no later than noon
(Chicago time) (i) on the proposed Funding Date in the case of a requested Prime
Rate Loan and (ii) at least two (2) Business Days in advance of the proposed
Funding Date in the case of a requested LIBOR Rate Loan ("Notice of Borrowing").
The Notice of Borrowing shall specify: (1) the proposed Funding Date (which
shall be a Business Day); (2) the amount and type of Loans requested; (3) in the
case of a Revolving Loan, that the aggregate amount of the Revolving Loan will
not exceed the Maximum Revolving Loan Amount; (4) whether such Loans shall
consist of Prime Rate Loans or LIBOR Rate Loans; (5) if such Loans, or any
portion thereof are to be LIBOR Rate Loans, the amounts thereof and the initial
Interest Periods therefor; and (6) that no Default or Event of Default has
occurred and is continuing or would result from the proposed advance. Borrower
may not borrow any LIBOR Rate Loan if any Default or Event of Default has
occurred and is continuing.
In lieu of delivering a Notice of Borrowing, Borrower may give Agent
telephonic notice by the required time of the notice hereunder; provided that
--------
such notice shall be promptly confirmed in writing by delivery of a written
Notice of Borrowing to Agent on that same day.
Neither Agent nor any Lender shall incur any liability to Borrower for
acting upon any telephonic notice that Agent believes in good faith to have been
given by a duly authorized officer or other person authorized to borrow on
behalf of Borrower or for otherwise acting in good faith under this subsection
2.1(C). Neither Agent nor any Lender will make any advance pursuant to any
telephonic notice unless Agent has also received the most recent financial
statements required under subsection 5.1 by noon (Chicago time). The making of
an advance pursuant to telephonic notice shall constitute a Loan under this
Agreement. Each such advance made to Borrower under the Revolving Loan shall be
deposited by wire transfer in immediately available funds in such account as
Borrower may from time to time designate to Agent in writing.
(3) Borrower shall give Agent at least three (3) Business Days prior
written notice of its desire to borrow any CAPEX Advance, which notice shall be
accompanied by a certificate of Borrower describing, in reasonable detail, the
Permitted CAPEX Equipment to be purchased with the proceeds thereof. Each
notice of borrowing hereunder shall specify the Funding Date (which shall be a
Business Day), whether such CAPEX shall consist of a Prime Rate Loan or a LIBOR
Rate Loan and the Interest Period, if any, applicable thereto. Each such CAPEX
Advance to Borrower shall be deposited in immediately available funds in such
account as Borrower may from time to time designate to Agent in writing.
(4) Agent shall notify Lenders of Loans requested hereunder in
accordance with subsection 9.6.
(D) Notes . Borrower shall execute and deliver to each Lender (1) a
-----
CAPEX Note to evidence its CAPEX Loan, such CAPEX Note to be in the principal
amount of the CAPEX Loan Commitment of such Lender and with other appropriate
insertions and (2) a Revolving Note to evidence its Revolving Loan, such
Revolving Note to be in the principal amount of the Revolving Loan Commitment of
such Lender and with other appropriate insertions. In the event of an
assignment under subsection 9.1, Borrower shall, upon surrendering of the
assigning Lender's Notes, issue new Notes to reflect the new commitments or
Loans of the assigning Lender and its assignee.
(E) Lender Letters of Credit and Risk Participation Agreements. Subject
----------------------------------------------------------
to the terms and conditions of this Agreement and in reliance upon the
representations and warranties of Borrower herein set
17
forth, the Revolving Loan Commitments may, in addition to advances under the
Revolving Loan, be utilized, upon the request of Borrower, for (i) the issuance
of documentary letters of credit by Agent (each such letter of credit, a "Lender
Letter of Credit") or (ii) the issuance by Agent of risk participation
agreements (each such agreement, a "Risk Participation Agreement") to confirm
payment to banks which issue documentary letters of credit for the account of
Borrower. Each Risk Participation Agreement shall provide for automatic daily
reporting of the outstanding Underlying L/C's and any amounts drawn thereunder.
All Lender Letters of Credit and Lender Guaranties (as defined in the Existing
Loan Agreement) outstanding under the Existing Credit Agreement on the Closing
Date shall be deemed Lender Letters of Credit hereunder.
(1) Maximum Amount. The aggregate amount of Risk Participation
--------------
Liability with respect to all Lender Letters of Credit and Risk Participation
Agreements outstanding at any time shall not exceed Twenty-five Million Dollars
($25,000,000), subject to, and reduced by, any reductions in the Revolving Loan
Commitment under subsection 2.4.
(2) Reimbursement. Borrower shall be irrevocably and
-------------
unconditionally obligated forthwith without presentment, demand, protest or
other formalities of any kind, to reimburse Agent, for the benefit of Agent and
Lenders, for any amounts paid by Agent or any Lender with respect to any Lender
Letter of Credit or any Risk Participation Agreement issued for the account of
Borrower, including all fees, costs and expenses paid by Agent or any Lender to
any bank that issues letters of credit. Borrower hereby authorizes and directs
Agent, at Agent's option, to debit Borrower's account (by increasing the
principal balance of the Revolving Loan) in the amount of any payment made by
Agent or any Lender with respect to any Lender Letter of Credit or any Risk
Participation Agreement. All amounts paid by Agent or any Lender with respect
to any Lender Letter of Credit or Risk Participation Agreement that are not
immediately repaid by Borrower with the proceeds of a Revolving Loan or
otherwise shall bear interest at the Default Rate applicable to Revolving Loans.
Each Lender agrees to fund its Pro Rata Share of any Revolving Loan made
pursuant to this subsection 2.1(E)(2). In the event that Borrower shall fail to
reimburse Agent on the date of any payment by Agent under a Lender Letter of
Credit or Risk Participation Agreement in an amount equal to the amount of such
payment, Agent shall promptly notify each Lender of the unreimbursed amount of
such payment, together with accrued interest thereon, and each Lender agrees to
purchase, and shall be deemed to have purchased, a participation in such Lender
Letter of Credit or Risk Participation Agreement in an amount equal to its Pro
Rata Share of the unpaid amount of such Risk Participation Liability and each
Lender agrees to pay to Agent such Lender's Pro Rata Share of such Risk
Participation Liability. The obligation of each Lender to deliver to Agent an
amount equal to its respective participation pursuant to the foregoing sentence
shall be absolute and unconditional and such remittance shall be made
notwithstanding the occurrence or continuation of an Event of Default or Default
or failure to satisfy any condition set forth in Section 3. In the event any
Lender fails to make available to Agent the amount of such Lender's
participation in such Lender Letter of Credit or Risk Participation Agreement as
provided in this subsection 2.1(E)(2), Agent shall be entitled to recover such
amount on demand from such Lender, together with interest at the Prime Rate.
(3) Conditions of Issuance. In addition to all other terms and
----------------------
conditions set forth in this Agreement, the issuance by Agent of any Lender
Letter of Credit or Risk Participation Agreement shall be subject to the
conditions precedent that the Lender Letter of Credit or Underlying L/C be in
such form, be for such amount, contain such terms and support such transactions
as are reasonably acceptable to Agent. Each Lender Letter of Credit, Underlying
L/C and Risk Participation Agreement shall be in form and substance acceptable
to Agent. The expiration date of each Lender Letter of Credit or Underlying L/C
shall be on a date which is at least thirty (30) days before the Termination
Date. Each Risk Participation Agreement shall provide that all demands or
claims for payment with respect to each Underlying L/C must be presented by a
date certain, which date will be at least thirty (30) days before the
Termination Date.
18
(4) Request for Letters of Credit. Borrower shall give Agent at
-----------------------------
least two (2) Business Days prior notice specifying the date a Lender Letter of
Credit or Underlying L/C is to be issued, identifying the beneficiary and
describing the nature of the transactions proposed to be supported thereby. The
notice shall be accompanied by the form of the requested Lender Letter of Credit
or Underlying L/C.
(F) Other Letter of Credit and Guaranty Provisions.
----------------------------------------------
(1) Obligations Absolute. The obligation of Borrower to reimburse
--------------------
Agent or any Lender for payments made under any Lender Letter of Credit or Risk
Participation Agreement shall be unconditional and irrevocable and shall be paid
strictly in accordance with the terms of this Agreement under all circumstances
including the following circumstances:
(a) any lack of validity or enforceability of any Lender Letter of
Credit or Risk Participation Agreement or Underlying L/C or any other agreement;
(b) the existence of any claim, setoff, defense or other right which
Borrower, any of its Subsidiaries or Affiliates, Agent or any Lender, on the one
hand, may at any time have against any beneficiary or transferee of any Lender
Letter of Credit or any Underlying L/C (or any Persons for whom any such
transferee may be acting), Agent, any Lender or any other Person, on the other
hand, whether in connection with this Agreement, the transactions contemplated
herein or any unrelated transaction (including any underlying transaction
between Borrower or any of its Subsidiaries or Affiliates and the beneficiary
for which the Lender Letter of Credit or Underlying L/C was procured);
(c) any draft, demand, certificate or any other document presented
under any Lender Letter of Credit or Underlying L/C proving to be forged,
fraudulent, invalid or insufficient in any respect or any statement therein
being untrue or inaccurate in any respect;
(d) payment by Agent or any Lender under any Lender Letter of Credit
or Risk Participation Agreement against presentation of a demand, draft or
certificate or other document which does not comply with the terms of such
Lender Letter of Credit or Underlying L/C; provided that, in the case of any
--------
payment by Agent or a Lender under any Lender Letter of Credit or Underlying
L/C, Agent or such Lender has not acted with gross negligence or willful
misconduct (as determined by a court of competent jurisdiction) in determining
that the demand for payment under such Lender Letter of Credit, Underlying L/C
or Risk Participation Agreement complies on its face with any applicable
requirements for a demand for payment under such Lender Letter of Credit,
Underlying L/C or Risk Participation Agreement;
(e) any other circumstance or happening whatsoever, which is
similar to any of the foregoing; or
(f) the fact that a Default or an Event of Default shall have
occurred and be continuing.
(2) Nature of Agent's and Lenders' Duties. As between Agent and or
-------------------------------------
any Lender and Borrower, Borrower assumes all risks of the acts and omissions
of, or misuse of any Lender Letter of Credit, Underlying L/C or Risk
Participation Agreement by beneficiaries of any Lender Letter of Credit or
Underlying L/C. In furtherance and not in limitation of the foregoing, neither
Agent nor any Lender shall be responsible: (a) for the form, validity,
sufficiency, accuracy, genuineness or legal effect of any document submitted by
any party in connection with the application for and issuance of any Lender
Letter of Credit, Underlying L/C or Risk Participation Agreement, even if it
should in fact prove to be in any or all respects invalid, insufficient,
inaccurate, fraudulent or forged; (b) for the validity or sufficiency of any
instrument
19
transferring or assigning or purporting to transfer or assign any Lender Letter
of Credit or Underlying L/C or the rights or benefits thereunder or proceeds
thereof, in whole or in part, which may prove to be invalid or ineffective for
any reason; (c) for failure of the beneficiary of any Lender Letter of Credit or
Underlying L/C to comply fully with conditions required in order to demand
payment under such Lender Letter of Credit or Underlying L/C; provided that, in
--------
the case of any payment by Agent or any Lender under any Lender Letter of Credit
or Risk Participation Agreement, or by any issuer of an Underlying L/C, Agent,
or such Lender or such issuer has not acted with gross negligence or willful
misconduct (as determined by a court of competent jurisdiction) in determining
that the demand for payment under such Lender Letter of Credit or Risk
Participation Agreement or Underlying L/C complies on its face with any
applicable requirements for a demand for payment thereunder; (d) for errors,
omissions, interruptions or delays in transmission or delivery of any messages,
by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher;
(e) for errors in interpretation of technical terms; (f) for any loss or delay
in the transmission or otherwise of any document required in order to make a
payment under any Lender Letter of Credit, Underlying L/C or Risk Participation
Agreement or of the proceeds thereof; (g) for the credit of the proceeds of any
drawing under any Lender Letter of Credit, Underlying L/C or demand under, a
Risk Participation Agreement; and (h) for any consequences arising from causes
beyond the control of Agent or any Lender. None of the above shall affect,
impair, or prevent the vesting of any of Agent's or any Lender's rights or
powers hereunder.
(3) In furtherance and extension of and not in limitation of, the
specific provisions hereinabove set forth, any action taken or omitted by Agent
or any Lender under or in connection with any Lender Letter of Credit or Risk
Participation Agreement, if taken or omitted in good faith, shall not put Agent
or any Lender under any resulting liability to Borrower.
2.2 Interest .
--------
(A) Rate of Interest. The Loans and all other Obligations shall bear
----------------
interest from the date such Loans are made or such other Obligations become due
to the date paid at a rate per annum determined by reference to the Prime Rate
or the LIBOR Rate. The applicable basis for determining the rate of interest
shall be selected by Borrower initially at the time a notice of borrowing is
given pursuant to subsection 2.1(C). The basis for determining the interest
rate with respect to any Loan may be changed from time to time pursuant to
subsection 2.2(E). If on any day a Loan is outstanding with respect to which
notice has not been delivered to Agent in accordance with the terms of this
Agreement specifying the basis for determining the rate of interest, then for
that day that Loan shall bear interest determined by reference to the Prime
Rate.
The Loans shall bear interest through maturity as follows:
(1) if a Prime Rate Loan, then at a per annum rate equal to the Prime
Rate minus one half of one percent (0.50%); and
-----
(2) if a LIBOR Rate Loan, then at a per annum rate equal to the LIBOR
Rate plus one and one-quarter percent (1.25%).
----
Notwithstanding the foregoing, if, as of the end of any Fiscal Year, the
ratio of the daily average outstanding Obligations of Borrower and its Domestic
Subsidiaries to EBITDA for such Fiscal Year exceeds 2.5 to 1, all Loans shall
bear interest at a rate equal to one quarter of one percent (0.25%) per annum
plus the then-applicable rate, until the ratio of the daily average outstanding
----
Obligations of Borrower and its Domestic Subsidiaries to EBITDA for any
subsequent Fiscal Year is less than 2.5 to 1, at which time the interest rate
shall be reduced by one quarter of one percent (0.25%) per annum, for subsequent
Fiscal Years. If thereafter the ratio of the average daily outstanding
Obligations of Borrower and its Subsidiaries to EBITDA for any subsequent Fiscal
Year exceeds 2.5 to 1, the interest rate shall increase as provided in the
foregoing sentence.
20
Any adjustment required hereby shall be effective on the fifth Business Day
following receipt by Agent and Lenders of the audited financial statements
delivered pursuant to subsection 5.1 (C) hereof; provided that any change
--------
in the interest rate shall not become effective for any outstanding LIBOR Rate
Loans until the end of the applicable Interest Period.
After the occurrence of an Event of Default and for so long as such Event
of Default continues, (i) the Loans and all other Obligations shall, at the
option of Agent or Requisite Lenders, bear interest at a rate per annum equal to
two percent (2.0%) plus the applicable interest rate (the "Default Rate") and
(ii) each LIBOR Rate Loan shall automatically convert to a Prime Rate Loan at
the end of any applicable Interest Period.
(B) Interest Periods. In connection with each LIBOR Rate Loan,
----------------
Borrower shall elect an interest period (each an "Interest Period") to be
applicable to such Loan, which Interest Period shall be either a one, two, three
or six month period; provided that
--------
(1) the initial Interest Period for any Loan shall commence on the
Funding Date of such Loan;
(2) in the case of immediately successive Interest Periods, each
successive Interest Period shall commence on the day on which the next preceding
Interest Period expires;
(3) if an Interest Period would otherwise expire on a day that is not a
Business Day, such Interest Period shall expire on the next succeeding Business
Day; provided that if any Interest Period would otherwise expire on a day that
--------
is not a Business Day but is a day of the month after which no further Business
Day occurs in such month, such Interest Period shall expire on the next
preceding Business Day;
(4) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding day
in the calendar month at the end of such Interest Period) shall, subject to part
(5) below, end on the last Business Day of a calendar month;
(5) no Interest Period shall extend beyond the Termination Date;
(6) no Interest Period may extend beyond a date on which Borrower is
required to make a scheduled payment of principal of the Loans unless the sum of
(a) the aggregate principal amount of Loans that are Prime Rate Loans or that
have Interest Periods expiring on or before such date and (b) the available,
unused Revolving Loan Commitment or Borrowing Limit equals or exceeds the
principal amount required to be paid on the Loans on such date; and
(7) there shall be no more than five (5) Interest Periods relating to
LIBOR Rate Loans outstanding at any time.
(C) Computation and Payment of Interest. Interest on the Loans and all
-----------------------------------
other Obligations shall be computed on the daily principal balance on the basis
of a 360-day year for the actual number of days elapsed in the period during
which it accrues. In computing interest on any Loan, the date of funding of the
Loan or the first day of an Interest Period applicable to such Loan or, with
respect to a Prime Rate Loan being converted from a LIBOR Rate Loan, the date of
conversion of such LIBOR Rate Loan to such Prime Rate Loan, shall be included
and the date of payment of such Loan or the expiration date of an Interest
Period applicable to such Loan, or with respect to a Prime Rate Loan being
converted to a LIBOR Rate Loan, the date of conversion of such Prime Rate Loan
to such LIBOR Rate Loan, shall be excluded; provided that if a Loan is repaid on
--------
the same day on which it is made, one day's interest shall be paid on that Loan.
Interest on Prime Rate Loans and all other Obligations other than LIBOR Rate
Loans shall be payable to Agent, for the
21
benefit of Lenders, monthly in arrears on the first day of each month, on the
date of any prepayment of Loans and at maturity, whether by acceleration or
otherwise. Interest on LIBOR Rate Loans shall be payable to Agent, for the
benefit of Lenders, on the last day of the applicable Interest Period for such
Loan, and at maturity, whether by acceleration or otherwise. In addition, for
each LIBOR Rate Loan having an Interest Period longer than three (3) months,
interest accrued on such Loan shall also be payable on the last day of each
three (3) month interval during such Interest Period.
(D) Interest Laws. Notwithstanding any provision to the contrary
-------------
contained in this Agreement or any other Loan Document, Borrower shall not be
required to pay, and neither Agent nor any Lender shall be permitted to collect,
any amount of interest in excess of the maximum amount of interest permitted by
law ("Excess Interest"). If any Excess Interest is provided for or determined
by a court of competent jurisdiction to have been provided for in this Agreement
or in any other Loan Document, then in such event: (1) the provisions of this
subsection shall govern and control; (2) neither Borrower nor any Loan Party
shall be obligated to pay any Excess Interest; (3) any Excess Interest that
Agent or any Lender may have received hereunder shall be, at such Lender's
option, (a) applied as a credit against the outstanding principal balance of the
Obligations or accrued and unpaid interest (not to exceed the maximum amount
permitted by law), (b) refunded to the payor thereof, or (c) any combination of
the foregoing; (4) the interest rate(s) provided for herein shall be
automatically reduced to the maximum lawful rate allowed from time to time under
applicable law (the "Maximum Rate"), and this Agreement and the other Loan
Documents shall be deemed to have been and shall be, reformed and modified to
reflect such reduction; and (5) neither Borrower nor any Loan Party shall have
any action against Agent or any Lender for any damages arising out of the
payment or collection of any Excess Interest. Notwithstanding the foregoing, if
for any period of time interest on any Obligations is calculated at the Maximum
Rate rather than the applicable rate under this Agreement, and thereafter such
applicable rate becomes less than the Maximum Rate, the rate of interest payable
on such Obligations shall remain at the Maximum Rate until each Lender shall
have received the amount of interest which such Lender would have received
during such period on such Obligations had the rate of interest not been limited
to the Maximum Rate during such period.
(E) Conversion or Continuation. Subject to the provisions of subsection
--------------------------
2.10, Borrower shall have the option to (1) convert at any time all or any part
of outstanding Prime Rate Loans equal to Five Hundred Thousand Dollars
($500,000) and integral multiples of Five Hundred Thousand Dollars ($500,000) in
excess of that amount to LIBOR Rate Loans, or (2) upon the expiration of any
Interest Period applicable to a LIBOR Rate Loan, to continue all or any portion
of such Loan equal to Five Hundred Thousand Dollars ($500,000) and integral
multiples of Five Hundred Thousand Dollars ($500,000) in excess of that amount
as a LIBOR Rate Loan and the succeeding Interest Period(s) of such continued
Loan shall commence on the last day of the Interest Period of the Loan to be
continued; or (3) at the end of any Interest Period, convert all or any part of
a LIBOR Rate Loan to a Prime Rate Loan; provided that any LIBOR Rate Loan which
--------
continues as such meets the minimum requirement of clause (2); and provided,
--------
further, that no outstanding Loan may be continued as, or be converted into, a
-------
LIBOR Rate Loan when any Event of Default or Default has occurred and is
continuing.
Borrower shall deliver a Notice of Conversion/Continuation to Agent no
later than noon (Chicago time) at least two (2) Business Days in advance of the
proposed conversion/ continuation date ("Notice of Conversion/Continuation"). A
Notice of Conversion/Continuation shall certify: (1) the proposed
conversion/continuation date (which shall be a Business Day); (2) the amount of
the Loan to be converted/continued; (3) the nature of the proposed
conversion/continuation; (4) in the case of a conversion to, or a continuation
of, a LIBOR Rate Loan, the requested Interest Period; and (5) that no Default or
Event of Default has occurred and is continuing or would result from the
proposed conversion/continuation.
22
In lieu of delivering the above-described Notice of
Conversion/Continuation, Borrower may give Agent telephonic notice by the
required time of any proposed conversion/continuation under this subsection 2.2
(E); provided that such notice shall be promptly confirmed in writing by
--------
delivery of a Notice of Conversion/Continuation to Agent on or before the
proposed conversion/continuation date.
Neither Agent nor any Lender shall incur any liability to Borrower in
acting upon any telephonic notice referred to above that Agent believes in good
faith to have been given by a duly authorized officer or other person authorized
to act on behalf of Borrower or for otherwise acting in good faith under this
subsection 2.2(E) and upon conversion/continuation by Lenders in accordance with
this Agreement pursuant to any telephonic notice, Borrower shall have effected
such conversion or continuation, as the case may be, hereunder.
2.3 Fees
----
(A) Agent's Fee. Borrower shall pay to Agent such fees as are agreed
-----------
upon by Borrower and Agent in a letter agreement of even date herewith.
(B) Unused Line Fee. Borrower shall pay to Agent, for the benefit of
---------------
Lenders, a fee in an amount equal to the Revolving Loan Commitment less the sum
----
of (i) the average daily balance of the Revolving Loan plus (ii) the average
----
daily face amount of the Risk Participation Reserve during the preceding month
multiplied by one-half percent (.5%) per annum, such fee to be payable monthly
in arrears on the first day of the first month following the Closing Date and
the first day of each month thereafter. The first payment hereunder shall
include the Unused Line Fee payable under the Existing Loan Agreement for any
partial month prior to the Closing Date.
(C) Letter of Credit and Guaranty Fees. Borrower shall pay to Agent for
----------------------------------
the benefit of Lenders fees for each Lender Letter of Credit and each Risk
Participation Agreement for the period from and including the date of issuance
of same to and excluding the date of expiration or termination, equal to the
average daily face amount of Risk Participation Liability multiplied by one and
three-quarters percent (1.75%) per annum, such fees to be calculated on the
basis of a 360-day year for the actual number of days elapsed and to be payable
monthly in arrears on the first day of the first month following the Closing
Date and the first day of each month thereafter. Borrower shall also reimburse
Agent for any and all fees and expenses, if any, paid by Agent to the issuer of
the Underlying L/C.
(D) Closing Fee. On the Closing Date, Borrower shall pay to Agent for
-----------
the ratable benefit of Lenders a closing fee of Fifty Thousand Dollars
($50,000).
23
2.4 Payments and Prepayments
------------------------
(A) Manner and Time of Payment. In its sole discretion, Agent may
--------------------------
charge interest and other amounts payable hereunder to the Revolving Loan, all
as set forth on Agent's books and records. Unless otherwise directed by Agent,
all payments to Lenders hereunder shall be made by delivery thereof to Agent to
the account specified below or, with respect to the Revolving Loan only, by
delivery to Agent of all proceeds of Accounts or other Collateral deposited in
the Blocked Accounts in accordance with subsection 5.6 hereof, but subject to
the terms of such subsection and the agreements governing the Blocked Accounts.
If Agent elects to ▇▇▇▇ Borrower for any amount due hereunder, such amount shall
be immediately due and payable with interest thereon as provided herein. All
payments made directly by Borrower of the Obligations shall be made in Dollars
without deduction, defense, setoff or counterclaim and in same day funds and
delivered to Agent by wire transfer to Agent's account ("Agent's Account"), ABA
No. ▇▇▇-▇▇▇▇-▇, Account No. 52-98695 at First National Bank of Chicago, ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Reference: ▇▇▇▇▇▇ Business Credit for
the benefit of The North Face or at such other place as Agent may direct from
time to time by notice to Borrower. Proceeds remitted from the Blocked Accounts
or otherwise wire transferred to Agent's Account shall be credited to the
Obligations on the Business Day on which Agent receives immediately available
funds in Agent's Account if received prior to 3 p.m. (New York time).
(B) Mandatory Prepayments
---------------------
(1) Overadvance. At any time that the principal balance of the
-----------
Revolving Loan exceeds the Maximum Revolving Loan Amount, Borrower shall
immediately repay the Revolving Loan to the extent necessary to reduce the
principal balance to an amount that is equal to or less than the Maximum
Revolving Loan Amount.
(2) Proceeds of Asset Dispositions and Securities Sales.
---------------------------------------------------
Immediately upon receipt by Borrower or any of its Subsidiaries of proceeds of
any Asset Disposition (in one or a series of related transactions), which
proceeds exceed Fifty Thousand Dollars ($50,000), net of taxes and other
customary closing costs payable in connection therewith and the amount applied
to repay Indebtedness secured by any Permitted Encumbrance (it being understood
that if the net proceeds exceed Fifty Thousand Dollars ($50,000), the entire
amount and not just the portion above Fifty Thousand Dollars ($50,000) shall be
subject to this paragraph), or the proceeds from the issuance of securities of
Borrower or any of its Subsidiaries after the Closing Date (net of reasonable
underwriting fees and customary closing costs payable in connection therewith),
Borrower shall prepay the Obligations in an amount equal to such proceeds.
Notwithstanding the foregoing, if Borrower reasonably expects the proceeds of
any Asset Disposition to be reinvested within 180 days to repair or replace any
assets with like assets, Borrower shall deliver the proceeds to Agent to be
applied to the Revolving Loan, and Borrower may, so long as no Default or Event
of Default shall have occurred and be continuing, borrow Revolving Loans for
such repair or replacement. If Borrower fails to reinvest such proceeds within
180 days, Borrower hereby authorizes Lenders to make a Revolving Loan to repay
the CAPEX Loan as required hereby and/or if the CAPEX Loan has been repaid, the
Revolving Loan Commitment shall be permanently reduced as provided herein. All
such prepayments shall first be applied in payment of Scheduled Installments in
the inverse order of maturity (and the CAPEX Loan Commitment will be permanently
reduced in the amount of such prepayment) and, at any time after the CAPEX Loan
shall have been repaid in full, such payments shall be applied as a permanent
reduction of the Revolving Loan Commitment; provided, however, that prepayments
-------- -------
from proceeds of any issuance of Common Stock shall not permanently reduce the
Revolving Loan Commitment.
(C) Voluntary Prepayments and Repayments. Borrower may, at any time and
------------------------------------
upon not less than three (3) Business Days prior notice to Agent, prepay the
CAPEX Loan in whole or in part, and upon like notice may terminate the Revolving
Loan Commitment, provided, however, the Revolving Loan
-------- -------
24
Commitment may not be terminated by Borrower until the CAPEX Loan and all
Revolving Loans are paid in full. Upon termination of the Revolving Loan
Commitment, Borrower shall cause Agent and each Lender to be released to the
satisfaction of Agent from all liability under any Lender Letters of Credit or
Risk Participation Agreements or, at Agent's option, Borrower will deposit cash
collateral with Agent in an amount equal to the Risk Participation Liability
with respect to each Lender Letter of Credit and each Risk Participation
Agreement that will remain outstanding after prepayment or repayment or provide
one or more letters of credit to Agent, from a bank and on terms acceptable to
Agent.
(D) Payments on Business Days. Whenever any payment to be made
-------------------------
hereunder shall be stated to be due on a day that is not a Business Day, the
payment may be made on the next succeeding Business Day and such extension of
time shall be included in the computation of the amount of interest or fees due
hereunder.
2.5 Term of this Agreement. Subject to satisfaction of the conditions set
----------------------
forth in subsection 3.1 hereof, this Agreement shall become effective on the
Closing Date and remain in effect until February 1, 2000 (the "Termination
Date"). The Commitments shall (unless earlier terminated) terminate on the
Termination Date. In addition, this Agreement may be terminated as set forth in
Section 8.3 hereof. Upon termination in accordance with Section 8.3 or on the
Termination Date, all Obligations shall be immediately due and payable without
notice or demand. Notwithstanding any termination, until all Obligations have
been fully paid and satisfied, Agent, on behalf of Lenders, shall be entitled to
retain security interests in and liens upon all Collateral, and even after
payment of all Obligations hereunder, the obligation of Borrower and its
Subsidiaries to indemnify Agent and Lenders in accordance with the terms hereof
or of any other Loan Document shall continue.
2.6 Statements; Application of Payments. Agent shall render a monthly
-----------------------------------
statement of account to Borrower within twenty (20) days after the end of each
month. Such statement of account shall constitute an account stated unless
Borrower makes written objection thereto in reasonable detail (including
appropriate calculations) within thirty (30) days from the date such statement
is mailed to Borrower. Borrower promises to pay all of its Obligations as such
amounts become due or are declared due pursuant to the terms of this Agreement.
After the occurrence and during the continuance of an Event of Default, Borrower
irrevocably waives the right to direct the application of any and all payments
at any time or times thereafter received by Agent or any Lender from or on
behalf of Borrower, and Borrower hereby irrevocably agrees that Agent shall have
the continuing exclusive right to apply and to reapply any and all payments
received at any time or times after the occurrence and during the continuance of
an Event of Default against the Obligations in such manner as Agent may deem
advisable notwithstanding any previous entry by Agent upon any books and
records.
2.7 Grant of Security Interest. To secure the payment and performance when
--------------------------
due of the Obligations, including all renewals, extensions, restructurings and
refinancings of any or all of the Obligations, Borrower hereby confirms the
grant to Agent, on behalf of Lenders, of the continuing first priority security
interest, lien and mortgage in the "Collateral" (as defined in the Existing Loan
Agreement) and grants to Agent, on behalf of Lenders, a continuing first
priority security interest, lien and mortgage in and to all right, title and
interest of Borrower in the following property of Borrower, whether now owned or
existing or hereafter acquired or arising and regardless of where located (all
being collectively included within the "Collateral"): (A) Accounts; (B)
Inventory; (C) general intangibles (as defined in the UCC), including Borrower's
rights and claims under the Assigned Agreements and the Canadian Documents; (D)
documents (as defined in the UCC) or other receipts covering, evidencing or
representing goods; (E) instruments (as defined in the UCC); (F) chattel paper
(as defined in the UCC); (G) Equipment; (H) Mortgaged Property; (I) Intellectual
Property, including without limitation that set forth on Schedule 4.13 hereof;
(J) all deposit accounts of Borrower maintained with any bank or financial
institution; (K) all cash and other monies and property of Borrower in
25
the possession or under the control of Agent or any Lender or any participant;
(L) all books, records, ledger cards, files, correspondence, computer programs,
tapes, disks and related data processing software that at any time evidence or
contain information relating to any of the property described above or are
otherwise necessary or helpful in the collection thereof or realization thereon;
(M) rights under this Agreement or any other Loan Document and the proceeds of
any Loans hereunder; and (N) proceeds of all or any of the property described
above, including, without limitation, the proceeds of any insurance policies
covering any of the above described property. Borrower hereby confirms that the
security interests granted to ▇▇▇▇▇▇ under the Existing Loan Agreement shall
continue in full force and effect as if granted to Agent for the benefit of
Lenders.
2.8 Capital Adequacy and Other Adjustments. In the event that Agent or any
--------------------------------------
Lender shall have determined that the adoption after the date hereof of any law,
treaty, governmental (or quasi-governmental) rule, regulation, guideline or
order regarding capital adequacy, reserve requirements or similar requirements
or compliance by Agent or such Lender or any corporation controlling Agent or
such Lender with any request or directive regarding capital adequacy, reserve
requirements or similar requirements (whether or not having the force of law and
whether or not failure to comply therewith would be unlawful) from any central
bank or governmental agency or body having jurisdiction does or shall have the
effect of increasing the amount of capital, reserves or other funds required to
be maintained by Agent or such Lender or any corporation controlling Agent or
such Lender with respect to the Obligations and thereby reducing the rate of
return on Agent's or such Lender's or such corporation's capital as a
consequence of its obligations hereunder, then Borrower shall from time to time
within fifteen (15) days after notice and demand from Agent or such Lender
(together with the certificate referred to in the next sentence) pay to Agent or
such Lender additional amounts sufficient to compensate Agent or such Lender for
such reduction, so long as Agent or such Lender is then requiring such payments
from other borrowers, the demand does not seek payment for a period more than 90
days in arrears and the demand is made prior to payment in full of the
Obligations and termination of all Commitments. A certificate as to the amount
of such cost and showing the basis of the computation of such cost submitted by
Agent or such Lender to Borrower shall, absent manifest error, be final,
conclusive and binding for all purposes. If a Lender makes a demand for
compensation pursuant to this subsection 2.8, Borrower may obtain, at Borrower's
expense, a replacement lender who agrees to acquire Lender's interest in the
Loans and the Commitments on the terms set forth in this Agreement and such
Lender shall assign to such replacement lender its interest in the Loans and the
Commitments, provided that Borrower has paid all amounts then due to such Lender
--------
(including any amounts due under this subsection 2.8).
2.9 Taxes.
-----
(A) No Deductions. Any and all payments or reimbursements made
-------------
hereunder or under the Notes shall be made free and clear of and without
deduction for any and all taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto; excluding, however, the
following: taxes imposed on the net income of a Lender or Agent by the
jurisdiction under the laws of which such Lender or Agent is organized or doing
business or any political subdivision thereof and taxes imposed on its net
income by the jurisdiction of a Lender's or Agent's applicable lending office or
any political subdivision thereof. If Borrower shall be required by law to
deduct any such amounts from or in respect of any sum payable hereunder to Agent
or any Lender, then the sum payable hereunder shall be increased as may be
necessary so that, after making all required deductions, Agent or such Lender
receives an amount equal to the sum it would have received had no such
deductions been made. Each Lender which is organized under the laws of a
jurisdiction other than the United States or any state thereof shall deliver to
Agent and Borrower concurrently with its execution of this Agreement or any
Lender Addition Agreement duly executed copies of such Internal Revenue Service
forms as required to demonstrate that it is entitled to receive all payments
hereunder free from United States withholding taxes as of such date.
26
(B) Changes in Tax Laws. In the event that, subsequent to the Closing
-------------------
Date, (1) any changes in any existing law, regulation, treaty or directive or in
the interpretation or application thereof, (2) any new law, regulation, treaty
or directive enacted or any interpretation or application thereof, or (3)
compliance by Agent or any Lender with any request or directive (whether or not
having the force of law) from any governmental authority, agency or
instrumentality:
(1) does or shall subject Agent or any Lender to any tax of any kind
whatsoever with respect to this Agreement, the other Loan Documents or any Loans
made or Risk Participation Agreements or Lender Letters of Credit issued
hereunder, or change the basis of taxation of payments to Agent or any Lender of
principal, fees, interest or any other amount payable hereunder (except for net
income taxes, or franchise taxes imposed in lieu of net income taxes, imposed
generally by federal, state or local taxing authorities with respect to interest
or commitment or other fees payable hereunder or changes in the rate of tax on
the overall net income of Agent or any Lender); or
(2) does or shall impose on Agent or any Lender any other condition or
increased cost in connection with the transactions contemplated hereby or
participations herein; and the result of any of the foregoing is to increase the
cost to Agent or any Lender of issuing or participating in any Lender Letter of
Credit or Risk Participation Agreement or making or continuing any Loan
hereunder, as the case may be, or to reduce any amount receivable hereunder,
then, in any such case, Borrower shall promptly pay to Agent or such Lender,
upon its demand, any additional amounts necessary to compensate Agent or such
Lender, on an after-tax basis, for such additional cost or reduced amount
receivable, as determined by Agent or such Lender with respect to this Agreement
or the other Loan Documents. If Agent or any Lender becomes entitled to claim
any additional amounts pursuant to this subsection, it shall promptly notify
Borrower of the event by reason of which Agent or such Lender has become so
entitled. A certificate as to any additional amounts payable pursuant to the
foregoing sentence submitted by Agent or any Lender to Borrower shall, absent
manifest error, be final, conclusive and binding for all purposes.
2.10 Special Provisions Governing LIBOR Rate Loans.
---------------------------------------------
Notwithstanding any other provision of this Agreement, the following
provisions shall govern with respect to LIBOR Rate Loans as to the matters
covered:
(A) Determination of Interest Rate. As soon as practicable after noon
------------------------------
(New York time) on each Interest Rate Determination Date, Agent shall determine
(which determination shall, absent manifest error, be final, conclusive and
binding upon all parties) the interest rate that shall apply to the LIBOR Rate
Loans for which an interest rate is then being determined for the applicable
Interest Period and shall promptly give notice thereof (in writing or by
telephone confirmed in writing) to Borrower and Lenders.
(B) Substituted Rate of Borrowing. If on any Interest Rate
-----------------------------
Determination Date Agent shall have determined (which determination shall be
final and conclusive and binding upon all parties) that:
(1) by reason of any changes arising after the date of this Agreement
affecting the LIBOR market or affecting the position of Agent or any Lender in
such market, adequate and fair means do not exist for ascertaining the
applicable interest rate by reference to the LIBOR Rate with respect to the
LIBOR Rate Loans as to which an interest rate determination is then being made;
or
(2) by reason of (a) any change after the date hereof in any
applicable law or governmental rule, regulation or order (or any interpretation
thereof and including the introduction of any new law or governmental rule,
regulation or order) or (b) any change in circumstances affecting Agent or any
Lender or the LIBOR market or the position of Agent or any Lender in such market
(such as for example, but
27
not limited to, official reserve requirements required by Regulation D to the
extent not given effect in the LIBOR Rate), the LIBOR Rate shall not represent
the effective pricing to Lenders for Dollar deposits of comparable amounts for
the relevant period;
then, and in any such event, Agent shall promptly (and in any event as soon as
possible after being notified of a borrowing, conversion or continuation) give
notice (by telephone confirmed in writing) to Borrower and Lenders of such
determination. Thereafter, Borrower shall pay to Agent for the benefit of
Lenders, upon written demand therefor, such additional amounts (in the form of
an increased rate of, or a different method of calculating, interest or
otherwise as Agent in its sole discretion shall determine) as shall be required
to cause Lenders to receive interest with respect to LIBOR Rate Loans for the
Interest Period following that Interest Rate Determination Date at a rate per
annum equal to the applicable LIBOR Rate Margin in excess of the effective
pricing to Lenders for Dollar deposits to make or maintain LIBOR Rate Loans. A
certificate as to additional amounts owed showing in reasonable detail the basis
for the calculation thereof, submitted in good faith to Borrower by Agent shall,
absent manifest error, be final and conclusive and binding upon all of the
parties hereto.
(C) Required Termination and Prepayment. If on any date any Lender
-----------------------------------
shall have reasonably determined (which determination shall be final and
conclusive and binding upon all parties) that the making or continuation of its
LIBOR Rate Loans has become unlawful or impossible by compliance by any Lender
in good faith with any law, governmental rule, regulation or order (whether or
not having the force of law and whether or not failure to comply therewith would
be unlawful), then, and in any such event, that Lender shall promptly give
notice (by telephone confirmed in writing) to Agent and Borrower of that
determination. Subject to prior withdrawal of a notice of borrowing or a Notice
of Conversion/Continuation or prepayment of the LIBOR Rate Loans as contemplated
by the following subsection 2.10(D), the obligation of Lenders to make or
maintain any LIBOR Rate Loans during any such period shall be terminated at the
earlier of the termination of the Interest Period then in effect or when
required by law and Borrower shall no later than the termination of the Interest
Period in effect at the time any such determination pursuant to this subsection
2.10 (C) is made or, earlier, when required by law, repay or prepay the LIBOR
Rate Loans, together with all interest accrued thereon.
(D) Options of Borrower. In lieu of paying Lenders such additional
-------------------
moneys as are required by subsection 2.10(B) or the prepayment required by
subsection 2.10(C), Borrower may exercise any one of the following options:
(1) If the determination by Agent or any Lender relates only to LIBOR
Rate Loans then being requested by Borrower pursuant to a notice of borrowing or
a Notice of Conversion/Continuation, Borrower may by giving notice (by telephone
confirmed in writing) to Agent no later than the date immediately prior to the
date on which such LIBOR Rate Loans are to be made, withdraw that notice and the
LIBOR Rate Loans then being requested shall be made by Lenders as Prime Rate
Loans; or
(2) Upon written notice to Agent, Borrower may terminate the
obligations of Lenders to make or maintain Loans as, and to convert Loans into,
LIBOR Rate Loans and in such event, Borrower shall, prior to the time any
payment pursuant to subsection 2.10(C) is required to be made or, if the
provisions of subsection 2.10(B) are applicable, at the end of the then current
Interest Period, convert all of the LIBOR Rate Loans into Prime Rate Loans in
the manner contemplated by subsection 2.2(E) but without satisfying the advance
notice requirements therein; or
(3) Borrower may give notice (by telephone confirmed in writing) to
Agent and require Lenders to make the LIBOR Rate Loan then being requested as a
Prime Rate Loan or to continue to maintain any outstanding Prime Rate Loan then
the subject of a Notice of Conversion/Continuation as a Prime Rate
28
Loan or to convert any LIBOR Rate Loans then outstanding that are so affected
into Prime Rate Loans at the end of the then current Interest Period (or at such
earlier time as prepayment is otherwise required to be made pursuant to
subsection 2.10(C)) in the manner contemplated by subsection 2.2 (E) but without
satisfying the advance notice requirements therein, that notice to pertain only
to those Loans and to have no effect on the obligations of Lenders to make or
maintain LIBOR Rate Loans or to convert Prime Rate Loans into LIBOR Rate Loans.
(E) Compensation. Borrower shall compensate each Lender, upon written
------------
request by such Lender (which request shall set forth in reasonable detail the
basis for requesting such amounts and which shall, absent manifest error, be
conclusive and binding upon all parties hereto), for all reasonable losses,
expenses and liabilities (including, without limitation, any loss (including
interest paid) sustained by such Lender in connection with the re-employment of
such funds), such Lender may sustain: (1) if for any reason (other than a
default by such Lender) a borrowing of any LIBOR Rate Loan does not occur on a
date specified therefor in a notice of borrowing, a Notice of
Conversion/Continuation or a telephonic request for borrowing or
conversion/continuation or a successive Interest Period does not commence after
notice therefor is given pursuant to subsection 2.2(E); (2) if any prepayment of
any of its LIBOR Rate Loans occurs on a date that is not the last day of an
Interest Period applicable to that Loan; (3) if any prepayment of any of its
LIBOR Rate Loans is not made on any date specified in a notice of prepayment
given by Borrower; or (4) as a consequence of any other default by Borrower to
repay its LIBOR Rate Loans when required by the terms of this Agreement;
provided that during the period while any such amounts have not been paid, Agent
--------
shall reserve an equal amount from amounts otherwise available to be borrowed
under the Revolving Loan.
(F) Booking of LIBOR Rate Loans . Any Lender may make, carry or transfer
---------------------------
LIBOR Rate Loans at, to, or for the account of, any of its branch offices or the
office of an Affiliate of such Lender.
(G) Assumptions Concerning Funding of LIBOR Rate Loans . Calculation of
--------------------------------------------------
all amounts payable to Lenders under this subsection 2.10 shall be made as
though each Lender had actually funded its relevant LIBOR Rate Loan through the
purchase of a LIBOR deposit bearing interest at the LIBOR Rate in an amount
equal to the amount of that LIBOR Rate Loan and having a maturity comparable to
the relevant Interest Period and through the transfer of such LIBOR deposit from
an offshore office to a domestic office in the United States of America;
provided, however, that any Lender may fund each of its LIBOR Rate Loans in any
-------- -------
manner it sees fit and the foregoing assumption shall be utilized only for the
calculation of amounts payable under this subsection 2.10.
SECTION 3 CONDITIONS TO EFFECTIVENESS; CONDITIONS TO LOANS
3.1 Conditions to Effectiveness of this Agreement and to Loans on the Closing
-------------------------------------------------------------------------
Date. The effectiveness of this Agreement and obligations of Agent and each
----
Lender to make Loans or to issue Lender Letters of Credit or participate in any
Risk Participation Agreement on the Closing Date are subject to the prior or
concurrent satisfaction of all of the conditions set forth below.
(A) Closing Deliveries. Agent shall have received, in form and
------------------
substance acceptable to Agent all documents, instruments and information
identified on Schedule 3.1(A), and all other agreements, notes, certificates,
legal opinions, orders, authorizations, financing statements, mortgages and
other documents which Agent or any Lender may in good faith request and each and
all of the foregoing must be in form and substance acceptable to Agent.
(B) Security Interests. Agent shall have received satisfactory evidence
------------------
that all security interests and liens granted to ▇▇▇▇▇▇ or Agent pursuant to the
Existing Loan Agreement, this Agreement or the other
29
Loan Documents have been duly perfected and constitute first priority liens on
the Collateral, subject only to Permitted Encumbrances. Agent shall have
received all UCC termination statements and other releases of Liens, duly
executed by the applicable secured parties, releasing any and all Liens against
the Collateral, except Permitted Encumbrances.
(C) Repayment of Loans. The "Term Loan" under the Existing Loan
-------------------
Agreement shall be repaid in full on the Closing Date.
(D) Fees and Costs. Borrower shall have paid the fees payable on the
--------------
Closing Date referred to in subsections 2.3(A) and (D) and all fees and costs of
Agent's counsel.
(E) Corporate Authorization and Opinions. Agent shall have received
------------------------------------
evidence satisfactory to it that all necessary actions of Borrower to authorize
the execution, delivery and performance of this Agreement and the other Loan
Documents have been duly taken, and shall have received the opinion of Crosby,
Heafey, ▇▇▇▇▇ & May, in form and substance acceptable to Agent and its counsel.
(F) Availability. After giving effect to any Loans made on the Closing
------------
Date and the payment of all fees and expenses, the Maximum Revolving Loan Amount
shall exceed the outstanding principal balance of the Revolving Loans plus the
Risk Participation Reserve by at least Five Million Dollars ($5,000,000).
(G) Budgets. Lenders shall have received and approved Borrower's 1997
-------
and 1998 Budgets, which shall be monthly for 1997 and annual for 1998, and
determined that Borrower will be able to achieve such Budgets.
3.2 Conditions to all Loans and Lender Letters of Credit. The obligations of
----------------------------------------------------
each Lender to make Loans or of Agent to issue Lender Letters of Credit or to
execute and deliver any Risk Participation Agreement on any Funding Date
(including the Closing Date) are subject to satisfaction of all of the
conditions set forth below.
(A) Loan Documents . Agent shall have received, in form and substance
--------------
satisfactory to Lender, all agreements, mortgages, financing statements and
other documents as required to perfect or continue the perfection of Agent's
first priority security interests in the Collateral for the benefit of Lenders.
(B) Consents . All consents, approvals or authorizations of any Person
--------
required for the execution, delivery or performance of the Loan Documents shall
have been obtained and remain in full force and effect.
(C) Representations and Warranties . The representations and warranties
------------------------------
contained herein and in the Loan Documents shall be true, correct and complete
in all material respects on and as of that Funding Date to the same extent as
though made on and as of that date, except for any representation or warranty
limited by its terms to a specific date and taking into account any amendments
to the Schedules or Exhibits as a result of any disclosures made by Borrower to
Lenders after the Closing Date and approved by Agent.
(D) No Default . No event shall have occurred and be continuing or would
----------
result from the consummation of the requested borrowing or notice requesting
issuance of a Lender Letter of Credit or Underlying L/C that would constitute a
Default or an Event of Default.
(E) Performance of Agreements . Each Loan Party shall have performed in
-------------------------
all material respects all agreements and satisfied all conditions which any Loan
Document or (if failure to perform would have a
30
Material Adverse Effect or permit other parties to exercise remedies against a
Loan Party) any other Transaction Document provides shall be performed by it on
or before that Funding Date.
(F) No Prohibition. No provision of any law or regulation, and no
--------------
order, judgment or decree of any court, arbitrator or governmental authority,
shall purport to enjoin or restrain Agent or any Lender from making any Loans or
issuing or participating in any Lender Letters of Credit or Underlying L/C's or
impair any security interest in the Collateral.
(G) Margin Regulations. The making of the Loans requested on such
------------------
Funding Date shall not violate Regulation G, Regulation T, Regulation U or
Regulation X of the Board of Governors of the Federal Reserve System.
(H) No Litigation. There shall not be pending or, to the knowledge of
-------------
Borrower, threatened, any action, charge, claim, demand, suit, proceeding,
petition, governmental investigation or arbitration against or affecting any
Loan Party or any of its Subsidiaries or any property of any Loan Party or any
of its Subsidiaries that has not been disclosed by Borrower in writing, and
that, in the opinion of Agent, would reasonably be expected to have a Material
Adverse Effect and there shall have occurred no development in any such action,
charge, claim, demand, suit, proceeding, petition, governmental investigation or
arbitration that, in the opinion of Agent, would reasonably be expected to have
a Material Adverse Effect.
(I) No Material Adverse Change. No event shall have occurred since the
--------------------------
Original Closing Date which has resulted in any material adverse change in the
business, properties, assets or condition (financial or otherwise) of Borrower
individually or Borrower and its Subsidiaries taken as a whole.
SECTION 4 BORROWER'S REPRESENTATIONS AND WARRANTIES
In order to induce Agent and each Lender to enter into this Agreement,
to make Loans and to issue or participate in Lender Letters of Credit and Risk
Participation Agreements, Borrower represents and warrants to Agent and each
Lender that the following statements are and will be true, correct and complete:
4.1 Organization, Powers, Capitalization.
------------------------------------
(A) Organization and Powers. Each of the Loan Parties is a corporation
-----------------------
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and qualified to do business in all jurisdictions
where such qualification is required. Each of the Loan Parties has (and had at
all relevant times) all requisite corporate power and authority to own and
operate its properties, to carry on its business as now conducted and proposed
to be conducted and to enter into each Loan Document and other Transaction
Document to which such Loan Party is a signatory.
(B) Capitalization. The authorized capital stock of each of the Loan
--------------
Parties is as set forth on Schedule 4.1(B). All issued and outstanding shares
of capital stock of each of the Loan Parties are duly authorized and validly
issued, fully paid, and nonassessable. The capital stock of each of Borrower's
Subsidiaries is free and clear of all Liens other than those in favor of Agent
for the benefit of Lenders. All shares of the capital stock of the Loan Parties
were issued in compliance with all applicable state and federal (domestic or
foreign) laws concerning the issuance of securities. As of the Closing Date,
the Investor Group owns the capital stock of Borrower in the amounts set forth
on Schedule 4.1(B). All of the capital stock of TNF Europe is owned by Borrower
(except one director's qualifying share), all of the capital stock of TNF Canada
is owned by Borrower, and all of the capital stock of TNF Italy (except
director's qualifying shares) is owned by TNF Europe and Borrower. There are no
preemptive or other outstanding rights, options, warrants,
31
conversion rights or similar agreements or understandings for the purchase or
acquisition (i) from any Loan Party or any other Person of any securities of any
of Borrower's Subsidiaries or (ii) from any Loan Party or member of the Investor
Group of any securities of Borrower that would constitute a Change of Control.
4.2 Authorization of Borrowing and Acquisition, No Conflict. Borrower has
-------------------------------------------------------
(and had at all relevant times) the corporate power and authority to incur the
Obligations and to grant security interests in the Collateral. The execution,
delivery and performance of the Loan Documents and the other Transaction
Documents by each Loan Party signatory thereto has been duly authorized by all
necessary corporate and shareholder action. The execution, delivery and
performance by each Loan Party of each Loan Document and other Transaction
Document to which it is a party and the consummation of the transactions
contemplated by this Agreement and the Transaction Documents do not and will not
be in contravention of any applicable law, the corporate charter or bylaws of
any Loan Party or any material agreement or order by which any Loan Party or any
of its property is bound. No consents, authorizations or permits are required
to be obtained by Borrower or any of its Subsidiaries for the execution,
delivery or performance of any Loan Document, except those which have been
obtained and delivered to Agent. This Agreement is, and the other Transaction
Documents, including the Notes, are the legally valid and binding obligations of
the applicable Loan Parties, respectively, enforceable against the Loan Parties
in accordance with the respective terms of the respective Transaction Documents.
4.3 Financial Condition. The financial statements of Borrower and its
-------------------
Subsidiaries as of November 30, 1993 and for each period thereafter which have
been, and all financial statements concerning Borrower and its Subsidiaries
which have been furnished pursuant to the Existing Loan Agreement or will
hereafter be furnished by Borrower and its Subsidiaries to Agent or any Lender
pursuant to this Agreement have been or will be prepared in accordance with GAAP
consistently applied throughout the periods involved (except as disclosed
therein) and do or will present fairly in all material respects the financial
condition of the Persons covered thereby as at the dates thereof and the results
of their operations for the periods then ended. The Budgets delivered and to be
delivered have been and will be prepared by Borrower in light of the past
operations of the business of Borrower and its Subsidiaries.
4.4 Indebtedness and Liabilities. As of the Closing Date, except as set
----------------------------
forth on Schedule 7.1(C), neither Borrower nor any of its Subsidiaries has (a)
any Indebtedness except Indebtedness under the Existing Loan Agreement or as
accrued in the financial statements dated as of December 31, 1996 or February
28, 1997; or (b) any liabilities other than as stated in financial statements
dated as of December 31, 1996 or February 28, 1997 or operating lease
liabilities and trade credit to Persons incurred in the ordinary course of
business following the date of the such financial statements.
4.5 Account Warranties. Borrower represents, warrants and covenants as to
------------------
each Account of Borrower or TNF Canada or any of Borrower's Subsidiaries which
is a party to a Loan Document that, at the time of its creation, the Account is
a valid, bona fide account, representing an indebtedness incurred by the named
account debtor for goods actually sold and delivered or for services completely
rendered; there are no setoffs, or counterclaims, genuine or otherwise, against
the Account; the Account does not represent a sale to an Affiliate (other than
Goldwin or TNF Canada) or a consignment, sale subject to return or a ▇▇▇▇ and
hold transaction; no agreement exists permitting any deduction or discount
(other than the discount stated on the invoice); Borrower or the applicable
Subsidiary is the lawful owner of the Account and Borrower or such Subsidiary
has the right to assign the same to Agent, for the benefit of Lenders; each
Account is free of all security interests, liens and encumbrances other than
those in favor of Agent, for the benefit of Lenders and, as to Accounts of TNF
Canada Liens in favor of Borrower which have been assigned to Agent, for the
benefit of Lenders; and the Account is due and payable in accordance with its
terms.
32
4.6 Names. Borrower does not conduct business, nor has it at any time during
-----
the past five years conducted business, under any name, trade name or fictitious
business name other than those names set forth on Schedule 4.6.
4.7 Locations; FEIN. Schedule 4.7 sets forth the locations of Borrower's and
---------------
each Subsidiary's principal places of business, the locations of their books and
records, the locations of all other offices of Borrower and its Subsidiaries and
all Collateral locations, and such locations are Borrower's and its Subsidiaries
sole locations for their respective businesses and the Collateral. Borrower's
federal employer identification number is ▇▇-▇▇▇-▇▇▇▇.
4.8 Title to Properties; Liens. Borrower and each of its Subsidiaries has
--------------------------
good, sufficient and legal title, subject to Permitted Encumbrances, to all its
respective material properties and assets. Except for Permitted Encumbrances,
all such properties and assets are free and clear of Liens. To the best
knowledge of Borrower after due inquiry, there are no actual, threatened or
alleged defaults with respect to any leases of real property under which
Borrower or any of its Subsidiaries is lessee or lessor which would have a
Material Adverse Effect.
4.9 Litigation; Adverse Facts. Except as set forth on Schedule 4.9, there
-------------------------
are no judgments outstanding against any Loan Party or Old TNF or affecting any
property of any Loan Party or Old TNF nor is there any action, charge, claim,
demand, suit, proceeding, petition, governmental investigation or arbitration
now pending or, to the best knowledge of Borrower after due inquiry, threatened
against or affecting any Loan Party or Old TNF or any property of any Loan Party
or Old TNF which could reasonably be expected to result in any Material Adverse
Effect. No Loan Party has received any opinion or memorandum or legal advice
from legal counsel to the effect that such Loan Party is exposed to any
liability which could reasonably be expected to result in any Material Adverse
Effect.
4.10 Payment of Taxes. Except as set forth on Schedule 4.10 or permitted
----------------
pursuant to Section 5.9, all tax returns and reports of Borrower and each of its
Subsidiaries required to be filed by any of them have been timely filed, and all
taxes, assessments, fees and other governmental charges upon such Persons and
upon their respective properties, assets, income and franchises which are shown
on such returns as due and payable have been paid when due and payable. None of
the income tax returns of Borrower or any of its Subsidiaries are under audit.
No tax liens have been filed against any assets of Borrower or its Subsidiaries
and not discharged and no claims are being asserted with respect to any taxes
against Borrower or its Subsidiaries. The charges, accruals and reserves on the
books of Borrower and each of its Subsidiaries in respect of any taxes or other
governmental charges are in accordance with GAAP.
4.11 Performance of Agreements. None of the Loan Parties, and none of their
-------------------------
respective Subsidiaries is in default in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained in any
contractual obligation of any such Person, and no condition exists that, with
the giving of notice or the lapse of time or both, would constitute such a
default, except as set forth in Schedule 4.11 and for such defaults which could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
4.12 Employee Benefit Plans. Borrower, each Subsidiary of Borrower and each
----------------------
ERISA Affiliate is in compliance in all material respects with all applicable
provisions of ERISA, the IRC and all other applicable laws and the regulations
and interpretations thereof with respect to all Employee Benefit Plans and, as
to TNF Europe and TNF Canada, with all applicable laws relating to any employee
benefit or retirement plans. No liability has been incurred by Borrower, any
Subsidiary of Borrower, Old TNF or any ERISA Affiliate which remains unsatisfied
for any funding obligation, taxes or penalties with respect to any Employee
Benefit Plan or any similar plan of TNF Europe and TNF Canada, except the
liability of TNF Europe for underfunding of
33
its pension plan as disclosed prior to the Original Closing Date, for which
Borrower has no liability. Neither Borrower, any Subsidiary of Borrower, or any
ERISA Affiliate has any withdrawal liability under any multi-employer plan.
4.13 Intellectual Property. Borrower and each of its Subsidiaries owns, is
---------------------
licensed to use or otherwise has the right to use, all Intellectual Property
used in or necessary for the conduct of its business as currently conducted and
as conducted by Old TNF and its Subsidiaries prior to the Original Closing Date
and all such Intellectual Property is identified on Schedule 4.13.
4.14 Broker's Fees. No broker's or finder's fee or commission will be payable
-------------
with respect to the issuance and sale of the Notes or any of the other
transactions contemplated hereby.
4.15 Environmental Compliance. Each Loan Party and Old TNF has been and is
------------------------
currently in compliance in all material respects with all applicable
Environmental Laws, including obtaining and maintaining in effect all permits,
licenses or other authorizations required by applicable Environmental Laws.
There are no claims, liabilities, investigations, litigation, administrative
proceedings, whether pending or threatened, or judgments or orders relating to
any Hazardous Materials asserted or (to the best knowledge of Borrower)
threatened against any Loan Party or Old TNF or relating to any real property
currently or formerly owned, leased or operated by any Loan Party or Old TNF
which could have a Material Adverse Effect.
4.16 Solvency. As of and from and after the date of this Agreement, Borrower
--------
and each of its Subsidiaries: (a) owns and will own assets the fair saleable
value of which are (i) greater than the total amount of its liabilities
(including contingent liabilities); (ii) greater than the amount that will be
required to pay its probable liabilities as they mature; (b) has capital that is
not unreasonably small in relation to its business as presently conducted or any
contemplated or undertaken transaction; and (c) does not intend to incur and
does not believe that it will incur debts beyond its ability to pay such debts
as they become due.
4.17 Disclosure. No representation or warranty of Borrower, any of its
----------
Subsidiaries or any other Loan Party contained in this Agreement, the Existing
Loan Agreement, the Purchase Agreement, or any other Transaction Document, the
financial statements described in subsection 4.3 or delivered by Borrower under
this Agreement, the other Loan Documents, or any other document, certificate or
written statement in final form furnished to Agent or any Lender by or on behalf
of any such Person for use in connection with the Loan Documents contains any
untrue statement of a material fact or omitted, omits or will omit (in each case
at the time made) to state a material fact necessary in order to make the
statements contained herein or therein not misleading in light of the
circumstances in which the same were made. The Budgets and pro forma financial
information contained in such materials are based upon good faith estimates and
assumptions believed by such Persons to be reasonable at the time made, it being
recognized by Agent and Lenders that such projections as to future events are
not to be viewed as facts and that actual results during the period or periods
covered by any such projections may differ from the projected results. There is
no material fact known to Borrower that has had or could reasonably be expected
to have a Material Adverse Effect and that has not been disclosed herein or in
such other documents, certificates and statements furnished to Agent and Lenders
for use in connection with the transactions contemplated hereby.
4.18 Insurance. Borrower and each of its Subsidiaries maintains insurance
---------
policies for business interruptions and public liability and property and
casualty damage for its business and properties as required by subsection 5.10,
no notice of cancellation has been received with respect to such policies and
Borrower and each of its Subsidiaries is in compliance with all conditions
contained in such policies. Agent, for the benefit of Lenders has been named as
an additional insured and loss payee, respectively, on all such insurance
policies.
34
4.19 Compliance with Laws. Neither Borrower nor any of its Subsidiaries is in
--------------------
violation of any law, ordinance, rule, regulation, order, policy, guideline or
other requirement of any domestic or foreign government or any instrumentality
or agency thereof, having jurisdiction over the conduct of its business or the
ownership of its properties, including, without limitation, any violation
relating to any use, release, storage, transport or disposal of any Hazardous
Material, which violation would subject Borrower or any such Subsidiary, or any
of their respective officers to criminal liability or have a Material Adverse
Effect and no such violation has been alleged.
4.20 Bank Accounts. Schedule 4.20 sets forth the account numbers and
-------------
locations of all bank accounts of Borrower and its Subsidiaries as of the
Closing Date.
4.21 Subsidiaries. Borrower has no Subsidiaries other than TNF Canada, TNF
------------
Europe, TNF Italy and a dormant Subsidiary of TNF Europe, Black & ▇▇▇▇▇▇▇▇▇
(Exports) Limited, which conducts no business and has no assets or liabilities
other than a guaranty of the indebtedness and/or obligations of TNF Europe.
4.22 Use of Proceeds and Margin Security. Borrower shall use the proceeds of
-----------------------------------
all Loans for proper business purposes (as described in this Agreement)
consistent with all applicable laws, statutes, rules and regulations. No
portion of the proceeds of any Loan shall be used by Borrower or any of its
Subsidiaries in any manner that might cause the borrowing or the application of
such proceeds to violate Regulation G, Regulation U, Regulation T or Regulation
X or any other regulation of the Board of Governors of the Federal Reserve
System or to violate the Exchange Act.
4.23 Employee Matters. Except as set forth on Schedule 4.23, (a) no Loan
----------------
Party nor any of such Loan Party's employees is subject to any collective
bargaining agreement, (b) no petition for certification or union election is
pending with respect to the employees of any Loan Party and no union or
collective bargaining unit has sought such certification or recognition with
respect to the employees of any Loan Party within the past three (3) years and
(c) there are no strikes, slowdowns, work stoppages or controversies pending or,
to the best knowledge of Borrower after due inquiry, threatened between any Loan
Party and its respective employees, other than employee grievances arising in
the ordinary course of business which could not reasonably be expected to have,
either individually or in the aggregate, a Material Adverse Effect. Except as
set forth on Schedule 4.23, neither Borrower nor any of its Subsidiaries is
subject to an employment contract or any liability for severance pay.
4.24 Governmental Regulation. None of the Loan Parties is, or after giving
-----------------------
effect to any Loan will be, subject to regulation under the Public Utility
Holding Company Act of 1935, the Federal Power Act or the Investment Company Act
of 1940 or to any federal or state statute or regulation limiting its ability to
incur Indebtedness for borrowed money.
4.25 Purchase Agreement; Transaction Documents; Existing Loan Agreement.
------------------------------------------------------------------
Borrower represents and warrants that each of the representations and warranties
of Sellers and Borrower in the Purchase Agreement and each representation and
warranty of Borrower in any other Transaction Document, all of which are
incorporated herein by this reference, were true and correct in all material
respects as of the Original Closing Date and each representation and warranty of
Borrower in the Existing Loan Agreement, all of which are incorporated herein by
reference, were true and correct when made under the Existing Loan Agreement.
Notwithstanding anything in the Purchase Agreement or any Transaction Document
or the Existing Loan Agreement to the contrary, all such representations and
warranties incorporated herein shall, solely for purposes of this Agreement,
survive the execution and delivery of the Purchase Agreement or any Transaction
Document and the consummation of the Acquisition, the execution and delivery of
this Agreement and the making of the Loans.
35
4.26 TNF Canada. TNF Canada has the corporate power and authority to purchase
----------
Inventory from Borrower and to grant security interests in its assets to secure
the unpaid obligations owed to Borrower. The Canadian Documents executed and
delivered by TNF Canada have been duly authorized, executed and delivered by TNF
Canada, and neither the execution and delivery of such Canadian Documents, nor
TNF Canada's performance thereof, contravenes or violates its governing
documents, any applicable law or any agreement or order to which TNF Canada is a
party.
4.27 Inventory Warranties. Borrower represents, warrants and covenants as to
--------------------
the Inventory of Borrower, TNF Canada and any of Borrower's Subsidiaries that is
party to any Loan Document that the Inventory is owned by Borrower or such
Subsidiary, free and clear of all Liens, and is not obsolete or unmarketable in
the ordinary course of business, and was not produced in violation of the Fair
Labor Standards Act.
SECTION 5 AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, so long as any of the Commitments
hereunder shall be in effect and until payment in full of all Obligations and
termination of all Lender Letters of Credit and Underlying L/C's, unless
Requisite Lenders or Agent at the direction of Requisite Lenders shall otherwise
give prior written consent, Borrower shall perform, and shall cause each of its
Subsidiaries to perform, all covenants in this Section 5 applicable to such
Person.
5.1 Financial Statements and Other Reports. Borrower will maintain, and
--------------------------------------
cause each of its Subsidiaries to maintain, a system of accounting established
and administered in accordance with sound business practices to permit
preparation of financial statements in conformity with GAAP. Borrower will
deliver to Agent and each Lender the financial statements and other reports
described below (unless specified to be delivered solely to Agent).
(A) Monthly Financials. As soon as available and in any event within
------------------
thirty (30) days after the end of each month, Borrower will deliver (1) the
consolidated and consolidating balance sheet of Borrower and its Subsidiaries as
at the end of such month and the related consolidated and consolidating
statements of income, stockholders' equity and cash flow for such month and for
the period from the beginning of the then current Fiscal Year to the end of such
month, (2) the consolidated and consolidating balance sheet and the related
consolidated and consolidating statements of income, stockholders' equity and
cash flow for the same period of the prior year and (3) a schedule of the
outstanding Indebtedness for borrowed money of Borrower and its Subsidiaries
describing in reasonable detail each such debt issue or loan outstanding and the
principal amount and amount of accrued and unpaid interest with respect to each
such debt issue or loan.
(B) Quarterly Financials. As soon as available and in any event within
--------------------
forty-five (45) days after the end of each quarter of a Fiscal Year, Borrower
will deliver the consolidated and consolidating balance sheet of Borrower and
its Subsidiaries as at the end of such period and the related consolidated and
consolidating statements of income, stockholders' equity and cash flow for such
quarter of a Fiscal Year and for the period from the beginning of the then
current Fiscal Year to the end of such quarter of a Fiscal Year. Borrower will
also deliver the consolidated and consolidating balance sheet, and the related
consolidated and consolidating statements of income, stockholders' equity and
cash flow for the same periods in the prior Fiscal Year.
(C) Year-End Financials. As soon as available and in any event within
-------------------
ninety (90) days after the end of each Fiscal Year, Borrower will deliver: (1)
the consolidated balance sheet of Borrower and its Subsidiaries as at the end of
such year and the related consolidated statements of income, stockholders'
equity and cash flow for such Fiscal Year; (2) for the Fiscal Year ending
December 31, 1994, the consolidated
36
balance sheet, and the related consolidated statements of income, stockholders'
equity and cash flow for Old TNF for the prior Fiscal Year; (3) a schedule of
the outstanding Indebtedness of Borrower and its Subsidiaries describing in
reasonable detail each such debt issue or loan outstanding and the principal
amount and amount of accrued and unpaid interest with respect to each such debt
issue or loan; and (4) a report with respect to the financial statements of
Borrower and its Subsidiaries from a firm of independent certified public
accountants selected by Borrower and acceptable to Agent, which report shall be
unqualified as to going concern and scope of audit and shall state that (a) such
consolidated financial statements present fairly the consolidated financial
position of Borrower and its Subsidiaries as at the dates indicated and the
results of their operations and cash flow for the periods indicated in
conformity with GAAP applied on a basis consistent with prior years and (b) that
the examination by such accountants in connection with such consolidated
financial statements has been made in accordance with generally accepted
auditing standards; and (5) copies of the consolidating financial statements of
Borrower and its Subsidiaries, including (a) consolidating balance sheets of
Borrower and its Subsidiaries as at the end of such Fiscal Year showing
intercompany eliminations and (b) related consolidating statements of earnings
of Borrower and its Subsidiaries showing intercompany eliminations and (c)
consolidating cash flows of Borrower and its Subsidiaries.
(D) Accountants' Certification and Reports. Together with each delivery
--------------------------------------
of consolidated financial statements of Borrower and its Subsidiaries pursuant
to subsection 5.1(C), Borrower will deliver a written statement by its
independent certified public accountants (a) stating that the examination has
included a review of the terms of this Agreement as same relate to accounting
matters and (b) stating whether, in connection with the examination, any
condition or event that constitutes a Default or an Event of Default has come to
their attention and, if such a condition or event has come to their attention,
specifying the nature and period of existence thereof. Promptly upon receipt
thereof, Borrower will deliver copies of all significant reports submitted to
Borrower by independent public accountants in connection with each annual,
interim or special audit of the financial statements of Borrower made by such
accountants, including the comment letter submitted by such accountants to
management in connection with their annual audit.
(E) Compliance Certificate. Together with the delivery of each set of
----------------------
financial statements referenced in subparts (B) and (C) of this subsection 5.1,
Borrower will deliver a Compliance Certificate.
(F) Borrowing Limit Calculation. Concurrently with the delivery of the
---------------------------
financial statements pursuant subsection 5.1(A), Borrower shall deliver to Agent
a calculation of the Borrowing Limit in reasonable detail.
(G) [intentionally omitted]]
(H) Management Report. Together with each delivery of financial
-----------------
statements of Borrower and its Subsidiaries pursuant to subdivisions (B) and (C)
of this subsection 5.1, Borrower will deliver a management report: (1)
describing the operations and financial condition of Borrower and its
Subsidiaries for the quarter then ended and the portion of the current Fiscal
Year then elapsed; (2) setting forth in comparative form the corresponding
figures for the corresponding periods of the previous Fiscal Year (or, as
applicable, for the Fiscal Year of Old TNF) and the corresponding figures from
the most recent Budget for the current Fiscal Year delivered to Agent and
Lenders pursuant to 5.1(P); and (3) discussing the reasons for any significant
variations. The information above shall be presented in reasonable detail and
shall be certified by the chief financial officer of Borrower to the effect that
such information fairly presents the results of operations and financial
condition of Borrower and its Subsidiaries as at the dates and for the periods
indicated.
37
(I) Appraisals. From time to time after the occurrence of an Event of
----------
Default, upon the request of Agent, Borrower will obtain and deliver to Agent,
at Borrower's expense, appraisal reports in form and substance and from
appraisers acceptable to Agent, stating the then current fair market and orderly
liquidation values of all or any portion of the Collateral.
(J) Government Notices. Borrower will deliver to Agent promptly after
------------------
receipt by Borrower or any of its Subsidiaries copies of all notices, requests,
subpoenas, inquiries or other writings received from any governmental agency
concerning any Employee Benefit Plan, the violation or alleged violation of any
Environmental Laws, the storage, use or disposal of any Hazardous Material, the
violation or alleged violation of the Fair Labor Standards Act or Borrower's or
any Subsidiary's payment or nonpayment of any taxes, including any tax audit.
(K) Events of Default, etc. Promptly upon any officer of Borrower or of
----------------------
any of its Subsidiaries obtaining knowledge of any of the following events or
conditions, Borrower shall deliver a certificate of Borrower's chief executive
officer specifying the nature and period of existence of such condition or event
and what action Borrower and/or its Subsidiary has taken, is taking and proposes
to take with respect thereto: (1) any condition or event that constitutes an
Event of Default or Default; (2) any notice of default that any Person has given
to Borrower or any of its Subsidiaries or any other action taken with respect to
a claimed default; or (3) any Material Adverse Effect.
(L) Trade Names. Borrower and its Subsidiaries will give Agent at least
-----------
thirty (30) days advance written notice of any change of name or of any new
trade name or fictitious business name. Borrower's and each of its
Subsidiaries' use of any trade name or fictitious business name will be in
compliance with all laws regarding the use of such names.
(M) Locations. Borrower will give Agent at least thirty (30) days
---------
advance written notice of any change in the principal place of business of
Borrower or of any of its Subsidiaries which is a party to any Loan Document or
any change in the location of the books and records or any of the Collateral or
of any new location for the books and records or any of the Collateral.
(N) Bank Accounts. Borrower will give Agent written notice after
-------------
Borrower or any of its Subsidiaries which is a party to any Loan Document opens
any new bank account no later than fifteen (15) days after opening such account.
(O) Litigation. Promptly upon any officer of Borrower or of any of its
----------
Subsidiaries obtaining knowledge of (1) the institution of any action, suit,
proceeding, governmental investigation or arbitration against or affecting any
Loan Party or any property of any Loan Party not previously disclosed by
Borrower to Agent (other than any such action, suit, proceeding, investigation
or arbitration which seeks only money damages in an amount not in excess of
$100,000) or (2) any material development in any action, suit, proceeding,
governmental investigation or arbitration at any time pending against or
affecting any Loan Party or any property of any Loan Party which is reasonably
likely to have a Material Adverse Effect, Borrower will promptly give notice
thereof to Agent and provide such other information as may be reasonably
available to them to enable Agent and its counsel to evaluate such matter.
(P) Budgets. As soon as available and in any event no later than the
-------
end of each Fiscal Year of Borrower, Borrower will deliver a consolidated and
consolidating Budget of Borrower and its Subsidiaries for the forthcoming three
Fiscal Years, year by year, and for the forthcoming Fiscal Year, month by month.
(Q) [intentionally omitted]
38
(R) Other Information. With reasonable promptness, Borrower will
-----------------
deliver such other information and data with respect to any Loan Party, any
Subsidiary of any Loan Party or any of the Collateral as Agent or any Lender may
reasonably request from time to time.
5.2 Access to Accountants. Borrower authorizes Agent to discuss the
---------------------
financial condition and financial statements of Borrower and its Subsidiaries
with Borrower's or any of its Subsidiaries' independent public accountants upon
reasonable notice to Borrower of its intention to do so and authorizes such
accountants to respond to all of Agent's inquiries.
5.3 Inspection. Borrower shall permit Agent and any Lender and any
----------
authorized representatives designated by Agent or any Lender to visit and
inspect any of the properties of Borrower or any of its Subsidiaries, including
its and their financial and accounting records, and to make copies and take
extracts therefrom, and to discuss its and their affairs, finances and business
with its and their employees and independent public accountants, at such
reasonable times during normal business hours and as often as may be reasonably
requested; provided Lenders shall coordinate such visits through Agent and,
--------
except as provided in this subsection 5.3 or subsection 10.1, at Lenders'
expense; and, provided further, that so long as no Event of Default has
-------- -------
occurred, such inspections shall be limited to once in each Fiscal Year without
Borrower's consent. Borrower agrees to pay to Agent audit fees equal to Five
Hundred Dollars ($500.00) per auditor per day or any portion thereof, excluding
all full days spent by Agent traveling to or from Borrower's locations (but not
to exceed Five Thousand Dollars ($5,000) in any Fiscal Year for all Lenders and
Agent so long as no Event of Default has occurred), plus out of pocket expenses.
5.4 Collateral Records. Borrower shall keep and shall cause each of its
------------------
Subsidiaries to keep full and accurate books and records relating to the
Collateral and shall ▇▇▇▇ such books and records to indicate Agent's security
interests in the Collateral for the benefit of Lenders.
5.5 Account Covenants; Verification. Borrower shall, at its own expense: (a)
-------------------------------
cause all invoices evidencing Accounts of Borrower and all copies thereof to
bear a notice that such invoices are payable in the name of Borrower to the
Blocked Accounts established in accordance with subsection 5.6 and (b) use its
best efforts to assure prompt payment of all amounts due or to become due under
such Accounts. No discounts, credits or allowances will be issued, granted or
allowed by Borrower or any Subsidiary to customers and no returns will be
accepted without Agent's prior written consent except in the ordinary course of
business; provided, that until Agent notifies Borrower to the contrary after the
--------
occurrence and during the continuance of an Event of Default, Borrower may
presume consent. Borrower will promptly notify Agent in the event that a
customer alleges any dispute or claim with respect to an Account of Borrower and
each of its Subsidiaries in excess of $50,000 or of any other circumstances
known to Borrower that may impair the validity or collectibility of such an
Account. Agent shall have the right, at any time or times hereafter, to verify
the validity, amount or any other matter relating to an Account, by mail,
telephone or in person. After the occurrence of a Default or an Event of
Default, Borrower shall not, and shall not permit any Subsidiary to, without the
prior consent of Agent, adjust, settle or compromise the amount or payment of
any Account, or release wholly or partly any customer or obligor thereof, or
allow any credit or discount thereon.
5.6 Collection of Accounts and Payments. Borrower shall establish such
-----------------------------------
lockboxes and depository accounts (collectively, "Blocked Accounts") with such
banks as are reasonably acceptable to Agent to which all account debtors shall
directly remit all payments on Accounts of Borrower and in which Borrower will
immediately deposit all cash payments made for Inventory or other cash payments
constituting proceeds of Collateral in the identical form in which such payment
was made, whether by cash or check. Unless a facility for a Permitted Canadian
Financing has been executed, Borrower shall cause TNF Canada to establish a
lockbox for payment of its Accounts, and all funds shall be transferred to a
Blocked Account. Prior to the occurrence of a Default or an Event of Default,
Agent shall instruct the banks to release all funds in the
39
Blocked Accounts to Borrower. After the occurrence of a Default or an Event of
Default which has not been cured, Agent may deliver a notice that all funds in
the Blocked Accounts shall be transferred to Agent and, in such event, Borrower
hereby agrees that all payments received by Agent, whether by cash, check, wire
transfer or any other instrument, made to such Blocked Accounts or otherwise
received by Agent and whether on the Accounts or as proceeds of other Collateral
or otherwise will be the sole and exclusive property of Agent for the benefit of
Lenders. Borrower, and any of its Affiliates, employees, agents or other Persons
acting for or in concert with Borrower, shall, acting as trustee for Agent,
receive, as the sole and exclusive property of Agent, any monies, checks, notes,
drafts or any other payments relating to and/or proceeds of Accounts or other
Collateral which come into the possession or under the control of Borrower or
any of Borrower's Affiliates, employees, agents or other Persons acting for or
in concert with Borrower, and immediately upon receipt thereof, Borrower or such
Persons shall remit the same or cause the same to be remitted, in kind, to the
Blocked Accounts, Agent's Account or to Agent at its address set forth in
subsection 9.6 below.
5.7 Endorsement. Borrower hereby constitutes and appoints, and shall cause
-----------
each of its Subsidiaries which is a party to any Loan Document to constitute and
appoint, Agent and all Persons designated by Agent for that purpose as
Borrower's true and lawful attorney-in-fact, with power to endorse Borrower's
name to any of the items of payment described in subsection 5.6 above and all
proceeds of Collateral that come into Agent's or any Lender's possession or
under Agent's or any Lender's control. Both the appointment of Agent as
Borrower's or its Subsidiary's attorney and Agent's rights and powers are
coupled with an interest and are irrevocable until payment in full and complete
performance of all of the Obligations.
5.8 Corporate Existence. Borrower will, and will cause each of its
-------------------
Subsidiaries to, at all times preserve and keep in full force and effect its
corporate existence and all rights and franchises material to its business.
Borrower will promptly notify Agent of any change in its or any of its
Subsidiaries' corporate structures.
5.9 Payment of Taxes. Borrower will, and will cause each of its Subsidiaries
----------------
to, pay all taxes, assessments and other governmental charges imposed upon it or
any of its properties or assets or with respect to any of its franchises,
business, income or property before any penalty accrues thereon; provided that
--------
no such tax need be paid if Borrower or such Subsidiary is contesting same in
good faith by appropriate proceedings promptly instituted and diligently
conducted and if Borrower or such Subsidiary has established appropriate
reserves as shall be required in conformity with GAAP.
5.10 Maintenance of Properties; Insurance. Borrower will maintain or cause to
------------------------------------
be maintained in good repair, working order and condition all material
properties used in the business of Borrower and its Subsidiaries and will make
or cause to be made all appropriate repairs, renewals and replacements thereof.
Borrower will maintain or cause to be maintained, with financially sound and
reputable insurers, business interruption insurance (with no exclusion for
earthquakes), public liability and property damage and casualty insurance with
respect to its business and properties and the business and properties of its
Subsidiaries against loss or damage of the kinds customarily carried or
maintained by corporations of established reputation engaged in similar
businesses and in amounts acceptable to Agent. Borrower shall cause Agent, for
the benefit of Lenders, to be named as loss payee on all insurance policies
relating to any Collateral and as additional insured under all liability
policies, in each case pursuant to appropriate endorsements in form and
substance acceptable to Agent. Borrower shall apply any proceeds received from
any policies of insurance relating to any Collateral to the Obligations as set
forth in subsection 2.4(B).
5.11 Compliance with Laws. Borrower will, and will cause each of its
--------------------
Subsidiaries to, comply with the requirements of all applicable laws, rules,
regulations and orders of any governmental authority as now in effect and which
may be imposed in the future in all jurisdictions in which Borrower or any of
its
40
Subsidiaries is now doing business or may hereafter be doing business, other
than those laws the noncompliance with which would not have a Material Adverse
Effect.
5.12 Further Assurances. Borrower shall, and shall cause each of its
------------------
Subsidiaries to, from time to time, execute such guaranties, financing or
continuation statements, documents, security agreements, reports and other
documents or deliver to Agent such instruments, certificates of title or other
documents as Agent at any time may reasonably request to evidence, perfect or
otherwise implement the guaranties and security for repayment of the Obligations
provided for in the Loan Documents. At Agent's request, Borrower shall cause
any of its Subsidiaries promptly to guaranty the Obligations and to grant to
Agent, for the benefit of Lenders, security interests in the real, personal and
mixed property of such Subsidiary to secure the Obligations; provided that, so
--------
long as Borrower does not loan or advance funds (by capital contribution or
otherwise) to TNF Europe or TNF Italy except as expressly permitted hereby,
neither TNF Europe nor TNF Italy shall be required to guaranty the Obligations
or grant Liens to Lender on its assets, and so long as Borrower and TNF Canada
are in compliance with this Agreement with respect to Indebtedness of TNF Canada
and investments by Borrower in TNF Canada, and the Liens granted to Borrower by
TNF Canada have been perfected and assigned to Agent, TNF Canada shall not be
required to guaranty the Obligations.
5.13 Collateral Locations. Borrower will keep its Collateral at the locations
--------------------
specified as Borrower's locations on Schedule 4.7. With respect to any new
location (which as to Borrower in any event shall be within the continental
United States or Canada), Borrower will execute such documents and take such
actions as Agent deems necessary to perfect and protect the security interests
of Agent in the Collateral, for the benefit of Lenders including obtaining
agreements from any landlord in form and substance acceptable to Agent.
Borrower will segregate its Collateral from any Inventory of TNF Canada, and
undertake such procedures as may be requested by Agent to identify all such
Collateral. If TNF Canada enters into a Permitted Canadian Financing, Borrower
shall no longer keep any Collateral in Canada.
5.14 Bailees. If any Collateral is at any time in the possession or control of
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any warehouseman, bailee or any of Borrower's or any Subsidiary's agents or
processors, Borrower shall, upon the request of Agent, notify, or cause its
Subsidiary to notify, such warehouseman, bailee, agent or processor of the
security interests in favor of Agent, for the benefit of Lenders, created hereby
and shall instruct such Person to hold all such Collateral for Agent's account
subject to Agent's instructions.
5.15 Mortgages; Title Insurance; Surveys.
-----------------------------------
(A) Mortgaged Property. Agent may from time to time designate real
------------------
property or leasehold interests of any Loan Party or any Subsidiary of any Loan
Party after the date hereof as "Mortgaged Property", in which case Borrower
shall as promptly as possible (and in any event within sixty (60) days after
such designation) deliver to Agent, for the benefit of Lenders, a fully executed
Mortgage, in form and substance acceptable to Agent, together with title
insurance policies and surveys as required by this subsection 5.15. Borrower
agrees that, following the taking of the actions with respect to any Mortgaged
Property required by the immediately preceding sentence, Agent, for the benefit
of Lenders, shall have a valid and enforceable mortgage on the respective
Mortgaged Property, free and clear of all defects and encumbrances except for
Permitted Encumbrances. Notwithstanding the foregoing, Agent shall not require
a leasehold mortgage or deed of trust to the extent that it is prohibited by the
applicable lease, nor any Mortgage on the real property owned by TNF Europe so
long as TNF Europe is not required to guaranty the Obligations.
(B) Title Insurance. Within thirty (30) days following delivery of any
---------------
Mortgage with respect to Mortgaged Property, Borrower shall deliver or cause to
be delivered to Agent, for the benefit of Lenders, ALTA lender's title insurance
policies issued by title insurers reasonably satisfactory to Agent (the
"Mortgage
41
Policies") in form and substance and in amounts reasonably acceptable
to Agent assuring Agent that the Mortgages are valid and enforceable first
priority mortgage liens on the respective Mortgaged Property, free and clear of
all defects and encumbrances except Permitted Encumbrances. The Mortgage
Policies shall be in form and substance reasonably acceptable to Agent and shall
include an endorsement insuring against the effect of future advances under this
Agreement, for mechanics' liens and for any other matter that Agent may
reasonably request, and shall provide for affirmative insurance and such
reinsurance as Agent may reasonably request. In the case of each leasehold
constituting Mortgaged Property, Agent shall have received such estoppel
letters, consents and waivers from the landlords and non-disturbance agreements
from any holders of mortgages or deeds of trust on such real estate as may have
been requested by Agent, which letters shall be in form and substance
satisfactory to Agent.
(C) Surveys. Within thirty (30) days following delivery of any Mortgage
-------
with respect to Additional Mortgaged Property, Borrower shall deliver or cause
to be delivered to Agent current surveys, certified by a licensed surveyor, for
all real property that is the subject of the Mortgage Policies. All such
surveys shall be sufficient to allow the issuer of the mortgage policy to issue
an ALTA lender's policy.
5.16 Canadian Accounts. Borrower will cause TNF Canada to apply proceeds of
-----------------
the collections of its Accounts and any Permitted Canadian Financing to the
payment of the Intercompany Inventory Account and other Indebtedness owed to
Borrower. Unless a credit facility to provide a Permitted Canadian Financing is
in effect, TNF Canada shall not maintain more than Seventy-Five Thousand Dollars
($75,000) in cash or cash equivalents.
5.17 Dividends. Borrower will not pay any cash dividends on any Borrower
---------
Stock.
SECTION 6 FINANCIAL COVENANTS
Borrower covenants and agrees that so long as any of the Commitments
remain in effect and until payment in full of all Obligations and termination of
all Lender Letters of Credit and Risk Participation Agreements, unless Borrower
has received the prior written consent of Requisite Lenders or of Agent at the
direction of Requisite Lenders, Borrower shall comply with and shall cause each
of its Subsidiaries to comply with all covenants in this Section 6 applicable to
such Person.
6.1 Tangible Net Worth. As of the end of each Fiscal Quarter Tangible Net
------------------
Worth shall be at least $50,000,000 in 1997, and in each Fiscal Year thereafter
shall be increased by an amount equal to seventy-five percent (75%) of
Borrower's net income (determined in accordance with GAAP) (but not decreased by
the amount of any loss) for Fiscal Year 1997 and each Fiscal Year ended
thereafter.
6.2 Minimum EBITDA. Minimum EBITDA at the end of each fiscal quarter set
--------------
forth below for the rolling four (4) quarter period ending on the last day of
each fiscal quarter set forth below shall not be less than the amount set forth
below opposite such date.
42
Fiscal Quarter Amount
----------------------- -----------
3/31/97 $11,000,000
6/30/97 $11,000,000
9/30/97 $12,000,000
12/31/97 $13,000,000
3/31/98 $13,000,000
6/30/98 $13,000,000
9/30/98 $14,000,000
12/31/98 and thereafter $15,000,000
6.3 Capital Expenditure Limits. The aggregate amount of all Capital
--------------------------
Expenditures of Borrower and its Domestic Subsidiaries (excluding (i) trade-ins,
and (ii) Capital Expenditures in respect of replacement assets to the extent
funded with casualty insurance proceeds), will not exceed Fifteen Million
Dollars ($15,000,000) in any Fiscal Year. In the event that Borrower or any of
its Domestic Subsidiaries enters into a Capital Lease or other contract with
respect to fixed assets, for purposes of calculating Capital Expenditures under
this subsection only, the amount of the Capital Lease initially capitalized on
Borrower's balance sheet prepared in accordance with GAAP shall be considered
expended in full on the date that Borrower or any of its Domestic Subsidiaries
enters into such contract or Capital Lease.
6.4 Fixed Charge Coverage. Fixed Charge Coverage at the end of each fiscal
---------------------
quarter for the rolling four (4) quarter period ending on the last day of each
fiscal quarter shall not be less than 1.2.
6.5 Total Interest Coverage. Total Interest Coverage at the end of each
-----------------------
fiscal quarter for the rolling four (4) quarter period ending on the last day of
each fiscal quarter shall not be less than 1.75.
6.6 Leverage Ratio. The Leverage Ratio at the end of each fiscal quarter for
--------------
the rolling four (4) quarter period ending on the last day of each fiscal
quarter shall not exceed 4.0 for the fiscal quarters ending March 31, and June
30, 1997, 3.5 for the fiscal quarter ending September 30, 1997 and for any
fiscal quarter ending thereafter.
6.7 Adjustment of Financial Covenants. If TNF Canada enters into a Permitted
---------------------------------
Canadian Financing, Borrower, Agent and Lenders agree to negotiate in good faith
in order to amend the foregoing covenants and the related definitions to exclude
TNF Canada and provide criteria for evaluating Borrower's performance and
financial condition which shall be the same after such exclusion.
SECTION 7 NEGATIVE COVENANTS
Borrower covenants and agrees that so long as any of the Commitments
remain in effect and until payment in full of all Obligations and termination of
all Lender Letters of Credit and Risk Participation Agreements, unless Borrower
has received the prior written consent of Requisite Lenders or of Agent at the
direction of Requisite Lender, Borrower shall comply, and shall cause each of
its Subsidiaries to comply, with all covenants in this Section 7 applicable to
such Person.
7.1 Indebtedness and Liabilities . Borrower will not, and will not permit any
----------------------------
of its Subsidiaries to, directly or indirectly create, incur, assume, guaranty,
or otherwise become or remain directly or indirectly liable, on a fixed or
contingent basis, with respect to any Indebtedness except: (a) the Obligations;
(b) Indebtedness not to exceed One Hundred Thousand Dollars ($100,000) in the
aggregate at any time
43
outstanding secured by purchase money Liens; (c) Indebtedness with respect to
Capital Leases permitted under subsection 6.3 hereof; (d) Indebtedness existing
on the Closing Date not otherwise permitted hereunder and identified on Schedule
7.1(C) and refinancings thereof in amounts not in excess of that set forth on
such Schedule 7.1(C); provided, that in no event may any refinancing of the
--------
Indebtedness of TNF Europe or TNF Italy require any guaranty of payment or other
credit support by Borrower; (e) until TNF Canada enters into a Permitted
Canadian Financing, the Intercompany Inventory Account and other intercompany
Indebtedness of TNF Canada to Borrower in an amount not to exceed the investment
permitted under subsection 7.4(e) and if a credit facility for a Permitted
Canadian Financing is in effect, the Intercompany Inventory Account in an amount
not to exceed Fifty Thousand Dollars ($50,000); (f) a Permitted Canadian
Financing; and (g) Permitted FX Contracts. Except for Indebtedness described in
the preceding sentence, Borrower will not, and will not permit any of its
Subsidiaries to, incur any indebtedness or liabilities except for trade
payables, operating leases and other liabilities not constituting Indebtedness
in the ordinary course of business not delinquent or with respect to which
Borrower or any of its Subsidiaries is contesting in good faith the amount or
validity thereof by appropriate proceedings and then only to the extent that
Borrower or any of its Subsidiaries has established adequate reserves therefor,
if appropriate under GAAP.
7.2 Guaranties. Except for guaranties issued to Agent for the benefit of
----------
Lenders or endorsements of instruments or items of payment for collection in the
ordinary course of business or customary indemnities to corporate agents,
officers and directors (but subject to sub-section 7.5), Borrower shall not, and
shall not permit any of its Subsidiaries to, guaranty, endorse, or otherwise in
any way become or be responsible for any obligations of any other Person,
whether directly or indirectly by agreement to purchase the indebtedness of any
other Person or through the purchase of goods, supplies or services, or
maintenance of working capital or other balance sheet covenants or conditions,
or by way of stock purchase, capital contribution, advance or loan for the
purpose of paying or discharging any indebtedness or obligation of such other
Person or otherwise. The foregoing shall not prohibit Subsidiaries from
guarantying the Obligations, nor Borrower from guarantying the obligations of
TNF Canada under its lease; provided that the terms of such lease and guaranty
--------
are acceptable to Lender.
7.3 Transfers, Liens and Related Matters.
------------------------------------
(A) Transfers. Borrower shall not, and shall not permit any of its
---------
Subsidiaries to, sell, assign (by operation of law or otherwise) or otherwise
dispose of, or grant any option with respect to any of the Collateral or the
assets of such Person, except that Borrower and its Subsidiaries may (i) sell
Inventory in the ordinary course of business; (ii) with the prior written
consent of Lender not to be unreasonably withheld or delayed, license trademarks
and tradenames in the ordinary course of business consistent with past practices
of Old TNF prior to the Original Closing Date; (iii) terminate the leases
described on Schedule 7.3(B); and (iv) make voluntary Asset Dispositions if all
of the following conditions are met: (1) the market value of assets sold or
otherwise disposed of in any single transaction or series of related
transactions does not exceed Twenty-five Thousand Dollar ($25,000) and the
aggregate market value of assets sold or otherwise disposed of in any Fiscal
Year does not exceed Seventy-five Thousand Dollars ($75,000); (2) the
consideration received is at least equal to the fair market value of such
assets; (3) the sole consideration received is cash; (4) the net proceeds of
such Asset Disposition are applied as required by subsection 2.4(B); (5) after
giving effect to the sale or other disposition of the assets included within the
Asset Disposition and the repayment of the Obligations with the proceeds
thereof, Borrower is in compliance on a pro forma basis with the covenants set
forth in Section 6 recomputed for the most recently ended month for which
information is available and is in compliance with all other terms and
conditions contained in this Agreement; and (6) no Default or Event of Default
shall result from such sale or other disposition.
44
(B) Liens. Except for Permitted Encumbrances, Borrower will not, and
-----
will not permit any of its Subsidiaries to, directly or indirectly create,
incur, assume or permit to exist any Lien on or with respect to any of the
Collateral or the assets of such Person or any proceeds, income or profits
therefrom.
(C) No Negative Pledges. Neither Borrower nor any Subsidiary of
-------------------
Borrower shall enter into or assume any agreement (other than the Loan
Documents) prohibiting the creation or assumption of any Lien upon its
properties or assets, whether now owned or hereafter acquired, other than any
such agreement entered into by TNF Europe prior to the Original Closing Date or
in connection with a refinancing of Indebtedness of TNF Europe permitted by
subsection 7.1(d) and any prohibition on Liens upon assets of TNF Canada in any
Permitted Canadian Financing.
(D) No Restrictions on Subsidiary Distributions to Borrower. Except as
-------------------------------------------------------
provided herein and for any agreement entered into by TNF Europe prior to the
Original Closing Date, Borrower will not and will not permit any of its
Subsidiaries directly or indirectly to create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction of any kind
on the ability of any such Subsidiary to: (1) pay dividends or make any other
distribution on any of such Subsidiary's capital stock owned by Borrower or any
Subsidiary of Borrower; or (2) subject to subordination provisions, pay any
indebtedness owed to Borrower or any other Subsidiary; (3) make loans or
advances to Borrower or any other Subsidiary; or (4) transfer any of its
property or assets to Borrower or any other Subsidiary.
7.4 Investments and Loans. Borrower shall not, and shall not permit any of
---------------------
its Domestic Subsidiaries to, make or permit to exist investments in or loans to
any other Person, except: (a) Cash Equivalents; (b) loans and advances to
employees for moving, entertainment, travel and other similar expenses in the
ordinary course of business in an aggregate outstanding amount not in excess of
Two Hundred Thousand Dollars ($200,000) at any time; (c) the investment of
Borrower in the stock of TNF Europe and of TNF Europe in the stock of Black &
▇▇▇▇▇▇▇▇▇ (Exports) Limited, in each case existing on the Original Closing Date
(but excluding in each case any additional investments, by capital contribution
or otherwise, or loans); (d) in addition to investments permitted under clause
(c) the investment of Borrower in TNF Europe or TNF Italy not to exceed
$3,000,000 (excluding retained earnings); and (e) the investment (by loan,
advance, capital contribution or otherwise) of Borrower in TNF Canada in an
amount not in excess of Five Hundred Thousand Dollars ($500,000) in the
aggregate plus liabilities of TNF Canada for Inventory sold by Borrower in
accordance with the Canadian Documents; provided that the Intercompany Inventory
--------
Account and all Indebtedness or liabilities of TNF Canada to Borrower shall be
repaid with the initial proceeds of any Permitted Canadian Financing and no
further sales of Inventory shall be made by Borrower to TNF Canada except as
permitted under the definition of Permitted Canadian Financing. Prior to TNF
Canada's entering into an agreement for a Permitted Canadian Financing, Borrower
shall not amend the provisions of the Canadian Documents relating to the price
of Inventory sold by Borrower to TNF Canada, or the Liens granted to Borrower
and assigned to Agent.
7.5 Restricted Junior Payments. Borrower will not, and will not permit any
--------------------------
of its Subsidiaries to, directly or indirectly declare, order, pay, make or set
apart any sum for any Restricted Junior Payment, except that: (a) Subsidiaries
of Borrower may make Restricted Junior Payments to Borrower with respect to
their common stock; and (b) so long as no Default or Event of Default shall have
occurred and be continuing or shall result from the Restricted Junior Payment
and Borrower is in compliance on a pro forma basis with the covenants set forth
in Section 6, Borrower may (i) repurchase Common Stock or options or Management
Restricted Stock held by an employee of Borrower upon termination of employment
of such employee in an aggregate amount in each Fiscal Year not to exceed Five
Hundred Thousand Dollars ($500,000); and (ii) pay director's fees in an amount
not in excess of Three Hundred Thousand Dollars ($300,000.00) per year; and (c)
Borrower may pay base compensation to Borrower's two top executive officers in
an amount not in excess, in the aggregate, of One Million Dollars
($1,000,000.00) in each Fiscal Year and such incentive compensation
45
as may be approved by the Compensation Committee of Borrower's Board of
Directors plus an amount not in excess of Five Hundred Thousand ($500,000) in
the aggregate for legal fees and expenses of such officers in connection with
proceedings for which the Board of Directors has approved Borrower's
indemnification.
7.6 Restriction on Fundamental Changes. Neither Borrower nor any of its
----------------------------------
Subsidiaries will: (a) enter into any transaction of merger or consolidation;
(b) liquidate, wind-up or dissolve itself (or suffer any liquidation or
dissolution); (c) convey, sell, lease, sublease, transfer or otherwise dispose
of, in one transaction or a series of transactions, all or any substantial part
of its business or assets, or the capital stock of any of its Subsidiaries,
whether now owned or hereafter acquired; or (d) acquire by purchase or otherwise
all or any substantial part of the business or assets of, or stock or other
evidence of beneficial ownership of, any Person.
7.7 Preferred Stock. Borrower will not issue any Preferred Stock which
---------------
requires the cash payment of dividends or any mandatory redemption thereof.
7.8 Transactions with Affiliates. Borrower will not, and will not permit any
----------------------------
Loan Party to, directly or indirectly, enter into or permit to exist any
transaction (including the purchase, sale or exchange of property or the
rendering of any service) with any Affiliate or with any officer, director or
employee of any Loan Party, except for (a) transactions in the ordinary course
of, and pursuant to the reasonable requirements of, Borrower's or a Subsidiary's
business and upon fair and reasonable terms which are fully disclosed to Agent
and Lenders and which are no less favorable to Borrower or such Subsidiary than
it would obtain in a comparable arm's length transaction with an unaffiliated
Person; (b) the transactions set forth in the Goldwin Stock Purchase Agreement;
and (c) the issuance of grants or awards under the Management Stock Plans and
purchases of securities to the extent permitted by subsection 7.5. The
foregoing shall not prohibit the transactions contemplated by the Transaction
Documents or Borrower's performance of the terms thereof so long as Borrower
fully complies with all restrictions contained in any other covenant in this
Agreement.
7.9 Environmental Liabilities. Borrower will not, and will not permit any
-------------------------
Loan Party to: (a) violate in any material respect any applicable Environmental
Law; (b) dispose of any Hazardous Materials (except in accordance with
applicable law) into or onto or from, any real property owned, leased or
operated by any Loan Party; or (c) permit any Lien imposed pursuant to any
Environmental Law to be imposed or to remain on any real property owned, leased
or operated by any Loan Party.
7.10 Conduct of Business. Borrower will not, and will not permit any of its
-------------------
Subsidiaries to, engage in any business other than businesses of the type
engaged in by Borrower as of the date hereof.
7.11 Compliance with ERISA. Borrower will not, and will not permit any of its
---------------------
Subsidiaries to establish any new Employee Benefit Plan or amend any existing
Employee Benefit Plan if the liability or increased liability resulting from
such establishment or amendment is material. Neither Borrower nor any
Subsidiary shall fail to establish, maintain and operate each Employee Benefit
Plan in compliance in all material respects with the provisions of ERISA, the
IRC and all other applicable laws and the regulations and interpretations
thereof.
7.12 Tax Consolidations. Borrower will not, and will not permit any of its
------------------
Subsidiaries to, file or consent to the filing of any consolidated income tax
return with any Person other than Borrower or any of its Subsidiaries.
7.13 Subsidiaries. Borrower will not, and will not permit any of its
------------
Subsidiaries to, establish, create or acquire any new Subsidiaries after the
Closing Date without Lender's prior written consent. TNF Canada and
46
TNF Europe will remain wholly-owned Subsidiaries of Borrower, and TNF Italy will
remain wholly-owned by TNF Europe and Borrower.
7.14 Fiscal Year. Neither Borrower nor any Subsidiary of Borrower shall
-----------
change its Fiscal Year.
7.15 Press Release; Public Offering Materials. Borrower will not, and will
----------------------------------------
not permit any Loan Party to, disclose the name of Agent or any Lender in any
press release or in any prospectus, proxy statement or other materials filed
with any governmental entity relating to a public offering of the capital stock
of any Loan Party without prior notice to Agent and Lenders and the approval of
Agent and such Lender the terms of the disclosure concerning it, which approval
will not be unreasonably withheld. Notwithstanding the foregoing, this
Agreement may be filed with the Securities and Exchange Commission to the extent
required by law.
SECTION 8 DEFAULT, RIGHTS AND REMEDIES
8.1 Event of Default. "Event of Default" shall mean the occurrence or
----------------
existence of any one or more of the following:
(A) Payment. Failure to make payment of the principal of any of the
-------
Obligations when due (in installments, by mandatory prepayment, acceleration or
otherwise) or failure to pay interest or any other amount due to Lender under
the Loan Documents when due and such default is not remedied within five (5)
days after such interest or other amount becomes due; or
(B) Default in Other Agreements. (1) Default of Borrower or any of its
---------------------------
Subsidiaries in payment when due of any principal or interest on any
Indebtedness or (2) breach or default of Borrower or any of its Subsidiaries
with respect to any Indebtedness, if such failure to pay, breach or default
entitles the holder to cause such Indebtedness having an individual principal
amount in excess of $250,000 or having an aggregate principal amount in excess
of $500,000 to become or be declared due prior to its stated maturity; or
(C) Breach of Certain Provisions. Failure of Borrower to perform or
----------------------------
comply with any term or condition contained in subsections 5.1, 5.3, 5.5, 5.6,
5.8 or contained in Section 6 or Section 7; or
(D) Breach of Warranty. Any representation, warranty, certification or
------------------
other statement made by any Loan Party in any Loan Document or in any statement
or certificate at any time given by such Person in writing pursuant or in
connection with any Loan Document is false in any material respect on the date
made; or
(E) Other Defaults Under Loan Documents. Borrower or any other Loan
-----------------------------------
Party defaults in the performance of or compliance with any term contained in
this Agreement or the other Loan Documents and such default is not remedied or
waived within ten (10) days after receipt by Borrower of notice from Agent or
Requisite Lenders of such default (other than occurrences described in other
provisions of this subsection 8.1 for which a different grace or cure period is
specified or which constitute immediate Events of Default); or
(F) Change in Control. Any Change in Control occurs; or
-----------------
(G) Involuntary Bankruptcy; Appointment of Receiver, etc. (1) A court
----------------------------------------------------
enters a decree or order for relief with respect to Borrower or any of its
Subsidiaries in an involuntary case under the Bankruptcy Code or any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, which
decree or order is not stayed or other similar relief is not granted under any
applicable federal or state law; or (2) the continuance of any of the following
events for forty-five (45) days unless dismissed, bonded or discharged:
47
(a) an involuntary case is commenced against Borrower or any of its
Subsidiaries, under any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect; or (b) a decree or order of a court for the
appointment of a receiver, liquidator, sequestrator, trustee, custodian or other
officer having similar powers over Borrower or any of its Subsidiaries, or over
all or a substantial part of their respective property, is entered; or (c) an
interim receiver, trustee or other custodian is appointed without the consent of
Borrower or any of its Subsidiaries, for all or a substantial part of the
property of Borrower or any such Subsidiary; or
(H) Voluntary Bankruptcy; Appointment of Receiver, etc. (1) An order
--------------------------------------------------
for relief is entered with respect to Borrower or any of its Subsidiaries or
Borrower or any of its Subsidiaries commences a voluntary case under the
Bankruptcy Code or any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect, or consents to the entry of an order for relief in
an involuntary case or to the conversion of an involuntary case to a voluntary
case under any such law or consents to the appointment of or taking possession
by a receiver, trustee or other custodian for all or a substantial part of its
property; or (2) Borrower or any of its Subsidiaries makes any assignment for
the benefit of creditors; or (3) the board of directors of Borrower or any of
its Subsidiaries adopts any resolution or otherwise authorizes action to approve
any of the actions referred to in this subsection 8.1(H); or
(I) Liens. Any lien, levy or assessment is filed or recorded with
-----
respect to or otherwise imposed upon all or any part of the Collateral or the
assets of Borrower or any of its Subsidiaries by the United States or any
department or instrumentality thereof or by any state, county, municipality or
other governmental agency, domestic or foreign (other than Permitted
Encumbrances) and such lien, levy or assessment is not stayed, vacated, paid or
discharged within ten (10) days; or
(J) Judgment and Attachments. Any money judgment, writ or warrant of
------------------------
attachment, or similar process involving (1) an amount in any individual case in
excess of $250,000 or (2) an amount in the aggregate at any time in excess of
$500,000 (in either case not adequately covered by insurance, subject to the
deductibles approved by Agent, as to which the insurance company has
acknowledged coverage) is entered or filed against Borrower or any of its
Subsidiaries or any of their respective assets or any Collateral and remains
undischarged, unvacated, unbonded or unstayed for a period of forty-five (45)
days or in any event later than five (5) days prior to the date of any proposed
sale thereunder; or
(K) Dissolution. Any order, judgment or decree is entered against
-----------
Borrower or any of its Subsidiaries decreeing the dissolution or split up of
Borrower or that Subsidiary and such order remains undischarged or unstayed for
a period in excess of twenty (20) days; or
(L) Injunction. Borrower or any of its Subsidiaries is enjoined,
----------
restrained or in any way prevented by the order of any court or any
administrative or regulatory agency from conducting all or any material part of
its business and such order continues for more than thirty (30) days; or
(M) Invalidity of Loan Documents. Any of the Loan Documents for any
----------------------------
reason, other than a partial or full release in accordance with the terms
thereof, ceases to be in full force and effect or is declared to be null and
void, or any Loan Party or Shareholder denies that it has any further liability
under any Loan Documents to which it is party, or gives notice to such effect;
or
(N) Failure of Security. Agent, on behalf of Lenders, does not have or
-------------------
ceases to have a valid and perfected first priority security interest in the
Collateral (subject to Permitted Encumbrances), in each case, for any reason
other than the failure of Agent or any Lender to take any action within its
control; or
(O) Damage, Strike, Casualty. Any material damage to, or loss, theft or
------------------------
destruction of, any Collateral, whether or not insured, or any strike, lockout,
labor dispute, embargo, condemnation, act of God
48
or public enemy, or other casualty which causes, for more than fifteen (15)
consecutive days beyond the coverage period of any applicable business
interruption insurance as to which Borrower has received payments, the cessation
or substantial curtailment of revenue producing activities at any facility of
Borrower or any of its Subsidiaries if any such event or circumstance could
reasonably be expected to have a Material Adverse Effect; or
(P) Licenses and Permits. The loss, suspension or revocation of, or
--------------------
failure to renew, any license or permit now held or hereafter acquired by
Borrower or any of its Subsidiaries, if such loss, suspension, revocation or
failure to renew could have a Material Adverse Effect.
8.2 Suspension of Commitments. Upon the occurrence of any Default or Event
-------------------------
of Default, notwithstanding any grace period or right to cure, Agent may, and
upon the demand of Requisite Lenders shall, without notice or demand,
immediately cease making additional Loans and the Commitments shall be
suspended; provided that, in the case of a Default, if the subject condition or
--------
event is waived, cured or removed by Requisite Lenders within any applicable
grace or cure period, the Commitments shall be reinstated.
8.3 Acceleration. Upon the occurrence of any Event of Default described in
------------
the foregoing subsections 8.1(G) or 8.1(H), all Obligations shall automatically
and immediately be immediately due and payable, without presentment, demand,
protest or other requirements of any kind, all of which are hereby expressly
waived by Borrower, and the Commitments shall thereupon terminate. Upon the
occurrence and during the continuance of any other Event of Default, Agent may,
and upon demand by Requisite Lenders shall, by written notice to Borrower, (a)
declare all or any portion of the Obligations to be, and the same shall
forthwith become, immediately due and payable and the Commitments shall
thereupon terminate and (b) demand that Borrower immediately deposit with Agent
an amount equal to the Risk Participation Liability to enable Lender to make
payments under the Lender Letters of Credit and Risk Participation Agreements
when required and such amount shall become immediately due and payable.
8.4 Remedies. If any Event of Default shall have occurred and be continuing,
--------
Agent may, and upon demand of Requisite Lenders shall, exercise in respect of
the Collateral, in addition to all other rights and remedies provided for herein
or in any other Loan Documents or otherwise available to Agent or Lenders, all
the rights and remedies of a secured party on default under the UCC (whether or
not the UCC applies to the affected Collateral) and may also (a) notify any or
all obligors on the Accounts to make all payments directly to Agent; (b) require
Borrower and any other Loan Party to, and Borrower hereby agrees that it will,
at its expense and upon request of Agent forthwith, assemble all or part of the
Collateral as directed by Agent and make it available to Agent at a place to be
designated by Agent which is reasonably convenient to both parties; (c) withdraw
all cash in the Blocked Accounts and apply such monies in payment of the
Obligations in the manner provided in subsection 8.7; (d) without notice or
demand or legal process, enter upon any premises of Borrower and any other Loan
Party and take possession of the Collateral; and (e) without notice except as
specified below, sell the Collateral or any part thereof in one or more parcels
at public or private sale, at any of the Lender's offices or elsewhere, at such
time or times, for cash, on credit or for future delivery, and at such price or
prices and upon such other terms as Agent may deem commercially reasonable.
Borrower agrees that, to the extent notice of sale shall be required by law, at
least ten (10) days notice to Borrower of the time and place of any public sale
or the time after which any private sale is to be made shall constitute
reasonable notification. At any sale of the Collateral, if permitted by law,
Agent or any Lender may bid (which bid may be, in whole or in part, in the form
of cancellation of indebtedness) for the purchase of the Collateral or any
portion thereof for the account of Agent or such Lender. Agent and Lenders
shall not be obligated to make any sale of Collateral regardless of notice of
sale having been given. Borrower shall remain liable for any deficiency. Agent
may adjourn any public or private sale from time to time by announcement at the
time and place fixed therefor, and such sale may, without further notice, be
made at the
49
time and place to which it was so adjourned. Agent shall not be required to
proceed against any Collateral but may proceed against Borrower directly. To the
extent permitted by law, Borrower hereby specifically waives all rights of
redemption, stay or appraisal which it has or may have under any law now
existing or hereafter enacted.
8.5 Appointment of Attorney-in-Fact. Borrower hereby constitutes and
-------------------------------
appoints Agent as Borrower's attorney-in-fact with full authority in the place
and stead of Borrower and in the name of Borrower, Agent or otherwise, from time
to time in Agent's discretion to take any action and to execute any instrument
that Agent may deem necessary or advisable to accomplish the purposes of this
Agreement, including: (a) to ask, demand, collect, ▇▇▇ for, recover, compound,
receive and give acquittance and receipts for moneys due and to become due under
or in respect of any of the Collateral; (b) to adjust, settle or compromise the
amount or payment of any Account, or release wholly or partly any customer or
obligor thereunder or allow any credit or discount thereon; (c) to receive,
endorse, and collect any drafts or other instruments, documents and chattel
paper, in connection with clause (a) above; (d) to file any claims or take any
action or institute any proceedings that Agent may deem necessary or desirable
for the collection of any of the Collateral or otherwise to enforce the rights
of Agent and Lenders with respect to any of the Collateral; and (e) to sign and
endorse any invoices, freight or express bills, bills of lading, storage or
warehouse receipts, assignments, verifications and notices in connection with
Accounts and other documents relating to the Collateral. The appointment of
Agent as Borrower's attorney and Agent's rights and powers are coupled with an
interest and are irrevocable until payment in full and complete performance of
all of the Obligations.
8.6 Limitation on Duty of Agent and Lenders with Respect to Collateral.
------------------------------------------------------------------
Beyond the safe custody thereof, neither Agent nor any Lender shall have any
duty with respect to any Collateral in its possession or control (or in the
possession or control of any agent or bailee of Agent ) or with respect to any
income thereon or the preservation of rights against prior parties or any other
rights pertaining thereto. Agent and each Lender shall be deemed to have
exercised reasonable care in the custody and preservation of the Collateral in
its possession if the Collateral is accorded treatment substantially equal to
that which it accords its own property. Neither Agent nor any Lender shall be
liable or responsible for any loss or damage to any of the Collateral, or for
any diminution in the value thereof, by reason of the act or omission of any
warehouseman, carrier, forwarding agency, consignee or other agent or bailee
selected by Agent or any Lender in good faith.
8.7 Application of Proceeds. Upon the occurrence and during the continuance
-----------------------
of an Event of Default, the proceeds of any sale of, or other realization upon,
all or any part of the Collateral shall be applied: first, to all fees, costs
-----
and expenses incurred by Agent or any Lender with respect to this Agreement, the
other Loan Documents or the Collateral; second, to all fees due and owing to
------
Agent and Lenders; third, to accrued and unpaid interest on the Obligations;
-----
fourth, to the principal amounts of the Obligations outstanding in such order as
------
Agent may determine in its sole discretion; and fifth, to any other indebtedness
-----
or obligations of Borrower owing to Agent or any Lender.
8.8 Waivers, Non-Exclusive Remedies. No failure on the part of Agent or any
-------------------------------
Lender to exercise, and no delay in exercising and no course of dealing with
respect to, any right under this Agreement or any other Loan Document shall
operate as a waiver thereof; nor shall any single or partial exercise by Agent
or any Lender of any right under this Agreement or any other Loan Document
preclude any other or further exercise thereof or the exercise of any other
right. The rights in this Agreement and the other Loan Documents are cumulative
and are not exclusive of any other remedies provided by law.
50
SECTION 9 ASSIGNMENTS; AGENCY PROVISIONS
9.1 Assignments and Participations. Each Lender may assign its rights and
------------------------------
delegate its obligations under this Agreement to another Person; provided that
--------
such assignment shall be of a constant and not a varying percentage of its
Commitments and shall be of the same percentage of the Revolving Loan Commitment
and CAPEX Loan Commitment (or outstanding CAPEX Loan); provided that (a) unless
--------
such assignment is to a Lender or an Affiliate of a Lender, the assigning Lender
shall first obtain the written consent of Agent, which consent is not to be
unreasonably withheld; (b) the amount of Commitments and Loans of the assigning
Lender being assigned shall in no event be less than the lesser of (i) Five
Million Dollars ($5,000,000) or (ii) the entire amount of the Commitments and
Loans of such assigning Lender, (c) the Lender and its assignee shall have
executed and delivered to Agent a Lender Addition Agreement and paid to Agent a
processing fee of Two Thousand Five Hundred Dollars ($2,500); (d) as a condition
to the effectiveness of such assignment, Borrower shall have complied with its
obligations under the last sentence of subsection 2.1(F); and (e) no assignment
may be made to any Odyssey Bank.
In the case of an assignment authorized under this subsection 9.1, the
assignee shall have, to the extent of such assignment, the same rights, benefits
and obligations as it would if it were a Lender hereunder. The assigning Lender
shall be relieved of its obligations hereunder with respect to its Commitment or
such assigned portion thereof. Borrower hereby acknowledges and agrees that any
assignment will give rise to a direct obligation of Borrower to the assignee and
that the assignee shall be considered to be a "Lender". Each Lender may sell
participations in all or any part of any Loans made by it to another Person;
provided that no participation may be sold to any Odyssey Bank; and provided,
-------- --------
further that any such participation shall be in a minimum amount of Five Million
-------
Dollars ($5,000,000) and provided, further, that all amounts payable by Borrower
-------- -------
hereunder shall be determined as if that Lender had not sold such participation
and the holder of any such participation shall not be entitled to require such
Lender to take or omit to take any action hereunder except action directly
affecting (a) any reduction in the principal amount, interest rate or fees
payable with respect to any Loan in which such holder participates; (b) any
extension of the Term or the date fixed for any payment of interest or fees
payable with respect to any Loan in which such holder participates; and (c) any
release of substantially all of the Collateral (other than in accordance with
the terms of this Agreement or the Loan Documents). Borrower hereby
acknowledges and agrees that any participation will give rise to a direct
obligation of Borrower to the participant, and the participant shall for
purposes of subsections 2.8, 2.9, 2.10, 9.4 and 10.2 be considered to be a
"Lender".
Except as otherwise provided in this subsection 9.1, no Lender shall, as
between Borrower and that Lender, be relieved of any of its obligations
hereunder as a result of any sale, assignment, transfer or negotiation of, or
granting of participation in, all or any part of the Loans or other obligations
owed to such Lender. Each Lender may furnish any information concerning
Borrower and its Subsidiaries in the possession of that Lender from time to time
to an assignee or participant which is an institutional lender (including
prospective assignees and participants) and may furnish such information to
other Persons upon taking reasonable steps to assure the confidentiality
thereof.
Agent shall provide Borrower with written notice of the name and address of
any new Lender after the date hereof.
51
9.2 Agent.
-----
(A) Appointment. Each Lender hereby designates and appoints ▇▇▇▇▇▇ as
-----------
its Agent under this Agreement and the Loan Documents, and each Lender hereby
irrevocably authorizes Agent to take such action or to refrain from taking such
action on its behalf under the provisions of this Agreement and the Loan
Documents and to exercise such powers as are set forth herein or therein,
together with such other powers as are reasonably incidental thereto. Agent is
authorized and empowered to amend, modify, or waive any provisions of this
Agreement or the other Loan Documents on behalf of Lenders subject to the
requirement that certain of Lenders' consent be obtained in certain instances as
provided in subsection 9.3 or otherwise specifically required under this
Agreement. Agent agrees to act as such on the express conditions contained in
this subsection 9.2. The provisions of this subsection 9.2 are solely for the
benefit of Agent and Lenders and neither Borrower nor any Loan Party shall have
any rights as a third party beneficiary of any of the provisions hereof. In
performing its functions and duties under this Agreement, Agent does not assume
and shall not be deemed to have assumed any obligation toward or relationship of
agency or trust with or for Borrower or any Loan Party. Agent may perform any
of its duties hereunder, or under the Loan Documents, by or through its agents
or employees.
(B) Nature of Duties. Agent shall have no duties or responsibilities
----------------
except those expressly set forth in this Agreement or in the Loan Documents.
The duties of Agent shall be mechanical and administrative in nature. Agent
shall not have by reason of this Agreement a fiduciary relationship in respect
of any Lender. Nothing in this Agreement or any of the Loan Documents, express
or implied, is intended to or shall be construed to impose upon Agent any
obligations in respect of this Agreement or any of the Loan Documents except as
expressly set forth herein or therein. Each Lender shall make its own
independent investigation of the financial condition and affairs of Borrower and
its Subsidiaries in connection with the extension of credit hereunder and shall
make its own appraisal of the credit worthiness of Borrower, and 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
(other than financial information received by it in accordance herewith),
whether coming into its possession before the Closing Date hereunder or at any
time or times thereafter. If Agent seeks the consent or approval of any Lenders
to the taking or refraining from taking any action hereunder, then Agent shall
send notice thereof to each Lender. Agent shall promptly notify each Lender any
time that the Requisite Lenders have instructed Agent to act or refrain from
acting pursuant hereto.
(C) Rights, Exculpation, Etc. Neither Agent nor any of its
------------------------
officers, directors, employees or agents shall be liable to any Lender for any
action taken or omitted by them hereunder or under any of the Loan Documents, or
in connection herewith or therewith, except that Agent shall be liable with
respect to its own gross negligence or willful misconduct. Agent shall not be
liable for any apportionment or distribution of payments made by it in good
faith and if any such apportionment or distribution is subsequently determined
to have been made in error, the sole recourse of any Lender to whom payment was
due but not made shall be to recover from other Lenders any payment in excess of
the amount to which they are determined to be entitled (and such other Lenders
hereby agree to return to such Lender any such erroneous payments received by
them). In performing its functions and duties hereunder, Agent shall exercise
the same care which it would in dealing with loans for its own account, but
Agent shall not be responsible to any Lender for any recitals, statements,
representations or warranties herein or for the execution, effectiveness,
genuineness, validity, enforceability, collectibility, or sufficiency of this
Agreement or any of the Loan Documents or the transactions contemplated thereby,
or for the financial condition of any Loan Party. 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 Agreement or any of the Loan
Documents or the financial condition of any Loan Party, or the existence or
possible existence of any Default or Event of Default. Agent may at any time
request instructions from Lenders with respect to any actions or approvals which
by the terms of this
52
Agreement or of any of the Loan Documents Agent is permitted or required to take
or to grant, and if such instructions are promptly requested, Agent shall be
absolutely entitled to refrain from taking any action or to withhold any
approval and shall not be under any liability whatsoever to any Person for
refraining from any action or withholding any approval under any of the Loan
Documents until it shall have received such instructions from Requisite Lenders
or all of the Lenders, as applicable. In no event shall Agent be required to
take any action or to refrain from taking any action which, in Agent's opinion,
would expose Agent to any liability. Without limiting the foregoing, no Lender
shall have any right of action whatsoever against Agent as a result of Agent
acting or refraining from acting under this Agreement or any of the other Loan
Documents in accordance with the instructions of Requisite Lenders.
(D) Reliance. Agent shall be entitled to rely upon any written notices,
--------
statements, certificates, orders or other documents or any telephone message or
other communication (including any writing, telex, telecopy or telegram)
believed by it in good faith to be genuine and correct and to have been signed,
sent or made by the proper Person, and with respect to all matters pertaining to
this Agreement or any of the Loan Documents and its duties hereunder or
thereunder, upon advice of counsel selected by it. Agent shall be entitled to
rely upon the advice of legal counsel, independent accountants, and other
experts selected by Agent in its sole discretion.
(E) Indemnification. Lenders will reimburse and indemnify Agent for and
---------------
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses, advances or disbursements of any
kind or nature whatsoever which may be imposed on, incurred by, or asserted
against Agent in any way relating to or arising out of this Agreement or any of
the Loan Documents or any action taken or omitted by Agent under this Agreement
for any of the Loan Documents, in proportion to each Lender's Pro Rata Share;
provided, however, that no Lender shall be liable for any portion of such
-------- -------
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses, advances or disbursements resulting from Agent's gross
negligence or willful misconduct. The obligations of Lenders under this
subsection 9.2(E) shall survive the payment in full of the Obligations and the
termination of this Agreement.
(F) ▇▇▇▇▇▇ Individually. With respect to its Commitments and the Loans
-------------------
made by it, and the Notes issued to it, ▇▇▇▇▇▇ shall have and may exercise the
same rights and powers hereunder and is subject to the same obligations and
liabilities as and to the extent set forth herein for any other Lender. The
terms "Lenders" or "Requisite Lenders" or any similar terms shall, unless the
context clearly otherwise indicates, include ▇▇▇▇▇▇ in its individual capacity
as a Lender or one of the Requisite Lenders. ▇▇▇▇▇▇ may lend money to, and
generally engage in any kind of banking, trust or other business with any Loan
Party as if it were not acting as Agent pursuant hereto.
(G) Successor Agent.
---------------
(1) Resignation. Agent may resign from the performance of all its
-----------
functions and duties hereunder at any time by giving at least thirty (30)
Business Days' prior written notice to Borrower and Lenders. Such resignation
shall take effect upon the acceptance by a successor Agent of its appointment
pursuant to clause (2) below or as otherwise provided below.
(2) Appointment of Successor. Upon any such notice of resignation
------------------------
pursuant to clause (G) (1) above, Requisite Lenders shall appoint a successor
Agent. If a successor Agent shall not have been so appointed within said thirty
(30) Business Day period, the retiring Agent, shall then appoint a successor
Agent who shall serve as Agent until such time, if any, as Requisite Lenders,
appoint a successor Agent as provided above.
53
(3) Successor Agent. Upon the acceptance of any appointment as
---------------
Agent under the Loan Documents 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 the Loan Documents. Even after any
retiring Agent's resignation as Agent under the Loan Documents, the provisions
of this subsection 9.2 shall continue to inure to its benefit as to any actions
taken or omitted to be taken by it while it was Agent under the Loan Documents.
(H) Collateral Matters.
------------------
(1) Release of Collateral. (a) Lenders hereby irrevocably
---------------------
authorize Agent, at its option and in its discretion, to release any Lien
granted to or held by Agent upon any property covered by this Agreement or the
Loan Documents (i) upon termination of the Commitments and payment and
satisfaction of all Obligations; (ii) constituting property being sold or
disposed of if Borrower certifies to Agent that the sale or disposition is made
in compliance with the provisions of this Agreement (and Agent may rely in good
faith conclusively on any such certificate, without further inquiry); (iii)
constituting property leased to Borrower under a lease which has expired or been
terminated in a transaction permitted under this Agreement or is about to expire
and which has not been, and is not intended by Borrower to be, renewed or
extended; or (iv) on assets of TNF Canada if required in connection with a
Permitted Canadian Financing (and Agent may rely in good faith conclusively on a
certificate of Borrower that the conditions to such Permitted Canadian Financing
have been met).
(b) In any year, without requiring the consent of any Lender, Agent
may release or compromise any Collateral and the proceeds thereof having a value
not greater than ten percent (10%) of the total book value of all Collateral,
and, with the prior consent of Requisite Lenders, may release or compromise any
Collateral and the proceeds thereof having a value not greater than twenty-five
percent (25%) of the book value of all Collateral. With the consent of Lenders
owning a total of at least eighty-five percent (85%) of the Commitments of all
Lenders, Agent may release or compromise any Collateral or proceeds thereof in
excess of that otherwise permitted hereunder. Lenders hereby irrevocably
authorize Agent to release or compromise Collateral or proceeds as permitted
under this subsection 9.2(H)(1)(b).
(c) Notwithstanding anything to the contrary contained herein, Agent
may, at its sole discretion, release or compromise Collateral and the proceeds
thereof to the extent permitted by subsection 9.2(H)(1)(a).
(d) Lenders hereby authorize and direct Agent to execute the Amendment
Agreement and Confirmation of Liens in the form attached hereto as Exhibit E.
(2) Confirmation of Authority; Execution of Releases. Without in
------------------------------------------------
any manner limiting Agent's authority to act without any specific or further
authorization of Lenders or with the consent by Requisite Lenders or with the
consent of less than all Lenders (as set forth in subsection 9.2(H)(1)), each
Lender agrees to confirm in writing, upon request by Borrower, the authority to
release any property covered by this Agreement or the Loan Documents conferred
upon Agent under subsections 9.2(H)(1)(a) and (b). So long as no Event of
Default is then continuing, upon receipt by Agent of confirmation from the
Requisite Lenders or from the requisite percentage of Lenders specifically
required by subsection 9.2(H)(1)(b), as the case may be, of its authority to
release any particular item or types of property covered by this Agreement or
the Loan Documents, and upon at least five (5) Business Days prior written
request by Borrower, Agent shall (and is hereby irrevocably authorized by
Lenders to) execute such documents as may be necessary to evidence the release
of the Liens granted to Agent for the benefit of Lenders herein or pursuant
hereto upon such collateral; provided, however, that (i) Agent shall not be
-------- -------
required to execute any such document on terms which, in Agent's opinion, would
expose Agent to liability or create any obligation or entail any
54
consequence other than the release of such Liens without recourse or warranty,
and (ii) such release shall not in manner discharge, affect or impair the
Obligations or any Liens upon (or obligations of any Loan Party, in respect of),
all interests retained by any Loan Party, including (without limitation) the
proceeds of any sale, all of which shall continue to constitute part of the
property covered by this Agreement or the Loan Documents.
(3) Absence of Duty. Agent shall have no obligation whatsoever to any
---------------
Lender or any other Person to assure that the property covered by this Agreement
or the Loan Documents exists or is owned by Borrower or is cared for, protected
or insured or has been encumbered or that the Liens granted to Agent, on behalf
of Lenders, 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 at all or in any particular manner or under
any duty of care, disclosure or fidelity, or to continue exercising, any of the
rights, authorities and powers granted or available to Agent in this subsection
9.2(H) or in any of the Loan Documents, it being understood and agreed that in
respect of the property covered by this Agreement or the Loan Documents or any
act, omission or event related thereto, Agent may act in any manner it may deem
appropriate, in its discretion, given Agent's own interest in property covered
by this Agreement or the Loan Documents as one of the Lenders and that Agent
shall have no duty or liability whatsoever to any of the other Lenders;
provided, that Agent shall exercise the same care which it would in dealing with
--------
loans for its own account.
(I) Agency for Perfection. Agent and each Lender hereby appoints each
---------------------
other Lender as agent for the purpose of perfecting Lenders' security interest
in assets which, in accordance with Article 9 of the Uniform Commercial Code in
any applicable jurisdiction, can be perfected only by possession. Should any
Lender (other than Agent) obtain possession of any such Collateral, such Lender
shall notify Agent thereof, and, promptly upon Agent's request therefor, shall
deliver such Collateral to Agent or in accordance with Agent's instructions.
Each Lender agrees that it will not have any right individually to enforce or
seek to enforce this Agreement or any Loan Document or to realize upon any
collateral security for the Loans, it being understood and agreed that such
rights and remedies may be exercised only by Agent.
9.3 Amendments, Consents and Waivers for Certain Actions.
----------------------------------------------------
(A) Except as otherwise provided in this subsection 9.3 or in subsections
9.2 and 10.3 and except as to matters set forth in other subsections hereof as
requiring only Agent's consent, the consent of Requisite Lenders shall be
required to amend, modify, terminate, or waive any provision of this Agreement,
including, but not limited to, any amendment, modification, termination, or
waiver with regard to Sections 5, 6 and 7.
(B) In the event Agent requests the consent of a Lender and does not
receive a written denial thereof within five (5) Business Days after such
Lender's receipt of such request, then such Lender will be deemed to have given
such consent.
(C) In the event Agent requests the consent of a Lender and such consent is
denied, then ▇▇▇▇▇▇ or the Lender which assigned its interest in the Loans to
such Lender (the "Assigning Lender") may, at its option, require such Lender to
reassign its interest in the Loans to ▇▇▇▇▇▇ or the Assigning Lender, as
applicable, for a price equal to the then outstanding principal amount thereof
plus accrued and unpaid interest and fees due such Lender, which interest and
fees will be paid when collected from Borrower. In the event that ▇▇▇▇▇▇ or
the Assigning Lender elects to require any Lender to reassign its interest to
▇▇▇▇▇▇ or the Assigning Lender, ▇▇▇▇▇▇ or the Assigning Lender, as applicable,
will so notify such Lender in writing within forty-five (45) days following such
Lender's denial, and such Lender will reassign its interest to ▇▇▇▇▇▇ or the
Assigning Lender, as applicable, no later than five (5) days following receipt
of such notice.
55
(D) In the event Agent waives (1) any Default arising under subsection
8.1(E) as a result of the breach of any of the provisions of Section 5 of this
Agreement (other than any such breach which constitutes an Event of Default) or
(2) any Default constituting a condition to the funding of any Revolving Loan or
issuance of any Lender Letter of Credit or execution of a Risk Participation
Agreement, such waiver shall expire on the date upon which the Default which was
the subject of such waiver matures into an Event of Default pursuant to the
terms of this Agreement.
9.4 Set Off and Sharing of Payments. In addition to any rights now or
-------------------------------
hereafter granted under applicable law and not by way of limitation of any such
rights, upon the occurrence and during the continuance of any Event of Default,
each Lender is hereby authorized by Borrower at any time or from time to time,
with reasonably prompt subsequent notice to Borrower or to any other Person (any
prior or contemporaneous notice being hereby expressly waived) to set off and to
appropriate and to apply any and all (A) balances held by such Lender or such
holder at any of its offices for the account of Borrower or any of its
Subsidiaries (regardless of whether such balances are then due to Borrower or
its Subsidiaries), and (B) other property at any time held or owing by such
Lender or such holder to or for the credit or for the account of Borrower or any
of its Subsidiaries, against and on account of any of the Obligations which are
not paid when due; except that no Lender or any such holder shall exercise any
such right without the prior written consent of Agent. Any Lender having a
right to set off shall, to the extent the amount of any such set off exceeds its
Pro Rata Share of the Obligations, purchase for cash (and the other Lenders or
holders shall sell) participations in each such other Lender's or holder's Pro
Rata Share of the Obligations as would be necessary to cause such Lender to
share such excess with each other Lender or holder in accordance with their
respective Pro Rata Shares. Borrower agrees, to the fullest extent permitted by
law, that (a) any Lender or holder may exercise its right to set off with
respect to amounts in excess of its Pro Rata Share of the Obligations and may
sell participations in such excess to other Lenders and holders, and (b) any
Lender or holder so purchasing a participation in the Loans made or other
obligations held by other Lenders or holders may exercise all rights of set-off,
bankers' lien, counterclaim or similar rights with respect to such participation
as fully as if such Lender or holder were a direct holder of Loans and other
Obligations in the amount of such participation.
9.5 Disbursement of Funds. Agent may, on behalf of Lenders, disburse
---------------------
funds to Borrower for Loans requested. Each Lender shall reimburse Agent on
demand for all funds disbursed on its behalf by Agent, or if Agent so requests,
each Lender will remit to Agent its Pro Rata Share of any Loan before Agent
disburses same to Borrower. If any Lender fails to pay the amount of its Pro
Rata Share forthwith upon Agent's demand, Agent shall promptly notify Borrower,
and Borrower shall immediately repay, such amount to Agent. Any repayment
required pursuant to this subsection 9.5 shall be without premium or penalty.
Nothing in this subsection 9.5 or elsewhere in this Agreement or the other Loan
Documents, including without limitation the provisions of subsection 9.6, shall
be deemed to require Agent to advance funds on behalf of any Lender or to
relieve any Lender from its obligation to fulfill its Commitments hereunder or
to prejudice any rights that Agent or Borrower may have against any Lender as a
result of any default by such Lender hereunder.
9.6 Disbursements of Advances, Payments and Information.
---------------------------------------------------
(A) Revolving Loan Advances and Payments; Fee Payments.
--------------------------------------------------
(1) The Revolving Loan balance may fluctuate from day to day through
Agent's disbursement of funds to, and receipt of funds from, Borrower. In order
to minimize the frequency of transfers of funds between Agent and each Lender
notwithstanding terms to the contrary set forth in Section 2, Revolving Loan
advances and payments will be settled according to the procedures described in
subsection 9.6(A)(2) and 9.6(A)(3) of this Agreement. Payments of principal
interest and fees in respect of the CAPEX Loan will be settled on the Business
Day received in accordance with the provisions of Section 2.
56
Notwithstanding these procedures, each Lender's obligation to fund its portion
of any advances made by Agent to Borrower will commence on the date such
advances are made by Agent. Such payments will be made by such Lender without
set-off, counterclaim or reduction of any kind.
(2) Once each week, or more frequently (including daily) , if Agent so
elects, Agent will advise each Lender by telephone, telex, or telecopy of the
amount of each such Lender's Pro Rata Share of the Revolving Loan balance. In
the event that payments are necessary to adjust the amount of such Lender's Pro
Rata Share of the Revolving Loan balance to such Lender's Pro Rata Share of the
Revolving Loan, the party from which such payment is due will pay the other, in
same day funds, by wire transfer to the other's account not later than 3:00 p.m.
(New York time) on such date. Notwithstanding the foregoing, if Agent so
elects, Agent may require that each Lender make its Pro Rata Share of any
requested Loan available to Agent for disbursement on or prior to the Funding
Date applicable to such Loan. If Agent elects to require that such funds be
made available, Agent shall promptly advise each Lender by telephone, telex or
telecopy of the amount of such Lender's Pro Rata Share of such requested Loan.
Each Lender shall pay Agent such Lender's Pro Rata Share of such requested Loan
in same day funds, by wire transfer to Agent's account not later than 3:00 p.m.
(New York) time on such Funding Date.
(3) For purposes of this subsection 9.6(A)(3), the following terms
and conditions will have the meanings indicated:
(a) "Daily Loan Balance" means an amount calculated as of the end of
each calendar day by subtracting (i) the cumulative principal amount paid by
Agent to a Lender on a Loan from the Closing Date through and including such
calendar day, from (ii) the cumulative principal amount on a Loan advanced by
such Lender to Agent on that Loan from the Closing Date through and including
such calendar day.
(b) "Daily Interest Rate" means an amount calculated by dividing the
interest rate payable to a Lender on a Loan (as set forth in subsection 2.2) as
of each calendar day by three hundred sixty (360).
(c) "Daily Interest Amount" means an amount calculated by multiplying
the Daily Loan Balance of a Loan by the associated Daily Interest Rate on that
Loan.
(d) "Interest Ratio" means a number calculated by dividing the total
amount of the interest on a Loan received by Agent with respect to the
immediately preceding month by the total amount of interest on that Loan due
from Borrower during the immediately preceding month.
On the first Business Day of each month ("Interest Settlement Date"), Agent will
advise each Lender by telephone, telex, or telecopy of the amount of such
Lender's share of interest and fees payable with respect to the Obligations
outstanding during the immediately preceding month. Provided that such Lender
has made all payments required to be made by it under this Agreement, Agent will
pay to such Lender, by wire transfer to such Lender's account (as specified by
such Lender on the signature page of this Agreement or the applicable Lender
Addition Agreement as amended by such Lender from time to time after the date
hereof pursuant to the notice provisions contained herein or in the applicable
Lender Addition Agreement) not later than 3:00 p.m. (New York time) on the next
Business Day following the Interest Settlement Date, such Lender's share of such
interest and fees. Such Lender's share of interest on each Loan will be
calculated for that Loan by adding together the Daily Interest Amounts for each
calendar day of the prior month for that Loan and multiplying the total thereof
by the Interest Ratio for that Loan. Such Lender's share of the total Unused
Line Fee payable in respect thereto and received by Agent shall be equal to the
product of (i) (A) the Commitments of the Lenders minus the average daily
balance of Risk Participation Reserve during the
57
preceding month, multiplied by such Lender's Pro Rata Share of the Commitments,
minus (B) the average daily balance of such Lender's advances under the
Revolving Loan during the preceding month, multiplied by (ii) one-half of one
percent (.50%) per annum. Such Lender's share of any Lender Letter of Credit and
Risk Participation Agreement fees shall be equal to such fees received by Agent
multiplied by such Lender's Pro Rata Share of the Commitments.
(B) Availability of Lender's Pro Rata Share.
---------------------------------------
(1) Unless Agent has been notified by a Lender prior to a Funding Date
of such Lender's intention not to fund its Pro Rata Share of the Loan amount
requested by Borrower, Agent may assume that such Lender will make such amount
available to Agent on the Business Day following the next Settlement Date. If
such amount is not, in fact, made available to Agent by such Lender when due,
Agent will be entitled to recover such amount on demand from such Lender without
set-off, counterclaim or deduction of any kind.
(2) Nothing contained in this subsection 9.6(B) will be deemed to
relieve a Lender of its obligation to fulfill its Commitments or to prejudice
any rights Agent or Borrower may have against such Lender as a result of any
default by such Lender under this Agreement.
(3) Without limiting the generality of the foregoing, each Lender
shall be obligated to fund its Pro Rata Share of any Revolving Loan made after
any acceleration of the Obligations with respect to any draw on a Lender Letter
of Credit or Underlying L/C.
(C) Return of Payments.
------------------
(1) If Agent pays an amount to a Lender under this Agreement in the
belief or expectation that a related payment has been or will be received by
Agent from Borrower and such related payment is not received by Agent, then
Agent will be entitled to recover such amount from such Lender without set-off,
counterclaim or deduction of any kind.
(2) If Agent determines at any time that any amount received by Agent
under this Agreement must be returned to Borrower or paid to any other Person
pursuant to any solvency law or otherwise, then, notwithstanding any other term
or condition of this Agreement, Agent will not be required to distribute any
portion thereof to any Lender. In addition, each Lender will repay to
Agent on demand any portion of such amount that Agent has distributed to such
Lender, together with interest at such rate, if any, as Agent is required to pay
to Borrower or such other Person, without set-off, counterclaim or deduction of
any kind.
(D) Dissemination of Information. Agent will use its best efforts to
----------------------------
provide Lenders with any information received by Agent from Borrower which is
required to be provided to a Lender hereunder; provided, however, that Agent
shall not be liable to Lenders for any failure to do so, except to the extent
that such failure is attributable to Agent's gross negligence or willful
misconduct.
SECTION 10 MISCELLANEOUS
10.1 Expenses and Attorneys' Fees. Whether or not the transactions
----------------------------
contemplated hereby shall be consummated, Borrower agrees to promptly pay all
fees, costs and expenses incurred by Agent and, to the extent specified below,
Lenders in connection with any matters contemplated by or arising out of this
Agreement or any other Loan Document including the following, and all such fees,
costs and expenses shall be part of the Obligations, payable on demand and
secured by the Collateral: (a) fees, costs and expenses of
58
Agent (including attorneys' fees, allocated costs of internal counsel and fees
of environmental consultants, accountants and other professionals retained by
Agent) incurred in connection with the examination, review, due diligence
investigation, documentation and closing of the financing arrangements evidenced
by the Loan Documents; (b) fees, costs and expenses of Agent (including
attorneys' fees, allocated costs of internal counsel and fees of environmental
consultants, accountants and other professionals retained by Agent) incurred in
connection with the review, negotiation, preparation, documentation, execution
and administration of the Loan Documents, the Loans, and after the occurrence
and during the continuance of an Event of Default, the fees, costs and expenses
of Agent and Lenders (including attorney's fees and allocated costs of internal
counsel) in connection with any amendments, waivers, consents, forbearance and
other modifications relating thereto or any subordination or intercreditor
agreements; (c) fees, costs and expenses incurred in creating, perfecting and
maintaining perfection of Liens in favor of Agent for the benefit of Lenders;
(d) fees, costs and expenses incurred in connection with forwarding to Borrower
the proceeds of Loans including Agent's standard wire transfer fee; (e) fees,
costs, expenses and bank charges, including bank charges for returned checks,
incurred by Agent in establishing, maintaining and handling lock box accounts,
Blocked Accounts or other accounts for collection of the Collateral; (f) fees,
costs, and expenses of Agent and Lenders (including attorneys' fees and
allocated costs of internal counsel) and costs of settlement incurred in
collecting upon or enforcing rights against the Collateral or incurred in any
action to enforce this Agreement or other Loan Document or to collect any
payments due from Borrower or any other Loan Party under this Agreement or any
other Loan Document or incurred in connection with any refinancing or
restructuring of the credit arrangements provided under this Agreement, whether
in the nature of a "workout" or in connection with any insolvency or bankruptcy
proceedings or otherwise.
10.2 Indemnity. In addition to the payment of expenses pursuant to subsection
---------
10.1, whether or not the transactions contemplated hereby shall be consummated,
Borrower agrees to indemnify, pay and hold Agent and each Lender and any holder
of the Notes or other assignee under section 9.1, and the officers, directors,
employees, agents, affiliates and attorneys of Agent and each Lender and such
holders or assignees (collectively called the "Indemnitees") harmless from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, expenses and disbursements of any kind
or nature whatsoever (including the fees and disbursements of counsel for such
Indemnitees in connection with any investigative, administrative or judicial
proceeding commenced or threatened, whether or not such Indemnitee shall be
designated a party thereto) that may be imposed on, incurred by, or asserted
against that Indemnitee, in any manner relating to or arising out of this
Agreement or any other Loan Document, the consummation of the transactions
contemplated by this Agreement, the statements contained in the commitment
letters, if any, delivered by Agent or any Lender, Agent or any Lender's
agreement to make the Loans hereunder, the use or intended use of the proceeds
of any of the Loans or the exercise of any right or remedy hereunder or under
any other Loan Document (the "Indemnified Liabilities"); provided that Borrower
--------
shall have no obligation to an Indemnitee hereunder with respect to Indemnified
Liabilities arising from the gross negligence or willful misconduct of that
Indemnitee as determined by a court of competent jurisdiction.
10.3 Amendments and Waivers. Except as otherwise provided herein or in
----------------------
Section 9, no amendment, modification, termination or waiver of any provision of
this Agreement, the Note(s) or any other Loan Document, or consent to any
departure by any Loan Party therefrom, shall in any event be effective unless
the same shall be in writing and signed by Requisite Lenders or Agent, as
applicable; provided, no amendment, modification, termination or waiver shall,
--------
unless in writing and signed by all Lenders, do any of the following: (a)
increase the Commitment of any Lender; (b) reduce the principal of, rate of
interest on or fees payable with respect to any Loan; (c) extend the scheduled
maturity date of the principal amount of the Loans; (d) change the percentage of
the Commitments or of the aggregate unpaid principal amount of the Loans, or the
percentage of Lenders which shall be required for Lenders or any of them to take
any action hereunder; (e) release Collateral (except to the extent permitted
under subsection 9.2(H) and except if the sale or disposition of such Collateral
is permitted under any other provision of this Agreement or any other Loan
59
Document); (f) amend or waive this subsection 10.3 or the definitions of the
terms used in this subsection 10.3 insofar as the definitions affect the
substance of this subsection 10.3; (g) any increase in the advance rates
contained in the definition of "Borrowing Limit" or in subsection 2.1(C); and
(h) consent to the assignment or other transfer by any Loan Party of any of its
rights and obligations under any Loan Document; and provided, further, that no
-------- -------
amendment, modification, termination or waiver affecting the rights or duties of
Agent under any Loan Document shall in any event be effective unless in writing
and signed by Agent, in addition to Lenders required hereinabove to take such
action. Each amendment, modification, termination or waiver shall be effective
only in the specific instance and for the specific purpose for which it was
given. No amendment, modification, termination or waiver shall be required for
Agent to take additional Collateral pursuant to any Loan Document. No
amendment, modification, termination or waiver of any provision of any Note
shall be effective without the written concurrence of the holder of that Note.
No notice to or demand on Borrower or any other Loan Party in any case shall
entitle Borrower or any other Loan Party to any other or further notice or
demand in similar or other circumstances. Any amendment, modification,
termination, waiver or consent effected in accordance with this subsection 10.3
shall be binding upon each holder of the Note[s] at the time outstanding, each
future holder of the Note[s], and, if signed by a Loan Party, on such Loan
Party.
10.4 Notices. Unless otherwise specifically provided herein, all notices
-------
shall be in writing addressed to the respective party as set forth below and may
be personally served, telecopied or sent by overnight courier service or United
States mail and shall be deemed to have been given: (a) if delivered in person,
when delivered; (b) if delivered by telecopy, on the date of transmission if
transmitted on a Business Day before 4:00 p.m. (New York time) or, if not, on
the next succeeding Business Day; (c) if delivered by overnight courier, two (2)
days after delivery to such courier properly addressed; or (d) if by U.S. Mail,
four Business Days after depositing in the United States mail, with postage
prepaid and properly addressed.
If to Borrower: THE NORTH FACE, INC.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: Crosby, Heafey, ▇▇▇▇▇ & May
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to Agent: ▇▇▇▇▇▇ FINANCIAL, INC.
or ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ Business Credit
Portfolio Manager
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇ FINANCIAL, INC.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ Business Credit
Legal Department
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
60
If to any Lender: its address indicated on the
signature page hereto, in a Lender Addition
Agreement or in a notice to Agent and
Borrower
or to such other address as the party addressed shall have previously designated
by written notice to the serving party, given in accordance with this subsection
10.4.
10.5 Survival of Warranties and Certain Agreements. All agreements,
---------------------------------------------
representations and warranties made herein shall survive the execution and
delivery of this Agreement and the making of the Loans hereunder.
Notwithstanding anything in this Agreement or implied by law to the contrary,
the agreements of Borrower set forth in subsections 10.1 and 10.2 and the
indemnities set forth in the Existing Loan Agreement shall survive the payment
of the Loans and the termination of this Agreement.
10.6 Indulgence Not Waiver. No failure or delay on the part of Agent, any
---------------------
Lender or any holder of a Notes in the exercise of any power, right or privilege
hereunder or under a Note shall impair such power, right or privilege or be
construed to be a waiver of any default or acquiescence therein, nor shall any
single or partial exercise of any such power, right or privilege preclude other
or further exercise thereof or of any other right, power or privilege.
10.7 Marshaling; Payments Set Aside. Neither Agent nor any Lender shall be
------------------------------
under any obligation to marshal any assets in favor of any Loan Party or any
Shareholder or any other party or against or in payment of any or all of the
Obligations. To the extent that any Loan Party or any Shareholder makes a
payment or payments to Agent or any Lender or Agent and/or any Lender enforces
its security interests or exercise its rights of setoff, and such payment or
payments or the proceeds of such enforcement or setoff or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause, then to the
extent of such recovery, the Obligations or part thereof originally intended to
be satisfied, and all Liens, rights and remedies therefor, shall be revived and
continued in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.
10.8 Entire Agreement. This Agreement, the Notes, and the other Loan
----------------
Documents referred to herein embody the final, entire agreement among the
parties hereto and supersede any and all prior commitments, agreements,
representations, and understandings, whether written or oral, relating to the
subject matter hereof and may not be contradicted or varied by evidence of
prior, contemporaneous, or subsequent oral agreements or discussions of the
parties hereto or their agents or attorneys. There are no oral agreements among
the parties hereto.
10.9 Independence of Covenants. All covenants hereunder shall be given
-------------------------
independent effect so that if a particular action or condition is not permitted
by any of such covenants, the fact that it would be permitted by an exception
to, or be otherwise within the limitations of, another covenant shall not avoid
the occurrence of a Default or an Event of Default if such action is taken or
condition exists.
10.10 Severability. The invalidity, illegality or unenforceability in any
------------
jurisdiction of any provision in or obligation under this Agreement or the other
Loan Documents shall not affect or impair the validity, legality or
enforceability of the remaining provisions or obligations under this Agreement,
or the other Loan Documents or of such provision or obligation in any other
jurisdiction.
10.11 Lenders' Obligations Several; Independent Nature of Lenders' Rights.
-------------------------------------------------------------------
The obligation of each Lender hereunder is several and not joint and no Lender
shall be responsible for the obligation or commitment of any
61
other Lender hereunder. In the event that any Lender at any time should fail to
make a Loan as herein provided, the Lenders, or any of them, at their sole
option, may make the Loan that was to have been made by the Lender so failing to
make such Loan. Nothing contained in any Loan Document and no action taken by
Agent or any Lender pursuant hereto or thereto shall be deemed to constitute
Lenders to be a partnership, an association, a joint venture or any other kind
of entity. The amounts payable at any time hereunder to each Lender shall be a
separate and independent debt, and, subject to the terms of any Lender Addition
Agreement, each Lender shall be entitled to protect and enforce its rights
arising out of this Agreement and it shall not be necessary for any other Lender
to be joined as an additional party in any proceeding for such purpose.
10.12 Headings. Section and subsection headings in this Agreement are
--------
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose or be given any substantive effect.
10.13 APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE
--------------
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
ILLINOIS, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
10.14 Successors and Assigns. This Agreement shall be binding upon and inure
----------------------
to the benefit of the parties hereto and their respective successors and assigns
except that Borrower may not assign its rights or obligations hereunder without
the written consent of Lenders.
10.15 No Fiduciary Relationship; Limitation of Liabilities.
----------------------------------------------------
(A) No provision in this Agreement or in any other Loan Document and no
course of dealing between the parties shall be deemed to create any fiduciary
duty by Agent or any Lender to Borrower.
(B) Neither Agent nor any Lender, nor any affiliate, officer, director,
employee, attorney, or agent of Agent or any Lender shall have any liability
with respect to, and Borrower hereby waives, releases, and agrees not to ▇▇▇ any
of them upon, any claim for any special, indirect, incidental, or consequential
damages suffered or incurred by Borrower in connection with, arising out of, or
in any way related to, this Agreement or any other Loan Document, or any of the
transactions contemplated by this Agreement or any other Loan Document.
Borrower hereby waives, releases, and agrees not to ▇▇▇ Agent or any Lender or
any of its affiliates, officers, directors, employees, attorneys, or agents for
punitive damages in respect of any claim in connection with, arising out of, or
in any way related to, this Agreement or any other Loan Document, or any of the
transactions contemplated by this Agreement or any of the transactions
contemplated hereby.
10.16 CONSENT TO JURISDICTION. BORROWER HEREBY CONSENTS TO THE JURISDICTION
-----------------------
OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF ▇▇▇▇, STATE OF
ILLINOIS AND IRREVOCABLY AGREES THAT, SUBJECT TO AGENT'S ELECTION, ALL ACTIONS
OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTES OR ANY
OTHER LOAN DOCUMENT SHALL BE LITIGATED IN SUCH COURTS. BORROWER ACCEPTS FOR
ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE
NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF
FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT
--------------------
RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, THE NOTES, ANY OTHER LOAN
DOCUMENT OR THE OBLIGATIONS.
62
10.17 WAIVER OF JURY TRIAL. BORROWER, AGENT AND EACH LENDER HEREBY WAIVE
--------------------
THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF THIS AGREEMENT, THE NOTES OR ANY OTHER LOAN DOCUMENT.
BORROWER, AGENT AND EACH LENDER ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL
INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED
ON THE WAIVER IN ENTERING INTO THIS AGREEMENT, THE NOTES AND THE OTHER LOAN
DOCUMENTS AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED
FUTURE DEALINGS. BORROWER, AGENT AND EACH LENDER FURTHER WARRANT AND REPRESENT
THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH
KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL.
10.18 Construction. Borrower, Agent and each Lender each acknowledge that it
------------
has had the benefit of legal counsel of its own choice and has been afforded an
opportunity to review this Agreement and the other Loan Documents with its own
legal counsel and that this Agreement and the other Loan Documents shall be
construed without regard to which party may be deemed to have drafted the same
or any provision thereof.
10.19 Counterparts; Effectiveness. This Agreement and any amendments,
---------------------------
waivers, consents, or supplements may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all of which
counterparts together shall constitute but one and the same instrument. This
Agreement shall become effective upon the execution of a counterpart hereof by
each of the parties hereto, and acceptance of the Borrower's counterpart by
Agent at its office in Chicago and satisfaction or waiver of the conditions set
forth in subsection 3.1. At the time of the effectiveness of this Agreement,
this Agreement shall amend and restate and thereby supersede the Existing Loan
Agreement. From and after the date on which this Agreement becomes effective,
all references in the other Loan Documents shall be deemed references to this
Agreement, as it may be amended, supplemented or otherwise modified from time to
time.
10.20 No Duty. All attorneys, accountants, appraisers, and other
-------
professional Persons and consultants respectively retained by Agent, any Lender,
Borrower and Borrower's Affiliates shall have the right to act exclusively in
the interest of the party retaining then and shall have no duty of disclosure,
duty of loyalty, duty of care, or other duty or obligation of any type or nature
whatsoever to any other party; provided that this Section 10.20 shall not be
--------
deemed to reduce the legal or contractual duty of any Person providing reports,
opinions, financial statements, audit reports or other documents to any Person.
[remainder of page intentionally blank]
63
Witness the due execution of this Third Amended and Restated Loan and
Security Agreement by the respective duly authorized officers of the undersigned
as of the date first written above.
THE NORTH FACE, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------
Its: Chief Financial Officer
-----------------------
[Signature pages continue]
64
▇▇▇▇▇▇ FINANCIAL, INC.,
as a Lender and as Agent
Revolving Loan
Commitment: $27,691,000 By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
CAPEX Loan ----------------------
Commitment:$2,309,000 Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------
Its: Vice President
----------------------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
Revolving Loan
Commitment: $18,462,000 By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
CAPEX Loan ----------------------
Commitment:$1,538,000 Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
----------------------
Its: Vice President
----------------------
Address for Notices:
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
IBJ ▇▇▇▇▇▇▇▇ BANK & TRUST COMPANY
Revolving Loan
Commitment: $13,847,000 By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
CAPEX Loan --------------------
Commitment:$1,153,000 Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------
Its: Vice President
--------------------
Address for Notices:
IBJ ▇▇▇▇▇▇▇▇ BANK & TRUST COMPANY
▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
65
SCHEDULES
Schedule 1.1(B) Liens
Schedule 1.2 Accounting Adjustments
Schedule 3.1(A) Closing Deliveries
Schedule 4.1(B) Capitalization
Schedule 4.6 Names
Schedule 4.7 Locations; FEIN
Schedule 4.9 Litigation; Adverse Facts
Schedule 4.10 Taxes
Schedule 4.11 Performance of Agreements
Schedule 4.13 Intellectual Property
Schedule 4.20 Bank Accounts
Schedule 4.23 Employee Matters
Schedule 7.1(C) Indebtedness and Liabilities
66
EXHIBITS
Exhibit A Compliance Certificate
Exhibit B CAPEX Note
Exhibit C Lender Addition Agreement
Exhibit D Revolving Note
Exhibit E Confirmation of Liens
67