EXHIBIT 10.1
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CREDIT AGREEMENT
Dated as of September 1, 2000,
among
PEET'S COFFEE AND TEA, INC.
as Borrower,
THE OTHER CREDIT PARTIES SIGNATORY HERETO,
as Credit Parties,
and
GENERAL ELECTRIC CAPITAL CORPORATION,
as Lender
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Table Of Contents
Page
1. AMOUNT AND TERMS OF CREDIT........................................................ 1
1.1 Credit Facilities.......................................................... 1
1.2 Letters of Credit.......................................................... 3
1.3 Prepayment................................................................. 3
1.4 Use of Proceeds............................................................ 5
1.5 Interest and Applicable Margins............................................ 5
1.6 Reserves Against Borrowing Availability.................................... 7
1.7 [Intentionally Omitted.]................................................... 7
1.8 Cash Management System..................................................... 7
1.9 Fees....................................................................... 7
1.10 Receipt of Payments........................................................ 8
1.11 Application and Allocation of Payments..................................... 8
1.12 Loan Account and Accounting................................................ 9
1.13 Indemnity.................................................................. 9
1.14 Access..................................................................... 10
1.15 Taxes...................................................................... 11
1.16 Capital Adequacy; Increased Costs; Illegality.............................. 11
1.17 Single Loan................................................................ 12
2. CONDITIONS PRECEDENT.............................................................. 12
2.1 Conditions to the Initial Loans............................................ 12
2.2 Further Conditions to Each Loan............................................ 13
3. REPRESENTATIONS AND WARRANTIES..................................................... 14
3.1 Corporate Existence; Compliance with Law.................................. 14
3.2 Executive Offices; Collateral Locations; FEIN............................. 14
3.3 Corporate Power, Authorization, Enforceable Obligations................... 14
3.4 Financial Statements and Projections...................................... 15
3.5 Material Adverse Effect................................................... 15
3.6 Ownership of Property; Liens.............................................. 15
3.7 Labor Matters............................................................. 16
3.8 Ventures, Subsidiaries and Affiliates; Outstanding Stock and Indebtedness. 16
3.9 Government Regulation..................................................... 17
3.10 Margin Regulations........................................................ 17
3.11 Taxes..................................................................... 17
3.12 ERISA..................................................................... 18
3.13 No Litigation............................................................. 19
3.14 Brokers................................................................... 19
3.15 Intellectual Property..................................................... 19
3.16 Full Disclosure........................................................... 19
3.17 Environmental Matters..................................................... 19
3.18 Insurance................................................................. 20
3.19 Deposit and Disbursement Accounts......................................... 20
3.20 Government Contracts...................................................... 20
Table Of Contents
(continued)
Page
3.21 Customer and Trade Relations............................................... 20
3.22 Agreements and Other Documents............................................. 21
3.23 Solvency................................................................... 21
3.24 Year 2000 Representations.................................................. 21
4. FINANCIAL STATEMENTS AND INFORMATION.............................................. 21
4.1 Reports and Notices........................................................ 21
4.2 Communication with Accountants............................................. 21
5. AFFIRMATIVE COVENANTS............................................................. 22
5.1 Maintenance of Existence and Conduct of Business........................... 22
5.2 Payment of Obligations..................................................... 22
5.3 Books and Records.......................................................... 22
5.4 Insurance; Damage to or Destruction of Collateral.......................... 22
5.5 Compliance with Laws....................................................... 24
5.6 Supplemental Disclosure.................................................... 24
5.7 Intellectual Property...................................................... 25
5.8 Environmental Matters...................................................... 25
5.9 Landlords' Agreements, Mortgagee Agreements and Bailee Letters............. 25
5.10 Inactive Subsidiary........................................................ 26
5.11 Further Assurances......................................................... 26
6. NEGATIVE COVENANTS................................................................ 26
6.1 Mergers, Subsidiaries, Etc................................................. 26
6.2 Investments; Loans and Advances............................................ 26
6.3 Indebtedness............................................................... 27
6.4 Employee Loans and Affiliate Transactions.................................. 27
6.5 Capital Structure and Business............................................. 28
6.6 Guaranteed Indebtedness.................................................... 28
6.7 Liens...................................................................... 28
6.8 Sale of Stock and Assets................................................... 29
6.9 ERISA...................................................................... 29
6.10 Financial Covenants........................................................ 29
6.11 Hazardous Materials........................................................ 29
6.12 Sale-Leasebacks............................................................ 29
6.13 Cancellation of Indebtedness............................................... 29
6.14 Restricted Payments........................................................ 29
6.15 Change of Corporate Name or Location; Change of Fiscal Year................ 29
6.16 No Impairment of Intercompany Transfers.................................... 30
6.17 No Speculative Transactions................................................ 30
6.18 Leases..................................................................... 30
6.19 Store Expansion............................................................ 31
6.20 Credit Parties Other than Borrower......................................... 31
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Table Of Contents
(continued)
Page
7. TERM.............................................................................. 32
7.1 Termination................................................................ 32
7.2 Survival of Obligations Upon Termination of Financing Arrangements......... 32
8. EVENTS OF DEFAULT; RIGHTS AND REMEDIES............................................ 32
8.1 Events of Default.......................................................... 32
8.2 Remedies................................................................... 34
8.3 Waivers by Credit Parties.................................................. 34
9. PARTICIPATIONS.................................................................... 34
10. SUCCESSORS AND ASSIGNS............................................................ 35
11. MISCELLANEOUS..................................................................... 35
11.1 Complete Agreement; Modification of Agreement.............................. 35
11.2 Amendments and Waivers..................................................... 36
11.3 Fees and Expenses.......................................................... 36
11.4 No Waiver.................................................................. 37
11.5 Remedies................................................................... 37
11.6 Severability............................................................... 37
11.7 Conflict of Terms.......................................................... 37
11.8 Confidentiality............................................................ 38
11.9 GOVERNING LAW.............................................................. 38
11.10 Notices.................................................................... 39
11.11 Section Titles............................................................. 39
11.12 Counterparts............................................................... 39
11.13 WAIVER OF JURY TRIAL....................................................... 39
11.14 Press Releases............................................................. 40
11.15 Reinstatement.............................................................. 40
11.16 Advice of Counsel.......................................................... 40
11.17 No Strict Construction..................................................... 40
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THIS CREDIT AGREEMENT ("Agreement") is entered into as of September 1,
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2000, by and among PEET'S COFFEE AND TEA, INC., a Washington corporation
("Borrower"); the other Credit Parties signatory hereto; and GENERAL ELECTRIC
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CAPITAL CORPORATION, a New York corporation (in its individual capacity, "GE
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Capital"), as Lender.
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RECITALS
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A. Borrower has requested that Lender extend revolving and term
credit facilities to Borrower of up to Thirty Million Dollars ($30,000,000) in
the aggregate for the purpose of refinancing certain indebtedness of Borrower
and to provide (i) working capital financing for Borrower, (ii) funds for other
general corporate purposes of Borrower, and (iii) funds for certain fees and
expenses in connection with the financing transactions contemplated herein; and
Lender is willing to make certain loans and other extensions of credit to
Borrower of up to such amount upon the terms and conditions set forth herein.
B. Borrower desires to secure all of its obligations under the Loan
Documents by granting to Lender a security interest in and lien upon all of its
existing and after-acquired personal and real property.
▇. ▇▇▇▇'▇ Trademark Company, a Washington corporation ("Trademark
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Co."), is willing to enter into a guaranty of all of the obligations of Borrower
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to Lender under the Loan Documents and to pledge all of its assets to secure
such guaranty.
▇. ▇▇▇▇'▇ Companies, Inc., a Washington corporation ("Holdings"), is
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willing to enter into a guaranty of all of the obligations of Borrower to Lender
under the Loan Documents and to pledge to Lender all of the capital Stock of
Borrower and Trademark Co. to secure such guaranty.
E. Capitalized terms used in this Agreement shall have the meanings
ascribed to them in Annex A and, for purposes of this Agreement and the other
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Loan Documents, the rules of construction set forth in Annex A shall govern.
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All exhibits, schedules, annexes and other attachments (collectively,
"Appendices") hereto, or expressly identified to this Agreement, are
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incorporated herein by reference and, taken together with this Agreement, shall
constitute but a single agreement. These Recitals shall be construed as part of
the Agreement.
AGREEMENT
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NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter contained, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. AMOUNT AND TERMS OF CREDIT
1.1 Credit Facilities.
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(a) Revolving Credit Facility.
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(i) Subject to the terms and conditions hereof, Lender
agrees to make its advances available to Borrower from time to time until the
Commitment Termination Date (each, a "Revolving Credit Advance"). The aggregate
amount of Revolving Credit Advances outstanding shall not exceed at any time the
lesser of (A) the Revolving Loan Commitment and (B) the
1 CREDIT AGREEMENT
Borrowing Base, in each case less the sum of the Letter of Credit Obligations
outstanding at such time ("Borrowing Availability"). Until the Commitment
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Termination Date, Borrower may from time to time borrow, repay and reborrow
under this Section 1.1(a). Each Revolving Credit Advance shall be made on notice
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by Borrower to the representative of Lender identified in Schedule 1.1 at the
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address specified therein. Any such notice must be given no later than (1) 10:30
a.m (California time) on the Business Day of the proposed Revolving Credit
Advance, in the case of an Index Rate Loan, or (2) 10:30 a.m. (California time)
on the date that is three Business Days prior to the proposed Revolving Credit
Advance, in the case of a LIBOR Loan. Each such notice (a "Notice of Revolving
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Credit Advance") shall be given in writing (by telecopy or overnight courier)
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substantially in the form of Exhibit 1.1(a)(i), and shall include the
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information required in such Exhibit and such other information as may be
required by Lender. If Borrower desires to have the Revolving Credit Advances
bear interest by reference to a LIBOR Rate, it must comply with Section 1.5(e).
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(ii) Borrower shall execute and deliver to Lender a
note to evidence the Revolving Loan Commitment which note shall be (A) dated the
Closing Date and (B) substantially in the form of Exhibit 1.1(a)(ii) (the
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"Revolving Note"). The Revolving Note shall represent the obligation of Borrower
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to pay the amount of the Revolving Loan Commitment or, if less, the aggregate
unpaid principal amount of all Revolving Credit Advances made to Borrower
together with interest thereon as prescribed in Section 1.5. The entire unpaid
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balance of the Revolving Loan and all other noncontingent Obligations shall be
immediately due and payable in full in immediately available funds on the
Commitment Termination Date.
(b) Term Loans.
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(i) Subject to the terms and conditions hereof, Lender
agrees to make (A) a term loan on the Closing Date to Borrower ("Term Loan A")
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in the original principal amount of the Term Loan A Commitment, and (B) a term
loan on the Closing Date to Borrower ("Term Loan B," and collectively with Term
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Loan A, the "Term Loans") in the original principal amount of the Term Loan B
Commitment. Term Loan A shall be evidenced by a promissory note substantially in
the form of Exhibit 1.1(b)(1) (the "Term Loan A Note") and Term Loan B shall be
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by a promissory note substantially in the form of Exhibit 1.1(b)(2) (the "Term
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Loan B Note," and collectively with the Term Loan A Note, the "Term Notes"),
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and Borrower shall execute and deliver each Term Note to Lender. Each Term Note
shall represent the obligation of Borrower to pay to Lender the amount of the
applicable Term Loan Commitment, together with interest thereon as prescribed
in Section 1.5.
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(ii) (A) Borrower shall pay the principal amount of
Term Loan A in (x) fifty-nine (59) consecutive monthly installments of One
Hundred Sixteen Thousand Six Hundred Sixty Six and 66/100 Dollars ($116,666.66)
each, on the last day of each of fifty-nine (59) Fiscal Months commencing
September 30, 2000, and (y) one installment of One Hundred Sixteen Thousand Six
Hundred Sixty Six and 67/100 Dollars ($116,666.67) on August 31, 2005.
(B) Borrower shall pay the entire principal
amount of Term Loan B in a single payment of Eight Million Dollars ($8,000,000)
on February 28, 2002.
(iii) Notwithstanding Section 1.1(b)(ii), the aggregate
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outstanding principal balance of Term Loan A and Term Loan B shall each be due
and payable in full in immediately available funds on the Commitment Termination
Date, if not sooner paid in full.
2 CREDIT AGREEMENT
(c) Reliance on Notices. Lender shall be entitled to rely
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upon, and shall be fully protected in relying upon, any Notice of Revolving
Credit Advance, Notice of Conversion/ Continuation or similar notice believed by
Lender to be genuine. Lender may assume that each Person executing and
delivering any such notice was duly authorized, unless the responsible
individual acting thereon for Lender has actual knowledge to the contrary.
1.2 Letters of Credit. Subject to and in accordance with the
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terms and conditions contained herein and in Annex B, Borrower shall have the
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right to request, and Lender agrees to incur, Letter of Credit Obligations in
respect of Borrower.
1.3 Prepayment.
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(a) Voluntary Prepayments. Borrower may at any time on at
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least five days' prior written notice to Lender (i) voluntarily prepay all or
part of either of the Term Loans or (ii) voluntarily prepay all or part of the
Revolving Loan and permanently reduce (but not terminate) the Revolving Loan
Commitment; provided, that (A) any such prepayments or reductions shall be in a
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minimum amount of $1,000,000 and integral multiples of $500,000 in excess of
such amount, (B) the Revolving Loan Commitment shall not be reduced to an amount
less than the greater of (1) $10,000,000 and (2) the L/C Sublimit, and (C) if
all or any part of any such prepayment is applied to reduce the then outstanding
principal amount of Term Loan B, then, after giving effect to such prepayment,
Borrower shall have Net Borrowing Availability of not less than $2,000,000.
Borrower may at any time on at least ten days' prior written notice to Lender
terminate the Revolving Loan Commitment; provided, that upon such termination
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all Loans and other Obligations shall be immediately due and payable in full and
Borrower shall make arrangements, in accordance with the terms and conditions of
Annex B, for the satisfaction of any outstanding Letter of Credit Obligations.
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Any such voluntary prepayment and any such reduction or termination of the
Revolving Loan Commitment must be accompanied by payment of the fee required by
Section 1.9(c), if any, Lender's out-of-pocket expenses, and payment of any
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LIBOR funding breakage costs in accordance with Section 1.13(b). Upon any such
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prepayment and reduction or termination of the Revolving Loan Commitment,
Borrower's right to request Revolving Credit Advances, or request that Letter of
Credit Obligations be incurred on its behalf, shall simultaneously be
permanently reduced or terminated, as the case may be; provided, that a
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permanent reduction of the Revolving Loan Commitment shall not require a
corresponding pro rata reduction in the L/C Sublimit. Each notice of partial
prepayment shall designate the Loan or other Obligations to which such
prepayment is to be applied; provided, that any partial prepayment of Term Loan
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A made by Borrower shall be applied to prepay the scheduled installments of Term
Loan A in inverse order of maturity.
(b) Mandatory Prepayments.
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(i) If at any time the outstanding balance of the
Revolving Loan exceeds the lesser of (A) the Revolving Loan Commitment and (B)
the Borrowing Base, then Borrower shall immediately repay the aggregate
outstanding Revolving Credit Advances to the extent required to eliminate such
excess. If any such excess remains after repayment in full of the aggregate
outstanding Revolving Credit Advances, Borrower shall provide cash collateral
for the Letter of Credit Obligations in the manner set forth in Annex B to the
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extent required to eliminate such excess.
(ii) Immediately upon receipt by any Credit Party of
proceeds of any asset disposition (excluding proceeds of asset dispositions
permitted by Section 6.8) or any sale of Stock of any Subsidiary of any Credit
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Party, Borrower shall prepay the Loans in an amount equal to
3 CREDIT AGREEMENT
all such proceeds, net of (A) commissions and other reasonable and customary
transaction costs, fees and expenses properly attributable to such transaction
and payable by Borrower in connection therewith (in each case, paid to non-
Affiliates), (B) transfer taxes, (C) amounts payable to holders of senior Liens
(to the extent such Liens constitute Permitted Encumbrances hereunder), if any,
and (D) an appropriate reserve for income taxes in accordance with GAAP in
connection therewith. Any such prepayment shall be applied in accordance with
Section 1.3(c).
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(iii) If any Credit Party issues Stock or any debt
securities:
(A) If such issuance occurs in connection with
any Public Offering or Private Placement of Stock of Holdings then, no later
than the Business Day following the date of receipt by any Credit Party of the
proceeds thereof, Borrower shall, except as otherwise provided in Section
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6.19(c), apply all such proceeds, net of underwriting discounts and commissions
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and other reasonable costs paid to non-Affiliates in connection with any such
Public Offering or Private Placement, as follows: first, to accrued and unpaid
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interest outstanding under Term Loan B; second, to prepay the outstanding
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principal amount of Term Loan B until such Loan shall have been prepaid in full;
third, to interest then due and payable on the Revolving Credit Advances; and
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fourth, to the outstanding principal balance of Revolving Credit Advances until
the same shall have been paid in full; provided, that the Revolving Loan
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Commitment shall not be permanently reduced by the amount of any such payments
with respect to the Revolving Loan.
(B) If such issuance occurs other than for the
purposes provided in clause (A) above then, no later than the Business Day
following the date of receipt of the proceeds thereof, Borrower shall prepay the
Loans in an amount equal to all such proceeds, net of underwriting discounts and
commissions and other reasonable costs paid to non-Affiliates in connection
therewith; provided, that no prepayment of the Loans shall be required in
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connection with the issuance of Stock of Holdings to employees of Borrower upon
the exercise of employee stock options to the persons or pursuant to the stock
option plans identified in Disclosure Schedule (3.7).
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(iv) If the proceeds described in Section 1.3(b)(ii) or
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1.3(b)(iii) are received by a Credit Party other than Borrower, such Credit
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Party shall immediately distribute or contribute such proceeds to Borrower to
fund the prepayments required by Section 1.3(b)(ii) or 1.3(b)(iii), as
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applicable. Any prepayments required by Section 1.3(b)(i), 1.3(b)(ii), or
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1.3(b)(iii)(B) shall be applied in accordance with Section 1.3(c).
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(c) Application of Certain Mandatory Prepayments. Any
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prepayments made by Borrower pursuant to Section 1.3(b)(ii) or (b)(iii)(B) shall
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be applied as follows: first, to Fees and reimbursable expenses of Lender then
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due and payable pursuant to any of the Loan Documents; second, to interest then
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due and payable on Term Loan B; third, to prepay the principal amount of Term
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Loan B until such Loan shall have been prepaid in full; fourth, to interest then
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due and payable on Term Loan A; fifth, to prepay the scheduled installments of
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Term Loan A in inverse order of maturity, until such Loan shall have been
prepaid in full; sixth, to interest then due and payable on the Revolving Credit
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Advances; seventh, to the outstanding principal balance of Revolving Credit
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Advances until the same shall have been paid in full; and eighth, to any Letter
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of Credit Obligations incurred on behalf of Borrower, to provide cash collateral
therefor in the manner set forth in Annex B, until all such Letter of Credit
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Obligations have been fully cash collateralized in the manner set forth in Annex
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B. The Revolving Loan Commitment shall not be permanently reduced by the amount
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of any such prepayments.
4 CREDIT AGREEMENT
(d) Application of Prepayments from Insurance Proceeds. Prepayments
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from insurance proceeds in accordance with Section 5.4(c) shall be applied as
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follows: insurance proceeds from casualties or losses to cash or Inventory shall
be applied to the Revolving Credit Advances; insurance or condemnation proceeds
from casualties or losses to Equipment, Fixtures and Real Estate shall be
applied first to Term Loan B and, after Term Loan B shall have been paid in
full, to prepay the scheduled installments of Term Loan A in inverse order of
maturity, until Term Loan A shall have been prepaid in full. The Revolving Loan
Commitment shall not be permanently reduced by the amount of any such
prepayments. If the precise amount of insurance or condemnation proceeds
allocable to Inventory as compared to Equipment, Fixtures and Real Estate are
not otherwise determined, the allocation and application of those proceeds shall
be determined by Lender.
(e) No Consent to Prohibited Transactions. Nothing in this Section
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1.3 shall be construed to constitute Lender's consent to any transaction that is
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not permitted by other provisions of this Agreement or the other Loan Documents.
1.4 Use of Proceeds. Borrower shall utilize the proceeds of the Term
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Loans and the Revolving Loan solely for the Refinancing (and to pay any related
transaction expenses), for scheduled payments in connection with the Facility
Bond, and for the financing of Borrower's ordinary working capital and general
corporate needs (but excluding in any event the making of any Restricted Payment
not specifically permitted by Section 6.14). Disclosure Schedule (1.4) contains
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a description of Borrower's sources and uses of funds as of the Closing Date,
including Loans and Letter of Credit Obligations to be made or incurred on such
date, and a funds flow memorandum detailing how funds from each source are to be
transferred to particular uses.
1.5 Interest and Applicable Margins.
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(a) Borrower shall pay interest to Lender in arrears on each
applicable Interest Payment Date, at the following rates: (i) with respect to
the Revolving Credit Advances, the Index Rate plus the Applicable Revolver Index
Margin per annum or, at the election of Borrower, the applicable LIBOR Rate plus
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the Applicable Revolver LIBOR Margin per annum; (ii) with respect to Term Loan
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A, the Index Rate plus the Applicable Term Loan A Index Margin per annum or, at
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the election of Borrower, the applicable LIBOR Rate plus the Applicable Term
Loan A LIBOR Margin per annum, and (iii) with respect to Term Loan B, the Index
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Rate plus the Applicable Term Loan B Index Margin per annum or, at the election
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of Borrower, the applicable LIBOR Rate plus the Applicable Term Loan B LIBOR
Margin per annum.
The Applicable Margins as of the Closing Date shall be determined by
reference to the following table:
Applicable Margin Per Annum Rate
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Applicable Revolver Index Margin 1.25%
Applicable Revolver LIBOR Margin 3.00%
Applicable Term Loan A Index Margin 1.25%
Applicable Term Loan A LIBOR Margin 3.00%
Applicable Term Loan B Index Margin 5.25%
Applicable Term Loan B LIBOR Margin 7.00%
(b) If any payment on any Loan becomes due and payable on a day
other than a Business Day, the maturity thereof will be extended to the next
succeeding Business Day (except as
5 CREDIT AGREEMENT
set forth in the definition of LIBOR Period) and, with respect to payments of
principal, interest thereon shall be payable at the then applicable rate during
such extension.
(c) All computations of Fees calculated on a per annum basis and
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interest shall be made by Lender on the basis of a 360-day year, in each case
for the actual number of days occurring in the period for which such fees or
interest are payable. Each determination by Lender of an interest rate hereunder
shall be final, binding and conclusive on Borrower (absent manifest error).
(d) So long as an Event of Default under Sections 8.1(a), (h) or (i)
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shall have occurred and be continuing or so long as any other Default or Event
of Default shall have occurred and be continuing, and at the election of Lender
after written notice from Lender to Borrower, the interest rates applicable to
the Loans and the Letter of Credit Fees shall be increased by two percentage
points (2%) per annum above the rates of interest or the rate of such Fees
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otherwise applicable hereunder (the "Default Rate"), and all outstanding
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Obligations shall bear interest at the Default Rate applicable to such
Obligations. Interest and Letter of Credit Fees at the Default Rate shall
accrue from the initial date of such Default or Event of Default until that
Default or Event of Default is cured or waived and shall be payable upon demand.
(e) Subject to the conditions precedent set forth in Section 2.2,
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Borrower shall have the option to (i) request that any Revolving Credit Advance
be made as a LIBOR Loan, (ii) convert at any time all or any part of outstanding
Loans from Index Rate Loans to LIBOR Loans, (iii) convert any LIBOR Loan to an
Index Rate Loan, subject to payment of LIBOR breakage costs in accordance with
Section 1.13(b) if such conversion is made prior to the expiration of the LIBOR
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Period applicable thereto, or (iv) continue all or any portion of any Loan as a
LIBOR Loan upon the expiration of the applicable LIBOR Period and the succeeding
LIBOR Period of that continued Loan shall commence on the last day of the LIBOR
Period of the Loan to be continued. Any Loan to be made or continued as, or
converted into, a LIBOR Loan must be in a minimum amount of $2,000,000 and
integral multiples of $500,000 in excess of such amount. Any such election must
be made by 10:30 a.m (California time) on the third Business Day prior to (A)
the date of any proposed Revolving Credit Advance that is to bear interest at
the LIBOR Rate, (B) the end of each LIBOR Period with respect to any LIBOR Loans
to be continued as such, or (C) the date on which Borrower wishes to convert any
Index Rate Loan to a LIBOR Loan for a LIBOR Period designated by Borrower in
such election. If no election is received with respect to a LIBOR Loan by 10:30
a.m. (California time) on the third Business Day prior to the end of the LIBOR
Period with respect thereto (or if a Default or an Event of Default shall have
occurred and be continuing or if the additional conditions precedent set forth
in Section 2.2 shall not have been satisfied), that LIBOR Loan shall be
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converted to an Index Rate Loan at the end of its LIBOR Period. Borrower must
make such election by notice to Lender in writing, by telecopy or overnight
courier. In the case of any conversion or continuation, such election must be
made pursuant to a written notice (a "Notice of Conversion/ Continuation") in
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the form of Exhibit 1.5(e).
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(f) Notwithstanding anything to the contrary set forth in this
Section 1.5, if a court of competent jurisdiction determines in a final order
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that the rate of interest payable hereunder exceeds the highest rate of interest
permissible under law (the "Maximum Lawful Rate"), then so long as the Maximum
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Lawful Rate would be so exceeded, the rate of interest payable hereunder shall
be equal to the Maximum Lawful Rate; provided, that if at any time thereafter
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the rate of interest payable hereunder is less than the Maximum Lawful Rate,
Borrower shall continue to pay interest hereunder at the Maximum Lawful Rate
until such time as the total interest received by Lender is equal to the total
interest that would have been received had the interest rate payable hereunder
been
6 CREDIT AGREEMENT
(but for the operation of this paragraph) the interest rate payable since
the Closing Date as otherwise provided in this Agreement. Thereafter, interest
hereunder shall be paid at the rate(s) of interest and in the manner provided in
Sections 1.5(a) through (e), unless and until the rate of interest again exceeds
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the Maximum Lawful Rate, and at that time this paragraph shall again apply. In
no event shall the total interest received by Lender pursuant to the terms
hereof exceed the amount that Lender could lawfully have received had the
interest due hereunder been calculated for the full term hereof at the Maximum
Lawful Rate. If the Maximum Lawful Rate is calculated pursuant to this
paragraph, such interest shall be calculated at a daily rate equal to the
Maximum Lawful Rate divided by the number of days in the year in which such
calculation is made. If, notwithstanding the provisions of this Section 1.5(f),
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a court of competent jurisdiction shall finally determine that Lender has
received interest hereunder in excess of the Maximum Lawful Rate, Lender shall,
to the extent permitted by applicable law, promptly apply such excess in the
order specified in Section 1.11 and thereafter shall refund any excess to
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Borrower or as a court of competent jurisdiction may otherwise order.
1.6 Reserves Against Borrowing Availability. Based on the information
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delivered by Borrower to Lender and on any other information available to
Lender, Lender shall in its reasonable credit judgment determine whether
Borrowing Availability shall be subject to Reserves. Lender reserves the right,
at any time and from time to time after the Closing Date in its reasonable
credit judgment, to establish or modify criteria for Reserves; provided, that
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Reserves established to ensure the payment of accrued Interest Expenses or
Indebtedness shall be deemed to be a reasonable exercise of Lender's credit
judgment.
1.7 [Intentionally Omitted.]
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1.8 Cash Management System. On or prior to the Closing Date, Borrower
----------------------
will establish and will maintain until the Termination Date the cash management
system described in Annex C (the "Cash Management System").
------- ----------------------
1.9 Fees.
----
(a) Borrower shall pay to Lender on the Closing Date a closing
fee of $300,000 (the "Closing Fee"), which Closing Fee shall be fully earned and
-----------
nonrefundable on the Closing Date, and against which Closing Fee shall be
credited (x) the initial $25,000 underwriting deposit paid to Lender by Borrower
in connection with the proposal letter dated May 19, 2000, and (y) the $100,000
---
commitment fee paid to Lender by Borrower in connection with the commitment
letter dated July 5, 2000, net of (z) costs and expenses, including reasonable
------
attorneys' fees and other legal costs and expenses of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ &
▇▇▇▇▇▇, incurred as of the Closing Date by Lender in connection with the
transactions contemplated hereby.
(b) [Intentionally Omitted.]
---------------------
(c) If Borrower prepays all or any portion of Term Loan A or
prepays the Revolving Loan and reduces or terminates the Revolving Loan
Commitment, whether voluntarily or involuntarily and whether before or after
acceleration of the Obligations, then Borrower shall pay to Lender as liquidated
damages and compensation for the costs of being prepared to make funds available
hereunder an amount equal to (i) the Applicable Percentage multiplied by (ii)
(A) the principal amount of Term Loan A prepaid, plus (B) the amount of the
reduction of the Revolving Loan Commitment. As used herein, the term "Applicable
Percentage" shall mean (1) three percent (3%) in the case of a prepayment on or
prior to the first anniversary of the Closing Date, (2) two
7 CREDIT AGREEMENT
percent (2%) in the case of a prepayment after the first anniversary of the
Closing Date but on or prior to the second anniversary thereof, and (3) one
percent (1%) in the case of a prepayment after the second anniversary of the
Closing Date but on or prior to the third anniversary thereof. Notwithstanding
the foregoing, no prepayment fee shall be payable by Borrower upon (x) a
mandatory prepayment made pursuant to Sections 1.3(b) or 1.16(c); provided, that
--------
Borrower does not permanently reduce the Revolving Loan Commitment upon any such
prepayment and, in the case of prepayments made pursuant to Sections 1.3(b)(ii)
or (b)(iii), the transaction giving rise to the applicable prepayment is
expressly permitted under Section 6, or (y) prepayment of some or all of the
Obligations then outstanding in connection with a Public Offering or Private
Placement of Holdings.
(d) Borrower shall pay to Lender the Letter of Credit Fee as
provided in Annex B.
-------
1.10 Receipt of Payments. Borrower shall make each payment under this
-------------------
Agreement not later than 11:00 a.m. (California time) on the day when due in
immediately available funds in Dollars to the Collection Account. For purposes
of computing Fees and determining Borrowing Availability or Net Borrowing
Availability as of any date, all payments shall be deemed received on the
Business Day of receipt of immediately available funds therefor in the
Collection Account prior to 11:00 a.m. (California time). For purposes of
computing interest, all payments shall be deemed received on the Business Day
following receipt of immediately available funds therefor in the Collection
Account prior to 11:00 a.m. (California time). Payments received after 11:00
a.m. (California time) on any Business Day shall be deemed to have been received
on the following Business Day.
1.11 Application and Allocation of Payments.
--------------------------------------
(a) So long as no Default or Event of Default shall have
occurred and be continuing: (i) payments consisting of proceeds of Accounts
received in the ordinary course of business shall be applied to the Revolving
Loan; (ii) payments matching specific scheduled payments then due shall be
applied to those scheduled payments; (iii) voluntary prepayments shall be
applied as determined by Borrower, subject to the provisions of Section 1.3(a);
--------------
and (iv) mandatory prepayments shall be applied as set forth in Sections 1.3(c)
---------------
and (d). As to each other payment, and as to all payments made when a Default or
---
Event of Default shall have occurred and be continuing or following the
Commitment Termination Date, Borrower hereby irrevocably waives the right to
direct the application of any and all payments received from or on behalf of
Borrower, and irrevocably agrees that Lender shall have the continuing exclusive
right to apply any and all such payments against the Obligations as Lender may
deem advisable notwithstanding any previous entry by Lender in the Loan Account
or any other books and records. In the absence of a specific determination by
Lender with respect thereto, payments shall be applied to amounts then due and
payable in the following order: (1) to Fees and Lender's expenses reimbursable
hereunder; (2) to interest on the Loans, ratably in proportion to the interest
accrued as to each Loan; (3) to principal payments on Term Loan B; (4) to
principal payments on Term Loan A; (5) to principal payments on the Revolving
Loans and to provide cash collateral for Letter of Credit Obligations in the
manner described in Annex B, ratably to the aggregate, combined principal
-------
balance of the Revolving Loans and outstanding Letter of Credit Obligations; and
(6) to all other Obligations to the extent reimbursable under Section 11.3.
------------
(b) Lender is authorized to, and at its sole election may,
charge to the Revolving Loan balance on behalf of Borrower and cause to be paid
all Fees, expenses, Charges, costs (including insurance premiums in accordance
with Section 5.4(a)) and interest and principal, other
---------------
8 CREDIT AGREEMENT
than principal of the Revolving Loan, owing by Borrower under this Agreement or
any of the other Loan Documents if and to the extent Borrower fails to pay
promptly any such amounts as and when due, even if such charges would cause the
aggregate amount of Revolving Credit Advances outstanding to Borrower after
giving effect to such charges to exceed Borrowing Availability. At Lender's
option and to the extent permitted by law, any charges so made shall constitute
part of the Revolving Loan hereunder.
1.12 Loan Account and Accounting. Lender shall maintain a loan
account (the "Loan Account") on its books to record: (a) all Revolving Credit
------------
Advances and the Term Loans, (b) all payments made by Borrower, and (c) all
other debits and credits as provided in this Agreement with respect to the Loans
or any other Obligations. All entries in the Loan Account shall be made in
accordance with Lender's customary accounting practices as in effect from time
to time. The balance in the Loan Account, as recorded on Lender's most recent
printout or other written statement, shall, absent manifest error, be
presumptive evidence of the amounts due and owing to Lender by Borrower;
provided that any failure to so record or any error in so recording shall not
--------
limit or otherwise affect Borrower's duty to pay the Obligations. Lender shall
render to Borrower a monthly accounting of transactions with respect to the
Loans setting forth the balance of the Loan Account for the immediately
preceding month. Unless Borrower notifies Lender in writing of any objection to
any such accounting (specifically describing the basis for such objection),
within 120 days after the date thereof, each and every such accounting shall be
deemed final, binding and conclusive on Borrower (absent manifest error) in all
respects as to all matters reflected therein. Only those items expressly
objected to in such notice shall be deemed to be disputed by Borrower.
1.13 Indemnity.
---------
(a) Each Credit Party that is a signatory hereto shall jointly
and severally indemnify and hold harmless each of Lender and its Affiliates, and
each such Person's respective officers, directors, employees, attorneys, agents
and representatives (each, an "Indemnified Person"), from and against any and
------------------
all suits, actions, proceedings, claims, damages, losses, liabilities and
expenses (including reasonable attorneys' fees and disbursements and other costs
of investigation or defense, including those incurred upon any appeal) that may
be instituted or asserted against or incurred by any such Indemnified Person as
the result of credit having been extended, suspended or terminated under this
Agreement and the other Loan Documents and the administration of such credit,
and in connection with or arising out of the transactions contemplated hereunder
and thereunder and any actions or failures to act in connection therewith,
including any and all Environmental Liabilities and legal costs and expenses
arising out of or incurred in connection with disputes between or among any
parties to any of the Loan Documents (collectively, "Indemnified Liabilities");
-----------------------
provided, that no such Credit Party shall be liable for any indemnification to
--------
an Indemnified Person to the extent that any such suit, action, proceeding,
claim, damage, loss, liability or expense results from that Indemnified Person's
gross negligence or willful misconduct. NO INDEMNIFIED PERSON SHALL BE
RESPONSIBLE OR LIABLE TO ANY OTHER PARTY TO ANY LOAN DOCUMENT, ANY SUCCESSOR,
ASSIGNEE OR THIRD PARTY BENEFICIARY OF SUCH PERSON OR ANY OTHER PERSON ASSERTING
CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR
CONSEQUENTIAL DAMAGES THAT MAY BE ALLEGED AS A RESULT OF CREDIT HAVING BEEN
EXTENDED, SUSPENDED OR TERMINATED UNDER ANY LOAN DOCUMENT OR AS A RESULT OF ANY
OTHER TRANSACTION CONTEMPLATED HEREUNDER OR THEREUNDER.
9 CREDIT AGREEMENT
(b) To induce Lender to provide the LIBOR Rate option on the
terms provided herein, if: (i) any LIBOR Loans are repaid in whole or in part
prior to the last day of any applicable LIBOR Period (whether such repayment is
made pursuant to any provision of this Agreement or any other Loan Document or
occurs as a result of acceleration, by operation of law or otherwise); (ii)
Borrower shall default in payment when due of the principal amount of or
interest on any LIBOR Loan; (iii) Borrower shall default in making any borrowing
of, conversion into or continuation of LIBOR Loans after Borrower has given
notice requesting the same in accordance herewith; or (iv) Borrower shall fail
to make any prepayment of a LIBOR Loan after Borrower has given a notice thereof
in accordance herewith, then Borrower shall indemnify and hold harmless Lender
from and against all losses, costs and expenses resulting from or arising from
any of the foregoing. Such indemnification shall include any loss (including
loss of margin) or expense arising from the reemployment of funds obtained by it
or from fees payable to terminate deposits from which such funds were obtained.
For the purpose of calculating amounts payable under this subsection, Lender
shall be deemed to have actually funded the relevant LIBOR Loan through the
purchase of a deposit bearing interest at the LIBOR Rate in an amount equal to
the amount of that LIBOR Loan and having a maturity comparable to the relevant
LIBOR Period; provided, that Lender may fund each of its LIBOR Loans in any
--------
manner it sees fit, and the foregoing assumption shall be utilized only for the
calculation of amounts payable under this subsection. This covenant shall
survive the termination of this Agreement and the payment of the Notes and all
other amounts payable hereunder. As promptly as practicable under the
circumstances, Lender shall provide Borrower with its written calculation of all
amounts payable pursuant to this Section 1.13(b), and such calculation shall be
---------------
binding on the parties hereto unless Borrower shall object in writing within
thirty (30) calendar days of receipt thereof, specifying the basis for such
objection in detail.
1.14 Access.
------
(a) Each Credit Party that is a party hereto shall, during
normal business hours, from time to time upon two Business Days' prior notice as
frequently as Lender determines to be appropriate: (i) provide Lender and any of
its officers, employees and agents access to its properties, facilities,
advisors and employees (including officers) of each Credit Party and to the
Collateral; (ii) permit Lender and any of its officers, employees and agents to
inspect, audit and make extracts from such Credit Party's books and records; and
(iii) permit Lender and its officers, employees and agents to inspect, review,
evaluate and make test verifications and counts of the Accounts, Inventory and
other Collateral of any Credit Party. If a Default or Event of Default shall
have occurred and be continuing or if access is necessary to preserve or protect
the Collateral as determined by Lender, each such Credit Party shall provide
such access at all times and without advance notice. Furthermore, so long as any
Event of Default shall have occurred and be continuing, Borrower shall provide
Lender with access to its suppliers and customers. Each such Credit Party shall
make available to Lender and its counsel, as quickly as is possible under the
circumstances, originals or copies of all books and records that Lender may
request. Each such Credit Party shall deliver any document or instrument
necessary for Lender, as it may from time to time request, to obtain records
from any service bureau or other Person that maintains records for such Credit
Party, and shall maintain supporting documentation on media, including computer
tapes and discs owned by such Credit Party.
(b) Within 30 days after delivery of an invoice therefor,
Borrower shall pay Lender a Fee of $600 per day per individual (plus all out-of-
pocket costs and expenses) in connection with Lender's field examinations
permitted under Section 1.14(a) and Section 4(c) of the Security Agreement. Such
--------------- ------------
Fees and expenses shall be charged against the Revolving Loan in connection with
10 CREDIT AGREEMENT
each field audit conducted after the Closing Date; provided, that (A) if a
--------
Default or Event of Default shall have occurred and be continuing, then there
shall be no limit on the reimbursement of Lender's charges or out of pocket
expenses for field examinations and appraisals, and (B) so long as no Default or
Event of Default shall have occurred and be continuing, Lender shall not be
entitled to be reimbursed for more than two (2) field examinations in any
calendar year or for an aggregate amount in excess of $15,000 per field
examination.
1.15 Taxes.
-----
(a) Any and all payments by Borrower hereunder or under the
Notes shall be made, in accordance with this Section 1.15, free and clear of and
------------
without deduction for any and all present or future Taxes. If Borrower shall be
required by law to deduct any Taxes from or in respect of any sum payable
hereunder or under the Notes, (i) the sum payable shall be increased as much as
shall be necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section 1.15) Lender
------------
receives an amount equal to the sum it would have received had no such
deductions been made, (ii) Borrower shall make such deductions, and (iii)
Borrower shall pay the full amount deducted to the relevant taxing or other
authority in accordance with applicable law. Within 30 days after the date of
any payment of Taxes, Borrower shall furnish to Lender the original or a
certified copy of a receipt evidencing payment thereof.
(b) Each Credit Party that is a signatory hereto shall indemnify
and, within ten days of demand therefor, pay Lender for the full amount of Taxes
(including any Taxes imposed by any jurisdiction on amounts payable under this
Section 1.15) paid by Lender, and any liability (including penalties, interest
------------
and expenses) arising therefrom or with respect thereto, whether or not such
Taxes were correctly or legally asserted.
1.16 Capital Adequacy; Increased Costs; Illegality.
---------------------------------------------
(a) If 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 Lender with any request or directive
regarding capital adequacy, reserve requirements or similar requirements
(whether or not having the force of law), in each case adopted after the Closing
Date, from any central bank or other Governmental Authority increases or would
have the effect of increasing the amount of capital, reserves or other funds
required to be maintained by Lender and thereby reducing the rate of return on
Lender's capital as a consequence of its obligations hereunder, then Borrower
shall from time to time upon demand by Lender pay to Lender additional amounts
sufficient to compensate Lender for such reduction. A certificate as to the
amount of that reduction and showing the basis of the computation thereof
submitted by Lender to Borrower shall be final, binding and conclusive on
Borrower (absent manifest error) for all purposes.
(b) If, due to either (i) the introduction of or any change in
any law or regulation (or any change in the interpretation thereof) or (ii) the
compliance with any guideline or request from any central bank or other
Governmental Authority (whether or not having the force of law), in each case
adopted after the Closing Date, there shall be any increase in the cost to
Lender of agreeing to make or making, funding or maintaining any Loan, then
Borrower shall, from time to time upon demand by Lender, pay to Lender
additional amounts sufficient to compensate Lender for such increased cost. A
certificate as to the amount of such increased cost, submitted to Borrower by
Lender, shall be final, binding and conclusive on Borrower (absent manifest
error) for all purposes.
11 CREDIT AGREEMENT
Lender agrees that, as promptly as practicable after it becomes aware of any
circumstances referred to above that would result in any such increased cost,
Lender shall, to the extent not inconsistent with Lender's internal policies of
general application, use reasonable commercial efforts to minimize costs and
expenses incurred by it and payable to it by Borrower pursuant to this Section
-------
1.16(b).
-------
(c) Notwithstanding anything to the contrary contained herein,
if the introduction of or any change in any law or regulation (or any change in
the interpretation thereof) shall make it unlawful, or any central bank or other
Governmental Authority shall assert that it is unlawful, for Lender to agree to
make or to make or to continue to fund or maintain any LIBOR Loan, then, unless
Lender is able to make or to continue to fund or to maintain such LIBOR Loan at
another branch or office of Lender without, in Lender's opinion, adversely
affecting it or its Loans or the income obtained therefrom, on notice thereof
and demand therefor by Lender to Borrower (i) the obligation of Lender to agree
to make or to make or to continue to fund or maintain LIBOR Loans shall
terminate, and (ii) Borrower shall forthwith prepay in full all outstanding
LIBOR Loans owing to Lender, together with interest accrued thereon, unless
------
Borrower, within five Business Days after the delivery of such notice and
demand, converts all such LIBOR Loans into Index Rate Loans.
1.17 Single Loan. All Loans to Borrower and all of the other
-----------
Obligations of Borrower arising under this Agreement and the other Loan
Documents shall constitute one general obligation of Borrower secured, until the
Termination Date, by all of the Collateral.
2. CONDITIONS PRECEDENT
2.1 Conditions to the Initial Loans. Lender shall not be obligated
-------------------------------
to make any Loan or incur any Letter of Credit Obligations on the Closing Date,
or to take, fulfill, or perform any other action hereunder, until the following
conditions have been satisfied or provided for in a manner satisfactory to
Lender, in Lender's sole discretion, or waived in writing by Lender:
(a) Credit Agreement; Loan Documents. This Agreement or
--------------------------------
counterparts hereof shall have been duly executed by and delivered to Borrower
and Lender, and Lender shall have received such documents, instruments,
agreements and legal opinions as Lender shall reasonably request in connection
with the transactions contemplated by this Agreement and the other Loan
Documents, including all those listed in the Schedule of Documents, each in form
and substance satisfactory to Lender.
(b) Repayment of Prior Lender Obligations; Satisfaction of
------------------------------------------------------
Outstanding L/C's. (i) Lender shall have received a fully executed original of a
-----------------
pay-off letter satisfactory to Lender confirming that all of the Prior Lender
Obligations will be repaid in full from the proceeds of the Term Loans and the
initial Revolving Credit Advance and all Liens upon any of the property of
Credit Parties or any of their Subsidiaries in favor of Prior Lender shall be
terminated by Prior Lender immediately upon such payment; and (ii) all letters
of credit issued or guaranteed by Prior Lender shall have been cash
collateralized, supported by a guaranty of Lender or supported by a Letter of
Credit issued pursuant to the Annex B, as mutually agreed upon by and among
-------
Lender, Borrower and Prior Lender.
(c) Approvals. Lender shall have received (i) satisfactory
---------
evidence that the Credit Parties have obtained all required consents and
approvals of all Persons, including all requisite Governmental Authorities, to
the execution, delivery and performance of this Agreement and the other Loan
Documents and the consummation of the Related Transactions; or (ii) an officer's
12 CREDIT AGREEMENT
certificate in form and substance satisfactory to Lender affirming that no such
consents or approvals are required.
(d) Opening Availability. The Borrowing Base calculation
--------------------
supporting the initial Revolving Credit Advance and the initial Letter of Credit
Obligations incurred and the amount of the Reserves to be established on the
Closing Date shall be sufficient in value, as determined by Lender, to provide
Borrower with Net Borrowing Availability, after giving effect to the initial
Revolving Credit Advance, the funding of Term Loan A, the incurrence of the
initial Letter of Credit Obligations, and the consummation of the Related
Transactions (on a pro forma basis, with trade payables being paid currently,
---------
and expenses and liabilities being paid in the ordinary course of business and
without acceleration of sales) of at least $2,000,000.
(e) Payment of Fees. Borrower shall have paid the Fees required
---------------
to be paid on the Closing Date in the respective amounts specified in Section
-------
1.9, and shall have reimbursed Lender for all fees, costs and expenses of
---
closing presented as of the Closing Date.
(f) Capital Structure; Other Indebtedness. The capital
-------------------------------------
structure of each Credit Party and the terms and conditions of all Indebtedness
of each Credit Party shall be acceptable to Lender in its sole discretion.
(g) Due Diligence. Lender shall have completed its business and
-------------
legal due diligence, with results satisfactory to Lender.
(h) Consummation of Related Transactions. Lender shall have
------------------------------------
received fully executed copies of each of the other Related Transactions
Documents, each of which shall be in form and substance satisfactory to Lender
and its counsel.
2.2 Further Conditions to Each Loan. Lender shall not be obligated
-------------------------------
to fund any Loan, convert or continue any Loan as a LIBOR Loan or incur any
Letter of Credit Obligation, if, as of the date thereof:
(a) any representation or warranty by any Credit Party contained
herein or in any other Loan Document shall be untrue or incorrect as of such
date, except to the extent that such representation or warranty expressly
relates to an earlier date and except for changes therein expressly permitted or
expressly contemplated by this Agreement;
(b) any event or circumstance having a Material Adverse Effect
shall have occurred since the date hereof;
(c) any Default or Event of Default shall have occurred and be
continuing or would result after giving effect to any Loan (or the incurrence of
any Letter of Credit Obligations); or
(d) after giving effect to any Revolving Credit Advance (or the
incurrence of any Letter of Credit Obligations), the Revolving Loan would exceed
the lesser of the Borrowing Base and the Revolving Loan Commitment.
The request and acceptance by Borrower of the proceeds of any Loan, the
incurrence of any Letter of Credit Obligations or the conversion or continuation
of any Loan into, or as, a LIBOR Loan, as the case may be, shall be deemed to
constitute, as of the date of such request, acceptance or incurrence, (i) a
representation and warranty by Borrower that the conditions in this Section 2.2
-----------
have been
13 CREDIT AGREEMENT
satisfied and (ii) a reaffirmation by Borrower of the granting and continuance
of Lender's Liens pursuant to the Collateral Documents.
3. REPRESENTATIONS AND WARRANTIES
To induce Lender to make the Revolving Credit Advances and Term Loans and
to incur Letter of Credit Obligations, the Credit Parties executing this
Agreement, jointly and severally, make the following representations and
warranties to Lender with respect to all Credit Parties, each and all of which
shall survive the execution and delivery of this Agreement.
3.1 Corporate Existence; Compliance with Law. Each Credit Party: (a)
----------------------------------------
is a corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation; (b) is duly qualified to conduct
business and is in good standing in each other jurisdiction where its ownership
or lease of property or the conduct of its business requires such qualification,
except where the failure to be so qualified would not result in exposure to
losses, damages or liabilities in excess of $50,000; (c) has the requisite
corporate power and authority and the legal right to own, pledge, mortgage or
otherwise encumber and operate its properties, to lease the property it operates
under lease and to conduct its business as now, heretofore and proposed to be
conducted; (d) subject to specific representations regarding Environmental Laws,
has all licenses, permits, consents or approvals from or by, and has made all
filings with, and has given all notices to, all Governmental Authorities having
jurisdiction, to the extent required for such ownership, operation and conduct;
(e) is in compliance with its charter and bylaws; and (f) subject to specific
representations set forth herein regarding ERISA, Environmental Laws, tax and
other laws, is in compliance with all applicable provisions of law, except where
the failure to comply, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
3.2 Executive Offices; Collateral Locations; FEIN. Disclosure
--------------------------------------------- ----------
Schedule (3.2) sets forth the location, as of the Closing Date, of (a) the chief
--------------
executive office of each Credit Party, (b) the federal employer identification
number of each Credit Party, and (c) the warehouses and premises within which
any Collateral is stored or located, other than miscellaneous Collateral the
fair market value of which, in the aggregate, does not exceed $250,000.
3.3 Corporate Power, Authorization, Enforceable Obligations. The
-------------------------------------------------------
execution, delivery and performance by each Credit Party of the Loan Documents
to which it is a party and the creation of all Liens provided for therein: (a)
are within such Credit Party's corporate power; (b) have been duly authorized by
all necessary or proper corporate and shareholder action; (c) do not contravene
any provision of such Credit Party's charter or bylaws; (d) do not violate any
law or regulation, or any order or decree of any court or Governmental
Authority; (e) do not conflict with or result in the breach or termination of,
constitute a default under or accelerate or permit the acceleration of any
performance required by, any indenture, mortgage, deed of trust, lease,
agreement or other instrument to which such Credit Party is a party or by which
such Credit Party or any of its property is bound; (f) do not result in the
creation or imposition of any Lien upon any of the property of such Credit Party
other than those in favor of Lender pursuant to the Loan Documents; and (g) do
not require the consent or approval of any Governmental Authority or any other
Person, except those referred to in Section 2.1(c), all of which will have been
--------------
duly obtained, made or complied with prior to the Closing Date. On or prior to
the Closing Date, each of the Loan Documents shall have been duly executed and
delivered by each Credit Party that is a party thereto and each such Loan
Document shall then constitute a legal, valid and binding obligation of such
Credit Party enforceable against it in accordance with its terms.
14 CREDIT AGREEMENT
3.4 Financial Statements and Projections. Except for the Projections, all
------------------------------------
Financial Statements concerning Holdings and its Subsidiaries that are
referenced below have been prepared in accordance with GAAP consistently applied
throughout the periods covered (except as disclosed therein and except, with
respect to unaudited Financial Statements, for the absence of footnotes and
normal year-end audit adjustments) and present fairly in all material respects
the financial position of the Persons covered thereby as at the dates thereof
and the results of their operations and cash flows for the periods then ended.
(a) The following Financial Statements attached hereto as Disclosure
----------
Schedule (3.4(a)) have been delivered on the date hereof:
-----------------
(i) The audited consolidated balance sheets at January 3, 1999,
and January 2, 2000, and the related statements of income and cash flows of
Holdings and its Subsidiaries for the Fiscal Years then ended, certified by
the Chief Financial Officers of Holdings and Borrower.
(ii) The unaudited consolidated balance sheets at June 30, 2000,
and the related statements of income and cash flows of Holdings and its
Subsidiaries for the two Fiscal Quarters then ended.
(b) [Intentionally Omitted.]
---------------------
(c) Projections. The Projections delivered on the date hereof and
-----------
attached hereto as Disclosure Schedule (3.4(c)) have been prepared by Borrower
----------------------------
in light of the past operations of its businesses, but including future payments
of known contingent liabilities, and reflect projections for the three-year
period beginning on July 1, 2000, on a month-by-month basis for the first six
months and on a year-by-year basis thereafter. The Projections are based upon
estimates and assumptions stated therein, all of which Borrower believes to be
reasonable and fair in light of current conditions and current facts known to
Borrower and, as of the Closing Date, reflect Borrower's good faith and
reasonable estimates of the future financial performance of Borrower and of the
other information projected therein for the period set forth therein.
3.5 Material Adverse Effect. Between January 2, 2000, and the Closing
-----------------------
Date: (a) no Credit Party has incurred any obligations, contingent or
noncontingent liabilities, liabilities for Charges, long-term leases or unusual
forward or long-term commitments that are not reflected in the Pro Forma and
that, alone or in the aggregate, could reasonably be expected to have a Material
Adverse Effect; (b) Except as set forth in Disclosure Schedule (3.6), no
-------------------------
contract, lease or other agreement or instrument has been entered into by any
Credit Party or has become binding upon any Credit Party's assets and no law or
regulation applicable to any Credit Party has been adopted that has had or could
reasonably be expected to have a Material Adverse Effect; and (c) no Credit
Party is in default and to the best of each Credit Party's knowledge no third
party is in default under any material contract, lease or other agreement or
instrument to which such Credit Party is a party that alone or in the aggregate
could reasonably be expected to have a Material Adverse Effect. Between January
2, 2000, and the Closing Date, no event has occurred that alone or together with
other events, could reasonably be expected to have a Material Adverse Effect.
3.6 Ownership of Property; Liens. As of the Closing Date, the real estate
----------------------------
("Real Estate") listed in Disclosure Schedule (3.6) constitutes all of the real
----------- -------------------------
property owned, leased, subleased, or used by any Credit Party. Each Credit
Party owns good and marketable fee simple title to all of its
15
owned Real Estate, and valid and marketable leasehold interests in all of its
leased Real Estate, all as described in Disclosure Schedule (3.6), and copies of
-------------------------
all such leases or a summary of terms thereof satisfactory to Lender have been
delivered to Lender. Disclosure Schedule (3.6) further describes any Real Estate
-------------------------
with respect to which any Credit Party is a lessor, sublessor or assignor as of
the Closing Date. Each Credit Party also has good and marketable title to, or
valid leasehold interests in, all of its personal property and assets. As of the
Closing Date, none of the properties and assets of any Credit Party are subject
to any Liens other than Permitted Encumbrances, and there are no facts,
circumstances or conditions known to any Credit Party that may result in any
Liens (including Liens arising under Environmental Laws) other than Permitted
Encumbrances. Except as described in Disclosure Schedule (3.6), each Credit
-------------------------
Party has received all deeds, assignments, waivers, consents, nondisturbance and
attornment or similar agreements, bills of sale and other documents, and has
duly effected all recordings, filings and other actions necessary to establish,
protect and perfect such Credit Party's right, title and interest in and to all
such Real Estate and other properties and assets. Except as expressly set forth
in the documents delivered to Lender by Credit Parties on or before the Closing
Date with respect to Credit Parties' interests in Real Estate, no Credit Party
holds any purchase options, rights of first refusal or other similar contractual
rights pertaining to any Real Estate. As of the Closing Date, no portion of any
Credit Party's Real Estate has suffered any material damage by fire or other
casualty loss that has not heretofore been repaired and restored in all material
respects to its original condition or otherwise remedied. As of the Closing
Date, all material permits required to have been issued or appropriate to enable
the Real Estate to be lawfully occupied and used for all of the purposes for
which it is currently occupied and used have been lawfully issued and are in
full force and effect.
3.7 Labor Matters. As of the Closing Date, (a) no strikes or other
-------------
material labor disputes against any Credit Party are pending or, to any Credit
Party's knowledge, threatened; (b) hours worked by and payment made to employees
of each Credit Party comply with the Fair Labor Standards Act and each other
federal, state, local or foreign law applicable to such matters; (c) all
payments due from any Credit Party for employee health and welfare insurance
have been paid or accrued as a liability on the books of such Credit Party; (d)
except as set forth in Disclosure Schedule (3.7), no Credit Party is a party to
-------------------------
or bound by any collective bargaining agreement, management agreement,
consulting agreement, employment agreement, bonus plan or agreement or stock
option, restricted stock, stock appreciation right or any similar plan,
agreement or arrangement (and as to all agreements described in Disclosure
----------
Schedule (3.7), Credit Parties have delivered to Lender template documents the
--------------
provisions of which are substantially identical to the provisions of all such
agreements to which any Credit Party is a party or by which any Credit Party is
bound); (e) there is no organizing activity involving any Credit Party pending
or, to any Credit Party's knowledge, threatened by any labor union or group of
employees; (f) there are no representation proceedings pending or, to any Credit
Party's knowledge, threatened with the National Labor Relations Board, and no
labor organization or group of employees of any Credit Party has made a pending
demand for recognition; and (g) except as set forth in Disclosure Schedule
-------------------
(3.7), there are no complaints or charges against any Credit Party pending or,
-----
to the knowledge of any Credit Party, threatened to be filed with any
Governmental Authority or arbitrator based on, arising out of, in connection
with, or otherwise relating to the employment or termination of employment by
any Credit Party of any individual.
3.8 Ventures, Subsidiaries and Affiliates; Outstanding Stock and
------------------------------------------------------------
Indebtedness. Except as set forth in Disclosure Schedule (3.8), no Credit Party
------------ -------------------------
has any Subsidiaries, is engaged in any joint venture or partnership with any
other Person, or is an Affiliate of any other Person. As of the Closing Date,
all of the issued and outstanding Stock of each Credit Party is owned by each of
the Stockholders and in the amounts set forth in Disclosure Schedule (3.8).
-------------------------
Except as set forth in
16
Disclosure Schedule (3.8), there are no outstanding rights to purchase, options,
-------------------------
warrants or similar rights or agreements pursuant to which any Credit Party may
be required to issue, sell, repurchase or redeem any of its Stock or other
equity securities or any Stock or other equity securities of its Subsidiaries.
All outstanding Indebtedness of each Credit Party as of the Closing Date is
described in Section 6.3 (including Disclosure Schedule (6.3)). Except as set
----------- --------------------------
forth in Disclosure Schedule (3.8), neither Holdings nor any of its Subsidiaries
-------------------------
other than Borrower and Trademark Co. has any assets (except Stock of its
Subsidiaries) or any Indebtedness or Guaranteed Indebtedness (except the
Obligations).
3.9 Government Regulation. No Credit Party is an "investment company" or
---------------------
an "affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company," as such terms are defined in the Investment Company Act of
1940. No Credit Party is subject to regulation under the Public Utility Holding
Company Act of 1935, the Federal Power Act, or any other federal or state
statute that restricts or limits its ability to incur Indebtedness or to perform
its obligations hereunder. The making of the Loans by Lender to Borrower, the
incurrence of the Letter of Credit Obligations on behalf of Borrower, the
application of the proceeds thereof and repayment thereof and the consummation
of the Related Transactions will not violate any provision of any such statute
or any rule, regulation or order issued by the Securities and Exchange
Commission.
3.10 Margin Regulations. No Credit Party is engaged, nor will it engage,
------------------
principally or as one of its important activities, in the business of extending
credit for the purpose of "purchasing" or "carrying" any "margin security" as
such terms are defined in Regulation U of the Federal Reserve Board as now and
from time to time hereafter in effect (such securities being referred to herein
as "Margin Stock"). No Credit Party owns any Margin Stock, and none of the
------------
proceeds of the Loans or other extensions of credit under this Agreement will be
used, directly or indirectly, for the purpose of purchasing or carrying any
Margin Stock, for the purpose of reducing or retiring any Indebtedness that was
originally incurred to purchase or carry any Margin Stock or for any other
purpose that might cause any of the Loans or other extensions of credit under
this Agreement to be considered a "purpose credit" within the meaning of
Regulations T, U or X of the Federal Reserve Board. No Credit Party will take
or permit to be taken any action that might cause any Loan Document to violate
any regulation of the Federal Reserve Board.
3.11 Taxes.
-----
(a) Disclosure Schedule (3.11) sets forth as of the Closing Date
--------------------------
those taxable years for which any Credit Party's tax returns are currently being
audited by the IRS or any other applicable Governmental Authority and any
assessments or threatened assessments in connection with such audit, or
otherwise currently outstanding. Except as described in Disclosure Schedule
(3.11), no Credit Party has executed or filed with the IRS or any other
Governmental Authority any agreement or other document extending, or having the
effect of extending, the period for assessment or collection of any Charges.
None of the Credit Parties or their respective predecessors are liable for any
Charges: (i) under any agreement (including any tax sharing agreements) or (ii)
to each Credit Party's knowledge, as a transferee.
(b) Except to the extent that any failure or failures of Credit
Parties to comply with such representations and warranties do not and could not
reasonably be expected, in the aggregate, to have a Material Adverse Effect, (i)
all tax returns, reports and statements, including information returns, required
by any Governmental Authority to be filed by any Credit Party have been filed
with the appropriate Governmental Authority and all Charges have been paid prior
to the
17
date on which any fine, penalty, interest or late charge may be added thereto
for nonpayment thereof (or any such fine, penalty, interest, late charge or loss
has been paid), excluding Charges or other amounts being contested in accordance
with Section 5.2(b), (ii) proper and accurate amounts have been withheld by each
--------------
Credit Party from its respective employees for all periods in full and complete
compliance with all applicable federal, state, local and foreign laws and such
withholdings have been timely paid to the respective Governmental Authorities,
and (iii) as of the Closing Date, no Credit Party has agreed or been requested
to make any adjustment under IRC Section 481(a), by reason of a change in
accounting method or otherwise.
3.12 ERISA.
-----
(a) Disclosure Schedule (3.12) lists all (i) all ERISA
--------------------------
Affiliates and (ii) all Plans and separately identifies all Pension Plans,
including all Title IV Plans, Multiemployer Plans, ESOPs and Welfare Plans,
including all Retiree Welfare Plans. Copies of all such listed Plans, together
with a copy of the latest IRS/DOL 5500-series form for each such Plan, have been
delivered to Lender. Each Qualified Plan has been determined by the IRS to
qualify under Section 401 of the IRC, the trusts created thereunder have been
determined to be exempt from tax under the provisions of Section 501 of the IRC,
and nothing has occurred that would cause the loss of such qualification or tax-
exempt status. Each Plan is in compliance with the applicable provisions of
ERISA and the IRC, including the timely filing of all reports required under the
IRC or ERISA, including the statement required by 29 CFR Section 2520.104-23.
Neither any Credit Party nor any ERISA Affiliate has failed to make any
contribution or pay any amount due as required by either Section 412 of the IRC
or Section 302 of ERISA or the terms of any such Plan. Neither any Credit Party
nor any ERISA Affiliate has engaged in a "prohibited transaction," as defined in
Section 406 of ERISA and 4975 of the IRC, in connection with any Plan, that
would subject any Credit Party to a material tax on prohibited transactions
imposed by Section 502(i) of ERISA or Section 4975 of the IRC. Each Credit Party
and each ERISA Affiliate has performed all of its respective obligations under
all Plans.
(b) Except as set forth in Disclosure Schedule (3.12): (i) no
--------------------------
Title IV Plan has any Unfunded Pension Liability; (ii) no ERISA Event or event
described in Section 4062(e) of ERISA with respect to any Title IV Plan has
occurred or is reasonably expected to occur; (iii) there are no pending, or to
the knowledge of any Credit Party, threatened claims (other than claims for
benefits in the normal course), sanctions, actions or lawsuits, asserted or
instituted against any Plan or any Person as fiduciary or sponsor of any Plan;
(iv) no Credit Party or ERISA Affiliate has incurred or reasonably expects to
incur any liability as a result of a complete or partial withdrawal from a
Multiemployer Plan; (v) within the last five years no Title IV Plan of any
Credit Party or any ERISA Affiliate (determined at any time within the last five
years) has been terminated, whether or not in a "standard termination" as that
term is used in Section 4041(b)(1) of ERISA, nor has any Title IV Plan of any
Credit Party or any ERISA Affiliate (determined at any time within the last five
years) with Unfunded Pension Liabilities been transferred outside of the
"controlled group" (within the meaning of Section 4001(a)(14) of ERISA) of any
Credit Party or ERISA Affiliate (determined at such time); (vi) except in the
case of any ESOP, Stock of all Credit Parties and their ERISA Affiliates makes
up, in the aggregate, no more than 10% of the assets of any Plan, measured on
the basis of fair market value as of the latest valuation date of any Plan; and
(vii) no liability under any Title IV Plan has been satisfied with the purchase
of a contract from an insurance company that is not rated AAA by the Standard &
Poor's Corporation or an equivalent rating by another nationally recognized
rating agency.
18
3.13 No Litigation. No action, claim, lawsuit, demand, investigation
-------------
or proceeding is now pending or, to the knowledge of any Credit Party,
threatened against any Credit Party before any Governmental Authority or before
any arbitrator or panel of arbitrators (collectively, "Litigation") that (a)
challenges any Credit Party's right or power to enter into or perform any of its
obligations under the Loan Documents to which it is a party, or the validity or
enforceability of any Loan Document or any action taken thereunder, or (b) that
has a reasonable risk of being determined adversely to any Credit Party and
that, if so determined, could have a Material Adverse Effect. Except as set
forth in Disclosure Schedule (3.13), as of the Closing Date there is no
Litigation pending or threatened that seeks damages in excess of $100,000 or
injunctive relief against, or alleges criminal misconduct by, any Credit Party.
3.14 Brokers. No broker or finder acting on behalf of any Person
-------
brought about the obtaining, making or closing of the Loans or the Related
Transactions, and no Credit Party has any obligation to any Person in respect of
any finder's or brokerage fees in connection therewith.
3.15 Intellectual Property.
---------------------
(a) Except as set forth in Disclosure Schedule (3.15), no
--------------------------
Credit Party is aware of any infringement or claim of infringement by others of
any Intellectual Property Collateral.
(b) Except to the extent that any failure or failures of Credit
Parties to comply with such representations and warranties do not and could not
reasonably be expected, in the aggregate, to have a Material Adverse Effect, (i)
as of the Closing Date, each Credit Party owns or has rights to use all
Intellectual Property necessary to continue to conduct its business as now or
heretofore conducted by it or proposed to be conducted by it, and each Patent,
Trademark, Copyright and License is listed, together with application or
registration numbers, as applicable, in Disclosure Schedule (3.15), and (ii)
--------------------------
each Credit Party conducts its business and affairs without infringement of or
interference with any Intellectual Property of any other Person.
3.16 Full Disclosure. No information contained in this Agreement, any
---------------
of the other Loan Documents, any Projections, Financial Statements or Collateral
Reports or other reports from time to time delivered hereunder or any written
statement furnished by or on behalf of any Credit Party to Lender pursuant to
the terms of this Agreement contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact necessary to make
the statements contained herein or therein not misleading in light of the
circumstances under which they were made. The Liens granted to Lender pursuant
to the Collateral Documents will at all times be fully perfected first priority
Liens in and to the Collateral described therein, subject, as to priority, only
to Permitted Encumbrances with respect to the Collateral other than Accounts.
3.17 Environmental Matters.
---------------------
(a) Except as set forth in Disclosure Schedule (3.17), as of
--------------------------
the Closing Date: (i) to the knowledge of each Credit Party, the Real Estate is
free of contamination from any Hazardous Material except for such contamination
that would not adversely impact the value or marketability of such Real Estate
and that would not result in Environmental Liabilities that could reasonably be
expected to have a Material Adverse Effect; (ii) no Credit Party has caused or
suffered to occur any Release of Hazardous Materials on, at, in, under, above,
to, from or about any of its Real Estate; (iii) the Credit Parties are and have
been in compliance with all Environmental Laws, except for such noncompliance
that would not result in Environmental Liabilities that could reasonably be
19
expected to have a Material Adverse Effect; (iv) the Credit Parties have
obtained, and are in compliance with, all Environmental Permits required by
Environmental Laws for the operations of their respective businesses as
presently conducted or as proposed to be conducted, except where the failure to
so obtain or comply with such Environmental Permits would not result in
Environmental Liabilities that could reasonably be expected to have a Material
Adverse Effect, and all such Environmental Permits are valid, uncontested and in
good standing; (v) no Credit Party is involved in operations or knows of any
facts, circumstances or conditions, including any Releases of Hazardous
Materials, that are likely to result in any Environmental Liabilities of such
Credit Party that could reasonably be expected to have a Material Adverse
Effect, and, to the extent that any Credit Party has or has had the right to
control the use or occupancy of the Real Estate by Persons other than Credit
Parties, no Credit Party has permitted any current or former tenant or occupant
of the Real Estate to engage in any such operations; (vi) there is no Litigation
arising under or related to any Environmental Laws, Environmental Permits or
Hazardous Material that seeks damages, penalties, fines, costs or expenses in
excess of $25,000 or injunctive relief against, or that alleges criminal
misconduct by, any Credit Party; (vii) no notice has been received by any Credit
Party identifying it as a "potentially responsible party" or requesting
information under CERCLA or analogous state statutes, and to the knowledge of
the Credit Parties, there are no facts, circumstances or conditions that may
result in any Credit Party being identified as a "potentially responsible party"
under CERCLA or analogous state statutes; and (viii) the Credit Parties have
provided to Lender copies of all existing environmental reports, reviews and
audits and all written information pertaining to actual or potential
Environmental Liabilities, in each case relating to any Credit Party.
(b) Each Credit Party hereby acknowledges and agrees that (i)
to such Credit Party's actual knowledge, without investigation or inquiry of
other Persons, Lender is not now, and has not ever been, in control of any of
the Real Estate, (ii) except as provided in clause (i) of this Section 3.17(b)
---------- ---------------
with respect to Real Estate, Lender is not now, and has not ever been, in
control of any Credit Party's affairs, and (iii) Lender does not have the
capacity through the provisions of the Loan Documents or otherwise to cause such
Credit Party to violate or otherwise fail to comply with Environmental Laws or
Environmental Permits with respect to such Credit Party's ownership, operation
or management of any of its Real Estate.
3.18 Insurance. Disclosure Schedule (3.18) lists all insurance
--------- --------------------------
policies of any nature maintained, as of the Closing Date, for current
occurrences by each Credit Party, as well as a summary of the terms of each such
policy.
3.19 Deposit and Disbursement Accounts. Disclosure Schedule (3.19)
--------------------------------- --------------------------
lists all banks and other financial institutions at which any Credit Party
maintains deposit or other accounts as of the Closing Date, including any
Disbursement Accounts, and such Schedule correctly identifies the name, address
and telephone number of each depository, the name in which the account is held,
a description of the purpose of the account, and the complete account number
therefor.
3.20 Government Contracts. Except as set forth in Disclosure Schedule
-------------------- -------------------
(3.20), as of the Closing Date, no Credit Party is a party to any contract or
-----
agreement with any Governmental Authority and no Credit Party's Accounts are
subject to the Federal Assignment of Claims Act (31 U.S.C. Section 3727) or any
similar state or local law.
3.21 Customer and Trade Relations. As of the Closing Date, there
----------------------------
exists no actual or, to the knowledge of any Credit Party, threatened
termination or cancellation of, or any material adverse modification or change
in (a) the business relationship of any Credit Party with any customer or
20
group of customers whose purchases during the preceding 12 months caused them to
be ranked among the ten largest customers of such Credit Party, or (b) the
business relationship of any Credit Party with any supplier material to its
operations.
3.22 Agreements and Other Documents. As of the Closing Date, each
------------------------------
Credit Party has provided to Lender or its counsel accurate and complete copies
(or summaries) of all of the following agreements or documents to which any of
them are subject, each of which is listed in Disclosure Schedule (3.22): (a)
--------------------------
supply agreements and purchase agreements not terminable by such Credit Party
within 60 days following written notice issued by such Credit Party and
involving transactions in excess of $1,000,000 per annum; (b) leases of
---------
Equipment having a remaining term of one year or longer and requiring aggregate
rental and other payments in excess of $500,000 per annum; (c) licenses and
---------
permits held by the Credit Parties, the absence of which could be reasonably
likely to have a Material Adverse Effect; (d) instruments and documents
evidencing Indebtedness of such Credit Party and any Lien granted by such Credit
Party with respect thereto; and (e) instruments and agreements evidencing the
issuance of any equity securities, warrants, rights or options to purchase
equity securities of such Credit Party.
3.23 Solvency. Both before and after giving effect to: (a) the Loans
--------
to be made or incurred on the Closing Date or such other date as Loans requested
hereunder are made or incurred; (b) the disbursement of the proceeds of such
Loans pursuant to the instructions of Borrower; (c) the Refinancing and the
consummation of the other Related Transactions; and (d) the payment and accrual
of all transaction costs in connection with the foregoing, each Credit Party is
and will be Solvent.
3.24 Year 2000 Representations. Each Credit Party has eliminated all
-------------------------
Year 2000 Problems, except where the failure to correct the same could not
reasonably be expected to have a Material Adverse Effect, individually or in the
aggregate.
4. FINANCIAL STATEMENTS AND INFORMATION
4.1 Reports and Notices.
-------------------
(a) Each Credit Party executing this Agreement hereby agrees
that, from and after the Closing Date and until the Termination Date, it shall
deliver to Lender the Financial Statements, notices, Projections and other
information at the times, to the Persons and in the manner set forth in Annex E.
-------
(b) Each Credit Party executing this Agreement hereby agrees
that, from and after the Closing Date and until the Termination Date, it shall
deliver to Lender the Collateral Reports (including Borrowing Base Certificates
in the form of Exhibit 4.1(b)) at the times, to the Persons and in the manner
---------------
set forth in Annex F.
-------
4.2 Communication with Accountants. Each Credit Party executing this
------------------------------
Agreement authorizes Lender to communicate directly with its independent
certified public accountants, including Deloitte & Touche, and authorizes and
shall instruct those accountants and advisors to disclose and make available to
Lender any and all Financial Statements and other supporting financial
documents, schedules and information relating to any Credit Party (including
copies of any issued management letters) with respect to the business, financial
condition and other affairs of any Credit Party.
21
5. AFFIRMATIVE COVENANTS
Each Credit Party executing this Agreement jointly and severally agrees as
to all Credit Parties that from and after the date hereof and until the
Termination Date:
5.1 Maintenance of Existence and Conduct of Business. Each Credit
------------------------------------------------
Party shall: (a) do or cause to be done all things necessary to preserve and
keep in full force and effect its corporate existence and its rights and
franchises; (b) continue to conduct its business substantially as now conducted
or as otherwise permitted hereunder; (c) at all times maintain, preserve and
protect all of its assets and properties used or useful in the conduct of its
business, and keep the same in good repair, working order and condition in all
material respects (taking into consideration ordinary wear and tear) and from
time to time make, or cause to be made, all necessary or appropriate repairs,
replacements and improvements thereto consistent with industry practices; and
(d) transact business only in such corporate and trade names as are set forth in
Disclosure Schedule (5.1); provided, that Credit Parties may transact business
------------------------- --------
under additional trade names upon not less than thirty (30) days advance written
notice to Lender.
5.2 Payment of Obligations.
----------------------
(a) Subject to Section 5.2(b), each Credit Party shall pay and
--------------
discharge or cause to be paid and discharged promptly all Charges payable by it,
including (i) Charges imposed upon it, its income and profits, or any of its
property (real, personal or mixed) and all Charges with respect to tax, social
security and unemployment withholding with respect to its employees, and (ii)
lawful claims for labor, materials, supplies and services or otherwise before
any thereof shall become past due.
(b) Each Credit Party may in good faith contest, by appropriate
proceedings, the validity or amount of any Charges, Taxes or claims described in
Section 5.2(a); provided, that: (i) adequate reserves with respect to such
-------------- --------
contest are maintained on the books of such Credit Party, in accordance with
GAAP, (ii) no Lien shall be imposed to secure payment of such Charges, Taxes or
claims that is superior to any of the Liens securing the Obligations and such
contest is maintained and prosecuted continuously and with diligence and
operates to suspend collection or enforcement of such Charges; (iii) none of the
Collateral becomes subject to forfeiture or loss as a result of such contest;
and (iv) such Credit Party shall promptly pay or discharge such contested
Charges, Taxes or claims and all additional charges, interest, penalties and
expenses, if any, and shall deliver to Lender evidence acceptable to Lender of
such compliance, payment or discharge, if such contest is terminated or
discontinued adversely to such Credit Party or the conditions set forth in this
Section 5.2(b) are no longer met.
--------------
5.3 Books and Records. Each Credit Party shall keep adequate books
-----------------
and records with respect to its business activities in which proper entries,
reflecting all financial transactions, are made in accordance with GAAP and on a
basis consistent with the Financial Statements attached as Disclosure Schedule
-------------------
(3.4(a)).
-------
5.4 Insurance; Damage to or Destruction of Collateral.
-------------------------------------------------
(a) The Credit Parties shall, at their sole cost and expense,
maintain the policies of insurance described in Disclosure Schedule (3.18) as in
--------------------------
effect on the date hereof or otherwise in form and in amounts and with insurers
acceptable to Lender. If any Credit Party at any time or times
22
hereafter shall fail to obtain or maintain any of the policies of insurance
required above or to pay all premiums relating thereto, Lender may at any time
or times thereafter obtain and maintain such policies of insurance and pay such
premiums and take any other reasonable action with respect thereto that Lender
deems advisable. Lender shall have no obligation to obtain insurance for any
Credit Party or pay any premiums therefor. By doing so, Lender shall not be
deemed to have waived any Default or Event of Default arising from any Credit
Party's failure to maintain such insurance or pay any premiums therefor. All
sums so disbursed, including attorneys' fees, court costs and other charges
related thereto, shall be payable on demand by Borrower to Lender and shall be
additional Obligations hereunder secured by the Collateral.
(b) Lender reserves the right at any time upon any change in
any Credit Party's risk profile (including any change in the types of products
sold or maintained by any Credit Party or any laws affecting the potential
liability of such Credit Party) to require, in the exercise of its reasonable
credit judgment, additional forms and limits of insurance to, in Lender's
opinion, adequately protect both Lender's interests in all or any portion of the
Collateral and to ensure that each Credit Party is protected by insurance in
amounts and with coverage customary for its industry. If requested by Lender,
each Credit Party shall deliver to Lender from time to time a report of a
reputable insurance broker, satisfactory to Lender, with respect to its
insurance policies.
(c) Each Credit Party shall deliver to Lender, in form and
substance satisfactory to Lender, endorsements to (i) all "All Risk" and
business interruption insurance naming Lender as loss payee, and (ii) all
general liability and other liability policies naming Lender as additional
insured. Each Credit Party irrevocably makes, constitutes and appoints Lender
(and all officers, employees or agents designated by Lender), so long as any
Default or Event of Default shall have occurred and be continuing or the
anticipated insurance proceeds exceed $2,500,000, as such Credit Party's true
and lawful agent and attorney-in-fact for the purpose of making, settling and
adjusting claims under such "All Risk" policies of insurance, endorsing the name
of such Credit Party on any check or other item of payment for the proceeds of
such "All Risk" policies of insurance and for making all determinations and
decisions with respect to such "All Risk" policies of insurance. Lender shall
have no duty to exercise any rights or powers granted to it pursuant to the
foregoing power-of-attorney. Credit Parties shall promptly notify Lender of any
loss, damage, or destruction to the Collateral in the amount of $250,000 or
more, whether or not covered by insurance. After deducting from such proceeds
the reasonable expenses, if any, incurred by Lender in the collection or
handling thereof, Lender may, at its option, apply such proceeds to the
reduction of the Obligations in accordance with Section 1.3(d) (provided, that
-------------- --------
in the case of insurance proceeds pertaining to any Credit Party other than
Borrower, such insurance proceeds shall be applied to the Loans owing by
Borrower), or permit or require each Credit Party to use such money, or any part
thereof, to replace, repair, restore or rebuild the Collateral in a diligent and
expeditious manner with materials and workmanship of substantially the same
quality as existed before the loss, damage or destruction. Notwithstanding the
foregoing, if the casualty giving rise to such insurance proceeds could not
reasonably be expected to have a Material Adverse Effect and such insurance
proceeds do not exceed $2,500,000 in the aggregate, Lender shall permit the
applicable Credit Party to replace, restore, repair or rebuild the property;
provided, that if such Credit Party has not completed or entered into binding
--------
agreements to complete such replacement, restoration, repair or rebuilding
within fifteen (15) calendar months of such casualty, Lender may apply such
insurance proceeds to the Obligations in accordance with Section 1.3(d);
--------------
provided further, that in the case of insurance proceeds pertaining to any
-------- -------
Credit Party other than Borrower, such insurance proceeds shall be applied to
the Loans owing by Borrower. All insurance proceeds that are to be made
available to Borrower to replace, repair, restore or rebuild the Collateral
shall be applied by Lender to reduce the outstanding principal
23
balance of the Revolving Loan (which application shall not result in a permanent
reduction of the Revolving Loan Commitment) and upon such application, Lender
shall establish a Reserve against the Borrowing Base in an amount equal to the
amount of such proceeds so applied. All insurance proceeds made available to any
Credit Party that is not a Borrower to replace, repair, restore or rebuild
Collateral shall be deposited in a cash collateral account. Thereafter, such
funds shall be made available to such Credit Party to provide funds to replace,
repair, restore or rebuild the Collateral as follows: (A) Borrower shall request
a Revolving Credit Advance or release from the cash collateral account to be
made to such Credit Party in the amount requested to be released; (B) so long as
the conditions set forth in Section 2.2 have been met, Lender shall make such
-----------
Revolving Credit Advance or shall release funds from the cash collateral
account; and (C) in the case of insurance proceeds applied against the Revolving
Loan, the Reserve established with respect to such insurance proceeds shall be
reduced by the amount of such Revolving Credit Advance. To the extent not used
to replace, repair, restore or rebuild the Collateral, such insurance proceeds
shall be applied in accordance with Section 1.3(d); provided, that in the case
-------------- --------
of insurance proceeds pertaining to any Credit Party other than Borrower, such
insurance proceeds shall be applied to the Loans owing by Borrower.
(d) The rights and remedies provided to Lender in clauses (a)
through (c) of this Section 5.4 (collectively, "Section 5.4 Remedies"), are
----------- --------------------
subject to all obligations of Credit Parties under, and the rights and remedies
of other parties to, all written documents and agreements delivered to Lender by
Credit Parties on or before the Closing Date, executed by any of the Credit
Parties in connection with (i) any lease of Equipment between such Credit Party,
as lessee, and any person other than Lender, as lessor, or (ii) the Facility
Bond, to the extent that such documents and agreements operate to limit the
Section 5.4 Remedies, provided, that, within two Business Days of any Credit
--------
Party's receipt thereof, Credit Parties shall provide Lender with copies of any
writing, and shall inform Lender of any other communication, constituting a
notice or demand from any Person that conflicts or is inconsistent with the
Section 5.4 Remedies.
5.5 Compliance with Laws. Each Credit Party shall comply with all
--------------------
federal, state, local, and foreign laws and regulations applicable to it,
including those relating to licensing, ERISA and labor matters, Environmental
Laws and Environmental Permits, and the purchase, sale, storage and processing
of food and food products, except to the extent that the failure to comply,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
5.6 Supplemental Disclosure. From time to time or as may be
-----------------------
requested by Lender (which request will not be made more frequently than once
each year absent the occurrence and continuance of a Default or an Event of
Default), the Credit Parties shall supplement each Disclosure Schedule hereto,
or any representation herein or in any other Loan Document, with respect to any
matter hereafter arising that, if existing or occurring at the date of this
Agreement, would have been required to be set forth or described in such
Disclosure Schedule or as an exception to such representation or that is
necessary to correct any information in such Disclosure Schedule or
representation that has been rendered inaccurate thereby (and, in the case of
any supplements to any Disclosure Schedule, such Disclosure Schedule shall be
appropriately marked to show the changes made therein); provided, that (a) no
--------
such supplement to any such Disclosure Schedule or representation shall be or be
deemed a waiver of any Default or Event of Default resulting from the matters
disclosed therein, except as consented to by Lender in writing, and (b) no
supplement shall be required as to representations and warranties that relate
solely to the Closing Date.
24
5.7 Intellectual Property. Each Credit Party shall conduct its
---------------------
business and affairs without infringement of or interference with any
Intellectual Property of any other Person in any material respect.
5.8 Environmental Matters. Each Credit Party shall and shall cause
---------------------
each Person within its control to: (a) conduct its operations and keep and
maintain its Real Estate in compliance with all Environmental Laws and
Environmental Permits other than noncompliance that could not reasonably be
expected to have a Material Adverse Effect; (b) to the fullest extent possible
pursuant to any lease governing such Credit Party's use or occupancy of Real
Estate, implement any and all investigation, remediation, removal and response
actions that are appropriate or necessary to maintain the value and
marketability of the Real Estate or to otherwise comply with Environmental Laws
and Environmental Permits pertaining to the presence, generation, treatment,
storage, use, disposal, transportation or Release of any Hazardous Material on,
at, in, under, above, to, from or about any of its Real Estate; (c) notify
Lender promptly after such Credit Party becomes aware of any violation of
Environmental Laws or Environmental Permits or any Release on, at, in, under,
above, to, from or about any Real Estate that is reasonably likely to result in
Environmental Liabilities in excess of $25,000; and (d) promptly forward to
Lender a copy of any order, notice, request for information or any communication
or report received by such Credit Party in connection with any such violation or
Release or any other matter relating to any Environmental Laws or Environmental
Permits that could reasonably be expected to result in Environmental Liabilities
in excess of $25,000, in each case whether or not the Environmental Protection
Agency or any Governmental Authority has taken or threatened any action in
connection with any such violation, Release or other matter. If Lender at any
time has a reasonable basis to believe that there may be a violation of any
Environmental Laws or Environmental Permits by any Credit Party or any
Environmental Liability arising thereunder, or a Release of Hazardous Materials
on, at, in, under, above, to, from or about any of its Real Estate, that, in
each case, could reasonably be expected to have a Material Adverse Effect, then
each Credit Party shall, upon Lender's written request, to the fullest extent
possible pursuant to any lease governing such Credit Party's use or occupancy of
Real Estate, (i) cause the performance of such environmental audits including
subsurface sampling of soil and groundwater, and preparation of such
environmental reports, in each case at Borrower's expense, as Lender may from
time to time reasonably request, all of which shall be conducted by reputable
environmental consulting firms acceptable to Lender and shall be in form and
substance reasonably acceptable to Lender, and (ii) permit Lender or its
representatives to have access to all Real Estate for the purpose of conducting
such environmental audits and testing as Lender deems appropriate, including
subsurface sampling of soil and groundwater. Borrower shall reimburse Lender for
the costs of such audits and tests and the same will constitute a part of the
Obligations secured hereunder.
5.9 Landlords' Agreements, Mortgagee Agreements and Bailee Letters.
--------------------------------------------------------------
Each Credit Party shall obtain a landlord's agreement, mortgagee agreement or
bailee letter, as applicable, from the lessor of each leased property, mortgagee
of owned property or bailee with respect to any warehouse, processor or
converter facility or other location where Collateral is stored or located,
which agreement or letter shall contain a waiver or subordination of all Liens
or claims that the landlord, mortgagee or bailee may assert against the
Collateral at that location, and shall otherwise be satisfactory in form and
substance to Lender; provided, that with respect to each such location other
--------
than ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, and ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, the requirements set forth in this sentence shall be
deemed satisfied by Borrower's best efforts to obtain such a landlord's
agreement, mortgagee agreement or bailee letter. With respect to such locations
or warehouse space leased or acquired after the Closing Date, if Lender has not
received a landlord or mortgagee agreement or bailee letter as of the date such
location is acquired or leased, Lender shall
25
impose such Reserves as may be established by Lender in its reasonable credit
judgment. After the Closing Date, no real property or warehouse space shall be
leased or acquired by any Credit Party and no Inventory of any Credit Party
shall be shipped to a processor or converter under arrangements established
after the Closing Date, without the prior written consent of Lender (which
consent shall not be unreasonably withheld and, in Lender's discretion, may be
conditioned upon the establishment of Reserves acceptable to Lender) or unless
and until a satisfactory landlord or mortgagee agreement or bailee letter, as
appropriate, shall first have been obtained with respect to such location. Each
Credit Party shall timely and fully pay and perform its obligations under all
leases and other agreements with respect to each leased location or public
warehouse where any Collateral is or may be located.
5.10 Inactive Subsidiary. Holdings shall cause WBG to remain inactive
-------------------
at all times from and after the Closing Date to and including the Termination
Date. Within 90 days after the Closing Date, Holdings shall either (a) dissolve
WBG and provide documentary evidence of such dissolution to Lender or (b) cause
WBG to (i) execute a Guaranty in form and substance acceptable to Lender, (ii)
become a party to the Security Agreement and the Borrower Pledge Agreement,
(iii) execute one or more UCC financing statements and take such other actions
as Lender may request in order to perfect its Lien on all of the personal
property and assets of WBG, and (iv) deliver documents and information in form
and substance satisfactory to Lender, including those described in Items 1.3,
1.4, 1.7, 1.9, 1.12, 1.13, 1.19, 1.20, and 2.1 of the Schedule of Documents,
together with a certificate of an officer of WBG addressing the execution and
delivery of the agreements, documents, and information described in this clause
------
(b).
---
5.11 Further Assurances. Each Credit Party executing this Agreement
------------------
agrees that it shall and shall cause each other Credit Party to, at such Credit
Party's expense and upon request of Lender, duly execute and deliver, or cause
to be duly executed and delivered, to Lender such further instruments and do and
cause to be done such further acts as may be necessary or proper in the
reasonable opinion of Lender to carry out more effectively the provisions and
purposes of this Agreement or any other Loan Document.
6. NEGATIVE COVENANTS
Each Credit Party executing this Agreement jointly and severally agrees as
to all Credit Parties that, without the prior written consent of Lender, from
and after the date hereof until the Termination Date:
6.1 Mergers, Subsidiaries, Etc. No Credit Party shall directly or
--------------------------
indirectly, by operation of law or otherwise, (a) form or acquire any
Subsidiary, or (b) merge with, consolidate with, acquire all or substantially
all of the assets or Stock of, or otherwise combine with or acquire, any Person.
6.2 Investments; Loans and Advances. Except as otherwise expressly
-------------------------------
permitted by this Section 6, no Credit Party shall make or permit to exist any
---------
investment in, or make, accrue or permit to exist loans or advances of money to,
any Person, through the direct or indirect lending of money, holding of
securities or otherwise, except that: (a) Borrower may hold investments
comprised of notes payable, or stock or other securities issued by Account
Debtors to Borrower pursuant to negotiated agreements with respect to settlement
of such Account Debtor's Accounts in the ordinary course of business, so long as
the aggregate amount of such Accounts so settled by Borrower does not exceed
$100,000; (b) each Credit Party may maintain its existing investments in its
Subsidiaries as of the Closing Date; (c) subject to the provisions of the
Borrower Pledge Agreement, Borrower
26
may maintain loans and advances to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ in an aggregate principal
amount not exceeding $60,000 pursuant to that certain letter agreement between
Borrower and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ dated as of July 31, 1992; and (d) so long as no
Default or Event of Default shall have occurred and be continuing and there is
no Revolving Loan balance, Borrower may make investments up to $1,000,000 in the
aggregate, subject to Control Letters in favor of Lender or otherwise subject to
a perfected security interest in favor of Lender, in (i) marketable direct
obligations issued or unconditionally guaranteed by the United States of America
or any agency thereof maturing within one year from the date of acquisition
thereof, (ii) commercial paper maturing no more than one year from the date of
creation thereof and currently having the highest rating obtainable from either
Standard & Poor's Rating Group or ▇▇▇▇▇'▇ Investors Service, Inc., (iii)
certificates of deposit maturing no more than one year from the date of creation
thereof issued by commercial banks incorporated under the laws of the United
States of America, each having combined capital, surplus and undivided profits
of not less than $300,000,000 and having a senior unsecured rating of "A" or
better by a nationally recognized rating agency (an "A Rated Bank"), (iv) time
------------
deposits maturing no more than 30 days from the date of creation thereof with A
Rated Banks, and (v) mutual funds that invest solely in one or more of the
investments described in clauses (i) through (iv) above.
6.3 Indebtedness.
------------
(a) No Credit Party shall create, incur, assume or permit to
exist any Indebtedness, except (without duplication) (i) Indebtedness secured by
purchase money security interests and Capital Leases permitted in clause (k) of
----------
the definition of Permitted Encumbrances, (ii) the Loans and the other
Obligations, (iii) unfunded pension fund and other employee benefit plan
obligations and liabilities to the extent they are permitted to remain unfunded
under applicable law, (iv) existing Indebtedness, including the Facility Bond,
described in Disclosure Schedule (6.3) and refinancings thereof or amendments or
-------------------------
modifications thereof that do not have the effect of increasing the principal
amount thereof or changing the amortization thereof (other than to extend the
same) and that are otherwise on terms and conditions no less favorable to any
Credit Party or Lender, as determined by Lender, than the terms of the
Indebtedness being refinanced, amended or modified, (v) Indebtedness
specifically permitted under Section 6.17, and (vi) leases of real or personal
------------
property entered into by Borrower after the Closing Date to the extent permitted
under Sections 6.10, 6.18, and 6.19.
-------- ---- ---- ----
(b) No Credit Party shall, directly or indirectly, voluntarily
purchase, redeem, defease or prepay any principal of, premium, if any, interest
or other amount payable in respect of any Indebtedness, other than: (i) the
Obligations; (ii) Indebtedness secured by a Permitted Encumbrance if the asset
securing such Indebtedness has been sold or otherwise disposed of in accordance
with Section 6.8(b) or (c); and (iii) regularly scheduled payments in respect of
-------------- ---
the Facility Bond as set forth in Disclosure Schedule (6.3).
-------------------------
6.4 Employee Loans and Affiliate Transactions.
-----------------------------------------
(a) Except as otherwise expressly permitted in this Section 6
---------
with respect to Affiliates, no Credit Party shall enter into or be a party to
any transaction with any other Credit Party or any Affiliate thereof except in
the ordinary course of and pursuant to the reasonable requirements of such
Credit Party's business and upon fair and reasonable terms that are no less
favorable to such Credit Party than would be obtained in a comparable arm's
length transaction with a Person not an Affiliate of such Credit Party. In
addition, if any such transaction or series of related transactions involves
payments in excess of $25,000 in the aggregate, the terms of these transactions
must be
27
disclosed in advance to Lender. All such transactions existing as of the date
hereof are described in Disclosure Schedule (6.4(a)).
----------------------------
(b) Except as otherwise expressly permitted in Section 6.2, no
Credit Party shall enter into any lending or borrowing transaction with any
employees of any Credit Party, except loans to its employees on an arm's length
basis in the ordinary course of business consistent with past practices for
travel expenses, relocation costs and similar purposes and stock option
financing up to a maximum of $150,000 to any employee and up to a maximum of
$150,000 in the aggregate at any one time outstanding.
6.5 Capital Structure and Business. No Credit Party shall (a) make
------------------------------
any changes in any of its business objectives, purposes or operations that could
reasonably be expected to have or result in a Material Adverse Effect, (b) make
any change in its capital structure as described in Disclosure Schedule (3.8),
-------------------------
including the issuance of any shares of Stock, warrants or other securities
convertible into Stock or any revision of the terms of its outstanding Stock,
other than the issuance of Stock of Borrower to employees of Borrower upon the
exercise of employee stock options by the persons or pursuant to the stock
option plans identified in Disclosure Schedule (3.7); provided, that Holdings
------------------------- --------
may make a Public Offering or Private Placement so long as (i) the proceeds
thereof are applied in prepayment of the Obligations to the extent required by
Section 1.3(b)(iii), and (ii) no Change of Control occurs after giving effect
-------------------
thereto, or (c) amend its charter or bylaws in a manner that would adversely
affect Lender or such Credit Party's duty or ability to repay the Obligations.
No Credit Party shall engage in any business other than the businesses currently
engaged in by it, except that, for the purpose of developing markets outside of
the United States, a Credit Party may enter into licensing or joint venture
agreements, and related distribution or supply agreements (collectively,
"Overseas Agreements"); provided, that (x) no Credit Party shall, in connection
------------------- --------
with the Overseas Agreements, transfer to any Person any material assets of any
Credit Party, other than Inventory sold to such Person for purposes of resale or
licenses to Intellectual Property granted to such Person in connection with such
sale or resale, (y) no Credit Party shall, in connection with the Overseas
Agreements, (i) create, incur, assume or permit to exist any Liens on or with
respect to its Accounts or any of its other property or assets, or (ii) incur
any Indebtedness or contingent liabilities that would be required, consistent
with GAAP, to be reported in or in a footnote to an audited financial statement
of one or more Credit Parties, aggregating more than $250,000 as of any date of
determination, and (z) Credit Parties shall keep Lender reasonably informed of
proposed Overseas Agreements and shall promptly provide Lender with copies of
all Overseas Agreements executed or delivered by any Credit Party.
6.6 Guaranteed Indebtedness. No Credit Party shall create, incur,
-----------------------
assume or permit to exist any Guaranteed Indebtedness except (a) by endorsement
of instruments or items of payment for deposit to the general account of any
Credit Party, and (b) for Guaranteed Indebtedness incurred for the benefit of
any other Credit Party if the primary obligation is expressly permitted by this
Agreement.
6.7 Liens. No Credit Party shall create, incur, assume or permit to
-----
exist any Lien on or with respect to its Accounts or any of its other properties
or assets (whether now owned or hereafter acquired) except for Liens in
existence on the date hereof and summarized in Disclosure Schedule (6.7) and
-------------------------
other Permitted Encumbrances. In addition, no Credit Party shall become a party
to any agreement, note, indenture or instrument or take any other action that
would prohibit the creation of a Lien on any of its properties or other assets
in favor of Lender as additional collateral for the
28
Obligations, except operating leases, Capital Leases or Licenses that prohibit
Liens upon the assets that are subject thereto.
6.8 Sale of Stock and Assets. No Credit Party shall sell, transfer,
------------------------
convey, assign or otherwise dispose of any of its properties or other assets,
including the capital Stock of any of its Subsidiaries (whether in a public or a
private offering or otherwise) or any of its Accounts, other than: (a) the sale
of Inventory in the ordinary course of business or pursuant to the transactions
specifically permitted under Section 6.17; (b) the sale, transfer, conveyance or
------------
other disposition by a Credit Party of Equipment, Fixtures or Real Estate that
is obsolete or no longer used or useful in such Credit Party's business and
having a value not exceeding $250,000 in any single transaction or $500,000 in
the aggregate in any Fiscal Year; and (c) other Equipment and Fixtures having a
value not exceeding $250,000 in any single transaction or $500,000 in the
aggregate in any Fiscal Year. With respect to any disposition of assets or
other properties permitted pursuant to clauses (b) and (c) above, Lender agrees
----------- ---
on reasonable prior written notice to release its Lien on such assets or other
properties in order to permit the applicable Credit Party to effect such
disposition and shall execute and deliver to Borrower, at Borrower's expense,
appropriate termination statements under the Code and other releases as
reasonably requested by Borrower.
6.9 ERISA. No Credit Party shall, or shall cause or permit any ERISA
-----
Affiliate to, cause or permit to occur an event that could result in the
imposition of a Lien under Section 412 of the IRC or Section 302 or 4068 of
ERISA or cause or permit to occur an ERISA Event to the extent such ERISA Event
could reasonably be expected to have a Material Adverse Effect.
6.10 Financial Covenants. Borrower shall not breach or fail to comply
-------------------
with any of the financial covenants set forth in Annex G (the "Financial
------- ---------
Covenants").
---------
6.11 Hazardous Materials. No Credit Party shall cause or permit a
-------------------
Release of any Hazardous Material on, at, in, under, above, to, from or about
any of the Real Estate where such Release would (a) violate in any respect, or
form the basis for any Environmental Liabilities under, any Environmental Laws
or Environmental Permits or (b) otherwise adversely impact the value or
marketability of any of the Real Estate or any of the Collateral, other than
such violations or Environmental Liabilities that could not reasonably be
expected to have a Material Adverse Effect.
6.12 Sale-Leasebacks. No Credit Party shall engage in any sale-
---------------
leaseback, synthetic lease or similar transaction involving any of its assets,
except to the extent such transaction is in force as of, and disclosed to Lender
in writing prior to, the Closing Date.
6.13 Cancellation of Indebtedness. No Credit Party shall cancel any
----------------------------
claim or debt owing to it, except for reasonable consideration negotiated on an
arm's length basis and in the ordinary course of its business consistent with
past practices.
6.14 Restricted Payments. No Credit Party shall make any Restricted
-------------------
Payment, except employee loans permitted under Section 6.4(b).
--------------
6.15 Change of Corporate Name or Location; Change of Fiscal Year. No
-----------------------------------------------------------
Credit Party shall (a) change its corporate name or (b) change its chief
executive office, principal place of business, corporate offices or, except with
respect to miscellaneous Collateral the fair market value of which does not
exceed $250,000 in the aggregate at any time, the warehouses or locations at
which Collateral is held or stored, or the location of its records concerning
the Collateral, in each
29
case without at least 30 days' prior written notice to Lender and after Lender's
written acknowledgment that any reasonable action requested by Lender in
connection therewith, including to continue the perfection of any Liens in favor
of Lender in any Collateral, has been completed or taken, and provided that any
--------
such new location shall be in the continental United States of America. Without
limiting the generality of the foregoing, no Credit Party shall change its name,
identity or corporate structure in any manner that might make any financing or
continuation statement filed in connection herewith seriously misleading within
the meaning of Section 9402(7) of the Code or any other then applicable
provision of the Code except upon prior written notice to Lender and after
Lender's written acknowledgment that any reasonable action requested by Lender
in connection therewith, including to continue the perfection of any Liens in
favor of Lender in any Collateral, has been completed or taken. No Credit Party
shall change its Fiscal Year without at least 30 days' prior written notice to
Lender.
6.16 No Impairment of Intercompany Transfers. No Credit Party shall
---------------------------------------
directly or indirectly enter into or become bound by any agreement, instrument,
indenture or other obligation (other than this Agreement and the other Loan
Documents) that could directly or indirectly restrict, prohibit or require the
consent of any Person with respect to the payment of dividends or distributions
or the making or repayment of intercompany loans by a Subsidiary of Borrower to
Borrower.
6.17 No Speculative Transactions. No Credit Party shall engage in any
---------------------------
transaction involving commodity purchase or option agreements, futures contracts
or similar transactions, except solely to hedge against fluctuations in the
prices or supply of commodities owned or purchased by it and the values of
foreign currencies receivable or payable by it and interest swaps, caps or
collars.
6.18 Leases.
------
(a) After the Closing Date, no Credit Party shall enter into
any new operating lease for Equipment, if the aggregate of all payments arising
under such new operating leases, payable during the first twelve (12)
consecutive Fiscal Months of each such new operating lease by all Credit Parties
on a consolidated basis, would exceed (i) in Fiscal Year 2000, without regard to
the payments arising under operating leases for Equipment already in existence
as of the Closing Date, $500,000, or (ii) in each subsequent Fiscal Year of
Credit Parties, without regard to the payments arising under operating leases
for Equipment already in existence as of the first Business Day of such Fiscal
Year, $250,000.
(b) After the Closing Date, except for those operating leases
for Real Estate permitted to be entered into under Section 6.19, no Credit Party
------------
shall enter into any new operating lease for Real Estate if the aggregate of all
payments arising under such new operating leases, payable during the first
twelve (12) consecutive Fiscal Months of each such new operating lease by all
Credit Parties on a consolidated basis, would exceed (i) at all times prior to
the Term Loan B Repayment Date, without regard to the payments arising under
operating leases for Real Estate already in existence as of the Closing Date,
$150,000, or (ii) commencing with the Fiscal Year in which the Term Loan B
Repayment Date occurs and for each Fiscal Year thereafter, without regard to the
payments arising under operating leases for Real Estate already in existence as
of the first Business Day of such Fiscal Year, $500,000.
30
6.19 Store Expansion.
---------------
(a) Except in connection with the retail locations operated by
Borrower and set forth in Disclosure Schedule (3.2), no Credit Party shall
-------------------------
engage in any transaction or enter into any agreement with respect to the
opening of any new retail location without the prior written consent of Lender.
(b) Notwithstanding the provisions of clause (a) of this Section
---------- -------
6.19, so long as no Default or Event of Default exists or would otherwise be
----
caused to exist by such transaction, agreement, or opening, and subject to the
provisions of Section 5.9:
-----------
(i) Prior to the Term Loan B Repayment Date, Borrower may engage
in transactions and enter into agreements with respect to the opening of one (1)
new retail location, provided, that Credit Parties shall not make any Capital
--------
Expenditures in connection with such new location exceeding $750,000; and
(ii) From and after the Term Loan B Repayment Date, Borrower may
engage in transactions and enter into agreements with respect to the opening of
up to three (3) new retail locations during any Fiscal Year; provided, that
--------
Credit Parties shall not make any Capital Expenditures in connection with such
new locations exceeding, in the aggregate, $1,800,000 during any such Fiscal
Year;
provided further, that the Capital Expenditures described in this clause (b)
-------- -------
shall be included in the calculation of Capital Expenditures set forth in Annex
-----
G of this Agreement.
-
(c) In addition to the transactions and agreements addressed by
clause (b) of this Section 6.19, Borrower may, subject to the provisions of
---------- ------------
Section 5.9, engage in transactions and enter into agreements, including the
operating leases described below in this clause (c), with respect to the opening
----------
of up to two (2) additional retail stores the Capital Expenditures and/or
operating lease payments for which are financed through Private Placements
completed by Credit Parties on terms acceptable to Lender, in the exercise of
its reasonable credit judgment, during any Fiscal Year. To the extent used
solely for such Capital Expenditures and/or operating lease payments, (i) such
Private Placements shall not be subject to the provisions of Section
-------
1.3(b)(iii), and (ii) such Capital Expenditures shall be excluded from the
-----------
calculation of Capital Expenditures set forth in Annex G of this Agreement.
-------
Further, Credit Parties may enter into a new operating lease for each such new
location so long as the aggregate of all payments arising under each such new
operating lease, payable during the first twelve (12) consecutive Fiscal Months
of such new operating lease by all Credit Parties on a consolidated basis, does
not exceed $167,000. Nothing in this clause (c) shall limit the right of
----------
Borrower to fund any Capital Expenditures or lease payments permitted by this
clause (c) by obtaining Revolving Credit Advances to the extent that such
Revolving Credit Advances are otherwise available under the terms and conditions
of this Agreement.
6.20 Credit Parties Other than Borrower. None of the Credit Parties other
----------------------------------
than Borrower shall engage in any trade or business, or own any assets (other
than the Stock of their Subsidiaries or the Intellectual Property owned by
Trademark Co.) or incur any Indebtedness or Guaranteed Indebtedness (other than
the Obligations), except that Trademark Co. may engage in the business of
licensing Trademarks to Borrower pursuant to that certain Exclusive Trademark
License Contract dated as of October 18, 1994, as amended by that certain First
Amendment to Exclusive Trademark
31
License Contract dated as of on or about the Closing Date, each by and between
Borrower and Trademark Co.
7. TERM
7.1 Termination. The financing arrangements contemplated hereby shall be
-----------
in effect until the Commitment Termination Date, and the Loans and all other
Obligations shall be automatically due and payable in full on such date.
7.2 Survival of Obligations Upon Termination of Financing Arrangements.
------------------------------------------------------------------
Except as otherwise expressly provided in the Loan Documents, no termination or
cancellation (regardless of cause or procedure) of any financing arrangement
under this Agreement shall in any way affect or impair the obligations, duties
and liabilities of the Credit Parties or the rights of Lender relating to any
unpaid portion of the Loans or any other Obligations, due or not due,
liquidated, contingent or unliquidated or any transaction or event occurring
prior to such termination, or any transaction or event, the performance of which
is required after the Commitment Termination Date. Except as otherwise
expressly provided herein or in any other Loan Document, all undertakings,
agreements, covenants, warranties and representations of or binding upon the
Credit Parties, and all rights of Lender, all as contained in the Loan
Documents, shall not terminate or expire, but rather shall survive any such
termination or cancellation and shall continue in full force and effect until
the Termination Date; provided, that the provisions of Section 11, the payment
-------- ----------
obligations under Sections 1.15 and 1.16, and the indemnities contained in the
------------- ----
Loan Documents shall survive the Termination Date.
8. EVENTS OF DEFAULT; RIGHTS AND REMEDIES
8.1 Events of Default. The occurrence of any one or more of the following
-----------------
events (regardless of the reason therefor) shall constitute an "Event of
--------
Default" hereunder:
-------
(a) Borrower (i) shall fail to make any payment of principal of, or
interest on, or Fees owing in respect of, the Loans or any of the other
Obligations when due and payable, or (ii) shall fail to pay or reimburse Lender
for any expense reimbursable hereunder or under any other Loan Document within
ten days following Lender's demand for such reimbursement or payment of
expenses.
(b) Any Credit Party shall fail or neglect to perform, keep or
observe any of the provisions of Sections 1.4, 1.8, 5.4 or 6, or any of the
------------ --- --- -
provisions set forth in Annexes C or G, respectively.
--------- -
(c) Borrower shall fail or neglect to perform, keep or observe any of
the provisions of Section 4 or any provisions set forth in Annexes E or F,
--------- --------- -
respectively, and the same shall remain unremedied for three Business Days or
more after written demand by Lender.
(d) Any Credit Party shall fail or neglect to perform, keep or
observe any other provision of this Agreement or of any of the other Loan
Documents (other than any provision embodied in or covered by any other clause
of this Section 8.1) and the same shall remain unremedied for 20 days or more.
-----------
(e) A default or breach shall occur under any other agreement,
document or instrument to which any Credit Party is a party that is not cured
within any applicable grace period
32
therefor, and such default or breach (i) involves the failure to make any
payment when due in respect of any Indebtedness (other than the Obligations) of
any Credit Party in excess of $500,000 in the aggregate, or (ii) causes, or
permits any holder of such Indebtedness or a trustee to cause, Indebtedness or a
portion thereof in excess of $500,000 in the aggregate to become due prior to
its stated maturity or prior to its regularly scheduled dates of payment,
regardless of whether such default is waived, or such right is exercised, by
such holder or trustee.
(f) Any information contained in any Borrowing Base Certificate shall
be untrue or incorrect in any respect, or any representation or warranty herein
or in any Loan Document or in any written statement, report, financial statement
or certificate (other than a Borrowing Base Certificate) made or delivered to
Lender by any Credit Party is untrue or incorrect in any material respect as of
the date when made or deemed made.
(g) Assets of any Credit Party with a fair market value of $250,000
or more shall be attached, seized, levied upon or subjected to a writ or
distress warrant, or come within the possession of any receiver, trustee,
custodian or assignee for the benefit of creditors of any Credit Party and such
condition continues for 30 days or more.
(h) A case or proceeding shall have been commenced against any Credit
Party seeking a decree or order in respect of such Credit Party (i) under Title
11 of the United States Code or any other applicable federal, state or foreign
bankruptcy or other similar law, (ii) appointing a custodian, receiver,
liquidator, assignee, trustee or sequestrator (or similar official) for such
Credit Party or for any substantial part of such Credit Party's assets, or (iii)
ordering the winding-up or liquidation of the affairs of such Credit Party, and
such case or proceeding shall remain undismissed or unstayed for 60 days or more
or a decree or order granting the relief sought in such case or proceeding shall
be entered by a court of competent jurisdiction over such case or proceeding.
(i) Any Credit Party shall (i) file a petition seeking relief under
Title 11 of the United States Code or any other applicable federal, state or
foreign bankruptcy or other similar law, (ii) consent to or fail to contest in a
timely and appropriate manner the institution of proceedings thereunder or the
filing of any such petition or the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar
official) for such Credit Party or for any substantial part of such Credit
Party's assets, (iii) make an assignment for the benefit of creditors, or (iv)
take any corporate action in furtherance of any of the foregoing, or (v) admit
in writing its inability to, or shall be generally unable to, pay its debts as
such debts become due.
(j) A final judgment or judgments for the payment of money in excess
of $250,000 in the aggregate at any time outstanding shall be rendered against
any Credit Party and the same shall not, within 30 days after the entry thereof,
have been discharged or execution thereof stayed or bonded pending appeal, or
shall not have been discharged prior to the expiration of any such stay.
(k) Any material provision of any Loan Document shall for any reason
cease to be valid, binding and enforceable in accordance with its terms (or any
Credit Party shall challenge the enforceability of any Loan Document or shall
assert in writing, or engage in any action or inaction based on any such
assertion, that any provision of any of the Loan Documents has ceased to be or
otherwise is not valid, binding and enforceable in accordance with its terms),
or any Lien created under any Loan Document shall cease to be a valid and
perfected first priority Lien (except as otherwise permitted herein or therein)
in any of the Collateral purported to be covered thereby.
33
(l) Any Change of Control shall occur.
(m) Any event shall occur, whether or not insured or insurable, as a
result of which revenue-producing activities cease or are substantially
curtailed at any facility of Borrower generating more than 15% of Borrower's
revenues for the Fiscal Year preceding such event, such cessation or curtailment
continues for more than 20 days, and Lender has not received within 45 days of
such event evidence satisfactory to Lender that the issuers of Borrower's
insurance policies have irrevocably committed, without reservation of rights, to
make immediate payments under such policies sufficient to compensate Borrower
and Lender for such reduction of revenue-producing activities.
8.2 Remedies.
--------
(a) If any Default or Event of Default shall have occurred and be
continuing, then Lender may (i) without notice, suspend the Revolving Loan
facility with respect to further Revolving Credit Advances or the incurrence of
further Letter of Credit Obligations whereupon any further Revolving Credit
Advances and the incurrence of further Letter of Credit Obligations, shall be
made or incurred in Lender's sole discretion so long as such Default or Event of
Default is continuing, and (ii) without notice except as otherwise expressly
provided herein, increase the rate of interest applicable to the Loans and the
Letter of Credit Fees to the Default Rate.
(b) If any Event of Default shall have occurred and be continuing,
Lender may, without notice: (i) terminate the Revolving Loan with respect to
further Revolving Credit Advances or the incurrence of further Letter of Credit
Obligations; (ii) declare all or any portion of the Obligations, including all
or any portion of any Loan, to be forthwith due and payable, and require that
the Letter of Credit Obligations be cash collateralized as provided in Annex B,
-------
all without presentment, demand, protest or further notice of any kind, all of
which are expressly waived by Borrower and each other Credit Party; or (iii)
exercise any rights and remedies provided to Lender under the Loan Documents or
at law or in equity, including all remedies provided under the Code; provided,
--------
that upon the occurrence of an Event of Default specified in Sections 8.1(g),
---------------
(h) or (i), the Revolving Loan facility shall be immediately terminated and all
--- ---
of the Obligations, including the Revolving Loan, shall become immediately due
and payable without declaration, notice or demand by any Person.
8.3 Waivers by Credit Parties. Except as otherwise provided for in this
-------------------------
Agreement or by applicable law, each Credit Party waives: (a) presentment,
demand and protest and notice of presentment, dishonor, notice of intent to
accelerate, notice of acceleration, protest, default, nonpayment, maturity,
release, compromise, settlement, extension or renewal of any or all commercial
paper, accounts, contract rights, documents, instruments, chattel paper and
guaranties at any time held by Lender on which any Credit Party may in any way
be liable, and hereby ratifies and confirms whatever Lender may do in this
regard; (b) all rights to notice and a hearing prior to Lender's taking
possession or control of, or Lender's replevy, attachment or levy upon, the
Collateral or any bond or security that might be required by any court prior to
allowing Lender to exercise any of its remedies; and (c) the benefit of all
valuation, appraisal and exemption laws.
9. PARTICIPATIONS
9.1 The Credit Parties signatory hereto consent to Lender's sale of
participations in, at any time or times, any Commitments or any portion thereof
or interest therein. Any participation by
34
Lender of all or any part of its Commitments shall be sold with the
understanding that all amounts payable by Borrower hereunder shall be determined
as if Lender had not sold such participation, and that the holder of any such
participation shall not be entitled to require Lender to take or omit to take
any action hereunder except actions directly affecting (a) any reduction in the
principal amount of, or interest rate or Fees payable with respect to, any Loan
in which such holder participates, (b) any extension of the scheduled
amortization of the principal amount of any Loan in which such holder
participates or the final maturity date thereof, and (c) any release of all or
substantially all of the Collateral (other than in accordance with the terms of
this Agreement, the Collateral Documents or the other Loan Documents). Solely
for purposes of Sections 1.13, 1.15, and 1.16, Borrower acknowledges and agrees
------------- ---- ----
that a participation shall give rise to a direct obligation of Borrower to the
participant and the participant shall be considered to be a "Lender." Except as
set forth in the preceding sentence neither Borrower nor any other Credit Party
shall have any obligation or duty to any participant.
9.2 Each Credit Party executing this Agreement shall assist Lender as
reasonably required to enable Lender to effect any such participation,
including, if requested by Lender with respect to a proposed increase in any of
the Commitments, the participation of management in meetings with potential
participants. Each Credit Party executing this Agreement shall certify the
correctness, completeness and accuracy of all descriptions of the Credit Parties
and their respective affairs contained in any selling materials provided by it
and all other information provided by it and included in such materials, except
that any Projections delivered by Borrower shall only be certified by Borrower
as having been prepared by Borrower in compliance with the representations
contained in Section 3.4(c).
--------------
9.3 Lender may furnish any information concerning Credit Parties in the
possession of Lender from time to time to participants (including prospective
participants). Lender shall use its best efforts to obtain from participants
confidentiality covenants substantially equivalent to those contained in Section
-------
11.8 hereof.
----
10. SUCCESSORS AND ASSIGNS
This Agreement and the other Loan Documents shall be binding on and
shall inure to the benefit of each Credit Party, Lender and their respective
successors and assigns (including, in the case of any Credit Party, a debtor-in-
possession on behalf of such Credit Party), except as otherwise provided herein
or therein. No Credit Party may assign, transfer, hypothecate or otherwise
convey its rights, benefits, obligations or duties hereunder or under any of the
other Loan Documents without the prior express written consent of Lender. Any
such purported assignment, transfer, hypothecation or other conveyance by any
Credit Party without the prior express written consent of Lender shall be void.
The terms and provisions of this Agreement are for the purpose of defining the
relative rights and obligations of each Credit Party and Lender with respect to
the transactions contemplated hereby and no Person shall be a third party
beneficiary of any of the terms and provisions of this Agreement or any of the
other Loan Documents.
11. MISCELLANEOUS
11.1 Complete Agreement; Modification of Agreement. The Loan Documents
---------------------------------------------
constitute the final expression of the entire agreement between the parties with
respect to the subject matter thereof and may not be modified, altered or
amended except as set forth in Section 11.2. Any proposal letter, commitment
------------
letter, or similar agreement between any Credit Party and Lender or any
35
of their respective Affiliates, predating this Agreement and relating to a
financing of substantially similar form, purpose or effect shall be superseded
by this Agreement.
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY OR EXTEND
CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT, ARE NOT ENFORCEABLE
UNDER CALIFORNIA OR WASHINGTON LAW.
11.2 Amendments and Waivers. No amendment, modification, termination or
----------------------
waiver of any provision of this Agreement, any of the Notes or any other Loan
Document, or any consent to any departure by any Credit Party therefrom, in any
event be effective unless the same shall be in writing and signed by Lender and
Borrower.
Upon indefeasible payment in full in cash and performance of all of
the Obligations (other than indemnification Obligations under Section 1.13),
------------
termination of the Commitments and a release of all claims against Lender, and
so long as no suits, actions, proceedings or claims are pending or threatened
against any Indemnified Person asserting any damages, losses or liabilities that
are Indemnified Liabilities, Lender shall deliver to Borrower termination
statements, mortgage releases and other documents necessary or appropriate to
evidence the termination of the Liens securing payment of the Obligations.
11.3 Fees and Expenses. Borrower shall reimburse Lender for all out-of-
-----------------
pocket expenses incurred in connection with the negotiation and preparation of
the Loan Documents (including the reasonable fees and expenses of all of its
special loan counsel, advisors, consultants and auditors retained in connection
with the Loan Documents and the Related Transactions and advice in connection
therewith). Borrower shall reimburse Lender for all fees, costs and expenses,
including the reasonable fees, costs and expenses of counsel or other advisors
(including environmental and management consultants and appraisers) for advice,
assistance, or other representation in connection with:
(a) the forwarding to Borrower or any other Person on behalf of
Borrower by Lender of the proceeds of the Loans;
(b) any amendment, modification or waiver of, consent with respect
to, or termination of, any of the Loan Documents or Related Transactions
Documents or advice in connection with the administration of the Loans made
pursuant hereto or its rights hereunder or thereunder;
(c) any litigation, contest, dispute, suit, proceeding or action
(whether instituted by Lender, Borrower or any other Person, and whether as a
party, witness or otherwise) in any way relating to the Collateral, any of the
Loan Documents or any other agreement to be executed or delivered in connection
herewith or therewith, including any litigation, contest, dispute, suit, case,
proceeding or action, and any appeal or review thereof, in connection with a
case commenced by or against Borrower or any other Person that may be obligated
to Lender by virtue of the Loan Documents, including any such litigation,
contest, dispute, suit, proceeding or action arising in connection with any
work-out or restructuring of the Loans during the pendency of one or more Events
of Default;
(d) any attempt to enforce any remedies of Lender against any or
all of the Credit Parties or any other Person that may be obligated to Lender by
virtue of any of the Loan Documents,
36
including any such attempt to enforce any such remedies in the course of any
work-out or restructuring of the Loans during the pendency of one or more Events
of Default;
(e) any work-out or restructuring of the Loans during the pendency
of one or more Events of Default; and
(f) efforts to (i) monitor the Loans or any of the other
Obligations, (ii) evaluate, observe or assess any of the Credit Parties or their
respective affairs, and (iii) verify, protect, evaluate, assess, appraise,
collect, sell, liquidate or otherwise dispose of any of the Collateral;
including, as to each of clauses (a) through (f) above, all attorneys' and other
----------- ---
professional and service providers' fees arising from such services, including
those in connection with any appellate proceedings, and all expenses, costs,
charges and other fees incurred by such counsel and others in connection with or
relating to any of the events or actions described in this Section 11.3, all of
------------
which shall be payable, on demand, by Borrower to Lender. Without limiting the
generality of the foregoing, such expenses, costs, charges and fees may include:
fees, costs and expenses of accountants, environmental advisors, appraisers,
investment bankers, management and other consultants and paralegals; court costs
and expenses; photocopying and duplication expenses; court reporter fees, costs
and expenses; long distance telephone charges; air express charges; telegram or
telecopy charges; secretarial overtime charges; and expenses for travel, lodging
and food paid or incurred in connection with the performance of such legal or
other advisory services.
11.4 No Waiver. Lender's failure, at any time or times, to require strict
---------
performance by the Credit Parties of any provision of this Agreement or any
other Loan Document shall not waive, affect or diminish any right of Lender
thereafter to demand strict compliance and performance herewith or therewith.
Any suspension or waiver of an Event of Default shall not suspend, waive or
affect any other Event of Default whether the same is prior or subsequent
thereto and whether the same or of a different type. None of the undertakings,
agreements, warranties, covenants and representations of any Credit Party
contained in this Agreement or any of the other Loan Documents and no Default or
Event of Default by any Credit Party shall be deemed to have been suspended or
waived by Lender, unless such waiver or suspension is by an instrument in
writing signed by an officer of or other duly authorized signatory of Lender and
directed to Borrower specifying such suspension or waiver.
11.5 Remedies. Lender's rights and remedies under this Agreement shall be
--------
cumulative and nonexclusive of any other rights and remedies that Lender may
have under any other agreement, including the other Loan Documents, by operation
of law or otherwise. Recourse to the Collateral shall not be required.
11.6 Severability. Wherever possible, each provision of this Agreement and
------------
the other Loan Documents shall be interpreted in such a manner as to be
effective and valid under applicable law, but if any provision of this Agreement
or any other Loan Document shall be prohibited by or invalid under applicable
law, such provision shall be ineffective only to the extent of such prohibition
or invalidity without invalidating the remainder of such provision or the
remaining provisions of this Agreement or such other Loan Document.
11.7 Conflict of Terms. Except as otherwise provided in this Agreement or
-----------------
any of the other Loan Documents by specific reference to the applicable
provisions of this Agreement, if any
37
provision contained in this Agreement is in conflict with, or inconsistent with,
any provision in any of the other Loan Documents, the provision contained in
this Agreement shall govern and control.
11.8 Confidentiality. Lender agrees to use commercially reasonable efforts
---------------
(equivalent to the efforts Lender applies to maintain as confidential its own
confidential information) to maintain as confidential all confidential
information provided to it by the Credit Parties and designated as confidential
for a period of three years following receipt thereof or one year after the
Termination Date, whichever is longer, except that Lender may disclose such
information: (a) to Persons employed or engaged by Lender in evaluating,
approving, structuring or administering the Loans and the Commitments; (b) to
any bona fide participant or potential participant that has agreed to comply
---------
with the covenant contained in this Section 11.8 (and any such bona fide
------------ ---- ----
participant or potential participant may disclose such information to Persons
employed or engaged by them as described in clause (a) above); (c) as required
----------
or requested by any Governmental Authority or reasonably believed by Lender to
be compelled by any court decree, subpoena or legal or administrative order or
process; (d) as, on the advice of Lender's counsel, is required by law; (e) in
connection with the exercise of any right or remedy under the Loan Documents or
in connection with any Litigation to which Lender is a party, or (f) that ceases
to be confidential through no fault of Lender.
11.9 GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF THE
------------- --------
LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY
AND PERFORMANCE, THE LOAN DOCUMENTS AND THE OBLIGATIONS SHALL BE GOVERNED BY,
AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
CALIFORNIA APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE (WITHOUT
REGARD TO THE CONFLICT OF LAW PROVISIONS THEREOF) AND ANY APPLICABLE LAWS OF THE
UNITED STATES OF AMERICA. EACH CREDIT PARTY HEREBY CONSENTS AND AGREES THAT THE
STATE OR FEDERAL COURTS LOCATED IN SAN FRANCISCO COUNTY, CITY OF SAN FRANCISCO,
CALIFORNIA SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR
DISPUTES BETWEEN THE CREDIT PARTIES AND LENDER PERTAINING TO THIS AGREEMENT OR
ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS; PROVIDED, THAT LENDER AND THE
--------
CREDIT PARTIES ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE
HEARD BY A COURT LOCATED OUTSIDE OF SAN FRANCISCO COUNTY, CITY OF SAN FRANCISCO,
CALIFORNIA AND; PROVIDED, FURTHER NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR
-------- -------
OPERATE TO PRECLUDE LENDER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN
ANY OTHER JURISDICTION TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR
THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF
LENDER. EACH CREDIT PARTY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH CREDIT
PARTY HEREBY WAIVES ANY OBJECTION THAT SUCH CREDIT PARTY MAY HAVE BASED UPON
LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY
----- --- ----------
CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY SUCH COURT. EACH CREDIT PARTY HEREBY WAIVES PERSONAL SERVICE OF
THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND
38
AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH CREDIT PARTY AT THE ADDRESS SET
FORTH IN ANNEX H OF THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED
-------
COMPLETED UPON THE EARLIER OF SUCH CREDIT PARTY'S ACTUAL RECEIPT THEREOF OR
THREE DAYS AFTER DEPOSIT IN THE UNITED STATES MAIL, PROPER POSTAGE PREPAID.
11.10 Notices. Except as otherwise provided herein, whenever it is
-------
provided herein that any notice, demand, request, consent, approval, declaration
or other communication shall or may be given to or served upon any of the
parties by any other parties, or whenever any of the parties desires to give or
serve upon any other parties any communication with respect to this Agreement,
each such notice, demand, request, consent, approval, declaration or other
communication shall be in writing and shall be deemed to have been validly
served, given or delivered: (a) upon the earlier of actual receipt and three
Business Days after deposit in the United States Mail, registered or certified
mail, return receipt requested, with proper postage prepaid; (b) upon
transmission, when sent by telecopy or other similar facsimile transmission
(with such telecopy or facsimile promptly confirmed by delivery of a copy by
personal delivery or United States Mail as otherwise provided in this Section
-------
11.10); (c) one Business Day after deposit with a reputable overnight courier
-----
with all charges prepaid; or (d) when delivered, if hand-delivered by messenger,
all of which shall be addressed to the party to be notified and sent to the
address or facsimile number indicated in Annex H or to such other address (or
-------
facsimile number) as may be substituted by notice given as herein provided. The
giving of any notice required hereunder may be waived in writing by the party
entitled to receive such notice. Failure or delay in delivering copies of any
notice, demand, request, consent, approval, declaration or other communication
to any Person (other than Borrower or Lender) designated in Annex H to receive
-------
copies shall in no way adversely affect the effectiveness of such notice,
demand, request, consent, approval, declaration or other communication.
11.11 Section Titles. The Section titles and Table of Contents contained
--------------
in this Agreement are and shall be without substantive meaning or content of any
kind whatsoever and are not a part of the agreement between the parties hereto.
11.12 Counterparts. This Agreement may be executed in any number of
------------
separate counterparts, each of which shall collectively and separately
constitute one agreement.
11.13 WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION WITH
--------------------
COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN
EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL
LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR
DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO
ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF
ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER ARISING IN CONTRACT,
TORT OR OTHERWISE, BETWEEN LENDER AND ANY CREDIT PARTY ARISING OUT OF, CONNECTED
WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN
CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR THE
TRANSACTIONS RELATED THERETO.
39
11.14 Press Releases. Each Credit Party executing this Agreement agrees
--------------
that neither it nor its Affiliates will in the future issue any press releases
or other public disclosure using the name of GE Capital or its affiliates or
referring to this Agreement, the other Loan Documents or the Related
Transactions Documents without at least two Business Days' prior notice to GE
Capital and without the prior written consent of GE Capital unless (and only to
the extent that) such Credit Party or Affiliate is required to do so under law
and then, in any event, such Credit Party or Affiliate will consult with GE
Capital before issuing such press release or other public disclosure. Each
Credit Party consents to the publication by Lender of a tombstone or similar
advertising material relating to the financing transactions contemplated by this
Agreement. Lender shall provide a draft of such tombstone or similar
advertising material to each Credit Party for review and comment prior to the
publication thereof. Lender reserves the right to provide to industry trade
organizations information necessary and customary for inclusion in league table
measurements with Borrower's consent which shall not be unreasonably withheld or
delayed.
11.15 Reinstatement. This Agreement shall remain in full force and effect
-------------
and continue to be effective should any petition be filed by or against Borrower
for liquidation or reorganization, should Borrower become insolvent or make an
assignment for the benefit of any creditor or creditors or should a receiver or
trustee be appointed for all or any significant part of Borrower's assets, and
shall continue to be effective or to be reinstated, as the case may be, if at
any time payment and performance of the Obligations, or any part thereof, is,
pursuant to applicable law, rescinded or reduced in amount, or must otherwise be
restored or returned by any obligee of the Obligations, whether as a "voidable
preference," "fraudulent conveyance," or otherwise, all as though such payment
or performance had not been made. In the event that any payment, or any part
thereof, is rescinded, reduced, restored or returned, the Obligations shall be
reinstated and deemed reduced only by such amount paid and not so rescinded,
reduced, restored or returned.
11.16 Advice of Counsel. Each of the parties represents to each other
-----------------
party hereto that it has discussed this Agreement and, specifically, the
provisions of Sections 1 and 11.13, with its counsel.
---------- -----
11.17 No Strict Construction. The parties hereto have participated
----------------------
jointly in the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the parties hereto and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Agreement.
40
IN WITNESS WHEREOF, this Agreement has been duly executed as of the
date first written above.
"Borrower"
PEET'S COFFEE & TEA, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chief Financial Officer
"Lender"
GENERAL ELECTRIC CAPITAL
CORPORATION
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
Duly Authorized Signatory
The following Persons are signatories to this Agreement in their
capacities as Credit Parties and not as Borrowers.
"Credit Parties"
PEET'S COMPANIES, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chief Financial Officer
PEET'S TRADEMARK COMPANY
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chief Financial Officer
41
ANNEX A (Recitals)
--------
to
CREDIT AGREEMENT
----------------
DEFINITIONS
-----------
Capitalized terms used in the Loan Documents shall have (unless
otherwise provided elsewhere in the Loan Documents) the following respective
meanings, and all references in the following definitions to Sections, Exhibits,
Schedules or Annexes shall refer to Sections, Exhibits, Schedules or Annexes of
the Agreement:
"Account Debtor" shall mean any Person who may become obligated to any
--------------
other Person under, with respect to, or on account of, an Account.
"Accounting Changes" shall have the meaning assigned to it in Annex G.
------------------ -------
"Accounts" shall mean all "accounts," as such term is defined in the
--------
Code, now owned or hereafter acquired by any Person, including (a) all accounts
receivable, other receivables, book debts and other forms of obligations (other
than forms of obligations evidenced by Chattel Paper, Documents or Instruments),
whether arising out of goods sold or services rendered by it or from any other
transaction (including any such obligations that may be characterized as an
account or contract right under the Code), (b) all of such Person's rights in,
to and under all purchase orders or receipts for goods or services, (c) all of
such Person's rights to any goods represented by any of the foregoing (including
unpaid sellers' rights of rescission, replevin, reclamation and stoppage in
transit and rights to returned, reclaimed or repossessed goods), (d) all monies
due or to become due to such Person, under all purchase orders and contracts for
the sale of goods or the performance of services or both by such Person or in
connection with any other transaction (whether or not yet earned by performance
on the part of such Person), including the right to receive the proceeds of said
purchase orders and contracts, and (e) all collateral security and guaranties of
any kind given by any other Person with respect to any of the foregoing.
"Affiliate" shall mean, with respect to any Person, (a) each Person
---------
that, directly or indirectly, owns or controls, whether beneficially, or as a
trustee, guardian or other fiduciary, five percent (5%) or more of the Stock
having ordinary voting power in the election of directors of such Person, (b)
each Person that controls, is controlled by or is under common control with such
Person, (c) each of such Person's officers, directors, joint venturers and
partners or (d) in the case of Borrower, the immediate family members, spouses
and lineal descendants of individuals who are Affiliates of Borrower. For the
purposes of this definition, "control" of a Person shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of its
management or policies, whether through the ownership of voting securities, by
contract or otherwise; provided, that the term "Affiliate" shall specifically
-------- ---------
exclude Lender.
"Agreement" shall mean the Credit Agreement by and among Borrower, the
---------
other Credit Parties party thereto and Lender, as the same may be amended,
supplemented, restated, or otherwise modified from time to time, in accordance
with the terms hereof.
"Appendices" shall have the meaning assigned to it in the recitals to
----------
the Agreement.
A-1
"Applicable Margins" shall mean, collectively, the Applicable Revolver
------------------
Index Margin, the Applicable Term Loan A Index Margin, the Applicable Term Loan
B Index Margin, the Applicable Revolver LIBOR Margin, the Applicable Term Loan A
LIBOR Margin, and the Applicable Term Loan B LIBOR Margin.
"Applicable Percentage" shall have the meaning assigned to it in
---------------------
Section 1.9(c).
--------------
"Applicable Revolver Index Margin" shall mean the per annum interest
-------------------------------- ---------
rate margin from time to time in effect and payable in addition to the Index
Rate applicable to the Revolving Loan, as determined by reference to Section
-------
1.5(a).
------
"Applicable Revolver LIBOR Margin" shall mean the per annum interest
-------------------------------- ---------
rate from time to time in effect and payable in addition to the LIBOR Rate
applicable to the Revolving Loan, as determined by reference to Section 1.5(a).
--------------
"Applicable Term Loan A Index Margin" shall mean the per annum
----------------------------------- ---------
interest rate from time to time in effect and payable in addition to the Index
Rate applicable to Term Loan A, as determined by reference to Section 1.5(a).
--------------
"Applicable Term Loan B Index Margin" shall mean the per annum
----------------------------------- ---------
interest rate from time to time in effect and payable in addition to the Index
Rate applicable to Term Loan B, as determined by reference to Section 1.5(a).
--------------
"Applicable Term Loan A LIBOR Margin" shall mean the per annum
----------------------------------- ---------
interest rate from time to time in effect and payable in addition to the LIBOR
Rate applicable to Term Loan A, as determined by reference to Section 1.5(a).
--------------
"Applicable Term Loan B LIBOR Margin" shall mean the per annum
----------------------------------- ---------
interest rate from time to time in effect and payable in addition to the LIBOR
Rate applicable to Term Loan B, as determined by reference to Section 1.5(a).
--------------
"Bankruptcy Code" shall mean the provisions of title 11 of the United
---------------
States Code, 11 U.S.C. '' 101 et seq.
-- ---
"Borrower" shall have the meaning assigned thereto in the preamble to
--------
the Agreement.
"Borrower Accounts" shall have the meaning assigned to it in Annex C.
----------------- -------
"Borrower Pledge Agreement" shall mean the Pledge Agreement of even
-------------------------
date herewith executed by each of Borrower, Trademark Co., and WBG in favor of
Lender, pledging all Stock of its Subsidiaries, if any, and all promissory notes
evidencing loans and advances owing to or held by it, as the same may be
amended, supplemented, restated, or otherwise modified from time to time, in
accordance with the terms thereof.
"Borrowing Availability" shall have the meaning assigned to it in
----------------------
Section 1.1(a)(i).
-----------------
"Borrowing Base" shall mean, as of any date of determination by
--------------
Lender, from time to time, an amount equal at such time to (a) the maximum
amount of the Revolving Loan to Borrower that could then be incurred or remain
outstanding without causing Borrower's Senior
A-2
Funded Debt (including such Revolving Loan) to exceed (i) 3.75 times Borrower's
Trailing 12 Fiscal Month EBITDA during the period from the Closing Date through
August 31, 2001, (ii) 3.50 times Borrower's Trailing 12 Fiscal Month EBITDA
during the period from September 1, 2001 through August 31, 2002, and (iii) 3.25
times Borrower's Trailing 12 Fiscal Month EBITDA at all times on or after
September 1, 2002, in each case less (b) any Reserves established by Lender at
such time.
"Borrowing Base Certificate" shall mean a certificate to be executed
--------------------------
and delivered from time to time by Borrower in the form attached to the
Agreement as Exhibit 4.1(b).
--------------
"Business Day" shall mean any day that is not a Saturday, a Sunday or
------------
a day on which banks are required or permitted to be closed in the States of
California or New York and in reference to LIBOR Loans shall mean any such day
that is also a LIBOR Business Day.
"Capital Expenditures" shall mean, with respect to any Person, all
--------------------
expenditures (by the expenditure of cash or the incurrence of Indebtedness) by
such Person during any measuring period for any fixed assets or improvements or
for replacements, substitutions or additions thereto that have a useful life of
more than one year and that are required to be capitalized under GAAP.
"Capital Lease" shall mean, with respect to any Person, any lease of
-------------
any property (whether real, personal or mixed) by such Person as lessee that, in
accordance with GAAP, would be required to be classified and accounted for as a
capital lease on the balance sheet of such Person.
"Capital Lease Obligation" shall mean, with respect to any Capital
------------------------
Lease of any Person, the amount of the obligation of the lessee thereunder that,
in accordance with GAAP, would appear on a balance sheet of such lessee in
respect of such Capital Lease.
"Cash Collateral Account" shall have the meaning assigned to it in
-----------------------
Annex B.
-------
"Cash Equivalents" shall have the meaning assigned to it in Annex B.
---------------- -------
"Cash Management System" shall have the meaning assigned to it in
----------------------
Section 1.8.
-----------
"Change of Control" shall mean any event, transaction or occurrence as
-----------------
a result of which (a) the Persons constituting the Stockholders of Holdings as
of the Closing Date shall cease to own and control, in the aggregate, all of the
economic and voting rights associated with ownership of at least fifty-one
percent (51%) of all classes of the Stock of Holdings on a fully diluted basis,
(b) Holdings shall cease to own and control all of the economic and voting
rights associated with all of the Stock of Borrower, or (c) Borrower shall cease
to own and control all of the economic and voting rights associated with all of
the Stock of any of its Subsidiaries.
"Charges" shall mean all federal, state, county, city, municipal,
-------
local, foreign or other governmental taxes (including taxes owed to the PBGC at
the time due and payable), levies, assessments, charges, liens, claims or
encumbrances upon or relating to (a) the Collateral, (b) the Obligations, (c)
the employees, payroll, income or gross receipts of any Person, (d) any Person's
ownership or use of any properties or other assets, or (e) any other aspect of
any Person's business.
"Chattel Paper" shall mean any "chattel paper," as such term is
-------------
defined in the Code, now owned or hereafter acquired by any Person, wherever
located.
"Closing Date" shall mean September 1, 2000.
------------
A-3
"Code" shall mean the Uniform Commercial Code as the same may, from
----
time to time, be enacted and in effect in the State of California; provided,
--------
that in the event that, by reason of mandatory provisions of law, any or all of
the attachment, perfection or priority of, or remedies with respect to, Lender's
Lien on any Collateral is governed by the Uniform Commercial Code as enacted and
in effect in a jurisdiction other than the State of California, the term "Code"
shall mean the Uniform Commercial Code as enacted and in effect in such other
jurisdiction solely for purposes of the provisions thereof relating to such
attachment, perfection, priority or remedies and for purposes of definitions
related to such provisions.
"Collateral" shall mean the property covered by the Security Agreement
----------
and the other Collateral Documents and any other property, real or personal,
tangible or intangible, now existing or hereafter acquired, that may at any time
be or become subject to a security interest or Lien in favor of Lender to secure
the Obligations.
"Collateral Documents" shall mean the Security Agreement, the Pledge
--------------------
Agreements, the Guaranties, the Patent, Trademark and Copyright Security
Agreement and all similar agreements entered into guaranteeing payment of, or
granting a Lien upon property as security for payment of, the Obligations.
"Collateral Reports" shall mean the reports with respect to the
------------------
Collateral referred to in Annex F.
-------
"Collection Account" shall mean that certain account of Lender,
------------------
account number ▇▇▇-▇▇▇-▇▇ in the name of Lender at Bankers Trust Company in New
York, New York, ABA No. 021 001 033, or such other account as may be designated
in writing by Lender as the "Collection Account."
"Commitment Termination Date" shall mean the earliest of (a) August
---------------------------
31, 2005, (b) the date of termination of Lender's obligation to make Revolving
Credit Advances and to incur Letter of Credit Obligations or permit existing
Loans to remain outstanding pursuant to Section 8.2(b), and (c) the date of
--------------
indefeasible prepayment in full by Borrower of the Loans, the cancellation and
return (or stand-by guarantee) of all Letters of Credit or the cash
collateralization of all Letter of Credit Obligations pursuant to Annex B, and
-------
the permanent reduction of the Revolving Loan Commitment to zero dollars ($0).
"Commitments" shall mean the aggregate of the Revolving Loan
-----------
Commitment and the Term Loan Commitment, which aggregate commitment shall be
Thirty Million Dollars ($30,000,000) on the Closing Date, as such amount may be
reduced, amortized or adjusted from time to time in accordance with the
Agreement.
"Compliance Certificate" shall have the meaning assigned to it in
----------------------
Annex E.
-------
"Concentration Account" shall have the meaning assigned to it in Annex
--------------------- -----
C.
-
"Contracts" shall mean all contracts, undertakings, or agreements
---------
(other than rights evidenced by Chattel Paper, Documents or Instruments) in or
under which such Person may now or hereafter have any right, title or interest,
including any agreement relating to the terms of payment or the terms of
performance of any Account.
A-4
"Control Letter" shall mean a letter agreement between Lender and (a)
--------------
the issuer of uncertificated securities with respect to uncertificated
securities in the name of any Credit Party, (b) a securities intermediary with
respect to securities, whether certificated or uncertificated, securities
entitlements and other financial assets held in a securities account in the name
of any Credit Party, (c) a futures commission merchant, or clearing house with
respect to commodity accounts and commodity contracts held by any Credit Party,
whereby, among other things, the issuer, securities intermediary or futures
commission merchant, as applicable, disclaims any security interest in the
applicable financial assets, acknowledges the Lien of Lender on such financial
assets, and agrees to follow the instructions or entitlement orders of Lender
without further consent by the affected Credit Party.
"Copyright License" shall mean any and all rights now owned or
-----------------
hereafter acquired by any Person under any written agreement granting any right
to use any Copyright or Copyright registration.
"Copyrights" shall mean all of the following now owned or existing or
----------
hereafter adopted or acquired by any Person: (a) all copyrights and general
intangibles of like nature (whether registered or unregistered), all
registrations and recordings thereof, and all applications in connection
therewith, including all registrations, recordings and applications in the
United States Copyright Office or in any similar office or agency of the United
States or any territory thereof, or any other country or any political
subdivision thereof; and (b) all extensions or renewals thereof.
"Credit Parties" shall mean Holdings, Borrower, Trademark Co., and
--------------
each of their respective Subsidiaries.
"Default" shall mean any event that, with the passage of time or
-------
notice or both, would, unless cured or waived, become an Event of Default.
"Default Rate" shall have the meaning assigned to it in Section
------------ -------
1.5(d).
"Disbursement Accounts" shall have the meaning assigned to it in Annex
--------------------- -----
C.
-
"Disclosure Schedules" shall mean the Schedules prepared by Borrower
--------------------
and denominated as Disclosure Schedules 1.4 through 6.7 in the Index to the
------------------------ ---
Agreement.
"Documents" shall mean any "documents," as such term is defined in the
---------
Code, now owned or hereafter acquired by any Person, wherever located.
"Dollars" or "$" shall mean lawful currency of the United States of
------- -
America.
"EBITDA" shall mean, with respect to any Person for any fiscal period,
------
without duplication, an amount equal to (a) consolidated net income of such
Person for such period, minus (b) the sum of (i) income tax credits, (ii)
interest income, (iii) gain from extraordinary items for such period, (iv) any
aggregate net gain (but not any aggregate net loss) during such period arising
from the sale, exchange or other disposition of capital assets by such Person
(including any fixed assets, whether tangible or intangible, all inventory sold
in conjunction with the disposition of fixed assets and all securities), and (v)
any other non-cash gains that have been added in determining consolidated net
income, in each case to the extent included in the calculation of consolidated
net income of such Person for such period in accordance with GAAP, but without
duplication, plus
A-5
(c) the sum of (i) any provision for income taxes, (ii) Interest Expense, (iii)
loss from extraordinary items for such period, (iv) the amount of non-cash
charges (including depreciation and amortization) for such period, (v) amortized
debt discount for such period, and (vi) the amount of any deduction to
consolidated net income as the result of any grant to any members of the
management of such Person of any Stock, in each case to the extent included in
the calculation of consolidated net income of such Person for such period in
accordance with GAAP, but without duplication. For purposes of this definition,
the following items shall be excluded in determining consolidated net income of
a Person: (A) the income (or deficit) of any other Person accrued prior to the
date it became a Subsidiary of, or was merged or consolidated into, such Person
or any of such Person's Subsidiaries; (B) the income (or deficit) of any other
Person (other than a Subsidiary) in which such Person has an ownership interest,
except to the extent any such income has actually been received by such Person
in the form of cash dividends or distributions; (C) the undistributed earnings
of any Subsidiary of such Person to the extent that the declaration or payment
of dividends or similar distributions by such Subsidiary is not at the time
permitted by the terms of any contractual obligation or requirement of law
applicable to such Subsidiary; (D) any restoration to income of any contingency
reserve, except to the extent that provision for such reserve was made out of
income accrued during such period; (E) any write-up of any asset; (F) any net
gain from the collection of the proceeds of life insurance policies; (G) any net
gain arising from the acquisition of any securities, or the extinguishment,
under GAAP, of any Indebtedness, of such Person; (H) in the case of a successor
to such Person by consolidation or merger or as a transferee of its assets, any
earnings of such successor prior to such consolidation, merger or transfer of
assets; and (I) any deferred credit representing the excess of equity in any
Subsidiary of such Person at the date of acquisition of such Subsidiary over the
cost to such Person of the investment in such Subsidiary.
"Environmental Laws" shall mean all applicable federal, state, local
------------------
and foreign laws, statutes, ordinances, codes, rules, standards and regulations,
now or hereafter in effect, and any applicable judicial or administrative
interpretation thereof, including any applicable judicial or administrative
order, consent decree, order or judgment, imposing liability or standards of
conduct for or relating to the regulation and protection of human health,
safety, the environment and natural resources (including ambient air, surface
water, groundwater, wetlands, land surface or subsurface strata, wildlife,
aquatic species and vegetation). Environmental Laws include the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980 (42 U.S.C.
(S)(S) 9601 et seq.) ("CERCLA"); the Hazardous Materials Transportation
-------
Authorization Act of 1994 (49 U.S.C. (S)(S) 5101 et seq.); the Federal
------
Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. (S)(S) 136 et seq.); the
------
Solid Waste Disposal Act (42 U.S.C. (S)(S) 6901 et seq.); the Toxic Substance
------
Control Act (15 U.S.C. (S)(S) 2601 et seq.); the Clean Air Act (42 U.S.C. (S)(S)
------
7401 et seq.); the Federal Water Pollution Control Act (33 U.S.C. (S)(S) 1251 et
------ --
seq.); the Occupational Safety and Health Act (29 U.S.C. (S)(S) 651 et seq.);
--- ------
and the Safe Drinking Water Act (42 U.S.C. (S)(S) 300(f) et seq.), and any and
------
all regulations promulgated thereunder, and all analogous state, local and
foreign counterparts or equivalents and any transfer of ownership notification
or approval statutes.
"Environmental Liabilities" shall mean, with respect to any Person,
-------------------------
all liabilities, obligations, responsibilities, response, remedial and removal
costs, investigation and feasibility study costs, capital costs, operation and
maintenance costs, losses, damages, punitive damages, property damages, natural
resource damages, consequential damages, treble damages, costs and expenses
(including all fees, disbursements and expenses of counsel, experts and
consultants), fines, penalties, sanctions and interest incurred as a result of
or related to any claim, suit, action, investigation, proceeding or demand by
any Person, whether based in contract, tort, implied or express warranty, strict
liability, criminal or civil statute or common law, including any arising under
or related to any
A-6
Environmental Laws, Environmental Permits, or in connection with any Release or
threatened Release or presence of a Hazardous Material whether on, at, in,
under, from or about or in the vicinity of any real or personal property.
"Environmental Permits" shall mean all permits, licenses,
---------------------
authorizations, certificates, approvals or registrations required by any
Governmental Authority under any Environmental Laws.
"Equipment" shall mean all "equipment," as such term is defined in the
---------
Code, now owned or hereafter acquired by any Person, wherever located including
all such Person's machinery and equipment, including processing equipment,
conveyors, machine tools, data processing and computer equipment with software
and peripheral equipment, and all engineering, processing and manufacturing
equipment, office machinery, furniture, materials, handling equipment, tools,
attachments, accessories, automotive equipment, trailers, trucks, forklifts,
molds, dies, stamps, motor vehicles, rolling stock and other equipment of every
kind and nature, trade fixtures and fixtures together with all additions and
accessions thereto, replacements therefor, all parts therefor, all substitutes
for any of the foregoing, fuel therefor, and all manuals, drawings,
instructions, warranties and rights with respect thereto, and all products and
proceeds thereof and condemnation awards and insurance proceeds with respect
thereto.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974
-----
and any regulations promulgated thereunder.
"ERISA Affiliate" shall mean, with respect to any Credit Party, any
---------------
trade or business (whether or not incorporated) that, together with such Credit
Party, are treated as a single employer within the meaning of Sections 414(b),
(c), (m) or (o) of the IRC.
"ERISA Event" shall mean, with respect to any Credit Party or any
-----------
ERISA Affiliate, (a) any event described in Section 4043(c) of ERISA with
respect to a Title IV Plan; (b) the withdrawal of any Credit Party or ERISA
Affiliate from a Title IV Plan subject to Section 4063 of ERISA during a plan
year in which it was a "substantial employer," as defined in Section 4001(a)(2)
of ERISA; (c) the complete or partial withdrawal of any Credit Party or any
ERISA Affiliate from any Multiemployer Plan; (d) the filing of a notice of
intent to terminate a Title IV Plan or the treatment of a plan amendment as a
termination under Section 4041 of ERISA; (e) the institution of proceedings to
terminate a Title IV Plan or Multiemployer Plan by the PBGC; (f) the failure by
any Credit Party or ERISA Affiliate to make when due required contributions to a
Multiemployer Plan or Title IV Plan unless such failure is cured within 30 days;
(g) any other event or condition that might reasonably be expected to constitute
grounds under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Title IV Plan or Multiemployer Plan or for the
imposition of liability under Section 4069 or 4212(c) of ERISA; (h) the
termination of a Multiemployer Plan under Section 4041A of ERISA or the
reorganization or insolvency of a Multiemployer Plan under Section 4241 or 4245
of ERISA; (i) the loss of a Qualified Plan's qualification or tax exempt status;
or (j) the termination of a Plan described in Section 4064 of ERISA.
"ESOP" shall mean a Plan that is intended to satisfy the requirements
----
of Section 4975(e)(7) of the IRC.
"Event of Default" shall have the meaning assigned to it in Section
---------------- -------
8.1.
---
A-7
"Facility Bond" shall mean those certain California Statewide
-------------
Communities Development Authority Weekly Adjustable/Fixed Rate Industrial
Development Revenue Bonds, Series 1995E (Peet's Coffee & Tea, Inc., Project),
the scheduled payments in connection with which are set forth in Disclosure
----------
Schedule (6.3).
--------------
"Fair Labor Standards Act" shall mean the provisions of the Fair Labor
------------------------
Standards Act, 29 U.S.C. (S)(S) 201 et seq.
------
"Federal Funds Rate" shall mean, for any day, a floating rate equal to
------------------
the weighted average of the rates on overnight federal funds transactions among
members of the Federal Reserve System, as determined by Lender in its sole
discretion, which determination shall be final, binding and conclusive (absent
manifest error).
"Federal Reserve Board" shall mean the Board of Governors of the
---------------------
Federal Reserve System.
"Fees" shall mean any and all fees payable to Lender pursuant to the
----
Agreement or any of the other Loan Documents.
"Financial Covenants" shall have the meaning assigned to it in Section
------------------- -------
6.10.
----
"Financial Statements" shall mean the consolidated income statements,
--------------------
statements of cash flows and balance sheets of Borrower delivered in accordance
with Section 3.4 and Annex E.
----------- -------
"Fiscal Month" shall mean any of the monthly accounting periods of
------------
Borrower.
"Fiscal Quarter" shall mean any of the quarterly accounting periods of
--------------
Borrower ending on March 31, June 30, and September 30 of each year, and a date
selected by Borrower and falling during the first week of January of the
following year.
"Fiscal Year" shall mean any of the annual accounting periods of
-----------
Borrower ending, with respect to each year, on a date selected by Borrower and
falling during the first week of January of the following year.
"Fixed Charges" shall mean, with respect to any Person for any fiscal
-------------
period, (a) the aggregate of all Interest Expense paid or accrued during such
period plus (b) scheduled payments of principal with respect to Indebtedness,
----
other than Term Loan B, during such period.
"Fixed Charge Coverage Ratio" shall mean, with respect to any Person
---------------------------
for any fiscal period, the ratio of (a) (i) EBITDA minus (ii) the sum of (x)
-----
Taxes for such fiscal period plus (y) Capital Expenditures for such fiscal
----
period, to (b) Fixed Charges. In computing Fixed Charges for any fiscal period,
--
interest and principal payments that are due within one week after the end of
that fiscal period, without duplication, shall be deemed to have been paid on
the last day of that fiscal period.
"Fixtures" shall mean all "fixtures," as such term is defined in the
--------
Code, now owned or hereafter acquired by any Person, wherever located.
"Funded Debt" shall mean, with respect to any Person, without
-----------
duplication, all Indebtedness of such Person for borrowed money evidenced by
notes, bonds, debentures or similar
A-8
evidences of Indebtedness that by its terms matures more than one year from, or
is directly or indirectly renewable or extendible at such Person's option under
a revolving credit or similar agreement obligating the lender or lenders to
extend credit over a period of more than one year from the date of creation
thereof, and specifically including Capital Lease Obligations, current
maturities of long-term debt, revolving credit and short-term debt extendible
beyond one year at the option of the debtor, and also including, in the case of
Borrower, the Obligations.
"GAAP" shall mean generally accepted accounting principles in the
----
United States of America as in effect from time to time consistently applied, as
such term is further defined in Annex G to the Agreement.
-------
"GE Capital" shall mean General Electric Capital Corporation, a New
----------
York corporation.
"General Intangibles" shall mean any "general intangibles," as such
-------------------
term is defined in the Code, now owned or hereafter acquired by any Person,
including all right, title and interest that such Person may now or hereafter
have in or under any Contracts, Licenses, Copyrights, Trademarks and Patents,
and all applications therefor and reissues, extensions or renewals thereof,
interests in partnerships, joint ventures and other business associations,
permits, inventions (whether or not patented or patentable), knowledge, know-
how, software, data bases, data, skill, expertise, experience, processes,
models, drawings, materials and records, Goodwill (including the goodwill
associated with any Trademark or Trademark License), all rights and claims in or
under insurance policies (including insurance for fire, damage, loss and
casualty, whether covering personal property, real property, tangible rights or
intangible rights, all liability, life, key man and business interruption
insurance, and all unearned premiums), uncertificated securities, choses in
action, deposit, checking and other bank accounts, rights to receive tax refunds
and other payments, rights to receive dividends, distributions, cash,
instruments and other property in respect of or in exchange for pledged shares
or other equity interests, rights of indemnification, all books and records,
correspondence, credit files, invoices and other papers, including all tapes,
cards, computer runs and other papers and documents in the possession or under
the control of such Person or any computer bureau or service company from time
to time acting for such Person.
"Goods" shall mean any "goods" as such term is defined in the Code,
-----
now owned or hereafter acquired by any Person.
"Goodwill" shall mean all goodwill, trade secrets, proprietary or
--------
confidential information, technical information, procedures, formulate, quality
control standards, designs, operating and training manuals, customer lists and
distribution agreements now or hereafter owned or acquired by any Person.
"Governmental Authority" shall mean any nation or government, any
----------------------
state or other political subdivision thereof, and any agency, department or
other entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Guaranteed Indebtedness" shall mean, as to any Person, any obligation
-----------------------
of such Person guaranteeing any indebtedness, lease, dividend, or other
obligation ("primary obligation") of any other Person (the "primary obligor") in
------------------ ---------------
any manner, including any obligation or arrangement of such Person to (a)
purchase or repurchase any such primary obligation, (b) advance or supply funds
(i) for the purchase or payment of any such primary obligation or (ii) to
maintain working capital or
A-9
equity capital of the primary obligor or otherwise to maintain the net worth or
solvency or any balance sheet condition of the primary obligor, (c) purchase
property, securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation, or (d) indemnify the owner of such primary
obligation against loss in respect thereof. The amount of any Guaranteed
Indebtedness at any time shall be deemed to be an amount equal to the lesser at
such time of (x) the stated or determinable amount of the primary obligation in
respect of which such Guaranteed Indebtedness is incurred and (y) the Revolving
Loan Commitment for which such Person may be liable pursuant to the terms of the
instrument embodying such Guaranteed Indebtedness or, if not stated or
determinable, the maximum reasonably anticipated liability (assuming full
performance) in respect thereof.
"Guaranties" shall mean, collectively, the Holdings Guaranty, the
----------
Continuing Guaranty executed by Trademark Co. in favor of Lender dated as of the
Closing Date, and any other guaranty executed by any Guarantor in favor of
Lender in respect of the Obligations.
"Guarantors" shall mean Holdings, Trademark Co., and each other
----------
Person, if any, that executes a guaranty or other similar agreement in favor of
Lender in connection with the transactions contemplated by the Agreement and the
other Loan Documents.
"Hazardous Material" shall mean any substance, material or waste that
------------------
is regulated by, or forms the basis of liability now or hereafter under, any
Environmental Laws, including any material or substance that is (a) defined as a
"solid waste," "hazardous waste," "hazardous material," "hazardous substance,"
"extremely hazardous waste," "restricted hazardous waste," "pollutant,"
"contaminant," "hazardous constituent," "special waste," "toxic substance" or
other similar term or phrase under any Environmental Laws, (b) petroleum or any
fraction or by-product thereof, asbestos, polychlorinated biphenyls (PCB's), or
any radioactive substance.
"Holdings" shall have the meaning ascribed thereto in the recitals to
--------
the Agreement.
"Holdings Guaranty" shall mean the Holdings Guaranty and Pledge
-----------------
Agreement of even date herewith executed by Holdings in favor of Lender, in
which Holdings pledges all Stock of its Subsidiaries and all promissory notes
evidencing loans and advances owing to or held by it, as the same may be
amended, supplemented, restated, or otherwise modified from time to time, in
accordance with the terms thereof.
"Indebtedness" shall mean, with respect to any Person, without
------------
duplication, (a) all indebtedness of such Person for borrowed money or for the
deferred purchase price of property payment for which is deferred six months or
more, but excluding obligations to trade creditors incurred in the ordinary
course of business that are not overdue by more than six months unless being
contested in good faith, (b) all reimbursement and other obligations with
respect to letters of credit, bankers' acceptances and surety bonds, whether or
not matured, (c) all obligations evidenced by notes, bonds, debentures or
similar instruments, (d) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (even though the rights and remedies of the seller or
lender under such agreement in the event of default are limited to repossession
or sale of such property), (e) all Capital Lease Obligations and the present
value (discounted at the Index Rate as in effect on the Closing Date) of future
rental payments under synthetic leases, (f) all obligations of such Person under
commodity purchase or option agreements or other commodity price hedging
arrangements, in each case whether contingent or matured, (g) all obligations of
such Person under any foreign exchange contract, currency swap
A-10
agreement, interest rate swap, cap or collar agreement or other similar
agreement or arrangement designed to alter the risks of that Person arising from
fluctuations in currency values or interest rates, in each case whether
contingent or matured, (h) all Indebtedness referred to above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien upon or in property or other assets
(including accounts and contract rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such Indebtedness,
and (i) the Obligations with respect to which such Person is liable.
"Indemnified Liabilities" shall have the meaning assigned to it in
-----------------------
Section 1.13.
"Index Rate" shall mean, for any day, a floating rate equal to the
----------
higher of (a) the rate publicly quoted from time to time by The Wall Street
---------------
Journal as the "base rate on corporate loans posted by at least 75% of the
-------
nation's 30 largest banks" (or, if The Wall Street Journal ceases quoting a base
-----------------------
rate of the type described, the highest per annum rate of interest published by
---------
the Federal Reserve Board in Federal Reserve statistical release H.15 (519)
entitled "Selected Interest Rates" as the Bank prime loan rate or its
equivalent), and (b) the Federal Funds Rate plus 50 basis points per annum.
---------
Each change in any interest rate provided for in the Agreement based upon the
Index Rate shall take effect at the time of such change in the Index Rate.
"Index Rate Loan" shall mean a Loan or portion thereof bearing
---------------
interest by reference to the Index Rate.
"Instruments" shall mean any "instrument," as such term is defined in
-----------
the Code, now owned or hereafter acquired by any Person, wherever located,
including all certificated securities, all certificates of deposit, and all
notes and other evidences of indebtedness, other than instruments that
constitute, or are a part of a group of writings that constitute, Chattel Paper.
"Intellectual Property" shall mean any and all Licenses, Patents,
---------------------
Copyrights, Trademarks and the Goodwill associated with any of the foregoing.
"Intellectual Property Collateral" shall mean all of the right, title
--------------------------------
and interest of any Credit Party, whether presently existing or hereafter
arising or acquired, in, to and under the following:
(a) each Patent owned and Patent application filed by such Person;
(b) each Patent License to which such Person is a party (or the
assignee of a party);
(c) each Trademark owned and Trademark application filed by such
Person;
(d) each Trademark License to which such Person is a party (or the
assignee of a party);
(e) each Copyright owned and Copyright application filed by such
Person;
(f) each Copyright License to which such Person is a party;
(g) the Goodwill associated with each Trademark and Trademark
application, and each of such Person's Trademarks licensed under any Trademark
License; and
A-11
(h) all Proceeds of the foregoing, including (i) any and all proceeds
of any insurance, indemnity, warranty or guaranty payable to any Person from
time to time with respect to any of the foregoing, (ii) any and all payments (in
any form whatsoever) made or due and payable to any Person from time to time in
connection with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the foregoing by any Governmental Authority (or
any Person acting under color of Governmental Authority), (iii) any claim of any
Person against third parties for (A) past, present or future infringement of any
Patent or Patent License, (B) past, present or future infringement of any
Copyright, Copyright License, (C) past, present or future infringement or
dilution of any Trademark or Trademark License, or (D) injury to the Goodwill
associated with any Trademark or Trademark License, (iv) any recoveries by any
Person against third parties with respect to any litigation or dispute
concerning any of the foregoing, and (v) any and all other amounts from time to
time paid or payable under or in connection with any of the foregoing, upon
disposition or otherwise.
"Interest Expense" shall mean, with respect to any Person for any
----------------
fiscal period, interest expense (whether cash or non-cash) of such Person
determined in accordance with GAAP for the relevant period ended on such date,
including interest expense with respect to any Funded Debt of such Person and
interest expense for the relevant period that has been capitalized on the
balance sheet of such Person.
"Interest Payment Date" shall mean (a) as to any Index Rate Loan, the
---------------------
first Business Day of each month while such Loan is outstanding, and (b) as to
any LIBOR Loan, the last day of the applicable LIBOR Period; provided that, in
--------
addition to the foregoing, each of (x) the date upon which all of the
Commitments have been terminated and the Loans have been paid in full and (y)
the Commitment Termination Date shall be deemed to be an "Interest Payment Date"
with respect to any interest that has then accrued under the Agreement.
"Inventory" shall mean any "inventory," as such term is defined in the
---------
Code, now owned or hereafter acquired by any Person, wherever located including
inventory, merchandise, goods and other personal property that are held by or on
behalf of such Person for sale or lease or are furnished or are to be furnished
under a contract of service, or that constitute raw materials, work in process,
finished goods, returned goods, or materials or supplies of any kind, nature or
description used or consumed or to be used or consumed in such Person's business
or in the processing, production, packaging, promotion, delivery or shipping of
the same, including other supplies.
"Investment Property" shall mean all "investment property," as such
-------------------
term is defined in Section 9115 of the Code in those jurisdictions in which such
definition has been adopted, now owned or hereafter acquired by any Person,
wherever located, including (a) all securities, whether certificated or
uncertificated, including stocks, bonds, interests in limited liability
companies, partnership interests, treasuries, certificates of deposit, and
mutual fund shares, (b) all securities entitlements of such Person, including
the rights to any securities account and the financial assets held by a
securities intermediary in such securities account and any free credit balance
or other money owing by any securities intermediary with respect to that
account, (c) all securities accounts of such Person, (d) all commodity contracts
held by such Person, and (e) all commodity accounts held by such Person.
"IRC" shall mean the Internal Revenue Code of 1986 and any regulations
---
promulgated thereunder.
A-12
"IRS" shall mean the Internal Revenue Service.
---
"L/C Issuer" shall have the meaning assigned to it in Annex B.
---------- -------
"L/C Sublimit" shall have the meaning assigned to it in Annex B.
------------ -------
"Lender" shall mean GE Capital.
------
"Letter of Credit Fee" shall have the meaning assigned to it in Annex
-------------------- -----
B.
-
"Letter of Credit Obligations" shall mean all out-standing obligations
----------------------------
incurred by Lender at the request of Borrower, whether direct or indirect,
contingent or other-wise, due or not due, in connection with the issuance of a
reimbursement agreement or guaranty by Lender with respect to any Letter of
Credit. The amount of such Letter of Credit Obligations shall equal the
Revolving Loan Commitment that may be payable by Lender thereupon or pursuant
thereto.
"Letters of Credit" shall mean commercial or standby letters of credit
-----------------
issued for the account of Borrower by any L/C Issuer, and bankers' acceptances
issued by Borrower, for which Lender has incurred Letter of Credit Obligations.
"LIBOR Business Day" shall mean a Business Day on which banks in the
------------------
city of London are generally open for interbank or foreign exchange
transactions.
"LIBOR Loan" shall mean a Loan or any portion thereof bearing interest
----------
by reference to the LIBOR Rate.
"LIBOR Period" shall mean, with respect to any LIBOR Loan, each period
------------
commencing on a LIBOR Business Day selected by Borrower pursuant to the
Agreement and ending one, two or three months thereafter, as selected by
Borrower's irrevocable notice to Lender as set forth in Section 1.5(e); provided
-------------- --------
that the foregoing provision relating to LIBOR Periods is subject to the
following:
(a) if any LIBOR Period would otherwise end on a day that is not a
LIBOR Business Day, such LIBOR Period shall be extended to the next
succeeding LIBOR Business Day unless the result of such extension would be
to carry such LIBOR Period into another calendar month in which event such
LIBOR Period shall end on the immediately preceding LIBOR Business Day;
(b) any LIBOR Period that would otherwise extend beyond the Commitment
Termination Date shall end two LIBOR Business Days prior to such date;
(c) any LIBOR Period that begins on the last LIBOR Business Day of a
calendar month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such LIBOR Period) shall end on the
last LIBOR Business Day of a calendar month;
(d) Borrower shall select LIBOR Periods so as not to require a payment
or prepayment of any LIBOR Loan during a LIBOR Period for such Loan; and
A-13
(e) Borrower shall select LIBOR Periods so that there shall be no more
than five separate LIBOR Loans in existence at any one time.
"LIBOR Rate" shall mean for each LIBOR Period, a rate of interest
----------
determined by Lender equal to:
(a) the offered rate for deposits in United States Dollars for the
applicable LIBOR Period that appears on Telerate Page 3750 as of 11:00 a.m.
(London time) on the second full LIBOR Business Day preceding the first day
of each LIBOR Period (unless such date is not a Business Day, in which
event the next succeeding Business Day will be used); divided by
----------
(b) a number equal to 1.0 minus the aggregate (but without
-----
duplication) of the rates (expressed as a decimal fraction) of reserve
requirements in effect on the day that is two LIBOR Business Days prior to
the beginning of such LIBOR Period (including basic, supplemental, marginal
and emergency reserves under any regulations of the Federal Reserve Board
or other Governmental Authority having jurisdiction with respect thereto,
as now and from time to time in effect) for Eurocurrency (currently
referred to as "Eurocurrency Liabilities" in Regulation D of the Federal
Reserve Board that are required to be maintained by a member bank of the
Federal Reserve System.
If such interest rates shall cease to be available from Telerate News
Service, the LIBOR Rate shall be determined from such financial reporting
service or other information as shall be mutually acceptable to Lender and
Borrower.
"License" shall mean any Copyright License, Patent License, Trademark
-------
License or other license of rights or interests now held or hereafter acquired
by any Person.
"Lien" shall mean any mortgage or deed of trust, pledge,
----
hypothecation, assignment, deposit arrangement, lien, charge, claim, security
interest, easement or encumbrance, or preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including any lease or title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of, or agreement to give, any financing statement perfecting a security interest
under the Code or comparable law of any jurisdiction).
"Litigation" shall have the meaning assigned to it in Section 3.13.
---------- ------------
"Loan Account" shall have the meaning assigned to it in Section 1.12.
------------ ------------
"Loan Documents" shall mean the Agreement, the Notes, the Collateral
--------------
Documents and all other agreements, instruments, documents and certificates
identified in the Schedule of Documents executed and delivered to, or in favor
of, Lender and including all other pledges, powers of attorney, consents,
assignments, contracts, notices, and all other written matter whether
heretofore, now or hereafter executed by or on behalf of any Credit Party, or
any employee of any Credit Party, and delivered to Lender in connection with the
Agreement or the transactions contemplated thereby. Any reference in the
Agreement or any other Loan Document to a Loan Document shall include all
appendices, exhibits or schedules thereto, and all amendments, restatements,
supplements or other modifications thereto, and shall refer to such Agreement or
Loan Documents, as applicable, as the same may be in effect at any and all times
such reference becomes operative.
A-14
"Loans" shall mean the Revolving Loan and the Term Loans.
-----
"Margin Stock" shall have the meaning assigned to it in Section 3.10.
------------ ------------
"Material Adverse Effect" shall mean a material adverse effect on (a)
-----------------------
the business, assets, operations, prospects or financial or other condition of
the Credit Parties considered as a whole, (b) Borrower's ability to pay any of
the Loans or any of the other Obligations in accordance with the terms of the
Agreement, (c) the Collateral or Lender's Liens on the Collateral or the
priority of such Liens, or (d) Lender's rights and remedies under the Agreement
and the other Loan Documents. Without limiting the generality of the foregoing,
any event or occurrence adverse to one or more Credit Parties that results or
could reasonably be expected to result in costs and/or liabilities and/or loss
of revenues, individually or in the aggregate to any Credit Party in any 30-day
period in excess of the lesser of $1,000,000 and 10% of Borrowing Availability
as of any date of determination shall be deemed to constitute a Material Adverse
Effect.
"Maximum Lawful Rate" shall have the meaning assigned to it in Section
------------------- -------
1.5(f).
------
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
------------------
Section 4001(a)(3) of ERISA, and to which any Credit Party or ERISA Affiliate is
making, is obligated to make or has made or been obligated to make,
contributions on behalf of participants who are or were employed by any of them.
"Net Borrowing Availability" shall mean as of any date of
--------------------------
determination, the lesser of (a) the Revolving Loan Commitment and (b) the
Borrowing Base, in each case minus the Revolving Loan then outstanding.
"Notes" shall mean the Revolving Note and the Term Notes,
-----
collectively.
"Notice of Conversion/Continuation" shall have the meaning assigned to
---------------------------------
it in Section 1.5(e).
--------------
"Notice of Revolving Credit Advance" shall have the meaning assigned
----------------------------------
to it in Section 1.1(a).
--------------
"Obligations" shall mean all loans, advances, debts, liabilities and
-----------
obligations for the performance of covenants, tasks or duties or for payment of
monetary amounts (whether or not such performance is then required or
contingent, or such amounts are liquidated or determinable) owing by any Credit
Party to Lender, and all covenants and duties regarding such amounts, of any
kind or nature, present or future, whether or not evidenced by any note,
agreement or other instrument, arising under the Agreement or any of the other
Loan Documents. This term includes all principal, interest (including all
interest that accrues after the commencement of any case or proceeding by or
against any Credit Party in bankruptcy, whether or not allowed in such case or
proceeding), Fees, Charges, expenses, attorneys' fees and any other sum
chargeable to any Credit Party under the Agreement or any of the other Loan
Documents.
"Overseas Agreements" shall have the meaning assigned to it in Section
------------------- -------
6.5.
---
"Patent, Trademark and Copyright Security Agreement" shall mean the
--------------------------------------------------
Patent, Trademark and Copyright Security Agreement made in favor of Lender by
each applicable Credit
A-15
Party, as the same may be amended, supplemented, restated, or otherwise modified
from time to time, in accordance with the terms thereof.
"Patent License" shall mean rights under any written agreement now
--------------
owned or hereafter acquired by any Person granting any right with respect to any
invention on which a Patent is in existence.
"Patents" shall mean all of the following in which any Person now
-------
holds or hereafter acquires any interest: (a) all letters patent of the United
States or of any other country, all registrations and recordings thereof, and
all applications for letters patent of the United States or of any other
country, including registrations, recordings and applications in the United
States Patent and Trademark Office or in any similar office or agency of the
United States or any territory thereof, or any other country, and (b) all
reissues, continuations, continuations-in-part, divisions or extensions thereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
----
"Pension Plan" shall mean a Plan described in Section 3(2) of ERISA.
------------
"Permitted Encumbrances" shall mean the following encumbrances: (a)
----------------------
Liens for taxes or assessments or other governmental Charges not yet due and
payable; (b) pledges or deposits of money securing statutory obligations under
workmen's compensation, unemployment insurance, social security or public
liability laws or similar legislation (excluding Liens under ERISA); (c) pledges
or deposits of money securing bids, tenders, contracts (other than contracts for
the payment of money) or leases to which any Credit Party is a party as lessee
made in the ordinary course of business; (d) inchoate and unperfected workers',
mechanics' or similar liens arising in the ordinary course of business, so long
as such Liens attach only to Equipment, Fixtures or Real Estate; (e) carriers',
warehousemen's, suppliers' or other similar possessory liens arising in the
ordinary course of business and securing liabilities in an outstanding aggregate
amount not in excess of $50,000 at any time, so long as such Liens attach only
to Inventory; (f) deposits securing, or in lieu of, surety, appeal or customs
bonds in proceedings to which any Credit Party is a party; (g) any attachment or
judgment lien not constituting an Event of Default under Section 8.1(j); (h)
--------------
zoning restrictions, easements, licenses, or other restrictions on the use of
any Real Estate or other minor irregularities in title (including leasehold
title) thereto, so long as the same do not materially impair the use, value, or
marketability of such Real Estate; (i) Liens existing on the Closing Date and
listed in Disclosure Schedule (6.7); presently existing or hereinafter created
-------------------------
Liens in favor of Lender; and (k) Liens created after the Closing Date by
conditional sale or other title retention agreements (including Capital Leases)
or in connection with purchase money Indebtedness with respect to Equipment and
Fixtures acquired by any Credit Party in the ordinary course of business,
involving the incurrence of any aggregate amount of purchase money Indebtedness
and Capital Lease Obligations of not more than $500,000 outstanding at any one
time for all such Liens (provided that such Liens attach only to the assets
--------
subject to such purchase money debt and such Indebtedness is incurred within 20
days following such purchase and does not exceed 100% of the purchase price of
the subject assets).
"Person" shall mean any individual, sole proprietorship, partnership,
------
joint venture, trust, unincorporated organization, association, corporation,
limited liability company, institution, public benefit corporation, other entity
or government (whether federal, state, county, city,
A-16
municipal, local, foreign, or otherwise, including any instrumentality,
division, agency, body or department thereof).
"Plan" shall mean, at any time, an "employee benefit plan," as defined
----
in Section 3(3) of ERISA, that any Credit Party or any ERISA Affiliate
maintains, contributes to or has an obligation to contribute to, or has
maintained, contributed to or had an obligation to contribute to at any time
within the last seven years, on behalf of participants who are or were employed
by any Credit Party or any ERISA Affiliate.
"Pledge Agreements" shall mean the Borrower Pledge Agreement, the
-----------------
Holdings Guaranty, and any other pledge agreements entered into after the
Closing Date by any Credit Party (as required by the Agreement or any other Loan
Document).
"Prior Lender" shall mean Comerica Bank-California.
------------
"Prior Lender Obligations" shall mean all Indebtedness of any Credit
------------------------
Party or any Subsidiary of any Credit Party arising under or related to the
Credit Agreement dated as of December 16, 1998, by and between Borrower and
Prior Lender, or any document, instrument, or agreement executed or delivered in
connection therewith, as any of the same may have been amended, restated, or
otherwise modified from time to time.
"Private Placement" shall mean the issuance of Stock or debt
-----------------
securities pursuant to one or more exemptions from registration set forth in the
Securities Act or the Securities Exchange Act.
"Proceeds" shall mean "proceeds," as such term is defined in the Code,
--------
including (a) any and all proceeds of any insurance, indemnity, warranty or
guaranty payable to any Person from time to time with respect to any of the
Collateral, (b) any and all payments (in any form whatsoever) made or due and
payable to any Person from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of the
Collateral by any Governmental Authority (or any Person acting under color of
governmental authority), (c) any claim of any Person against third parties (i)
for past, present or future infringement of any Patent or Patent License, or
(ii) for past, present or future infringement or dilution of any Copyright,
Copyright License, Trademark or Trademark License, or for injury to the Goodwill
associated with any Trademark or Trademark License, (d) any recoveries by any
Person against third parties with respect to any litigation or dispute
concerning any of the Collateral, and (e) any and all other amounts from time to
time paid or payable under or in connection with any of the Collateral, upon
disposition or otherwise.
"Projections" shall mean Borrower's forecasted consolidated: (a)
-----------
balance sheets; (b) profit and loss statements; (c) cash flow statements; and
(d) capitalization statements, all prepared on a basis consistent with the
historical Financial Statements of Borrower, together with appropriate
supporting details and a statement of underlying assumptions.
"Public Offering" shall mean a firm underwritten public offering of
---------------
common stock registered on form ▇-▇, ▇-▇ or S-3 under the Securities Act by a
nationally- recognized investment banking firm, and after giving effect to which
the issuer shall be qualified for listing on the NASDAQ National Market, the
American Stock Exchange or the New York Stock Exchange.
A-17
"Qualified Plan" shall mean a Pension Plan that is intended to be tax-
--------------
qualified under Section 401(a) of the IRC.
"Real Estate" shall have the meaning assigned to it in Section 3.6.
----------- -----------
"Refinancing" shall mean the repayment in full by Borrower of the
-----------
Prior Lender Obligations on the Closing Date.
"Related Transactions" shall mean the initial borrowing under the
--------------------
Revolving Loan and the Term Loans on the Closing Date, the Refinancing, the
substitution of the Letter of Credit in connection with the Facility Bond, and
the payment of all fees, costs and expenses associated with all of the foregoing
and the execution and delivery of all of the Related Transactions Documents.
"Related Transactions Documents" shall mean the Loan Documents, and
------------------------------
all other documents executed or delivered in connection with the Related
Transactions.
"Release" shall mean any release, threatened release, spill, emission,
-------
leaking, pumping, pouring, emitting, emptying, escape, injection, deposit,
disposal, discharge, dispersal, dumping, leaching or migration of Hazardous
Material in the indoor or outdoor environment, including the movement of
Hazardous Material through or in the air, soil, surface water, ground water or
property.
"Reserves" shall mean, with respect to the Borrowing Base of Borrower,
--------
(a) reserves established pursuant to Section 5.4(c) and Section 5.9, (b)
-------------- -----------
reserves established to ensure the payment of accrued Interest Expenses or
Indebtedness, and (c) such other reserves against Borrowing Availability of
Borrower that Lender may establish from time to time with respect to contingent
liabilities that would be required, consistent with GAAP, to be reported in or
in a footnote to an audited financial statement of one or more Credit Parties.
"Restricted Payment" shall mean, with respect to any Person: (a) the
------------------
declaration or payment of any dividend or the incurrence of any liability to
make any other payment or distribution of cash or other property or assets in
respect of such Person's Stock; (b) any payment on account of the purchase,
redemption, defeasance, sinking fund or other retirement of such Person's Stock
or any other payment or distribution made in respect thereof, either directly or
indirectly; (c) any payment or prepayment of principal of, premium, if any, or
interest, fees or other charges on or with respect to, and any redemption,
purchase, retirement, defeasance, sinking fund or similar payment and any claim
for rescission with respect to, any Subordinated Debt of such Person; (d) any
payment made to redeem, purchase, repurchase or retire, or to obtain the
surrender of, any outstanding warrants, options or other rights to acquire Stock
of such Person now or hereafter outstanding; (e) any payment of a claim for the
rescission of the purchase or sale of, or for material damages arising from the
purchase or sale of, any shares of such Person's Stock or of a claim for
reimbursement, indemnification or contribution arising out of or related to any
such claim for damages or rescission; (f) any payment, loan, contribution, or
other transfer of funds or other property to any Stockholder of such Person
other than payments of compensation in the ordinary course of business to
stockholders who are employees of such Person; and (g) any payment of management
fees (or other fees of a similar nature) by such Person to any Stockholder of
such Person or its Affiliates.
"Retiree Welfare Plan" shall mean, at any time, a Welfare Plan that
--------------------
provides for continuing coverage or benefits for any participant or any
beneficiary of a participant after such
A-18
participant's termination of employment, other than continuation coverage
provided pursuant to Section 4980B of the IRC and at the sole expense of the
participant or the beneficiary of the participant.
"Revolving Credit Advance" shall have the meaning assigned to it in
------------------------
Section 1.1(a)(i).
-----------------
"Revolving Loan" shall mean, at any time, (a) the aggregate amount of
--------------
Revolving Credit Advances outstanding to Borrower, plus (b) the aggregate Letter
of Credit Obligations incurred on behalf of Borrower.
"Revolving Loan Commitment" shall mean commitment of Lender to make
-------------------------
Revolving Credit Advances or incur Letter of Credit Obligations, which
commitment shall be Fifteen Million Dollars ($15,000,000) on the Closing Date,
as such amount may be adjusted, if at all, from time to time in accordance with
the Agreement.
"Revolving Note" shall have the meaning assigned to it in Section
-------------- -------
1.1(a)(ii).
----------
"Schedule of Documents" shall mean the schedule, including all
---------------------
appendices, exhibits or schedules thereto, listing certain documents and
information to be delivered in connection with the Agreement, the other Loan
Documents and the transactions contemplated thereunder, substantially in the
form attached hereto as Annex D.
-------
"Section 5.4 Remedies" shall have the meaning assigned to it in
--------------------
Section 5.4(d).
--------------
"Securities Act" shall mean the provisions of the Securities Act of
--------------
1933, 15 U.S.C. Sections 77a et seq.
-- ---
"Securities Exchange Act" shall mean the provisions of the Securities
-----------------------
Exchange Act of 1934, 15 U.S.C. Sections 78 et seq.
------
"Security Agreement" shall mean the Security Agreement of even date
------------------
herewith entered into by and among Lender and each Credit Party and other Person
signatory thereto, as the same may be amended, supplemented, restated, or
otherwise modified from time to time, in accordance with the terms thereof.
"Senior Funded Debt" shall mean, as of any date of determination, (a)
------------------
Borrower's Funded Debt at such time, minus (b) Borrower's Funded Debt in
-----
connection with Term Loan B.
"Solvent" shall mean, with respect to any Person on a particular date,
-------
that on such date (a) the fair value of the property of such Person is greater
than the total amount of liabilities, including contingent liabilities, of such
Person; (b) the present fair salable value of the assets of such Person is not
less than the amount that will be required to pay the probable liability of such
Person on its debts as they become absolute and matured; (c) such Person does
not intend to, and does not believe that it will, incur debts or liabilities
beyond such Person's ability to pay as such debts and liabilities mature; and
(d) such Person is not engaged in a business or transaction, and is not about to
engage in a business or transaction, for which such Person's property would
constitute an unreasonably small capital. The amount of contingent liabilities
(such as litigation, guaranties and pension plan liabilities) at any time shall
be computed as the amount that, in light of all the facts and
A-19
circumstances existing at the time, represents the amount that can reasonably be
expected to become an actual or matured liability.
"Stock" shall mean all shares, options, warrants, general or limited
-----
partnership interests or other equivalents (regardless of how designated) of or
in a corporation, partnership or equivalent entity whether voting or nonvoting,
including common stock, preferred stock or any other "equity security" (as such
term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated
by the Securities and Exchange Commission under the Securities Exchange Act.
"Stockholder" shall mean, with respect to any Person, each holder of
-----------
Stock of such Person.
"Subsidiary" shall mean, with respect to any Person, (a) any
----------
corporation of which an aggregate of more than 50% of the outstanding Stock
having ordinary voting power to elect a majority of the board of directors of
such corporation (irrespective of whether, at the time, Stock of any other class
or classes of such corporation shall have or might have voting power by reason
of the happening of any contingency) is at the time, directly or indirectly,
owned legally or beneficially by such Person or one or more Subsidiaries of such
Person, or with respect to which any such Person has the right to vote or
designate the vote of 50% or more of such Stock whether by proxy, agreement,
operation of law or otherwise, and (b) any partnership or limited liability
company in which such Person or one or more Subsidiaries of such Person shall
have an interest (whether in the form of voting or participation in profits or
capital contribution) of more than 50% or of which any such Person is a general
partner or may exercise the powers of a general partner.
"Taxes" shall mean taxes, levies, imposts, deductions, Charges or
-----
withholdings, and all liabilities with respect thereto, directly or indirectly
arising from or related to any activity, business, or assets of any Credit Party
or the relationship between Lender and any Credit Party arising from or related
to any of the Loan Documents, excluding taxes imposed on or measured by the net
income of Lender by the jurisdictions under the laws of which Lender is
organized or by any political subdivision thereof.
"Term Loans" shall have the meaning assigned to it in Section
---------- -------
1.1(b)(i).
---------
"Term Loan A Commitment" shall mean the commitment of Lender to make
----------------------
Term Loan A, which commitment shall be Seven Million Dollars ($7,000,000) on the
Closing Date.
"Term Loan A Note" shall have the meaning assigned to it in Section
---------------- -------
1.1(b)(i).
---------
"Term Loan B Commitment" shall mean the commitment of Lender to make
----------------------
Term Loan B, which commitment shall be Eight Million Dollars ($8,000,000) on the
Closing Date.
"Term Loan B Note" shall have the meaning assigned to it in Section
---------------- -------
1.1(b)(i).
---------
"Term Loan B Repayment Date" shall mean the date on which the entire
--------------------------
principal amount of Term Loan B, together with all accrued interest thereon, has
been fully and finally paid.
"Term Loan Commitment" shall mean, collectively, the Term Loan A
--------------------
Commitment and the Term Loan B Commitment.
"Term Notes" shall have the meaning assigned to it in Section
---------- -------
1.1(b)(i).
---------
A-20
"Termination Date" shall mean the date on which (a) the Loans have
----------------
been indefeasibly repaid in full, (b) all other Obligations under the Agreement
and the other Loan Documents have been completely discharged, (c) Letter of
Credit Obligations have been terminated, replaced, guaranteed or cash
collateralized in accordance with Annex B, and (d) Borrower shall not have any
-------
further right to borrow any monies under the Agreement.
"Title IV Plan" shall mean a Pension Plan, as defined in Section 3 (2)
-------------
of ERISA (other than a Multiemployer Plan) that is covered by Title IV of ERISA,
and that any Credit Party or ERISA Affiliate maintains, contributes to or has an
obligation to contribute to, or has maintained, contributed to or had an
obligation to contribute to at any time within the last seven years, on behalf
of participants who are or were employed by any of them.
"Trademark Co." shall have the meaning assigned thereto in the
-------------
preamble to the Agreement.
"Trademark License" shall mean rights under any written agreement now
-----------------
owned or hereafter acquired by any Person granting any right to use any
Trademark.
"Trademarks" shall mean all of the following now owned or existing or
----------
hereafter adopted or acquired by any Person: (a) all trademarks, trade names,
corporate names, business names, trade styles, service marks, logos, other
source or business identifiers, prints and labels on which any of the foregoing
have appeared or appear, designs and general intangibles of like nature (whether
registered or unregistered) all registrations and recordings thereof, and all
applications in connection therewith, including registrations, recordings and
applications in the United States Patent and Trademark Office or in any similar
office or agency of the United States, any state or territory thereof, or any
other country or any political subdivision thereof; (b) all extensions or
renewals thereof; and (c) all goodwill associated with or symbolized by any of
the foregoing.
"Trailing 12 Fiscal Month EBITDA" shall mean, as of any date of
-------------------------------
determination, with respect to any Person, EBITDA of such Person (on a
consolidated basis) for the period consisting of the 12 consecutive Fiscal
Months or months, as the case may be, ending with their most-recently completed
Fiscal Month or month.
"Unfunded Pension Liability" shall mean, at any time, the aggregate
--------------------------
amount, if any, of the sum of (a) the amount by which the present value of all
accrued benefits under each Title IV Plan exceeds the fair market value of all
assets of such Title IV Plan allocable to such benefits in accordance with Title
IV of ERISA, all determined as of the most recent valuation date for each such
Title IV Plan using the actuarial assumptions for funding purposes in effect
under such Title IV Plan, and (b) for a period of five years following a
transaction which might reasonably be expected to be covered by Section 4069 of
ERISA, the liabilities (whether or not accrued) that could be avoided by any
Credit Party or any ERISA Affiliate as a result of such transaction.
"WBG" shall mean The West Bertona Group, Inc., a Washington
---
corporation.
"Welfare Plan" shall mean a Plan described in Section 3(1) of ERISA.
------------ ------------
"Year 2000 Date-Sensitive System/Component" shall mean, as to any
-----------------------------------------
Person, any system software, network software, applications software, data base,
computer file, embedded microchip, firmware or hardware that accepts, creates,
manipulates, sorts, sequences, calculates,
A-21
compares or outputs calendar-related data accurately; such systems and
components shall include, without limitation, mainframe computers, file
server/client systems, computer workstations, routers, hubs, other network-
related hardware, and other computer-related software, firmware or hardware and
information processing and delivery systems of any kind and telecommunications
systems and other communications processors, security systems, alarms, elevators
and HVAC systems.
"Year 2000 Problems" shall mean, with respect to each Credit Party,
------------------
limitations on the capacity or readiness of any such Credit Party's Year 2000
Date-Sensitive Systems/Components to accurately accept, create, manipulate,
sort, sequence, calculate, compare or output calendar date information with
respect to calendar year 1999 or any subsequent calendar year beginning on or
after January 1, 2000 (including leap year computations), including exchanges of
information among Year 2000 Date-Sensitive Systems/Components of the Credit
Parties and exchanges of information among the Credit Parties and Year 2000
Date-Sensitive Systems/Components of all Persons with whom any Credit Party
exchanges data electronically in the ordinary course of business (including
customers, suppliers, third-party vendors, subcontractors, processors-
converters, shippers and warehousemen), and functionality of peripheral
interfaces, firmware and embedded microchips.
Rules of construction with respect to accounting terms used in the
Agreement or any of the other Loan Documents shall be as set forth in Annex G.
-------
All other undefined terms contained in any of the Loan Documents shall, unless
the context indicates otherwise, have the meanings provided for by the Code as
in effect in the State of California to the extent the same are used or defined
therein. Unless otherwise specified, reference in the Agreement or any of the
Appendices to a section, subsection or clause refer to such Section, subsection
or clause as contained in the Agreement. The words "herein," "hereof" and
"hereunder" and other words of similar import refer to the Agreement as a whole,
including all Annexes, Exhibits and Schedules, as the same may from time to time
be amended, restated, modified or supplemented, and not to any particular
section, subsection or clause contained in the Agreement or any such Annex,
Exhibit or Schedule.
Wherever from the context it appears appropriate, each term stated in
either the singular or plural shall include the singular and the plural, and
pronouns stated in the masculine, feminine or neuter gender shall include the
masculine, feminine and neuter genders. The words "including", "includes" and
"include" shall be deemed to be followed by the words "without limitation"; the
word "or" is not exclusive; references to Persons include their respective
successors and assigns (to the extent and only to the extent permitted by the
Loan Documents) or, in the case of governmental Persons, Persons succeeding to
the relevant functions of such Persons; and all references to statutes and
related regulations shall include any amendments of the same and any successor
statutes and regulations. Whenever any provision in any Loan Document refers to
the knowledge (or an analogous phrase) of any Credit Party, such words are
intended to signify that such Credit Party has actual knowledge or awareness of
a particular fact or circumstance or that such Credit Party, if it had exercised
reasonable diligence, would have known or been aware of such fact or
circumstance.
A-22
ANNEX B (Section 1.2)
-----------
to
CREDIT AGREEMENT
----------------
LETTERS OF CREDIT
-----------------
(a) Issuance. Subject to the terms and conditions of the Agreement,
--------
Lender agrees to incur from time to time prior to the Commitment Termination
Date, upon the request of Borrower and for Borrower's account, Letter of Credit
Obligations by causing Letters of Credit to be issued (by a bank or other
legally authorized Person selected by or acceptable to Lender in its sole
discretion (each, an "L/C Issuer")) for Borrower's account and guaranteed by
----------
Lender; provided, that the aggregate amount of all such Letter of Credit
--------
Obligations shall not at any time exceed the least of (i) Three Million Dollars
($3,000,000) (the "L/C Sublimit"), (ii) the Revolving Loan Commitment less the
------------
aggregate outstanding principal balance of the Revolving Credit Advances, and
(iii) the Borrowing Base less the aggregate outstanding principal balance of the
Revolving Credit Advances. Except as may be otherwise required by a
Governmental Authority in connection with the Facility Bond, no such Letter of
Credit shall have an expiry date that is more than one year following the date
of issuance thereof. Lender shall be under no obligation to incur Letter of
Credit Obligations in respect of any Letter of Credit having an expiry date that
is later than the Commitment Termination Date.
(b) Revolving Credit Advances Automatic. In the event that Lender
-----------------------------------
shall make any payment on or pursuant to any Letter of Credit Obligation, such
payment shall then be deemed automatically to constitute a Revolving Credit
Advance to Borrower under Section 1.1(a) regardless of whether a Default or
--------------
Event of Default shall have occurred and be continuing and notwithstanding
Borrower's failure to satisfy the conditions precedent set forth in Section 2.
---------
(c) Cash Collateral.
---------------
(i) If Borrower is required to provide cash collateral for any
Letter of Credit Obligations pursuant to the Agreement prior to the Commitment
Termination Date, Borrower will pay to Lender cash or cash equivalents
acceptable to Lender ("Cash Equivalents") in an amount equal to 105% of the
----------------
Revolving Loan Commitment then available to be drawn under each applicable
Letter of Credit outstanding for the benefit of Borrower. Such funds or Cash
Equivalents shall be held by Lender in a cash collateral account (the "Cash
----
Collateral Account") maintained at a bank or financial institution acceptable to
------------------
Lender. The Cash Collateral Account shall be in the name of Borrower, and shall
be pledged to, and subject to the control of, Lender in a manner satisfactory to
Lender. Borrower hereby pledges and grants to Lender a security interest in all
such funds and Cash Equivalents held in the Cash Collateral Account from time to
time and all proceeds thereof, as security for the payment of all amounts due in
respect of the Letter of Credit Obligations and other Obligations, whether or
not then due. The Agreement, including this Annex B, shall constitute a security
-------
agreement under applicable law.
(ii) If any Letter of Credit Obligations, whether or not then
due and payable, shall for any reason be outstanding on the Commitment
Termination Date, Borrower shall either (A) provide cash collateral therefor in
the manner described above, (B) cause all such Letters of Credit and guaranties
thereof to be cancelled and returned, or (C) deliver a stand-by letter (or
letters) of credit in guarantee of such Letter of Credit Obligations, which
stand-by letter (or letters) of
B-1
credit shall be of like tenor and duration (plus 30 additional days) as, and in
an amount equal to 105% of the aggregate maximum amount then available to be
drawn under, the Letters of Credit to which such outstanding Letter of Credit
Obligations relate and shall be issued by a Person, and shall be subject to such
terms and conditions, as are to be satisfactory to Lender in its sole
discretion.
(iii) From time to time after funds are deposited in the Cash
Collateral Account by Borrower, whether before or after the Commitment
Termination Date, Lender may apply such funds or Cash Equivalents then held in
the Cash Collateral Account to the payment of any amounts, and in such order as
Lender may elect, as shall be or shall become due and payable by Borrower to
Lender with respect to such Letter of Credit Obligations of Borrower and, upon
the satisfaction in full of all Letter of Credit Obligations of Borrower, to any
other Obligations of Borrower then due and payable.
(iv) No Borrower nor any Person claiming on behalf of or
through Borrower shall have any right to withdraw any of the funds or Cash
Equivalents held in the Cash Collateral Account, except that upon the
termination of all Letter of Credit Obligations and the payment of all amounts
payable by Borrower to Lender in respect thereof, any funds remaining in the
Cash Collateral Account shall be applied to other Obligations then due and owing
and upon payment in full of such Obligations, any remaining amount shall be paid
to Borrower or as otherwise required by law.
(d) Fees and Expenses. Borrower agrees to pay (i) to Lender, as
-----------------
compensation to Lender for Letter of Credit Obligations incurred hereunder, (A)
all costs and expenses incurred by Lender on account of such Letter of Credit
Obligations, and (B) for each month during which any Letter of Credit Obligation
shall remain outstanding, a fee (the "Letter of Credit Fee") in an amount equal
--------------------
to one and one-half percent (1.5%) per annum multiplied by the daily average of
--------- -------------
the maximum amount available from time to time to be drawn under the applicable
Letter of Credit during such month which fee shall be paid to Lender in arrears
on the first day of each month and on the Commitment Termination Date, and (ii)
to any L/C Issuer, on demand, such fees (including all per annum fees), charges
---------
and expenses of such L/C Issuer in respect of the issuance, negotiation,
acceptance, amendment, transfer and payment of such Letter of Credit or
otherwise payable pursuant to the application and related documentation under
which such Letter of Credit is issued.
(e) Request for Incurrence of Letter of Credit Obligations. Borrower
------------------------------------------------------
shall give Lender at least three Business Days' prior written notice requesting
the incurrence of any Letter of Credit Obligation, specifying the date such
Letter of Credit Obligation is to be incurred, identifying the beneficiary and
describing the nature of the transactions proposed to be supported thereby. The
notice shall be accompanied by the form of the Letter of Credit (which shall be
acceptable to the L/C Issuer) to be guaranteed and, to the extent not previously
delivered to Lender, copies of all agreements between Borrower and the L/C
Issuer pertaining to the issuance of Letters of Credit. Notwithstanding
anything contained herein to the contrary, Letter of Credit applications by
Borrower and approvals by Lender and the L/C Issuer may be made and transmitted
pursuant to electronic codes and security measures mutually agreed upon and
established by and among Borrower, Lender and the L/C Issuer.
(f) Obligation Absolute. The obligation of Borrower to reimburse
-------------------
Lender for payments made with respect to any Letter of Credit Obligation shall
be absolute, unconditional and irrevocable, without necessity of presentment,
demand, protest or other formalities. Such obligations
B-2
of Borrower shall be paid strictly in accordance with the terms hereof under all
circumstances including the following:
(i) any lack of validity or enforceability of any Letter of
Credit or the Agreement or the other Loan Documents or any other agreement;
(ii) the existence of any claim, setoff, defense or other right
that Borrower or any of its Affiliates may at any time have against a
beneficiary or any transferee of any Letter of Credit (or any Persons or
entities for whom any such transferee may be acting), Lender, or any other
Person, whether in connection with the Agreement, the Letter of Credit, the
transactions contemplated herein or therein or any unrelated transaction
(including any underlying transaction between Borrower or any of its Affiliates
and the beneficiary for which the Letter of Credit was procured);
(iii) any draft, demand, certificate or any other document
presented under any Letter of Credit proving to be forged, fraudulent, invalid
or insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(iv) payment by Lender (except as otherwise expressly provided
in paragraph (g)(ii)(C) below) or any L/C Issuer under any Letter of Credit or
----------------------
guaranty thereof against presentation of a demand, draft or certificate or other
document that does not comply with the terms of such Letter of Credit or such
guaranty;
(v) any other circumstance or event whatsoever that is similar
to any of the foregoing; or
(vi) the fact that a Default or an Event of Default shall have
occurred and be continuing.
(g) Indemnification; Nature of Lender's Duties.
------------------------------------------
(i) In addition to amounts payable as elsewhere provided in the
Agreement, Borrower hereby agrees to pay and to protect, indemnify, and save
Lender harmless from and against any and all claims, demands, liabilities,
damages, losses, costs, charges and expenses (including attorneys' fees and
allocated costs of internal counsel) that Lender may incur or be subject to as a
consequence, direct or indirect, of (A) the issuance of any Letter of Credit or
guaranty thereof, or (B) the failure of Lender or of any L/C Issuer to honor a
demand for payment under any Letter of Credit or guaranty thereof as a result of
any act or omission, whether rightful or wrongful, of any present or future de
--
jure or de facto government or Governmental Authority, in each case other than
---- --------
to the extent solely as a result of the gross negligence or willful misconduct
of Lender (as finally determined by a court of competent jurisdiction).
(ii) As between Lender and Borrower, Borrower assumes all risks
of the acts and omissions of, or misuse of any Letter of Credit by,
beneficiaries of any Letter of Credit. In furtherance and not in limitation of
the foregoing, to the fullest extent permitted by law, Lender shall not be
responsible for: (A) the form, validity, sufficiency, accuracy, genuineness or
legal effect of any document issued by any party in connection with the
application for and issuance of any Letter of Credit, even if it should in fact
prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent
or forged; (B) the validity or sufficiency of any instrument transferring or
assigning or
B-3
purporting to transfer or assign any Letter of Credit or the rights or benefits
thereunder or proceeds thereof, in whole or in part, that may prove to be
invalid or ineffective for any reason; (C) failure of the beneficiary of any
Letter of Credit to comply fully with conditions required in order to demand
payment under such Letter of Credit; provided, that in the case of any payment
--------
by Lender under any Letter of Credit or guaranty thereof, Lender shall be liable
to the extent such payment was made solely as a result of its gross negligence
or willful misconduct (as finally determined by a court of competent
jurisdiction) in determining that the demand for payment under such Letter of
Credit or guaranty thereof complies on its face with any applicable requirements
for a demand for payment under such Letter of Credit or guaranty thereof; (D)
errors, omissions, interruptions or delays in transmission or delivery of any
messages, by mail, cable, telegraph, telex or otherwise, whether or not they may
be in cipher; (E) errors in interpretation of technical terms; (F) any loss or
delay in the transmission or otherwise of any document required in order to make
a payment under any Letter of Credit or guaranty thereof or of the proceeds
thereof; (G) the credit of the proceeds of any drawing under any Letter of
Credit or guaranty thereof; and (H) any consequences arising from causes beyond
the control of Lender. None of the above shall affect, impair, or prevent the
vesting of any of Lender's rights or powers hereunder or under the Agreement.
(iii) Nothing contained herein shall be deemed to limit or to
expand any waivers, covenants or indemnities made by Borrower in favor of any
L/C Issuer in any letter of credit application, reimbursement agreement or
similar document, instrument or agreement between Borrower and such L/C Issuer.
B-4
ANNEX C (Section 1.8)
-----------
to
CREDIT AGREEMENT
----------------
CASH MANAGEMENT SYSTEMS
-----------------------
Credit Parties shall, and shall cause each of their Subsidiaries to,
establish and maintain the cash management systems described below:
(a) On or before [_________ __], 2000 and until the Termination Date,
Borrower shall have established and maintain (i) blocked accounts in Borrower's
name in connection with Borrower's retail store operations (collectively, the
"Retail Blocked Accounts") with one or more of the banks set forth in Disclosure
----------------------- ----------
Schedule (3.19) as maintaining such accounts, for the collection of receivables
---------------
and other items (other than credit card receivables of such Borrower), into
which all cash, checks, drafts or other similar items of payment relating to or
constituting payments made in respect of any and all Collateral shall be
deposited promptly, and in any event no later than the first Business Day after
the date of receipt thereof. Each bank maintaining a Retail Blocked Account
shall have entered in a tri-party blocked account agreement with Lender and
Borrower, in form and substance acceptable to Lender (collectively, "Retail
------
Blocked Account Agreements").
--------------------------
(b) On or before the Closing Date and until the Termination Date,
Borrower shall (i) establish a blocked concentration account in Borrower's name
(the "Concentration Account"), for the collection of credit card receivables of
---------------------
such Borrower and for aggregating collections received in the Retail Blocked
Accounts of Borrower, at the bank or banks designated as the Concentration
Account bank for Borrower in Disclosure Schedule (3.19), which bank shall be
--------------------------
satisfactory to Lender (the "Concentration Account Bank"), and (ii) deposit or
--------------------------
cause to be deposited into the Concentration Account promptly, and in any event
no later than the first Business Day after the date of receipt thereof, all
cash, checks, drafts or other similar items of payment relating to or
constituting payments made in respect of any and all Collateral and not
otherwise deposited in a Retail Blocked Account. The Concentration Account Bank
shall have entered into a tri-party blocked account agreement with Lender and
Borrower, in form and substance acceptable to Lender (the "Concentration Blocked
---------------------
Account Agreement").
-----------------
(c) On or before the Closing Date and until the Termination Date,
Borrower shall have established and maintain, in its name, an account (the
"Master Disbursement Account") at the bank identified in Disclosure Schedule
--------------------------- -------------------
(3.19) as maintaining such account, into which Lender shall, from time to time,
------
deposit proceeds of Revolving Credit Advances made to such Borrower pursuant to
Section 1.1 for use by such Borrower solely in accordance with the provisions of
-----------
Section 1.4. Borrower shall transfer amounts received into its Master
-----------
Disbursement Account into (i) one or more accounts (collectively, the
"Disbursement Accounts") established by Borrower, in its name, at the banks
----------------------
identified in Disclosure Schedule (3.19) as maintaining Disbursement Accounts,
--------------------------
which banks shall be acceptable to Lender, or (ii) the Collection Account.
Borrower shall not, and shall not cause or permit any Credit Party or Subsidiary
thereof to, accumulate or maintain cash in the Master Disbursement Account, any
Disbursement Account or any payroll account as of any date of determination in
excess of checks outstanding against such account as of such date and amounts
necessary to meet minimum balance requirements, except as otherwise provided in
any tri-party blocked account agreement covering any such account. The banks at
which the Master Disbursement Accounts and Disbursement Accounts are held shall
have entered into a tri-party pledged account
C-1
agreement with Lender and Borrower, in form and substance acceptable to Lender
(the "Pledged Account Agreements").
(d) Each Retail Blocked Account Agreement, Concentration Blocked
Account Agreement, and each Pledged Account Agreement shall provide, among other
things, that the bank executing such agreement has no rights of setoff or
recoupment or any other claim against such account, as the case may be, other
than for payment of its service fees and other charges directly related to the
administration of such account and for returned checks or other items of
payment. Each Retail Blocked Account Agreement shall further provide that from
and after the date of such agreement the bank shall forward immediately all
amounts in the relevant Retail Blocked Account to the Concentration Account Bank
and to commence the process of daily sweeps from such Retail Blocked Account
into the Concentration Account. The Concentration Blocked Account Agreement
shall further provide that from and after the Closing Date, the Concentration
Account Bank shall immediately forward all amounts received in the Concentration
Account to the Collection Account through daily sweeps from the Concentration
Account into the Collection Account. Each Pledged Account Agreement shall
further provide that (i) from and after the date Lender has delivered a notice
(an "Activation Notice") to any bank with respect to the Master Disbursement
-----------------
Account or any other Disbursement Account(s), Borrower shall not, and shall not
cause or permit any Credit Party or Subsidiary thereof to, accumulate or
maintain cash in Disbursement Accounts or payroll accounts as of any date of
determination in excess of checks outstanding against such accounts as of that
date and amounts necessary to meet minimum balance requirements, and (ii) Lender
may deliver an Activation Notice at any time at which (A) a Default or Event of
Default shall have occurred and be continuing, (B) Lender reasonably believes
based upon information available to it that a Default or an Event of Default is
likely to occur; (C) Lender reasonably believes that an event or circumstance
that is likely to have a Material Adverse Effect has occurred, or (D) Lender
reasonably has grounds to question the integrity of Borrower's Cash Management
Systems or Borrower's compliance with the provisions of this Annex C or any
-------
other provisions of the Loan Documents to the extent related to such Cash
Management Systems.
(e) So long as no Default or Event of Default shall have occurred and
be continuing, Borrower may amend Disclosure Schedule (3.19) to add or replace a
--------------------------
Retail Blocked Account, or replace the Concentration Account or any Disbursement
Account; provided, that (i) Lender shall have consented in writing in advance to
-------- ----
the opening of such replacement account with the relevant bank and (ii) prior to
the time of the opening of such replacement account, the applicable Credit
Parties and such bank shall have executed and delivered to Lender a tri-party
agreement, in form and substance satisfactory to Lender. Borrower shall close
any of its accounts (and establish replacement accounts in accordance with the
foregoing sentence) promptly and in any event within 30 days following notice
from Lender that the creditworthiness of any bank maintaining an account is no
longer acceptable in Lender's reasonable judgment, or as promptly as practicable
and in any event within 60 days following notice from Lender that the operating
performance, funds transfer or availability procedures or performance with
respect to accounts of the bank maintaining such accounts or Lender's liability
under any tri-party blocked account agreement with such bank is no longer
acceptable in Lender's reasonable judgment.
(f) The Retail Blocked Accounts, the Disbursement Accounts, and the
Concentration Account shall be cash collateral accounts, with all cash, checks
and other similar items of payment in such accounts securing payment of the
Loans and all other Obligations, and in which each Credit Party shall have
granted a Lien to Lender pursuant to the Security Agreement.
C-2
(g) All amounts deposited in the Collection Account shall be deemed
received by Lender in accordance with Section 1.10 and shall be applied (and
------------
allocated) by Lender in accordance with Section 1.11. In no event shall any
------------
amount be so applied unless and until such amount shall have been credited in
immediately available funds to the Collection Account.
(h) Each Credit Party shall and shall cause its Affiliates, officers,
employees, agents, directors or other Persons acting for or in concert with such
Credit Party (each a "Related Person") to (i) hold in trust for Lender all
--------------
checks, cash and other items of payment received by such Credit Party or any
such Related Person, and (ii) within one (1) Business Day after receipt by such
Credit Party or any such Related Person of any checks, cash or other items of
payment, deposit the same into a Retail Blocked Account of the Concentration
Account. Each Credit Party and each Related Person acknowledges and agrees that
all cash, checks or other items of payment constituting proceeds of Collateral
are the property of Lender. All proceeds of the sale or other disposition of
any Collateral shall be deposited directly into a Retail Blocked Account or the
Concentration Account.
C-3
ANNEX D (Section 2.1(a))
--------------
to
CREDIT AGREEMENT
----------------
SCHEDULE OF DOCUMENTS
---------------------
[See attached]
D-1
ANNEX E (Section 4.1(a))
--------------
to
CREDIT AGREEMENT
----------------
FINANCIAL STATEMENTS AND PROJECTIONS -- REPORTING
-------------------------------------------------
Borrower shall deliver or cause to be delivered to Lender the
following:
(a) Monthly Financials. Within 30 days after the end of each Fiscal
------------------
Month, financial information regarding Credit Parties, certified by the Chief
Financial Officers of Borrower and Holdings, consisting of consolidated (i)
unaudited balance sheets as of the close of such Fiscal Month and the related
statements of income and cash flows for that portion of the Fiscal Year ending
as of the close of such Fiscal Month; (ii) unaudited statements of income and
cash flows for such Fiscal Month, setting forth in comparative form the figures
for the corresponding period in the prior year and the figures contained in the
Projections for such Fiscal Year, all prepared in accordance with GAAP (subject
to normal year-end adjustments); and (iii) a summary of the outstanding balance
of all loans and advances owing to any Credit Party as of the last day of such
Fiscal Month. Such financial information shall be accompanied by (A) a
statement in reasonable detail (each, a "Compliance Certificate") showing the
----------------------
calculations used in determining compliance with each financial covenant set
forth on Annex G that is tested on a monthly basis, and (B) the certification of
-------
the Chief Financial Officers of Borrower and Holdings that (x) such financial
information presents fairly in accordance with GAAP (subject to normal year-end
adjustments) the financial position and results of operations of Credit Parties,
on a consolidated basis, in each case as at the end of such month and for the
period then ended and (y) any other information presented is true, correct and
complete in all material respects and that there was no Default or Event of
Default in existence as of such time or, if a Default or Event of Default shall
have occurred and be continuing, describing the nature thereof and all efforts
undertaken to cure such Default or Event of Default.
(b) Quarterly Financials. Within 45 days after the end of each
--------------------
Fiscal Quarter, consolidated financial information regarding Credit Parties,
certified by the Chief Financial Officers of Borrower and Holdings, including
(i) unaudited balance sheets as of the close of such Fiscal Quarter and the
related statements of income and cash flows for that portion of the Fiscal Year
ending as of the close of such Fiscal Quarter and (ii) unaudited statements of
income and cash flows for such Fiscal Quarter, in each case setting forth in
comparative form the figures for the corresponding period in the prior year and
the figures contained in the Projections for such Fiscal Year, all prepared in
accordance with GAAP (subject to normal year-end adjustments). Such financial
information shall be accompanied by (A) a Compliance Certificate in respect of
each of the financial covenants set forth on Annex G that is tested on a
-------
quarterly basis and (B) the certification of the Chief Financial Officers of
Borrower and Holdings that (i) such financial information presents fairly in
accordance with GAAP (subject to normal year-end adjustments) the financial
position, results of operations and statements of cash flows of Credit Parties,
on a consolidated basis, as at the end of such Fiscal Quarter and for the period
then ended, (ii) any other information presented is true, correct and complete
in all material respects and that there was no Default or Event of Default in
existence as of such time or, if a Default or Event of Default shall have
occurred and be continuing, describing the nature thereof and all efforts
undertaken to cure such Default or Event of Default. In addition, Credit
Parties shall deliver to Lender, within 45 days after the end of each Fiscal
Quarter, a management discussion and analysis that includes a comparison to
budget for that Fiscal Quarter and a comparison of performance for that Fiscal
Quarter to the corresponding period in the prior year.
E-1
(c) Operating Plan. As soon as available, but not later than 30 days
--------------
after the end of each Fiscal Year, an annual operating plan for Credit Parties,
approved by the Boards of Directors of Borrower and Holdings, for the following
year, which will (i) include a statement of all of the material assumptions on
which such plan is based, (ii) include monthly balance sheets and a monthly
budget for the following year, and (iii) will integrate sales, gross profits,
operating expenses, operating profit, cash flow projections and Borrowing
Availability projections, all prepared on the same basis and in similar detail
as that on which operating results are reported (and in the case of cash flow
projections, representing management's good faith estimates of future financial
performance based on historical performance), and including plans for personnel,
Capital Expenditures and facilities.
(d) Annual Audited Financials. Within 90 days after the end of each
-------------------------
Fiscal Year, audited Financial Statements for Credit Parties on a consolidated
basis, consisting of balance sheets and statements of income and retained
earnings and cash flows, setting forth in comparative form in each case the
figures for the previous Fiscal Year, which Financial Statements shall be
prepared in accordance with GAAP and certified without qualification by an
independent certified public accounting firm of national standing or otherwise
acceptable to Lender. Such Financial Statements shall be accompanied by (i) a
statement prepared in reasonable detail showing the calculations used in
determining compliance with each of the Financial Covenants, (ii) a report from
such accounting firm to the effect that, in connection with their audit
examination, nothing has come to their attention to cause them to believe that a
Default or Event of Default has occurred (or specifying those Defaults and
Events of Default that they became aware of), it being understood that such
audit examination extended only to accounting matters and that no special
investigation was made with respect to the existence of Defaults or Events of
Default, (iii) a letter addressed to Lender in form and substance reasonably
satisfactory to Lender and subject to standard qualifications adopted by
nationally recognized accounting firms, signed by such accounting firm
acknowledging that Lender is entitled to rely upon such accounting firm's
certification of such audited Financial Statements, (iv) the annual letters to
such accountants in connection with their audit examination detailing contingent
liabilities and material litigation matters, and (v) the certification of the
Chief Executive Officer or Chief Financial Officer of each of Borrower and
Holdings that all such Financial Statements present fairly in accordance with
GAAP the financial position, results of operations and statements of cash flows
of Credit Parties on a consolidated basis, as at the end of such year and for
the period then ended, and that there was no Default or Event of Default in
existence as of such time or, if a Default or Event of Default shall have
occurred and be continuing, describing the nature thereof and all efforts
undertaken to cure such Default or Event of Default.
(e) Management Letters. Within five Business Days after receipt
------------------
thereof by any Credit Party, copies of all management letters, exception reports
or similar letters or reports received by such Credit Party from its independent
certified public accountants.
(f) Default Notices. As soon as practicable, and in any event within
---------------
five Business Days after an executive officer of any Credit Party has actual
knowledge of the existence of any Default, Event of Default or other event that
has had a Material Adverse Effect, telephonic or telecopied notice specifying
the nature of such Default or Event of Default or other event, including the
anticipated effect thereof, which notice, if given telephonically, shall be
promptly confirmed in writing on the next Business Day.
(g) SEC Filings and Press Releases. Promptly upon their becoming
------------------------------
available, copies of: (i) all Financial Statements, reports, notices and proxy
statements made available by any
E-2
Credit Party to its security holders; (ii) all regular and periodic reports and
all registration statements and prospectuses, if any, filed by any Credit Party
with any securities exchange or with the Securities and Exchange Commission or
any governmental or private regulatory authority; and (iii) all press releases
and other statements made available by any Credit Party to the public concerning
material changes or developments in the business of any such Person.
(h) Subordinated Debt and Equity Notices. As soon as practicable,
------------------------------------
copies of all material written notices given or received by any Credit Party
with respect to any Subordinated Debt or Stock of such Person, and, within two
Business Days after any Credit Party obtains knowledge of any matured or
unmatured event of default with respect to any Subordinated Debt, notice of such
event of default.
(i) Supplemental Schedules. Supplemental disclosures, if any,
----------------------
required by Section 5.6 of the Agreement.
-----------
(j) Litigation. Promptly upon learning thereof, written notice of
----------
any Litigation commenced or threatened against any Credit Party that (i) seeks
damages in excess of $100,000, (ii) seeks injunctive relief, (iii) is asserted
or instituted against any Plan, its fiduciaries or its assets or against any
Credit Party or ERISA Affiliate in connection with any Plan, (iv) alleges
criminal misconduct by any Credit Party, (v) alleges the violation of any law
regarding, or seeks remedies in connection with, any Environmental Liabilities,
or (vi) involves any product recall.
(k) Insurance Notices. Disclosure of losses or casualties required
-----------------
by Section 5.4 of the Agreement.
-----------
(l) Real Estate Default Notices. Copies of (i) any and all default
---------------------------
notices received under or with respect to any leased location or public
warehouse where Collateral is located, and (ii) such other notices or documents
as Lender may request in its reasonable discretion.
(m) Lease Amendments. Copies of all material amendments to real
----------------
estate leases of Borrower.
(n) Other Documents. Such other financial and other information
---------------
respecting any Credit Party's business or financial condition as Lender shall,
from time to time, request.
E-3
ANNEX F (Section 4.1(b))
--------------
to
CREDIT AGREEMENT
----------------
COLLATERAL REPORTS
------------------
Credit Parties shall deliver or cause to be delivered to Lender the
following:
(a) As soon as available and in any event no later than the fifth
Business Day of each Fiscal Month, the following reports, each of which shall be
prepared by Credit Parties as of the last day of the immediately preceding
Fiscal Month; provided, that if (i) a Default or an Event of Default shall have
--------
occurred and be continuing or (ii) Lender in good faith believes that a Default
or an Event of Default is imminent or deems its rights or interests in the
Collateral insecure, then such reports shall be delivered for such periods and
as frequently as Lender shall request:
(i) a Borrowing Base Certificate accompanied by such supporting
detail and documentation as shall be requested by Lender in its reasonable
discretion;
(ii) a summary of Inventory by location and type with a
supporting perpetual Inventory report, in each case accompanied by such
supporting detail and documentation as shall be requested by Lender in its
reasonable discretion; and
(iii) a monthly trial balance showing Accounts outstanding aged
from invoice due date as follows: 1 to 30 days, 31 to 60 days, 61 to 90
days and 91 days or more, accompanied by such supporting detail and
documentation as shall be requested by Lender in its reasonable discretion.
(b) At the time of delivery of each of the monthly Financial
Statements delivered pursuant to Annex E, a reconciliation of the Accounts trial
-------
balance and month-end Inventory reports of Borrower to Borrower's general ledger
and monthly Financial Statements delivered pursuant to Annex E, in each case
-------
accompanied by such supporting detail and documentation as shall be requested by
Lender in its reasonable discretion;
(c) At the time of delivery of each of the quarterly Financial
Statements delivered pursuant to Annex E, (i) a listing of government contracts
-------
of Borrower subject to the Federal Assignment of Claims Act of 1940; and (ii) a
list of any applications for the registration of any Patent, Trademark or
Copyright filed by any Credit Party with the United States Patent and Trademark
Office, the United States Copyright Office or any similar office or agency in
the prior Fiscal Quarter;
(d) Credit Parties, at their own expense, shall deliver to Lender the
results of each physical verification, if any, that Credit Parties or any of
their Subsidiaries may in their discretion have made, or caused any other Person
to have made on their behalf, of all or any portion of their Inventory (and, if
a Default or an Event of Default shall have occurred and be continuing, Credit
Parties shall, upon the request of Lender, conduct, and deliver the results of,
such physical verifications as Lender may require);
F-1
(e) Credit Parties, at their own expense, shall deliver to Lender
such appraisals of their assets as Lender may request at any time after the
occurrence and during the continuance of a Default or an Event of Default, such
appraisals to be conducted by an appraiser, and in form and substance,
satisfactory to Lender; and
(f) Such other reports, statements and reconciliations with respect
to the Borrowing Base or Collateral of any or all Credit Parties as Lender shall
from time to time request in its reasonable discretion.
F-2
ANNEX G (Section 6.10)
------------
to
CREDIT AGREEMENT
----------------
FINANCIAL COVENANTS
-------------------
Credit Parties shall not breach or fail to comply with any of the
following financial covenants, each of which shall be calculated in accordance
with GAAP consistently applied:
(a) Maximum Capital Expenditures. Credit Parties shall not make
----------------------------
Capital Expenditures on a consolidated basis (i) during the period from August
1, 2000, through December 31, 2000, in excess of $3,000,000, or (ii) during any
Fiscal Year of Borrower commencing during or after January 2001, in excess of
$4,000,000; provided, that the amount of permitted Capital Expenditures
--------
referenced above will be increased in any period by the positive amount equal to
the lesser of (x) 25% of the amount of permitted Capital Expenditures for the
immediately prior period, and (y) the amount (if any), equal to the difference
obtained by taking the Capital Expenditures limit specified above for the
immediately prior period minus the actual amount of any Capital Expenditures
expended during such prior period (the "Carry Over Amount"), and for purposes of
-----------------
measuring compliance herewith, the Carry Over Amount shall be deemed to be the
last amount spent on Capital Expenditures in that succeeding year.
(b) Minimum Fixed Charge Coverage Ratio. Credit Parties shall have,
-----------------------------------
on a consolidated basis, at the end of each Fiscal Month set forth below, a
Fixed Charge Coverage Ratio, measured cumulatively as of the last day of each
such Fiscal Month for the immediately preceding twelve (12) Fiscal Months, or
such lesser number of Fiscal Months as shall have elapsed since August 1, 2000,
of not less than the following:
Fixed Charge
Fiscal Month Ending Covered Ratio
------------------- -------------
August 31, 2000 <0.75>
September 30, 2000 <0.50>
October 31, 2000 <0.50>
November 30, 2000 <0.50>
December 31, 2000 0.50
January 31, 2001 0.50
February 28, 2001 0.50
March 31, 2001 0.75
G-1
April 30, 2001 0.75
May 31, 2001 0.75
June 30, 2001 0.75
July 31, 2001 0.75
August 31, 2001 0.75
September 30, 2001 1.00
October 31, 2001 1.00
November 30, 2001 1.00
December 31, 2001 1.00
January 31, 2002 1.00
February 28, 2002 1.00
March 31, 2002 1.00
June 30, 2002 1.10
September 30, 2002 1.20
December 31, 2002 1.30
March 31, 2003 1.30
June 30, 2003 1.30
September 30, 2003 1.30
December 31, 2003 1.30
March 31, 2004 1.30
June 30, 2004 1.30
September 30, 2004 1.30
G-2
December 31, 2004 1.30
March 31, 2005 1.30
June 30, 2005 1.30
(c) Minimum EBITDA. Credit Parties shall have EBITDA on a
--------------
consolidated basis at the end of each Fiscal Month set forth below, measured
cumulatively for the period of twelve (12) prior Fiscal Months through and
including such Fiscal Month, of not less than the following:
Fiscal Month Ending EBITDA
------------------- ------
August 31, 2000 $ 3,700,000
September 30, 2000 $ 3,800,000
October 31, 2000 $ 4,100,000
November 30, 2000 $ 4,300,000
December 31, 2000 $ 4,800,000
January 31, 2001 $ 4,800,000
February 28, 2001 $ 5,300,000
March 31, 2001 $ 5,900,000
April 30, 2001 $ 6,400,000
May 31, 2001 $ 6,600,000
June 30, 2001 $ 6,900,000
July 31, 2001 $ 6,800,000
August 31, 2001 $ 6,700,000
September 30, 2001 $ 6,800,000
October 31, 2001 $ 6,600,000
November 30, 2001 $ 6,600,000
December 31, 2001 $ 6,400,000
G-3
January 31, 2002 $ 6,500,000
February 28, 2002 $ 6,700,000
March 31, 2002 $ 6,900,000
June 30, 2002 $ 7,300,000
September 30, 2002 $ 7,800,000
December 31, 2002 $ 8,300,000
March 31, 2003 $ 9,100,000
June 30, 2003 $ 9,800,000
September 30, 2003 $10,600,000
December 31, 2003 $11,500,000
March 31, 2004 $11,500,000
June 30, 2004 $11,500,000
September 30, 2004 $11,500,000
December 31, 2004 $11,500,000
March 31, 2005 $11,500,000
June 30, 2005 $11,500,000
Unless otherwise specifically provided herein, any accounting term
used in the Agreement shall have the meaning customarily given such term in
accordance with GAAP, and all financial computations hereunder shall be computed
in accordance with GAAP consistently applied. That certain items or
computations are explicitly modified by the phrase "in accordance with GAAP"
shall in no way be construed to limit the foregoing. If any "Accounting
Changes" (as defined below) occur and such changes result in a change in the
calculation of the financial covenants, standards or terms used in the Agreement
or any other Loan Document, then Credit Parties and Lender agree to enter into
negotiations in order to amend such provisions of the Agreement so as to
equitably reflect such Accounting Changes with the desired result that the
criteria for evaluating Credit Parties' financial condition shall be the same
after such Accounting Changes as if such Accounting Changes
G-4
had not been made. "Accounting Changes" means (i) changes in accounting
principles required by the promulgation of any rule, regulation, pronouncement
or opinion of the Financial Accounting Standards Board of the American Institute
of Certified Public Accountants (or any successor thereto or any agency with
similar functions), (ii) changes in accounting principles concurred in by the
certified public accountants of Credit Parties; (iii) purchase accounting
adjustments under A.P.B. 16 or 17 and EITF 88-16, and the application of the
accounting principles set forth in FASB 109, including the establishment of
reserves pursuant thereto and any subsequent reversal (in whole or in part) of
such reserves; and (iv) the reversal of any reserves established as a result of
purchase accounting adjustments. All such adjustments resulting from
expenditures made subsequent to the Closing Date (including capitalization of
costs and expenses or payment of pre-Closing Date liabilities) shall be treated
as expenses in the period the expenditures are made and deducted as part of the
calculation of EBITDA in such period. If Credit Parties and Lender agree upon
the required amendments, then after appropriate amendments have been executed
and the underlying Accounting Change with respect thereto has been implemented,
any reference to GAAP contained in the Agreement or in any other Loan Document
shall, only to the extent of such Accounting Change, refer to GAAP, consistently
applied after giving effect to the implementation of such Accounting Change. If
Credit Parties and Lender cannot agree upon the required amendments within 30
days following the date of implementation of any Accounting Change, then all
Financial Statements delivered and all calculations of financial covenants and
other standards and terms in accordance with the Agreement and the other Loan
Documents shall be prepared, delivered and made without regard to the underlying
Accounting Change.
G-5
ANNEX H (Section 11.10)
-------------
to
CREDIT AGREEMENT
----------------
NOTICE ADDRESSES
----------------
(A) If to Lender, at
General Electric Capital Corporation
▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Account Manager, Peet's Coffee and Tea
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
General Electric Capital Corporation ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ 101 California Street, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Corporate Counsel Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇ Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇ Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
(B) If to Borrower, at
Peet's Coffee and Tea, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Chief Financial Officer
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
With copies to:
GnazzoThill
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
H-1
SCHEDULE (1.1)
to
CREDIT AGREEMENT
----------------
LENDER'S REPRESENTATIVE
-----------------------
General Electric Capital Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Portfolio Analyst - Peet's Coffee and Tea, Inc.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
INDEX OF APPENDICES
-------------------
Annex A (Recitals) - Definitions
Annex B (Section 1.2) - Letters of Credit
Annex C (Section 1.8) - Cash Management System
Annex D (Section 2.1(a)) - Schedule of Documents
Annex E (Section 4.1(a)) - Financial Statements and Projections -- Reporting
Annex F (Section 4.1(b)) - Collateral Reports
Annex G (Section 6.10) - Financial Covenants
Annex H (Section 11.10) - Notice Addresses
Exhibit 1.1(a)(i) - Form of Notice of Revolving Credit Advance
Exhibit 1.1(a)(ii) - Form of Revolving Note
Exhibit 1.1(b) - Form of Term Note
Exhibit 1.5(e) - Form of Notice of Conversion/Continuation
Exhibit 4.1(b) - Form of Borrowing Base Certificate
Schedule 1.1 - Lender's Representative
Disclosure Schedule (1.4) - Sources and Uses; Funds Flow Memorandum
Disclosure Schedule (3.2) - Executive Offices; Collateral Locations; FEIN
Disclosure Schedule (3.4(a)) - Financial Statements
Disclosure Schedule (3.4(c)) - Projections
Disclosure Schedule (3.6) - Real Estate and Leases
Disclosure Schedule (3.7) - Labor Matters
Disclosure Schedule (3.8) - Ventures and Affiliates; Stock
Disclosure Schedule (3.11) - Tax Matters
Disclosure Schedule (3.12) - ERISA Plans
Disclosure Schedule (3.13) - Litigation
Disclosure Schedule (3.15) - Intellectual Property
Disclosure Schedule (3.17) - Hazardous Materials
Disclosure Schedule (3.18) - Insurance
Disclosure Schedule (3.19) - Deposit and Disbursement Accounts
Disclosure Schedule (3.20) - Government Contracts
Disclosure Schedule (3.22) - Material Agreements
Disclosure Schedule (5.1) - Trade Names
Disclosure Schedule (6.3) - Indebtedness
Disclosure Schedule (6.4(a)) - Transactions with Affiliates
Disclosure Schedule (6.7) - Existing Liens