FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the period ended September 30, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _______ TO _______
Commission file number: 0-28096
-----------------------------
THE YORK GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 76-0490631
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
8554 KATY FREEWAY, SUITE 200, HOUSTON, TEXAS 77024
(Address of principal executive offices) (Zip Code)
(713) 984-5500
(Registrant's telephone number, including area code)
------------------------------
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS) AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS.
YES [X] NO [ ]
The number of shares outstanding of the registrant's common stock as of November
12, 1999 was 8,940,950.
<PAGE>
THE YORK GROUP, INC. AND SUBSIDIARIES
INDEX
PAGE
-----
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
September 30, 1999 (Unaudited) and December 31, 1998...... 2
Condensed Consolidated Statements of Income (Unaudited) -
Three and nine months ended September 30, 1999 and 1998... 3
Condensed Consolidated Statements of Cash Flows (Unaudited) -
Nine months ended September 30, 1999 and 1998............. 4
Notes to Condensed Consolidated Financial Statements
(Unaudited).............................................. 5-7
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition.......................8-11
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K........................... 12
Signature................................................................... 13
1
<PAGE>
THE YORK GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
ASSETS 1999 1998
---------------- ----------------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents ................................................... $ 1,653 $ 3,449
Trade accounts and notes receivable, net of allowance
for doubtful accounts and returns and allowances of
$4,069 in 1999 and $4,016 in 1998:
Stockholders and affiliates ............................................ 4,407 5,706
Other .................................................................. 30,452 26,418
Inventories, net ............................................................ 35,108 34,841
Prepaid expenses ............................................................ 2,481 2,984
Deferred tax assets ......................................................... 4,655 5,826
--------- ---------
Total current assets .................................................... 78,756 79,224
--------- ---------
Property, plant and equipment, net ................................................. 62,106 60,226
Goodwill and other intangibles, net ................................................ 66,205 62,200
Deferred cost and other assets ..................................................... 10,559 7,614
--------- ---------
Total assets ................................................................ $ 217,626 $ 209,264
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt ........................................... $ 21,057 $ 4,718
Accounts payable ............................................................ 13,388 8,018
Accrued expenses ............................................................ 15,049 16,179
--------- ---------
Total current liabilities ............................................... 49,494 28,915
--------- ---------
Long-term debt, net of current portion ............................................. 62,103 79,267
Other noncurrent liabilities ....................................................... 8,028 7,822
Deferred tax liabilities ........................................................... 8,196 8,173
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value, 1,000,000 shares authorized and unissued ... -- --
Common stock, $.01 par value, 25,000,000 shares authorized,
8,940,950 and 8,930,950 shares issued and outstanding ................... 89 89
Additional paid-in capital .................................................. 40,455 40,390
Cumulative foreign currency translation adjustment .......................... (105) (103)
Retained earnings ........................................................... 49,366 44,711
--------- ---------
Total stockholders' equity ............................................... 89,805 85,087
--------- ---------
Total liabilities and stockholders' equity .................................. $ 217,626 $ 209,264
========= =========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
2
<PAGE>
THE YORK GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------- -------------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales (including sales to stockholders and affiliates
of $5,664 and $7,058 for the three months ended September 30,
1999 and 1998, respectively, and $26,050 and $24,597 for
the nine months ended September 30, 1999 and
1998, respectively) .................................... $ 45,372 $ 58,352 $150,154 $174,186
Cost of goods sold ....................................... 30,583 43,113 101,721 124,555
-------- -------- -------- --------
Gross profit ......................................... 14,789 15,239 48,433 49,631
Other operating expenses ................................. 10,724 10,739 34,349 31,289
-------- -------- -------- --------
Operating income ..................................... 4,065 4,500 14,084 18,342
Interest expense, net .................................... 1,581 1,484 4,293 3,312
-------- -------- -------- --------
Income before income taxes ............................... 2,484 3,016 9,791 15,030
Income tax provision ..................................... 1,075 1,206 4,064 5,903
-------- -------- -------- --------
Net income ............................................... $ 1,409 $ 1,810 $ 5,727 $ 9,127
======== ======== ======== ========
Shares used in computing earnings per share:
Basic ................................................ 8,941 8,931 8,935 8,919
======== ======== ======== ========
Diluted .............................................. 9,032 9,079 9,028 9,307
======== ======== ======== ========
Earnings per share:
Basic ................................................ $ 0.16 $ 0.20 $ 0.64 $ 1.02
======== ======== ======== ========
Diluted .............................................. $ 0.16 $ 0.20 $ 0.63 $ 0.99
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
3
<PAGE>
THE YORK GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
----------------------------------
1999 1998
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income ......................................................... $ 5,727 $ 9,127
Adjustments to reconcile net income to net cash
provided by operating activities -
Depreciation and amortization ................................... 7,961 6,772
Deferred income tax benefit ..................................... (7) 97
Loss on disposition of property, plant and equipment ............ -- 104
Provision for doubtful accounts ................................. 109 123
Decrease/(increase) in:
Trade accounts and notes receivable .......................... (2,124) (4,817)
Inventories .................................................. 635 1,352
Prepaid expenses ............................................. 566 98
Deferred costs and other assets .............................. (2,061) (1,798)
Increase/(decrease) in:
Accounts payable and accrued expenses ........................ 2,700 (1,934)
Other noncurrent liabilities ................................. 107 (73)
-------- --------
Net cash provided by operating activities .................... 13,613 9,051
-------- --------
Cash flows from investing activities:
Capital expenditures ............................................... (4,609) (5,996)
Collections on notes receivable ................................... 138 227
Acquisitions, net of cash acquired of $507 and $17,582 ............. (4,817) (66,035)
-------- --------
Net cash used in investing activities ........................ (9,288) (71,804)
-------- --------
Cash flows from financing activities:
Proceeds from issuance of common stock ............................. 65 181
Repayment of long-term debt ........................................ (22,644) (23,089)
Proceeds from issuance of long-term debt ........................... 17,530 74,500
Dividends paid ..................................................... (1,072) (1,071)
-------- --------
Net cash provided by (used in) financing activities .......... (6,121) 50,521
-------- --------
Net decrease in cash and cash equivalents ..................................... (1,796) (12,232)
Cash and cash equivalents, beginning of period ................................ 3,449 15,478
-------- --------
Cash and cash equivalents, end of period ...................................... $ 1,653 $ 3,246
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest .................................. $ 4,000 $ 3,500
======== ========
Cash paid during the period for income taxes .............................. $ 3,000 $ 6,900
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
4
<PAGE>
THE YORK GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
September 30, 1999
1. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements include the
accounts of The York Group, Inc. and subsidiaries (the "Company") and have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company believes that the
disclosures are adequate to make the information presented not misleading. These
condensed consolidated financial statements should be read in conjunction with
the Company's December 31, 1998 audited consolidated financial statements and
the notes thereto included in the Company's 1998 Annual Report on Form 10-K. In
the opinion of the Company's management, all adjustments and eliminations,
consisting only of normal and recurring adjustments, necessary to present fairly
the condensed consolidated financial statements have been included. The results
of operations for such interim periods are not necessarily indicative of results
for the full year.
2. ACQUISITIONS
On April 19, 1999, the Company acquired all of the outstanding common stock of
Star Manufacturing Corporation, an assembler of metal caskets, for $4 million,
of which $2 million was paid at closing and $2 million is payable in one year.
On April 30, 1999, the Company acquired all of the outstanding common stock of
OMC Industries, a manufacturer of cast metal signage products, for approximately
$3.6 million in cash. Both acquisitions were accounted for using the purchase
method of accounting, with resulting goodwill of approximately $5.1 million. Pro
forma results of operations have not been presented as the effects of the
acquisitions are not significant.
3. SUPPLEMENTAL INFORMATION
SEPTEMBER 30, DECEMBER 31,
1999 1998
-------------- --------------
(in thousands)
Inventories:
Raw materials ......................... $10,479 $13,204
Work in process ....................... 2,369 2,807
Finished goods ........................ 22,260 18,830
------- -------
$35,108 $34,841
======= =======
Property, Plant and Equipment:
Land and improvements ................. $ 4,727 $ 4,819
Building and improvements ............. 21,248 19,806
Equipment ............................. 63,440 56,745
Construction-in-progress .............. 5,436 6,144
------- -------
94,851 87,514
Less: accumulated depreciation ........ 32,745 27,288
------- -------
$62,106 $60,226
======= =======
5
<PAGE>
4. EARNINGS PER SHARE
Earnings per share data for all periods presented has been computed pursuant to
SFAS No. 128, "Earnings Per Share", which requires a presentation of basic
earnings per share (basic EPS) and diluted earnings per share (diluted EPS).
Basic EPS excludes dilution and is determined by dividing income available to
common stockholders by the weighted average number of common shares outstanding
during the period. Diluted EPS reflects the potential dilution that could occur
if securities and other contracts to issue common stock were exercised or
converted into common stock. At September 30, 1999 the Company had options
outstanding for the purchase of an aggregate of 675,178 shares of common stock
of which 670,678 were excluded from the diluted EPS computation as they have
exercise prices that exceed the average fair value for the three-month and
nine-month periods ended September 30, 1999.
A reconciliation of weighted-average shares outstanding to shares used in
computing diluted EPS is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------- ---------------------
1999 1998 1999 1998
----- ----- ----- -----
(in thousands)
<S> <C> <C> <C> <C>
Weighted-average shares outstanding ................. 8,941 8,931 8,935 8,919
Dilutive securities consisting of options
and convertible debt .............................. 91 148 93 118
----- ----- ----- -----
Shares used in computing diluted EPS ................ 9,032 9,079 9,028 9,037
===== ===== ===== =====
</TABLE>
5. SEGMENT INFORMATION
SFAS No. 131, "Disclosure About Segments of an Enterprise and Related
Information", requires certain financial and supplementary information to be
discussed on an annual and interim basis for each reportable segment of an
enterprise. In accordance with SFAS No. 131, the Company identified its
reporting segments based on its internal reporting of strategic business units.
The products within each segment require substantially different manufacturing
processes, are marketed to different customer bases and have different economic
characteristics.
The Company's Casket Segment includes the manufacturing and distribution
operations of a wide variety of metal, wood and other caskets, caskets
components and metal burial vaults. The Company's Commemorative Products Segment
produces and sells products, primarily cast bronze, which are used to
commemorate people, places and events. The All Other Segment includes the
Company's fleet operations, architectural services, merchandising products and
services, and corporate expenses. Product transfers between industry segments
are not material. The Company evaluates segment performance based upon operating
income.
Interim financial information regarding the Company's segments is presented
below:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------- --------------------------
1999 1998 1999 1998
--------- --------- --------- ---------
(in thousands)
<S> <C> <C> <C> <C>
Net sales:
Caskets .............................................. $ 31,516 $ 43,735 $ 107,677 $ 139,460
Commemorative Products ............................... 10,715 12,191 34,196 27,336
All other ............................................ 3,141 2,426 8,281 7,390
--------- --------- --------- ---------
Consolidated net sales ........................ $ 45,372 $ 58,352 $ 150,154 $ 174,186
========= ========= ========= =========
Operating income:
Caskets .............................................. $ 6,185 $ 6,488 $ 19,957 $ 25,379
Commemorative Products ............................... 1,850 1,925 6,482 4,440
All other ............................................ (3,970) (3,913) (12,355) (11,477)
--------- --------- --------- ---------
Consolidated operating income ................. $ 4,065 $ 4,500 $ 14,084 $ 18,342
========= ========= ========= =========
</TABLE>
6
<PAGE>
6. COMPREHENSIVE INCOME
Effective January 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income." SFAS No. 130 establishes standards for reporting and
displaying comprehensive income and its components. Comprehensive income is the
total of net income and all other non-owner changes in equity. The Company has
comprehensive income of $1.4 million and $5.6 million for the three and nine
month periods ended September 30, 1999, respectively, consisting of net income
and foreign currency translation adjustment. The 1998 comprehensive income for
the Company consisted of net income and foreign currency translation adjustment.
7. DEBT
The Company amended and restated its $60 million revolving credit facility (the
"Facility") in August 1999. Under the terms of the amended agreement, the
Facility consists of a $35 million amortizing term loan and a revolving credit
facility providing for borrowings and the issuance of letters of credit in an
aggregate amount equal to the lesser of $25 million or a borrowing base, as
defined. The terms of the Facility call for an interest rate to be based, at the
Company's option, upon an adjusted LIBOR rate or prime rate. Adjustment factors
are based upon certain financial ratios, as defined, with a specified ceiling
(LIBOR +2.50%; Prime +1.50%) and floor (LIBOR +1.75%; Prime +.75%). The Facility
expires on June 30, 2001. The Facility is secured by substantially all of the
Company's assets, including the stock of all the Company's subsidiaries, does
not permit the payment of cash dividends under certain circumstances and
requires the Company's compliance with certain leverage, net worth and debt
service covenants. The Facility also contains a limitation on the Company's
capital expenditures. The Facility and the Senior Notes (which carry an annual
interest rate of 8.37%) are guaranteed by the Company's subsidiaries. The banks
and the holder of the Senior Notes have entered into an intercreditor agreement
whereby both sets of creditors have a security interest in substantially all of
the Company's assets.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
GENERAL
The Company is the second largest casket manufacturer in the United States and
produces a wide variety of caskets, casket components and burial vaults. During
March 1998, the Company acquired Colonial Guild, Ltd., thus becoming a major
manufacturer of commemorative products. The Company's finished caskets are
marketed through a network of Company and privately owned distributors, which
serve domestic funeral homes, as well as certain foreign markets, principally
Canada. Burial vaults are sold directly to funeral home and cemetery operators
as well as to privately owned distributors. The Company's commemorative memorial
products are sold directly to cemetery operators, monument dealers and funeral
homes, and its architectural signage products are sold primarily to sign and
trophy dealers.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1998
Net sales for the three months ended September 30, 1999 were $45.4 million
compared to $58.4 million for the same period in 1998. Casket Segment net sales
were $31.5 million, a decrease of $12.2 million from $43.7 in the 1998 period.
This decline principally reflects the loss of sales to Service Corporation
International ("SCI") in 1999 as a result of the termination as of December 31,
1998 of the supply contract between the Company and SCI and, to a lesser extent,
a decline in the number of deaths as compared to the third quarter of 1998.
Third quarter net sales of the Company's Commemorative Products Segment were
$10.7 million compared to $12.2 million in the comparable 1998 quarter,
primarily due to a temporary backlog of orders resulting from the current
consolidation of production activities from the Company's South Carolina foundry
to its West Virginia facility during the quarter. These declines were partially
offset by revenues of OMC Industries, which was acquired during the second
quarter of 1999. Third quarter 1999 net sales of the All Other Segment,
consisting primarily of merchandising display systems, were $3.1 million
compared to $2.4 million in the corresponding period in 1998.
Third quarter 1999 gross profit was $14.8 million compared to $15.2 million
during the third quarter of 1998. Gross margins improved to 32.5% in 1999 from
26.1% in 1998. 1999 Casket Segment gross profit decreased approximately $1.1
million, primarily due to lower sales to SCI partially offset by efficiency
improvements and cost reduction efforts. Third quarter 1999 Commemorative
Products Segment gross profit was equal to the 1998 period. This segment's gross
profit reflects the acquisition of OMC and the efficiencies realized as a result
of the closure of the Portland, Oregon foundry in late 1998 and movement of its
memorialization business segments to other foundry facilities, partially offset
by the sales volume decrease and inefficiencies experienced as a result of the
current plant consolidation activities between the South Carolina and West
Virginia operations. Third quarter 1999 gross profit of the All Other Segment
was $.9 higher than the same period in 1998 primarily due to higher sales
volumes and cost improvements.
Operating income for the third quarter of 1999 was $4.1 million, a $.4 million
decrease from the 1998 third quarter. Casket Segment 1999 third quarter
operating income was $6.2 million compared to $6.5 million in 1998, again
primarily attributable to the loss of sales to SCI almost totally offset by
effective cost reduction programs. 1999 third quarter operating income for the
Commemorative Products Segment was consistent with comparable prior year period
due to the unfavorable impact of lower sales volumes offset by the partial
realization this quarter of cost savings from plant consolidations. Operating
loss during the third quarter of 1999 for the All Other Segment, which includes
corporate expenses, was consistent with the same period last year.
Net interest expense increased slightly from 1998, due to an increase in
interest rates.
The Company's effective tax rate increased to 43.2% from 39.9% in 1998,
reflecting the impact of non-deductible expenses, primarily goodwill
amortization, relative to lower pre-tax earnings.
Net income decreased $.4 million to $1.4 million in 1999, and both basic and
diluted earnings per share were $.16 in 1999 compared to $.20 in 1998.
8
<PAGE>
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1998
Many of the factors that affected third quarter results also had an impact on
year to date results. Refer to the third quarter comparison for additional
discussion.
Net sales were $150.2 million, a decline of $24.0 million from 1998. Casket
Segment net sales were $107.7 million, a $31.8 million or 22.7% reduction from
1998, reflecting the loss of sales to SCI. Commemorative Products Segment net
sales increased to $34.2 million from $27.3 million in 1998, reflecting a full
nine months of sales in 1999 compared to only slightly more than six months in
1998. All Other Segment net sales were $.9 million higher than the 1998 level
due to higher sales of merchandising display systems.
Gross profit was $48.4 million compared to $49.6 million in 1998. Gross margins
improved to 32.2% in 1999 from 28.4% in 1998. The dollar decline reflects the
loss of SCI business in the Casket Segment partially offset by both the gross
profit of the Commemorative Products Segment for a full nine months in 1999 and
lower expenses in the Casket segment.
Operating income was $14.1 million in 1999 compared to $18.3 million in 1998.
The decline again reflects the loss of sales to SCI, offset partially by full
period results of the Commemorative Products Segment in 1999.
Net interest expense increased $1.0 million to $4.3 million in 1999, primarily
reflecting the debt incurred for the Colonial Guild, Ltd.
acquisition in mid-March 1998.
The Company's effective tax rate increased from 39.3% in 1998 to 41.5% in 1999.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically relied on cash flows from operations as well as
borrowings from banks and other lenders to fund its operations.
Cash and cash equivalents were $1.7 million at September 30, 1999, a decrease of
$1.8 million from December 31, 1998. For the nine months ended September 30,
1999, cash provided by operating activities totaled $13.6 million, cash used in
investing activities totaled $9.3 million and cash used in financing activities
totaled $6.1 million.
The Company utilized approximately $4.8 million of cash for acquisitions during
the first nine months of 1999, net of cash acquired.
Long-term debt, including current maturities, at September 30, 1999 totaled
$83.2 million compared to $84.0 million at December 31, 1998. Long-term debt at
September 30, 1999 consisted primarily of $34.0 million borrowed under the
Company's term loan, and $21.0 million borrowed under the Company's revolving
line of credit, $17.3 million of Senior Notes, $2.5 million in promissory notes,
$2.0 million in convertible notes, $1.9 million in deferred acquisition cost and
$3.9 million of capitalized lease obligations.
The Company amended and restated its $60 million revolving credit facility in
August 1999. Under the terms of the amended agreement, the facility consists of
a $35 million amortizing term loan and a revolving credit facility providing for
borrowings and the issuance of letters of credit in an aggregate amount equal to
the lesser of $25 million or a borrowing base, as defined. The facility is
secured and expires on June 30, 2001. The amended credit facility is secured by
substantially all of the Company's assets, including the stock of all the
Company's subsidiaries, does not permit the payment of cash dividends under
certain circumstances and requires the Company's compliance with certain
leverage, net worth and debt service covenants. The facility also contains a
limitation on the Company's capital expenditures. The facility and the Senior
Notes are guaranteed by the Company's subsidiaries. The banks and the holder of
the Senior Notes have entered into an intercreditor agreement whereby both sets
of creditors have a security interest in substantially all of the Company's
assets. At September 30, 1999, $2.0 million was available under the revolving
credit facility.
The Company's primary capital requirements are for capital expenditures and
working capital. As of September 30, 1999, the Company had invested nearly $10
million in the installation of leased YMS(TM) systems on behalf of its
customers. In July 1999, the Company formed an alliance with First Sierra
Financial, Inc., a commercial leasing company, which allows the Company to
continue offering the YMS program without having to fund each installation.
9
<PAGE>
The Company's capital resources consist of its cash balances at September 30,
1999, future cash flows from operations and the borrowing capacity under its
credit facility. The Company believes that these resources will be sufficient to
fund capital expenditures and meet other operating requirements. In order to
finance any future acquisition activities, the Company would require additional
capital resources. Additionally, $4.5 million of subordinated debt is due in
January 2000. The Company has initiated discussions with the subordinated note
holders regarding amendments to the debt instruments and anticipates the
successful completion of such amendments without a material effect on the
Company's financial results. There can be no assurance that the Company will be
successful in obtaining debt or equity financing on terms which are favorable.
THE YEAR 2000 ISSUE
The Company has assessed how it may be impacted by Year 2000 issues and has
formulated and commenced implementation of a plan to address both its
information technology ("IT") and non-IT systems issues. This plan involves a
combination of hardware and software modifications, upgrades and replacement,
including implementation of a new software package which will not only address
the Year 2000 issues but provide additional business process functionality in
the future. The Company is approximately 95% complete with its modifications,
upgrades and replacements. The Company has completed testing of its plan and
implementation with respect to all significant operations was completed October
31, 1999.
The Company has surveyed its suppliers and reviewed its customers to identify
and resolve any Year 2000 issues that may arise with such customers and
suppliers, but the Company currently does not believe that any such issues will
have a material effect on its operations or financial results.
The Company currently estimates that the cost of Year 2000 compliance for its
information systems, combined with capital expenditures for hardware and
software involving functionality improvements will approximate $5.9 million, of
which approximately $5.8 million has already been incurred. Approximately 80% of
the remaining expenditures are expected to be capitalized.
The Company has established a worst-case scenario and written contingency plans
to address any issues that could arise should the Company or any of its
suppliers or customers not be prepared to accommodate Year 2000 issues timely.
The Company believes that in an emergency it could revert to the use of manual
systems that do not rely on computers and could perform the minimum functions
required to provide information reporting to maintain satisfactory control of
its business. Should the Company have to utilize manual systems, it is uncertain
that it could maintain the same level of operations, and the result could have a
material adverse effect on its operations or financial results. The Company
intends to maintain constant surveillance on this situation and develop more
practicable contingency plans as may be required by the changing environment.
INFLATION
Historically, inflation has not had a material impact on the results of
operations of the Company nor is it anticipated to have a material impact for
the foreseeable future.
SELECTED QUARTERLY OPERATING RESULTS AND SEASONALITY
Historically, the Company's operations have experienced seasonal variations.
Generally, the Company's net sales are highest in the first quarter and lowest
in the third quarter of each year. These fluctuations are due in part to the
seasonal variance in the death rate, with a greater number of deaths generally
occurring in cold weather months, and the timing of the Company's annual
manufacturing facility vacation shutdowns, which occur primarily in the third
quarter. The Company's memorialization sales seasonally lag the Company's casket
business, and are highest in the second quarter, coinciding with the Memorial
Day Holiday, and lowest in the first quarter. In addition, operating results can
vary between quarters of the same or different years due to, among other things,
fluctuations in the number of deaths, changes in product mix, and the timing of
annual price increases relative to changes in costs. As a result, the Company
experiences variability in its operating results on a quarterly basis, which may
make quarterly year-to-year comparisons less meaningful.
10
<PAGE>
FORWARD-LOOKING STATEMENTS
Certain of the information relating to the Company contained or incorporated by
reference in this Form 10-Q is "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995. All statements included
or incorporated by reference in this Form 10-Q or made by management of the
Company, other than statements of historical fact regarding the Company, are
forward-looking statements. These statements, and all phases of the Company's
operations, are subject to risks and uncertainties, any one of which could cause
actual results to differ materially from those described in the forward-looking
statements. Such risks and uncertainties include or relate to, among other
things, the availability of debt and equity financing on terms that are
favorable to the Company, changes in demand for the Company's products and
services that could be caused by a number of factors, including changes in death
rate, cremation rates, competitive pressures and economic conditions, the effect
of competition on the Company's ability to maintain margins on existing or
acquired operations, the Company's ability to successfully integrate the
operations of acquired companies with existing operations, including risks and
uncertainties relating to its ability to achieve administrative and operating
costs savings and anticipated synergies and the ability of the Company or
critical third party suppliers to adequately complete "Y2K" preparation efforts.
11
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Amended and Restated Credit Agreement among The
York Group, Inc.; ABN-AMRO Bank, N.V. and certain
financial institutions dated August 12, 1999
10.2 First Amendment to the Senior Note Purchase
Agreement among The York Group, Inc. and The
Variable Annuity Life Insurance Company dated
August 12, 1999
27 - Financial data schedule
(b) Reports on Form 8-K
None
12
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
November 12, 1999 THE YORK GROUP, INC.
By: /s/ DAVID F. BECK
David F. Beck
Vice President and Chief
Financial Officer (Principal
Financial Officer and Duly Authorized
Officer)
13
EXHIBIT 10.1
$60,000,000
- --------------------------------------------------------------------------------
AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of
August 12, 1999
Among
THE YORK GROUP, INC., AS BORROWER
ABN AMRO BANK N.V., AS AGENT AND LENDER,
AND
CERTAIN FINANCIAL INSTITUTIONS, AS LENDERS
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 1. DEFINITIONS; INTERPRETATION ............................................................ 1
Section 1.1. Definitions ..................................................................... 1
Section 1.2. INTERPRETATION .................................................................. 18
Section 1.3. COMPUTATION OF TIME PERIODS ..................................................... 18
Section 1.4. ACCOUNTING TERMS ................................................................ 18
Section 1.5. CLASSES AND TYPES OF LOANS ...................................................... 19
SECTION 2. THE CREDIT FACILITIES .................................................................. 19
Section 2.1. LOANS ........................................................................... 19
Section 2.2. LETTERS OF CREDIT ............................................................... 19
Section 2.3. TYPES OF LOANS AND MINIMUM BORROWING ............................................ 22
Section 2.4. MANNER OF BORROWING ............................................................. 22
Section 2.5. INTEREST PERIODS ................................................................ 25
Section 2.6. PAYMENTS ........................................................................ 25
Section 2.7. DEFAULT RATES ................................................................... 27
Section 2.8. OPTIONAL PREPAYMENTS ............................................................ 28
Section 2.9. MANDATORY PREPAYMENTS OF LOANS .................................................. 29
Section 2.10. NOTES .......................................................................... 30
Section 2.11. BREAKAGE FEES .................................................................. 31
Section 2.12. COMMITMENT TERMINATIONS ........................................................ 31
SECTION 3. FEES AND PAYMENTS ...................................................................... 32
Section 3.1. FEES ............................................................................ 32
Section 3.2. PLACE AND APPLICATION OF PAYMENTS ............................................... 33
Section 3.3. WITHHOLDING TAXES ............................................................... 33
SECTION 4. CONDITIONS PRECEDENT ................................................................... 35
Section 4.1. CONDITIONS PRECEDENT TO EFFECTIVENESS ........................................... 35
Section 4.2. CONDITIONS PRECEDENT TO ALL BORROWINGS .......................................... 37
SECTION 5. REPRESENTATIONS AND WARRANTIES ......................................................... 38
Section 5.1. CORPORATE ORGANIZATION .......................................................... 38
Section 5.2. CORPORATE POWER AND AUTHORITY; VALIDITY ......................................... 39
Section 5.3. NO VIOLATION .................................................................... 39
Section 5.4. LITIGATION ...................................................................... 39
Section 5.5. USE OF PROCEEDS; MARGIN REGULATIONS ............................................. 39
Section 5.6. INVESTMENT COMPANY ACT .......................................................... 40
Section 5.7. PUBLIC UTILITY HOLDING COMPANY ACT .............................................. 40
Section 5.8. TRUE AND COMPLETE DISCLOSURE .................................................... 40
Section 5.9. FINANCIAL STATEMENTS ............................................................ 40
Section 5.10. NO MATERIAL ADVERSE CHANGE ..................................................... 40
Section 5.11. LABOR CONTROVERSIES ............................................................ 41
Section 5.12. TAXES .......................................................................... 41
Section 5.13. ERISA .......................................................................... 41
Section 5.14. CONSENTS ....................................................................... 41
</TABLE>
i
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<TABLE>
<CAPTION>
<S> <C>
Section 5.15. CAPITALIZATION ................................................................. 41
Section 5.16. OWNERSHIP OF PROPERTY .......................................................... 41
Section 5.17. COMPLIANCE WITH STATUTES ....................................................... 41
Section 5.18. ENVIRONMENTAL .................................................................. 42
Section 5.19. DIVIDEND RESTRICTIONS. ......................................................... 42
Section 5.20. YEAR 2000 COMPLIANCE ........................................................... 42
Section 5.21. INSURANCE ...................................................................... 43
SECTION 6. COVENANTS .............................................................................. 43
Section 6.1. CORPORATE EXISTENCE ............................................................. 43
Section 6.2. MAINTENANCE OF EQUIPMENT ........................................................ 43
Section 6.3. TAXES ........................................................................... 43
Section 6.4. ERISA ........................................................................... 44
Section 6.5. BURDENSOME RESTRICTIONS, ETC .................................................... 44
Section 6.6. INSURANCE ....................................................................... 44
Section 6.7. FINANCIAL REPORTS AND OTHER INFORMATION ......................................... 45
Section 6.8. LENDERS' INSPECTION RIGHTS ...................................................... 48
Section 6.9. CONDUCT OF BUSINESS ............................................................. 48
Section 6.10. NEW SUBSIDIARIES ............................................................... 49
Section 6.11. RESTRICTIONS ON REDEMPTION; DIVIDENDS .......................................... 49
Section 6.12. RESTRICTIONS ON FUNDAMENTAL CHANGES ............................................ 49
Section 6.13. ENVIRONMENTAL LAWS ............................................................. 50
Section 6.14. LIENS .......................................................................... 50
Section 6.15. DEBT ........................................................................... 52
Section 6.16. LOANS, ADVANCES AND INVESTMENTS ................................................ 53
Section 6.17. TRANSFER OF ASSETS ............................................................. 53
Section 6.18. TRANSACTIONS WITH AFFILIATES ................................................... 55
Section 6.19. COMPLIANCE WITH LAWS ........................................................... 55
Section 6.20. NEGATIVE PLEDGES ............................................................... 55
Section 6.21. VENDOR LEASE PLAN AGREEMENT; SENIOR NOTE PURCHASE AGREEMENT .................... 55
Section 6.24. MAXIMUM TOTAL DEBT TO EBITDA RATIO ............................................. 56
Section 6.25. MAXIMUM TOTAL DEBT TO TOTAL CAPITAL RATIO ...................................... 56
Section 6.26. MINIMUM FIXED CHARGE COVERAGE RATIO ............................................ 57
Section 6.27. MINIMUM EBITDA ................................................................. 57
Section 6.28. INTEREST RATE PROTECTION AGREEMENTS ............................................ 57
Section 6.29. POST-CLOSING MATTERS ........................................................... 57
Section 6.30. BANK ACCOUNTS .................................................................. 57
Section 6.31. CONSOLIDATED NET WORKING CAPITAL ............................................... 58
SECTION 7. EVENTS OF DEFAULT AND REMEDIES ......................................................... 58
Section 7.1. EVENTS OF DEFAULT ............................................................... 58
Section 7.2. NON-BANKRUPTCY DEFAULTS ......................................................... 60
Section 7.3. BANKRUPTCY DEFAULTS ............................................................. 60
Section 7.4. COLLATERAL FOR UNDRAWN LETTERS OF CREDIT ........................................ 61
Section 7.5. NOTICE OF DEFAULT ............................................................... 61
Section 7.6. EXPENSES ........................................................................ 61
SECTION 8. CHANGE IN CIRCUMSTANCES ................................................................ 61
Section 8.1. CHANGE OF LAW ................................................................... 61
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Section 8.2. UNAVAILABILITY OF DEPOSITS OR INABILITY TO ASCERTAIN LIBOR RATE ................. 62
Section 8.3. INCREASED COST AND REDUCED RETURN ............................................... 62
Section 8.4. LENDING OFFICES ................................................................. 64
Section 8.5. DISCRETION OF LENDER AS TO MANNER OF FUNDING .................................... 64
Section 8.6. LIMITATION ON CHARGES; SUBSTITUTE LENDERS; NON-DISCRIMINATION ................... 64
SECTION 9. THE AGENT .............................................................................. 65
Section 9.1. APPOINTMENT AND AUTHORIZATION OF AGENT .......................................... 65
Section 9.2. RIGHTS AND POWERS ............................................................... 65
Section 9.3. ACTION BY AGENT ................................................................. 65
Section 9.4. CONSULTATION WITH EXPERTS ....................................................... 66
Section 9.5. INDEMNIFICATION PROVISIONS; CREDIT DECISION ..................................... 66
Section 9.6. INDEMNITY ....................................................................... 67
Section 9.7. RESIGNATION OF AGENT AND SUCCESSOR AGENT ........................................ 67
SECTION 10. MISCELLANEOUS .......................................................................... 67
Section 10.1. NO WAIVER ...................................................................... 67
Section 10.2. NON-BUSINESS DAY ............................................................... 67
Section 10.3. DOCUMENTARY TAXES .............................................................. 68
Section 10.4. SURVIVAL OF REPRESENTATIONS .................................................... 68
Section 10.5. SURVIVAL OF INDEMNITIES ........................................................ 68
Section 10.6. SETOFF ......................................................................... 68
Section 10.7. NOTICES ........................................................................ 69
Section 10.8. COUNTERPARTS ................................................................... 69
Section 10.9. SUCCESSORS AND ASSIGNS ......................................................... 69
Section 10.10. SALES AND TRANSFERS OF BORROWINGS AND NOTES; PARTICIPATIONS IN BORROWINGS AND
NOTES.......................................................................... 69
Section 10.12. HEADINGS ...................................................................... 72
Section 10.13. LEGAL FEES, OTHER COSTS AND INDEMNIFICATION ................................... 72
Section 10.14. GOVERNING LAW: SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL ............... 73
Section 10.15. CONFIDENTIALITY ............................................................... 74
Section 10.16. EXECUTION IN COUNTERPARTS ..................................................... 75
Section 10.17. SEVERABILITY .................................................................. 75
Section 10.18. CHANGE IN ACCOUNTING PRINCIPLES OR TAX LAWS ................................... 75
Section 10.19. ENTIRE AGREEMENT .............................................................. 75
</TABLE>
iii
<PAGE>
EXHIBITS
- --------
Exhibit 2.2A - Form of Borrowing Request
Exhibit 2.2B - Form of Application
Exhibit 2.10A - Form of Revolving Note
Exhibit 2.10B - Form of Term Note
Exhibit 4.1A - Form of Security Agreement
Exhibit 4.1B - Form of Pledge Agreement
Exhibit 4.1C - Form of Subsidiary Guaranty
Exhibit 4.1D - Form of Subordination Agreement
Exhibit 4.1E - Form of Trademark and Patent Security Agreement
Exhibit 6.7A - Form of Compliance Certificate
Exhibit 6.7B - Form of Borrowing Base Certificate
Exhibit 10.10 - Form of Assignment Agreement
SCHEDULES
- ---------
Schedule 5.1 - List of Subsidiaries
Schedule 5.4 - Existing Litigation
Schedule 5.18 - Existing Environmental Claims
Schedule 6.15 - Existing Debt
Schedule 6.16 - Existing Investments, Existing YMS Rooms under Lease, Etc.
iv
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT, dated as of August 12, 1999, among
The York Group, Inc., a Delaware corporation (the "BORROWER"), ABN AMRO Bank
N.V., a Netherlands chartered bank ("ABN AMRO"), and the other lenders from time
to time parties hereto (each a "LENDER" and collectively, the "LENDERS"), and
ABN AMRO, as administrative agent for the Lenders (in such capacity, the
"AGENT").
WITNESSETH:
WHEREAS, the Borrower, the Lenders and the Agent are parties to the Credit
Agreement dated as of March 12, 1998 (as the same has been amended, modified and
supplemented since such date, the "EXISTING CREDIT AGREEMENT"); and
WHEREAS, the parties to the Existing Credit Agreement have agreed to amend
and restate the Existing Credit Agreement by entering into this Agreement (as
defined below).
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto agree that the Existing Credit
Agreement shall be amended and restated as follows (and that all existing
defaults or events of default under the Existing Credit Agreement shall be
waived):
SECTION 1. DEFINITIONS; INTERPRETATION.
Section 1.1. Definitions. Unless otherwise defined herein, the
following terms shall have the following meanings:
"ACCEPTABLE SECURITY INTEREST" in any Property means a Lien (a) which
exists in favor of the Collateral Agent for the benefit of the Agent, Lenders
and the Noteholders, (b) which is superior to all other Liens (except as
expressly permitted by this Agreement), (c) which secures the Obligations, and
(d) which is perfected and enforceable against all Persons in preference to any
rights of any Person therein (other than rights expressly permitted by this
Agreement and the Intercreditor Agreement).
"ACQUISITION" means a direct or indirect purchase by the Borrower or any
of its Subsidiaries after the date hereof for cash, stock or other securities or
other property, whether in one or more related transactions, of all or
substantially all of the assets or voting securities or other equity interests
of a Person or a business unit, division or group of a Person.
"ADJUSTED LIBOR RATE" means, for any Borrowing of Eurodollar Loans, a rate
per annum, determined in accordance with the following formula:
Adjusted LIBOR Rate = LIBOR RATE
----------
1.00 - Eurodollar Reserve Percentage
<PAGE>
"AFFILIATE" means, for any Person, (i) any other Person that directly or
indirectly through one or more intermediaries controls, or is under common
control with, or is controlled by, such Person, and (ii) any other Person owning
beneficially or controlling ten percent (10%) or more of the equity interests in
such Person. As used in this definition, "CONTROL" means the power, directly or
indirectly, to direct or cause the direction of management or policies of a
Person (through ownership of voting securities or other equity interests, by
contract or otherwise).
"AGENT" means ABN AMRO acting in its capacity as agent for the Lenders,
and any successor agent appointed hereunder pursuant to Section 9.7.
"AGREEMENT" means this Credit Agreement, as amended, restated or
supplemented from time to time.
"APPLICABLE MARGIN" means, for Eurodollar Loans, Base Rate Loans and the
commitment fee with respect to Letters of Credit and for any applicable period,
at such times as the relevant Total Debt to EBITDA Ratio is in one of following
Tiers, the percentage per annum set forth opposite such Total Debt to EBITDA
Ratio:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Total debt to EBITDA Ratio Eurodollars Loans Base Rate Loans
-------------------------- ----------------- ---------------
Tier I x less than 2.0 to 1.0 1.75% 0.75%
Teir II 2.0 to 1.0 less than or equal to 2.00% 1.00%
x greater than 2.5 to 1.0 2.00% 1.00%
Tier III 2.5 to 1.0 less than or equal to x 2.25% 1.25%
x greater than 3.0 to 1.0 2.25% 1.25%
Tier IV x greater than or equal to 3.0 2.50% 1.50%
</TABLE>
For the period from the Closing Date through the date the Borrower is to provide
the Agent with the financial statements for the calendar month ended July 31,
1999, as required by Section 6.7(a)(i), Applicable Margin shall be the
applicable percentage per annum set forth in Tier IV. Thereafter, the Applicable
Margin shall be reset by the Agent upon its receipt of the applicable financial
statements and Compliance Certificate as required by Section 6.7(a)(i) or (ii)
and Section 6.7(b) from the Borrower to be effective as of the date one (1)
Business Day after the earlier of the date such financial statements are
required to be provided or the date such financial statements are provided to
the Agent.
"APPLICATION" means an application for a Letter of Credit as defined in
Section 2.2(b).
"ASSIGNMENT AGREEMENT" means an agreement in substantially the form of
EXHIBIT 10.10 whereby a Lender conveys part or all of its Commitments, Loans and
participations in Letters of Credit to another Person that is, or thereupon
becomes, a Lender, or increases its Commitments, outstanding Loans and
outstanding participations in Letters of Credit pursuant to Section 10.10.
-2-
<PAGE>
"AUTHORIZED OFFICER" means any officer or other employee of the Borrower
or the Guarantor, as applicable, authorized from time to time to execute and
deliver a Credit Document under this Agreement.
"BASE RATE" means, for any day, the greater of:
(i) the fluctuating commercial loan rate announced by the Lender
which is the Agent from time to time at its Chicago, Illinois office (or other
corresponding office, in the case of any successor Agent) as its base rate for
Dollar loans in the United States of America in effect on such day (which base
rate may not be the lowest rate charged by the Agent on loans to any of its
customers), with any change in the Base Rate resulting from a change in such
announced rate to be effective on the date of the relevant change; and
(ii) the sum of (x) the rate per annum (rounded upwards, if
necessary, to the nearest 1/16th of 1%) equal to the weighted average of the
rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the next Business Day, PROVIDED THAT (A)
if such day is not a Business Day, the rate on such transactions on the
immediately preceding Business Day as so published on the next Business Day
shall apply, and (B) if no such rate is published on such next Business Day, the
rate for such day shall be the average of the offered rates quoted to the Agent
by two (2) federal funds brokers of recognized standing on such day for such
transactions as selected by the Agent, plus (y) one-half of one percent (0.50%)
per annum.
"BASE RATE LOAN" means a Loan bearing interest as provided in Section
2.6(a).
"BORROWER" means The York Group, Inc., a Delaware corporation.
"BORROWING" means a Revolving Borrowing or a Term Borrowing.
"BORROWING BASE" means, at any time, an amount equal to (a) 80% of the
Borrower's consolidated Eligible Accounts at such time plus (b) 50% of the value
of the Borrower's consolidated Eligible Inventory (determined on a first-in
first-out basis) at such time.
"BORROWING BASE CERTIFICATE" means a borrowing base certificate executed
by an Authorized Officer of the Borrower in substantially the form of EXHIBIT
6.7B.
"BORROWING REQUEST" means a request for a Borrowing executed by an
Authorized Officer of the Borrower in substantially the form of EXHIBIT 2.2A.
"BUSINESS DAY" means any day other than a Saturday, Sunday or other day on
which banks are authorized or required to close in Houston, Texas or New York,
New York, and, if the applicable Business Day relates to the advance or
continuation of, conversion into or payment on a Eurodollar Loan, on which banks
are dealing in Dollar deposits in the interbank eurocurrency market in London,
England.
-3-
<PAGE>
"CAPITAL EXPENDITURES" means, for any period, the sum, without
duplication, of (i) all expenditures of the Borrower and its Subsidiaries for
fixed or capital assets made during such period which, in accordance with GAAP,
would be classified as capital expenditures, and (ii) all Capitalized Lease
Obligations incurred during such period.
"CAPITALIZED LEASE OBLIGATIONS" means, for any period, the amount of the
Borrower's and its Subsidiaries' liabilities under all leases (or similar
arrangements) of real or personal property (or any interest therein) which in
accordance with GAAP would be classified as capitalized leases on the balance
sheet of the Borrower and its Subsidiaries.
"CASH EQUIVALENTS" means (i) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof having maturities of not more than twelve (12) months
from the date of acquisition; (ii) U.S. Dollar denominated time deposits and
certificates of deposit maturing within one (1) year from the date of
acquisition thereof with any Lender, or any other financial institution whose
short-term senior unsecured debt rating is at least A-2 from S&P or P-2 from
Moody's; (iii) LIBOR denominated time deposits and certificates of deposit
maturing within six (6) months from the date of acquisition thereof with any
Lender, or any other financial institution whose short-term senior unsecured
debt rating is at least A-1 from S&P or P-1 from Moody's; (iv) commercial paper
or Eurocommercial paper with a rating of at least A- 1 from S&P or P-1 from
Moody's, with maturities of not more than twelve (12) months from the date of
acquisition; (v) repurchase obligations entered into with any Lender or any
other financial institution whose short-term senior unsecured debt rating is at
least A-1 from S&P or P-1 from Moody's, which are secured by a fully perfected
security interest in any obligation of the type described in (i) above and has a
market value of the time such repurchase is entered into of not less than 100%
of the repurchase obligation of such Lender or such other Person thereunder;
(vi) marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within twelve (12) months from the date of
acquisition thereof or providing for the resetting of the interest rate
applicable thereto not less often than annually and, at the time of acquisition,
having one of the two highest ratings obtainable from either S&P or Moody's; and
(vii) money market funds which have at least $1,000,000,000 in assets and which
invest primarily in securities of the types described in clauses (i) through
(vi) above.
"CLASS" has the meaning set forth in Section 1.5.
"CLOSING DATE" means the date of this Agreement.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COLLATERAL" means all of the Property described under the definitions of
"Collateral", "Pledged Shares", "Pledged Securities", "Mortgaged Property" or
any other similar term contained in any of the Security Documents.
"COLLATERAL ACCOUNT" means the cash collateral account for outstanding
undrawn Letters of Credit as defined in Section 7.4(b).
-3-
<PAGE>
"COLLATERAL AGENT" means ABN AMRO Bank N.V., in its capacity as Collateral
Agent under the terms of the Intercreditor Agreement, and any successor
Collateral Agent pursuant to Section 3.6 of the Intercreditor Agreement.
"COMPLIANCE CERTIFICATE" means a certificate substantially in the form
of EXHIBIT 6.7A.
"COMMITMENTS" means, as to any Lender, its Revolving Credit Commitment
and its Term Commitment.
"CONSOLIDATED CASH INTEREST EXPENSE" means, as of any date of
determination, the aggregate of all cash Consolidated Interest Expense,
including, without limitation, all net amounts payable (or receivable) under
Interest Rate Protection Agreements and all imputed interest in respect of
Capitalized Lease Obligations; PROVIDED, HOWEVER, Consolidated Cash Interest
Expense shall not include interest expense attributable to amortization of debt
discount.
"CONSOLIDATED CURRENT ASSETS" means, as of any date of determination,
outstanding on such date, the total amount of the current assets of the Borrower
and its Subsidiaries as of such date determined on a consolidated basis in
accordance with GAAP.
"CONSOLIDATED CURRENT LIABILITIES" means, as of any date of determination,
outstanding on such date, the total amount of the current liabilities of the
Borrower and its Subsidiaries as of such date determined on a consolidated basis
in accordance with GAAP.
"CONSOLIDATED EARNINGS BEFORE INTEREST, LEASES AND TAXES" means, as of any
date of determination, with respect to the Borrower and its Subsidiaries, the
sum of (i) Consolidated Net Income, plus (ii) to the extent that any of the
items referred to in any of clauses (a), (b) or (c) below were deducted in
calculating Consolidated Net Income: (a) provisions for taxes on income or
revenues, (b) Consolidated Cash Interest Expense, and (c) Lease Expense minus
(iii) any extraordinary, unusual or nonrecurring gains or losses.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, the total interest
expense of the Borrower and its Subsidiaries on a consolidated basis for such
period in connection with Debt, determined in accordance with GAAP.
"CONSOLIDATED INTEREST INCOME" means, for any period, the total interest
income of the Borrower and its Subsidiaries on a consolidated basis for such
period in connection with Debt, determined in accordance with GAAP.
"CONSOLIDATED NET INCOME" means, for any period, the net income (or loss),
after provision for taxes, of the Borrower and its Subsidiaries on a
consolidated basis for such period, determined in accordance with GAAP.
"CONSOLIDATED NET TANGIBLE ASSETS" means as of any date of determination,
the total amount of assets of the Borrower and its Subsidiaries on a
consolidated basis for such period, less, without duplication, (i) current
liabilities, (ii) all reserves for depreciation and other asset valuation
reserves
-5-
<PAGE>
(but excluding reserves for deferred federal, state and other income taxes),
(iii) all assets properly classified as intangible assets, and (iv) appropriate
adjustments on account of minority interests of third parties holding common
stock in any Subsidiary of the Borrower; in each instance as determined in
accordance with GAAP.
"CONSOLIDATED NET WORKING CAPITAL" means, as at any date of determination,
outstanding on such date, an amount equal to the difference of (i) Consolidated
Current Assets of the Borrower and its Subsidiaries MINUS (ii) Consolidated
Current Liabilities of the Borrower and its Subsidiaries determined in
accordance with GAAP.
"CONSOLIDATED NET WORTH" means, as of any date of determination, the
Borrower's consolidated stockholders' equity determined in accordance with GAAP.
"CONTINGENT OBLIGATION" means, as applied to any Person, any direct or
indirect liability of that Person with respect to any Debt, lease, dividend,
letter of credit or other obligation (the "primary obligations") of another
Person (the "primary obligor"), in any manner, whether direct or indirect,
including, without limitation, any obligations of such Person, whether or not
contingent, (i) to purchase, repurchase or otherwise acquire such primary
obligations or any property constituting direct or indirect security therefor,
or (ii) to advance or provide funds (x) for the purchase, payment or discharge
of any such primary obligation, or (y) to maintain working capital or equity
capital of the primary obligor or otherwise to maintain the net worth or
solvency or any balance sheet item, level of income or financial condition of
the primary obligor, or (iii) to lease property or to purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment of
such primary obligation, or (iv) otherwise to assure or hold harmless the owner
of any such primary obligation against loss in respect thereof. The amount of
any Contingent Obligation shall be deemed to be an amount equal to the stated or
determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
anticipated liability in respect thereof.
"CREDIT DOCUMENTS" means this Agreement, the Notes, the Subsidiary
Guaranties, the Security Documents, the Subordination Agreements, the Fee
Letters, the Borrowing Requests, the Applications, each Interest Rate Protection
Agreement executed with a Lender (or an Affiliate of any Lender), if any, and
any other documents or instruments executed by the Borrower or any of the
Guarantors in connection with this Agreement.
"DEBT" means for any Person (without duplication): (i) all advances and
indebtedness, whether or not represented by bonds, debentures, notes, securities
or other evidences of indebtedness, for the repayment of money borrowed, (ii)
all indebtedness representing deferred payment of the purchase price of property
or assets, (iii) all Capitalized Lease Obligations and leases of property or
assets made as a part of any sale and lease-back transaction whether or not
required to be capitalized on a balance sheet, (iv) all Contingent Obligations,
including, without limitation, all indebtedness under guaranties, endorsements,
assumptions or other contractual obligations, including any letters of credit,
unsecured performance guarantees given in the normal course of business of the
Borrower or a Subsidiary under contractual obligations and any standby letters
of credit issued by a banking institution as security therefore; provided,
HOWEVER, that letters of credit issued by the Borrower or
-6-
<PAGE>
any Subsidiary as security for insurance premiums, workman's compensation
insurance, environmental bonds and other such similar purposes shall be excluded
from the amount of Debt to the extent of an aggregate amount of $2,500,000, (v)
all indebtedness secured by a Lien existing on property owned, subject to such
Lien, whether or not the indebtedness secured thereby shall have been assumed by
the owner thereof, (vi) Interest Rate Protection Agreements (without duplication
for the hedged obligation), and (vii) all amendments, renewals, extensions,
modifications and refundings of any indebtedness or obligations referred to
above in (i), (ii), (iii), (iv), (v) or (vi); provided, HOWEVER, that "Debt"
shall not include trade accounts payable arising in the ordinary course of
business. The amount of Debt attributable to original issue discount notes or
bonds shall be equal to the net book amount of consolidated debt recorded in
accordance with GAAP. The calculation of Debt shall include all Debt of the
Borrower, plus all Debt of other Persons, other than Subsidiaries, which has
been guaranteed by the Borrower or any Subsidiary. Debt shall also include the
redemption amount with respect to any stock of the Borrower required to be
redeemed within twelve (12) months following the date of determination.
"DEFAULT" means any event or condition the occurrence of which would, with
the passage of time or the giving of notice, or both, constitute an Event of
Default.
"DOLLAR" and "U.S. DOLLAR" and the sign "$" means lawful money of the
United States of America.
"EBITDA" means, as of any date of determination, the sum of (i)
Consolidated Net Income before (a) Consolidated Interest Expense, (b)
Consolidated Interest Income, (c) provisions for taxes based on income or
revenues, and (d) any extraordinary, unusual or nonrecurring gains or losses;
plus (ii) the amount of all depreciation, amortization expense and other
non-cash charges (excluding the effects of any accruals made in the ordinary
course of business) deducted in determining Consolidated Net Income, all
calculated on a consolidated basis for the Borrower and its Subsidiaries and as
determined in accordance with GAAP. Upon the consummation of any Acquisition,
EBITDA shall be adjusted to include the historical financial results of the
acquired business (on a historic twelve-month rolling pro forma basis).
"EFFECTIVE DATE" means the first date on which all conditions precedent
set forth in Section 4.1 and 4.2 are satisfied or waived in writing.
"ELIGIBLE ACCOUNTS" means, with respect to any Person and as of any date
of its determination by the Agent, the accounts receivable of such Person which
are reflected on the balance sheet of such Person as of such date in accordance
with GAAP, excluding, however:
(a) accounts receivable which are not "accounts" as such term is
defined in the Uniform Commercial Code of the jurisdiction or jurisdictions
applicable to such Person or accounts (including those represented by any
promissory note, trade acceptance, chattel paper, draft, or other instrument);
(b) accounts receivable which did not arise from an enforceable
order or contract for the absolute and final sale of the inventory or services
of the Person, or accounts receivable for
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which the sales or services of such receivable have not been fully performed in
the ordinary course of business of the Person;
(c) all accounts receivable from any account debtor that has 25% or
more of its accounts receivable to such Person past due more than 120 days after
the date of the invoices that generated such accounts receivable;
(d) any accounts receivable that are past due more than 120 days
after the date of the invoice that generated such accounts receivable;
(e) accounts receivable which are subject to any contest or offset
(other than offsets in the form of accrued and unpaid rebates, in which case the
"Eligible Accounts" would equal the net amount after giving effect to such
accrued and unpaid rebates), including contra accounts, or which have been
disputed;
(f) accounts receivable which were not generated in an arm's length
transaction or are accounts receivable from any Affiliate of the Person;
(g) accounts receivable in which there is not an Acceptable Security
Interest or which are subject to Liens (other than Permitted Liens) which would
be superior to the Lien of the Collateral Agent created under the Security
Documents; and
(h) accounts receivable which are otherwise unacceptable as
collateral as determined by the Agent according to the policies of the Agent
applied to its other customers generally (with such exceptions as may be
dictated by business practices specific to the Borrower's industry).
"ELIGIBLE INVENTORY" means, with respect to any Person and as of any date
of its determination by the Agent, the inventory of such Person which is
reflected on the balance sheet of such Person as of such date in accordance with
GAAP, excluding, however:
(a) inventory of such Person out on consignment, inventory held by
such Person on consignment, and inventory which is not "inventory" as such term
is defined in the Uniform Commerce Code of the jurisdiction or jurisdictions
applicable to such Person or to such inventory;
(b) inventory in which there is not an Acceptable Security Interest
or which is evidenced by any negotiable or non-negotiable document of title and
is goods in transit to third parties, bill and hold goods or deferred shipments
and which is subject to a third party's rights (other than Permitted Liens)
which would be superior to the Lien of the Collateral Agent created under the
Security Documents;
(c) inventory which has become obsolete, has been damaged and is not
saleable in its present state for the use for which it was manufactured or
purchased;
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(d) inventory which is located on premises owned or operated by the
customer that is to purchase such inventory and for which appropriate financing
statements have not been filed with respect to such inventory showing such
Person as secured party and such customer as debtor;
(e) inventory which is held by such Person in quantities in excess
of the quantity of such type of inventory sold or used by such Person or an
Affiliate of such Person during the last preceding 24 calendar months; and
(f) inventory which is otherwise unacceptable as collateral as
determined by the Agent according to the policies of the Agent applied to its
other customers generally (with such exceptions as may be dictated by business
practices specific to the Borrower's industry).
"ENVIRONMENTAL CLAIMS " means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens, notices of
non-compliance or violations, investigations or proceedings relating to any
Environmental Law ("CLAIMS") or any permit issued under any Environmental Law,
including, without limitation, (i) any and all Claims by governmental or
regulatory authorities for enforcement, cleanup, removal, response, remedial or
other actions or damages pursuant to any applicable Environmental Law and (ii)
any and all Claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief resulting from
Hazardous Materials or arising from alleged injury or threat of injury to health
or safety in relation to the environment.
"ENVIRONMENTAL LAW" means any federal, state or local statute, law, rule,
regulation, ordinance, code, written policy or rule of common law now or
hereafter in effect, including any judicial or administrative order, consent,
decree or judgment relating to (i) the environment, (ii) health or safety in
relation to the environment or (iii) Hazardous Materials.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EURODOLLAR LOAN" means a Loan bearing interest as provided in Section
2.6(b).
"EURODOLLAR RESERVE PERCENTAGE" means, with respect to each Interest
Period for a Eurodollar Loan, a percentage (expressed as a decimal) equal to the
daily average during such Interest Period of the percentages in effect on each
day of such Interest Period, if any, as prescribed by the Board of Governors of
the Federal Reserve System (or any successor thereto), for determining the
maximum reserve requirements (including, without limitation, any supplemental,
marginal and emergency reserves) applicable to "Eurocurrency Liabilities"
pursuant to Regulation D of the Board of Governors of the Federal Reserve System
or any other then applicable regulation of the Board of Governors which
prescribes reserve requirements applicable to "Eurocurrency Liabilities" as
presently defined in Regulation D.
"EVENT OF DEFAULT" means any of the events or circumstances specified
in Section 7.1.
"EXISTING CREDIT AGREEMENT" has the meaning set forth in the first
recital.
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"FEE LETTER" means (a) that certain letter agreement between the Borrower
and the Agent dated August 12, 1999, and (b) those certain letter agreements
between the Borrower and the Lenders, and "FEE LETTERS" means all such letter
agreements collectively.
"FIRST SIERRA" means First Sierra Financial, Inc.
"FIXED CHARGE COVERAGE RATIO" means, as of any date of determination, the
ratio of (i) Consolidated Earnings Before Interest, Leases and Taxes to (ii) the
sum of (a) Consolidated Cash Interest Expense plus (b) Lease Expense.
"FOREIGN SUBSIDIARY" means any Subsidiary of the Borrower incorporated in
a jurisdiction other than in a state, province or territory of the United
States.
"GAAP" means generally accepted accounting principles from time to time in
effect as set forth in the opinions and pronouncements of the Accounting
Principles Board and the statements and pronouncements of the Financial
Accounting Standards Board or in such other statements, opinions and
pronouncements by such other entity as may be approved by a significant segment
of the U.S. accounting profession.
"GUARANTOR" means each Subsidiary of the Borrower (other than YCF).
"HAZARDOUS MATERIAL" shall have the meaning assigned to that term in the
Comprehensive Environmental Response Compensation and Liability Act of 1980, as
amended by the Superfund Amendments and Reauthorization Acts of 1986, and shall
include any substance defined as "HAZARDOUS" or "TOXIC" or words used in place
thereof under any Environmental Law applicable to the
Borrower or any of its Subsidiaries.
"HIGHEST LAWFUL RATE" means the maximum nonusurious, interest rate, if
any, that at any time or from time to time may be contracted for, taken,
reserved, charged or received on the Loans or the Reimbursement Obligations, or
under laws applicable to the Lenders, which are presently in effect or, to the
extent allowed by applicable law, under such laws which may hereafter be in
effect and which allow a higher maximum nonusurious interest rate than
applicable laws now allow. Determination of the rate of interest for the purpose
of determining whether the Loans or the Reimbursement Obligations represented
hereby are usurious under all applicable laws shall be made by amortizing or
spreading using the actuarial method during the stated term of the Loans or the
Reimbursement Obligations, all interest at any time contracted for, taken,
reserved, charged or received from the Borrower in connection with the Loans or
the Reimbursement Obligations, as applicable.
"INTERCREDITOR AGREEMENT" means the Intercreditor Agreement dated as of
August 12, 1999 among the Borrower, the Guarantors, the Noteholders, the
Lenders, the Agent and the Collateral Agent.
"INTEREST PAYMENT DATE" means (i) in the case of Base Rate Loans, the last
day of each calendar month such Loan is outstanding commencing August 31, 1999,
(ii) in the case of Eurodollar
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Loans, on each day that is the monthly anniversary of the first day of the
Interest Period for such Loan, and the last day of each Interest Period for such
Loan, and (iii) in each case, on the date such Loans are due and payable.
"INTEREST PERIOD" means the period commencing on the date that a Borrowing
of Eurodollar Loans is advanced, continued or created by conversion and, subject
to Section 2.5, ending on the date one (1), two (2) or three (3) months
thereafter as selected by the Borrower pursuant to the terms of this Agreement,
or with respect to the initial Borrowing hereunder as otherwise agreed by the
Borrower and all Lenders.
"INTEREST RATE PROTECTION AGREEMENT" means any interest rate swap,
interest rate cap, interest rate collar, or other interest rate hedging
agreement or arrangement designed to protect against fluctuations in interest
rates.
"L/C DOCUMENTS" means this Agreement, the Letters of Credit and any
Applications with respect thereto and any draft or other document presented in
connection with a drawing thereunder.
"L/C OBLIGATIONS" means the undrawn face amounts of all outstanding
Letters of Credit and all unpaid Reimbursement Obligations with respect to
Letters of Credit.
"LEASE" means any lease, sublease or other instrument (other than a
Capitalized Lease Obligation) pursuant to which a Person is entitled to use any
property of another Person for an original term, such original term to include
any period for which such lease, sublease or other instrument may be renewed at
the option of the lessor or lessee thereunder.
"LEASE EXPENSE" means, as of any date of determination, for any period for
which the amount thereof is to be determined, (i) all amounts payable by the
Borrower and its Subsidiaries, on a consolidated basis in accordance with GAAP,
as a lessee or a sublessee under any Lease, minus (ii) any amounts required to
be paid by the Borrower or any of its Subsidiaries on account of maintenance,
repairs, insurance, taxes and similar charges (whether or not such are
designated as rents or additional rents) for such period.
"LENDERS" is defined in the preamble.
"LENDING OFFICE" means the branch, office or affiliate of a Lender
specified on the appropriate signature page hereof or designated pursuant to
Sections 8.4 or 10.10.
"LETTER OF CREDIT" means any of the letters of credit issued by the
Lenders for the account of the Borrower pursuant to Section 2.2(a).
"LIBOR RATE" means, relative to any Interest Period for each Eurodollar
Loan comprising part of the same Borrowing, a rate of interest per annum
(rounded upwards, if necessary, to the nearest whole multiple of 1/16 of 1 %),
equal to the arithmetic mean of the "LIBOR" rates of interest per annum
appearing on Telerate Page 3750 (or any successor publication) for the
applicable currency two (2) Business Days before the commencement of such
Interest Period for delivery on the
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first day of such Interest Period, at or about 11:00 a.m. (London, England time)
for a period approximately equal to such Interest Period. If the foregoing
Telerate rate is unavailable for any reason, then such rate shall be determined
by the Agent from the Reuters Screen LIBOR page, or if such rate is also
unavailable on such service, on any other interest rate reporting service of
recognized standing selected by the Agent after consultation with the Borrower.
"LIEN" means any interest in any property or asset in favor of a Person
other than the owner of the property or asset and securing an obligation owed to
such Person, whether such interest is based on the common law, statute or
contract, including, but not limited to, the security interest lien arising from
a mortgage, encumbrance, pledge, conditional sale, security agreement or trust
receipt, or a lease, consignment or bailment for security purposes.
"LOAN" means a Revolving Loan or a Term Loan.
"MAJORITY LENDERS" means, at any time, Lenders then holding in the
aggregate at least sixty-six and two/thirds percent (66- 2/3 %) of the sum of
the Loans held by the Lenders at such time and the L/C Obligations at such time,
or, if no such principal amount of the Loans and there are no L/C Obligations
then outstanding, Lenders having at least sixty-six and two/thirds percent (66-
2/3 %) of the aggregate amount of the Commitments at such time. The percentage
set forth opposite each Lender's name on the signature page hereto reflects the
initial voting percentage of each Lender hereunder.
"MATERIAL ADVERSE EFFECT" means an effect that results in a material
adverse change (i) since December 31, 1998 (other than as disclosed in the
Borrower's financial projections dated July 27, 1999, provided to the Agent) in
the business, properties, assets, financial condition or prospects of the
Borrower and its Subsidiaries taken as a whole, (ii) in the ability of the
Borrower or any of the Guarantors to perform its Obligations under the Credit
Documents to which it is a party, or (iii) in the rights and remedies of the
Lenders or the Agent in any material adverse respect under the Credit Documents.
"MATURITY DATE" means (i) with respect to the Revolving Loans, June 30,
2001 and (ii) with respect to the Term Loans, June 30, 2001.
"MOODY'S" means Moody's Investors Service, Inc. or any successor
thereto.
"MORTGAGE" means a mortgage in form and substance satisfactory to the
Agent and the Majority Lenders executed by the Borrower or any of its
Subsidiary, and "MORTGAGES" means all such Mortgages collectively.
"NET CASH PROCEEDS FROM ASSETS" means with respect to any asset sale or
transfer by the Borrower or any of its Subsidiaries permitted by Section 6.17
(including, without limitation, any sale or transfer resulting from a casualty
event or condemnation), the net cash proceeds received by the Borrower or such
Subsidiary after giving effect to (x) reasonable cash transaction costs and
expenses attributable to such sale, (y) cash taxes owing in connection with any
taxable gain (measured on a
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consolidated basis) attributable to such sale and purchase price adjustments
reasonably expected to be payable in connection therewith, and (z) the repayment
of any Debt owing by the Borrower or such Subsidiary to any Person (other than
the Borrower or any other Subsidiary of the Borrower) in respect of such asset.
"NET CASH PROCEEDS FROM ISSUANCE" means with respect to any sale or
issuance by the Borrower or any of its Subsidiaries of capital stock or
subordinated Debt, the net cash proceeds received by the Borrower or such
Subsidiary from such sale or issuance after giving effect to (x) reasonable fees
and reasonable out of pocket expenses of attorneys, accountants, investment
banks, notary publics and other reasonable cash transaction costs and expenses
attributable to such sale or issuance and (y) any reasonable and customary
underwriting discounts and commissions attributable to such sale or issuance.
"NOTE" means a Revolving Note or a Term Note, and "NOTES" means all such
promissory notes collectively.
"NOTEHOLDERS" means those noteholders party to the Senior Note Purchase
Agreement.
"OBLIGATIONS" means (a) all obligations of the Borrower and the Guarantors
to pay fees, costs and expenses hereunder, to pay principal or interest on
Loans, to pay Reimbursement Obligations and to pay any other obligations to the
Agent and Lenders arising under or in relation to any Credit Document and (b)
all obligations of the Borrower and the Guarantors owing to any Lender or any
Affiliate of a Lender under any Interest Rate Protection Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
thereto.
"PERMITTED BUSINESS" means any business described in Section 6.9.
"PERMITTED LIENS" means the Liens described in Section 6.14.
"PERSON" means an individual, partnership, corporation, limited liability
company, association, trust, unincorporated organization or any other entity or
organization, including a government or any agency or political subdivision
thereof.
"PLAN" means an employee pension benefit plan covered by Title IV of ERISA
or subject to the minimum funding standards under Section 412 of the Code that
is either (i) maintained by the Borrower or any of its Subsidiaries, or (ii)
maintained pursuant to a collective bargaining agreement or any other
arrangement under which more than one employer makes contributions and to which
the Borrower or any of its Subsidiaries is then making or accruing an obligation
to make contributions or has within the preceding five (5) plan years made or
had an obligation to make contributions.
"PLEDGE AGREEMENT" means each of the Pledge Agreements in substantially
the form of EXHIBIT 4.1B and executed by the Borrower or any Subsidiary of the
Borrower to secure all or a portion of the Obligations.
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"PRIVATE PLACEMENT" means the Borrower's issuance of its Senior Secured
Notes pursuant to the terms of the Senior Note Purchase Agreement.
"PROCEEDS" has the meaning set forth in the Intercreditor Agreement.
"PRO RATA SHARE" has the meaning set forth in the Intercreditor
Agreement.
"PURCHASING LENDER" has the meaning given such term in Section 10.10(b).
"REIMBURSEMENT OBLIGATION" means the obligations of the Borrower to
reimburse the Agent and the Lenders for each drawing under a Letter of Credit as
described in Section 2.2(c).
"REUTERS SCREEN" means, when used in connection with any designated page
and the "LIBOR" rate, the display page so designated on the Reuter Money 2000
Service (or such other page as may replace that page on that service or on any
replacement Reuter Service for the purpose of displaying rates comparable to the
"LIBOR" rate).
"REVOLVING BORROWING" means any extension of credit made by the Lenders by
way of Revolving Loans or Letters of Credit, including any Borrowings advanced,
continued or converted. A Borrowing is "ADVANCED" on the day the Lenders advance
funds comprising such Borrowing to the Borrower or a Letter of Credit is issued,
is "CONTINUED" (in the case of Eurodollar Loans) on the date a new Interest
Period commences for such Borrowing and is "CONVERTED" when such Borrowing is
changed from one Type of Revolving Loan to the other, all as requested by the
Borrower pursuant to Section 2.4(a).
"REVOLVING CREDIT" means the credit facility for making Revolving Loans
and issuing Letters of Credit described in Sections 2.1(a) and 2.2.
"REVOLVING CREDIT COMMITMENT" means, relative to any Lender, such Lender's
obligations to make Revolving Loans and participate in Letters of Credit
pursuant to Sections 2.1(a) and 2.2 in the dollar amount set forth opposite its
signature hereto or pursuant to Section 10.10, as such commitments may be
reduced from time to time or terminated pursuant to this Agreement; PROVIDED,
THAT, if the Revolving Credit Commitments are terminated, each Lender's
Revolving Credit Commitment shall be calculated based on its Revolving Credit
Commitment in effect immediately before such termination.
"REVOLVING CREDIT COMMITMENT AMOUNT" means $25,000,000, as such amount may
be reduced from time to time or terminated pursuant to the terms of this
Agreement.
"REVOLVING CREDIT COMMITMENT TERMINATION DATE" means the earliest of (i)
June 30, 2001 and (ii) the date on which the Revolving Credit Commitments are
terminated in full or reduced to zero pursuant to Sections 2.12, 7.2 or 7.3.
"REVOLVING LOAN " means any advance by a Lender to the Borrower as part of
a Revolving Borrowing and refers to a Base Rate Loan or a Eurodollar Loan.
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"REVOLVING NOTE" has the meaning set forth in Section 2.10.
"REVOLVING SHARE" means, for each Lender with a Revolving Credit
Commitment, the ratio (expressed as a percentage) of such Lender's Revolving
Credit Commitment at such time to the Revolving Credit Commitment Amount at such
time.
"SEC" means the Securities and Exchange Commission.
"S&P" means Standard & Poor's Ratings Group or any successor thereto.
"SECURITY AGREEMENT" means each of the Security Agreements in
substantially the form of EXHIBIT 4.1A and executed by the Borrower or any
Subsidiary of the Borrower to secure all or a portion of the Obligations.
"SECURITY DOCUMENTS" means the Pledge Agreements, the Security Agreements,
the Mortgages, the Intercreditor Agreement and each other document, instrument
or agreement executed in connection therewith or otherwise executed in order to
secure all or a portion of the Obligations.
"SENIOR NOTE PURCHASE AGREEMENT" means the Senior Note Purchase Agreement
dated as of June 30, 1994 among the Borrower and the Noteholders party thereto,
as amended by the First Amendment to Senior Note Purchase Agreement dated as of
August 12, 1999.
"SENIOR SECURED NOTES" means the Borrower's 8.37% Senior Secured Notes due
June 30, 2004 and issued pursuant to the terms of the Senior Note Purchase
Agreement.
"SHARED PROCEEDS" means (i) all Proceeds received from the sale or
disposition of all or substantially all of the Collateral, (ii) all Proceeds
received from any insurance policy as a result of any casualty event involving
the Collateral and which have not been disbursed to the Borrower or its
Subsidiaries to be reinvested in replacement assets, (iii) all Proceeds received
from the sale or disposition of any Collateral permitted by clauses (b), (f) and
(g) of Section 6.17 of the Credit Agreement and clauses (b), (f) and (g) of
Section 7.6 of the Note Agreement, and (iv) all Proceeds received from the sale
or disposition of any Collateral in violation or breach of the Credit Agreement,
the Note Agreement, the Credit Documents or the Financing Documents.
"SPECIAL PURPOSE SUBSIDIARIES" means Colonial Trade Company, Inc.,
Dixie Vault Trade Company, Inc., Doody Trade Company, Inc., Elder Davis Trade
Company, Inc., T.Y.G. Company, Inc., T.Y.G. Trade Company, Inc., T.Y.G. Trade
II Company, Inc., and West Point Trade Company, Inc.
"SUBORDINATION AGREEMENT" means a Subordination Agreement in
substantially the form of EXHIBIT 4.1D.
"SUBSIDIARY" means, for any Person, any corporation or other entity of
which more than fifty percent (50%) of the outstanding stock or comparable
equity interests having ordinary voting power for the election of the board of
directors of such corporation, any managers of such limited liability
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company or similar governing body (irrespective of whether or not, at the time,
stock or other equity interests of any other class or classes of such
corporation or other entity shall have or might have voting power by reason of
the happening of any contingency) is at the time directly or indirectly owned by
such Person, as applicable, or by one or more of its Subsidiaries.
"SUBSIDIARY GUARANTY" means each Guaranty of the Subsidiaries in
substantially the form of EXHIBIT 4.1D.
"TANGIBLE NET WORTH" means, as of the date of its determination, the
Consolidated Net Worth of the Borrower, excluding all of the Borrower's
consolidated intangible assets, as determined in accordance with GAAP
consistently applied.
"TAXES" shall have the meaning ascribed to such term in Section 5.12.
"TELERATE" means, when used in connection with any designated page and the
"LIBOR" rate, the display page so designated on the Dow Jones Telerate Service
(or such other page as may replace that page on that service or on any
replacement Dow Jones Service for the purpose of displaying rates comparable to
the "LIBOR" rate).
"TERM BORROWING" means any extension of credit made by the Lenders by way
of Term Loans, including any Borrowings advanced, continued or converted. A
Borrowing is "ADVANCED" on the day the Lenders advance funds comprising such
Borrowing to the Borrower is "CONTINUED" (in the case of Eurodollar Loans) on
the date a new Interest Period commences for such Borrowing and is "CONVERTED"
when such Borrowing is changed from one Type of Term Loan to the other, all as
requested by the Borrower pursuant to Section 2.4(a).
"TERM COMMITMENT" means, relative to any Lender, such Lender's obligations
to make Term Loans pursuant to Section 2.1(b) in the dollar amount set forth
opposite its signature hereto or pursuant to Section 10.10; PROVIDED HOWEVER,
that, after the Effective Date, the Term Commitment for each such Lender shall
be zero.
"TERM COMMITMENT AMOUNT" means $35,000,000; PROVIDED THAT, after the
Effective Date, the Term Commitment Amount shall be zero.
"TERM CREDIT" means the credit facility for making Term Loans described in
Section 2.1(b).
"TERM LOANS" means any advance by a Lender to the Borrower as part of a
Term Borrowing and refers to a Base Rate Loan or a Eurodollar Loan.
"TERM NOTE" has the meaning set forth in Section 2.10.
"TERM SHARE" means, for each Lender with a Term Commitment, the ratio
(expressed as a percentage) of such Lender's Term Commitment or outstanding Term
Loans at such time to the Term Commitment Amount or the aggregate outstanding
Term Loans, as applicable, at such time.
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"TOTAL CAPITAL" means, as of any date of determination, the sum of Total
Debt plus Consolidated Net Worth as of such date.
"TOTAL DEBT" means, as of any date of determination, the aggregate amount
of all Debt of the Borrower and its Subsidiaries outstanding on such date
determined on a consolidated basis in accordance with GAAP.
"TOTAL DEBT TO EBITDA RATIO" means, as of any date of determination, the
ratio of Total Debt to EBITDA, calculated using Total Debt at the date of
determination and EBITDA on a historic rolling twelve-months basis.
"TOTAL DEBT TO TOTAL CAPITAL RATIO" means, as of any date of
determination, the ratio of Total Debt to Total Capital.
"TRADEMARK AND PATENT SECURITY AGREEMENT" means each of the Trademark and
Patent Security Agreements in substantially the form of Exhibit 4.1E and
executed by the Borrower or any Subsidiary of the Borrower to secure all or a
portion of the Obligations.
"TRANSFER" means a sale, transfer, conveyance, assignment or other
disposition (or a series of related dispositions), including, without
limitation, any transfer pursuant to an option to purchase, any sale or
assignment (with or without recourse) of any accounts receivable and any sale
and leaseback of assets, of an asset, but excluding any involuntary transfer by
operation of law and any transfers of an asset pursuant to any casualty or theft
with respect to such asset.
"TRIGGERING EVENT" has the meaning set forth in the Intercreditor
Agreement.
"TYPE" has the meaning set forth in Section 1.5.
"UNFUNDED VESTED LIABILITIES" means, for any Plan at any time, the amount
by which the present value of all vested nonforfeitable accrued benefits under
such Plan exceeds the fair market value of all Plan assets allocable to such
benefits, determined as of the then most recent valuation date for such Plan,
but only to the extent that such excess represents a potential liability of the
Borrower or any of its Subsidiaries to the PBGC or such Plan.
"VENDER LEASE PLAN AGREEMENT " means the Vendor Lease Plan Agreement
delivered pursuant to Section 4.1.
"YCF" means The York Children's Foundation, a non-profit corporation.
"YMS ROOMS" means merchandising system rooms of the Borrower or any of its
Subsidiaries set up in the ordinary course of business at third party
facilities.
Section 1.2. INTERPRETATION. The foregoing definitions shall be equally
applicable to the singular and plural forms of the terms defined. Section,
Schedule, and Exhibit references are to this Agreement, unless otherwise
specified. All references to instruments, documents, contracts, and agreements
are references to such instruments, documents, contracts, and
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agreements as the same may be amended, supplemented, and otherwise modified from
time to time, unless otherwise specified and only to the extent such amendments,
supplements and modifications are permitted hereby. All references to times of
day in this Agreement shall be references to Chicago, Illinois time unless
otherwise specifically provided.
Section 1.3. COMPUTATION OF TIME PERIODS. In this Agreement in the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
means "to but excluding".
Section 1.4. ACCOUNTING TERMS. Except as otherwise expressly provided
herein, all accounting terms used herein shall be interpreted, and all financial
statements and certificates and reports as to financial matters required to be
delivered to the Lenders hereunder shall (unless otherwise disclosed to the
Lenders in writing at the time of delivery thereof) be prepared, in accordance
with GAAP applied on a basis consistent with those used in the preparation of
the latest financial statements furnished to the Lenders hereunder (which prior
to the delivery of the first financial statements under Section 6.7 hereof,
shall mean the financial statements described in Section 5.9). All calculations
made for the purposes of determining compliance with this Agreement shall
(except as otherwise expressly provided herein) be made by application of GAAP
applied on a basis consistent with those used in the preparation of the annual
or monthly financial statements furnished to the Lenders pursuant to Section 6.7
hereof most recently delivered prior to or concurrently with such calculations
(or, prior to the delivery of the first financial statements under Section 6.7
hereof, used in the preparation of the financial statements described in Section
5.9). In addition, all calculations and defined accounting terms used herein
shall, unless expressly provided otherwise, when referring to any Person, refer
to such Person on a consolidated basis and mean such Person and its consolidated
subsidiaries.
Section 1.5. CLASSES AND TYPES OF LOANS. Loans are distinguished by
"Class" and "Type". The "Class" of a Loans refers to the determination of
whether such Loan is a Term Loan or a Revolving Loan, each of which constitutes
a Class. The "Type" of a Loan refers to the determination whether such Loan is a
Eurodollar Loan or a Base Rate Loan, each of which constitutes a Type.
SECTION 2. THE CREDIT FACILITIES.
Section 2.1. LOANS.
(a) REVOLVING LOANS. Subject to the terms and conditions hereof, each
Lender severally and not jointly agrees to make one or more loans (each, a
"REVOLVING LOAN") to the Borrower from time to time before the Revolving Credit
Commitment Termination Date on a revolving basis in an aggregate amount not to
exceed at any time outstanding an amount equal to its Revolving Credit
Commitment then in effect, subject to any reductions thereof pursuant to the
terms of this Agreement. The Revolving Loans shall be made ratably from the
Lenders in proportion to their respective Revolving Shares. No Lender shall be
required to make any Revolving Loan if, after giving effect thereto, (i) the sum
of (A) the aggregate principal amount of the Revolving Loans of all Lenders and
(B) the L/C Obligations outstanding of the Borrower would thereby exceed the
lesser of (I) the
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Borrowing Base then in effect and (II) the Revolving Credit Commitment Amount
then in effect or (ii) the sum of (A) the aggregate principal amount of the
Revolving Loans of such Lender and (B) its participating interest in all L/C
Obligations would thereby exceed the Revolving Credit Commitment of such Lender
then in effect. Revolving Loans may be repaid, in whole or in part, and all or
any portion of the principal amount thereof reborrowed, before the Revolving
Credit Commitment Termination Date, subject to the terms and conditions hereof.
(b) TERM LOANS. On the Effective Date, each Lender severally agrees,
subject to the terms and conditions hereof, to make one or more Term Loans to
the Borrower in an aggregate amount not to exceed an amount equal to its Term
Commitment then in effect. The Term Loans shall be made ratably from the Lenders
in proportion to their respective Term Shares. No Lender shall be required to
make any Term Loan if, after giving effect thereto, all of the Term Loans of
such Lender would exceed the Term Commitment of such Lender then in effect. Once
repaid, in whole or in part, no portion of the Term Loans may be reborrowed.
Section 2.2. LETTERS OF CREDIT.
(a) ISSUANCE OF LETTERS OF CREDIT. Subject to the terms and conditions
hereof, the Agent agrees to issue, from time to time prior to the Revolving
Credit Commitment Termination Date, at the request of the Borrower and on behalf
of the Lenders and in reliance on their obligations under this Section 2.2, one
or more letters of credit (each a "LETTER OF CREDIT") for the Borrower's
account, all such Letters of Credit to be in an aggregate undrawn face amounts
at any time outstanding not to exceed $3,000,000; PROVIDED THAT the Agent shall
not issue a Letter of Credit, and the Lenders shall have no obligation to
purchase a participation interest in a Letter of Credit pursuant to Section
2.2(d), if after giving effect thereto, the aggregate principal amount of the
Revolving Loans and the L/C Obligations then outstanding would thereby exceed
the lesser of (i) the Borrowing Base then in effect and (ii) the Revolving
Credit Commitment Amount then in effect; and PROVIDED FURTHER THAT the Agent
shall have no obligation to issue and the Lenders shall have no obligation to
purchase a participation interest in a Letter of Credit if the issuance of such
Letter of Credit would violate any legal or regulatory restriction then
applicable to the Agent or such Lender as notified by such Lender to the Agent
before the date of issuance of such Letter of Credit.
(b) ISSUANCE PROCEDURE. To request that the Agent issue a Letter of
Credit, the Borrower shall deliver to the Agent a duly executed Borrowing
Request from an Authorized Officer in substantially the form of EXHIBIT 2.2A,
together with a duly executed application for the relevant Letter of Credit
substantially in the form of EXHIBIT 2.2B (each, an "APPLICATION"), or such
other computerized issuance or application procedure, instituted from time to
time by the Agent and agreed to by the Borrower, completed to the reasonable
satisfaction of the Agent, and such other documentation and information as the
Agent may reasonably request. In the event of any irreconcilable difference or
inconsistency between this Agreement and an Application, the provisions of this
Agreement shall govern. Upon receipt of a properly completed and executed
Borrowing Request and Application and any other reasonably requested documents
or information at least three (3) Business Days prior to any requested issuance
date, the Agent will process such Borrowing Request and Application in
accordance with its customary procedures and issue the requested Letter of
Credit on the requested issuance date. The Borrower may cancel any requested
issuance of a
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Letter of Credit prior to the issuance thereof. The Agent will notify each
Lender of the amount and expiration date of each Letter of Credit it issues
promptly upon issuance thereof. Each Letter of Credit shall have an expiration
date no later than the earlier of (i) one (1) year after the issuance date for
such Letter of Credit and (ii) December 31, 2001; PROVIDED THAT if any Letter of
Credit issued pursuant to this Section 2.2 shall have any expiration date that
is later than the Maturity Date applicable to Revolving Loans, then the Borrower
shall be required to deposit with the Agent as cash collateral for such Letter
of Credit an amount equal to the full amount then available for drawing under
such Letter of Credit (plus an amount equal to the maximum projected amount of
Letter of Credit fees due and payable with respect to such Letter of Credit
under Section 3.1(b) for the period from the Maturity Date applicable to
Revolving Loans through the expiration date for such Letter of Credit), such
deposit to be made in accordance with the terms of Section 7.4. The Agent agrees
to issue amendments to any Letter of Credit increasing its amount, or extending
its expiration date, at the request of the Borrower subject to the conditions
precedent for all Loans of Section 4.2 and the other terms and conditions of
this Section 2.2.
(c) THE BORROWER'S REIMBURSEMENT OBLIGATIONS.
(i) The Borrower hereby irrevocably and unconditionally agrees to
reimburse the Agent, for the ratable benefit of the Lenders, for each payment or
disbursement made by the Agent to settle its obligations under any draft drawn
under a Letter of Credit (each, a "REIMBURSEMENT OBLIGATION") within two (2)
Business Days from when such draft is paid with either funds not borrowed
hereunder or with a Borrowing subject to Section 2.4 and the other terms and
conditions contained in this Agreement. The Reimbursement Obligation shall bear
interest (which the Borrower hereby promises to pay) from and after the date
such draft is paid until (but excluding the date) the Reimbursement Obligation
is paid at the lesser of the (A) Highest Lawful Rate and (B) the Base Rate plus
the Applicable Margin so long as the Reimbursement Obligation shall not be past
due, and thereafter at the default rate per annum as set forth in Section 2.7.
If any such payment or disbursement is reimbursed to the Agent after 1:30 p.m.
on the date such payment or disbursement is made by the Agent, interest shall be
paid on the reimbursable amount for one (1) day. The Agent shall give the
Borrower notice of any drawing on a Letter of Credit within one (1) Business Day
after receipt of any draft drawn under a Letter of Credit.
(ii) The Borrower agrees for the benefit of the Agent and each
Lender that, notwithstanding any provision of any Application, the obligations
of the Borrower under this Section 2.2(c) and each applicable Application shall
be absolute, unconditional and irrevocable (subject to Section 2.2(b)) and shall
be performed strictly in accordance with the terms of this Agreement and each
applicable Application under all circumstances whatsoever INCLUDING, BUT NOT
LIMITED TO, ANY DEFENSE BASED UPON THE AGENT'S OR ANY LENDER'S OWN SIMPLE OR
CONTRIBUTORY NEGLIGENCE (other than the defense of payment in accordance with
this Agreement or a defense based on the gross negligence or willful misconduct
of the Agent or any Lender), including, without limitation, the following
circumstances:
(1) any lack of validity or enforceability of any of the
L/C Documents;
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(2) the existence of any claim, setoff, defense or other right
the Borrower or any Subsidiary may have at any time against a
beneficiary of a Letter of Credit (or any Person for whom a
beneficiary may be acting), the Agent, any Lender or any other
Person, whether in connection with this Agreement, another L/C
Document or any unrelated transaction;
(3) any statement or any other document presented under a
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, provided that the Agent's determination
that documents presented under the Letter of Credit comply with the
terms thereof did not constitute gross negligence or willful
misconduct of the Agent;
(4) payment by the Agent under a Letter of Credit against
presentation to the Agent of a draft or certificate that does not
comply with the terms of the Letter of Credit, PROVIDED THAT the
Agent's determination that documents presented under the Letter of
Credit comply with the terms thereof did not constitute gross
negligence or willful misconduct of the Agent; or
(5) any other act or omission to act or delay of any kind by
the Agent, any Lender or any other Person or any other event or
circumstance whatsoever that might, but for the provisions of this
Section 2.2(c), constitute a legal or equitable discharge of the
Borrower's obligations hereunder or under any L/C Document, PROVIDED
THAT such act or omission of the Agent or any Lender did not
constitute gross negligence or willful misconduct of the Agent or
any Lender.
(d) THE PARTICIPATING INTERESTS. Each Lender severally and not jointly
agrees to purchase from the Agent, and the Agent hereby agrees to sell to each
Lender, an undivided percentage participating interest, to the extent of its
Revolving Share, in each Letter of Credit issued by, and Reimbursement
Obligation owed to, the Agent in connection with a Letter of Credit. Upon any
failure by the Borrower to pay any Reimbursement Obligation in connection with a
Letter of Credit at the time required in Sections 2.2(c) and 2.4(c), or if the
Agent is required at any time to return to the Borrower or to a trustee,
receiver, liquidator, custodian or other Person any portion of any payment by
the Borrower of any Reimbursement Obligation in connection with a Letter of
Credit, the Agent shall promptly give notice of same to each Lender, and the
Agent shall have the right to require each Lender to fund its participation in
such Reimbursement Obligation. Each Lender (except the Agent to the extent it is
also a Lender) shall pay to the Agent an amount equal to such Lender's Revolving
Share of such unpaid or recaptured Reimbursement Obligation not later than the
Business Day it receives notice from the Agent to such effect, if such notice is
received before 1:00 p.m., or not later than the following Business Day if such
notice is received after such time. If a Lender fails to pay timely such amount
to the Agent, it shall also pay to the Agent interest on such amount accrued
from the date payment of such amount was made by the Agent to the date of such
payment by the Lender at a rate per annum equal to the Base Rate plus the
Applicable Margin in effect for each such day and only after such payment shall
such Lender be entitled to receive its Revolving Share of each payment received
on the relevant Reimbursement Obligation and of interest paid thereon. The
several obligations of the Lenders to the Agent under this Section 2.2(d) shall
be
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absolute, irrevocable and unconditional under any and all circumstances
whatsoever and shall not be subject to any set-off, counterclaim or defense to
payment any Lender may have or have had against the Borrower, the Agent, any
other Lender or any other Person whatsoever including, but not limited to, any
defense based on the failure of the demand for payment under the Letter of
Credit to conform to the terms of such Letter of Credit or the legality,
validity, regularity or enforceability of such Letter of Credit and INCLUDING,
BUT NOT LIMITED TO, THOSE RESULTING FROM THE AGENT'S OWN SIMPLE OR CONTRIBUTORY
NEGLIGENCE. Without limiting the generality of the foregoing, such obligations
shall not be affected by any Default or Event of Default or by any subsequent
reduction or termination of any Revolving Credit Commitment of a Lender, and
each payment by a Lender under Section 2.2 shall be made without any offset,
abatement, withholding or reduction whatsoever.
Section 2.3. TYPES OF LOANS AND MINIMUM BORROWING AMOUNTS. Borrowings of
Loans may be outstanding as either Base Rate Loans or Eurodollar Loans, as
selected by the Borrower pursuant to Section 2.4. All Borrowings advanced on the
Effective Date shall be advanced as Base Rate Loans unless the requisite notice
for a Eurodollar Loan has been given pursuant to Section 2.4(a) and
indemnification is given by the Borrower to the Agent and the Lenders
satisfactory to the Agent and the Lenders for any breakage fees incurred. Each
Borrowing of Base Rate Loans and Eurodollar Loans shall be in an amount of not
less than $500,000.
Section 2.4. MANNER OF BORROWING.
(a) NOTICE TO THE AGENT. The Borrower shall give notice to the Agent by no
later than 12:00 noon (i) at least three (3) Business Days before the date on
which the Borrower requests the Lenders to advance a Borrowing of Eurodollar
Loans, and (ii) on the date the Borrower requests the Lenders to advance a
Borrowing of Base Rate Loans pursuant to a duly executed Borrowing Request from
an Authorized Officer, PROVIDED THAT the Borrower may give telephonic notice of
such request so long as a duly executed Borrowing Request is promptly thereafter
delivered or telecopied to the Agent. The Loans included in each Borrowing shall
bear interest initially at the Type of rate specified in the Borrowing Request
with respect to such Borrowing. Thereafter, the Borrower may from time to time
elect to change or continue the Type of interest rate borne by each Borrowing
or, subject to Section 2.3's minimum amount requirement for each outstanding
Borrowing, a portion thereof, as follows: (i) if such Borrowing is of Eurodollar
Loans, the Borrower may continue part or all of such Borrowing as Eurodollar
Loans for an Interest Period specified by the Borrower or convert part or all of
such Borrowing into Base Rate Loans on the last day of the Interest Period
applicable thereto, or the Borrower may earlier convert part or all of such
Borrowing into Base Rate Loans so long as it pays the breakage fees and funding
losses provided in Section 2.11; and (ii) if such Borrowing is of Base Rate
Loans, the Borrower may convert all or part of such Borrowing into Eurodollar
Loans for an Interest Period specified by the Borrower on any Business Day. The
Borrower may select multiple Interest Periods for the Loans constituting any
particular Borrowing, PROVIDED THAT at no time shall the number of different
Interest Periods for outstanding Eurodollar Loans exceed ten (10) (it being
understood for such purposes that (x) Interest Periods of the same duration, but
commencing on different dates, shall be counted as different Interest Periods
and (y) all Interest Periods commencing on the same date and of the same
duration shall be counted as one Interest Period regardless of the number of
Borrowings or Loans involved). Notices of the continuation of a
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Borrowing of Eurodollar Loans for an additional Interest Period or of the
conversion of part or all of a Borrowing of Eurodollar Loans into Base Rate
Loans or of Base Rate Loans into Eurodollar Loans must be given by no later than
12:00 noon at least three (3) Business Days with respect to continued or new
Eurodollar Loans before the date of the requested continuation or conversion.
The Borrower shall give such notices concerning the advance, continuation, or
conversion of a Borrowing by telephone or facsimile (which notice shall be
irrevocable once given and, if by telephone, shall be promptly confirmed in
writing) pursuant to a Borrowing Request which shall specify the date of the
requested advance, continuation or conversion (which shall be a Business Day),
the amount of the requested Borrowing, the Type and Class of Loans to comprise
such new, continued or converted Borrowing and, if such Borrowing is to be
comprised of Eurodollar Loans, the Interest Period applicable thereto. The
Borrower agrees that the Agent may rely on any such telephonic or facsimile
notice given by any person it in good faith believes is an Authorized Officer
without the necessity of independent investigation and that, if any such notice
by telephone conflicts with any written confirmation, such telephonic notice
shall govern if the Agent has acted in reliance thereon.
(b) NOTICE TO THE LENDERS. The Agent shall give prompt telephonic, telex
or facsimile notice to each Lender of any notice received pursuant to Section
2.4(a) relating to a Borrowing. The Agent shall give notice to the Borrower and
each Lender by like means of the interest rate applicable to each Borrowing of
Eurodollar Loans (but, if such notice is given by telephone, the Agent shall
confirm such rate in writing) promptly after the Agent has made such
determination.
(c) BORROWER'S FAILURE TO NOTIFY. If the Borrower fails to give notice
pursuant to Section 2.4(a) of (i) the continuation or conversion of any
outstanding principal amount of a Borrowing by way of Eurodollar Loans or of
(ii) a Borrowing by way of Loans to pay outstanding Reimbursement Obligations,
and has not notified the Agent by 12:00 noon at least three (3) Business Days
before the last day of the Interest Period for any Borrowing of Eurodollar Loans
or by the day such Reimbursement Obligation becomes due, that it intends to
repay such Borrowing or such Reimbursement Obligation with funds not borrowed
hereunder, the Borrower shall be deemed to have requested, as applicable, (x)
the continuation of such Borrowing as a Base Rate Loan or (y) the advance of a
new Borrowing of Base Rate Loans under the Revolving Credit on such day in the
amount of the Reimbursement Obligation then due, which Borrowing pursuant to
this subclause (y) shall be deemed to have been funded on such date by the
Lenders in accordance with Section 2.1(a) and to have been applied on such day
to pay the Reimbursement Obligation then due, in each case so long as no Default
or Event of Default shall have occurred and be continuing or would occur as a
result of such Borrowing but otherwise disregarding the conditions to Borrowings
set forth in Section 4.2. Upon the occurrence and during the continuance of any
Default or Event of Default, (i) each Eurodollar Loan will automatically, on the
last day of the then existing Interest Period therefor, convert into a Base Rate
Loan and (ii) the obligation of the Lenders to make, continue or convert Loans
into, Eurodollar Loans shall be suspended.
(d) DISBURSEMENT OF LOANS. Not later than 1:00 p.m. on the date of any
requested advance of a new Borrowing of Loans, each Lender, subject to all other
provisions hereof, shall make available its Loan comprising its ratable share of
such Borrowing in funds immediately available in Chicago, Illinois for the
benefit of the Agent and according to the disbursement instructions of the
Agent. The Agent shall make the proceeds of each such Borrowing available in
immediately available
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funds to the Borrower (or as directed in writing by Borrower) on such date. In
the event that any Lender does not make such amounts available to the Agent by
the time prescribed above, but such amount is received later that day, such
amount may be credited to the Borrower in the manner described in the preceding
sentence on the next Business Day (with interest on such amount to begin
accruing hereunder on such next Business Day), PROVIDED THAT acceptance by the
Borrower of any such late amount shall not be deemed a waiver by the Borrower of
any rights it may have against such Lender. No Lender shall be responsible to
the Borrower for any failure by another Lender to fund its portion of a
Borrowing, and no such failure by a Lender shall relieve any other Lender from
its obligation, if any, to fund its portion of a Borrowing.
(e AGENT RELIANCE ON LENDER FUNDING. Unless the Agent shall have been
notified by a Lender before the date on which such Lender is scheduled to make
payment to the Agent of the proceeds of a Loan (which notice shall be effective
upon receipt) that such Lender does not intend to make such payment, the Agent
may assume that such Lender has made such payment when due and in reliance upon
such assumption may (but shall not be required to) make available to the
Borrower the proceeds of the Loan to be made by such Lender and, if any Lender
has not in fact made such payment to the Agent, such Lender shall, on demand,
pay to the Agent the amount made available to the Borrower attributable to such
Lender together with interest thereon for each day during the period commencing
on the date such amount was made available to the Borrower and ending on (but
excluding) the date such Lender pays such amount to the Agent at a rate per
annum, equal to the Agent's cost of funds. If such amount is not received from
such Lender by the Agent immediately upon demand, the Borrower will, on demand,
repay to the Agent the proceeds of the Loan attributable to such Lender with
interest thereon at a rate per annum equal to the interest rate applicable to
the relevant Loan. Nothing in this subsection shall be deemed to relieve any
Lender from its obligation to fund its Commitments hereunder or to prejudice any
rights which the Borrower may have against any Lender as a result of any default
by such Lender hereunder.
Section 2.5. INTEREST PERIODS. As provided in Section 2.4(a), at the time
of each request for the advance or continuation of, or conversion into, a
Borrowing of Eurodollar Loans, the Borrower shall select an Interest Period
applicable to such Eurodollar Loans from among the available options subject to
the limitations in Section 2.4(a); PROVIDED, HOWEVER:
(i the Borrower may not select an Interest Period for a Borrowing
of Eurodollar Loans of any Class that extends beyond the applicable Maturity
Date for such Class of Loans;
(ii the Borrower may not select any Interest Period for any Term
Loans which ends after any principal repayment date set forth in Section
2.6(d)(ii) unless, after giving effect to such selection, the aggregate unpaid
principal amount of Term Loans that are Base Rate Loans and Term Loans having
Interest Periods which end on or before such principal repayment date shall be
at least equal to the amount of Term Loans due and payable on or before such
date;
(iii Interest Periods commencing on the same date for Loans
comprising part of the same Borrowing shall be of the same duration;
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(iv whenever the last day of any Interest Period would otherwise be
a day that is not a Business Day, the last day of such Interest Period shall be
extended to the next succeeding Business Day or reduced to the immediately
preceding Business Day if the next succeeding Business Day is in the next
calendar month; and
(v for purposes of determining an Interest Period, a month means a
period starting on one day in a calendar month and ending on the numerically
corresponding day in the next calendar month; PROVIDED, HOWEVER, that if there
is no such numerically corresponding day in the month in which an Interest
Period is to end or if such Interest Period begins on the last Business Day of a
calendar month, then such Interest Period shall end on the last Business Day of
the calendar month in which such Interest Period is to end.
Section 2.6. PAYMENTS.
(a INTEREST ON BASE RATE LOANS. Each Base Rate Loan shall bear interest
(computed on the basis of a 365/366-day year and actual days elapsed, excluding
the date of repayment) on the unpaid principal amount thereof from the date such
Loan is made until maturity (whether by acceleration or otherwise) or conversion
to a Eurodollar Loan in accordance with Section 2.4(a) hereof, at a rate per
annum equal to the lesser of (i) the Highest Lawful Rate, or (ii) the Base Rate
from time to time in effect plus the Applicable Margin, payable in arrears on
each Interest Payment Date for such Loan and at maturity (whether by
acceleration or otherwise) or conversion to a Eurodollar Loan in accordance with
Section 2.4(a).
(b INTEREST ON EURODOLLAR LOANS. Each Eurodollar Loan shall bear interest
(computed on the basis of a 360-day year and actual days elapsed, excluding the
date of repayment) on the unpaid principal amount thereof from the date such
Loan is made until maturity (whether by acceleration or otherwise) or conversion
to a Base Rate Loan in accordance with Section 2.4(a) hereof, at a rate per
annum equal to the lesser of (i) the Highest Lawful Rate, or (ii) the sum of the
Adjusted LIBOR Rate plus the Applicable Margin, payable in arrears on each
Interest Payment Date for such Loan and at maturity (whether by acceleration or
otherwise) or conversion to a Base Rate Loan in accordance with Section 2.4(a).
(c INTEREST RATE DETERMINATIONS. The Agent shall determine each interest
rate applicable to the Loans and Reimbursement Obligations hereunder and such
determination shall be conclusive and binding except in the case of the Agent's
manifest error or willful misconduct. The Agent shall give prompt telephonic,
telex or facsimile notice to the Borrower and each Lender of the interest rate
applicable to each Loan or Reimbursement Obligation (but, if such notice is
given by telephone, the Agent shall confirm such rate in writing) promptly after
the Agent has made such determination.
(d PRINCIPAL ELEMENTS.
(i REVOLVING LOANS. All outstanding principal of the Revolving
Loans, together with all accrued and unpaid interest thereon and all other
Obligations, shall be due and payable on the Maturity Date applicable to
Revolving Loans.
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(ii TERM LOANS. The Borrower shall repay the Term Loans to the
Lenders based on each Lender's Term Share in installments in the aggregate
amounts and on the dates indicated as follows:
DATE AMOUNT
- ---- ------
August 31, 1999 $500,000.00
September 30, 1999 $500,000.00
October 31, 1999 $666,666.67
November 30, 1999 $666,666.67
December 30, 1999 $666,666.67
January 31, 2000 $666,666.67
February 31, 2000 $666,666.67
March 31, 2000 $666,666.67
April 30, 2000 $833,333.33
May 31, 2000 $833,333.33
June 30, 2000 $833,333.33
July 31, 2000 $833,333.33
August 31, 2000 $833,333.33
September 30, 2000 $833,333.33
October 31, 2000 $1,000,000.00
November 30, 2000 $1,000,000.00
December 31, 2000 $1,000,000.00
January 31, 2001 $1,000,000.00
February 28, 2001 $1,000,000.00
March 31, 2001 $1,000,000.00
April 30, 2001 $1,000,000.00
May 31, 2001 $1,000,000.00
June 30, 2001 $17,000,000.00
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Section 2.7. DEFAULT RATES. If any payment of principal, interest or fees
is not paid when due after the expiration of the grace period therefor provided
in Section 7.1 (whether by acceleration or otherwise), such amount shall bear
interest (computed on the basis of a year of 360 days for Eurodollar Loans or
interest thereon and 365 or 366 days for unpaid fees, Base Rate Loans or
interest thereon and actual days elapsed) from the date such payment was due
until such amount then due is paid in full, payable on demand, (a) at a rate per
annum for Eurodollar Loans equal to the lesser of (i) the Highest Lawful Rate,
or (ii) the rate required to be paid on such Loan immediately prior to the
occurrence of such Default plus two percent (2 %) per annum and (b) at a rate
per annum for Base Rate Loans equal to the lesser of (i) the Highest Lawful
Rate, or (ii) the sum of the Base Rate from time to time in effect (but not less
than the Base Rate in effect at maturity) plus the Applicable Margin plus two
percent (2%) per annum. It is the intention of the Agent and the Lenders to
conform strictly to usury laws applicable to them. Accordingly, if the
transactions contemplated hereby or the Loans would be usurious as to any of the
Lenders under laws applicable to it (including the laws of the United States of
America and the State of Texas or any other jurisdiction whose laws may be
mandatorily applicable to such Lender notwithstanding the other provisions of
this Agreement, the Notes or any other Credit Document), then, in that event,
notwithstanding anything to the contrary in this Agreement, the Notes or any
other Credit Document, it is agreed as follows: (i) the aggregate of all
consideration which constitutes interest under laws applicable to such Lender
that is contracted for, taken, reserved, charged or received by such Lender
under this Agreement, the Notes or any other Credit Document or otherwise shall
under no circumstances exceed the Highest Lawful Rate, and any excess shall be
credited by such Lender on the principal amount of the Notes or to the
Reimbursement Obligations (or, if the principal amount of the Notes and all
Reimbursement Obligations shall have been paid in full, refunded by such Lender
to the Borrower); (ii) in the event that the maturity of the Notes is
accelerated by reason of an election of the holder or holders thereof resulting
from any Event of Default hereunder or otherwise, or in the event of any
required or permitted prepayment, then such consideration that constitutes
interest under laws applicable to such Lender may never include more than the
Highest Lawful Rate, and excess interest, if any, provided for in this
Agreement, the Notes, any other Credit Document or otherwise shall be
automatically canceled by such Lender as of the date of such acceleration or
prepayment and, if theretofore paid, shall be credited by such Lender on the
principal amount of the Notes or to the Reimbursement Obligations (or if the
principal amount of the Notes and all Reimbursement Obligations shall have been
paid in full, refunded by such Lender to the Borrower); and (iii) if at any time
the interest provided under the Notes or the Credit Agreement, together with any
other fees payable pursuant to the Notes, the Credit Agreement or any other
Credit Document and deemed interest under applicable law, exceeds the amount
that would have accrued at the Highest Lawful Rate, the amount of interest and
any such fees to accrue to such Lender hereunder and thereunder shall be limited
to the amount which would have accrued at the Highest Lawful Rate, but any
subsequent reductions shall not reduce the interest to accrue to such Lender
hereunder and thereunder below the Highest Lawful Rate until the total a-mount
of interest accrued pursuant hereto and thereto and such fees deemed to be
interest equals the amount of interest which would have accrued to such Lender
if a varying rate per annum equal to the interest hereunder had at all times
been in effect plus the amount of fees which
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would have been received but for the effect hereof; and in each case, to the
extent permitted by applicable law, such Lender shall not be subject to any of
the penalties provided by law for contracting for, taking, reserving, charging
or receiving interest in excess of the Highest Lawful Rate. The Agent and the
Lenders hereby elect to determine the applicable rate ceiling under Section
303.201 of the Texas Finance Code Ann. (Vernon 1998) by the weekly rate ceiling
from time to time in effect, subject to the Agent and the Lenders' right
subsequently to change such method in accordance with applicable law. The
provisions of Chapter 346 of Tex. Finance Code Ann. (Vernon 1998), regulating
certain revolving credit accounts shall not apply to this Agreement or any of
the Revolving Notes.
Section 2.8. OPTIONAL PREPAYMENTS.
(a REVOLVING LOANS. The Borrower shall have the privilege of prepaying
the Revolving Loans without premium or penalty in whole or in part at any time,
PROVIDED THAT any prepayment of Base Rate Loans or Eurodollar Loans under this
Section 2.8(a) shall be in increments of $500,000 or, if less, the total
outstanding principal amount of such Revolving Loans. If the Borrower is
prepaying Revolving Loans, it shall give to the Agent notice of the date and
amount of such prepayment no later than 12:00 noon at least three (3) Business
Days before (or, in the case of a prepayment of Base Rate Loans, same day
notice) the proposed prepayment date. All prepayments of Eurodollar Loans shall
be accompanied by accrued interest thereon, together with any applicable
breakage fees and funding losses pursuant to Section 2.11. The Borrower may
direct the application of any optional prepayment hereunder to the Base Rate
Loans or Eurodollar Loans outstanding.
(b TERM LOANS. The Borrower shall have the privilege of prepaying the
Term Loans without premium or penalty in whole or in part at any time, PROVIDED
THAT any prepayment of Base Rate Loans or Eurodollar Loans shall be in
increments of $500,000 or, if less, the total outstanding principal amount of
such Term Loans. If the Borrower is prepaying any Term Loan, the Borrower shall
give to the Agent notice of the date and amount of such prepayment no later than
12:00 noon (i) at least three (3) Business Days before the proposed prepayment
date in the case of Eurodollar Loans and (ii) at least one (1) Business Day
before the proposed prepayment date in the case of Base Rate Loans. All
prepayments of Eurodollar Loans shall be accompanied by accrued interest
thereon, together with any applicable breakage fees and funding losses pursuant
to Section 2.11. The Borrower may direct the application of any optional
prepayment hereunder to the Base Rate Loans or Eurodollar Loans outstanding.
Each optional prepayment of Term Loans shall be applied to the future scheduled
principal payments owing in respect of such Term Loans outstanding on a pro rata
basis.
Section 2.9. MANDATORY PREPAYMENTS OF LOANS.
(a REVOLVING LOANS.
(i0 If, on any date, the aggregate principal amount of the then
outstanding Revolving Loans and L/C Obligations shall at any time for any reason
exceed the lesser of (i) the Borrowing Base then in effect and (ii) the
Revolving Credit Commitment Amount then in effect, the Borrower shall,
immediately and without notice or demand, pay the amount of such excess to the
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Agent for the ratable benefit of the Lenders as a prepayment of the Revolving
Loans and, if all Revolving Loans have been paid, a prepayment of Letters of
Credit pursuant to the provisions of Section 7.4.
(ii If the aggregate amount of all cash balances and deposits of
the Borrower and its Subsidiaries as of the close of business on Friday of each
calendar week (or, if such day is not a Business Day, the next preceding
Business Day) exceeds $200,000, then the Borrower shall, prior to the close of
business on the first Business Day of the subsequent calendar week,
automatically and without any notice or demand, pay to the Agent for the ratable
benefit of the Lenders the amount of such excess as a prepayment of the
Revolving Loans.
(iii Any mandatory prepayment of Revolving Loans or Letters of
Credit pursuant to this Section 2.9(a) shall not be limited by the notice
provision for prepayments set forth in Section 2.8, but immediately upon
determining the need to make any such prepayment, the Borrower shall notify the
Lenders of such required prepayment. Furthermore, each such prepayment shall be
accompanied by the payment of all accrued and unpaid interest on the Revolving
Loans prepaid (other than interest owing in respect of prepayments required
pursuant to clause (ii) of this Section 2.9(a), which interest shall be paid
monthly on the last day of each calendar month) and each such prepayment of
Eurodollar Loans shall be accompanied by the payment of any applicable breakage
fees and funding losses owing pursuant to Section 2.11.
(b TERM LOANS.
(i Subject to the terms of the Intercreditor Agreement, the
Borrower shall, if a Triggering Event shall have occurred and be continuing,
prepay the Term Loans (A) by an amount equal to the Pro Rata Share of the
Collateral Agent, the Agent and the Lenders in any Net Cash Proceeds from Assets
received by the Borrower or any of its Subsidiaries from the Transfer of any
assets permitted by clauses (b), (f) and (g) of Section 6.17, and (B) by an
amount equal to the Pro Rata Share of the Collateral Agent, the Agent and the
Lenders in any casualty proceeds received by the Collateral Agent pursuant to
Section 6.6, such prepayments in each case being due and payable on the date the
Net Cash Proceeds from Assets are distributed by the Collateral Agent in
accordance with Section 2.3(a) of the Intercreditor Agreement. In addition, and
regardless of whether a Triggering Event shall have occurred and be continuing,
the Borrower shall prepay the Term Loans by an amount equal to 75% of the Net
Cash Proceeds from Issuances received by the Borrower or any of its Subsidiaries
from (I) the sale or issuance of any capital stock of the Borrower or any such
Subsidiary or (II) the issuance by such entities of any Debt subordinated to the
Obligations hereunder, such prepayment being due and payable on the date such
Net Cash Proceeds from Issuances are received
(ii Any mandatory prepayment of Term Loans pursuant to this Section
2.9(b) shall not be limited by the notice provision for prepayments set forth in
Section 2.8, but immediately upon determining the need to make any such
prepayment, the Borrower shall notify the Lenders of such required prepayment.
Furthermore, each such prepayment shall be accompanied by a payment of all
accrued and unpaid interest on the Term Loans prepaid and any applicable
breakage fees and funding losses pursuant to Section 2.11.
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(c APPLICATION OF TERM LOAN PREPAYMENT. Each mandatory prepayment
of Term Loans shall be applied to future scheduled payments of such Term
Loans in the inverse order of their maturity.
Section 2.10. NOTES.
(ai The Revolving Loans outstanding to the Borrower from the Lenders shall
be evidenced by promissory notes of the Borrower payable to each Lender in the
form of EXHIBIT 2.10A (each such promissory note, together with any replacements
thereof, a "REVOLVING NOTE"). Each holder of the Revolving Notes shall record on
its books and records or on a schedule to the Revolving Notes the amount of each
Revolving Loan outstanding from it to the Borrower, all payments of principal
and interest and the principal balance from time to time outstanding thereon,
the Type of such Revolving Loan and, if a Eurodollar Loan, the Interest Period
and interest rate applicable thereto. Such record, whether shown on the books
and records of a holder of a Revolving Note or on a schedule to its Revolving
Note, shall be PRIMA FACIE evidence as to all such matters; PROVIDED, HOWEVER,
that the failure of any holder to record any of the foregoing or any error in
any such record shall not limit or otherwise affect the obligation of the
Borrower to repay all Revolving Loans outstanding to it hereunder, together with
accrued interest thereon.
(b The Term Loans outstanding to the Borrower from the Lenders shall be
evidenced by promissory notes of the Borrower payable to each Lender in the form
of EXHIBIT 2.10B (each such promissory note, together with any replacements
thereof, a "TERM NOTE"). Each holder of the Term Notes shall record on its books
and records or on a schedule to the Term Notes the amount of each Term Loan
outstanding from it to the Borrower, all payments of principal and interest and
the principal balance from time to time outstanding thereon, the Type of such
Term Loan and, if a Eurodollar Loan, the Interest Period and interest rate
applicable thereto. Such record, whether shown on the books and records of a
holder of a Term Note or on a schedule to its Term Note, shall be PRIMA FACIE
evidence as to all such matters; PROVIDED, HOWEVER, that the failure of any
holder to record any of the foregoing or any error in any such record shall not
limit or otherwise affect the obligation of the Borrower to repay all Term Loans
outstanding to it hereunder, together with accrued interest thereon.
Section 2.11. BREAKAGE FEES. If any Lender incurs any loss, cost or
expense (including, without limitation, any loss of profit and loss, cost,
expense or premium reasonably incurred by reason of the liquidation or
re-employment of deposits or other funds acquired by such Lender to fund or
maintain any Eurodollar Loan or the relending or reinvesting of such deposits or
amounts paid or prepaid to the Lenders) as a result of any of the following
events other than any such occurrence as a result of a change of circumstance
described in Sections 8.1 or 8.2:
(i any payment, prepayment or conversion of a Eurodollar Loan on a
date other than the last day of its Interest Period (whether by acceleration,
prepayment or otherwise);
(ii any failure to make a principal payment of a Eurodollar
Loan on the due date therefor; or
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(iii any failure by the Borrower to borrow, continue, prepay or
convert to a Eurodollar Loan on the date specified in a notice given pursuant to
Section 2.4(a),
then the Borrower shall pay to such Lender such amount as will reimburse such
Lender for such loss, cost or expense. If any Lender makes such a claim for
compensation, it shall provide to the Borrower a certificate executed by an
officer of such Lender setting forth the amount of such loss, cost or expense in
reasonable detail (including an explanation of the basis for and the computation
of such loss, cost or expense), and the amounts shown on such certificate shall
be conclusive and binding absent manifest error. Within ten (10) days of receipt
of such certificate, the Borrower shall pay to such Lender the amount for such
loss, cost or expense as documented in such certificate.
Section 2.12. COMMITMENT TERMINATIONS. The Borrower shall have the right
to, from time to time after the Term Loans have been paid in full, terminate or
reduce the Revolving Credit Commitments without premium or penalty, in whole or
in part. Any such termination shall require at least three (3) Business Days'
prior and irrevocable written notice to the Agent (which notice shall indicate
the date and amount of the Revolving Credit Commitments to be terminated), and
any partial termination of Revolving Credit Commitments shall be required to be
(i) in an amount that is a multiple of $1,000,000 (or such lesser amount if the
remaining Revolving Credit Commitments are less than $1,000,000) and (ii)
allocated ratably among the Lenders in proportion to their respective Revolving
Credit Commitments; provided, that the Revolving Credit Commitment Amount may
not be reduced to an amount less than the sum of the aggregate principal amount
of the then outstanding Revolving Loans plus the L/C Obligations. The Agent
shall give prompt notice to each Lender of any such termination or reduction of
the Revolving Credit Commitments. Any termination of Revolving Credit
Commitments pursuant to this Section 2.12 is permanent and may not be
reinstated.
SECTION 3. FEES AND PAYMENTS.
Section 3.1. FEES. (ai For the period from the Closing Date to and
including the Revolving Credit Commitment Termination Date, the Borrower shall
pay to the Agent, for the ratable account of the Lenders, a commitment fee of
.50% per annum (computed on a basis of a 360-day year and for the actual days
elapsed) on an amount equal to the average daily difference between (i) the
Revolving Credit Commitment Amount and (ii) the sum of the aggregate outstanding
principal amount of Revolving Loans and L/C Obligations, such commitment fees to
be calculated, for any day. Such fee shall be payable monthly in arrears
commencing on August 31, 1999, and on the last day of each calendar month
thereafter and on the Maturity Date applicable to the Revolving Loans, unless
the Revolving Credit Commitment is terminated in whole on an earlier date, in
which event the commitment fee for the period to but not including the date of
termination shall be paid in whole on the date of such termination.
(bi LETTER OF CREDIT FEES. Commencing upon the date of issuance or
extension of any Letter of Credit and on the last day of each calendar month
thereafter, the Borrower shall pay to the Agent, for the ratable benefit of the
Lenders, monthly in arrears (pro rated, if necessary for any portion of such
month) commencing August 31, 1999 and continuing thereafter until the expiration
date for such Letter of Credit, a non-refundable fee equal to the face amount of
such Letter of Credit
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times the Applicable Margin for Eurodollar Loans then in effect, calculated in
each case on the basis of a 360-day year and for the actual days in the period;
PROVIDED THAT the minimum fee for any Letter of Credit shall be $500. In
addition, the Borrower shall pay to the Agent, solely for the Agent's account,
reasonable administrative and amendment fees and expenses for Letters of Credit
established by the Agent from time to time in accordance with its customary
practices and as agreed between the Agent and the Borrower and the fronting fee
described in the Fee Letter.
(c AGENT FEES. The Borrower shall pay to the Agent the fees agreed
to in the Fee Letter with the Agent and any other fees from time to time
agreed to by the Borrower and the Agent.
(d LENDERS FEES. The Borrower shall pay to each Lender an amendment
fee agreed to by the Borrower and such Lender in the Fee Letter with such
Lender.
Section 3.2. PLACE AND APPLICATION OF PAYMENTS. All payments of principal
of and interest on the Loans and the Reimbursement Obligations and all other
amounts payable by the Borrower under the Credit Documents shall be made by the
Borrower to the Agent by no later than 1:30 p.m. on the due date thereof at the
office of the Agent in Chicago, Illinois (or such other location as the Agent
may designate to the Borrower for the benefit of the Lenders). Any payments
received by the Agent from the Borrower after 1:30 p.m. shall be deemed to have
been received on the next Business Day. The Agent will, on the same day each
payment is received or deemed to have been received in accordance with this
Section 3.2, cause to be distributed like funds in like currency to each Lender
owed an Obligation for which such payment was received, pro rata based on the
respective amounts of such type of Obligation then owing to each Lender. In
calculating the amount of Obligations owing each Lender other than for principal
and interest on Loans and Reimbursement Obligations and fees under Section 3.1,
the Agent shall only be required to include such other Obligations that Lenders
have certified to the Agent in writing are due to such Lenders.
Section 3.3. WITHHOLDING TAXES.
(a PAYMENTS FREE OF WITHHOLDING. Except as otherwise required by law and
subject to Section 3.3(b), each payment by the Borrower or any Guarantor to the
Agent or any Lender under this Agreement or any other Credit Document shall be
made without withholding for or on account of any present or future taxes (other
than overall net income taxes on the recipient) imposed by or within the
jurisdiction in which the Borrower or such Guarantor is domiciled, any
jurisdiction from which the Borrower or such Guarantor makes any payment, or (in
each case) any political subdivision or taxing authority thereof or therein,
excluding, in the case of each Lender and the Agent, taxes, assessments or other
governmental charges:
(i imposed on, based upon, or measured by its income, and branch
profits, franchise and similar taxes imposed on it, by any
jurisdiction in which the Agent or such Lender, as the case may be,
is incorporated or maintains its principal place of business or
Lending Office or which subjects the Agent or such Lender to tax by
reason of a connection between the taxing jurisdiction and the Agent
or such Leader (other than a connection resulting from the
transactions contemplated by this Agreement);
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(ii imposed as a result of a connection between the taxing
jurisdiction and the Agent or such Lender, as the case may be, other
than a connection resulting from the transactions contemplated by
this Agreement;
(iii imposed as a result of the transfer by such Lender of its
interest in this Agreement or any other Credit Document or a
designation by such Lender of a new Lending Office (other than taxes
imposed as a result of any change in treaty, law or regulation after
such transfer of the Lender's interest in this Agreement or any
Credit Document or designation of a new Lending Office);
(iv imposed by the United States of America upon a Lender organized
under the laws of a jurisdiction outside of the United States,
except to the extent that such tax is imposed or increased as a
result of any change in applicable law, regulation or treaty (other
than an) addition of or change in any "anti-treaty shopping,"
"limitation of benefits," or similar provision applicable to a
treaty) after the date hereof, in the case of each Lender originally
a party hereto or, in the case of any Purchasing Lender (as defined
in Section 10.10), after the date on which it becomes a Lender; and
(v which would not have been imposed but for (a) the failure of the
Agent or any Lender, as the case may be, to provide (x) an Internal
Revenue Service Form 1001 or 4224, as the case may be, or any
substitute or successor form prescribed by the Internal Revenue
Service pursuant to Section 3.3(b) below, or (y) any other
certification, documentation or proof which could reasonably be
requested by the Borrower, or (b) a determination by a taxing
authority or a court of competent jurisdiction that a certification,
documentation or other proof provided by such Lender or the Agent to
establish an exemption from such tax, assessment or other
governmental charge is false
(all such non-excluded taxes, assessments or other governmental charges and
liabilities being hereinafter referred to as "INDEMNIFIED TAXES"). If any such
withholding is so required, the Borrower or such Guarantor, as applicable, shall
make the withholding, pay the amount withheld to the appropriate governmental
authority before penalties attach thereto or interest accrues thereon and
forthwith pay such additional amount as may be necessary to ensure that the net
amount actually received by the Agent and each Lender is free and clear of such
Indemnified Taxes (including Indemnified Taxes on such additional amount) and is
equal to the amount that the Agent or such Lender (as the case may be) would
have received had such withholding not been made. If the Agent or any Lender
pays any amount in respect of any Indemnified Taxes, penalties or interest, the
Borrower or such Guarantor, as applicable, shall reimburse the Agent or that
Lender for the payment on demand in the currency in which such payment was made.
If the Borrower or any Guarantor pays any Indemnified Taxes, penalties or
interest, it shall deliver official tax receipts evidencing the payment or
certified copies thereof, or other satisfactory evidence of payment if such tax
receipts have not yet been received by the Borrower or such Guarantor (with such
tax receipts to be promptly delivered when actually received), to the Agent or
the Lender on whose account such withholding was made (with a copy to the Agent
if not the recipient of the original) within ten (10) days of such payment.
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(b U.S. WITHHOLDING TAX EXEMPTIONS. Each Lender that is not a United
States person (as such term is defined in Section 7701(a)(30) of the Code) shall
submit to the Borrower and the Agent on or before the Closing Date, two duly
completed and signed copies of either Form 1001 (entitling such Lender to a
complete exemption from withholding under the Code on all amounts to be received
by such Lender, including fees, pursuant to the Credit Documents) or Form 4224
(relating to all amounts to be received by such Lender, including fees, pursuant
to the Credit Documents) of the Internal Revenue Service. Thereafter and from
time to time, each Lender shall submit to the Borrower and the Agent such
additional duly completed and signed copies of one or the other of such forms
(or such successor forms as shall be adopted from time to time by the relevant
United States taxing authorities) as may be (i) notified by the Borrower,
directly or through the Agent, to such Lender, and (ii) required under
then-current United States law or regulations to avoid United States withholding
taxes on payments in respect of all amounts to be received by such Lender,
including fees, pursuant to the Credit Documents. Upon the request of the
Borrower, each Lender that is a United States person shall submit to the
Borrower a certificate to the effect that it is such a United States person.
(c REFUND OF TAXES. If any Lender or the Agent receives a refund of any
Indemnified Tax or any tax referred to in Section 10.3 with respect to which the
Borrower or any Guarantor has paid any amount pursuant to this Section 3.3 or
Section 10.3, such Lender or the Agent shall pay the amount of such refund
(including any interest received with respect thereto) to the Borrower or such
Guarantor.
SECTION 4. CONDITIONS PRECEDENT.
Section 4.1. CONDITIONS PRECEDENT TO EFFECTIVENESS. This Agreement shall
become effective and the Existing Credit Agreement shall be amended and restated
as provided in this Agreement on the Effective Date when all conditions
precedent have been met, all in form and substance satisfactory to the Agent and
the Lenders, in sufficient number of signed counterparts, where applicable, to
provide one for each Lender (except for the Notes, of which only one original
shall be signed for each Lender) and executed, to the extent applicable, by an
Authorized Officer of the Borrower or the Guarantors:
(a The Agent shall have received:
(i AGREEMENT. This Agreement duly executed by the Borrower,
the Agent and each Lender.
(ii NOTES. The duly executed Notes of the Borrower;
(iii SECURITY AGREEMENTS; TRADEMARK AND PATENT SECURITY AGREEMENTS.
Security Agreements executed by the Borrower and each Guarantor and Trademark
and Patent Security Agreements executed by the Borrower and certain Guarantors
pledging to the Collateral Agent for the benefit of the Agent, the Lenders and
the Noteholders substantially all of the personal property assets of the
Borrower and the Guarantors, together with UCC-1 financing statements, patent
and
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trademark filings, and any other documents, agreements or instruments necessary
or desirable in the Agent's sole reasonable discretion to create an Acceptable
Security Interest in such Collateral;
(iv PLEDGE AGREEMENTS. Pledge Agreements executed by the Borrower
and the Guarantors as required by the Collateral Agent pledging to the
Collateral Agent for the benefit of the Agent, the Lenders and the Noteholders,
(a) all of the capital stock of the Subsidiaries of the Borrower that are not
Foreign Subsidiaries and (b) 65% of the capital stock of the Subsidiaries of the
Borrower that are Foreign Subsidiaries, in each case together with stock
certificates, stock powers executed in blank, UCC-1 financing statements and any
other documents, agreements or instruments necessary or desirable in the Agent's
sole reasonable discretion to create an Acceptable Security Interest in such
pledged stock;
(v GUARANTIES. (A) A duly executed amended and restated Subsidiary
Guaranty or a Subsidiary Guaranty, as applicable in each case, from each
Guarantor in substantially the form of EXHIBIT 4.1C;
(vi INTERCREDITOR AGREEMENT. The duly executed Intercreditor
Agreement in form and substance satisfactory to the Agent and the Lenders.
(vii AMENDMENT TO THE SENIOR NOTE PURCHASE AGREEMENT. A duly
executed Amendment to the Senior Note Purchase Agreement in form and
substance satisfactory to the Agent and the Lenders.
(viii CERTIFICATE OF OFFICERS OF BORROWER AND GUARANTORS. A
certificate of the Secretary or Assistant Secretary and the President or Vice
President of each of the Borrower and the Guarantors containing specimen
signatures of the persons authorized to execute Credit Documents on such
Person's behalf or any other documents provided for herein, together with (x)
copies of resolutions of the Board of Directors of such Person authorizing the
execution and delivery of the Credit Documents and of all other legal documents
or proceedings taken by such Person in connection with the execution and
delivery of the Credit Documents, (y) copies of such Person's Certificate or
Articles of Incorporation, certified by the Secretary of State of such Person's
jurisdiction of organization, and Bylaws and (z) a certificate of existence and
good standing from the appropriate governing agency of such Person's
jurisdiction of organization and, to the extent applicable, a certificate of
qualification as a foreign corporation and of good standing from the state(s)
where such Person conducts business;
(ix FEES. Payment of the fees and all other expenses
reasonably incurred through the date hereof then due and owing to the Agent
and the Lenders pursuant to the terms of this Agreement;
(x INSURANCE CERTIFICATE. An insurance certificate describing
in reasonable detail the insurance maintained by the Borrower and its
Subsidiaries as required by the Credit Documents;
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(xi CERTIFICATE OF FINANCIAL CONDITION. A certificate of the
Chief Financial Officer of the Borrower documenting the solvency of the
Borrower and its Subsidiaries on a consolidated basis as of the Effective
Date;
(xii CONSENTS. Certified copies of all documents evidencing any
necessary consents and governmental approvals taken or obtained by the
Borrower and the Guarantors with respect to the Credit Documents;
(xiii OPINION OF COUNSEL. The opinion of Locke, Liddell &
Sapp L.L.P., legal counsel to the Borrower and the Guarantors covering such
matters as the Agent may reasonably require;
(xiv CAPITAL EXPENDITURES BUDGET. A budget of the Capital
Expenditures of the Borrower and its Subsidiaries for each of the fiscal
quarters ending after the Closing Date through the fiscal quarter ending
March 31, 2000;
(xv VENDOR LEASE PLAN AGREEMENT. A copy of the executed Vendor
Lease Plan Agreement between the Borrower and First Sierra certified by an
Authorized Officer of the Borrower as being true and correct and attaching all
amendments, modifications, supplements and waivers to such agreement through the
Closing Date; and
(xvi OTHER DOCUMENTS. Such other documents as the Agent may
reasonably request.
(b All legal matters incident to the execution and delivery of the Credit
Documents shall be reasonably satisfactory to the Agent.
Section 4.2. CONDITIONS PRECEDENT TO ALL BORROWINGS. In the case of each
advance of Borrowing hereunder (including the issuance of, increase in the
amount of, or extension of the expiration date of, a Letter of Credit) the
following conditions precedent shall have been satisfied (or waived in writing
by the Majority Lenders or Lenders, as applicable, as required by Section
10.11):
(a NOTICES. In the case of a Borrowing, the Agent shall have received the
Borrowing Request required by Section 2.4, and in the case of the issuance,
extension or increase of Letter of Credit, the Agent shall have received a duly
completed Borrowing Request and Application for such Letter of Credit meeting
the requirements of Section 2.2;
(b REPRESENTATIONS AND WARRANTIES TRUE AND CORRECT. Each of the
representations and warranties of the Borrower and its Subsidiaries set forth
herein and in the other Credit Document shall be true and correct in all
material respects as of the time of such new Borrowing, except as result of the
transactions expressly permitted hereunder or thereunder and except to the
extent that any such representation or warranty relates solely to an earlier
date, in which case it shall have been true and correct in all material respects
as of such earlier date;
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(c NO DEFAULT. No Default or Event of Default shall have occurred
and be continuing or would occur as a result of such Borrowing;
(d NEW LITIGATION AND CHANGES IN PENDING LITIGATION. Since the Closing
Date, no new litigation (including, without limitation, derivative or injunctive
actions), arbitration proceedings or governmental proceedings shall be pending
or known to be threatened against the Borrower or any of its Subsidiaries which
could reasonably be expected to have a Material Adverse Effect; and no material
development (whether or not disclosed) shall have occurred in any litigation
(including without limitation, derivative or injunctive actions), arbitration
proceedings or governmental proceedings previously disclosed, which could
reasonably be expected to have a Material Adverse Effect;
(e REGULATION U; OTHER LAWS. The Borrowings to be made by the Borrower
shall no result in either the Borrower or the Lenders being in non-compliance
with or in violation o Regulation U of the Board of Governors of the Federal
Reserve System and shall not be prohibited by any other legal requirement
(including Regulations T and X of the Board of Governors of the Federal Reserve
System) imposed by the banking laws of the United States of America, and shall
not otherwise subject the Lenders to a penalty or other onerous conditions under
or pursuant to any legal requirement; and
(f MATERIAL ADVERSE EFFECT. There has occurred no event or effect
that has had or could reasonably be expected to have a Material Adverse
Effect.
Each request for the advance of a Borrowing and each request for the issuance
of, increase in the amount of, or extension of the expiration date of, a Letter
of Credit shall be deemed to be a representation and warranty by the Borrower on
the date of such Borrowing, or issuance of, increase in the amount of, or
extension of the expiration date of, such Letter of Credit that all conditions
precedent to such Borrowing have been satisfied or fulfilled unless the Borrower
gives to the Lenders written notice to the contrary, in which case the Lenders
shall not be required to fund such advances and the Lenders shall not be
required to issue, increase the amount of or extend the expiration date of such
Letter of Credit unless the Lenders shall have previously waived in writing such
non-compliance. In the event that any of the conditions specified in Section
4.2(c) are not satisfied, the Borrower may not convert any Base Rate Loan into a
Eurodollar Loan or continue any Eurodollar Loan and may only convert or continue
any Eurodollar Loan into or as a Base Rate Loan in accordance with Section
2.4(a) hereof and subject to the applicability of the provisions of Section 2.7
regarding default rates of interest. Further, in such case, any Eurodollar Loan
which has not been accelerated pursuant to the terms hereof shall automatically
convert into a Base Rate Loan at the end of the applicable Interest Period
unless prior to such time, the conditions specified in Section 4.2(c) shall have
been satisfied or waived pursuant to the terms hereof.
SECTION 5. REPRESENTATIONS AND WARRANTIES.
The Borrower represents and warrants to the Lenders and the Agent as
follows:
Section 5.1. CORPORATE ORGANIZATION.
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(a The Borrower and each of its Subsidiaries (i) is a duly incorporated
and existing corporation (or other Person) in good standing under the laws of
the jurisdiction of its organization, (ii) has all necessary corporate power (or
comparable power, in the case of a Subsidiary that is not a corporation) to own
the property and assets it uses in its business and otherwise to carry on its
business, and (iii) is duly licensed or qualified and in good standing in each
jurisdiction in which the nature of the business transacted by it or the nature
of the property owned or leased by it makes such licensing or qualification
necessary, except where the failure to be so licensed or qualified could not
reasonably be expected to have a Material Adverse Effect.
(b As of the Closing Date, the Borrower has no Subsidiaries and owns no
interest in any joint venture or other entity other than as listed in Schedule
5.1.
Section 5.2. CORPORATE POWER AND AUTHORITY; VALIDITY. Each of the Borrower
and the Guarantors has the corporate power and authority to execute, deliver and
carry out the terms and provisions of the Credit Documents to which it is a
party and has taken all necessary corporate action to authorize the execution,
delivery and performance of the Credit Documents to which it is a party. Each of
the Borrower and the Guarantors has duly executed and delivered each such Credit
Document and each such Credit Document constitutes the legal, valid and binding
obligation of such Person enforceable in accordance with its terms, subject as
to enforcement only to bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' right generally and
by general principles of equity, regardless of whether in a proceeding in equity
or a law.
Section 5.3. NO VIOLATION. Neither the execution, delivery nor performance
by the Borrower or any of the Guarantors of the Credit Documents to which it is
a party nor compliance by any of such Persons with the terms and provisions
thereof, nor the consummation by it of the transactions contemplated herein or
therein, will (i) contravene any applicable provision of any law statute, rule
or regulation, or any applicable order, writ, injunction or decree of any court
or governmental instrumentality, (ii) conflict with or result in any breach of
any term, covenant condition or other provision of, or constitute a default
under, or result in the creation or imposition of (or the obligation to create
or impose) any Lien other than any Permitted Lien upon any of the property or
assets of the Borrower or any of its Subsidiaries under the terms of any
contractual obligation to which the Borrower or any of its Subsidiaries is a
party or by which it or any of it properties or assets are bound or to which it
may be subject, or (iii) violate or conflict with any provision of the
Certificate or Articles of Incorporation or Bylaws or other charter documents of
such Person.
Section 5.4. LITIGATION. There are no lawsuits (including, without
limitation, derivative or injunctive actions), arbitration proceedings or
governmental proceedings pending or, to the best knowledge of the Borrower,
threatened, involving the Borrower or any of its Subsidiaries except as
disclosed in Schedule 5.4 and except for such lawsuits or other proceedings
which are not reasonably expected to have a Material Adverse Effect.
Section 5.5. USE OF PROCEEDS; MARGIN REGULATIONS. The proceeds of the
Revolving Loans may only be used to provide working capital and for general
corporate purposes (including the issuance of Letters of Credit) of the
Borrower, the Guarantors and their respective Subsidiaries and
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to refinance Debt of the Borrower or its Subsidiaries existing under the
Existing Credit Agreement. The proceeds of the Term Loans may only be used to
refinance Debt of the Borrower or its Subsidiaries existing under the Existing
Credit Agreement. Neither the Borrower nor any of its Subsidiaries are engaged
in the business of extending credit for the purpose of purchasing or carrying
margin stock. No proceeds of any Loan will be used to purchase or carry any
"MARGIN STOCK" (as defined in Regulation U of the Board of Governors of the
Federal Reserve System), to extend credit for the purpose of purchasing or
carrying any "MARGIN STOCK," or for a purpose which violates Regulations T, U or
X of the Board of Governors of the Federal Reserve System.
Section 5.6. INVESTMENT COMPANY ACT. Neither the Borrower nor any
of its Subsidiaries is an "INVESTMENT COMPANY" or a company "CONTROLLED" by
an "INVESTMENT COMPANY," within this meaning of the Investment Company Act of
1940, as amended.
Section 5.7. PUBLIC UTILITY HOLDING COMPANY ACT. Neither the Borrower nor
any of it Subsidiaries is a "HOLDING COMPANY," or a "SUBSIDIARY COMPANY" of a
"HOLDING COMPANY," or an "AFFILIATE" of a "HOLDING COMPANY" or of a "SUBSIDIARY
COMPANY" of a "HOLDING COMPANY," within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
Section 5.8. TRUE AND COMPLETE DISCLOSURE. All factual information
heretofore or contemporaneously furnished by the Borrower or any of its
Subsidiaries in writing to the Agent or any of the Lenders in connection with
any Credit Document or any transaction contemplated therein is, and all other
such factual information hereafter furnished by any such Persons in writing to
the Lenders in connection herewith, any of the other Credit Documents or the
Loans will be, true and accurate in all material respects, taken as a whole, on
the date of such information (or, if such information does not relate to a
specific date, on the date of delivery of such information) and not incomplete
by omitting to state any material fact necessary to make the information therein
not misleading at such time in light of the circumstances under which such
information was provided.
Section 5.9. FINANCIAL STATEMENTS. The financial statements heretofore
delivered to the Lenders for the Borrower's fiscal year ended December 31, 1998
and the Borrower's fiscal quarter ended March 31, 1999, have been prepared in
accordance with GAAP, applied on a basis consistent, except as otherwise noted
therein, with the Borrower's, financial statements for the previous fiscal year.
Each of such annual and quarterly financial statements fairly presents on a
consolidated basis the financial position of the Borrower, as of the dates
thereof, and the results of operations for the periods covered thereby, subject
in the case of interim financial statements, to normal year-end adjustments and
omission of certain footnotes as permitted by the SEC. As of the Closing Date,
the Borrower and its Subsidiaries, considered as a whole, have no material
contingent liabilities or material Debt required under GAAP to be disclosed in a
consolidated balance sheet of the Borrower that were not disclosed in the
financial statements referred to in this Section 5.9 or in the notes thereto or
disclosed in writing to the Agent.
Section 5.10. NO MATERIAL ADVERSE CHANGE. There has occurred no event or
effect since December 31, 1998, other than as disclosed in the Borrower's
financial projections dated July 27, 1999, provided to the Agent, that has had,
or to the best knowledge of the Borrower could reasonably be expected to have, a
Material Adverse Effect.
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Section 5.11. LABOR CONTROVERSIES. There are no labor strikes, lock-outs,
slow downs, work stoppages or similar events pending or, to the best knowledge
of the Borrower, threatened against the Borrower or any of its Subsidiaries that
could reasonably be expected to have a Material Adverse Effect.
Section 5.12. TAXES. The Borrower and its Subsidiaries have filed all
federal tax returns and all other material tax returns required to be filed, and
have paid all governmental taxes, rates, assessments, fees, charges and levies
(collectively, "Taxes") except such Taxes, if any, as are being contested in
good faith and for which reserves have been provided in accordance with GAAP. No
tax liens have been filed and no claims are being asserted for Taxes except to
the extent that such liens or claims, in the aggregate, could reasonably be
expected to have a Material Adverse Effect. The charges, accruals and reserves
on the books of the Borrower and its Subsidiaries for Taxes and other
governmental charges have been determined in accordance with GAAP.
Section 5.13. ERISA. With respect to each Plan, the Borrower and its
Subsidiaries have fulfilled their obligations under the minimum funding
standards of, and are in compliance in all material respects with, ERISA and
with the Code to the extent applicable to it, and have not incurred any
liability under Title IV of ERISA to the PBGC or a Plan other than a liability
to the PBGC for premiums under Section 4007 of ERISA, except where such
liability could not reasonably be expected to have a Material Adverse Effect.
Neither the Borrower nor any of its Subsidiaries has any contingent liability
with respect to any post-retirement benefits under a welfare plan as defined in
ERISA other than liability for continuation coverage described in Part 6 of
Title I of ERISA, except where such liability could not reasonably be expected
to have a Material Adverse Effect.
Section 5.14. CONSENTS. All consents and approvals of, and filings and
registrations with, and all other actions of, all governmental agencies,
authorities or instrumentalities required to consummate the Borrowings
hereunder, on the date of each such Borrowing, have been obtained or made and
are or will be in full force and effect.
ection 5.15. CAPITALIZATION. All outstanding shares of the Borrower
and its Subsidiaries have been duly and validly issued, and are fully paid and
nonassessable.
Section 5.16. OWNERSHIP OF PROPERTY. The Borrower and its Subsidiaries
have good and marketable title to or a valid leasehold interest in all of their
respective property except to the extent, in the aggregate, no Material Adverse
Effect could reasonably be expected to result from the failure to have such
title or interest, free and clear of any Liens except Permitted Liens. The
Borrower and its Subsidiaries own or hold valid licenses to use all the material
patents, trademarks, permits, service marks and trade names, free of any
burdensome restrictions, that are necessary to the operation of the business of
the Borrower and its Subsidiaries as presently conducted, except where the
failure to own or hold such licenses could not reasonably be expected to have a
Material Adverse Effect.
Section 5.17. COMPLIANCE WITH STATUTES. The Borrower and its Subsidiaries
are in compliance with all applicable statutes, regulations and orders of, and
all applicable restrictions imposed by, all governmental bodies and have all
necessary permits, licenses and other necessary authorizations with respect to
the conduct of their businesses and the ownership and operation of
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their properties except where the failure to so comply or hold such permits,
licenses or other authorizations, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.
Section 5.18. ENVIRONMENTAL MATTERS.
(a) The Borrower and its Subsidiaries are in compliance with, and on the
date of each Borrowing will be in compliance with, all applicable Environmental
Laws and the requirements of any permits issued under such Environmental Laws
except for such non-compliance which could not reasonably be expected to have a
Material Adverse Effect and as set forth on Schedule 5.18. To the best knowledge
of the Borrower, there are no pending, past or threatened Environmental Claims
against the Borrower or any of its Subsidiaries or any property owned or
operated by the Borrower or any of its Subsidiaries except for such
Environmental Claims which could not reasonably be expected to have a Material
Adverse Effect and as set forth on Schedule 5.18. To the best knowledge of the
Borrower, there are no conditions or occurrences on any property owned or
operated by the Borrower or any of its Subsidiaries or on any property adjoining
or in the vicinity of any such property that could reasonably be expected (i) to
form the basis of an Environmental Claim against the Borrower or any of its
Subsidiaries or any property owned or operated by the Borrower or any of its
Subsidiaries, or (ii) to cause any property owned or operated by the Borrower or
any of its Subsidiaries to be subject to any material restrictions on the
ownership, occupancy, use or transferability of such property by the Borrower or
any of its Subsidiaries under any applicable Environmental Law except for any
such condition or occurrence described in clauses (i) or (ii) which could not
reasonably be expected to have a Material Adverse Effect.
(b) To the best knowledge of the Borrower (i) Hazardous Materials have not
at any time been generated, used, treated or stored on, or transported to or
from, any property owned or operated by the Borrower or any of its Subsidiaries
in a manner that has violated or could reasonably be expected to violate any
Environmental Law, except for such violation which could not reasonably be
expected to have a Material Adverse Effect, and (ii) Hazardous Materials have
not at any time been released on or from any property owned or operated by the
Borrower or any of its Subsidiaries in a matter that has violated or could
reasonably be expected to violate any Environmental Law, except for such
violation which could not reasonably be expected to have a Material Adverse
Effect.
Section 5.19. DIVIDEND RESTRICTIONS. None of the Subsidiaries of
the Borrower is party to or subject to any agreement or understanding
restricting or limiting the payment of any dividends or other distributions
on its capital stock by any such Subsidiary.
Section 5.20. YEAR 2000 COMPLIANCE.
(a) The Borrower has (i) begun analyzing its business and operations and
each of its Subsidiaries and Affiliates' business and operations that could be
adversely affected by failure to become Year 2000 compliant (that is, the risk
that computer applications, imbedded microchips and other systems used by the
Borrower or any of its Subsidiaries or Affiliates will be able to perform
properly date sensitive functions prior to and after December 31, 1999), (ii)
developed a plan for becoming Year 2000 compliant in a timely manner, the
implementation of which is on schedule in all
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material respects and (iii) to date, implemented that plan in accordance with
that timetable. The Borrower reasonably believes that it will become Year 2000
compliant for its operations and those of its Subsidiaries and Affiliates on a
timely basis except to the extent that a failure to do so could not reasonably
be expected to have a material adverse effect upon the financial condition of
the Borrower.
(b) The Borrower reasonably believes that any suppliers, vendors, and
customers that are material to its operations or the operations of its
Subsidiaries and Affiliates will be Year 2000 compliant for their own computer
applications except to the extent that a failure to do so could not reasonably
be expected to have a material adverse effect upon the financial condition of
the Borrower.
Section 5.21. INSURANCE. The Borrowers and its Subsidiaries carry
insurance with reputable insurers in respect of such of their respective assets
and properties, in such amounts and against such risks as is customarily
maintained by other Persons of similar size engaged in similar businesses or,
self-insure to the extent that is customary for Persons of similar size engaged
in similar businesses.
SECTION 6. COVENANTS.
The Borrower covenants and agrees that, so long as any Note, Letter of
Credit, Reimbursement Obligation or any other Obligation is outstanding or any
Commitment is outstanding hereunder:
Section 6.1. CORPORATE EXISTENCE. The Borrower and its Subsidiaries will
preserve and maintain their existence except (i) for the dissolution of any
Subsidiaries whose assets are transferred to the Borrower or any of its
Subsidiaries, and (ii) as otherwise expressly permitted herein.
Section 6.2. MAINTENANCE OF EQUIPMENT. The Borrower and its Subsidiaries
will maintain, preserve and keep their material plants, properties and equipment
necessary to the proper conduct of their businesses in reasonably good repair,
working order and condition (normal wear and tear excepted) and will from time
to time make all reasonably necessary repairs, renewals, replacements, additions
and betterments thereto so that at all times such plants, properties and
equipment are reasonably preserved and maintained; PROVIDED, HOWEVER, that
nothing in this Section 6.2 shall prevent the Borrower or any of its
Subsidiaries from discontinuing the operation or maintenance of any such plants,
properties or equipment if such discontinuance is, in the judgment of the
Borrower or any such Subsidiary, as applicable, desirable in the conduct of its
business and not materially disadvantageous to the Lenders.
Section 6.3. TAXES. The Borrower and its Subsidiaries will duly pay and
discharge all Taxes upon or against them or their properties before payment is
delinquent and before penalties accrue thereon, unless and to the extent that
the same is being contested in good faith and by appropriate proceedings and
reserves have been established in conformity with GAAP.
Section 6.4. ERISA. Each of the Borrower and its Subsidiaries will
promptly pay and discharge all obligations and liabilities arising under ERISA
or otherwise with respect to each Plan of a character which if unpaid or
unperformed might result in the imposition of a material Lien,
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against any properties or assets of the Borrower and its Subsidiaries and will
promptly notify the Agent of (i) the occurrence of any reportable event (as
defined in ERISA) relating to a Plan (other than a multi-employer plan, as
defined in ERISA, so long as the event thereunder cannot reasonable be foreseen
to have a Material Adverse Effect on any of the Borrower or its Subsidiaries),
other than any such event with respect to which the PBGC has waived notice by
regulation; (ii) receipt of any notice from PBGC of its intention to seek
termination of any Plan or appointment of a trustee therefor; (iii) the
Borrower's or any of its Subsidiaries' intention to terminate or withdraw from
any Plan; and (iv) the occurrence of any event that could result in the
incurrence of any material liability fine or penalty, or any material increase
in the contingent liability of the Borrower or any Subsidiary in connection with
any post-retirement benefit under a welfare plan benefit (as defined in ERISA)
Section 6.5. BURDENSOME RESTRICTIONS, ETC. Promptly upon the existence or
occurrence thereof, the Borrower shall give to the Agent written notice of the
existence or occurrence of (i) any contractual obligation or the adoption of any
new requirement of law which could reasonably be expected to have a Material
Adverse Effect, and (ii) the existence or occurrence of any strike, slow down or
work stoppage which could reasonably be expected to have a Material Adverse
Effect.
Section 6.6. INSURANCE.
(a) POLICIES AND CERTIFICATES. Each of the Borrower and its Subsidiaries
will maintain insurance with responsible and reputable insurance companies or
associations in such amounts and covering such risks as are usually carried by
companies engaged in similar businesses and owning similar assets and properties
in the same general areas in which the Borrower and its Subsidiaries operate.
The Borrower and each of its Subsidiaries will also insure employers' and public
and product liability risks with responsible insurance companies, all as
reasonably acceptable to the Collateral Agent. The Borrower will (i) on the
Closing Date, (ii) on or before January 31st of each calendar year commencing
January 31, 2000 and (iii) upon the request of the Collateral Agent, furnish a
certificate from the Borrower's insurance agent(s) setting forth the nature and
extent of the insurance maintained pursuant to this Section 6.6 and providing
that such agent will provide fifteen (15) days' advance written notice to the
Collateral Agent prior to cancellation of any such insurance. In addition, upon
the request of the Collateral Agent, the Borrower will deliver to the Collateral
Agent copies of the underlying policies (as they are available), and evidence
that the premiums have been paid before termination of any insurance policies
representing such insurance. If such insurance is not maintained in full force
and effect, the Collateral Agent at its option may procure such insurance at the
Borrower's and its Subsidiaries' expense. All policies representing property
insurance shall name the Collateral Agent as loss payee in a form reasonably
satisfactory to the Collateral. All policies representing liability insurance
shall name the Collateral Agent, for the benefit of itself, the Agent, the
Lenders and the Noteholders, as an additional named insured party in a form
reasonably satisfactory to the Collateral Agent.
(b) NOTICE OF CASUALTY EVENTS, ETC. Promptly upon obtaining knowledge
thereof, the Borrower and its Subsidiaries shall notify the Collateral Agent of
any material casualty to the Collateral, including all casualties to the
Collateral where the aggregate damage to the Collateral could reasonably be
expected to exceed $1,000,000. With respect to any potential claims under any
property insurance maintained by the Borrower and its Subsidiaries in excess of
such amount, after the occurrence and during the continuance of an Event of
Default, the Collateral Agent may, but shall
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not be required to, make proof of loss under, settle and adjust any claims
under, and receive the proceeds under any such property insurance or direct the
Debtor (as defined in each Security Agreement) to take such actions at the
direction of the Collateral Agent , and the reasonable expenses incurred by the
Collateral Agent in the adjustment and collection of such proceeds shall be paid
by the Borrower and its Subsidiaries. The Collateral Agent shall not be liable
or responsible for failure to collect or exercise diligence in the collection of
any proceeds.
(c) PAYMENTS. With respect to any casualty to the Collateral, after the
occurrence and during the continuance of an Event of Default, all proceeds of
such casualty, including any property insurance proceeds, proceeds from actions,
and any other proceeds, whether or not above the amounts specified above, are
assigned to the Collateral Agent and shall be paid directly to the Collateral
Agent and applied in accordance with paragraph (d) below. In the event that any
such proceeds are paid to the Borrower or any of its Subsidiaries in violation
of the foregoing, the Borrower or such Subsidiary shall hold the proceeds in
trust for the Collateral Agent, segregate the proceeds from the other funds of
the Borrower or such Subsidiary, and promptly pay the proceeds to the Collateral
Agent with any necessary endorsement. Upon the request of the Collateral Agent,
after the occurrence and during the continuance of an Event of Default, each of
the Borrower and its Subsidiaries shall execute and deliver to the Collateral
Agent any additional assignments and other documents as may be necessary or
desirable to enable the Collateral Agent to directly collect the proceeds.
(d) APPLICATION OF PROCEEDS. With respect to the proceeds of any casualty
required to be paid to the Collateral Agent hereunder, after the occurrence and
during the continuance of an Event of Default, the Collateral Agent may, in its
sole discretion, either disburse the proceeds to the Borrower or any of its
Subsidiaries for the purpose of repairing, replacing, and restoring the damaged
collateral or retain the proceeds until a Triggering Event shall have occurred
and be continuing and thereafter apply such proceeds as provided for in Sections
2.3 and 2.6 of the Intercreditor Agreement.
Section 6.7. FINANCIAL REPORTS AND OTHER INFORMATION
(a) The Borrower and its Subsidiaries will maintain a system of accounting
in such manner as will enable preparation of financial statements in accordance
with GAAP and will furnish to the Lenders and their authorized representatives
such information about the business and financial condition of the Borrower and
its Subsidiaries as the Lenders may reasonably request; and, without any
request, will furnish to the Lenders:
(i) within 45 days after the end of each calendar month (except in
the case of December, within 60 days after the end of such calendar month), (A)
the consolidated balance sheet of the Borrower and its Subsidiaries as at the
end of such calendar month and the related consolidated statements of income and
of cash flows for such calendar month and for the portion of the fiscal year
ended with the last day of such calendar month, all of which shall be in
reasonable detail or in the form filed with the SEC and certified by the Chief
Financial Officer of the Borrower that they, to the best of his or her knowledge
after due inquiry, fairly present the financial condition of the Borrower and
its Subsidiaries as of the dates indicated and the results of their operations
and changes in their cash flows for the periods indicated and that they have
been prepared in accordance with GAAP, in
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each case, subject to normal year-end or quarter-end, as applicable, adjustments
and the omission of any footnotes as permitted by the SEC; (B) a report
detailing the aggregate Capital Expenditures and asset dispositions by the
Borrower and its Subsidiaries during such calendar month together with details
regarding (I) each individual Capital Expenditure in excess of $100,000 made
during such month, (II) each asset disposition in excess of $100,000 occurring
during such month, and (III) each Capital Expenditure made in connection with a
YMS Room during such month; and (C) for each calendar month that is the last
month of a fiscal quarter, a report comparing the financial results of such
fiscal quarter then ended to the budgeted projections (furnished pursuant to
Section 6.7(a)(iii)) for such quarter together with an explanation of any
variances;
(ii) within 90 days after the end of each fiscal year of the
Borrower, the consolidated and consolidating balance sheets of the Borrower and
its Subsidiaries as at the end of such fiscal year and the related consolidated
and consolidating (in substantially the form prepared prior to the Closing Date)
statements of income and changes in stockholders equity and of cash flows for
such fiscal year and setting forth consolidated comparative figures as of the
end of and for the preceding fiscal year, audited by an independent
nationally-recognized accounting firm (except for the consolidating statements
described herein) and in the form filed with the SEC (delivery to the Agent of a
copy of the Borrower's Form 10-K filed with the SEC (without exhibits) in any
event will satisfy the requirements of this subsection with respect to the
required consolidated financial statements only subject to Section 6.7(b));
(iii) On or before March 31, 2000, (A) a projection of Borrower's
consolidated balance sheet and consolidated income and cash flows for the five
fiscal quarters ending after such date and (B) a quarterly consolidated Capital
Expenditures projection of the Borrower for each of such five fiscal quarters;
(iv) as soon as possible and in any event by the first day of each
calendar month, a projection of Borrower's cash flows for such calender month
detailing on a weekly basis for such calendar month the projected cash inflow
and cash outflow of the Borrower and its Subsidiaries during such calendar
month;
(v) as soon as possible and in any event no later than the second
Business Day of each calendar week, a weekly report detailing the actual cash
inflow and outflow of the Borrower and its Subsidiaries and also comparing such
actual cash inflow and outflow to the projected cash inflow and outflow of the
Borrower and its Subsidiaries for the immediately preceding calendar week; and
(vi) within ten (10) days after the sending or filing thereof,
copies of all financial statements, reports, notices and proxy statements that
the Borrower sends to its stockholders generally or files with the SEC that are
publicly available.
(b) Each financial statement furnished to the Lenders pursuant to
subsections (i) and (ii) of Section 6.7(a) shall be accompanied by (i) a written
certificate signed by the Borrower's Chief Financial Officer to the effect that
(x) no Default or Event of Default has occurred during the period covered by
such statements or, if any such Default or Event of Default has occurred during
such period, setting forth a description of such Default or Event of Default and
specifying the action, if
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any, taken by the Borrower to remedy the same, and (y) the representations and
warranties contained herein are true and correct in all material respects as
though made on the date of such certificate, except to the extent that any such
representation or warranty relates solely to an earlier date, in which case it
was true and correct as of such earlier date and except as otherwise described
therein, as a result of the transactions expressly permitted hereunder or as
previously disclosed to the Lenders, and the financial statements furnished
therewith to the best of his or her knowledge after due inquiry, fairly present
the financial condition of the Borrower and its Subsidiaries as of the dates
indicated and the results of their operations and changes in their cash flows
for the periods indicated and they have been prepared in accordance with GAAP,
subject, if applicable, to normal year-end adjustments and the omission of any
footnotes as permitted by the SEC, and (ii) a Compliance Certificate in the form
of EXHIBIT 6.7A showing the Borrower's compliance with the financial covenants
set forth herein.
(c) As soon as available and in any event within 25 days after the end of
each calendar month, the Borrower will deliver to the Agent, (i) a Borrowing
Base Certificate in the form of EXHIBIT 6.7B executed by an Authorized Officer
of the Borrower calculating the Borrowing Base then in effect as of the end of
such calendar month and (ii) an accounts receivable aging summary as of the end
of such calendar month with respect to the Borrower's and its Subsidiaries'
accounts receivable, which summary shall be certified by an Authorized Officer
of the Borrower.
(d) Promptly after obtaining knowledge of any of the following, the
Borrower will provide the Agent with written notice in reasonable detail of: (i)
any pending or threatened Environmental Claim against the Borrower or any of its
Subsidiaries or any property owned or operated by the borrower or any of its
subsidiaries that if adversely determined could reasonably be expected to have a
Material Adverse Effect; (ii) any condition or occurrence on any property owned
or operated by the Borrower or any of its subsidiaries that results in
noncompliance by the Borrower or any of its Subsidiaries with any environmental
Law that could reasonably be expected to have a Material Averse Effect; and
(iii) the taking of any material removal or remedial action in response to the
actual or alleged presence of any Hazardous Material on any property owned or
operated by the Borrower or any of its Subsidiaries that could reasonably be
expected to have a Material Adverse Effect.
(e) The Borrower will promptly and in any event, within five (5) days
after an officer of the Borrower has knowledge thereof, give written notice to
the Agent of: (i) any pending or threatened litigation or proceeding against the
Borrower or any of its Subsidiaries asserting any claim or claims against any of
same in excess of $1,000,000 in the aggregate or that could reasonably be
expected to have a Material Adverse Effect; (ii) the occurrence of any Default
or Event of Default; (iii) any circumstance that could reasonably be expected to
have a Material Adverse Effect; and (iv) any event which could reasonably be
expected to result in a breach of Sections 6.23, 6.24, 6.25, 6.26 or 6.27.
(f) The Borrower will promptly notify the Agent in the event the Borrower
determines that any computer application which is material to its operations or
the operations of any of its Subsidiaries, Affiliates, material vendors,
suppliers or customers will not be fully Year 2000 compliant on a timely basis,
except to the extent that such failure could not reasonably be expected to have
a material adverse effect upon the financial condition of the Borrower.
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(g) The Agent will forward promptly to the Lenders the information
provided by the Borrower pursuant to this Section 6.7.
Section 6.8. LENDERS' INSPECTION RIGHTS. Upon reasonable notice from any
of the Leaders, the Borrower will permit the Agent or any of the Lenders (and
such Persons as the Agent or any Lender may designate), during normal business
hours following reasonable notice to visit and inspect any of the properties of
the Borrower or any of its Subsidiaries, to examine all of their books and
records, to make copies and extracts therefrom, and to discuss their respective
affairs, finances and accounts with their respective officers, employees and
independent public accountants (and by this provisions, the Borrower authorizes
such accountants to discuss with the Agent and the Lenders, and such Persons as
the Agent or any Lender may designate, the affairs, finances and accounts of the
Borrower and its Subsidiaries PROVIDED THAT the Borrower has the opportunity to
be present at such discussions), all at such reasonable times and as often as
may be reasonably requested. Any such inspection shall be at the expense of the
Borrower up to one (1) time a year, and if conducted any more frequently, at the
expense of the Agent or the Lender conducting such inspection unless a Default
or Event of Default shall have occurred and be continuing, in which event such
inspection shall be at the expense of the Borrower. In addition, the Borrower
and its Subsidiaries shall permit (i) the Agent to, at any time (and at least
semi-annually) in the Agent's discretion and at the Borrower's expense, perform
a collateral audit of the properties and assets of the Borrower and its
Subsidiaries and (ii) a business consultant selected by the Agent to, at any
time and at the Borrower's expense, evaluate the business activities of the
Borrower and its Subsidiaries.
Section 6.9. CONDUCT OF BUSINESS. The Borrower and its Subsidiaries
(except as provided in this Section 6.9) will not engage in any line of business
other than death care and memorial related services and products businesses and
any complimentary businesses thereto (each, a "PERMITTED BUSINESS"). None of the
Special Purpose Subsidiaries will engage in any line of business other than (i)
with respect to T.Y.G. Company, the cash and investment management business for
the Borrower and its Subsidiaries, and (ii) with respect to all other Special
Purpose Subsidiaries, the business of acting as an intellectual property holding
company for the Borrower and its Subsidiaries. Additionally, none of such
Special Purpose Subsidiaries will incur any Debt other than Debt related to tax
liabilities. Finally, the Borrower shall not own, create or acquire any other
Subsidiaries for the purpose of performing the actions described in clauses (i)
and (ii) above, other than the Special Purpose Subsidiaries.
Section 6.10. NEW SUBSIDIARIES. The Borrower shall cause any direct or
indirect Subsidiary which is formed or acquired after the Closing Date to,
within five (5) days following the formation or acquisition of such Subsidiary,
execute and deliver to the Agent (with sufficient originals for each applicable
Lender) any or all of the following documents requested by the Agent or any
Lender: a Subsidiary Guaranty in the form of the attached EXHIBIT 4.1C, a
Security Agreement in the form of the attached EXHIBIT 4.1A as applicable, a
Pledge Agreement in the form of the attached EXHIBIT 4.1B, as applicable (and
such other Security Documents and the Agent or any Lender may reasonably
request), and such evidence of corporate authority to enter into such Subsidiary
Guaranty, Security Agreement, Pledge Agreement and other Security Documents as
the Agent may reasonably request.
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Section 6.11. RESTRICTIONS ON REDEMPTION; DIVIDENDS.
(a) The Borrower shall not redeem, purchase or otherwise acquire any
shares of its capital stock or declare or pay any dividends on its capital stock
(other than dividends paid in kind) or make any distribution or payment to
shareholders, or set aside funds for any such purpose, except that, so long as
no Default or Event of Default shall have occurred and be continuing or would
occur as a result thereof, the Borrower may pay cash dividends on its common
stock in an annual amount not to exceed, on a per share basis, the annual per
share amount paid in fiscal year ended in 1998 (but in no event shall the
aggregate amount of all dividends paid in any fiscal year exceed the lesser of
(i) $1,500,000 and (ii) an amount equal to 50% of the Consolidated Net Income of
the Borrower during the preceding fiscal year); and
(b) Neither the Borrower nor any of its Subsidiaries shall, directly or
indirectly, create or otherwise permit to exist or become effective any
restriction on the ability of any Subsidiary of the Borrower to (i) pay
dividends or make any other distributions on its capital stock or any other
interest or participation in its profits owed by the Borrower or to pay any Debt
owed to the Borrower, or (ii) make loans or advances to the Borrower or any of
its Subsidiaries, except in either case for restrictions existing under or by
reason of applicable law, this Agreement and the other Credit Documents.
Section 6.12. RESTRICTIONS ON FUNDAMENTAL CHANGES. Neither the Borrower
nor any of its Subsidiaries shall be a party to any merger into or consolidation
with, make an Acquisition or otherwise purchase or acquire all or substantially
all of the assets or stock of, any other Person, or sell all or substantially
all of its assets or stock, except:
(a) the Borrower may purchase or otherwise acquire all or substantially
all of the stock or assets of, or otherwise acquire by merger or consolidation,
any of its Subsidiaries, and any such Subsidiary may merge into, or consolidate
with, or purchase or otherwise acquire all or substantially all of the assets or
stock of or sell all or substantially all of its assets or stock to, any other
Subsidiary of the Borrower (other than YCF) or the Borrower, in each case so
long as the Borrower shall be the surviving entity to any such merger or
consolidation if the transaction is with the Borrower;
(b) subject to the requirements of Section 6.10, the Borrower or any of
its Subsidiaries may form new Subsidiaries; and
(c) the Borrower and its Subsidiaries may issue additional capital stock
or ownership interests so long as there is no scheduled mandatory redemption or
scheduled liquidating distribution of any such stock or interest before the
Maturity Date with respect to the Revolving Loans.
Section 6.13. ENVIRONMENTAL LAWS. The Borrower and its Subsidiaries shall
comply with all Environmental Laws (including, without limitation, obtaining and
maintaining all necessary permits, licenses and other necessary authorizations)
applicable to or affecting the properties or business operations of the Borrower
or any of its Subsidiaries except to the extent that non-compliance could not
reasonably be expected to have a Material Adverse Effect.
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Section 6.14. LIENS. The Borrower and its Subsidiaries shall not
create, incur, assume or suffer to exist any Lien of any kind on any of their
properties or assets of any kind except the following (collectively, the
"PERMITTED LIENS"):
(a) Liens securing the Obligations pursuant to the Security
Documents;
(b) Liens securing the Obligations (as defined in the Senior Note Purchase
Agreement) pursuant to the Security Documents;
(c) Liens arising in the ordinary course of business by operation of law
in connection with workers' compensation, unemployment insurance, old age
benefits, social security obligations, taxes, assessments, statutory obligations
or other similar charges, good faith deposits, pledges or other Liens in
connection with (or to obtain letters of credit in connection with) bids,
performance bonds, contracts or leases to which the Borrower or its Subsidiaries
are a party or other deposits required to be made in the ordinary course of
business; PROVIDED THAT in each case the obligation secured is not for Debt and
is not overdue or, if overdue, is being contested in good faith by appropriate
proceedings and reserves in conformity with GAAP have been provided therefor;
(d) mechanics', workmen, materialmen, landlords', carriers' or other
similar Liens arising in the ordinary course of business (or deposits to obtain
the release of such Liens) related to obligations not due or, if due, that are
being contested in good faith by appropriate proceedings and reserves in
conformity with GAAP have been provided therefor;
(e) inchoate Liens under ERISA and Liens for Taxes not yet due or which
are being contested in good faith by appropriate proceedings and reserves in
conformity with GAAP have been provided therefor;
(f) Liens arising out of judgments or awards against the Borrower or any
of its Subsidiaries, or in connection with surety or appeal bonds or the like in
connection with bonding such judgments or awards, the time for appeal from which
or petition for rehearing of which shall not have expired or for which the
Borrower or such Subsidiary shall be prosecuting on appeal or proceeding for
review and for which it shall have obtained a stay of execution or the like
pending such appeal or proceeding for review; PROVIDED that the aggregate amount
of uninsured or underinsured liabilities (including interest, costs, fees and
penalties, if any) of the Borrower and its Subsidiaries secured by such Liens
shall not exceed $1,000,000 at any one time outstanding and PROVIDED FURTHER
there is adequate assurance, in the reasonable opinion of the Lenders, that the
insurance proceeds, if any, attributable thereto shall be paid promptly upon the
expiration of such time period or resolution of such proceeding if necessary to
remove such Liens;
(g) rights of a common owner of any interest in property held by a Person
and such common owner as tenants in common or through other common ownership;
(h) encumbrances (other than to secure the payment of Debt), easements,
restrictions, servitudes, permits, conditions, covenants, exceptions or
reservations in any property or rights-of-way of a Person for the purpose of
roads, pipelines, transmission lines, transportation lines, distribution
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lines, removal of gas, oil, coal, metals, steam, minerals, timber or other
natural resources, and other like purposes, or for the joint or common use of
real property, rights-of-way, facilities or equipment, or defects, irregularity
and deficiencies in title of any property or rights-of-way;
(i) financing statements filed by lessors of property (but only with
respect to the property so leased) and Liens under any conditional sale or title
retention agreements entered into in the ordinary course of business;
(j) rights of lessees of equipment owned by the Borrower or any of
its Subsidiaries;
(k) Liens securing Capitalized Lease Obligations or purchase money debt
permitted by Section 6.15(g) on any assets acquired; and
(l) any extension, renewal or replacement (or successive extensions,
renewals or replacements) in whole or in part of any Lien referred to in the
foregoing subsections (a) through (k), PROVIDED THAT the principal amount of
Debt secured thereby (other than with respect to subsection (a) above) does not
exceed the initial principal amount secured, and such extension, renewal or
replacement is limited to the property already subject to the Lien so extended,
renewed or replaced.
In the event that any property of the Borrower or any Subsidiary is subjected to
a Lien in violation of this Section 6.14, then immediately, and in any event
within ten days, the Borrower will make or cause to be made provision whereby
the Obligations will be secured equally and ratably with all other obligations
secured thereby, and in any case the Obligations shall have the benefit, to the
full extent that, and with such priority as, the Agent, the Lenders and any swap
counterparty under an Interest Rate Protection Agreement (each such Person being
a "Loan Party") may be entitled thereto under applicable law, of an equitable
Lien on such property securing the Obligations. In the event that the Borrower
obtains the full and final release of any Lien on any property of the Borrower
or any Subsidiary arising in violation of this Section 6.14, (A) any related
equitable Lien on such property arising under or in accordance with this
paragraph shall be automatically, without any affirmative action on any Loan
Party's part, released, and (B) any related contractual Lien on such property
granted under or in accordance with this paragraph shall promptly (and in any
event within five Business Days) be released by the Loan Parties executing and
delivering to the Borrower, at the Borrower's expense, releases sufficient to
fully release such contractual Liens. Compliance with this paragraph shall not
constitute a cure or waiver of any Default or Event of Default caused by any
property of the Borrower or any of its Subsidiaries becoming subject to a Lien
in violation of this Section 6.14.
Section 6.15. DEBT. The Borrower and its Subsidiaries shall not
contract, assume or suffer to exist any Debt (including, without limitation,
any Contingent Obligations), except:
(a) Debt under the Credit Documents;
(b) Debt existing on the Closing Date and described on Schedule 6.15;
PROVIDED that, the aggregate principal amount of such Debt may not be increased;
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(c) unsecured intercompany loans and advances from the Borrower to any of
its Subsidiaries (other than YCF) and unsecured intercompany loans and advances
from any of such Subsidiaries to the Borrower or any other Subsidiaries of the
Borrower (other than YCF), in each case which are subordinated to the
Obligations of the Borrower and the Guarantors to the Agent and the Lenders in
form and substance satisfactory to the Agent;
(d) Debt under any Interest Rate Protection Agreements entered into to
protect the borrower against fluctuations in interest rates and not for
speculative purposes;
(e) Debt under the Private Placement and any subsequent extensions,
renewals or refinancings thereof so long as such Debt is not increased in
amount, the maturity date is not made earlier in time, the interest rate per
annum applicable thereto is not increased, any amortization of principal
thereunder is not shortened and the payments thereunder are not increased and
the other terms and conditions thereof are no more restrictive than the terms
and conditions of the Private Placement;
(f) Debt subordinated to the Obligations hereunder on terms and conditions
reasonably satisfactory to the Agent; PROVIDED THAT no principal payments may be
made thereon (other than with respect to existing subordinated Debt listed on
Schedule 6.15) before the Maturity Date with respect to the Revolving Loans,
such Debt contains covenants no more restrictive than the covenants contained in
this Agreement and standstill provisions and no payments may be made thereon if
a Default or an Event of Default shall have occurred and be continuing or would
occur as a result of any such payment; and
(g) Debt not otherwise permitted by this Section 6.15 not to exceed
$1,000,000 in the aggregate at any time outstanding.
Section 6.16. LOANS, ADVANCES AND INVESTMENTS. The Borrower and its
Subsidiaries shall not purchase or acquire any stock, indebtedness, obligations
or securities of, or any other interest in, or make any capital contribution to,
any Person (any of the foregoing, an "INVESTMENT") or lend money or make
advances to any Person except:
(a) as permitted by Section 6.12(a) or (b) or Section 6.15(c);
(b) Investments outstanding as of the Closing Date and listed on Schedule
6.16 hereto
(c) loans to employees of the Borrower or any of its Subsidiaries for (i)
short-term loans in an aggregate amount of no greater than $250,000 at any one
time outstanding and in an amount no greater than $100,000 for any Person, and
(ii) moving and travel expenses and other similar expenses; in each case
incurred in the ordinary course of business;
(d) receivables owing to the Borrower or its Subsidiaries created or
acquired in the ordinary course of business and payable on customary trade terms
of the Borrower or such Subsidiary and in compliance with the arms-length
requirements of Section 6.18;
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(e) other advances or loans to, or Investments in, any Person, PROVIDED
THAT the aggregate amount of such other loans and advances outstanding and
Investments shall not exceed $250,000 at any one time outstanding;
(f) Investments in Cash Equivalents; and
(g) lease receivables in connection with the YMS Rooms described on
Schedule 6.16, which lease receivables may not at any time exceed an amount
equal to (i) with respect to each existing YMS Room listed on such Schedule
6.16, the amount of the lease receivables for such YMS Room existing as of the
Closing Date (which maximum lease receivable amount for such YMS Room permitted
hereunder shall decrease in accordance with the amortization schedule or payment
schedule set forth in the lease for such YMS Room as in effect on the Closing
Date) and (ii) with respect to each YMS Room described on such Schedule 6.16 as
not currently in existence but which is currently committed to be installed, the
amount of projected lease receivables for such committed YMS Room set forth on
Schedule 6.16.
Section 6.17. TRANSFER OF ASSETS. The Borrower and its Subsidiaries shall
not permit any transfer of any asset of the Borrower (including, without
limitation, the capital stock of or ownership interest in any of its
Subsidiaries) or any of its Subsidiaries except:
(a) Transfers of inventory (other than YMS Rooms) in the ordinary
course of business;
(b) the Transfer of assets that are obsolete, worn out or no longer useful
in the business of the Borrower and its Subsidiaries; PROVIDED THAT, the
Borrower and its Subsidiaries shall either (A) reinvest such Net Cash Proceeds
from Assets received by the Borrower or any of its Subsidiaries from any such
Transfer in replacement assets (with equal or greater value) within the three-
month period following such Transfer (or, if such replacement assets have
already been acquired prior to such Transfer with internal cash flow of the
Borrower and its Subsidiaries, apply such amounts as a reimbursement to the
Borrower or such Subsidiary for the purchase price of such asset) or (B) deposit
80% (or, if an Triggering Event under the Intercreditor Agreement shall have
occurred and be continuing, 100%) of such Net Cash Proceeds from Assets with the
Collateral Agent to be held as cash collateral for the Indebtedness (as defined
in the Intercreditor Agreement), or if the Intercreditor Agreement shall have
been terminated, such amounts shall be returned to the Borrower and its
Subsidiaries; PROVIDED FURTHER that, the Borrower shall notify the Collateral
Agent and the Agent within ten days of such Transfer of its intention to either
reinvest such Net Cash Proceeds from Assets in replacements assets or deposit
such Net Cash Proceeds with the Collateral Agent;
(c) Transfers of any assets among the Borrower and any of its Subsidiaries
(other than YCF);
(d) Transfers permitted by Sections 6.12(a);
(e) Transfers of YMS Rooms made in accordance with Section 6.22;
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(f) Transfers of any non-core assets of the Borrower and its Subsidiaries;
PROVIDED that, (i) the fair market value of all such assets transferred during
any fiscal year may not exceed 15% of Tangible Net Worth as of the Borrower's
most recent fiscal year end and (ii) 80% (or, if an Triggering Event under the
Intercreditor Agreement shall have occurred and be continuing, 100%) of the Net
Cash Proceeds from Assets received from all such Transfers are, upon receipt,
deposited with the Collateral Agent to be held as cash collateral for the
Indebtedness (as defined in the Intercreditor Agreement), or if the
Intercreditor Agreement shall have been terminated, such amounts shall be
returned to the Borrower and its Subsidiaries; and
(g) the sale of the Aiken, South Carolina plant and the Portland, Oregon
plant; PROVIDED that, 80% (or, if an Triggering Event under the Intercreditor
Agreement shall have occurred and be continuing, 100%) of the Net Cash Proceeds
from Assets received from all such Transfers are, upon receipt, deposited with
the Collateral Agent to be held as cash collateral for the Indebtedness (as
defined in the Intercreditor Agreement), or if the Intercreditor Agreement shall
have been terminated, such amounts shall be returned to the Borrower and its
Subsidiaries.
Upon the sale, disposition or other Transfer of any asset permitted in
accordance with this Section 6.17 and so long as no Default or Event of Default
shall have occurred and be continuing (or would be occasioned thereby), then the
Collateral Agent shall be permitted to, at the expense of the Borrower and
without the consent of any Lender, execute and deliver such releases or
terminations (or similar instruments) as may be reasonably necessary in order to
consummate such sale, disposition or Transfer.
Section 6.18. TRANSACTIONS WITH AFFILIATES. Except as otherwise
specifically permitted herein, the Borrower and its Subsidiaries shall not enter
into or be a party to any material transaction or arrangement or series of
related transactions or arrangements which in the aggregate would be material
with any Affiliate of such Person, including without limitation, the purchase
from, sale to or exchange of property with or the rendering of any service by or
for, any Affiliate, except pursuant to the reasonable requirements of such
entity's business and upon fair and reasonable terms no less favorable to such
entity than would be able to be obtained in a comparable arm's-length
transaction with a Person other than an Affiliate.
Section 6.19. COMPLIANCE WITH LAWS. The Borrower and its Subsidiaries
shall conduct their businesses and otherwise be in compliance in all material
respects with all applicable laws, regulations, ordinances and orders of all
governmental, judicial and arbitral authorities applicable to them and shall
obtain and maintain all necessary permits, licenses and other authorizations
necessary to conduct their businesses and own and operate their properties
except where the failure to comply or have such permits, licenses or other
authorizations could not reasonably be expected to have a Material Adverse
Effect.
Section 6.20. NEGATIVE PLEDGES. Neither the Borrower nor any of its
Subsidiaries shall enter into any agreement creating or assuming any Lien upon
its properties, revenues or assets, whether now owned or hereafter acquired
other than as permitted hereunder. Neither the Borrower nor any of its
Subsidiaries shall enter into any agreement other than this Agreement, the
Credit Documents, the Senior Note Purchase Agreement and the Financing Documents
(as defined in the Senior Note
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Purchase Agreement) prohibiting the creation or assumption of any Lien upon its
properties, revenues or assets, whether now owned or hereafter acquired, or
prohibiting or restricting the ability of the Borrower or any of its
Subsidiaries to amend or otherwise modify this Agreement or any Credit Document.
Section 6.21. VENDOR LEASE PLAN AGREEMENT; SENIOR NOTE PURCHASE AGREEMENT.
The Borrower shall not amend or supplement or permit any Subsidiary to amend or
supplement (or consent to any amendment or supplement of) the Vendor Lease Plan
Agreement. In addition, the Borrower shall not amend or supplement or permit any
Subsidiary to amend or supplement (or consent to any amendment or supplement of)
the Senior Note Purchase Agreement to the extent that such amendment or
supplement provides for the following or which has any of the following effects:
(a) increases the overall principal amount of the Debt under the Senior
Note Purchase Agreement or increases the amount of any single scheduled
installment of principal or interest;
(b) shortens or accelerates the date upon which any installment of
principal or interest becomes due or adds any additional mandatory redemption
provisions;
(c) shortens the final maturity date of such Debt or otherwise accelerates
the amortization schedule with respect thereto;
(d) increases the rate of interest accruing on such Debt;
(e) provides for the payment of additional fees or increases existing
fees; or
(f) adds restrictions which are more onerous or more restrictive than
those contained in this Agreement or which are otherwise materially adverse to
the Borrower or the Lenders;
Section 6.22. YMS ROOMS. Neither the Borrower nor any of its Subsidiaries
will enter into, install or otherwise maintain YMS Rooms with any customer other
than (i) YMS Rooms in existence and under lease with the Borrower or its
Subsidiaries prior to the date hereof, which leases are described on Schedule
6.16, (ii) YMS Rooms for which the Borrower or its Subsidiaries will be paid
cash consideration in accordance with its normal trade terms, (iii) YMS Rooms
installed with a customer as part of the Borrower's "millennium program", which
program allows for installation of YMS Rooms with certain large funeral homes in
lieu of the Borrower giving higher cash rebates to such customers; PROVIDED
that, such YMS Rooms under this clause (iii) shall only be permitted to the
extent the Capital Expenditures associated with such YMS Rooms are included in
the most recently delivered Capital Expenditure budget approved by the Agent and
the Lenders prior to the Closing Date, (iv) YMS Rooms which the Borrower or its
Subsidiaries have subsequently sold to First Sierra pursuant to the YMS leasing
program evidenced by the Vendor Lease Plan Agreement, which sales must be for
cash consideration to be paid in accordance with its normal trade terms and the
terms of which must provide that neither the Borrower nor any such Subsidiary
shall have any further obligations with respect to such YMS Rooms (other than
obligations owing pursuant to the Vender Lease Plan Agreement), and (v) YMS
Rooms which have been sold for cash pursuant to such other leasing program
approved in writing by the Majority Lenders.
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Section 6.23. MAXIMUM CAPITAL EXPENDITURES. The Borrower will not make any
Capital Expenditures other than (a) maintenance Capital Expenditures during any
fiscal quarter required in connection with the ongoing operation of the
Borrower's and its Subsidiaries' businesses to the extent that such Capital
Expenditures for each such fiscal quarter does not exceed the sum of (i) the
Capital Expenditures projected amount for such fiscal quarter as set forth in
the most recently delivered Capital Expenditures projection furnished to the
Agent and the Lenders plus (ii) the amount of any maintenance Capital
Expenditures projected to be made during the immediately preceding fiscal
quarter (without giving effect to any carry-forward amounts from prior periods)
that were not actually made, and (b) Capital Expenditures related to YMS Rooms
that comprise the "millennium program" to the extent provided for in the budget
for Capital Expenditures delivered prior to the Closing Date.
Section 6.24. MAXIMUM TOTAL DEBT TO EBITDA RATIO. The Borrower will
maintain a Total Debt to EBITDA Ratio as of the end of each calendar month for
the twelve month period then ended of not greater than (i) for the calendar
month ending July 31, 1999, 3.25 to 1.00, (ii) for the calendar month ending
August 31, 1999, 3.20 to 1.00, (iii) for the calendar month ending September 30,
1999, 3.15 to 1.00, and (iv) for each calendar month ending thereafter, 3.00 to
1.00.
Section 6.25. MAXIMUM TOTAL DEBT TO TOTAL CAPITAL RATIO. The
Borrower will maintain a Total Debt to Total Capital Ratio as of the end of
each calendar month of not greater than 55%.
Section 6.26. MINIMUM FIXED CHARGE COVERAGE RATIO. The Borrower will
maintain a Fixed Charge Coverage Ratio as of the end of each calendar month for
the twelve month period then ended of at least (i) for all calendar months
ending on or before December 31, 1999, 2.25 to 1.00, (ii) for all calendar
months ending after December 31, 1999 but on or before May 31, 2000, 2.35 to
1.00, and (iii) for all calendar months ending thereafter, 2.50 to 1.00.
Section 6.27. MINIMUM EBITDA. The Borrower will maintain its EBITDA as of
the end of each fiscal quarter for the fiscal quarter then ended of at least (i)
for the calendar quarter ending September 30, 1999, $5,575,000, (ii) for the
calendar quarter ending December 31, 1999, $6,875,000, (iii) for the calendar
quarter ending March 31, 2000, $8,525,000, (iv) for the calendar quarter ending
June 30, 2000, $6,975,000, (v) for the calendar quarter ending September 30,
2000, $7,150,000, (vi) for the calendar quarter ending December 31, 2000,
$8,575,000, (vii) for the calendar quarter ending March 31, 2001, $9,000,000,
and (viii) for the calendar quarter ending June 30, 2001, $7,375,000.
Section 6.28. INTEREST RATE PROTECTION AGREEMENTS. The Borrower agrees
that it will, within 30 days after the Closing Date, enter into and maintain in
full force and effect through September 30, 2000 Interest Rate Protection
Agreements with a Lender (or an Affiliate of a Lender) covering at least fifty
percent (50%) of the aggregate principal amount of the Indebtedness under the
Credit Agreement.
Section 6.29. POST-CLOSING MATTERS. The Borrower agrees that it will, (a)
within 60 days after the Closing Date, execute and deliver Mortgages, title
commitments, title policies, surveys,
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environmental reports and audits, and such other documents, agreements or
instruments as the Collateral Agent may reasonably request with respect to the
real properties required to be pledged as Collateral as security for the
Obligations as determined by the Collateral Agent in its sole reasonable
discretion, (b) within 10 days of the Closing Date, deliver to the Collateral
Agent (i) evidence satisfactory to the Agent indicating that there are no Liens
on any of the properties or assets of any of the Borrower or its Subsidiaries
other than Permitted Liens, or evidence that any such Liens (other than
Permitted Liens) have been terminated or will be terminated within 20 days of
the Closing Date, (ii) the stock certificates and stock powers required in
connection with the pledge of the shares of Colonial Guild, Ltd., Elder Davis,
Inc., Cercueil Lauziere Inc., Puget Sound Casket Company, and Oregon Casket
Company, Inc., and (iii) the intercompany notes held by the Special Purpose
Subsidiaries, (c) within 45 days after the Closing Date, permit the Agent (or
its representatives) to complete a collateral audit of the Borrower's and its
Subsidiaries' properties, and (d) within the 30 days after the Closing Date,
deliver to or cause to be delivered to the Agent and the Lenders Subordination
Agreements executed by each of the Special Purpose Subsidiaries.
Section 6.30. BANK ACCOUNTS. Within sixty (60) days from the Closing Date,
the Borrower shall establish with the Agent, any Lender or any Affiliate
thereof, a concentration account ("Concentration Account") into which all
deposits and receipts existing in the Borrower's and its Subsidiaries'
respective bank accounts shall be deposited on a daily basis. The Collateral
Agent shall have an Acceptable Security Interest in the Concentration Account,
and each of the Borrower and its Subsidiaries shall cause each depository where
such bank accounts are maintained to execute and deliver a bank account
agreement in form and substance satisfactory to the Agent and the Majority
Lenders providing for, among other things, (a) the grant of an Acceptable
Security Interest in favor of the Collateral Agent in each such bank account
(and the amounts contained therein) and (b) a weekly wire transfer or automated
clearinghouse transfer to the Concentration Account of all amounts contained in
such bank accounts.
Section 6.31. CONSOLIDATED NET WORKING CAPITAL. The Borrower and
its Subsidiaries will maintain at all times Consolidated Net Working Capital
of at least $1.00.
SECTION 7. EVENTS OF DEFAULT AND REMEDIES.
Section 7.1. EVENTS OF DEFAULT. Any one or more of the following
shall constitute an Event of Default:
(a) (i) default by the Borrower in the payment of the principal amount of
any Loan or any Reimbursement Obligation, or (ii) default by the Borrower in the
payment of any interest or any fees payable hereunder within three (3) Business
Days of the date such payment is due;
(b) default by the Borrower in the observance or performance of any
covenant set forth in Sections 6.6, 6.7(e), 6.11(a), 6.12 ,6.14 through 6.18, or
6.20 through 6.31;
(c) default or event of default by the Borrower or any of its Subsidiaries
in the observance or performance of any provision hereof or of any other Credit
Document not mentioned in (a) or (b) above which is not remedied within thirty
(30) days after the earlier of (i) such default or event of
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default first becoming known to any officer of the Borrower, or (ii) notice to
the Borrower by the Agent of the occurrence of such default or event of default;
(d) any representation or warranty or other written statement made or
deemed made herein, in any other Credit Document or in any financial or other
report or document furnished in compliance herewith or therewith by the Borrower
or any of its Subsidiaries proves untrue in any material respect as of the date
of the issuance or making, or deemed issuance or making thereof;
(e) default occurs in the payment when due (after any applicable grace
period) of Debt in an aggregate principal amount of $1,000,000 or more of the
Borrower or any of its Subsidiaries, or the occurrence of any other default
(after any applicable grace period) which would permit the holder or beneficiary
of such Debt, or a trustee therefor, to cause the acceleration of the maturity
of any such Debt or any mandatory unscheduled prepayment, purchase, or other
early funding thereof, including, without limitation, any Event of Default under
the Private Placement (without giving effect to any cure, waiver or remedy
thereof or amendment thereto after the Closing Date);
(f) the Borrower or any of its Subsidiaries (i) has entered involuntarily
against it an order for relief under the United States Bankruptcy Code or a
comparable action is taken under any bankruptcy or insolvency law of another
country or political subdivision of such country, (ii) generally does not pay,
or admits its inability generally to pay, its debts as they become due, (iii)
makes a general assignment for the benefit of creditors, (iv) applies for,
seeks, consents to, or acquiesces in, the appointment of a receiver, custodian,
trustee, examiner, liquidator or similar official for it or any substantial part
of its property, (v) institutes any proceeding seeking to have entered against
it an order for relief under the United States Bankruptcy Code or any comparable
law, to adjudicate it insolvent, or seeking dissolution, winding up,
liquidation, reorganization, arrangement, adjustment or composition of it or its
debts under any law relating to bankruptcy, insolvency or reorganization or
relief of debtors or fails to file an answer or other pleading denying the
material allegations of any such proceeding filed against it, (vi) makes any
board of directors resolution in direct furtherance of any matter described in
clauses (i) through (v) above, or (vii) fails to contest in good faith any
appointment or proceeding described in this Section 7.1(f);
(g) a custodian, receiver, trustee, examiner, liquidator or similar
official is appointed for the Borrower or any of its Subsidiaries or any
substantial part of its property, or a proceeding described in Section 7.1(f)(v)
is instituted against the Borrower or any of its Subsidiaries, and such
appointment continues undischarged or such proceeding continues undismissed or
unstayed for a period of sixty (60) days;
(h) the Borrower or any of its Subsidiaries fails within thirty (30) days
(or such earlier date as any steps to execute on such judgment or order take
place) to pay, bond or otherwise discharge, or to obtain an indemnity against on
terms and conditions satisfactory to the Lenders in their sole discretion, any
judgment or order for the payment of money in excess of $1,000,000 which is
uninsured or underinsured by at least such amount (provided that there is
adequate assurance, in the sole discretion of the Lenders, that the insurance
proceeds attributable thereto shall be paid promptly upon the expiration of such
time period or resolution of such proceeding), which is not stayed on appeal or
otherwise being appropriately contested in good faith in a manner that stays
execution;
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(i) the Borrower or any of its Subsidiaries fails to pay when due an
amount aggregating in excess of $1,000,000 that it is liable to pay to the PBGC
or to a Plan under Title IV of ERISA; or a notice of intent to terminate a Plan
having Unfunded Vested Liabilities of any of the Borrower or any of its
Subsidiaries in excess of $1,000,000 (a "MATERIAL PLAN") is filed under Title IV
of ERISA in a distress termination pursuant to Section 4041(c) of ERISA; or the
PBGC institutes proceedings under Title IV of ERISA to terminate or to cause a
trustee to be appointed to administer any Material Plan; or a proceeding is
instituted by a fiduciary of any Material Plan against the Borrower or any of
its Subsidiaries to collect any liability under Section 515 or 4219(c)(5) of
ERISA and such proceeding is not dismissed within thirty (30) days thereafter;
or a condition exists by reason of which the PBGC would be entitled to obtain a
decree adjudicating that any Material Plan must be terminated;
(j) (i) the Collateral Agent, the Agent and the Lenders shall fail to have
an Acceptable Security Interest in the Collateral (other than Collateral deemed
immaterial by the Collateral Agent in its sole reasonable discretion) or (ii)
any material provision of any Security Document shall for any reason cease to be
valid and binding on the Borrower or any Guarantor executing such Security
Document, or any such Person shall so state in writing; or
(k) the Borrower, any Guarantor, any Person acting on behalf of the
Borrower or any Guarantor or any governmental, judicial or arbitral authority
challenges the validity of any Credit Document or the Borrower's or any
Guarantor's obligations thereunder, or any Credit Document ceases to be in full
force and effect in all material respects or ceases to give to the Agent and the
Lenders the rights and powers purported to be granted in their favor thereby in
all material respects; or
(l) any Person or two or more Persons acting in concert shall acquire
beneficial ownership (within the meaning of Rule l3d-3 of the Securities
Exchange Act of 1934), directly or indirectly, of securities of the Borrower (or
other securities convertible into such securities) representing fifty percent
(50%) or more of the combined voting power of all outstanding securities of the
Borrower entitled to vote in the election of directors.
Section 7.2. NON-BANKRUPTCY DEFAULTS. When any Event of Default other than
those described in subsections (f) or (g) of Section 7.1 has occurred and is
continuing with respect to the Borrower, the Agent shall, if so directed by the
Majority Lenders, by notice to the Borrower: (a) terminate the remaining
Commitments and all other obligations of the Lenders hereunder on the date
stated in such notice (which may be the date thereof); (b) declare the
outstanding principal of and the accrued interest on the Notes to be forthwith
due and payable and thereupon the Notes, including both principal and interest
thereon, shall be and become immediately due and payable together with all other
amounts payable under the Credit Documents without further demand, presentment,
protest or notice of any kind, including, but not limited to, notice of intent
to accelerate and notice of acceleration, each of which is expressly waived by
the Borrower; (c) exercise any remedy existing under the Security Documents or
at law, and (d) demand that the Borrower immediately pay to the Agent (to be
held by the Agent pursuant to Section 7.4) the full amount then available for
drawing
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under each or any outstanding Letter of Credit, and the Borrower agrees to
immediately make such payment and acknowledges and agrees that the Lenders would
not have an adequate remedy at law for failure by the Borrower to honor any such
demand and that the Agent, for the benefit of the Lenders, shall have the right
to require the Borrower to specifically perform such undertaking whether or not
any drawings or other demands for payment have been made under any Letter of
Credit. The Agent, after giving notice to the Borrower pursuant to this Section
7.2, shall also promptly send a copy of such notice to the other Lenders, but
the failure to do so shall not impair or annul the effect of such notice.
Section 7.3. BANKRUPTCY DEFAULTS. When any Event of Default described in
subsections (f) or (g) of Section 7.1 has occurred and is continuing with
respect to the Borrower, then (i) the outstanding Notes shall immediately become
due and payable together with all other amounts payable under the Credit
Documents without presentment, demand, protest or notice of any kind, each of
which is expressly waived by the Borrower, (ii) and all obligations of the
Lenders to extend further credit pursuant to any of the terms hereof shall
immediately terminate, and (iii) the Borrower shall immediately pay to the Agent
(to be held by the Agent pursuant to Section 7.4) the full amount then available
for drawing under all outstanding Letters of Credit, the Borrower acknowledging
and agreeing that the Lenders and the Agent would not have an adequate remedy at
law for failure by the Borrower to honor this provision and that the Lenders and
the Agent shall have the right to require the Borrower to specifically perform
such undertaking whether or not any drawings or other demands for payment have
been made under any of the Letters of Credit.
Section 7.4. COLLATERAL FOR UNDRAWN LETTERS OF CREDIT. (a) If the
prepayment of the amount available for drawing under any or all outstanding
Letters of Credit is required under Section 2.2(b), 2.9, 7.2 or 7.3, the
Borrower shall forthwith pay the amount required to be so prepaid or deposited,
to be held by the Agent as provided in subsection (b) below.
(b) All amounts prepaid pursuant to subsection (a) above shall be held by
the Agent in a separate collateral account (such account, and the credit
balances, properties and any investments from time to time held therein, and any
substitutions for such account, any certificate of deposit or other instrument
evidencing any of the foregoing and all proceeds of and earnings on any of the
foregoing being collectively called the "COLLATERAL ACCOUNT") as security for,
and for application by the Agent (to the extent available) to, the reimbursement
of any drawing under any Letter of Credit then or thereafter paid by the Agent
(collectively, the "COLLATERALIZED OBLIGATIONS"). The Collateral Account shall
be held in the name of and subject to the exclusive dominion and control of the
Agent, for the benefit of the Agent and the Lenders, as pledgee hereunder. If
and when requested by the Borrower, the Agent shall invest and reinvest funds
held in the Collateral Account from time to time in Cash Equivalents specified
from time to time by the Borrower, PROVIDED THAT the Agent is irrevocably
authorized to sell investments held in the Collateral Account when and as
required to make payments out of the Collateral Account for application to
Collateralized Obligations due and owing from the Borrower to the Agent or the
Lenders. When and if (A) (i) the Borrower shall have made payment of all
Collateralized Obligations then due and payable, (ii) all relevant preference or
other disgorgement periods relating to the receipt of such payments have passed,
and (iii) no Letters of Credit remain outstanding and no Reimbursement
Obligations remain outstanding and due and
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payable hereunder, or (B) no Default or Event of Default shall be continuing,
the Agent shall repay to the Borrower any remaining amounts and assets held in
the Collateral Account.
Section 7.5. NOTICE OF DEFAULT. If an Event of Default shall have occurred
and be continuing, the Agent shall give notice to the Borrower under Section 7.2
promptly upon being requested to do so by the Majority Lenders and shall
thereupon notify all the Lenders thereof.
Section 7.6. EXPENSES. The Borrower agrees to pay to the Agent and each
Lender all reasonable out-of-pocket expenses incurred or paid by the Agent or
such Lender, including reasonable attorneys' fees and court costs, in connection
with any Default or Event of Default by the Borrower hereunder or in connection
with the enforcement of any of the Credit Documents.
SECTION 8. CHANGE IN CIRCUMSTANCES.
Section 8.1. CHANGE OF LAW. (a) Notwithstanding any other provisions of
this Agreement or any Note, if at any time after the date hereof (or, if later,
after the date the Agent or a Lender becomes the Agent or a Lender), any change
in applicable law or regulation or in the interpretation thereof makes it
unlawful for any Lender to make or continue to maintain Eurodollar Loans, such
Lender shall promptly give written notice thereof and of the basis therefor in
reasonable detail to the Borrower and such Lender's obligations to make,
continue or convert Loans into Eurodollar Loans under this Agreement shall
thereupon be suspended until it is no longer unlawful for such Lender to make or
maintain Eurodollar Loans.
(b) Upon the giving of the notice to Borrower referred to in subsection
(a) above, (i) any outstanding Eurodollar Loan of such Lender shall be
automatically converted to a Base Rate Loan in Dollars on the last day of the
Interest Period then applicable thereto or on such earlier date as required by
law, and (ii) such Lender shall make an advance as part of any requested
Borrowing of Eurodollar Loans as a Base Rate Loan, which Base Rate Loan shall,
for all other purposes, be considered part of such Borrowing.
(c) Any Lender that has given any notice pursuant to Section 8.l(a) shall,
upon determining that it would no longer be unlawful for it to make Eurodollar
Loans, give prompt written notice thereof to the Borrower and the Agent, and
upon giving such notice, its obligation to make, allow conversions into and
maintain Eurodollar Loans shall be reinstated.
Section 8.2. UNAVAILABILITY OF DEPOSITS OR INABILITY TO ASCERTAIN LIBOR
RATE. If on or before the first day of any Interest Period for any Borrowing of
Eurodollar Loans, the Agent determines in good faith (after consultation with
the other Lenders) that, due to changes in circumstances since the date hereof,
adequate and fair means do not exist for determining the Adjusted LIBOR Rate or
such rate will not accurately reflect the cost to the Majority Lenders of
funding Eurodollar Loans for such Interest Period, the Agent shall give written
notice (in reasonable detail) of such determination and of the basis therefor to
the Borrower and the Lenders, whereupon until the Agent notifies the Borrower
and Lenders that the circumstances giving rise to such suspension no longer
exist (which the Agent shall do promptly after they do not exist), (i) the
obligations of the Lenders to make, continue or convert Loans into Eurodollar
Loans, or to convert Base Rate Loans into Eurodollar Loans, shall be suspended
and (ii) each Eurodollar Loan will
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automatically on the last day of the then existing Interest Period therefor,
convert into a Base Rate Loan.
Section 8.3. INCREASED COST AND REDUCED RETURN. (a) If, on or after the
date hereof, the adoption of or any change in any applicable law, rule or
regulation, or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Lender (or its
Lending Office), including the Agent in its capacity as the issuer of Letters of
Credit, with any request or directive (whether or not having the force of law)
of any such authority, central bank or comparable agency:
(i) subjects any Lender of that type (or its Lending Office) to any
tax, duty or other charge related to any Eurodollar Loan, Letter of Credit
or Reimbursement Obligation, or its participation in any thereof, or its
obligation to advance or maintain Eurodollar Loans, issue Letters of
Credit or to participate therein, or shall change the basis of taxation of
payments to any Lender (or its Lending Office) of the principal of or
interest on its Eurodollar Loans, Letters of Credit or participations
therein, or any other amounts due under this Agreement related to its
Eurodollar Loans, Letters of Credit, Reimbursement Obligations, or
participations therein, or its obligation to make Eurodollar Loans, issue
Letters of Credit or acquire participations therein (except for changes in
the rate of tax on the overall net income of such Lender or its Lending
Office imposed by the jurisdiction in which such Lender's principal
executive office or Lending Office is located), or
(ii) imposes, modifies or deems applicable any reserve, special
deposit or similar requirement (including, without limitation, any such
requirement imposed by the Board of Governors of the Federal Reserve
System) against assets of, deposits with or for the account of, or credit
extended by, any Lender of that type (or its Lending Office) or imposes on
any Lender of that type (or its Lending Office) or on the interbank market
any other condition affecting its Eurodollar Loans, its Letters of Credit,
any Reimbursement Obligation owed to it, or its participation in any
thereof, or its obligation to advance or maintain Eurodollar Loans, issue
Letters of Credit or to participate in any thereof;
and the result of any of the foregoing is to increase the cost to such Lender
(or its Lending Office) of advancing or maintaining any Eurodollar Loan, issuing
or maintaining a Letter of Credit or participation therein or to reduce the
amount of any sum received or receivable by such Lender (or its Lending Office)
in connection therewith under this Agreement or its Note(s), by an amount deemed
by such Lender to be material, then, within ten (10) days after demand in
reasonable detail by such Lender (with a copy to the Agent), the Borrower shall
be obligated to pay to such Lender such additional amount or amounts as will
compensate such Lender for such increased cost or reduction.
(b) If, after the date hereof, the Agent or any Lender shall have
determined that the adoption after the date hereof of any applicable law, rule
or regulation regarding capital adequacy, or any change therein (including,
without limitation, any revision in the Final Risk-Based Capital Guidelines of
the Board of Governors of the Federal Reserve System (12 CFR Part 208, Appendix
A; 12 CFR Part 225, Appendix A) or of the Office of the Comptroller of the
Currency (12 CFR Part
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3, Appendix A), or in any other applicable capital adequacy rules heretofore
adopted and issued by any governmental authority), or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by the Agent or any Lender (or its Lending Office) with
and request or directive regarding capital adequacy (whether or not having the
force of law) of any such authority, central bank or comparable agency, has or
would have the effect of reducing the rate of return on such Lender's capital,
or on the capital of any corporation controlling such Lender, as, consequence of
its obligations hereunder to a level below that which such Lender could have
achieved but for such adoption, change or compliance (taking into consideration
such Lender's policies with respect to capital adequacy) by an amount deemed by
such Lender to be material, then from time to time, within ten (10) days after
demand in reasonable detail by such Lender (with a copy to the Agent), the
Borrower shall pay to such Lender such additional amount or amounts as will
compensate such Lender for such reduction.
(c) The Agent and each Lender that determines to seek compensation under
this Section 8.3 shall notify the Borrower and, in the case of a Lender other
than the Agent, the Agent of the circumstances that entitle the Agent or Lender
to such compensation and will designate a different Lending Office if such
designation will avoid the need for, or reduce the amount of, such compensation
and will not, in the sole judgment of such Lender, be otherwise disadvantageous
to it; PROVIDED THAT, the foregoing shall not in any way affect the rights of
any Lender or the obligations of the Borrower under this Section 8.3, and
PROVIDED FURTHER that no Lender shall be obligated to make its Eurodollar Loans
hereunder at any office located in the United States. A certificate of any
Lender claiming compensation under this Section 8.3 and setting forth the
additional amount or amounts to be paid to it hereunder shall be conclusive in
the absence of manifest error. In determining such amount, such Lender may use
any reasonable averaging and attribution methods.
Section 8.4. LENDING OFFICES. The Agent and each Lender may, at its
option, elect to make its Loans hereunder at the Lending Office specified on the
appropriate signature page hereof for each Type of Loan available hereunder or
at such other of its branches, offices or affiliates as it may from time to time
elect and designate in a written notice to the Borrower and the Agent.
Section 8.5. DISCRETION OF LENDER AS TO MANNER OF FUNDING. Subject to the
other provisions of this Agreement, each Lender shall be entitled to fund and
maintain its funding of all or any part of its Loans in any manner it sees fit.
Notwithstanding any other provision of this Agreement, each Lender shall be
entitled to fund and maintain its funding of all or any part of its Loans in any
manner it sees fit, it being understood, however, that for the purposes of this
Agreement all determinations hereunder shall be made as if each Lender had
actually funded and maintained each Eurodollar Loan through the purchase of
deposits in the eurodollar interbank market having a maturity corresponding to
such Loan's Interest Period and bearing an interest rate equal to the LIBOR Rate
for such Interest Period.
Section 8.6. LIMITATION ON CHARGES; SUBSTITUTE LENDERS;
NON-DISCRIMINATION. Anything in this Section 8 notwithstanding:
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(a) the Borrower shall not be required to pay to the Agent or any Lender
reimbursement or indemnification with regard to any costs or expenses described
in this Section unless the Agent or such Lender, as the case may be, notifies
the Borrower of such costs or expenses within 180 days after the date paid or
incurred;
(b) none of the Agent or the Lenders shall be permitted to pass through to
the Borrower charges and costs under this Section on a discriminatory basis
(i.e., which are not also passed through by the Agent or such Lender, as the
case may be, to other customers of the Agent or such Lender, as the case may be,
similarly situated where such customer is subject to documents providing for
such pass through); and
(c) if any Lender elects to pass through to Borrower any material charge
or cost under this Section 8 or elects to terminate the availability of
Eurodollar Loans for any period of time in excess of sixty (60) days, the
Borrower may, within sixty (60) days after the date of such event and so long as
no Default or Event of Default shall have occurred and be continuing, elect to
terminate such Lender as a party this Agreement; PROVIDED THAT, concurrently
with such termination, the Borrower shall (i) if the Agent and each of the other
Lenders shall consent, pay such Lender all principal, interest and fees and
other amounts owed to such Lender through such date of termination, or (ii) have
arranged for another financial institution approved by the Agent (such approval
not to be unreasonably withheld or delayed) as of such date, to become a
substitute Lender for all purposes under this Agreement in the manner provided
in Section 10.10; PROVIDED FURTHER that, prior to substitution for any such
Lender, the Borrower shall have given written notice to the Agent of such
intention and the Lenders shall have the option, but no obligation, for a period
of sixty (60) days after receipt of such notice, to increase their Term
Commitment and Revolving Commitment in order to replace the affected Lender in
lieu of such substitution.
SECTION 9. THE AGENT.
Section 9.1. APPOINTMENT AND AUTHORIZATION OF AGENT. Each Lender hereby
appoints ABN AMRO as the Agent under the Credit Documents and hereby authorizes
the Agent to take such action as Agent on each of its behalf and to exercise
such powers under the Credit Documents as are delegated to the Agent, by the
terms thereof, together with such powers as are reasonably incidental thereto.
Section 9.2. RIGHTS AND POWERS. The Agent shall have the same rights and
powers under the Credit Documents as any other Lender and may exercise or
refrain from exercising such rights and powers as though it were not an Agent,
and the Agent and its respective Affiliates may accept deposits from, lend money
to, and generally engage in any kind of business with the Borrower or any of its
Subsidiaries or Affiliates as if it were not an Agent under the Credit
Documents. The term Lender as used in all Credit Documents, unless the context
otherwise clearly requires, includes the Agent in its individual capacity as a
Lender.
Section 9.3. ACTION BY AGENT. The obligations of the Agent under the
Credit Documents are only those expressly set forth therein. Without limiting
the generality of the foregoing, the Agent shall not be required to take any
action concerning any Default or Event of Default, except as
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expressly provided in Sections 7.2 and 7.5. Unless and until the Majority
Lenders give such direction the Agent may, except as otherwise expressly
provided herein or therein, take or refrain from taking such actions as it deems
appropriate and in the best interest of all the Lenders. In no event, however,
shall the Agent be required to take any action in violation of applicable law or
of any provision of any Credit Document, and the Agent shall in all cases be
fully justified in failing or refusing to act hereunder or under any other
Credit Document unless it first receives any further assurances of its
indemnification from the Lenders that it may require, including prepayment of
any related expenses and any other protection it requires against any and all
costs, expenses, and liabilities it may incur in taking or continuing to take
any such action. The Agent shall be entitled to assume that no Default or Event
of Default exists unless notified in writing to the contrary by a Lender or the
Borrower. In all cases in which the Credit Documents do not require the Agent to
take specific action, the Agent shall be fully justified in using its discretion
in failing to take or in taking any action thereunder. Any instructions of the
Majority Lenders, or of any other group of Lenders called for under specific
provisions of the Credit Documents, shall be binding on all the Lenders and
holders of the Notes.
Section 9.4. CONSULTATION WITH EXPERTS. The Agent may consult with legal
counsel, independent public accountants and other experts selected by it and
shall not be liable for any action taken or omitted to be taken by it in good
faith in accordance with the advice of such counsel, accountants or experts.
Section 9.5. INDEMNIFICATION PROVISIONS; CREDIT DECISION. Neither the
Agent nor any of its directors, officers, agents, or employees shall be liable
for any action taken or not taken by them in connection with the Credit
Documents (i) with the consent or at the request of the Majority Lenders or (ii)
in the absence of their own gross negligence or willful misconduct. Neither the
Agent nor any of its directors, officers, agents or employees shall be
responsible for or have any duty to ascertain, inquire into or verify (i) any
statement, warranty or representation made in connection with this Agreement,
any other Credit Document or any Borrowing; (ii) the performance or observance
of any of the covenants or agreements of the Borrower or any Subsidiary
contained herein or in any other Credit Document; (iii) the satisfaction of any
condition specified in Section 4, except receipt of items required to be
delivered to the Agent; (iv) the validity, effectiveness, genuineness,
enforceability, value, worth or collectability hereof or of any other Credit
Document or of any other documents or writing furnished in connection with any
Credit Document; or (v) the value, sufficiency, creation, perfection or priority
of any interest in any collateral security; and the Agent makes no
representation of any kind or character with respect to any such matters
mentioned in this sentence. The Agent may execute any of its duties under any of
the Credit Documents by or through employees, agents, and attorneys-in-fact and
shall not be answerable to the Lenders or any other Person for the default or
misconduct of any such agents or attorneys-in-fact selected with reasonable
care. The Agent shall not incur any liability by acting in reliance upon any
notice, consent, certificate, other document or statement (whether written or
oral) believed by it to be genuine or to be sent by the proper party or parties.
In particular and without limiting any of the foregoing, the Agent shall have no
responsibility for confirming the accuracy of any Compliance Certificate or
other document or instrument received by any of them under the Credit Documents.
The Agent may treat the payee of any Note as the holder thereof until written
notice of transfer shall have been filed with such Agent signed by such owner in
form satisfactory to such agent. Each Lender acknowledges that it has
independently and without reliance on the Agent or any other Lender obtained
such information and made such
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investigations and inquiries regarding the Borrower and its Subsidiaries as it
deems appropriate, and based upon such information, investigations and
inquiries, made its own credit analysis and decision to extend credit to the
Borrower in the manner set forth in the Credit Documents. It shall be the
responsibility of each Lender to keep itself informed about the creditworthiness
and business, properties, assets, liabilities, condition (financial or
otherwise) and prospects of the Borrower and its Subsidiaries, and the Agent
shall have no liability whatsoever to any Lender for such matters. The Agent
shall have no duty to disclose to the Lenders information that is not required
by any Credit Document to be furnished by the Borrower or any Subsidiaries to
such agent at such time, but is voluntarily furnished to such agent (either in
its respective capacity as Agent or in its individual capacity).
Section 9.6. INDEMNITY. The Lenders shall ratably, in accordance with
their Revolving Shares and Term Shares, indemnify and hold the Agent and its
directors, officers, employees, agents and representatives harmless from and
against any liabilities, losses, costs or expenses suffered or incurred by it or
by any security trustee under any Credit Document or in connection with the
transactions contemplated thereby, regardless of when asserted or arising,
except to the extent they are promptly reimbursed for the same by the Borrower
and except to the extent that any event giving rise to a claim was caused by the
gross negligence or willful misconduct of the party seeking to be indemnified.
The obligations of the Lenders under this Section 9.6 shall survive termination
of this Agreement.
Section 9.7. RESIGNATION OF AGENT AND SUCCESSOR AGENT. The Agent may
resign at any time upon at least thirty (30) days' prior written notice to the
Lenders and the Borrower. Upon any such resignation of the Agent, the Majority
Lenders, with the consent of the Borrower, which consent shall not be
unreasonably withheld, shall have the right to appoint a successor Agent. If no
successor Agent shall have been so appointed by the Majority Lenders and shall
have accepted such appointment within thirty (30) days after the retiring
Agent's giving of notice of resignation, then the retiring Agent may, on behalf
of the Lenders and with the consent of the Borrower, which consent shall not be
unreasonably withheld or delayed, appoint a successor Agent which shall be any
Lender hereunder or any commercial bank organized under the laws of the United
States of America or of any State thereof and having a combined capital and
surplus of at least $1,000,000,000. Upon the acceptance of its appointment as
the Agent hereunder, such successor Agent shall thereupon succeed to and become
vested with all the rights and duties of the retiring Agent under the Credit
Documents, and the retiring Agent shall be discharged from its duties and
obligations thereunder. After any retiring Agent's resignation hereunder as
Agent, the provisions of this Section 9 and all protective provisions of the
other Credit Documents shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Agent.
SECTION 10. MISCELLANEOUS.
Section 10.1. NO WAIVER. No delay or failure on the part of the Agent or
any Lender, or on the part of the holder or holders of any Notes, in the
exercise of any power, right or remedy under any Credit Document, including, but
not limited to, any Security Document , shall operate as a waiver thereof or as
an acquiescence in any default, nor shall any single or partial exercise thereof
preclude any other ' or further exercise of any other power, right or remedy. To
the fullest extent permitted
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by applicable law, the powers, rights and remedies under the Credit Documents of
the Agent, the Lenders and the holder or holders of any Notes are cumulative to,
and not exclusive of, any powers, rights or remedies any of them would otherwise
have.
Section 10.2. NON-BUSINESS DAY. Subject to Section 2.5, if any payment of
principal or interest on any Loan, any Reimbursement Obligation or of any other
Obligation shall fall due on a day which is not a Business Day, interest or fees
(as applicable) at the rate, if any, such Loan, Reimbursement Obligation or
other Obligation bears for the period prior to maturity shall continue to accrue
in the manner set forth herein on such Obligation from the stated due date
thereof to the next succeeding Business Day, on which the same shall instead be
payable.
Section 10.3. DOCUMENTARY TAXES. The Borrower agrees that it will pay any
documentary, stamp or similar taxes payable with respect to any Credit Document,
including interest and penalties, in the event any such taxes are assessed
irrespective of when such assessment is made, other than any such taxes imposed
as a result of any transfer of an interest in a Credit Document.
Section 10.4. SURVIVAL OF REPRESENTATIONS. All representations and
warranties made herein or in certificates given pursuant hereto shall survive
the execution and delivery of this Agreement and the other Credit Documents, and
shall continue in full force and effect with respect to the date as of which
they were made as long as the Borrower has any Obligation hereunder or any
Commitment hereunder is in effect.
Section 10.5. SURVIVAL OF INDEMNITIES. All indemnities and all provisions
relative to reimbursement to the Lenders of amounts sufficient to protect the
yield of the Lenders with respect to the Loans and the L/C Obligations,
including, but not limited to, Section 2.11, Section 3.3, Section 7.6, Section
8.3 and Section 10.13 hereof, shall survive the termination of this Agreement
and the other Credit Documents and the payment of the Loans and all other
Obligations.
Section 10.6. SETOFF. In addition to any rights now or hereafter granted
under applicable law and not by way of limitation of any such rights, upon the
occurrence of, and throughout the continuance of, any Event of Default, each
Lender and each subsequent holder of any Note is hereby authorized by the
Borrower at any time or from time to time, without notice to the Borrower or any
other Person, any such notice being hereby expressly waived, to set off and to
appropriate and to apply any and all deposits (general or special, including,
but not limited to, Debt evidenced by certificates of deposit, whether matured
or unmatured, but not including trust accounts, and in whatever currency
denominated) and any other Debt at any time owing by that Lender or that
subsequent holder to or for the credit or the account of the Borrower, whether
or not matured, against and on account of the due and unpaid obligations and
liabilities of the Borrower to that Lender or that subsequent holder under the
Credit Documents, irrespective of whether or not that Lender or that subsequent
holder shall have made any demand hereunder. Each Lender shall promptly give
notice to the Borrower of any action taken by it under this Section 10.6,
PROVIDED THAT any failure of such Lender to give such notice to the Borrower
shall not affect the validity of such setoff. Each Lender agrees with each other
Lender a party hereto that if such Lender receives and retains any payment,
whether by setoff or application of deposit balances or otherwise, on any of the
Loans or L/C Obligations in excess of its ratable share of payments on all such
Obligations then owed
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to the Lenders hereunder, then such Lender shall purchase for cash at face
value, but without recourse, ratably from each of the other Lenders such amount
of the Loans or L/C Obligations, or participations therein, held by each such
other Lender as shall be necessary to cause such Lender to share such excess
payment ratably with all the other Lenders; PROVIDED, HOWEVER, that if any such
purchase is made by any Lender, and if such excess payment or part thereof is
thereafter recovered from such purchasing Lender, the related purchases from the
other Lenders shall be rescinded ratably and the purchase price restored as to
the portion of such excess payment so recovered, but without interest.
Section 10.7. NOTICES. Except as otherwise specified herein, all notices
under the Credit Documents shall be in writing (including cable, telecopy or
telex) and shall be given to a party hereunder at its address, telecopier number
or telex number set forth on the signature pages hereof or such other address,
telecopier number or telex number as such party may hereafter specify by notice
to the Agent and the Borrower, given by courier, by United States certified or
registered mail, by telegram or by other telecommunication device capable of
creating a written record of such notice and its receipt. Each such notice,
request or other communication shall be effective (i) if given by telecopier,
when such telecopy is transmitted to the telecopier number specified herein or
pursuant to Section 10.10 and a confirmation of receipt of such telecopy has
been received by the sender, (ii) if given by telex, when such telex is
transmitted to the telex number specified herein or pursuant to Section 10.10
and the answerback is received by sender, (iii) if given by courier, when
delivered, (iv) if given by U.S. mail, five (5) days after such communication is
deposited in the U.S. mail, certified or registered with return receipt
requested, or (v) if given by any other means, when delivered at the addresses
specified herein or pursuant to Section 10.10; provided that any notice given
pursuant to Section 2 shall be effective only upon receipt and, provided,
further, that any notice that but for this proviso would be effective after the
close of business on a Business Day or on a day that is not a Business Day shall
be effective at the opening of business on the next Business Day.
Section 10.8. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, and by the different parties on different counterpart signature
pages, each of which when executed shall be deemed an original, but all such
counterparts taken together shall constitute one and the same Agreement.
Section 10.9. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
the Borrower, each of the Lenders, the Agent and its respective successors and
assigns, and shall inure to the benefit of the Borrower, each of the Lenders,
the Agent and its respective successors and assigns, including any subsequent
holder of any Note; PROVIDED, HOWEVER, (i) the Borrower may not assign any of
its rights or obligations under this Agreement or any other Credit Document
without the written consent of all Lenders, (ii) the Agent may not assign any of
its respective rights or obligations under this Agreement or any Credit Document
except in accordance with Section 9, and (iii) no Lender may assign any of its
rights or obligations under this Agreement or any other Credit Document except
in accordance with Section 10.10. Any Lender may at any time pledge or assign
all or any portion of its rights under this Agreement and the Notes issued to it
to a Federal Reserve Bank to secure extensions of credit by such Federal Reserve
Bank to such Lender; PROVIDED THAT no such pledge or assignment shall release a
Lender from any of its obligations hereunder or substitute any such Federal
Reserve Bank for such Lender as a party hereto.
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Section 10.10. SALES AND TRANSFERS OF BORROWINGS AND NOTES;
PARTICIPATIONS IN BORROWINGS AND NOTES.
(a) Any Lender may at any time sell to one or more Persons
("PARTICIPANTS") participating interests in any Borrowing owing to such Lender,
the Notes held by such Lender, the Commitments of such Lender or any other
interest of such Lender hereunder, PROVIDED THAT no Lender may sell any
participating interests in any such Borrowing, Note, Commitment or other
interest hereunder without also selling to such Participant the appropriate pro
rata share of its Borrowings, Notes, Commitments and other interests hereunder;
and PROVIDED FURTHER that no Lender shall transfer, grant or assign any
participation under which the Participant shall have rights to vote upon or to
consent to any matter to be decided by the Lenders or the Majority Lenders
hereunder or under any other Credit Document or to approve any amendment to or
waiver of this Agreement or any other Credit Document except to the extent such
amendment or waiver would (i) increase the amount of such Lender's Commitment
and such increase would affect such Participant, (ii) reduce the principal of,
or interest on, any of such Lender's Borrowings, or any fees or other amounts
payable to such Lender hereunder and such reduction would affect such
Participant, (iii) postpone any date fixed for any scheduled payment of
principal of, or interest on, any of such Lender's Borrowings, or any fees or
other amounts payable to such Lender hereunder and such postponement would
affect such Participant, (iv) release any Guarantor from its obligations under
its Guaranty, or (v) release any portion of the Collateral, except as otherwise
specifically provided in any Credit Document. Furthermore, any Lender selling
such a participation must sell a pro rata share of its obligations with respect
to each Class of Loans and its Commitments related thereto. In the event of any
such sale by a Lender of participating interests to a Participant, such Lender's
obligations under this Agreement to the other parties to this Agreement shall
remain unchanged, such Lender shall remain solely responsible for the
performance thereof, such Lender shall remain the holder of any such Note for
all purposes under this Agreement, the Borrower and the Agent shall continue to
deal solely and directly with such Lender in connection with such Lender's
rights and obligations under this Agreement and such Lender shall retain the
sole right to enforce the obligations of the Borrower under any Credit Document.
The Borrower agrees that if amounts outstanding under this Agreement and the
Notes shall have been declared or shall have become due and payable in
accordance with Section 7.2 or 7.3 upon the occurrence of an Event of Default,
each Participant shall be deemed to have the right of setoff in respect of its
participating interest in amounts owing under this Agreement and any Note to the
same extent as if the amount of its participating interest were owing directly
to it as a Lender under this Agreement or any Note, PROVIDED THAT such right of
setoff shall be subject to the obligation of such Participant to share with the
Lenders, and the Lenders agree to share with such Participant, as provided in
Section 10.6. The Borrower also agrees that each Participant shall be entitled
to the benefits of Sections 2.11, 3.3 and 8.3 with respect to its participation
in the Commitments and the Borrowings outstanding from time to time, PROVIDED
THAT no Participant shall be entitled to receive any greater amount pursuant to
such Sections than the transferor Lender would have been entitled to receive in
respect of the amount of the participation transferred if no participation had
been transferred.
(b) Any Lender may at any time sell to (i) any other Lender or any
Affiliate thereof and, (ii) with the prior written consent of the Agent and the
Borrower (which shall not be unreasonably withheld or delayed), to one or more
Persons (any of (i) or (ii), a "PURCHASING LENDER"), all or any
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part of its rights and obligations under this Agreement and the other Credit
Documents, pursuant to an Assignment Agreement in the form attached as EXHIBIT
10.10, executed by such Purchasing Lender and such transferor Lender (and, in
the case of a Purchasing Lender which is not then a Lender or an Affiliate
thereof, by the Borrower and the Agent) and delivered to the Agent; PROVIDED
THAT each such sale to a Purchasing Lender shall be in a minimum amount of (a)
$5,000,000 or (b) all of such Lender's Commitments and Loans. Notwithstanding
the requirement of the Borrower's consent set forth above, but subject to all of
the other terms and conditions of this Section 10.10(b), any Lender may sell to
one or more commercial lending institutions, all or any part of their rights and
obligations under this Agreement and the other Credit Documents with only the
consent of the Agent (which shall not be unreasonably withheld or delayed) if an
Event of Default shall have occurred and be continuing. No Lender may sell any
Loans to a Purchasing Lender without also selling to such Purchasing Lender the
appropriate pro rata share of its Borrowings, Notes, Commitments and other
interests hereunder, including participations in Letters of Credit hereunder.
Furthermore, any Lender assigning its rights must sell a pro rata share of its
obligations with respect to each Class of Loans and its Commitments related
thereto. Upon such execution, delivery and acceptance, from and after the
effective date of the transfer determined pursuant to such Assignment Agreement,
(x) the Purchasing Lender thereunder shall be a party hereto and, to the extent
provided in such Assignment Agreement, have the rights and obligations of a
Lender hereunder with Commitments and Loans as set forth herein and (y) the
transferor Lender thereunder shall, to the extent provided in such Assignment
Agreement, be released from its obligations under this Agreement (and, in the
case of an Assignment Agreement covering all or the remaining portion of a
transferor Lender's rights and obligations under this Agreement, such transferor
Lender shall cease to be a party hereto). Such Assignment Agreement shall be
deemed to amend this Agreement to the extent, and only to the extent, necessary
to reflect the addition of such Purchasing Lender and the resulting adjustment
of the Commitments, Revolving Shares and Term Shares arising from the purchase
by such Purchasing Lender of all or a portion of the rights and obligations of
such transferor Lender under this Agreement, the Notes and the other Credit
Documents. On or prior to the effective date of the transfer determined pursuant
to such Assignment Agreement, the Borrower, at its own expense, shall execute
and deliver to the Agent in exchange for any surrendered Note, new Notes as
appropriate to the order of such Purchasing Lender in an amount equal to the
Commitments assumed by it pursuant to such Assignment Agreement, and, if the
transferor Lender has retained the Commitments or Borrowings hereunder, new
Notes to the order of the transferor Lender in an amount equal to the
Commitments or Borrowings retained by it hereunder. Such new Notes shall be
dated the Effective Date and shall otherwise be in the form of the Notes
replaced thereby. The Notes surrendered by the transferor Lender shall be
returned by the Agent to the Borrower marked "renewed."
(c) Upon its receipt of an Assignment Agreement executed by a transferor
Lender, a Purchasing Lender and the Agent (and, in the case of a Purchasing
Lender that is not then a Lender or an Affiliate thereof, by the Borrower),
together with payment by the transferor Lender to the Agent hereunder of a
registration and processing fee of $3,500 the Agent shall (i) promptly accept
such Assignment Agreement and (ii) on the effective date of the transfer
determined pursuant thereto give notice of such acceptance and recordation to
the Lenders and the Borrower. The Borrower shall not be responsible for such
registration and processing fee or any costs or expenses incurred by any Lender,
any Purchasing Lender or the Agent in connection with such assignment except as
provided above.
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(d) If, pursuant to this Section 10.10 any interest in this Agreement or
any Note is transferred to a Purchasing Lender which is organized under the laws
of any jurisdiction other than the United States of America or any State
thereof, the transferor Lender shall cause such Purchasing Lender, concurrently
with the effectiveness of such transfer, (i) to represent to the transferor
Lender (for the benefit of the transferor Lender, the Agent and the Borrower)
that under applicable law and treaties no taxes will be required to be withheld
by the Agent, the Borrower or the transferor Lender with respect to any payments
to be made to such transferee in respect of the Loans or the L/C Obligations,
(ii) to furnish to the transferor Lender (and, in the case of any Purchasing
Lender, the Agent and the Borrower) two duly completed and signed copies of
either U.S. Internal Revenue Service Form 4224 or U.S. Internal Revenue Service
Form 1001 or such successor forms as shall be adopted from time to time by the
relevant United States taxing authorities (wherein such Purchasing Lender claims
entitlement to complete exemption from U.S. federal withholding tax on all
interest payments hereunder), and (iii) to agree (for the benefit of the
transferor Lender, the Agent and the Borrower) to provide the transferor Lender
(and, in the case of any Purchasing Lender, the Agent and the Borrower) new
forms as contemplated by Section 3.3(b) upon the expiration or obsolescence of
any previously delivered form and comparable statements in accordance with
applicable U.S. laws and regulations and amendments duly executed and completed
by such transferee, and to comply from time to time with all applicable U.S.
laws and regulations with regard to such withholding tax exemption.
Section 10.11. AMENDMENTS, WAIVERS AND CONSENTS. Any provision of the
Credit Documents may be amended or waived if, but only if, such amendment or
waiver is in writing and is signed by (a) the Borrower, (b) the Majority
Lenders, and (c) if the rights or duties of the Agent are affected thereby, the
Agent, PROVIDED THAT:
(i) no amendment or waiver shall (A) increase the Revolving Credit
Commitment Amount or the Term Commitment Amount without the consent of all
Lenders or increase the Revolving Share or Term Share of any Lender without the
consent of such Lender, (B) postpone the Maturity Date without the consent of
all Lenders or reduce the amount of or postpone the date for any scheduled
payment of any principal of or interest on any Loan or Reimbursement Obligation
or of any fee payable hereunder without the consent of each Lender owed any such
Obligation, (C) release any Guarantor from its obligations under its Subsidiary
Guaranty or (D) release any portion of the Collateral (except as otherwise
specifically provided in any Credit Document), without the consent of all
Lenders; and
(ii) no amendment or waiver shall, unless signed by each Lender,
change the provisions of this Section 10.11 or the definition of Majority
Lenders or the number of Lenders required to take any action under any other
provision of the Credit Documents.
Section 10.12. HEADINGS. Section headings used in this Agreement
are for reference only and shall not affect the construction of this
Agreement.
Section 10.13. LEGAL FEES, OTHER COSTS AND INDEMNIFICATION. The Borrower,
upon demand by the Agent or any Lender, agrees to pay the reasonable fees and
disbursements of legal counsel to
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the Agent and any Lender in connection with the preparation and execution of the
Credit Documents, any amendment, waiver or consent related thereto, whether or
not the transactions contemplated therein are consummated and any enforcement of
any Credit Document or collection of any Obligations. The Borrower further
agrees to indemnify each Lender, the Agent and their respective directors,
officers, employees and attorneys (collectively, the "INDEMNIFIED PARTIES"),
against all losses, claims, damages, penalties, judgments, liabilities and
expenses (including, without limitation, all reasonable attorneys' fees and
other reasonable expenses of investigating, defending against claims, litigation
or preparation therefor, whether or not such Indemnified Party is a party
thereto) which any of them may pay or incur arising out of or relating to (i)
any action, suit or proceeding by any third party or governmental authority
against such Indemnified Party and relating to any Credit Document, the Loans,
any Letter of Credit or the application or proposed application by the Borrower
of the proceeds of any Loan, REGARDLESS OF WHETHER SUCH CLAIMS OR ACTIONS ARE
FOUNDED IN WHOLE OR IN PART UPON THE ALLEGED SIMPLE OR CONTRIBUTORY NEGLIGENCE
OF ANY OF THE INDEMNIFIED PARTIES AND/OR ANY OF THEIR RESPECTIVE DIRECTORS,
OFFICERS, EMPLOYEES OR ATTORNEYS, (ii) any investigation of any third party or
any governmental authority involving any Lender or the Agent and related to any
use made or proposed to be made by the Borrower of the proceeds of the
Borrowings, or any transaction financed or to be financed in whole or in part,
directly or indirectly with the proceeds of any Borrowing, and (iii) any
investigation of any third party or any governmental authority, litigation or
proceeding involving any Lender or the Agent by virtue of the Credit Documents
and related to any environmental cleanup, audit, compliance or other matter
relating to any Environmental Law or the presence of any Hazardous Material
(including, without limitation, any losses, liabilities, damages, injuries,
costs, expenses or claims asserted or arising under any Environmental Law) with
respect to the Borrower, regardless of whether caused by, or within the control
of, the Borrower; PROVIDED, HOWEVER, that the Borrower shall not be obligated to
indemnify any Indemnified Party for any of the foregoing arising out of such
Indemnified Party's or the Lender's or Agent's gross negligence or willful
misconduct or the gross negligence or wilful misconduct of any other Indemnified
Party with respect to the same Lender or Agent.
Section 10.14. GOVERNING LAW: SUBMISSION TO JURISDICTION; WAIVER OF
JURY TRIAL.
(A) THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS, AND THE RIGHTS AND
DUTIES OF THE PARTIES HERETO AND THERETO SHALL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF TEXAS.
(B) TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE PARTIES HERETO
AGREE THAT ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF
THE LENDERS OR THE BORROWER MAY BE BROUGHT AND MAINTAINED IN THE COURTS OF THE
STATE OF TEXAS SITTING IN HARRIS COUNTY OR THE UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF TEXAS. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, EACH OF THE BORROWER, THE
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LENDERS AND THE AGENT HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE
JURISDICTION OF THE COURTS OF THE STATE OF TEXAS AND THE UNITED STATES DISTRICT
COURT FOR THE SOUTHERN DISTRICT OF TEXAS FOR THE PURPOSE OF ANY SUCH LITIGATION
AS SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED
THEREBY IN CONNECTION WITH SUCH LITIGATION. TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, EACH OF THE BORROWER, THE LENDERS AND THE AGENT FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS, BY REGISTERED MAIL, POSTAGE
PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF TEXAS. TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE BORROWER, THE LENDERS
AND THE AGENT HEREBY EXPRESSLY AND IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY
HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT
IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT THE BORROWER, ANY
LENDER AND THE AGENT HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION
OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OF NOTICE,
ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH
RESPECT TO ITSELF OR ITS PROPERTY, SUCH PERSON HEREBY IRREVOCABLY WAIVES TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, SUCH IMMUNITY IN RESPECT OF ITS
OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS.
(C) TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY HERETO
WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR
DEFEND ANY RIGHTS UNDER THIS AGREEMENT OR UNDER ANY AMENDMENT, INSTRUMENT,
DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN
CONNECTION HEREWITH OR ARISING FROM ANY BANKING RELATIONSHIP EXISTING IN
CONNECTION WITH THIS AGREEMENT, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING
SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
Section 10.15. CONFIDENTIALITY. The Agent and each Lender agrees it will
not disclose without the Borrower's consent (other than to its employees,
auditors, counsel or other professional advisors or to its Affiliates) any
information concerning the Borrower or any of its Subsidiaries furnished
pursuant to any of the Credit Documents; PROVIDED THAT the Agent and the Lenders
may disclose any such information (i) that has become generally available to the
public other than through the Lenders, (ii) if required in any examination or
audit or any report, statement or testimony submitted to any federal or state
regulatory body having or claiming to have jurisdiction over the Lenders, (iii)
if required in response to any summons or subpoena or in connection with any
litigation, (iv) in order to comply with any law, order, regulation or ruling
applicable to the Lenders, (v) to any prospective or actual permitted transferee
in connection with any contemplated or actual permitted transfer of any interest
in the Notes by the Lenders, and (vi) in connection with the exercise of any
remedies by the
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Lenders; provided THAT such actual or prospective transferee executes an
agreement with the Lenders containing provisions substantially identical to
those contained in this Section 10.15 prior to such transferee's receipt of any
such information.
Section 10.16. EXECUTION IN COUNTERPARTS. Each counterpart when so
executed shall be deemed to be an original and all of which taken together
shall constitute one and the same agreement.
Section 10.17. SEVERABILITY. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
Section 10.18. CHANGE IN ACCOUNTING PRINCIPLES OR TAX LAWS. If (i) any
change in accounting principles from those used in the preparation of the
financial statements of the Borrower referred to in Section 5.9 is hereafter
occasioned by the promulgation of rules, regulations, pronouncements and
opinions by or required by the Financial Accounting Standards Board or the
American Institute of Certified Public Accountants (or successors thereto or
agencies with similar functions) and such change materially affects the
calculation of any component of any financial covenant, standard or term found
in this Agreement, or (ii) there is a material change in federal or foreign tax
laws which materially affects the Borrower's ability to comply with the
financial covenants, standards or terms found in this Agreement, the Borrower
and the Lenders agree to enter into negotiations in order to amend such
provisions so as to equitably reflect such changes with the desired result that
the criteria for evaluating any of the borrower's and its Subsidiaries'
consolidated financial condition shall be the same after such changes as if such
changes had not been made. Unless and until such provisions have been so
amended, the provisions of this Agreement shall govern.
Section 10.19. ENTIRE AGREEMENT. The Credit Documents constitute the
entire understanding among the Borrower, the Lenders and the Agent and supersede
all earlier or contemporaneous agreements, whether written or oral, concerning
the subject matter of the Credit Documents. THIS WRITTEN AGREEMENT TOGETHER WITH
THE OTHER CREDIT DOCUMENTS REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their duly authorized officers as of the day and
year first above written.
ADDRESS FOR NOTICES: BORROWER:
9430 Old Katy Road THE YORK GROUP, INC.
Houston, Texas 77055
Attention: Chief Financial Officer By:__________________________________
Copy to: General Counsel Name: David F. Beck
Telephone No.: 713/984-5507 Title: Vice President of Finance and
Chief Financial Officer
Fax No. 713/984-5517
<PAGE>
AGENT:
ABN AMRO BANK N.V., AS AGENT
By:_______________________________________
Name:_____________________________________
ADDRESS FOR NOTICES: Title:____________________________________
ABN AMRO Bank N.V.,
Three Riverway, Suite 1700
Houston, Texas 77056 By:_______________________________________
Attention: Ms. Laurie Tuzo Name:_____________________________________
Telephone No. 713/964-3360 Title:____________________________________
Fax No.: 713/961- 1699
PAYMENT INSTRUCTIONS: LETTERS OF CREDIT:
Name of Credit Bank: ABN AMRO Bank N.V., ABN AMRO Bank N.V.
New York, NY
City, State: Houston, Texas ABN No. 026009580
ABA No. 026009580 F/O ABN AMRO Bank N.V. -
Method of Payment: F/O ABN AMRO Bank N.V. - Chicago Trade Services CPU
Chicago CPU Acct. No. 653-001-1738-41
For Credit To: The York Group, Inc. Ref. York Group
Account No.: 650-001-1789-41
Reference: York Group
Attention: Linda Boardman
<PAGE>
LENDERS:
ABN AMRO BANK N.V.,
Revolving Credit Commitment
$5,833,333.33
Term Commitment By:______________________________________
$8,166,666.67 Laurie C. Tuzo
Senior Vice President
By:_______________________________________
Eric R. Hollingsworth
Vice President
ADDRESS FOR NOTICES:
See address for Agent
PAYMENT INSTRUCTIONS:
See Payment Instructions for Agent
LENDING OFFICE:
ABN AMRO Bank N.V.,
Three Riverway, Suite 1700
Houston, Texas 77056
Attention: Ms. Laurie Tuzo
Telephone No.: 713/964-3360
Fax No.: 713/961-1699
<PAGE>
BANK OF AMERICA, N.A,
Revolving Credit Commitment
$ 4,791,666.67
Term Commitment By:________________________________________
$ 6,708,333.33 Name:______________________________________
Title:_____________________________________
ADDRESS FOR NOTICES:
Bank of America, N.A.
901 S. Main, 11th Floor
Mail Code: TC1-492-11-05
Dallas, Texas 75202-3712
Attention: Roger E. Chitwood
Telephone No.: (214) 209-2833
Fax No.: (214) 209-3444
PAYMENT INSTRUCTIONS:
Name of Credit Bank: Bank of America, N.A.
City, State: Dallas, Texas
ABA No.: 111-000-025
Account No.: 0187253271
Reference: The York Group, Inc.
Attention: Ms. Fran Muelhmann (214)209-2262
LENDING OFFICE:
Bank of America, National Association
901 S. Main Street
Dallas, Texas 75202-3714
Attention: Mr. Roger E. Chitwood
Telephone No.: (214)209-2554
Fax No.: (214) 209-2588
<PAGE>
CHASE BANK TEXAS, N.A.
Revolving Credit Commitment
$ 4,791,666.67
Term Commitment By:________________________________________
$ 6,708,333.33 Name:______________________________________
Title:_____________________________________
ADDRESS FOR NOTICES:
Chase Bank of Texas, N.A.
712 Main Street, 5-CBBE-78
Houston, Texas 77002
Attention: James Dolphin
Telephone No.: (713) 216-5349
Attention: Robert Mendoza
Telephone No.: (713) 216-5831
Fax No.: (713) 216-6004
PAYMENT INSTRUCTIONS:
Name of Credit Bank: Chase Bank of Texas, N.A.
City, State: Houston, Texas
ABA No. 113-000-609
For Credit To: The York Group, Inc.
Account No.: 00100381673
Reference: The York Group, Inc.
LENDING OFFICE:
Chase Bank of Texas, N.A.
712 Main Street
Houston, Texas 77002
Attention: James Dolphin
Telephone No.: (713) 216-5349
Fax No.: (713) 216-6004
<PAGE>
FIRST UNION NATIONAL BANK
Revolving Credit Commitment
$4,791,666.67
Term Commitment By:_______________________________________
$ 6,708,333.33 Name:_____________________________________
Title:____________________________________
ADDRESS FOR NOTICES:
First Union National Bank
1339 Chestnut Street, PA 4848
Philadelphia, Pennsylvania 19107
Attention: David Mills
Telephone No.: (215) 786-2161
Fax No.: (215) 786-8449
PAYMENT INSTRUCTIONS:
Name of Credit Bank: First Union BK
City, State: Philadelphia, Pennsylvania
ABA No. 031-201-467
For Credit To: Capital Markets Group/ Deathcare Finance
Account No.: BNF:G/04659065137396
Reference: York Group
Attention: Kathy Crouse (215)973-4041
LENDING OFFICE:
First Union National Bank
1339 Chestnut Street, PA 4848
Philadelphia, Pennsylvania 19107
Attention: David Mills
Telephone No.: (215) 786-2161
Fax No.: (215) 786-8449
<PAGE>
WELLS FARGO BANK (TEXAS),
NATIONAL ASSOCIATION
Revolving Credit Commitment
$ 4,791,666.67
Term Commitment By:_______________________________________
$6,708,333.33 Name:_____________________________________
Title:____________________________________
ADDRESS FOR NOTICES:
Wells Fargo Bank (Texas), National Association
1000 Louisiana Street, 3rd Floor
Houston, Texas 77002
Attention: Christopher King
Telephone No.: (713) 319-1333
Fax No.: (713) 739-1082
PAYMENT INSTRUCTIONS:
Name of Credit Bank: Wells Fargo Bank (Texas), National Association
City, State: Houston, Texas
ABA No. 121-000-248
For Credit To: The York Group, Inc.
Account No.: 2712507201
Reference: The York Group, Inc.
Attention: Commercial Banking Services
LENDING OFFICE:
Wells Fargo Bank (Texas), National Association
1000 Louisiana Street, 3rd Floor
Houston, Texas 77002
Attention: Christopher King
Telephone No.: (713) 319-1333
Fax No.: (713) 739-1082
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
FIRST AMENDMENT
Dated as of August 12, 1999
amending the
Senior Note Purchase Agreement
Dated as of June 30, 1994
<PAGE>
FIRST AMENDMENT dated as of August 12, 1999 (the "Amendment") to the
SENIOR NOTE PURCHASE AGREEMENT dated as of June 30, 1994 (the "Agreement") by
and among The York Group, Inc., a Pennsylvania corporation (the "Company") and
The Variable Annuity Life Insurance Company, a Texas corporation (the
"Purchaser", and together with its successors and assigns and any holder of
Notes (as such term is defined below), the "Holders").
R E C I T A L S
WHEREAS, the Company has requested that the Purchaser enter into an
amendment to the Agreement and the Purchaser is willing to enter into such an
amendment subject to the terms and conditions set forth below.
NOW THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. AMENDMENTS TO THE AGREEMENT. Effective as of the Effective Date
(as hereinafter defined), the Agreement is hereby amended as follows:
1.1 GLOBAL CHANGES.
Each reference in the Agreement and in the Notes to "7.87%" shall be
changed to "8.37%" (such change in the interest rate to be effective on August
12, 1999), and any reference in the Agreement and in the Notes to "Senior Note"
shall be changed to "Senior Secured Note". EXHIBIT A attached to the Agreement
is hereby deleted and EXHIBIT A to this Amendment is hereby inserted in lieu
thereof. The "Closing Date" under the Agreement shall be deemed to be the
Effective Date of this Amendment.
1.2 AMENDMENTS TO SECTION 1.
(a) The heading of Section 1 of the Agreement is hereby amended by
inserting the language below after the existing heading:
"; GUARANTEES; PLEDGE AND SECURITY AGREEMENTS.
1.1 THE NOTES."
(b) Section 1 of the Agreement is further amended hereby by
inserting the following language at the end thereof after Section 1.1:
"1.2 THE SUBSIDIARY GUARANTEES; THE PLEDGE AGREEMENTS; THE SECURITY
AGREEMENTS AND THE TRADEMARK AND PATENT SECURITY AGREEMENTS. The Notes will be
unconditionally guaranteed by each
<PAGE>
of the Company's existing Subsidiaries pursuant to the subsidiary guarantees,
substantially in the form of EXHIBIT 4.1C of the Credit Agreement (individually
a "Subsidiary Guarantee" and collectively the "Subsidiary Guarantees", which
terms shall include after the Closing Date all additional Subsidiary Guarantees
from time to time executed and delivered pursuant to SECTION 6.10). The Notes
will also have the benefit of one or more (a) Pledge Agreements substantially in
the form of EXHIBIT 4.1B of the Credit Agreement (b) Security Agreements
substantially in the form of EXHIBIT 4.1A of the Credit Agreement and (c)
Trademark and Patent Security Agreements substantially in the form of EXHIBIT
4.1E of the Credit Agreement."
1.3 AMENDMENTS TO SECTION 3.
(a) Section 3 of the Agreement is hereby amended by deleting the
introductory paragraph and inserting in lieu thereof the following:
"This Agreement shall be amended as provided in the First Amendment on the
Effective Date when all conditions listed below have been met:"
(b) Section 3.7 of the Agreement is further amended by inserting the
words "the Amendment," after the word "Agreement" on the ninth line thereof.
(c) Section 3 of the Agreement is further amended by adding the
following provisions after Section 3.12:
"3.13 SECURITY AGREEMENTS; TRADEMARK AND PATENT SECURITY AGREEMENTS.
Security Agreements and Trademark and Patent Security Agreements shall have been
executed by the Company and each Guarantor pledging to the Collateral Agent for
the benefit of, among other persons, the Holders substantially all of the
personal property assets of the Company and the Guarantors, together with UCC-1
financing statements, patent and trademark filings and any other documents,
agreements or instruments necessary or desirable in the Holders' sole reasonable
discretion to create an Acceptable Security Interest in such collateral.
3.14 PLEDGE AGREEMENTS. Pledge Agreements shall have been executed by the
Company and the Guarantors pledging to the Collateral Agent for the benefit of,
among other persons, the Holders, (a) all of the capital stock of the
Subsidiaries of the Company that are not Foreign Subsidiaries and (b) 65% of the
capital stock of the Subsidiaries of the Company that are Foreign Subsidiaries,
in each case together with stock certificates, stock powers executed in blank,
UCC-1 financing statements and any other documents, agreements or instruments
necessary or desirable in the Holders' sole reasonable discretion to create an
Acceptable Security Interest in such pledged stock.
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<PAGE>
3.15 GUARANTEES. The Holder shall have received a duly executed Subsidiary
Guarantee from each Guarantor."
1.4 AMENDMENTS TO SECTION 4.
(a) Section 4.1 of the Agreement is hereby amended by deleting it in
its entirety and inserting in lieu thereof the following:
"4.1 MANDATORY REPAYMENTS. The Notes shall be subject to mandatory
prepayment as follows: (a) on August 31, 1999 and on the last day of each month
thereafter to and including May 31, 2000 (so long as the Notes shall be
outstanding), the Company will prepay $297,619.05 of the aggregate principal
amount of the Notes, (b) on June 30, 2000 (so long as the Notes shall be
outstanding) the Company will prepay $595,238.10 of the aggregate principal
amount of the Notes and (c) on July 31, 2000 and on the last day of each month
thereafter to and including June 30, 2004 (so long as the Notes shall be
outstanding), the Company will prepay $297,619.05 of the aggregate principal
amount of the Notes or, if the unpaid balance thereof is less or more, then such
other amount as may be then currently outstanding. Each such prepayment under
SECTION 4.1 shall be at the principal amount so to be prepaid, together with
accrued interest thereon to the date of such prepayment, without premium or
prepayment charge."
(b) The heading of Section 4.2 of the Agreement is hereby deleted
and replaced with the following heading:
"OPTIONAL AND MANDATORY PREPAYMENT WITH PREMIUM. (a)"
(c) The following language shall be added as a new clause (b) after
the first sentence of Section 4.2:
"(b) The Notes shall, if a Triggering Event shall have occurred and be
continuing, be subject to mandatory prepayment with (i) the Net Cash Proceeds
from Assets as set forth in the proviso of SECTION 7.6(G) and (ii) the casualty
proceeds received pursuant to SECTION 6.11, in each case subject to the pro rata
treatment set forth in SECTIONS 2.3 and 2.6 of the Intercreditor Agreement (any
such proceeds to be applied in accordance with this sentence, the "Mandatory
Proceeds"), such prepayments being due and payable on the date the Net Cash
Proceeds from Assets are distributed by the Collateral Agent in accordance with
Section 2.3(a) of the Intercreditor Agreement (the "Triggering Prepayment
Date"). On the Triggering Prepayment Date the Company shall be deemed to have
delivered a notice of prepayment and shall prepay the outstanding Notes in an
amount equal to the Mandatory Proceeds, either in whole or in part, by payment
of the principal amount of the Notes, or portion thereof to be prepaid, and
accrued interest on the Notes to the Triggering Prepayment Date, together with a
premium equal to the Make-Whole Premium Amount (determined by the Holders) with
respect to such principal amount
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<PAGE>
then to be prepaid, determined as of one (1) Business Day prior to the
Triggering Prepayment Date."
(c) The last three sentences of Section 4.2 shall become a new
clause (c) of Section 4.2.
1.5 AMENDMENTS TO SECTION 6.
(a) Section 6.1(c) of the Agreement is hereby amended by deleting
clause (ii) thereof from "(ii) specifying" on the thirteenth line through
"SECTIONS 6.8, 7.1, 7.2 and 7.4" on the seventeenth line thereof and inserting
in lieu thereof the following: "(ii) specifying the amount available at the end
of such accounting period for dividends in compliance with SECTION 7.4 and
showing in reasonable detail compliance during and at the end of such accounting
period with the restrictions contained in SECTIONS 6.8, 7.1, 7.2, 7.4, 7.6,
7.12, 7.13, 7.14, 7.15 and 7.16."
(b) Section 6.1(e) of the Agreement is hereby amended by inserting
on the third line thereof after the word "Lenders" the following language:
"or to the Agent (including, without limitation, under SECTION 6.7 of
the Credit Agreement)"
(c) Section 6.6 of the Agreement is hereby amended by inserting at
the end thereof the following sentences:
"None of the Special Purpose Subsidiaries will engage in any line of
business other than (i) with respect to T.Y.G. Company, the cash and investment
management business for the Company and its Subsidiaries, and (ii) with respect
to all other Special Purpose Subsidiaries, the business of acting as an
intellectual property holding company for the Company and its Subsidiaries.
Additionally, none of such Special Purpose Subsidiaries will incur any Debt
other than Debt related to tax liabilities. Finally, the Company shall not own,
create or acquire any other Subsidiaries for the purpose of performing the
actions described in clauses (i) and (ii) above, other than the Special Purpose
Subsidiaries."
(d) Section 6 is hereby amended by inserting after Section 6.9 of
the Agreement the following subsections:
"Section 6.10 NEW SUBSIDIARIES. The Company shall cause any direct or
indirect Subsidiary which is formed or acquired after the Closing Date to,
within five (5) days following the formation or acquisition of such Subsidiary,
execute and deliver to the Collateral Agent (with sufficient originals for each
Holder) all of the following documents: a Subsidiary Guarantee in the form of
EXHIBIT 4.1C of the Credit Agreement, a Security Agreement in the form of
EXHIBIT 4.1A of the Credit Agreement, a Pledge Agreement in the form of EXHIBIT
4.1B of the Credit
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<PAGE>
Agreement (and such other Security Documents as any Holder may reasonably
request), and such evidence of corporate or other authority to enter into such
Subsidiary Guarantee, Security Agreement, Pledge Agreement and other Security
Documents as any Holder may reasonably request.
Section 6.11 INSURANCE.
(a) POLICIES AND CERTIFICATES. Each of the Company and its Subsidiaries
will maintain insurance with responsible and reputable insurance companies or
associations in such amounts and covering such risks as are usually carried by
companies engaged in similar businesses and owning similar assets and properties
in the same general areas in which the Company and its Subsidiaries operate. The
Company and each of its Subsidiaries will also insure employers' and public and
product liability risks with responsible insurance companies, all as reasonably
acceptable to the Holders. The Company will (i) on the Closing Date, (ii) on or
before January 31st of each calendar year commencing January 31, 2000 and (iii)
upon the request of the Holders, furnish a certificate from the Company's
insurance agent(s) setting forth the nature and extent of the insurance
maintained pursuant to this SECTION 6.11 and providing that such agent will
provide fifteen (15) days' advance written notice to the Holders prior to
cancellation of any such insurance. In addition, upon the request of the
Holders, the Company will deliver to the Holders copies of the underlying
policies (as they are available), and evidence that the premiums have been paid
before termination of any insurance policies representing such insurance. If
such insurance is not maintained in full force and effect, the Collateral Agent
at its option may procure such insurance at the Company's and its Subsidiaries'
expense. All policies representing property insurance shall name the Collateral
Agent as loss payee in a form reasonably satisfactory to the Collateral Agent.
All policies representing liability insurance shall name the Collateral Agent,
for the benefit of itself, the Agent, the Lenders and the Holders, as an
additional named insured party in a form reasonably satisfactory to the
Collateral Agent.
(b) NOTICE OF CASUALTY EVENTS, ETC. Promptly upon obtaining knowledge
thereof, the Company and its Subsidiaries shall notify the Collateral Agent and
each Holder of any material casualty to the Collateral, including all casualties
to the Collateral where the aggregate damage to the Collateral could reasonably
be expected to exceed $1,000,000. With respect to any potential claims under any
property insurance maintained by the Company and its Subsidiaries in excess of
such amount, after the occurrence and during the continuance of an Event of
Default, the Collateral Agent may, but shall not be required to, make proof of
loss under, settle and adjust any claims under, and receive the proceeds under
any such property insurance or direct the Debtor (as defined in each Security
Agreement) to take such actions at the direction of the Collateral Agent, and
the reasonable expenses incurred by the Collateral Agent in the adjustment and
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<PAGE>
collection of such proceeds shall be paid by the Company and its Subsidiaries.
The Collateral Agent shall not be liable or responsible for failure to collect
or exercise diligence in the collection of any proceeds.
(c) PAYMENTS. With respect to any casualty to the Collateral, after the
occurrence and during the continuance of an Event of Default, all proceeds of
such casualty, including any property insurance proceeds, proceeds from actions,
and any other proceeds, whether or not above the amounts specified above, are
assigned to the Collateral Agent and shall be paid directly to the Collateral
Agent and applied in accordance with paragraph (d) below. In the event that any
such proceeds are paid to the Company or any of its Subsidiaries in violation of
the foregoing, the Company or such Subsidiary shall hold the proceeds in trust
for the Collateral Agent, segregate the proceeds from the other funds of the
Company or such Subsidiary, and promptly pay the proceeds to the Collateral
Agent with any necessary endorsement. Upon the request of the Collateral Agent,
after the occurrence and during the continuance of an Event of Default, each of
the Company and its Subsidiaries shall execute and deliver to the Collateral
Agent any additional assignments and other documents as may be necessary or
desirable to enable the Collateral Agent to directly collect the proceeds.
(d) APPLICATION OF PROCEEDS. With respect to the proceeds of any casualty
required to be paid to the Collateral Agent hereunder, after the occurrence and
during the continuance of an Event of Default, the Collateral Agent may, in its
sole discretion, either disburse the proceeds to the Company or any of its
Subsidiaries for the purpose of repairing, replacing, and restoring the damaged
collateral or retain the proceeds and apply such proceeds as provided for in
SECTIONS 2.3 and 2.6 of the Intercreditor Agreement and Section 4.2(b) hereof.
6.12 NEW NOTE. At any time after the Closing Date and simultaneously with
delivery by the Holders to their counsel (including, without limitation, Willkie
Farr & Gallagher) of the initial 7.87% Senior Note or of an affidavit of loss or
destruction of such Note in accordance with SECTION 11.4 of this Agreement, the
Company shall deliver to the Holders' counsel (including, without limitation,
Willkie Farr & Gallagher) a new Note substantially in the form of EXHIBIT A
attached hereto.
6.13 POST-CLOSING MATTERS. The Company agrees that it will, (a) within 60
days after the Closing Date, execute and deliver Mortgages, title commitments,
title policies, surveys environmental reports and audits, and such other
documents, agreements or instruments as the Collateral Agent may reasonably
request with respect to the real properties required to be pledged as Collateral
as security for the Obligations as determined by the Collateral Agent in its
sole reasonable discretion, (b) within 10 days of the Closing Date, deliver to
the Collateral Agent and the Holders (i) evidence satisfactory to
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<PAGE>
the Collateral Agent indicating that there are no Liens on any of the properties
or assets of any of the Company or its Subsidiaries other than Permitted Liens,
or evidence that any such Liens (other than Permitted Liens) have been
terminated or will be terminated within 20 days of the Closing Date, (ii) the
stock certificates and stock powers required in connection with the pledge of
the shares of Colonial Guild, Ltd., Elder Davis, Inc., Cercueil Lauziere Inc.,
Puget Sound Casket Company, and Oregon Casket Company, Inc., and (iii) the
intercompany notes held by the Special Purpose Subsidiaries, and (c) within 45
days after the Closing Date, permit the Collateral Agent (or its
representatives) to complete a collateral audit of the Company's and its
Subsidiaries' properties, (d) within 30 days after the Closing Date, deliver to
or cause to be delivered to each Holder one or more subordination agreements
from each of the Special Purpose Subsidiaries (the "Subordination Agreements")
substantially identical to the subordination agreements delivered to the Agent
and the Lenders under the Credit Agreement (in the form attached as EXHIBIT 4.1D
of the Credit Agreement) on the Closing Date or to be delivered to the Agent and
the Lenders from time to time after the Closing Date and (e) within 15 days
after the Closing Date, the Company at its expense shall obtain for the Notes a
PPN issued by Standard & Poor's CUSIP Service Bureau (in cooperation with the
Securities Valuation Office of the National Association of Insurance
Commissioners).
6.14 BANK ACCOUNTS. Within sixty (60) days from the Closing Date, the
Company shall establish with the Agent, any Lender or any Affiliate thereof, a
concentration account (the "Concentration Account") into which all deposits and
receipts existing in the Company's and its Subsidiaries' respective bank
accounts shall be deposited on a daily basis. The Collateral Agent, for the
benefit of the Agent, the Lenders and the Holders shall have an Acceptable
Security Interest in the Concentration Account, and each of the Borrower and its
Subsidiaries shall cause each depository where such bank accounts are maintained
to execute and deliver a bank account agreement in form and substance
satisfactory to the Collateral Agent providing for, among other things, (a) the
grant of an Acceptable Security Interest in favor of the Collateral Agent in
each such bank account (and the amounts contained therein) and (b) a weekly wire
transfer or automated clearinghouse transfer to the Concentration Account of all
amounts contained in such bank accounts.
6.15 PAYMENT OF FEES. No later than Monday, August 23, 1999, the Company
shall pay (i) a closing fee of $89,285.71 to the Holders by wire transfer of
immediately available funds to: ABA#011000028, State Street Bank and Trust
Company, Boston, MA 02101 Re: The Variable Annuity Life Insurance Company,
AC-0125-821-9 (OBI=PPN#98663 @ AA8 and closing fee) Fund Number PA 54, with a
duplicate payment notice to: The Variable Annuity Life Insurance Company, c/o
American General Corporation, Attn: Investment Research Department, A37-01, P.O.
Box 3247, Houston, Texas 77253-3247, Overnight Mail Address: 2929 Allen Parkway,
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<PAGE>
A37-01, Houston, Texas 77019-2155, and (ii) without limiting the generality of
SECTION 13.1, the fees and disbursements of Willkie Farr & Gallagher set forth
on a statement delivered on or prior to August 23, 1999, by wire transfer of
immediately available funds as set forth in such statement."
1.6 AMENDMENTS TO SECTION 7.
(a) Section 7.1 of the Agreement is hereby amended by deleting it
from the beginning until the words "in contemplation of such acquisition" and
inserting in lieu thereof the following:
"7.1 RESTRICTIONS ON THE INCURRENCE OF INDEBTEDNESS. The Company and its
Subsidiaries shall not contract, assume or suffer to exist any Debt (including,
without limitation, any Contingent Obligations), except:
(a) Debt under the Financing Documents;
(b) Debt existing on the Closing Date and described on ANNEX 7.1 hereto;
PROVIDED THAT, the aggregate principal amount of such Debt may not be increased;
(c) unsecured intercompany loans and advances from the Company to any of
its Subsidiaries (other than YCF) and unsecured intercompany loans and advances
from any of such Subsidiaries to the Company or any other Subsidiaries of the
Company (other than YCF), in each case which are subordinated to the obligations
of the Company and the Guarantors to Holders under this Agreement and any of the
Financing Documents (the "Obligations") in form and substance satisfactory to
the Holders;
(d) Debt under any Interest Rate Protection Agreements entered into to
protect the Company against fluctuations in interest rates and not for
speculative purposes;
(e) Debt under the Credit Agreement and any subsequent extensions,
renewals or refinancings thereof so long as such Debt is not increased in amount
(except as set forth in, and subject to the terms and conditions contained in,
the last sentence of SECTION 2.12 of the Intercreditor Agreement) the maturity
date is not made earlier in time, the interest rate per annum applicable thereto
is not increased, any amortization of principal thereunder is not shortened and
the payments thereunder are not increased and the other terms and conditions
thereof are no more restrictive than the terms and conditions of the Credit
Agreement;
(f) Debt subordinated to the Obligations hereunder on terms and conditions
reasonably satisfactory to the Holders; provided that (i) no principal payments
may be made thereon (other than with respect to existing subordinated Debt
listed on ANNEX 7.1 hereto) before June 30, 2004, (ii) such Debt contains
covenants no more restrictive than the covenants contained in this
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<PAGE>
Agreement and standstill provisions and (iii) no payments may be made thereon if
a Default or an Event of Default shall have occurred and be continuing or would
occur as a result of any such payment; and
(g) Debt not otherwise permitted by this SECTION 7.1 not to exceed
$1,000,000 in the aggregate at any time outstanding."
(b) Section 7.2 of the Agreement is hereby amended by deleting it in
its entirety and inserting in lieu thereof the following:
"7.2 MINIMUM FIXED CHARGE COVERAGE RATIO. The Company will maintain a
Fixed Charge Coverage Ratio as of the end of each calendar month for the twelve
month period then ended of at least (i) for all calendar months ending on or
before December 31, 1999, 2.25 to 1.00, (ii) for all calendar months ending
after December 31, 1999 but on or before May 31, 2000, 2.35 to 1.00, and (iii)
for all calendar months ending thereafter, 2.50 to 1.00."
(c) Section 7.3(a) of the Agreement is hereby amended by deleting it
in its entirety and inserting in lieu thereof the following:
"7.3 LIENS. (a) The Company and its Subsidiaries shall not create, incur,
assume or suffer to exist any Lien of any kind on any of their properties or
assets of any kind except the following (collectively, the "Permitted Liens"):
(i) Liens securing the Obligations pursuant to the
Security Documents;
(ii) Liens securing the Obligations (as such term is defined in the
Credit Agreement) pursuant to the Security Documents;
(iii) Liens arising in the ordinary course of business by operation
of law in connection with workers' compensation, unemployment insurance, old age
benefits, social security obligations, taxes, assessments, statutory obligations
or other similar charges, good faith deposits, pledges or other Liens in
connection with (or to obtain letters of credit in connection with) bids,
performance bonds, contracts or leases to which the Company or its Subsidiaries
are a party or other deposits required to be made in the ordinary course of
business; provided that in each case the obligation secured is not for Debt and
is not overdue or, if overdue, is being contested in good faith by appropriate
proceedings and reserves in conformity with GAAP have been provided therefor;
(iv) mechanics', workmen, materialmen, landlords', carriers' or
other similar Liens arising in the ordinary course of business (or deposits to
obtain the release of such Liens)
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related to obligations not due or, if due, that are being contested in good
faith by appropriate proceedings and reserves in conformity with GAAP have been
provided therefor;
(v) inchoate Liens under ERISA and Liens for Taxes not yet due or
which are being contested in good faith by appropriate proceedings and reserves
in conformity with GAAP have been provided therefor;
(vi) Liens arising out of judgments or awards against the Company or
any of its Subsidiaries, or in connection with surety or appeal bonds or the
like in connection with bonding such judgments or awards, the time for appeal
from which or petition for rehearing of which shall not have expired or for
which the Company or such Subsidiary shall be prosecuting on appeal or
proceeding for review and for which it shall have obtained a stay of execution
or the like pending such appeal or proceeding for review; provided that the
aggregate amount of uninsured or underinsured liabilities (including interest,
costs, fees and penalties, if any) of the Company and its Subsidiaries secured
by such Liens shall not exceed $1,000,000 at any one time outstanding; and
provided further that there is adequate assurance, in the reasonable opinion of
the Holders, that the insurance proceeds, if any, attributable thereto shall be
paid promptly upon the expiration of such time period or resolution of such
proceeding if necessary to remove such Liens;
(vii) rights of a common owner of any interest in property held by a
Person and such common owner as tenants in common or through other common
ownership;
(viii) encumbrances (other than to secure the payment of Debt),
easements, restrictions, servitudes, permits, conditions, covenants, exceptions
or reservations in any property or rights-of-way of a Person for the purpose of
roads, pipelines, transmission lines, transportation lines, distribution lines,
removal of gas, oil, coal, metals, steam, minerals, timber or other natural
resources, and other like purposes, or for the joint or common use of real
property, rights-of-way, facilities or equipment, or defects, irregularity and
deficiencies in title of any property or rights-of-way;
(ix) financing statements filed by lessors of property (but only
with respect to the property so leased) and Liens under any conditional sale or
title retention agreements entered into in the ordinary course of business;
(x) rights of lessees of equipment owned by the Company
or any of its Subsidiaries;
(xi) Liens securing Capitalized Lease Obligations or purchase money
debt permitted by SECTION 7.1(G) on any assets acquired;
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(xii) any extension, renewal or replacement (or successive
extensions, renewals or replacements) in whole or in part of any Lien referred
to in the foregoing subsections (i) through (xi), PROVIDED THAT the principal
amount of Debt secured thereby (other than with respect to subsection (i) above)
does not exceed the initial principal amount secured, and such extension,
renewal or replacement is limited to the property already subject to the Lien so
extended, renewed or replaced; and
(xiii) the contractual unperfected right of offset contained in
SECTION 10.6 of the Credit Agreement as in effect on the Effective Date and the
related common law right of offset, in each instance, with respect to the funds
in the Company's general operating accounts at ABN AMRO Bank N.V. or at any
other Lender, if any, deposited in the ordinary course of business; PROVIDED,
HOWEVER, that any exercise of such rights of offset will be deemed an immediate
Event of Default under SECTION 9.1 hereof."
(d) Section 7.4 of the Agreement is hereby amended by deleting it in
its entirety and inserting in lieu thereof the following:
"7.4 RESTRICTIONS ON REDEMPTION; DIVIDENDS. (a) The Company shall not
redeem, purchase or otherwise acquire any shares of its capital stock or declare
or pay any dividends on its capital stock (other than dividends paid in kind) or
make any distribution or payment to shareholders, or set aside funds for any
such purpose, except that, so long as no Default or Event of Default shall have
occurred and be continuing or would occur as a result thereof, the Company may
pay cash dividends on its common stock in an annual amount not to exceed, on a
per share basis, the annual per share amount paid in fiscal year ended in 1998
(but in no event shall the aggregate amount of all dividends paid in any fiscal
year exceed the lesser of (i) $1,500,000 and (ii) an amount equal to 50% of the
Consolidated Net Income of the Company during the preceding fiscal year); and
(b) Neither the Company nor any of its Subsidiaries shall, directly or
indirectly, create or otherwise permit to exist or become effective any
restriction on the ability of any Subsidiary of the Company to (i) pay dividends
or make any other distributions on its capital stock or any other interest or
participation in its profits owed by the Company or to pay any Debt owed to the
Company, or (ii) make loans or advances to the Company or any of its
Subsidiaries, except in either case for restrictions existing under or by reason
of applicable law, this Agreement and the other Financing Documents."
(e) Section 7.5 of the Agreement is hereby amended by deleting it in
its entirety and inserting in lieu thereof the following:
"7.5 RESTRICTIONS ON FUNDAMENTAL CHANGES. Neither the Company nor any of
its Subsidiaries shall be a party to any
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merger into or consolidation with, make an Acquisition or otherwise purchase or
acquire all or substantially all of the assets or stock of, any other Person, or
sell all or substantially all of its assets or stock, except:
(a) the Company may purchase or otherwise acquire all or substantially all
of the stock or assets of, or otherwise acquire by merger or consolidation, any
of its Subsidiaries, and any such Subsidiary may merge into, or consolidate
with, or purchase or otherwise acquire all or substantially all of the assets or
stock of or sell all or substantially all of its assets or stock to, any other
Subsidiary of the Company (other than YCF) or the Company, in each case so long
as the Company shall be the surviving entity to any such merger or consolidation
if the transaction is with the Company;
(b) subject to the requirements of SECTION 6.10, the Company or any of its
Subsidiaries may form new Subsidiaries; and
(c) the Company and its Subsidiaries may issue additional capital stock or
ownership interests so long as there is no scheduled mandatory redemption or
scheduled liquidating distribution of any such stock or interest before June 30,
2004."
(f) Section 7.6 of the Agreement is hereby amended by deleting it in
its entirety and inserting in lieu thereof the following:
"7.6 TRANSFER OF ASSETS. The Company and its Subsidiaries shall not permit
any transfer of any asset of the Company (including, without limitation, the
capital stock of or ownership interest in any of its Subsidiaries) or any of its
Subsidiaries except:
(a) Transfers of inventory (other than YMS Rooms) in the ordinary
course of business;
(b) the Transfer of assets that are obsolete, worn out or no longer useful
in the business of the Company and its Subsidiaries; PROVIDED THAT (i) the Net
Cash Proceeds from Assets received by the Company or any of its Subsidiaries
from any such Transfer are either (A) reinvested by the Company and its
Subsidiaries in replacement assets (with equal or greater value) within the
three-month period following such Transfer (or, if such replacement assets have
already been acquired prior to such Transfer with internal cash flow of the
Company and its Subsidiaries, applied as a reimbursement to the Company or such
Subsidiary for the purchase price of such asset) or (B) applied in accordance
with the proviso to clause (g) below, and (ii) within ten days of such Transfer,
the Company notifies the Agent of its intention to either reinvest such Net Cash
Proceeds from Assets in replacements assets or apply such Net Cash Proceeds from
Assets pursuant to subclause (B) above.
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(c) Transfers of any assets among the Company and any of its Subsidiaries
(other than Special Purpose Subsidiaries);
(d) Transfers permitted by SECTION 7.5;
(e) Transfers of YMS Rooms made in accordance with SECTION 7.11;
(f) Transfers of any non-core assets of the Company and its Subsidiaries;
PROVIDED THAT, (i) the fair market value of all such assets transferred during
any fiscal year may not exceed 15% of Tangible Net Worth as of the Company's
most recent fiscal year end and (ii) the Net Cash Proceeds from Assets received
from all such Transfers are applied in accordance with the proviso to clause (g)
below; and
(g) the sale of the Aiken, South Carolina plant; PROVIDED THAT, (i) 80%
(or 100% if a Triggering Event shall have occurred and be continuing) of the Net
Cash Proceeds from Assets received by the Company or any of its Subsidiaries
from Transfers contemplated by clauses (b) and (f) above and this clause (g) are
applied as a prepayment of the Notes in accordance with SECTION 4.2(B) hereof
and the Term Loans in accordance with SECTION 2.9(B) of the Credit Agreement, on
a pro rata basis in accordance with SECTIONS 2.3 and 2.6 of the Intercreditor
Agreement.
Upon the sale, disposition or other Transfer of any asset permitted in
accordance with this SECTION 7.6 and so long as no Default or Event of Default
shall have occurred and be continuing (or would be occasioned thereby), then the
Collateral Agent shall be permitted to, at the expense of the Company and
without the consent of any Holder, execute and deliver such releases or
terminations (or similar instruments) as may be reasonably necessary in order to
consummate such sale, disposition or Transfer."
(g) Section 7.7 of the Agreement is hereby amended by deleting it in
its entirety and inserting in lieu thereof the following:
"7.7 TRANSACTION WITH AFFILIATES. Except as otherwise specifically
permitted herein, the Company and its Subsidiaries shall not enter into or be a
party to any material transaction or arrangement or series of related
transactions or arrangements which in the aggregate would be material with any
Affiliate of such Person, including without limitation, the purchase from, sale
to or exchange of property with or the rendering of any service by or for, any
Affiliate, except pursuant to the reasonable requirements of such entity's
business and upon fair and reasonable terms no less favorable to such entity
than would be able to be obtained in a comparable arm's-length transaction with
a Person other than an Affiliate."
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(h) Section 7 of the Agreement is further amended by inserting the
following language after Section 7.8:
"7.9 NEGATIVE PLEDGES. Neither the Company nor any of its Subsidiaries
shall enter into any agreement creating or assuming any Lien upon its
properties, revenues or assets, whether now owned or hereafter acquired other
than as permitted hereunder. Neither the Company nor any of its Subsidiaries
shall enter into any agreement other than this Agreement, the Financing
Documents, the Credit Agreement and the Credit Documents (as such term is
defined in the Credit Agreement) prohibiting the creation or assumption of any
Lien upon its properties, revenues or assets, whether now owned or hereafter
acquired, or prohibiting or restricting the ability of the Company or any of its
Subsidiaries to amend or otherwise modify this Agreement or any Financing
Document.
7.10 VENDOR LEASE PLAN AGREEMENT; CREDIT AGREEMENT. The Company shall not
amend or supplement or permit any Subsidiary to amend or supplement (or consent
to any amendment or supplement of) the Vendor Lease Plan Agreement. In addition,
the Company shall not amend or supplement or permit any Subsidiary to amend or
supplement (or consent to any amendment or supplement of) the Credit Agreement
to the extent that such amendment or supplement provides for the following or
which has any of the following effects:
(a) increases the overall principal amount of the Debt under the Credit
Agreement (except as set forth in, and subject to the terms and conditions
contained in, the last sentence of SECTION 2.12 of the Intercreditor Agreement)
or increases the amount of any single scheduled installment of principal or
interest;
(b) shortens or accelerates the date upon which any installment of
principal or interest becomes due or adds any additional mandatory redemption
provisions;
(c) shortens the final maturity date of such Debt or otherwise accelerates
the amortization schedule with respect thereto;
(d) increases the rate of interest accruing on such Debt;
(e) provides for the payment of additional fees or increases existing
fees; or
(f) adds restrictions which are more onerous or more restrictive than
those contained in this Agreement or which are otherwise materially adverse to
the Company or the Holders.
7.11 YMS ROOMS. Neither the Company nor any of its Subsidiaries will enter
into, install or otherwise maintain YMS Rooms with any customer other than (i)
YMS Rooms in existence and
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under lease with the Company or its Subsidiaries prior to the date hereof, which
leases are described on SCHEDULE 6.16, (ii) YMS Rooms for which the Company or
its Subsidiaries will be paid cash consideration in accordance with its normal
trade terms, (iii) YMS Rooms installed with a customer as part of the Company's
"millennium program", which program allows for installation of YMS Rooms with
certain large funeral homes in lieu of the Company giving higher cash rebates to
such customers; PROVIDED THAT, such YMS Rooms under this clause (iii) shall only
be permitted to the extent the Capital Expenditures associated with such YMS
Rooms are included in the most recently delivered Capital Expenditure budget
approved by the Holders prior to the Closing Date, (iv) YMS Rooms which the
Company or its Subsidiaries have subsequently sold to First Sierra pursuant to
the YMS leasing program evidenced by the Vendor Lease Plan Agreement, which
sales must be for cash consideration to be paid in accordance with its normal
trade terms and the terms of which must provide that neither the Company nor any
such Subsidiary shall have any further obligations with respect to such YMS
Rooms (other than obligations owing pursuant to the Vendor Lease Plan
Agreement), and (v) YMS Rooms which have been sold for cash pursuant to such
other leasing program approved in writing by the Majority Lenders (as such term
is defined in the Credit Agreement) or if the Credit Agreement has been
terminated, the Holders.
7.12 MAXIMUM CAPITAL EXPENDITURES. The Company will not make any Capital
Expenditures other than (a) maintenance Capital Expenditures during any fiscal
quarter required in connection with the ongoing operation of the Company's and
its Subsidiaries' businesses to the extent that such Capital Expenditures for
each such fiscal quarter does not exceed the sum of (i) the Capital Expenditures
projected amount for such fiscal quarter as set forth in the most recently
delivered Capital Expenditures projection furnished to the Holders plus (ii) the
amount of any maintenance Capital Expenditures projected to be made during the
immediately preceding fiscal quarter (without giving effect to any carry-forward
amounts from prior periods) that were not actually made, and (b) Capital
Expenditures related to YMS Rooms that comprise the "millennium program" to the
extent provided for in the budget for Capital Expenditures delivered prior to
the Closing Date.
7.13 MAXIMUM TOTAL DEBT TO EBITDA RATIO. The Company will maintain a Total
Debt to EBITDA Ratio as of the end of each calendar month for the twelve month
period then ended of not greater than (i) for the calendar month ending July 31,
1999, 3.25 to 1.00, (ii) for the calendar month ending August 31, 1999, 3.20 to
1.00, (iii) for the calendar month ending September 30, 1999, 3.15 to 1.00, and
(iv) for each calendar month ending thereafter, 3.00 to 1.00.
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7.14 MAXIMUM TOTAL DEBT TO TOTAL CAPITAL RATIO. The Company will maintain
a Total Debt to Total Capital Ratio as of the end of each calendar month of not
greater than 55%.
7.15 MINIMUM EBITDA. The Company will maintain its EBITDA as of the end of
each fiscal quarter for the fiscal quarter then ended of at least (i) for the
calendar quarter ending September 30, 1999, $5,575,000, (ii) for the calendar
quarter ending December 31, 1999, $6,875,000, (iii) for the calendar quarter
ending March 31, 2000, $8,525,000, (iv) for the calendar quarter ending June 30,
2000, $6,975,000, (v) for the calendar quarter ending September 30, 2000,
$7,150,000, (vi) for the calendar quarter ending December 31, 2000, $8,575,000,
(vii) for the calendar quarter ending March 31, 2001, $9,000,000, and (viii) for
each calendar quarter ending thereafter, $7,375,000.
7.16 LOANS, ADVANCES, INVESTMENTS. The Company and its Subsidiaries shall
not purchase or acquire any stock, indebtedness, obligations or securities of,
or any other interest in, or make any capital contribution to, any Person (any
of the foregoing, an "Investment") or lend money or make advances to any Person
except:
(a) as permitted by SECTION 7.5(A) or (B) or SECTION 7.1(C);
(b) Investments outstanding as of the Closing Date and listed on ANNEX
7.16 hereto;
(c) loans to employees of the Company or any of its Subsidiaries for (i)
short-term loans in an aggregate amount of no greater than $250,000 at any one
time outstanding and in an amount no greater than $100,000 for any Person, and
(ii) moving and travel expenses and other similar expenses; in each case
incurred in the ordinary course of business;
(d) receivables owing to the Company or its Subsidiaries created or
acquired in the ordinary course of business and payable on customary trade terms
of the Company or such Subsidiary and in compliance with the arms-length
requirements of SECTION 7.7;
(e) other advances or loans to, or Investments in, any Person, PROVIDED
THAT the aggregate amount of such other loans and advances outstanding and
Investments shall not exceed $250,000 at any one time outstanding;
(f) Investments in Cash Equivalents; and
(g) lease receivables in connection with the YMS Rooms described on ANNEX
7.16 hereto, which lease receivables may not at any time exceed an amount equal
to (i) with respect to each existing YMS Room listed on such ANNEX 7.16, the
amount of the lease receivables for such YMS Room existing as of the Closing
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Date (which maximum lease receivable amount for such YMS Room permitted
hereunder shall decrease in accordance with the amortization schedule or payment
schedule set forth in the lease for such YMS Room as in effect on the Closing
Date) and (ii) with respect to each YMS Room described on such ANNEX 7.16 as not
currently in existence but which is currently committed to be installed, the
amount of projected lease receivables for such committed YMS Room set forth on
ANNEX 7.16 hereto."
1.7 AMENDMENTS TO SECTION 8.
(a) Section 8.3 is hereby amended by (i) deleting the years "1990",
"1991", "1992" and "1993" on the third line thereof and inserting in lieu
thereof the years "1995," "1996," "1997" and "1998," respectively and (ii)
deleting the year "1994" on the sixth line thereof and inserting in lieu thereof
the year "1999".
(b) Section 8 of the Agreement is amended hereby by adding the
following subsections after Section 8.24:
"8.25 YEAR 2000 COMPLIANCE.
(a) The Company has (i) begun analyzing its business and operations and
each of its Subsidiaries and Affiliates' business and operations that could be
adversely affected by failure to become Year 2000 compliant (that is, the risk
that computer applications, imbedded microchips and other systems used by the
Company or any of its Subsidiaries or Affiliates will be able to perform
properly date sensitive functions prior to and after December 31, 1999), (ii)
developed a plan for becoming Year 2000 compliant in a timely manner, the
implementation of which is on schedule in all material respects and (iii) to
date, implemented that plan in accordance with that timetable. The Company
reasonably believes that it will become Year 2000 compliant for its operations
and those of its Subsidiaries and Affiliates on a timely basis except to the
extent that a failure to do so could not reasonably be expected to have a
material adverse effect upon the financial condition of the Company.
(b) The Company reasonably believes that any suppliers, vendors, and
customers that are material to its operations or the operations of its
Subsidiaries and Affiliates will be Year 2000 compliant for their own computer
applications except to the extent that a failure to do so could not reasonably
be expected to have a material adverse effect upon the financial condition of
the Company.
8.26 INSURANCE. The Company and its Subsidiaries carry insurance with
reputable insurers in respect of such of their respective assets and properties,
in such amounts and against such risks as is customarily maintained by other
Persons of similar size engaged in similar businesses or, self-insure to the
extent that is customary for Persons of similar size engaged in similar
businesses."
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1.8 AMENDMENT TO SECTION 9.
(a) Clause (c) of Section 9.1 of the Agreement is hereby amended by
deleting it and inserting in lieu thereof the following:
"(c) Default shall occur in the observance or performance of any of the
covenants or conditions contained in SECTIONS 6.8, 6.11, 6.13, 6.14 and 6.15 or
Sections 7.1, 7.2, 7.3, 7.4(A), 7.5, 7.6, 7.7, 7.9 through 7.16, or the Company
shall fail to comply with the notice requirements of SECTION 6.1(G) hereof;"
(b) Clause (d) of Section 9.1 of the Agreement is hereby amended by
deleting it and inserting in lieu thereof the following:
"(d) [Intentionally Omitted];"
(c) Clause (i) of Section 9.1 of the Agreement is hereby amended by
inserting after the word "thereby" on the third, seventh and ninth lines thereof
the following language: "(including, without limitation, the Financing
Documents)".
(d) Section 9.1 of the Agreement is hereby amended by inserting after
clause (l) the following clauses:
"(m) the Collateral Agent and the Holders shall fail to have an Acceptable
Security Interest in the Collateral (other than Collateral deemed immaterial by
the Collateral Agent in its sole reasonable discretion) or (ii) any material
provision of any Financing Document shall for any reason cease to be valid and
binding on the Company or any Guarantor executing such Financing Document, or
any such Person shall so state in writing; or
(n) the Company, any Guarantor, any Person acting on behalf of the Company
or any Guarantor or any governmental, judicial or arbitral authority challenges
the validity of any Financing Document or the Company's or any Guarantor's
obligations thereunder, or any Financing Document ceases to be in full force and
effect in all material respects or ceases to give to the Holders the rights and
powers purported to be granted in their favor thereby in all material respects.
(o) any Person or two or more Persons acting in concert shall acquire
beneficial ownership (within the meaning of Rule 13d-3 of the Securities
Exchange Act of 1934), directly or indirectly, of securities of the Company (or
other securities convertible into such securities) representing fifty percent
(50%) or more of the combined voting power of all outstanding securities of the
Company entitled to vote in the election of directors."
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(e) Section 9.5 of the Agreement is amended hereby by deleting "9.87%" in
the first sentence and substituting in lieu thereof "10.37%".
1.9 AMENDMENTS TO SECTION 12.
(a) Section 12.1 of the Agreement is hereby amended by inserting the
following definitions in their proper alphabetical order:
""Acceptable Security Interest" in any Property shall mean a Lien (a)
which exists in favor of the Collateral Agent for the benefit of, among other
persons, the Holders, (b) which is superior to all other Liens (except as
expressly permitted by this Agreement), (c) which secures the Obligations, and
(d) which is perfected and enforceable against all Persons in preference to any
rights of any Person therein (other than rights expressly permitted by this
Agreement and the Intercreditor Agreement).
"Acquisition" shall mean a direct or indirect purchase by the Company or
any of its Subsidiaries after the date hereof for cash, stock or other
securities or other property, whether in one or more related transactions, of
all or substantially all of the assets or voting securities or other equity
interests of a Person or a business unit, division or group of a Person.
"Agent" shall mean ABN AMRO Bank N.V. acting in its capacity as agent
for the Lenders, and any successor agent appointed pursuant to SECTION 9.7 of
the Credit Agreement.
"Authorized Officer" shall mean any officer or other employee of the
Company or the Guarantor, as applicable, authorized from time to time to execute
and deliver a Financing Document.
"Capital Expenditures" shall mean, for any period, the sum, without
duplication, of (i) all expenditures of the Company and its Subsidiaries for
fixed or capital assets made during such period which, in accordance with GAAP,
would be classified as capital expenditures, and (ii) all Capitalized Lease
Obligations incurred during such period.
"Capitalized Lease Obligations" shall mean, for any period, the amount of
the Company's and its Subsidiaries' liabilities under all leases (or similar
arrangements) of real or personal property (or any interest therein) which in
accordance with GAAP would be classified as capitalized leases on the balance
sheet of the Company and its Subsidiaries.
"Cash Equivalents" shall mean (i) securities issued or directly and fully
guaranteed or insured by the United States or any agency or instrumentality
thereof having maturities of not more than twelve (12) months from the date of
acquisition; (ii) U.S. Dollar denominated time deposits and certificates of
deposit
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maturing within one (1) year from the date of acquisition thereof with any
Lender, or any other financial institution whose short-term senior unsecured
debt rating is at least A-2 from S&P or P-2 from Moody's; (iii) LIBOR
denominated time deposits and certificates of deposit maturing within six (6)
months from the date of acquisition thereof with any Lender, or any other
financial institution whose short-term senior unsecured debt rating is at least
A-1 from S&P or P-1 from Moody's; (iv) commercial paper or Eurocommercial paper
with a rating of at least A-1 from S&P or P-1 from Moody's, with maturities of
not more than twelve (12) months from the date of acquisition; (v) repurchase
obligations entered into with any Lender or any other financial institution
whose short-term senior unsecured debt rating is at least A-1 from S&P or P-1
from Moody's, which are secured by a fully perfected security interest in any
obligation of the type described in (i) above and has a market value at the time
such repurchase is entered into of not less than 100% of the repurchase
obligation of such Lender or such other Person thereunder; (vi) marketable
direct obligations issued by any state of the United States or any political
subdivision of any such state or any public instrumentality thereof maturing
within twelve (12) months from the date of acquisition thereof or providing for
the resetting of the interest rate applicable thereto not less often than
annually and, at the time of acquisition, having one of the two highest ratings
obtainable from either S&P or Moody's; and (vii) money market funds which have
at least $1,000,000,000 in assets and which invest primarily in securities of
the types described in clauses (i) through (vi) above.
"Collateral" shall mean all of the Property described under the
definitions of "Collateral", "Pledged Shares", "Pledged Securities", "Mortgaged
Property" or any other similar term contained in any of the Security Documents.
"Collateral Agent" shall mean ABN AMRO Bank N.V., in its capacity as
Collateral Agent under the terms of the Intercreditor Agreement, and any
successor Collateral Agent pursuant to Section 3.6 of the Intercreditor
Agreement.
"Consolidated Interest Expense" shall mean, for any period, the total
interest expense of the Company and its Subsidiaries on a consolidated basis for
such period in connection with Debt, determined in accordance with GAAP.
"Consolidated Interest Income" shall mean, for any period, the total
interest income of the Company and its Subsidiaries on a consolidated basis for
such period in connection with Debt, determined in accordance with GAAP.
"Consolidated Net Worth" shall mean, as of any date of determination, the
Company's consolidated stockholders' equity determined in accordance with GAAP.
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"EBITDA" shall mean, as of any date of determination, the sum of (i)
Consolidated Net Income before (a) Consolidated Interest Expense, (b)
Consolidated Interest Income, (c) provisions for taxes based on income or
revenues, and (d) any extraordinary, unusual or nonrecurring gains or losses;
plus (ii) the amount of all depreciation, amortization expense and other
non-cash charges (excluding the effects of any accruals made in the ordinary
course of business) deducted in determining Consolidated Net Income, all
calculated on a consolidated basis for the Company and its Subsidiaries and as
determined in accordance with GAAP. Upon the consummation of any Acquisition,
EBITDA shall be adjusted to include the historical financial results of the
acquired business (on a historic twelve-month rolling pro forma basis).
"Financing Documents" shall mean this Agreement, the Notes, the Subsidiary
Guaranties, the Security Documents, the Subordination Agreements, the
Intercreditor Agreement and any other documents or instruments executed by the
Company or any of the Guarantors in connection with this Agreement, as the same
may be amended from time to time.
"First Sierra" shall mean First Sierra Financial, Inc.
"Foreign Subsidiary" shall mean any Subsidiary of the Company incorporated
in a jurisdiction other than in a state, province or territory of the United
States.
"Guarantor" shall mean each Subsidiary of the Company (other than YCF).
"Intercreditor Agreement" shall mean the Intercreditor Agreement dated as
of August 12, 1999 among the Company, the Guarantors, the Holders, the Lenders,
the Agent and the Collateral Agent, as the same may be amended from time to
time.
"Interest Rate Protection Agreement" shall mean any interest rate swap,
interest rate cap, interest rate collar, or other interest rate hedging
agreement or arrangement designed to protect against fluctuations in interest
rates.
"Lenders" shall mean the Agent and other lenders as defined in the
introductory paragraph of the Credit Agreement.
"Moody's" shall mean Moody's Investors Service, Inc. or any successor
thereto.
"Mortgage" shall mean a mortgage in form and substance satisfactory to the
Holders, executed by the Company or any of its Subsidiaries, and "Mortgages"
shall mean all such Mortgages collectively.
"Net Cash Proceeds from Assets" shall mean with respect to any asset sale
or transfer by the Company or any of its
-21-
<PAGE>
Subsidiaries permitted by SECTION 7.6 (including, without limitation, any sale
or transfer resulting from a casualty event or condemnation), the net cash
proceeds received by the Company or such Subsidiary after giving effect to (x)
reasonable cash transaction costs and expenses attributable to such sale, (y)
cash taxes owing in connection with any taxable gain (measured on a consolidated
basis) attributable to such sale and purchase price adjustments reasonably
expected to be payable in connection therewith, and (z) the repayment of any
Debt owing by the Company or such Subsidiary to any Person (other than the
Company or any other Subsidiary of the Company) in respect of such asset.
"Pledge Agreement" shall mean each of the Pledge Agreements in
substantially the form of EXHIBIT 4.1B of the Credit Agreement and executed by
the Company or any Subsidiary of the Company to secure all or a portion of the
Obligations.
"Security Agreement" shall mean each of the Security Agreements in
substantially the form of EXHIBIT 4.1A of the Credit Agreement and executed by
the Company or any Subsidiary of the Company to secure all or a portion of the
Obligations.
"Security Documents" shall mean the Pledge Agreements, the Security
Agreements, the Mortgages and each other document, instrument or agreement
executed in connection therewith or otherwise executed in order to secure all or
a portion of the Obligations.
"S&P" shall mean Standard & Poor's Ratings Group or any successor thereto.
"Special Purpose Subsidiaries" shall mean Colonial Trade Company, Inc.,
Dixie Vault Trade Company, Inc., Doody Trade Company, Inc., Elder Davis Trade
Company, Inc., T.Y.G. Company, Inc., T.Y.G. Trade II Company, Inc. and West
Point Trade Company, Inc.
"Tangible Net Worth" shall mean, as of the date of its determination, the
Consolidated Net Worth of the Company, excluding all of the Company's
consolidated intangible assets, as determined in accordance with GAAP
consistently applied.
"Taxes" shall mean all federal tax returns and all other material tax
returns required to be filed and all governmental taxes, rates, assessments,
fees, charges and levies.
"Term Loans" shall mean any advance by a Lender to the Company pursuant to
the Credit Agreement as part of a Term Borrowing and refers to a Base Rate Loan
or a Eurodollar Loan (as each such term is defined in the Credit Agreement).
"Total Capital" shall mean, as of any date of determination, the sum of
Total Debt plus Consolidated Net Worth as of such date.
-22-
<PAGE>
"Total Debt" shall mean, as of any date of determination, the aggregate
amount of all Debt of the Company and its Subsidiaries outstanding on such date
determined on a consolidated basis in accordance with GAAP.
"Total Debt to EBITDA Ratio" shall mean, as of any date of determination,
the ratio of Total Debt to EBITDA, calculated using Total Debt at the date of
determination and EBITDA on a historic rolling twelve-months basis.
"Total Debt to Total Capital Ratio" shall mean, as of any date of
determination, the ratio of Total Debt to Total Capital.
"Trademark and Patent Security Agreement" shall mean each of the Trademark
and Patent Security Agreements in substantially the form of EXHIBIT 4.1E of the
Credit Agreement and executed by the Company or any Subsidiary of the Company to
secure all or a portion of the Obligations.
"Transfer" shall mean a sale, transfer, conveyance, assignment or other
disposition (or a series of related dispositions), including, without
limitation, any transfer pursuant to an option to purchase, any sale or
assignment (with or without recourse) of any accounts receivable and any sale
and leaseback of assets, of an asset, but excluding any involuntary transfer by
operation of law and any transfers of an asset pursuant to any casualty or theft
with respect to such asset.
"Triggering Event" shall have the meaning set forth in the
Intercreditor Agreement.
"Vendor Lease Plan Agreement" shall mean the Vendor Lease Plan Agreement
between the Company and First Sierra certified by an Authorized Officer of the
Company as being true and correct and attaching all amendments, modifications,
supplements and waivers to such agreement through the Closing Date.
"YCF" shall mean the York Children's Foundation, a non-profit
corporation.
"YMS Rooms" shall mean merchandising system rooms of the Company or any of
its Subsidiaries set up in the ordinary course of business at third party
facilities."
(b) Section 12.1 of the Agreement is further amended by (1) deleting
the figure "5 million" from the fourteenth line of the definition of "Debt"
therein and substituting in lieu thereof "2,500,000," and (2) deleting the
following language on the twentieth line of such definition: "or (ii) casket
repurchase obligations under any repurchase agreements in an amount not to
exceed $5,000,000 in the aggregate during the term of this Agreement".
-23-
<PAGE>
(c) Section 12.1 of the Agreement is further amended by deleting the
definition of "Credit Agreement" and inserting in lieu thereof the following:
""Credit Agreement" shall mean the Credit Agreement, among the
Company, the Agent and the Lenders, whether or not such Credit Agreement is
amended, modified or terminated after the date hereof."
(d) Section 12.1 of the Agreement is further amended by inserting in
the definition of "Consolidated Earnings Before Interest, Leases and Taxes":
after the words "(C) Lease Expense" the words:
"minus (iii) any extraordinary, unusual or nonrecurring gains or
losses"
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to you as follows:
2.1 ORGANIZATION, AUTHORIZATION, ETC. Each of the Company, its
Subsidiaries and the Guarantors is a corporation or limited liability company
duly organized, validly existing and in good standing under the laws of their
respective states of organization or incorporation, and has all requisite power
and authority to execute, deliver and perform its obligations under this
Amendment, the Agreement and the Financing Documents.
The execution and delivery of this Amendment and the performance of this
Amendment, the Agreement and the Financing Documents have been duly authorized
by all necessary corporate or other and, if required, stockholder action on the
part of the Company, its Subsidiaries and the Guarantors. This Amendment, the
Agreement and the Financing Documents are legal, valid and binding obligations
of the Company, enforceable against the Company, its Subsidiaries and the
Guarantors in accordance with their respective terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization, fraudulent transfer,
moratorium or other similar laws relating to or affecting creditors' rights
generally and by general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
2.2 COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC. The execution,
delivery and performance by the Company, its Subsidiaries and the Guarantors of
this Amendment, the Agreement and the Financing Documents do not and will not
(i) violate (A) any provision of any law, statute, rule or regulation, other
than any law, statute, rule or regulation, the violation of which will not
result in a material adverse effect on the financial condition of the Company,
or of the certificate of incorporation, certificate of formation, or other
constitutive documents or by-laws of the Company, any Subsidiary or any
Guarantor, (B) any order of any Governmental Authority or (C) any provision of
any
-24-
<PAGE>
material indenture, agreement or other instrument to which the Company or any
Guarantor is a party or by which any of them or any of their property or assets
is or may be bound, (ii) be in conflict with, result in a breach of or
constitute (alone or with notice or lapse of time or both) a default under any
such indenture, agreement or other instrument or (iii) result in the creation or
imposition of any Lien (other than any Lien created under the Financing
Documents) upon or with respect to any property or assets now owned or hereafter
acquired by the Company, any Subsidiary or any Guarantor.
2.3 GOVERNMENTAL AUTHORIZATIONS, ETC. No approval, authorization or
consent of, or registration, filing or declaration with, any state, federal or
local governmental body is required in connection with the execution, delivery
or performance by the Company of this Amendment, except such as have been made
or obtained and are in full force and effect and other than filings, recordings
and approvals to record and/or perfect the Liens created by the Financing
Documents.
2.4 NO DEFAULT, ETC. Except as set forth in a letter from the
Holders to the Company dated June 28, 1999 (as amended on August 13, 1999), no
Event of Default or Default has occurred and is continuing, and neither the
Company, any Subsidiary or any Guarantor is in default (whether or not waived)
in the performance or observance of any of the terms, covenants or conditions
contained in any instrument evidencing any Indebtedness, and no event has
occurred and is continuing which, with notice or lapse of time or both, would
become such a default.
2.5 NO UNDISCLOSED FEES. The Company has not, directly or
indirectly, paid or caused to be paid any consideration (as supplemental or
additional interest, a fee or otherwise) to any Lender in order to induce such
Lender to enter into the Credit Agreement or to induce such Lender to take any
other action in connection with the transactions contemplated hereby, nor has
the Company agreed to make any such payment.
2.6 DELIVERY OF DOCUMENTS. The Company has provided to each Holder
true and complete copies of all documents executed by or provided by the Company
to the Collateral Agent, the Agent and the Lenders under the Credit Agreement.
2.7 NOTES NOT HELD BY COMPANY, ETC. Neither the Company nor any
Subsidiary or Affiliate of the Company directly or indirectly owns any of the
Notes.
2.8 OTHER REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in SECTION 8 of the Agreement are true and
correct in all material respects on and as of the Effective Date. The schedules
to the Agreement with respect to the representations and warranties of
-25-
<PAGE>
the Company set forth in SECTION 8 of the Credit Agreement are set forth in
EXHIBIT B hereto.
3. CONDITIONS TO EFFECTIVENESS OF THIS AMENDMENT.
This Amendment shall become effective only upon the satisfaction in
full (or waiver by the Holders) of the following conditions precedent (the first
date upon which each such condition shall have been so satisfied or waived being
herein referred to as the "Effective Date"):
(a) NO DEFAULTS. On the Effective Date (after giving effect to
this Amendment) no Default or Event of Default shall have occurred and be
continuing.
(b) AMENDMENT. Each of the Company and the Holders shall have
executed this Amendment, and counterparts thereof bearing the signatures of the
Company shall have been delivered to the Holders.
(c) CONDITIONS. All of the conditions of closing set forth in
Section 3 of the Agreement (except for SECTIONS 3.3 and 3.10 of the Agreement)
shall be satisfied as of August 12, 1999 as if the Closing Date was such date.
(d) REPRESENTATIONS AND WARRANTIES, ETC. The representations
and warranties of the Company contained in Section 8 of the Agreement shall be
true in all material respects on and as of the Effective Date as though such
representations and warranties had been made on and as of the Effective Date,
except to the extent such representations and warranties expressly relate to an
earlier date or that there are changes to the factual information contained in
such representations and warranties that do not reflect any violation of or
failure to comply with any provision of the Agreement, and the Holders have
received a certificate of a senior financial officer of the Company, dated the
Effective Date, to such effect.
(e) FINANCING DOCUMENTS. The Holder shall have received a copy
of the Financing Documents executed and delivered by the Company, the Guarantor,
the Collateral Agent, the Agent and the Lenders, as the case may be, with no
modifications thereof.
(f) OFFICER'S CERTIFICATE. The Collateral Agent shall have
received an officer's certificate of the Company certifying as to the
satisfaction of all conditions to closing, such certificate to be substantially
satisfactory in form and substance to all the Holders.
(g) VENDOR LEASE PLAN AGREEMENT The Holders shall have
received a certified copy of the Vendor Lease Plan Agreement certified by an
Authorized Officer of the Company as being true and correct and attaching all
amendments,
-26-
<PAGE>
modifications, supplements and waivers to such agreement through the Closing
Date.
4. AGREEMENT; TERMS. Except as otherwise provided hereby, the
Agreement shall continue in full force and effect in accordance with the
provisions thereof on the date hereof, and this Amendment shall not be deemed to
waive or amend any provision of the Agreement or the Intercreditor Agreement
except as expressly set forth herein. As used in the Agreement, the terms "this
Agreement", herein, hereinafter, hereunder, hereto and words of similar import
shall mean and refer to, from and after the Effective Date, unless the context
otherwise requires, the Agreement as amended by this Amendment. Capitalized
terms used and not defined herein shall have the meaning assigned to such terms
in the Agreement or the Intercreditor Agreement.
5. HEADINGS. Section headings in this Amendment are included herein
for convenience of reference only and shall not define, limit or otherwise
affect any of the terms or provisions hereof.
6. COUNTERPARTS. This Amendment may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute one
and the same instrument, and all signatures need not appear on any one
counterpart.
7. EXPENSES. Without limiting the generality of SECTION 13.1 of the
Agreement, the Company agrees to pay the reasonable fees and disbursements and
other charges of Willkie Farr & Gallagher, the Holders' special counsel, for
their services rendered in connection with the transactions contemplated hereby
and with respect to this Amendment and any other document delivered pursuant to
this Amendment and reimburse the Holders for their out-of-pocket expenses in
connection with the foregoing; PROVIDED, HOWEVER, that the Company agrees to pay
the fees and disbursements of Willkie Farr & Gallagher set forth on a statement
delivered to it on or prior to August 23, 1999, no later than Monday, August 23,
1999 by wire transfer as set forth in such statement.
8. CLOSING Fee. The Company agrees to pay a closing fee equal to
$89,285.71 to the Holders no later than Monday, August 23, 1999 by wire transfer
as set forth in Section 6.15 of the Agreement.
9. LAW GOVERNING: SUBMISSION TO JURISDICTION.
(a) THIS AMENDMENT, THE NOTES, AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH (i) THE LAWS OF THE STATE OF TEXAS WITHOUT REFERENCE TO THE
PRINCIPLES OF CONFLICTS
-27-
<PAGE>
OF LAWS THEREUNDER AND (ii) THE LAWS OF THE UNITED STATES OF AMERICA, AS
APPLICABLE.
(b) EACH OF THE COMPANY AND THE HOLDERS HEREBY IRREVOCABLY AND
UNCONDITIONALLY:
(i) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AMENDMENT, ANY NOTE AND ANY DOCUMENT TO WHICH IT IS
A PARTY, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT OF ANY
THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF
TEXAS, THE COURTS OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF
TEXAS, AND APPELLATE COURTS FROM ANY THEREOF;
(ii) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN
SUCH COURTS, AND WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE
VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR
PROCEEDING WAS BROUGHT IN ANY INCONVENIENT COURT AND AGREES NOT TO PLEAD OR
CLAIM THE SAME;
(iii) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR
PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED
MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM AND MAIL), POSTAGE PREPAID, TO IT AT ITS
ADDRESS SPECIFIED OR REFERENCED IN SECTION 13.2 OF THE AGREEMENT; AND
(iv) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT
SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT
TO SUE IN ANY OTHER JURISDICTION.
[REMAINDER OF THE PAGE INTENTIONALLY LEFT BLANK]
-28-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed as of the date first above written.
THE YORK GROUP, INC.
By:________________________
Name:
Title:
THE VARIABLE ANNUITY LIFE
INSURANCE COMPANY
By:________________________
Name:
Title:
-29-
<PAGE>
EXHIBIT "A"
THE YORK GROUP, INC.
8.37% SENIOR SECURED NOTE
DUE JUNE 30, 2004
Registered Note No. ____ Houston, Texas
$_______________ ______________
PPN ____________
THE YORK GROUP, INC., a Pennsylvania corporation (the "Company"), for
value received, hereby promises to pay to
_____________________________________________, or registered assigns, on the
30th day of June, 2004, the principal sum of _________________________ AND
00/100 DOLLARS ($_____________) (or so much thereof as shall not have been
prepaid) and to pay interest (computed on the basis of a 360-DAY year, with
interest payments calculated on the basis of twelve 30-day months) on the
principal amount from time to time remaining unpaid hereon at the rate of (i)
7.87% per annum from June 30, 1999 to and including August 11, 1999 and (ii)
8.37% per annum from and including August 12, 1999 until maturity, payable
commencing on August 31, 1999, and thereafter monthly on the last day of each
month and at maturity, and to pay interest on any overdue principal and (to the
extent legally permitted) on any overdue installment of interest or any overdue
premium, at a rate per annum equal to the Default Rate, after maturity, whether
by acceleration or otherwise, until paid. The principal hereof and interest to
accrue hereon and premium, if any, are payable in lawful money of the United
States of America in accordance with the Agreement (hereinafter defined).
This note (the "Senior Secured Note") is one of a duly authorized issue of
Senior Notes of the Company in the aggregate principal amount of $25,000,000
issued under and pursuant to the terms and provisions of a Senior Secured Note
Purchase Agreement dated as of June 30, 1994, as amended by the First Amendment,
dated as of August 12, 1999 (the "Agreement"), entered into by the Company with
the Purchasers named in Annex I to said Agreement, and this Senior Secured Note
and the Holder hereof are entitled equally and ratably with the Holders of all
other Senior Secured Notes outstanding from time to time under the Agreement to
all of the benefits provided for by said Agreement or referred to therein by any
thereof. This Senior Secured Note is also entitled to the benefits of Subsidiary
Guarantees heretofore and from time to time hereafter executed and delivered
pursuant to the Agreement. The provisions of the Agreement (including, without
limitation, Section 5.2 of the Agreement) are hereby
<PAGE>
incorporated in this Senior Secured Note to the same extent as if set forth at
length herein. All capitalized terms not otherwise defined herein shall have the
respective meanings ascribed to them in the Agreement.
As provided in the Agreement, upon surrender of this Senior Secured Note
for registration or transfer, duly endorsed or accompanied by a written
instrument of transfer duly executed, by the registered holder hereof or his
attorney duly authorized in writing, a new Senior Secured Note for a like unpaid
principal amount will be issued to, and registered in the name of, the
transferee upon the payment of the taxes or other governmental charges, if any,
that may be imposed in connection therewith. The Company may treat the Person in
whose name this Senior Secured Note is registered as the owner hereof for the
purpose of receiving payment and for all other purposes, and the Company shall
not be affected by any notice to the contrary.
This Senior Secured Note and any other Senior Secured Note may, under
certain circumstances be declared due prior to its expressed maturity date, all
in the events, on the terms and in the manner as provided in the Agreement.
As provided in the Agreement, this Senior Secured Note is subject to
optional and mandatory prepayment in whole or in part, with premium, and the
Company agrees to make such prepayments of principal on the dates, in the
amounts and in the manner provided in the Agreement, to which reference is made
for the terms and conditions applicable to prepayment.
Should the indebtedness represented by this Senior Secured Note or any
part thereof be collected in any proceeding provided for in the Agreement or be
placed in the hands of attorneys for collection, the Company agrees to pay, in
addition to the principal, premium, if any, and interest due and payable hereon,
all costs of collecting this Senior Secured Note, including reasonable
attorneys' fees and expenses.
Notwithstanding any provision to the contrary in the Agreement or this
Senior Secured Note or in any document or documents otherwise relating thereto
or hereto, in no event shall the Agreement or this Senior Secured Note or such
documents require or permit the payment, charging, taking, reserving, or
receiving of any sums constituting interest under applicable laws which exceed
the maximum amount permitted by such laws. If any such excess interest is
contracted for, charged, taken, reserved, or received under the Agreement or
this Senior Secured Note or in any of the documents otherwise relating thereto
or hereto, or in any communication by the Holder hereof or any other Person to
the Company or any other party liable for payment of this Senior Secured Note,
or in the event all or part of the principal or interest hereof shall be prepaid
or accelerated, so that under any of such circumstances or under any other
circumstance whatsoever the amount of interest contracted for, charged, taken,
<PAGE>
reserved, or received on the amount of principal actually outstanding from time
to time under the Agreement or this Senior Secured Note shall exceed the maximum
amount of interest permitted by applicable usury laws, then in any such event it
is agreed as follows: (i) the provisions of this paragraph shall govern and
control, (ii) any such excess shall be canceled automatically to the extent of
such excess, and shall not be collected or collectible, (iii) any such excess
which is or has been received shall be credited against the then unpaid
principal balance of this Senior Secured Note or refunded to the Company, at the
option of the Holder hereof, and (iv) the effective rate of interest shall be
automatically reduced to the maximum lawful rate allowed under applicable laws
as construed by courts having jurisdiction hereof or thereof. Without limiting
the foregoing, all calculations of the rate of interest contracted for, charged,
taken, reserved, or received in connection herewith which are made for the
purpose of determining whether such rate exceeds the maximum lawful rate shall
be made to the extent permitted by applicable laws by amortizing, prorating,
allocating and spreading during the period of the full term of this Senior
Secured Note, including all prior and subsequent renewals and extensions, all
interest at any time contracted for, charged, taken, reserved, or received. The
term "applicable usury laws" shall mean such laws of the State of Texas or the
laws of the United States, whichever laws allow the higher rate of interest, as
such laws now exist; provided, however, that if such laws shall hereafter allow
higher rates of interest, then the applicable usury laws shall be the laws
allowing the higher rates, to be effective as of the effective date of such
laws.
This Senior Secured Note is entitled to all of the benefits of the
Agreement.
THIS SENIOR SECURED NOTE IS GOVERNED BY AND IS TO BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE LAWS OF THE UNITED STATES
OF AMERICA.
THE YORK GROUP, INC.
By:_______________________________
Name:
Title:
<PAGE>
EXHIBIT "B"
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE YORK GROUP, INC. 1999 THIRD QUARTER REPORT ON FORM 10-Q AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 1,653
<SECURITIES> 0
<RECEIVABLES> 38,881
<ALLOWANCES> 4,022
<INVENTORY> 35,108
<CURRENT-ASSETS> 78,756
<PP&E> 94,851
<DEPRECIATION> 32,745
<TOTAL-ASSETS> 217,626
<CURRENT-LIABILITIES> 49,494
<BONDS> 62,103
0
0
<COMMON> 89
<OTHER-SE> 89,805
<TOTAL-LIABILITY-AND-EQUITY> 217,626
<SALES> 150,154
<TOTAL-REVENUES> 150,154
<CGS> 101,721
<TOTAL-COSTS> 101,721
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,293
<INCOME-PRETAX> 9,791
<INCOME-TAX> 4,064
<INCOME-CONTINUING> 5,727
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,727
<EPS-BASIC> 0.64
<EPS-DILUTED> 0.63
</TABLE>
