SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ ] Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934 [Fee Required]
or
[X] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from April 1, 1996 to December 31, 1996
Commission file number 1-12271
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CARSON, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 06-1428605
(State or other jurisdiction of incorporation
or organization) (I.R.S. Employer Identification
Number)
64 Ross Road, Savannah Industrial Park
Savannah, Georgia 31405
(Address, including zip code, of principal executive offices)
Registrant's telephone number, including area code: (912) 651-3400
Securities Registered Pursuant to Section 12 (b) of the Act:
Title of Each Class: Name of Exchange On Which Registered:
Common Stock - Class A, $0.01 Par Value New York Stock Exchange
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
Securities Registered Pursuant to Section 12 (g) of the Act: None
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Aggregate market value of the voting stock held by non-affiliates of the
registrant, computed by reference to the closing price on The New York Stock
Exchange on February 28, 1997 was: $90,248,064
Indicate the number of shares outstanding of each of the registrant's classes,
as of the latest practicable date.
Title of Each Class: Outstanding at February 28,
1997:
Common Stock - Class A, $0.01 Par Value 4,996,568 shares
Common Stock - Class B, $0.01 Par Value 1,859,677 shares
Common Stock - Class C, $0.01 Par Value 8,127,937 shares
Documents incorporated by reference:
1996 Annual Report to Shareholders -- Part II, Exhibit 13.
Definitive Proxy Statement for the 1997 Annual Meeting of Shareholders on May 9,
1997 -- Part III.
<PAGE>
Part I.
Item 1. Business
Forward Looking Statements
This transition report on Form 10-K for the nine months ended December 31,
1996 as well as other public documents of the Company contain forward-looking
statements which involve risks and uncertainties, including (i) the Company's
plans to introduce new products and product enhancements, (ii) the Company's
plans to expand its international operations in Africa, Brazil, and the
Caribbean, (iii) the Company's plans to enter the ethnic cosmetics product
category, (iv) the Company's plans to enter the U.S. professional salon market
for ethnic hair care products, (v) the Company's plans to make selective
acquisitions, and (vi) the Company's marketing, distribution and manufacturing
expansion plans. The Company's actual results may differ materially from those
discussed in such forward-looking statements. When used herein and in the
Company's future filings, the terms "expects", "plans", "intends", "estimates",
"projects", or "anticipates" or similar expressions are intended to identify
forward-looking statements (within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")). In addition to risk
factors that may be described in the Company's filings with the Securities and
Exchange Commission (the "Commission") (including this filing and the Company's
prospectus dated October 14, 1996), actual results could differ materially from
those expressed in any forward-looking statements made by the Company.
Additional risk factors include, but are not limited to, the following: (a) the
Company's success in implementing its growth strategy, including its success in
obtaining financing where required, (b) difficulties or delays in developing and
introducing new products or the failure of consumers to accept new product
offerings, (c) changes in consumer preferences, including reduced consumer
demand for the Company's current products, (d) the nature and extent of future
competition in the Company's principal marketing areas, and (e) political,
economic and demographic developments in the United States, Africa, Brazil, the
Caribbean, Europe and other countries where the Company now does or in the
future may do business.
Organization and Business
Carson, Inc. (formerly DNL Savannah Holding Corp. and also referred to herein as
the "Company") was established in May 1995 and until August 1995 its operations
were de minimus. On August 23, 1995, the Company acquired all of the outstanding
stock of Aminco, Inc. (also referred to as the "Predecessor"). Aminco's
operations were principally conducted by its wholly owned subsidiary, Carson
Products Company. Subsequent to the acquisition of Aminco, Carson Products
Company was merged into Aminco; the surviving entity was renamed Carson Products
Company. The accompanying financial statements of the Company include the
operating results of Carson Products Company ("Carson Products") from the
acquisition date.
The Company's acquisition of the Predecessor for approximately $95 million
in cash (including $6 million for fees and other costs directly associated with
the acquisition) was initially financed with long-term borrowings aggregating
approximately $68.0 million and has been accounted for as a purchase (the
"Acquisition"). Accordingly, the purchase price has been allocated to the
Predecessor's identifiable assets and liabilities based on the fair values at
the acquisition date. The excess of the purchase price over the fair value of
the Predecessor's identifiable net assets has been classified as goodwill.
In July 1996, the Company's South African subsidiary sold 25% of its shares
in an initial public offering on the Johannesburg Stock Exchange. The subsidiary
received net proceeds of approximately $4.2 million from this sale (which
resulted in a gain to the Company of approximately $2.8 million which was
recorded in paid in capital). In conjunction with this public offering, the
Company entered into an amendment to its license agreement with its South
African subsidiary which provides that commencing on April 1, 1998, its South
African subsidiary will pay the Company a royalty in the amount of 3.0% of the
net sales price of all licensed products. The amount of the royalty increases to
3.5% on April 1, 1999 and 4.0% on April 1, 2000 until the termination of the
agreement. The initial term of the agreement expires on April 1, 1999; however,
the agreement continues indefinitely thereafter until terminated by either party
upon 12 months written notice.
<PAGE>
General
Carson, Inc. is a leading manufacturer and marketer in the United States retail
ethnic hair care market for African-Americans. The Company believes that it is
one of the leading global manufacturers and marketers of ethnic hair care
products for persons of African descent. The Company's flagship brand, Dark &
Lovely, is the most widely recognized ethnic brand name in the United States
retail ethnic hair care market. The Company currently sells over 70 different
products under five principal brand names, including Dark & Lovely, Excelle,
Beautiful Beginnings, Dark & Natural and Magic. The majority of the Company's
sales are derived from four categories of the ethnic health and beauty aids
market: hair relaxers and texturizers, which are used to chemically treat and
straighten hair (constituting approximately 50% of the Company's sales in 1996),
hair color, shaving products and hair care maintenance products. The Company's
products are specifically formulated to address the unique physiological
characteristics of hair of persons of African descent, which typically include
curliness and dryness. The Company believes that it has the number one United
States retail market position in three of the four ethnic hair care categories
in which it competes (hair relaxers and texturizers, hair color and shaving
products). In addition, the Company believes that the strength of its
competitive position in the ethnic hair care industry is attributable, in part,
to its heritage of technological innovation and its focused Research and
Development effort. The Company markets its products in the United States with
its own experienced direct sales force. The Company currently markets its
products in over 60 countries outside of the United States, primarily through
local distributors. In the nine months ended December 31, 1996, approximately
28.5% of the Company's net sales were derived from sales within these countries.
The United States retail ethnic hair care market, principally targeting the
distinct hair care needs of African-Americans, was estimated to be a $1.2
billion retail business in 1995. According to 1995 United States Census Data
("Census Data") published by the United States Department of Commerce, the
African-American population was approximately 34 million and represented 12.7%
of the United States population. This segment of the population is projected by
the United States Department of Commerce to grow significantly faster than the
general population through the middle of the next century. The personal income
of African-Americans doubled from 1980 to 1990 and their combined purchasing
power was estimated to be approximately $260 billion in 1990, according to the
Census Data. Moreover, research indicates that African-American consumers
generally spend up to three times as much of their disposable income on health
and beauty products as Caucasian consumers.
<PAGE>
On a global scale, the Company currently estimates that there are approximately
900 million people of African descent outside the United States, including an
estimated 750 million people on the African continent, 100 million people in
Brazil, 20 million people in the Caribbean, 10-15 million people in Europe and
10-13 million people in Central America. The Company's experience in developing
regions such as South Africa, the Caribbean and Brazil indicates the percentage
of women who patronize salons is dramatically higher in these developing markets
than in developed markets such as the United States. These women tend to
patronize salons because relaxer products are generally unavailable on a retail
basis, professionals have the expertise, as well as ready access to hot water,
which is necessary for effective use of relaxer products, and the local salon is
often a social gathering place for its patrons. Although there is no independent
market data to support the size of the international market, the Company
believes that the international market is significant. For example, the Company
estimates that in Southern Africa, with a Black population of approximately 100
million, manufacturers of ethnic hair care products generated approximately $40
million in sales in 1995.
Ethnic Market Leadership
The Company's resources are focused primarily on satisfying the unique personal
care needs of individuals of African descent worldwide. The Company believes
that it has the number one United States retail market position in three of the
four ethnic hair care categories in which it competes (hair relaxers and
texturizers, hair color and shaving products). The Company attributes its
leading market position to its strong brand names, combined with its direct
sales force, broad distribution, R&D capabilities and experienced management
team. Because of these strengths, the Company believes that it has a competitive
advantage over both the companies specializing in products for the ethnic hair
care market and the few general market companies that compete in the ethnic hair
care market but whose principal resources are targeted to the general health and
beauty aids market.
Strong Brands. The Company currently sells its products under five
principal brand names including Dark & Lovely, Excelle, Beautiful Beginnings,
Dark & Natural and Magic. The Company's flagship brand, Dark & Lovely, is the
most widely recognized ethnic brand name in the United States retail ethnic hair
care market for African-Americans. The Company believes that its brand strength
is based upon product quality, properly targeted advertising, package design,
reputation for innovation and focused commitment to the unique needs of ethnic
consumers.
Experienced Sales Force and Broad Distribution. In April 1995, the Company
established a direct sales force to enhance its ability to further penetrate
existing markets with both current and new products. The sales force has
significant sales experience both with major consumer product companies and
ethnic hair care competitors. The Company believes that it now has the largest
direct sales force serving the United States retail ethnic hair care market.
Historically, the Company used commissioned sales brokers, as is the industry
norm, who tended to have conflicting brand loyalties and provided minimal
marketing and sell-through support. In the United States, the Company benefits
from having its extensive product line distributed broadly through three
principal channels: (i) multi-warehouse chains, including mass merchandisers
(e.g., Wal-Mart, K-Mart), major drug chains (e.g., Walgreens, Revco), food
chains (e.g., Winn Dixie, Kroger) and discount chains (e.g., Family Dollar,
Dollar General), (ii) Beauty and Barber Supply Stores ("B&B's") such as
Alberto-Culver Company's Sally's Beauty Supply stores and members of the
National Beauty Supply Dealers Association, and (iii) ethnic product
distributors.
Research and Development. The Company believes that its heritage of
technological innovation and its focused R&D effort are important to maintaining
its market leadership position. Three of the ethnic hair care industry's most
significant innovations were introduced by the Company: the first hair color
developed exclusively for hair of persons of African descent (1972), the first
no-lye relaxer, which provided a safe relaxer product for home use (1978), and
the recently patented Fail Safe technology for no-lye relaxers, which eliminates
problems associated with imprecise mixing which can make no-lye products too
weak, thereby impacting straightening, or too strong, leading to hair damage.
One of the most significant sources of consumer complaints in the industry is
inconsistent results caused by mixing errors. The Company believes that its R&D
department, led by two industry experienced chemists with Ph.Ds and including
nine other researchers and technicians, represents the largest R&D effort
focused on the ethnic hair care market.
Experienced Management Team. Carson's team of seasoned senior executives
with extensive experience in the ethnic market and consumer products industry
continue to build on the Company's strong position in the global ethnic hair
care market. This management team has focused the Company's strategy to further
develop the ethnic hair care market both in the United States and
internationally.
<PAGE>
Carson's Growth Strategy
The Company believes that it is well positioned to grow both internally and
through acquisitions, in order to enhance its market position in the ethnic
personal care market. The Company intends to achieve its goals by (i) increasing
its share of existing markets, (ii) increasing international expansion, (iii)
leveraging brands into new categories, (iv) targeting the United States
professional salon market and (v) capitalizing on selective acquisition
opportunities.
Increase Share of Existing Markets. Using Carson's 90-year research and
development expertise in male depilatories, the Company expects to launch its
first depilatory for women, Naturally Soft, in 1997. The Company has high
aspirations for this product as we believe the product formulation outperforms
any of the other female depilatories on the market. In addition, we plan to
target the growing children's market with a newly patented texturizer for boys,
a pre-teen female relaxer and a children's bubble bath and body lotion.
The Company plans on supplementing its existing products with new additions
each year, while at the same time challenging R&D to improve existing product
lines. Since the Company has the largest R&D group in the ethnic personal care
industry, the Company believes that it can protect our current position in our
existing markets by constantly upgrading the quality of our products and
simultaneously entering new and developing markets.
Increase International Expansion. The primary targets for Carson's
international expansion are Africa, Brazil and the Caribbean. For the nine-month
period ended December 31, 1996 compared to the nine-month period ended December
31, 1995, international sales were up 31.9%.
Southern Africa has been the largest growth area for the Company. As a
result, the Company is currently doubling the manufacturing and warehouse space
at its South Africa facility after less than one year of operation in order to
support the anticipated growth of the Company. In late 1996, we also purchased a
production facility in Ghana located near the Ghanaian Coca-Cola bottling plant
which will enable the Company to better service the 200 million Black people
located in the region. The plant is projected to be operational by June 1997.
In Kenya, East Africa, the Company anticipates having a similar facility to
the West African Ghanaian plant which should be operational by late 1997 or
early 1998. Since East Africa has over 150 million Black people, we believe the
Company has a similar opportunity for dramatic growth in this region.
Brazil is another key international area for Carson. With the magnitude of
the target population in Brazil, estimated at 100 million people of African
descent, which is almost three times the targeted market of the United States,
the Company believes it has a tremendous opportunity in this region. All of the
Company's products have been approved by the Brazilian authorities. The Company
is in discussions with a number of financial institutions and major Brazilian
corporations to establish a bonded warehouse operation which will ensure
consistent and timely delivery of its products and reduce its overall risk.
In the Caribbean, sales for the nine-month period ended December 31, 1996
increased by more than 120% above the same period in 1995. Our success in the
Caribbean reflects the Company's decision in March 1996 to substantially alter
its distribution strategy and to assign direct responsibility to a Carson sales
manager dedicated exclusively to this region. The Company plans to acquire a
facility in Jamaica, which will enable the Company to produce in a Caribbean
Community and Common Market (CARICOM) nation, and thereby substantially reduce
the taxes and tariffs on its products.
Leverage Brands into New Product Categories. The introduction of the Dark &
Lovely Cosmetic Line is on target for launch in the second quarter of 1997. The
position for the Dark & Lovely Cosmetic Line is "Class to Mass." The Company
plans to leverage the same distribution channels as its core business and offer
a quality line of products at an affordable price. The Company plans to
introduce a complete line of cosmetics with 76 SKU's. Initially, face products,
eye shadows, lipsticks and nail enamels will be introduced. In early 1998, the
Company plans to add accessory products such as pencils and mascaras.
Target the United States Professional Salon Market. Carson is planning to
introduce a specially formulated 50 SKU-line of professional products in the
fourth quarter of calendar 1997. Product formulation and development, along with
packaging and quantitatively based concept testing have been completed. A
Professional Salon Design Council comprised of expert professional
cosmetologists has been assembled to provide input into the development of the
professional product line. Their preliminary responses and evaluation of the
product formulas have been very positive. An experienced management team has
been put in place to direct the expansion into the professional market.
Capitalize on Selective Acquisition Opportunities. Because the ethnic
personal care market is a highly fragmented industry, the Company believes it is
properly positioned for pursuing strategic acquisitions. Carson has entered into
an agreement with a leading Wall Street firm to act as the Company's acquisition
financial advisor. The Company believes it can strengthen its current product
categories or enter certain market segments where it has had little or no
presence, with the correct acquisitions.
<PAGE>
Key Brands And Products
The Company manufactures and markets a variety of products worldwide. The
following table sets forth the Company's principal products, by brand, as of
December 31, 1996.
<TABLE>
<S> <C>
Brand Products
Dark &Lovely RELAXERS: Cream Relaxer, Regular Strength; Cream Relaxer Plus,
Super Strength Hair Care Maintenance Products: Corrective Leave-in Condition
Therapy; Pro Therapy Protein Intensive Conditioner; Rich & Natural Hair Dress
Conditioner; Silky Set Conditioning Set &Wrap Lotion; Quik Freeze Super Shine
Spritz; 3-N-1 Plus Detangling/Conditioning Shampoo; Deep Conditioning Treatment;
Restore &Repair Reconstructive Hair Therapy; Quick Styling Gel-Regular Hold;
Quick Styling Gel-Super Hold; Ultra Cholesterol Super Strengthening/Conditioning
Treatment; 24-hr. Therapy Moisture &Shine Replenisher; Ultra Strengthener Herbal
& Vitamin Hair Therapy; Restorer Super Strengthening Hot Oil; Healthy Shine Oil
Sheen Spray; Color Care Shampoo; Color Care Conditioner
HAIR COLOR: Permanent: Jet Black; Natural Black; Brown Sable; Rich Auburn; Sunset Auburn; Autumn Red;
Light Brown; Honey Blonde; Golden Bronze; Chestnut Blonde; Spicy Cinnamon;
Midnight Blue; Black Ruby; Light Golden Blonde; Deep Copper
REVIVING COLORS HAIRCOLOR: Semi-Permanent: Radiant Black; Ebone Brown; Spiced Auburn;
Passion Plum; Natural Black; Brown Cinnamon
Excelle RELAXERS: Cream Relaxer,
Regular Strength; Cream Relaxer Plus, Super Strength
HAIR CARE MAINTENANCE PRODUCTS: Silky Sensation Shampoo; 5-Minute Reconstructer;
Leave-In Conditioning Mist
Beautiful Beginnings
RELAXERS: Children's Relaxer
HAIR CARE MAINTENANCE PRODUCTS: Conditioning Shampoo Plus Detangler; Leave-In
Conditioner Plus Detangler; Natural Oil Moisturizer
Plus Detangler; Scalp Conditioner and Hair Dress
Dark & Natural TEXTURIZERS: Texture Enhancer, Regular
Strength; Texture Enhancer, Extra Strength; Texture Enhancer for Short Hair
and Fades
HAIR CARE MAINTENANCE PRODUCTS: Moisturizing Shampoo; Dry Hair &Scalp
Moisturizer Conditioner; Wave Lotion; Wave & Style Gel
HAIR COLOR: Jet Black; Natural Black; Darkest Brown
MOUSTACHE &BEARD COLOR; Jet Black, Natural Black
Magic SHAVING PRODUCTS: Shaving Powders: Gold,
Platinum, Blue and Red; Cream Shave: Regular & Mild and Pre-shave/After-shave
lotion
</TABLE>
<PAGE>
Marketing and Promotions
The Company believes that understanding the consumer, meeting her or his
needs and delivering on product promises are critical in maintaining the
Company's competitive position. The Company spent an average of approximately 1%
of net sales for each of the last two fiscal years on market research, such as
in-home consumer product placements for new products, tracking studies, concept
testing, package testing and advertising testing aimed at improving its
understanding of and effectively targeting its consumer. The Company also
maintains a toll-free telephone number to answer consumer questions and to
gather consumer feedback used to focus the Company's marketing programs.
Over 15% of net sales in 1996 was allocated to advertising and consumer
promotions. The Company believes that is the leading advertiser in the ethnic
hair care market, with most of its emphasis on television and print. The Company
regularly advertises in magazines aimed at consumers of African descent, such as
Essence, Ebony, Black Enterprise and Jet, and in targeted spot advertising on
television and cable channels such as Black Entertainment Television (BET) and
engages in promotional activities and in-store displays to introduce new
products or attract new consumers. The Company also uses its kit packaging
format to conduct sampling programs for new products.
In January 1996, the Company's advertising account was awarded to Don
Coleman & Associates, Inc., considered by the Company to be in the forefront of
ethnic advertising. The previous agency had been in place for over 20 years. A
new campaign for the Company's flagship brand, Dark & Lovely, including
television, print, and radio advertising was launched in late autumn of 1996.
The Company is actively involved in numerous public relations and
community relationship events. In 1996, the Company was involved in the Olympics
both in Savannah and Atlanta. In Atlanta, the Company was one of the sponsors of
La Maison Olympique Africaine, The African Olympic House, providing the Company
with an opportunity to highlight its presence in the global African business
community. The Company's commitment to the African-American community is
demonstrated through several support programs including sponsorship of the Black
Family Reunion Program and a Safe Shelter Program for homeless women and
children and the establishment of the Carson Scholarship Program at historically
Black universities such as Dillard, Hampton and Fisk Universities. From October
to December 1996, the Company, in conjunction with several leading
African-American women's organizations and the Celebrating Life Foundation,
promoted awareness of breast cancer among African-American women. In addition,
the Company has committed to donate $0.10 from the sale of every Dark & Lovely
relaxer and hair color unit sold during that period, up to $150,000, to the
Celebrating Life Foundation to help provide education on breast cancer and make
screening available to African-American women unable to afford the examination.
<PAGE>
Distribution and Sales
The Company's customers can be categorized into three principal
distribution channels in the U.S. retail ethnic hair care market, as follows:
Multi-warehouse Chains. Multi-warehouse chains are groups of stores
operating under the same name that have a number of different
distribution points, warehouses or shipping points. Chains which
carry the Company's products include mass merchandisers (e.g.
Wal-Mart, K-Mart), drug chains (e.g., Walgreens, Revco, CVS, Rite
Aid, Duane Reade), food chains (e.g., Winn Dixie, Kroger), and
discount chains (e.g., Family Dollar, Dollar General). The chains
generally are an important part of the Company's retail business
because of their ability to draw ethnic customers from a large
geographic area. The Company's multi-warehouse chain customers may
purchase the Company's products directly from the Company, through an
ethnic product distributor, or both.
Beauty & Barber Supply Stores. The Beauty & Barber Supply Stores
("B&Bs") are dominated by the Sally's Beauty Supply retail chain
(Alberto-Culver Company) and the National Beauty Supply Dealers
Association (the "NBSDA"), a large group of independent
family-controlled retail outlets. B&Bs that are members of the NBSDA
are prevalent in the African-American community, typically in retail
outlets in strip shopping malls. B&Bs generally have convenient
locations, low everyday prices, and a wide selection of ethnic
products relative to retail chains.
Ethnic Product Distributors. Ethnic product distributors are
wholesalers who either place products directly in stores or have a
warehouse-to-warehouse relationship with the major chains. K-Mart is
an example of a chain that has a warehouse-to-warehouse relationship
in which K-Mart obtains the Company's products for certain of its
stores through a major ethnic product distributor in Detroit. The
overall importance of this class of trade has gained increasing
significance in recent years.
The combination of multi-warehouse chains, B&Bs and ethnic product distributors
accounted for approximately 87.0% of the Company's domestic net sales in 1996.
The balance of the Company's net sales during this period were generated by
general market distributors, regional chains and military exchanges and
commissaries. No single Company customer accounted for more than approximately
8.6% of the Company's net sales in the nine months ended December 31, 1996.
As the Company develops new stock keeping units (SKUs) for existing
product lines, launches new products and enters new markets in the U.S. ethnic
health and beauty aids sector, the Company believes that its strong, direct
relationships with multi-warehouse chains, B&Bs and ethnic product distributors
will play an increasingly valuable role in maintaining market share as well as
gaining additional shelf space, promotional/advertising space and store
merchandising coverage. The Company has been selected by one of its
multi-warehouse chain customers to be the ethnic category manager for all ethnic
health and beauty aids products carried by such customer. As ethnic category
manager, the Company assists in the development of the customer's merchandising
program for ethnic health and beauty aids products.
The Company's strong relationships with its customers in the various
distribution channels are enhanced by its direct sales force which totals over
30 and is comprised of two divisional managers, eight regional managers and
between three and six sales merchandisers per region, covering the Northeast,
Mid-Atlantic, Mideast and Midwest regions in the Northern Division and the
Mid-South, Southeast, Southwest and Western regions in the Southern Division.
The sales force in each region sells to all of the distribution channels doing
business in its market.
The Company has established distributor relationships in various countries
in international markets. In South Africa, the Company focuses its direct sales
efforts primarily on hair care salons which are serviced through regional
distributors and specialty cash-and-carry wholesale outlets. Retail product
distribution in South Africa is currently being expanded to include mass
merchandisers and other large retail chains.
<PAGE>
Research and Development and Quality Control
The Company believes that the strength of its competitive position in the
ethnic hair care industry is attributable, in part, to its heritage of
technological innovation and its focused R&D effort. Three of the ethnic hair
care industry's most significant innovations were introduced by the Company: the
first hair color developed exclusively for African-American hair (1972), the
first no-lye relaxer, which provided a safe relaxer product for home use (1978),
and the recently patented Fail Safe technology for no-lye relaxers, which
eliminates problems associated with mixing no-lye relaxer products to obtain the
correct strength. The Company believes that its R&D department, led by two
industry experienced chemists with Ph.D.s and including nine other researchers
and technicians, represents the largest R&D effort focused on the ethnic hair
care market. In 1996, the Company's R&D department finalized the development of
several product innovations, including the Fail Safe and DL2000 hair relaxer
technologies, as well as a full line of hair care maintenance products.
The R&D department pursues an aggressive product development schedule and
intends to maintain its leadership in product innovations and technological
improvements. In particular, the R&D department intends to: (i) facilitate the
Company's entry into the U.S. professional salon market with a line of specially
formulated products; (ii) expand the rapidly growing line of Dark & Natural
products; (iii) develop new and innovative hair care maintenance products; (iv)
strengthen the Company's hair color products; (v) and develop more effective,
milder depilatories for both men and women. The R&D department's agenda also
includes the continued review and evaluation of various packaging alternatives
to ensure that the Company's products are delivered in safe, secure and
cost-effective containers. The Company's R&D costs (principally for new
products) for the years ended March 31, 1994, 1995 and 1996 was $0.4 million,
$0.3 million and $0.4 million, respectively. For the nine months ended December
31, 1996, the Company's R&D costs were $0.3 million. The Company's estimated
budget for R&D costs for 1997 is $0.6 million. These amounts do not include
amounts spent on quality control, analytical chemistry, microbiology, package
testing and consumer products testing.
The R&D department also supervises the Quality Control staff of 13 who
perform extensive safety and quality tests on the Company's products, including
analytical chemistry, microbiology and package testing. The Company tests its
new products with the aid of its four in-house cosmetology technicians at its
on-site salon.
Manufacturing
The Company uses a batching process in its manufacturing operations for
virtually all of its products. The batching process begins with chemical
ingredients being mixed in kettles in batch sizes ranging from 2,000 lbs. to
21,000 lbs. The kettles heat, cool, homogenize and blend each batch of materials
according to standard operating procedures (SOPs). The SOPs for each product are
established by the Company's R&D and Quality Control staff and are periodically
reviewed and improved to ensure uniformity and batch-to-batch conformity with
the manufacturing specifications for the product.
The product is then transferred from the kettles into a holding tank or
another type of storage device until it is pumped into a filling machine that
volumetrically fills the liquid or cream into plastic jars, tubes, bottles or
packets. Each container (i.e., jar, tube, bottle or packet) is coded to identify
or track a specific batch. Hair care maintenance products are then packed in
shipping boxes and sent to the finished goods warehouse ready for shipment to
the Company's customers. Certain other products are filled, capped, labeled,
coded and stored temporarily until they are assembled as components in the
relaxer, texturizer or hair color kits.
The Company emphasizes quality and adherence to Good Manufacturing
Practices (according to FDA guidelines) throughout the production operation.
Each batch of finished product is tested by Quality Control staff before it is
packaged and shipped. The Company's quality control measures and standards
include testing raw materials and packaging materials.
The Company purchases raw materials, packaging, and components throughout
the world and reviews the efficiency and quality of its purchasing contracts.
Except as described below, the Company believes that alternate sources of
supplies exist and does not anticipate any significant shortages of, or
difficulty in obtaining, such supplies.
Guanidine carbonate is an essential raw material used in the manufacturing
of no-lye relaxer products and has been purchased by the Company for over 15
years from the one principal supplier to all manufacturers of no-lye relaxers,
located in Austria. The Company maintains a stock of guanidine carbonate at its
Savannah facility which would satisfy its requirements for approximately four to
six months of future production. The Company believes that guanidine carbonate
of comparable quality could be made available within this time period from other
suppliers on comparable terms.
<PAGE>
Competition
The U.S. retail ethnic hair care market is competitive and highly
fragmented with a number of market participants that focus specifically on this
market. Six companies generated approximately 50% of industry sales in 1995 with
the remainder being generated by a number of smaller companies, according to the
Towne-Oller Report. Some of the larger companies, such as Soft Sheen, Luster
Products and Pro-Line Corp., are privately-owned and compete only in the ethnic
market, as does the Johnson Products subsidiary of IVAX, Inc., a New York Stock
Exchange traded company. However, a few general market companies, such as
Revlon, Inc. and Alberto-Culver Company, also produce a limited line of
specialized products for the ethnic consumer. In certain product categories,
such as shampoos and hair color, competition also arises from general market
manufacturers such as the Procter & Gamble Company and Bristol-Myers Squibb
Company's Clairol division. Such general market companies are larger and have
substantially greater financial and other resources than the Company.
Internationally, the Company's competitors differ from market to market, and
include Revlon, Soft Sheen and several regionally based foreign companies.
The Company primarily competes on the basis of brand recognition, product
quality, performance and price. Advertising, promotions, merchandising,
packaging and the timing of new product introductions and line extensions also
have a significant impact on buying decisions and the structure and quality of
the sales force affect product reception, in-store position, display space and
inventory levels in retail outlets.
Trademarks and Patents
The Company owns all of the trademark rights used in connection with its
principal brands both in the United States and in the other countries in which
its products are principally sold. Significant trademarks include: Dark &
Lovely, Dark & Lovely Excelle, Beautiful Beginnings, Dark & Natural and Magic.
The Company utilizes certain proprietary or patented technologies in the
formulation or manufacture of a number of its products; however, the loss of
such proprietary rights would not have a material adverse effect on the
business, results of operations or financial condition of the Company.
Consumer Laws, Government and Industry Regulations
The Company is subject to the Food, Drug and Cosmetics Act, the Consumer
Product Safety Act, the Federal Hazardous Substance Act and to the jurisdiction
of the Consumer Product Safety Commission as well as product safety laws in
foreign jurisdictions. Such regulations subject the Company to the possibility
of requirements of repurchase or recall of products found to be defective and
the possibility of fines or penalties. The Food and Drug Administration ("FDA")
has promulgated certain regulations concerning product ingredients, product
labeling and product claims. In addition, the FTC regulates product claims. The
Company is subject to consumer laws in foreign countries where its products are
sold, for example, bilingual packaging requirements (Canada) and new product
registration requirements (Brazil). Existing and future FDA, FTC and foreign
regulations could impact distribution and sales of certain of the Company's
products.
The Company operates under the FDA's Good Manufacturing Practices (GMP)
guidelines and is regulated by the FDA, although its product formulas do not
have to be approved in advance by the FDA. Coloring agents used in the Company's
products may be either Food, Drug & Cosmetic (FD&C) or Drug & Cosmetic (D&C)
classified. Additionally, as a member of the Cosmetics, Toiletries and
Fragrances Association ("CTFA"), the Company agrees to adhere to Quality
Assurance Guidelines as promulgated by CTFA. The Company believes that it is
substantially in compliance with such guidelines and uses such guidelines as
standards for its operational activities. The Company is also subject to various
other Federal, state, local and foreign regulations. Federal, State and local
regulations in the United States that are designed to protect customers or the
environment have had an increasing influence on product claims, contents and
packaging. The Company believes that it is in substantial compliance with such
regulations.
<PAGE>
Employees
The Company is organized into seven departments--Marketing, R&D (including
Quality Control), Sales, Operations (Production and Materials Management),
Finance, Administration and Human Resources. As of December 31, 1996, the
Company employed approximately 281 persons in Georgia, an additional 31
elsewhere in the United States and 90 internationally. In the United States, 214
were hourly personnel and 98 were salaried employees. The Company also utilizes
temporary workers as needed, primarily in manufacturing. Approximately 90 such
temporary workers were utilized on a daily basis by the Company during the nine
months ended December 31, 1996. The Company is non-union and believes that its
relationship with employees is good.
Environmental Matters
The Company is subject to various Federal, state, local and foreign
environmental requirements, including those relating to discharges to air, water
and land, the handling and disposal of solid and hazardous waste and the cleanup
of properties affected by hazardous substances. Certain environmental laws, such
as the Comprehensive Environmental Response, Compensation, and Liability Act, as
amended ("CERCLA"), impose strict, retroactive, joint and several liability upon
persons responsible for releases of hazardous substances.
The Company is not aware of any liabilities arising under environmental
requirements, except as would not be expected to have a material adverse effect
on the Company's business, results of operations or financial condition.
However, some risk of environmental liability is inherent in the nature of the
Company's current and former businesses and the Company might in the future
incur material costs to meet current or more stringent compliance, cleanup or
other obligations pursuant to environmental requirements.
The Company has had difficulty meeting its permit levels for various
parameters for its wastewater discharge to the City of Savannah's sewer system
resulting in the issuance of notices of violation to the Company by the City of
Savannah. In response, the Company installed pretreatment equipment, which has
reduced the concentrations of many of the constituents of concern. However, the
Company continues to experience difficulty meeting certain discharge
limitations. If the Company cannot either improve the reliability of its present
treatment system, or obtain modifications to its discharge limits from the sewer
authorities, it may be required to install additional treatment equipment. The
Company is working cooperatively with the City of Savannah to address this issue
and has not been nor does it expect to be fined. However, there can be no
guarantee that the Company will not incur future costs, including but not
limited to, fines in connection with waste water compliance. The costs for
installing additional treatment could be as much as $0.5 million. The Company
does not currently expect the costs of environmental compliance to have a
material adverse effect on its business, results of operations or financial
condition.
Item 2. Properties
The Company owns and occupies six buildings on a 11.6-acre tract in
Savannah. The plant, warehouses and offices encompass approximately 225,000 sq.
ft. on seven acres of the property, with the remaining 4.6 acres undeveloped.
Four of the buildings are used primarily for warehousing and storage. The
largest building (more than 120,000 sq. ft.) houses the manufacturing equipment
for substantially all of the Company's products, shipping, quality control, the
R&D laboratories, customer research and a professional hair salon which tests
new products. The manufacturing and warehousing space has been expanded seven
times since it was originally built in 1954. The Company is in the process of
reconfiguring its production lines and expanding its physical space in order to
increase the capacity of the Savannah facility. Following the planned capacity
increase, the Company believes that the capacity in the Savannah facility will
be adequate for its needs in the reasonably foreseeable future.
The Company's South African subsidiary owns and occupies one building on
4.5 acres in Midrand, South Africa, 15 miles north of Johannesburg in a
developing industrial park located on the major highway between Johannesburg and
Pretoria. The property was previously occupied by Pfizer as a manufacturing
facility and was easily converted to suit the Company's needs. The building
encompasses approximately 40,000 sq. ft. and houses the manufacturing equipment
for all products, shipping and receiving, raw material and finished goods
storage, an R&D laboratory and executive office space. Ample acreage is
available for expansion of the facility. The Company believes that capacity in
the South African facility is adequate for its needs in the reasonably
foreseeable future.
In late 1996, the Company purchased a production facility in Ghana located
near the Ghanaian Coca-Cola bottling plant which will enable the Company to
better service the 200 million Black people located in the region. The plant is
expected to be operational by June 1997. In Kenya, East Africa, the Company
anticipates having a similar facility to the West African Ghanaian plant which
should be operational by late 1997 or early 1998. Since East Africa has over 150
million Black people, the Company believes it has a similar opportunity for
dramatic growth in this region.
<PAGE>
Item 3. Legal Proceedings
The Company is involved in various routine legal proceedings incident to
the ordinary course of its business and believes that the outcome of all pending
legal proceedings, in the aggregate, will not have a material adverse effect on
the business, results of operations or financial condition of the Company.
Item 4. Submission of Matters to Vote of Security Holders
Not applicable.
Executive Officers of the Registrant
- --------------------------------------------------------------------------------
Name Age Position
- --------------------------------------------------------------------------------
Dr. LeRoy Keith 57 Chairman of the Board and Chief Executive
Officer
- --------------------------------------------------------------------------------
Joyce M. Roche 49 President and Chief Operating Officer
-------------------------------------------------------------------------------
Dennis E. Smith 49 Executive Vice President, Sales
-------------------------------------------------------------------------------
Bill Bradley 48 Executive Vice President, Worldwide
Operations
-------------------------------------------------------------------------------
Miriam Muley 42 Executive Vice President, Marketing
-------------------------------------------------------------------------------
Bradford N. Creswell 37 Executive Vice President, Finance and Chief
Financial Officer
-------------------------------------------------------------------------------
Officers of the Company are elected annually by the Board of Directors.
Dr. Keith became Chairman and Chief Executive Officer of Carson
Products concurrent with the Acquisition in August 1995 and a Director of the
Company upon its inception in May 1995, and served as Vice President until
1996. Dr. Keith became Chairman and Chief Executive Officer of the Company
in August 1996. Dr. Keith has served as Chairman of the Board of Directors
of AM Cosmetics since June 1996. He served on the Board of Directors of the
Predecessor from June 1994 to August 1995. Prior to that, he served as
President of Morehouse College from 1987 to 1994. Dr. Keith is a member of
the Board of Directors of Keystone Investment Group, the Mutual Funds Board
of Phoenix Home Life Insurance Company, One to One Partnership, Inc. and the
National Committee for the Performing Arts of the John F. Kennedy Center.
Ms. Roche became President and Chief Operating Officer of Carson Products
in July 1996 and President, Chief Operating Officer and Director of the Company
in August 1996. Prior to July 1996, she held the position of Executive Vice
President of Global Marketing and Director since joining Carson Products in
August 1995. Before joining Carson Products, Ms. Roche was employed by Avon,
Inc. for 19 years where she held the titles of Senior Vice President of
Marketing from 1991 to 1993 and Vice President of Global Marketing from 1993 to
1994.
Mr. Smith became Executive Vice President of Sales of Carson Products
concurrent with the Acquisition in August 1995 and of the Company in August
1996. Mr. Smith became a Director of Carson Products in December 1995. Prior to
August 1995, he held the position of Vice President of Sales of Carson Products
from 1990 to 1995.
Ms. Muley became Executive Vice President of Marketing of Carson Products
in July 1996 and of the Company in August 1996. Prior to July 1996, she held the
position of Vice President, Marketing since joining Carson Products in April
1996. She was previously employed by Avon from 1992 to 1996 as General Manager,
African-American Business Unit and by Bristol-Myers Squibb's Clairol division as
Product Manager from 1990 to 1992.
Mr. Creswell became Executive Vice President of Finance and Chief
Financial Officer of Carson Products concurrent with the Acquisition in August
1995 and of the Company in August 1996. He also served as President of Northwest
Capital, Inc. since 1992. Prior to that time, he was employed as Vice President,
Investment Banking with Bankers Trust Company from 1987 to 1992.
<PAGE>
PART II
Item 5. Market for the Registrant's Common Stock and Related Shareholder
Matters
The high and low sales prices for the Company's common stock as reported
by the New York Stock Exchange since the time of the Company's initial public
offering through December 31, 1996 are as follows:
High 16 5/8
Low 13 3/4
At February 28, 1996, there were approximately 1,252 holers of record of
the Company's common stock. Since the Acquisition, the Company has not declared
or paid any cash or other dividends on its Common Stock and does not expect to
pay dividends for the forseeable future. The Company anticipates that for the
forseeable future, earnings will be reinvested in the business to finance its
growth and development. The declaration and payment of dividends by the Company
are subject to the discretion of the Board of Directors of the Company (the
"Board"). The Company entered into a new bank credit facility which restricts
the ability of the Company or any subsidiary of the Company from paying cash
dividends other than dividends or distributions payable in shares of capital
stock. Any future determination to pay dividends will depend on the Company's
results of operations, financial condition, capital requirements, contractual
restrictions and other factors deemed relevant by the Board.
Item 6. Selected Financial Data
This information is set forth on page 1 of Exhibit 13 under the caption
"Selected Historical Consolidated Financial Data."
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
This information is set forth on pages 2-7 of Exhibit 13 to this report and
is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
This information is set forth on pages 8-24 of Exhibit 13 to this report
and is incorporated herein by reference.
Item 9. Disagreements on Accounting and Financial Disclosure
None.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
Information concerning directors is incorporated by reference to "Proposal
Number 1 - Election of Directors" on pages 8-10 of the Company's Proxy Statement
to be filed for its 1997 Annual Meeting of Stockholders. Reference is also made
to Item 4(A), Part I of this report, "Executive Officers of the Registrant,"
which information is incorporated herein.
Section 16(a) of the Exchange act requires the directors, executive
officers and persons who own beneficially more than 10% of certain equity
securites of the Company to file reports of ownership with the Commission.
Copies of all such reports are required to be furnished to the Company.
Based on the reports received by the Company (and on written representations
from the reporting persons), the Company believes that each of the Company's
directors, officers and 10% beneficial owners of its Class A Common Stock
failed to file on a timely basis the required Form 3 at the time the
Company's registration statement for its initial public offering was declared
effective by the Commission. In addition, the following insider filings were
delinquent: Lawrence Bathgate, Form 4 and 5 with respect to one transaction
not filed on a timely basis; Bradford N. Creswell, Form 4 with respect to one
transaction not filed on a timely basis; Arthur P. Gnann, III, Form 4 with
respect to one transaction not filed on a timely basis; James L. Hudson,
Form 4 with respect to one transaction not filed on a timely basis; Joyce M.
Roche, Form 4 with respect to one transaction not filed on a timely basis;
Vincent A. Wasik, Form 4 with respect to one transaction not filed on a
timely basis.
Item 11. Executive Compensation
This information is incorporated herein by reference to "Compensation and
Other Transactions with Executive Officers and Directors - Executive Officer
Compensation" on pages 15-20 of the Company's Proxy Statement to be
filed for its 1997 Annual Meeting of Stockholders.
Item 12. Security Ownership of Certain Beneficial Owners and Management
This information is incorporated herein by reference to "Principal
Stockholders" and "Stock Ownership of Directors and Executive Officers" on pages
2-4 and 13, respectively, of the Company's Proxy Statement to be filed for its
1997 Annual Meeting of Stockholders.
Item 13. Certain Relationships and Related Transactions
This information is incorporated herein by reference to "Certain
Relationships and Related Transactions" on pages 5-7 of the Proxy Statement to
be filed for its 1997 Annual Meeting of Shareholders.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K
(a) The following documents are incorporated by reference herein:
1. Financial Statements
Exhibit 13, a copy of which is filed with this Form 10-K, contains the
Balance Sheet as of December 31, 1996 and March 31, 1996, the related statements
of operations, shareholders' investment and cash flows for the following
periods: Company April 1, 1996 through December 31, 1996, Unaudited Company
August 23, 1995 to December 31, 1995, Predecessor April 1, 1995 to August 22,
1995, Company August 23, 1995 to March 31, 1996 and Predecessor year ended March
31, 1995 and the related reports of Deloitte Touche LLP and Price Waterhouse
LLP. The financial statements and the reports of Deloitte Touche LLP and Price
Waterhouse LLP are incorporated herein by reference. The financial statements
included herein include the following:
Balance Sheets -- December 31, 1996 and March 31,
1996
Statements of Operations for the following periods:
April 1, 1996 to December 31, 1996; August 23, 1995 to December
31, 1995 (unaudited); April 1, 1995 to August 22, 1995; August
23, 1995 to March 31, 1996; and April 1, 1994 to March 31, 1995
Statement of Shareholders' Equity for the following
periods: April 1, 1996 to December 31, 1996; August 23, 1995 to
March 31, 1996; April 1, 1995 to August 22, 1995; and April 1,
1994 to March 31, 1995
Statements of Cash Flows for the following periods:
April 1, 1996 to December 31, 1996; August 23, 1995 to December
31, 1995 (unaudited); April 1, 1995 to August 22, 1995; August
23, 1995 to March 31, 1996; and April 1, 1994 to March 31, 1995
2. Financial Statement Schedule
Schedule II -- Valuation and Qualifying Accounts for
the following periods: Nine months ended December 31, 1996,
August 23, 1995 to March 31, 1996, April 1, 1995 to August 22,
1995 and April 1, 1994 to March 31, 1995.
3. Exhibits incorporated by reference or filed with this report
- --------------------------------------------------------------------------------
Number Description
- --------------------------------------------------------------------------------
*3.1 ........... Amended and Restated Articles of Incorporation
- --------------------------------------------------------------------------------
*3.2 ........... By-laws of Registrant
- --------------------------------------------------------------------------------
*4 ............. Form of Commnon Stock Certificate
- --------------------------------------------------------------------------------
*9 ............. Voting Trust Agreement
- --------------------------------------------------------------------------------
*10.1 .......... Employment Agreement dated as of August 23, 1995, as amended
as of July 31, 1996, between Carson Products Company and Dr.
Leroy Keith
- --------------------------------------------------------------------------------
*10.2 .......... Employment Agreement dated as of July 7, 1995, as amended as
of July 31, 1996, between Carson Products Company and Joyce
M. Roche
- --------------------------------------------------------------------------------
*10.3 .......... Employment Agreement dated as of June 7, 1995, as amended as
of July 31, 1996, between Carson Products Company and Dennis
E. Smith
- --------------------------------------------------------------------------------
*10.4 .......... Employment Agreement dated as of April 1, 1996, as amended as
of July 31, 1996, between Carson Products Company and Sharon
A. Davis
- --------------------------------------------------------------------------------
*10.5 .......... Employment Agreement dated as of June 7, 1995, as amended as
of July 31, 1996, between Carson Products Company and John
P. Brown, Jr.
- --------------------------------------------------------------------------------
*10.6 .......... Employment Agreement dated as of June 22, 1995, as amended as
of July 31, 1996, between Carson Products Company and Dr.
Donald Cowser
- --------------------------------------------------------------------------------
*10.7 .......... Employment Agreement dated as of September 1, 1995, as amended
as of July 31, 1996, between Carson Products Company and
Arthur P. Gnann III
- --------------------------------------------------------------------------------
*10.8 .......... Employment Agreement dated as of September 1, 1995, as amended
as of July 31, 1996, between Carson Products Company and
Allena Lee-Brown
- --------------------------------------------------------------------------------
*10.9 .......... Employment Agreement dated as of March 11, 1996, as amended as
of July 31, 1996, between Carson Products Company and Miriam
Muley
- --------------------------------------------------------------------------------
*10.10 ......... Management Assistance Agreement dated as of August 23, 1995
between Carson Products Company and Morningside Captial
Group L.L.C.
- --------------------------------------------------------------------------------
*10.11 ......... Management Agreement dated as of June 26, 1996 between
Carson Products Company and AM Cosmetics, Inc.
- --------------------------------------------------------------------------------
*10.12 ......... Subscription Agreement dated as of June 26, 1996 between
Carson Products Company and Morningside AM Acquisition Corp.
- --------------------------------------------------------------------------------
*10.13 ......... Carson, Inc. 1996 Long-term Incentive Plan
- --------------------------------------------------------------------------------
*10.14 ......... Carson, Inc. 1996 Non-Employee Directors Equity Incentive
Program
- --------------------------------------------------------------------------------
*10.15 ......... Subscription Agreement dated as of August 23, 1995 by and
among the Registrant and Investors set forth in Schedule I
- --------------------------------------------------------------------------------
*10.16 ......... Subscription Agreement dated as of August 23, 1995 by and
among the Registrant and DNL Partners,Limited Partnership
- --------------------------------------------------------------------------------
*10.17 ......... Subscription Agreement dated as of August 23, 1995 by and
among the Registrant, Indosuez Carson Partners and Indosuez CM
II, Inc.
- --------------------------------------------------------------------------------
*10.18 ......... Subscription Agreement dated as of August 15, 1996 by and
among the Registrant and the indivudials (outside directors)
named therein
- --------------------------------------------------------------------------------
*10.19 ......... Subscription Agreement dated as of August 15, 1995 by and
among the Registrant and the individuals (members of
senior management) named therein
- --------------------------------------------------------------------------------
*10.20 ......... Licensing Agreement dated April 7, 1994, as amended May 14,
1996, between Carson Products Company and Carson Products
Company S.A. (Proprietary) Limited
- --------------------------------------------------------------------------------
*10.21 ......... Distribution Agreement dated May 14, 1996 between Carson
Products Company and Carson Products Company S.A.
(Proprietary) Limited
- --------------------------------------------------------------------------------
*10.22 ......... Promissory note between Joyce Roche and the Registrant
- --------------------------------------------------------------------------------
*10.23 ......... Promissory note between John P. Brown and the Registrant
- --------------------------------------------------------------------------------
*10.24 ......... Promissory note between Dennis Smith and the Registrant
- --------------------------------------------------------------------------------
*10.25 ......... Promissory note between Donald Cowsar and the Registrant
- --------------------------------------------------------------------------------
*10.26 ......... Promissory note between Arthur P. Gnann, III and the
Registrant
- --------------------------------------------------------------------------------
*10.27 ......... Promissory note between Sharon A. Davis and the Registrant
- --------------------------------------------------------------------------------
*10.28 ......... Pledge agreement dated August 13, 1996 between Arthur P.
Gnann, III and the Registrant
- --------------------------------------------------------------------------------
*10.29 ......... Pledge agreement dated August 13, 1996 between Sharon A. Davis
and the Registrant
- --------------------------------------------------------------------------------
*10.30 ......... Pledge agreement dated August 13, 1996 between Dr. Donald
Cowser and the Registrant
- --------------------------------------------------------------------------------
*10.31 ......... Pledge agreement dated August 13, 1996 between John P. Brown
and the Registrant
- --------------------------------------------------------------------------------
*10.32 ......... Pledge agreement dated August 13, 1996 between Miriam Muley
and the Registrant
- --------------------------------------------------------------------------------
*10.33 ......... Pledge agreement dated August 13, 1996 between Joyce Roche and
the Registrant
- --------------------------------------------------------------------------------
*10.34 ......... Pledge agreement dated August 13, 1996 between Dennis Smith
and the Registrant
- --------------------------------------------------------------------------------
10.35 .......... New Senior Bank Facility (including exhibits) dated as of
October 18, 1996
<PAGE>
- --------------------------------------------------------------------------------
13 .............. Annual Report to Shareholders for the nine months ended
December 31, 1996
- --------------------------------------------------------------------------------
*16 ............. Letter regarding Change in Certifying Accountant from Price
Waterhouse LLP
- --------------------------------------------------------------------------------
*21 ............. Subsidiaries of the Registrant
- --------------------------------------------------------------------------------
23 .............. Consent of Deloitee Touche LLP
- --------------------------------------------------------------------------------
23.1 ............ Consent of Price Waterhouse LLP
- --------------------------------------------------------------------------------
27 .............. Financial Data Schedule
- --------------------------------------------------------------------------------
* Incorporated herein by reference to the Registrant's Registration Statement on
Form S-1 filed with the Securities and Exchange Commission on October 14, 1996
[File No. 333-10191] and the amendments thereto.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registration has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CARSON, INC.
Date: March 26, 1997 By: /s/ Dr. Leroy Keith
Dr. LeRoy Keith
Chairman, Chief Executive Officer
and Director
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates included.
Date: March 26, 1997 By: /s/ Dr. Leroy Keith
Dr. LeRoy Keith
Chairman, Chief Executive Officer
and Director
Date: March 26, 1997 By: /s/ Joyce M. Roche
Joyce M. Roche
President and Chief Operating
Officer and Director
Date: March 26, 1997 By: /s/ Dennis E. Smith
Dennis E. Smith
Executive Vice President, Sales and
Director
Date: March 26, 1997 By: /s/ Lawrence E. Bathgate, II
Lawrence E. Bathgate, II
Director
Date: March 26, 1997 By: Abbey J. Butler
Abbey J. Butler
Director
Date: March 26, 1997 By: /s/ Suzanne de Passe
Suzanne de Passe
Director
Date: March 26, 1997 By: /s/ Melvyn J. Estrin
Melvin J. Estrin
Director
Date: March 26, 1997 By: /s/ James L. Hudson
James L. Hudson
Director
Date: March 26, 1997 By: /s/ Jack Kemp
Jack Kemp
Director
Date: March 26, 1997 By: /s/ John L. Sabre
John L. Sabre
Director
Date: March 26, 1997 By: /s/ Vincent A. Wasik
Vincent A. Wasik
Director
Date: March 26, 1997 By: /s/ Bradford N. Creswell
Bradforn N. Creswell
Chief Financial Officer
<PAGE>
Carson, Inc.
Valuation and Qualifying Accounts
For the Nine Months Ended December 31, 1996
(in thousands)
<TABLE>
Schedule II
<S> <C> <C> <C> <C>
----------Twelve months---------
Predecessor Predecessor Company Company
Period Period Nine
Year From From Months
Ended April 1, 1995 to August 23, 1995 to Ended
March 31, 1995 August 22, 1995 March 31, 1996 December 31, 1996
Allowance for doubtful accounts:
Balance, beginning of period $206 $242 $358 $531
Addition - provisions charged to income 629 158 329 112
Deduction - accounts written off as uncollectible (593) (42) (156) (29)
Balance, end of period $242 $358 $531 $614
</TABLE>
CREDIT AGREEMENT
among
CARSON PRODUCTS COMPANY
and
BANQUE INDOSUEZ, NEW YORK BRANCH,
AS AGENT,
and
THE LENDING INSTITUTIONS LISTED HEREIN
--------------------
Dated as of October 18, 1996
--------------------
$40,000,000
DRAFT: March 21, 1997 H:\WPCDOCS\1186\141151
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. Amount and Terms of Credit............................ 1
1.01 Commitments .......................................... 1
1.02 Minimum Amount of Each Borrowing;
Maximum Number of Borrowings........................ 3
1.03 Notice of Borrowings.................................. 3
1.04 Disbursement of Funds................................. 4
1.05 Notes................................................. 5
1.06 Conversions; Continuations............................ 6
1.07 Pro Rata Borrowings................................... 7
1.08 Interest.............................................. 7
1.09 Interest Periods...................................... 8
1.10 Special Provisions Governing Reserve
Adjusted Eurodollar Loans........................... 9
1.11 Capital Requirements.................................. 14
1.12 Total Loan Commitments; Limitations
on Outstanding Loan Amounts......................... 15
1.13 Letters of Credit..................................... 15
SECTION 2. Commitments........................................... 25
2.01 Voluntary Reduction of Commitments.................... 25
2.02 Mandatory Adjustments of Commitments,
etc................................................. 25
2.03 Commitment Commission................................. 26
SECTION 3. Payments.............................................. 26
3.01 Voluntary Prepayments................................. 26
3.02 Mandatory Prepayments................................. 27
3.03 Method and Place of Payment........................... 31
3.04 Net Payments.......................................... 32
SECTION 4. Conditions Precedent.................................. 34
4.01 Conditions Precedent to Initial Loans................. 34
4.02 Conditions Precedent to All Loans..................... 43
4.03 Conditions Precedent to All Letters
of Credit........................................... 44
SECTION 5. Representations, Warranties and
Agreements.......................................... 44
5.01 Corporate Status...................................... 45
5.02 Corporate Power and Authority; Business............... 45
5.03 No Violation.......................................... 46
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-i-
<PAGE>
Page
5.04 Litigation............................................ 46
5.05 Use of Proceeds....................................... 47
5.06 Governmental Approvals, etc........................... 47
5.07 Investment Company Act................................ 47
5.08 Public Utility Holding Company Act.................... 47
5.09 True and Complete Disclosure.......................... 48
5.10 Holdings IPO; Repayment of
Subordinated Debt................................... 48
5.11 Financial Condition; Financial
Statements; Projections............................. 48
5.12 Security Interests.................................... 50
5.13 Tax Returns and Payments.............................. 51
5.14 ERISA................................................. 51
5.15 Subsidiaries.......................................... 53
5.16 Patents, etc.......................................... 53
5.17 Compliance with Laws, etc............................. 53
5.18 Properties............................................ 53
5.19 Securities............................................ 54
5.20 Collective Bargaining Agreements...................... 54
5.21 Indebtedness Outstanding.............................. 54
5.22 Environmental Matters................................. 54
5.23 Environmental Investigations.......................... 56
5.24 Fine Products Company................................. 57
SECTION 6. Affirmative Covenants................................. 57
6.01 Information Covenants................................. 57
6.02 Books, Records and Inspections........................ 63
6.03 Maintenance of Property; Insurance.................... 64
6.04 Payment of Taxes...................................... 64
6.05 Corporate Franchises.................................. 65
6.06 Compliance with Statutes, etc......................... 65
6.07 ERISA................................................. 65
6.08 Performance of Obligations............................ 66
6.09 End of Fiscal Years; Fiscal Quarters.................. 66
6.10 Use of Proceeds....................................... 66
6.11 Equal Security for Loans and Notes;
No Further Negative Pledges......................... 67
6.12 Lender Meeting........................................ 67
6.13 Pledge of Additional Collateral
6.14 Security Interests.................................... 68
6.15 Environmental Events.................................. 68
6.16 New Subsidiaries...................................... 69
6.17 Repayment of Existing Subordinated Debt............... 70
SECTION 7. Negative Covenants.................................... 70
7.01 Changes in Business................................... 70
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Page
7.02 Amendments or Waivers of Certain
Documents........................................... 70
7.03 Liens................................................. 70
7.04 Indebtedness.......................................... 73
7.05 Advances, Investments and Loans....................... 74
7.06 Prepayments of Indebtedness; Amendments............... 75
7.07 Dividends, etc........................................ 75
7.08 Transactions with Affiliates.......................... 76
7.09 Total Interest Coverage Ratio......................... 77
7.10 Fixed Charge Coverage Ratio........................... 77
7.11 Leverage Ratio........................................ 78
7.12 Issuance of Subsidiary Stock.......................... 78
7.13 Disposition of Assets................................. 78
7.14 Contingent Obligations................................ 81
7.15 ERISA................................................. 82
7.16 Merger and Consolidations............................. 82
7.17 Sale and Lease-Backs.................................. 83
7.18 Sale or Discount of Receivables....................... 83
7.19 Fine Products Company................................. 83
SECTION 8. Events of Default..................................... 83
8.01 Payments.............................................. 83
8.02 Representations, etc.................................. 84
8.03 Covenants............................................. 84
8.04 Default Under Other Agreements........................ 84
8.05 Bankruptcy, etc....................................... 84
8.06 ERISA................................................. 85
8.07 Security Documents.................................... 86
8.08 Guarantees............................................ 86
8.09 Judgments............................................. 86
8.10 Ownership............................................. 86
SECTION 9. Definitions........................................... 88
SECTION 10. The Agent............................................. 122
10.01 Appointment........................................... 122
10.02 Delegation of Duties.................................. 122
10.03 Exculpatory Provisions................................ 122
10.04 Reliance by the Agent................................. 123
10.05 Notice of Default..................................... 124
10.06 Non-Reliance on Agent and Other Banks................. 124
10.07 Indemnification....................................... 125
10.08 The Agent in Its Individual Capacity.................. 125
10.09 Successor Agent....................................... 125
10.10 Resignation by Agent.................................. 126
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SECTION 11. Miscellaneous......................................... 126
11.01 Payment of Expenses, etc.............................. 126
11.02 Right of Setoff....................................... 127
11.03 Notices............................................... 128
11.04 Benefit of Agreement.................................. 128
11.05 No Waiver; Remedies Cumulative........................ 131
11.06 Payments Pro Rata..................................... 131
11.07 Calculations; Computations............................ 132
11.08 Governing Law; Submission to
Jurisdiction; Venue................................. 132
11.09 Counterparts.......................................... 133
11.10 Effectiveness......................................... 133
11.11 Headings Descriptive.................................. 133
11.12 Amendment or Waiver................................... 134
11.13 Survival.............................................. 134
11.14 Domicile of Loans..................................... 134
11.15 Waiver of Jury Trial.................................. 134
11.16 Independence of Covenants............................. 134
ANNEX I - List of Banks
ANNEX II - Bank Addresses
ANNEX III - Schedule of Existing Debt
ANNEX IV - Schedule of Subsidiaries
ANNEX V - Schedule of Collective Bargaining Agreements
ANNEX VI - Summary of Corporate Insurance Policies
ANNEX VII - Schedule of Liens
ANNEX VIII - List of Mortgaged Real Property
ANNEX IX - Schedule of Litigation
ANNEX X - Schedule of Consents
ANNEX XI - Schedule of Restrictions
ANNEX XII - Environmental Matters
ANNEX XIII - Taxes
ANNEX XIV - Schedule of Intellectual Property
ANNEX XV - Schedule of Existing Leases
ANNEX XVI - Compliance with Laws
Exhibit A - Form of Revolving Note
Exhibit B-1 - Form of A Term Note
Exhibit B-2 - Form of B Term Note
Exhibit C-1 - Form of Opinion of Milbank, Tweed, Hadley & McCloy
Exhibit C-2 - Form of Opinion of Hunter, Maclean, Exley & Dunn,
P.C.
Exhibit C-3 - Form of Local Counsel Opinion
Exhibit D - Form of Mortgage
Exhibit E - Form of Holdings Guarantee
Exhibit F-1 - Form of Borrower Securities Pledge Agreement
Exhibit F-2 - Form of Holdings Securities Pledge Agreement
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Exhibit G - Form of Borrower Intellectual Property Security
Agreement
Exhibit H - Form of Borrower General Security Agreement
Exhibit I-1 - Form of Notice of Assignment
Exhibit I-2 - Form of Assignment and Assumption Agreement
Exhibit J - Form of Notice of Borrowing
Exhibit K - Form of Notice of Conversion/Continuation
Exhibit L - Form of Officer's Solvency Certificate
Exhibit M - Form of Borrowing Base Certificate
Exhibit N - Form of Officer's Certificate Regarding
Environmental Review
Exhibit O - Form of Landlord Lien Assurance Agreement
Exhibit P - Form of Consolidated Financial Plan
Exhibit Q - Form of Non-U.S. Lender Certificate
Exhibit R - Form of Subsidiary Guarantee
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CREDIT AGREEMENT, dated as of October 18, 1996 (the "Agreement"),
among CARSON PRODUCTS COMPANY, a Delaware corporation (subsequent to its merger
with DNL Savannah Acquisition Corp., the "Borrower"), the lending institutions
listed in Annex I (each a "Bank" and, collectively, the "Banks") and the New
York branch of BANQUE INDOSUEZ ("Indosuez") as the agent and collateral agent
for the Banks (in such capacity, the "Agent"). Unless otherwise defined herein,
all capitalized terms used herein and defined in Section 9 are used herein as so
defined.
WITNESSETH:
WHEREAS, Carson, Inc. (formerly known as DNL Savannah
Holding Corp.), a Delaware corporation ("Holdings") shall
consummate, on the Closing Date, an initial public offering of its
common stock (the "Holdings IPO");
WHEREAS, in conjunction with the Holdings IPO, Holdings and the
Borrower wish to refinance the existing indebtedness of the Borrower (the
Holdings IPO and the use of proceeds therefrom, and the Borrowings and the Notes
hereunder are, collectively, the "Refinancing");
WHEREAS, Holdings will execute a Guarantee, secured by a pledge of
the shares of capital stock of the Borrower, guaranteeing the Borrower's
obligations hereunder;
WHEREAS, the Borrower desires to incur Loans from the Banks, the
proceeds of which will be applied, to the extent necessary, to consummate the
Refinancing, to provide working capital to the Borrower, to pay certain fees and
expenses incurred in connection with the Refinancing and for general corporate
purposes; and
WHEREAS, the Banks are willing to make available the credit
facilities provided for herein.
NOW, THEREFORE, IT IS AGREED:
SECTION 1. Amount and Terms of Credit.
1.01 Commitments. Subject to and upon the terms and conditions
herein set forth, each Bank severally agrees, in the case of any Borrowing under
the A Term Loan Facility or the B Term Loan Facility, in each case, on the
Closing Date and, in the case of any Borrowing under the Revolving Portion, at
any time and from time to time on and after the Closing Date and prior to the
Revolving Loan Commitment Termination Date, to make a Loan or Loans to the
Borrower, which Loans shall be drawn under the Loan Facility
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(including the Revolving Portion and Term Portion thereof), as set
forth below.
(a) Loans under the Term Portion of the Loan Facility (each a "Term
Loan" and, collectively, the "Term Loans") may be made to the Borrower
under the A Term Loan Facility (each an "A Term Loan" and, collectively,
the "A Term Loans") or the B Term Loan Facility (each a "B Term Loan" and,
collectively, the "B Term Loans").
(i) Each A Term Loan under the A Term Loan Facility (A) shall
be made to the Borrower as a single drawing on the Closing Date, (B)
except as hereinafter provided, shall initially be made as a Base
Rate Loan and, 60 days after the Closing Date or such earlier time
as the Agent may agree, shall, at the option of the Borrower, be
Base Rate Loans or Reserve Adjusted Eurodollar Loans; provided that
all Term Loans made by all Banks pursuant to the same Borrowing
shall, unless otherwise specifically provided herein, consist
entirely of Loans of the same Type and (C) shall not exceed for any
Bank at any time outstanding the aggregate principal amount which
equals the A Term Loan Commitment of such Bank.
(ii) Each B Term Loan under the B Term Loan Facility (A) shall
be made to the Borrower as a single drawing on the Closing Date, (B)
except as hereinafter provided, shall initially be made as a Base
Rate Loan and, 60 days after the Closing Date or such earlier time
as the Agent may agree, shall, at the option of the Borrower, be
Base Rate Loans or Reserve Adjusted Eurodollar Loans; provided that
all Term Loans made by all Banks pursuant to the same Borrowing
shall, unless otherwise specifically provided herein, consist
entirely of Loans of the same Type and (C) shall not exceed for any
Bank at any time outstanding the aggregate principal amount which
equals the B Term Loan Commitment of such Bank.
(b) Loans under the Revolving Portion of the Loan Facility (each a
"Revolving Loan" and, collectively, the "Revolving Loans") (i) shall be
made at any time and from time to time on and after the Closing Date
(including up to $3,000,000 on the Closing Date for purposes of financing
the Refinancing and paying related fees and expenses; provided that the
Borrower has utilized the full amount of the Total Term Loan Commitment
for financing the Refinancing and paying related fees and expenses) and
prior to the Revolving Loan Commitment Termination Date, (ii) except as
hereinafter
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provided, shall initially be Base Rate Loans and, 60 days after the
Closing Date or such earlier time as the Agent may agree, shall, at the
option of the Borrower, be Base Rate Loans or Reserve Adjusted Eurodollar
Loans; provided that all Revolving Loans made by all Banks pursuant to the
same Borrowing shall, unless otherwise specifically provided herein,
consist entirely of Loans of the same Type, (iii) may be repaid and
reborrowed in accordance with the provisions hereof, (iv) shall not exceed
for any Bank at any time outstanding the Revolving Loan Commitment of such
Bank at such time and (v) shall not be made pursuant to a particular
Notice of Borrowing if the aggregate principal amount of Revolving Loans
then outstanding, after giving effect to the Revolving Loan requested by
such Notice of Borrowing, plus the then outstanding Letters of Credit
Usage, after giving effect to the issuance of all Letters of Credit
subject to outstanding requests for issuance, would exceed the lesser of
the Borrower's Borrowing Base as shown in the Borrowing Base Certificate
that was last required to be delivered pursuant to Section 6.01 or the
Total Revolving Loan Commitment.
1.02 Minimum Amount of Each Borrowing; Maximum Number of Borrowings.
The minimum aggregate principal amount of a Borrowing of Term Loans consisting
of Reserve Adjusted Eurodollar Loans or Base Rate Loans shall be the Minimum
Borrowing Amount and, if greater, shall be in integral multiples of $100,000;
provided, however, that the Banks' Term Loan Commitments shall terminate, on a
pro rata basis, with respect to any portion of the Total Term Loan Commitments
not utilized by the Borrower on the Closing Date. The minimum aggregate
principal amount of a Borrowing of Revolving Loans consisting of Reserve
Adjusted Eurodollar Loans or Base Rate Loans shall be the Minimum Borrowing
Amount (other than a Borrowing of Base Rate Loans such that the total amount of
Revolving Loans and Letters of Credit Usage to be outstanding after giving
effect to such Borrowing shall be equal to the Total Revolving Commitment) and,
if greater, shall be in integral multiples of $100,000. More than one Borrowing
may be incurred on any date; provided that at no time shall there be outstanding
more than 6 Borrowings of Reserve Adjusted Eurodollar Loans.
1.03 Notice of Borrowings. Whenever the Borrower desires that the
Banks make Reserve Adjusted Eurodollar Loans under the Revolving Loan Facility
it shall give the Agent at the Agent's Office prior to 10:00 A.M. (New York
time) at least three Business Days' prior written notice (or telephonic notice
promptly confirmed in writing) of each such Borrowing of Reserve Adjusted
Eurodollar Loans. Whenever the Borrower desires that the Banks make Base Rate
Revolving Loans on a same-day basis under the Revolving Loan
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Facility it shall give the Agent at the Agent's office prior to 10:00 A.M. (New
York time) written notice (or telephonic notice promptly confirmed in writing)
of each such Borrowing of Base Rate Loans. Each such notice, which shall be
substantially in the form of Exhibit J hereto (each a "Notice of Borrowing"),
shall be irrevocable, shall be deemed a representation by the Borrower that all
conditions precedent to such Borrowing set forth in Section 4.02 have been
satisfied and shall specify (i) the aggregate principal amount in U.S. dollars
of the Loans to be made pursuant to such Borrowing, all of which shall be
specified in such manner as is necessary to comply with all limitations on
Revolving Loans outstanding hereunder, including without limitation,
availability under the Borrowing Base, (ii) the date of Borrowing (which shall
be a Business Day) and (iii) whether the respective Borrowing shall consist of
Base Rate Loans or Reserve Adjusted Eurodollar Loans and, if Reserve Adjusted
Eurodollar Loans, the Interest Period to be initially applicable thereto. The
Agent shall as promptly as practicable give each Bank written notice (or
telephonic notice promptly confirmed in writing) of each proposed Borrowing, of
such Bank's proportionate share thereof and of the other matters covered by the
Notice of Borrowing.
1.04 Disbursement of Funds. (a) No later than 1:00 P.M. (New York
time) on the date specified in each Notice of Borrowing, each Bank will make
available to the Agent in New York its pro rata portion of each Borrowing
requested to be made on such date in the manner provided below.
(b) Each Bank shall make available all amounts it is to fund under
any Borrowing on or after the Closing Date in immediately available funds to the
Agent to the account specified therefor by the Agent or if no account is so
specified at the Agent's Office and the Agent will make such funds available to
the Borrower, no later than 4:00 P.M. (New York time) on the date specified in
each Notice of Borrowing, by depositing to the account specified therefor by the
Borrower or if no account is so specified to its account at the Agent's Office
the aggregate of the amounts so made available in the type of funds received.
Unless the Agent shall have been notified by any Bank prior to the date of any
such Borrowing that such Bank does not intend to make available to the Agent its
portion of the Borrowing or Borrowings to be made on such date, the Agent may
assume that such Bank has made such amount available to the Agent on such date
of Borrowing, and the Agent, in reliance upon such assumption, may (in its sole
discretion and without any obligation to do so) make available to the Borrower a
corresponding amount. If such corresponding amount is not in fact made available
to the Agent by such Bank and the Agent has made available same to the Borrower,
the Agent shall be entitled to
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recover such corresponding amount from such Bank. If such Bank does not pay such
corresponding amount forthwith upon the Agent's demand therefor, the Agent shall
promptly notify the Borrower, and the Borrower shall upon the Agent's request
immediately pay such corresponding amount to the Agent. The Agent shall also be
entitled to recover from such Bank or the Borrower, as the case may be, interest
on such corresponding amount in respect of each day from the date such
corresponding amount was made available by the Agent to the Borrower to the date
such corresponding amount is recovered by the Agent, at a rate per annum equal
to (x) if paid by such Bank, the Federal Funds Rate or (y) if paid by the
Borrower (and/or one or more other Credit Parties), the then applicable rate of
interest, calculated in accordance with Section 1.08, for the respective Loans.
The Agent shall also be entitled to recover from any Bank an amount equal to any
other losses incurred by the Agent as a result of the failure of such Bank to
provide such amount as provided in this Agreement.
(c) Nothing herein shall be deemed to relieve any Bank from its
obligation to fulfill its Commitments hereunder or to prejudice any rights which
the Borrower or any other Credit Party may have against any Bank as a result of
any default by such Bank hereunder.
1.05 Notes. (a) The Borrower's obligation to pay the principal of
and interest on all the Loans made to it by each Bank shall be evidenced (i) if
Revolving Loans, by a promissory note (each, a "Revolving Note" and,
collectively, the "Revolving Notes") duly executed and delivered by the Borrower
substantially in the form of Exhibit A hereto, with blanks appropriately
completed in conformity herewith, and (ii) if Term Loans, by a promissory note
(an "A Term Note" or a "B Term Note," respectively, as the case may be, and,
collectively, the "Term Notes") duly executed and delivered by the Borrower,
substantially in the form of Exhibits B- 1 and B-2 hereto, respectively, each
with blanks appropriately completed in conformity herewith.
(b) The Revolving Note of the Borrower issued to each Bank shall (i)
be executed by the Borrower, (ii) be payable to the order of such Bank and be
dated the Closing Date, (iii) be in a stated principal amount equal to the
Revolving Loan Commitment of such Bank and be payable in the aggregate principal
amount of the outstanding Revolving Loans evidenced thereby, (iv) mature, with
respect to each Loan evidenced thereby, on the Final Revolving Loan Maturity
Date, (v) be subject to mandatory prepayment as provided in Section 3.02, (vi)
bear interest as provided in the appropriate clause of Section 1.08 in respect
of the Base Rate Loans and Reserve Adjusted Eurodollar Loans, as the case may
be, evidenced
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thereby and (vii) be entitled to the benefits of this Agreement and the other
applicable Credit Documents.
(c) Each of the Term Notes of the Borrower issued to each Bank shall
(i) be executed by the Borrower, (ii) be payable to the order of such Bank and
be dated the Closing Date, (iii) be in a stated principal amount equal to the A
Term Loan Commitment of such Bank or the B Term Loan Commitment of such Bank, as
the case may be, and be payable in the aggregate principal amount of the A Term
Loans or the B Term Loans evidenced thereby, (iv) mature, with respect to each
Loan evidenced thereby, on the Final A Term Loan Maturity Date with respect to
the A Term Loans and the Final B Term Loan Maturity Date with respect to the B
Term Loans represented thereby, as the case may be, (v) be subject to mandatory
prepayment as provided in Section 3.02, (vi) bear interest as provided in the
appropriate clause of Section 1.08 in respect of the Base Rate Loans and Reserve
Adjusted Eurodollar Loans, as the case may be, evidenced thereby and (vii) be
entitled to the benefits of this Agreement and the other applicable Credit
Documents.
(d) Each Bank will note on its internal records the amount of each
Loan made by it and each payment in respect thereof and will, prior to any
transfer of any of its Notes, endorse on the reverse side thereof the
outstanding principal amount of Loans evidenced thereby. Failure to make any
such notation shall not affect the Borrower's or any Credit Party's obligations
hereunder or under the other applicable Credit Documents in respect of such
Loans.
1.06 Conversions; Continuations. The Borrower shall have the option
to convert on any Business Day commencing on the earlier of receipt of the
Agent's approval or 60 days after the Closing Date all or a portion (which
portion shall not be less than the Minimum Borrowing Amount) of the outstanding
principal amount of the Loans owing by the Borrower pursuant to a single Portion
of the Loan Facility into a Borrowing or Borrowings pursuant to such Portion of
another Type of Loan, or to continue all or a portion of such Borrowings as the
same Type of Loan; provided that (i) except as otherwise provided in Section
1.10(b), Reserve Adjusted Eurodollar Loans may be converted into Base Rate Loans
or continued as Reserve Adjusted Eurodollar Loans only on the last day of an
Interest Period applicable to such Reserve Adjusted Eurodollar Loans, (ii) no
such partial conversion of Reserve Adjusted Eurodollar Loans shall reduce the
outstanding principal amount of Reserve Adjusted Eurodollar Loans under the Loan
Facility (or Portion thereof) made pursuant to a single Borrowing to less than
the Minimum Borrowing Amount, (iii) one Type of Loan may only be continued as or
converted into Reserve Adjusted Eurodollar Loans if
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no Default or Event of Default is in existence on the date of the conversion,
(iv) Borrowings resulting from conversions or continuations pursuant to this
Section 1.06 shall be limited in amount and number as provided in Section 1.02
and (v) all or a portion of the outstanding principal amount of Base Rate Loans
may not be converted into Reserve Adjusted Eurodollar Loans if such Base Rate
Loans or portions thereof will mature within 30 days of such proposed
conversion. Each such conversion (or continuation) shall be effected by the
Borrower by giving the Agent at the Agent's Office prior to 10:00 A.M. (New York
time) at least three Business Days' (or one Business Day in the case of a
conversion into Base Rate Loans) prior written notice (or telephonic notice
promptly confirmed in writing) (each a "Notice of Conversion/Continuation")
specifying the Loans to be so converted or continued, the Type of Loans to be
converted into or continued and, if to be converted into or continued as Reserve
Adjusted Eurodollar Loans, the Interest Period to be initially applicable
thereto. The Agent shall give each Bank notice as promptly as practicable of any
such proposed conversion or continuation affecting any of its Loans.
Notwithstanding the foregoing or the provisions of Section 1.09, if a Default or
Event of Default is in existence on the last day of any Interest Period in
respect of any Borrowing of Reserve Adjusted Eurodollar Loans, such Loans may
not be continued as Reserve Adjusted Eurodollar Loans but instead shall be
automatically converted on the last day of such Interest Period into Base Rate
Loans. If no Notice of Conversion/Continuation has been duly delivered with
respect to a Reserve Adjusted Eurodollar Loan on or before the third Business
Day prior to the last day of the Interest Period applicable thereto, such
Reserve Adjusted Eurodollar Loan shall be automatically converted into a Base
Rate Loan.
1.07 Pro Rata Borrowings. All Borrowings under this Agreement shall
be loaned by the Banks pro rata on the basis of their A Term Loan Commitments, B
Term Loan Commitments or Revolving Loan Commitments, as the case may be. No Bank
shall be responsible for any default by any other Bank in its obligation to make
Loans hereunder and each Bank shall be obligated to make the Loans provided to
be made by it hereunder, regardless of the failure of any other Bank to fulfill
its commitments hereunder.
1.08 Interest. (a) The unpaid principal amount of each Base Rate
Loan shall bear interest from the date of the Borrowing thereof until maturity
(whether by acceleration or otherwise) (or unless sooner converted into a
Reserve Adjusted Eurodollar Loan) at a rate per annum equal to the sum of (i)
the Base Rate in effect from time to time and (ii) the applicable Interest
Margin.
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(b) The unpaid principal amount of each Reserve Adjusted Eurodollar
Loan shall bear interest from the date of the Borrowing thereof until maturity
(whether by acceleration or otherwise) (or unless sooner converted to a Base
Rate Loan) at a rate per annum equal to the sum of (i) the relevant Eurodollar
Rate and (ii) the applicable Interest Margin.
(c) Overdue principal and, to the extent permitted by law, overdue
interest in respect of each Loan shall bear interest at a rate per annum equal
to the sum of (i) the rate of interest applicable to such Loan and (ii) 2%;
provided that the amount of the overdue principal of each Reserve Adjusted
Eurodollar Loan shall bear interest at the rate of interest applicable thereto
plus 2% for the balance of the then current Interest Period.
(d) Interest shall accrue from and including the date of any
Borrowing to but excluding the date of any repayment thereof and shall be
payable (i) in respect of each Base Rate Loan, quarterly in arrears on the last
Business Day of each March, June, September and December beginning December
1996; (ii) in respect of each Reserve Adjusted Eurodollar Loan, in arrears on
the last day of each Interest Period applicable thereto and, in the case of an
Interest Period in excess of three months, on each date occurring at three-month
intervals after the first date of such Interest Period; and (iii) in respect of
each Loan, on any prepayment (on the amount prepaid), at maturity (whether by
acceleration or otherwise) and, after such maturity, on demand.
(e) All computations of interest hereunder shall be made in
accordance with Section 11.07(b).
(f) The Agent, upon determining the interest rate for any Borrowing
of Reserve Adjusted Eurodollar Loans for any Interest Period, shall promptly
notify the Borrower and the Banks thereof. Such determination shall, absent
manifest error, be final, conclusive and binding upon all parties hereto.
1.09 Interest Periods. At the time the Borrower gives a Notice of
Borrowing or Notice of Conversion/Continuation in respect of the making of, or
conversion into or continuation of, a Borrowing of Reserve Adjusted Eurodollar
Loans, it shall have the right to elect, by giving the Agent written notice (or
telephonic notice promptly confirmed in writing), the Interest Period applicable
to such Borrowing, which Interest Period shall, at the option of such Borrower,
be a one, two, three or six month period. Notwithstanding anything to the
contrary contained above:
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(a) the initial Interest Period for any Borrowing of Reserve
Adjusted Eurodollar Loans shall commence on the date of such Borrowing
(including the date of any conversion from a Borrowing of Base Rate Loans)
and each Interest Period occurring thereafter in respect of such Borrowing
shall commence on the date on which the next preceding Interest Period
expires;
(b) if any Interest Period relating to a Borrowing of Reserve
Adjusted Eurodollar Loans begins on a date for which there is no
numerically corresponding date in the calendar month in which such
Interest Period ends, such Interest Period shall end on the last Business
Day of such calendar month;
(c) if any Interest Period would otherwise expire on a day which is
not a Business Day, such Interest Period shall expire on the next
succeeding Business Day; provided that if any Interest Period in respect
of a Reserve Adjusted Eurodollar Loan would otherwise expire on a day
which is not a Business Day but is a day of the month after which no
further Business Day occurs in such month, such Interest Period shall
expire on the next preceding Business Day;
(d) no Interest Period shall extend beyond the Final Revolving Loan
Maturity Date (in the case of Revolving Loans) or the Final A Term Loan
Maturity Date (in the case of A Term Loans) or the Final B Term Loan
Maturity Date (in the case of B Term Loans); and
(e) no Interest Period with respect to any Borrowing of Reserve
Adjusted Eurodollar Loans shall extend beyond any date upon which the
Borrower thereof is required to make a scheduled payment of principal with
respect to the Term Loans if, after giving effect to the selection of such
Interest Period, the aggregate principal amount of A Term Loans and B Term
Loans maintained as Reserve Adjusted Eurodollar Loans with Interest
Periods ending after such date of scheduled payment of principal would
exceed the amount of A Term Loans and B Term Loans, respectively,
permitted to be outstanding after such scheduled payment of principal.
1.10 Special Provisions Governing Reserve Adjusted Eurodollar Loans.
Notwithstanding any other provisions of this Agreement, the following provisions
shall govern with respect to Reserve Adjusted Eurodollar Loans as to the matters
covered:
(a) On an Interest Rate Determination Date, the Agent
shall determine (which determination shall, absent
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demonstrable error, be final, conclusive and binding upon all parties
hereto) the interest rate which shall apply to the Reserve Adjusted
Eurodollar Loans for which an interest rate is then being determined for
the applicable Interest Period and shall promptly give notice thereof (in
writing or by telephone confirmed in writing) to the Borrower thereof and
to each Bank.
(b) In the event that (x) in the case of clause (i) below, the Agent
or (y) in the case of clause (ii) or (iii) below, any Bank shall have
determined (which determination shall, absent demonstrable error, be
final, conclusive and binding upon all parties hereto):
(i) on any date for determining the Eurodollar Rate for any
Interest Period that, by reason of any changes arising on or after
the Effective Date affecting the interbank eurodollar market,
adequate and fair means do not exist for ascertaining the applicable
interest rate on the basis provided for in the definition of
Eurodollar Rate;
(ii) at any time that such Bank shall incur increased costs or
reductions in the amounts received or receivable hereunder with
respect to any Reserve Adjusted Eurodollar Loans or its obligation
to make Reserve Adjusted Eurodollar Loans because of (x) any change
since the Effective Date (including changes proposed or published
prior to the Effective Date) in any applicable law, governmental
rule, regulation, guideline or order (or in the interpretation or
administration thereof and including the introduction of any new law
or governmental rule, regulation, guideline or order) (such as, for
example, but not limited to, a change in official reserve
requirements, but, in all events, excluding reserves required under
Regulation D to the extent included in the computation of the
Eurodollar Rate), including a change in the basis of taxation of
payments to any Bank of the principal of or interest on the Notes or
any other amounts payable hereunder (except for changes in the rate
of tax on, or determined by reference to, the net income or profits
of such Bank pursuant to the laws of the jurisdiction in which it is
organized or in which its principal office or applicable lending
office is located or any subdivision thereof or therein) and/or (y)
other circumstances affecting such Bank, the interbank eurodollar
market, or the position of such Bank in such market; or
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(iii) at any time that the making or continuance of any Reserve
Adjusted Eurodollar Loan has become unlawful by compliance by such
Bank in good faith with any law, governmental rule, regulation,
guideline or order (or would conflict with any such governmental
rule, regulation, guideline or order not having the force of law
even though the failure to comply therewith would not be unlawful),
or has become impracticable as a result of a contingency occurring
after the Effective Date which materially and adversely affects the
interbank eurodollar market;
then, and in any such event, the Agent in the case of clause (i) above or
such Bank in the case of clause (ii) or (iii) above shall promptly give
notice (by telephone confirmed in writing) in accordance with Section
1.10(h) hereof to the Borrower of the Loan affected and, in the case of
clause (ii) or (iii) to the Agent, of such determination (which notice the
Agent shall promptly transmit to each of the other Banks). Thereafter (x)
in the case of clause (i) above, Reserve Adjusted Eurodollar Loans shall
no longer be available until such time as the Agent notifies the Borrower
and the Banks that the circumstances giving rise to such notice by the
Agent no longer exist, and any Notice of Borrowing or Notice of
Conversion/Continuation given by the Borrower with respect to the
borrowing of or conversion into (or continuation of) Reserve Adjusted
Eurodollar Loans which have not yet been incurred shall be deemed
rescinded by the Borrower, (y) in the case of clause (ii) above, the
Borrower shall pay to such Bank, within 10 Business Days after a written
demand therefor, such additional amounts (in the form of an increased rate
of, or a different method of calculating, interest or otherwise as such
Bank in its reasonable discretion shall determine) as shall be required to
compensate such Bank for such increased costs or reductions in amounts
receivable hereunder (a written notice pursuant to Section 1.10(h) hereof
as to the additional amounts owed to such Bank, setting forth in
reasonable detail the basis for the calculation thereof, submitted to the
Borrower shall, absent demonstrable error, be final, conclusive and
binding upon all parties hereto) and (z) in the case of clause (iii)
above, the Borrower shall take one of the actions specified in Section
1.10(c) as promptly as possible and, in any event, within the time period
required by law.
(c) At any time that any Reserve Adjusted Eurodollar Loan is
affected by the circumstances described in Section 1.10(b)(ii) or (iii),
the Borrower may (and in the case of a Reserve Adjusted Eurodollar Loan
affected pursuant
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to Section 1.10(b)(iii) shall) either (i) if a Notice of Borrowing or
Notice of Conversion/Continuation has been given with respect to the
affected Reserve Adjusted Eurodollar Loan, cancel said Notice of Borrowing
or Notice of Conversion/Continuation by giving the Agent telephonic notice
(confirmed promptly in writing) thereof on the same date (if the Borrower
has been notified by not later than 3:00 P.M., New York time, or the next
Business Day if otherwise) that the Borrower was notified by a Bank
pursuant to Section 1.10(b)(ii) or (iii), or (ii) if the affected Reserve
Adjusted Eurodollar Loan is then outstanding, upon at least three Business
Days' notice to the Agent, require the affected Bank to convert each such
Reserve Adjusted Eurodollar Loan into a Base Rate Loan, or prepay such
Reserve Adjusted Eurodollar Loan; provided that if more than one Bank is
affected at any time, then all affected Banks must be treated the same
pursuant to this Section 1.10(c); and provided, further, that the Borrower
shall compensate any such affected Banks as set forth in Section 1.10(f).
(d) Anything herein to the contrary notwithstanding, if on any
Interest Rate Determination Date no Eurodollar Rate is available by reason
of the inability of the Agent to determine such interest rate in
accordance with the definition thereof, the Agent shall give the Borrower
and each Bank prompt notice thereof and the Loans requested to be made as
Reserve Adjusted Eurodollar Loans shall, subject to the applicable notice
requirements, be made as Base Rate Loans.
(e) Each Bank agrees that, as promptly as practicable after it
becomes aware of the occurrence of any event or the existence of a
condition that would cause it to be an affected Bank under Section 1.10(b)
(ii) or (iii), it will, to the extent not inconsistent with such Bank's
internal policies or any legal or regulatory restrictions, use reasonable
efforts to make, fund or maintain the affected Reserve Adjusted Eurodollar
Loans of such Bank through another lending office of such Bank if as a
result thereof the additional moneys which would otherwise be required to
be paid in respect of such Loans pursuant to Section 1.10(b)(ii) would be
materially reduced or the illegality or other adverse circumstances which
would otherwise require conversion or prepayment of such Loans pursuant to
Section 1.10(b)(iii) would cease to exist, and if, as determined by such
Bank, in its reasonable discretion, the making, funding or maintaining of
such Loans through such other lending office would not otherwise
materially adversely affect such Loans or such Bank. The Borrower hereby
agrees to pay all reasonable expenses incurred by any Bank in utilizing
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another lending office of such Bank pursuant to this Section
1.10(e).
(f) The Borrower shall compensate each Bank, within 10 Business Days
after a written request by that Bank (which request shall be accompanied
by a written notice pursuant to Section 1.10(h) setting forth in
reasonable detail the basis for the calculation of such amounts), for all
reasonable losses, expenses and liabilities (including, without
limitation, such factors as any interest paid by that Bank to lenders of
funds borrowed by it to make or carry its Reserve Adjusted Eurodollar
Loans and any loss sustained by that Bank in connection with re-employment
of such funds (based upon the difference between the amount earned in
connection with re-employment of such funds and the amount payable by the
Borrower if such funds had been borrowed or remained outstanding)) which
that Bank may sustain with respect to the Borrower's Reserve Adjusted
Eurodollar Loans: (i) if for any reason (other than a default or error by
that Bank) a Borrowing of any such Reserve Adjusted Eurodollar Loan does
not occur on a date specified therefor in a Notice of Borrowing or a
Notice of Conversion/Continuation or in a telephonic request for borrowing
or conversion or continuation, or a successive Interest Period in respect
of any such Reserve Adjusted Eurodollar Loan does not commence after
notice therefor is given pursuant to Section 1.06, (ii) if any prepayment
or conversion (as required by Sections 3.01 and 3.02, by acceleration or
otherwise) of any of such Bank's Reserve Adjusted Eurodollar Loans to the
Borrower occurs on a date which is not the last day of the Interest Period
applicable to that Loan, (iii) if any prepayment of any such Bank's
Reserve Adjusted Eurodollar Loans to the Borrower is not made on any date
specified in a notice of prepayment given by the Borrower, or (iv) as a
consequence of any other failure by the Borrower to repay such Bank's
Reserve Adjusted Eurodollar Loans to the Borrower when required by the
terms of this Agreement.
(g) Any Bank claiming any additional amounts payable pursuant to
this Section 1.10 agrees to use reasonable efforts (consistent with such
Bank's internal policies, legal and regulatory restrictions and commercial
considerations) to designate a different lending office if the making of
such a designation would avoid the need for, or reduce the amount of, any
such additional amounts and would not, in the reasonable judgment of such
Bank, be in any way otherwise disadvantageous to such Bank.
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(h) Each Bank shall notify the Borrower of any event occurring after
the date hereof entitling such Bank to compensation under the foregoing
paragraphs of this Section 1.10 as promptly as practicable, but in any
event within 90 days, after such Bank obtains actual knowledge thereof;
provided that if any Bank fails to give such notice within 90 days after
it obtains actual knowledge of such an event, such Bank shall, with
respect to compensation payable pursuant to this Section 1.10 in respect
of any costs or other amounts resulting from or relating to such event,
only be entitled to payment under this Section 1.10 for such costs or
other amounts from and after the date 90 days prior to the date that such
Bank does give such notice. Each Bank will furnish to the Borrower a
certificate setting forth in reasonable detail the basis and amount of
each request by such Bank for compensation under this Section 1.10.
Determinations by any Bank for purposes of this Section 1.10, including of
the effect of any regulatory change pursuant to Section 1.10(b)(ii) on its
costs of maintaining Loans or its obligation to make Loans, or on amounts
receivable by it in respect of Loans, and of the amounts required to
compensate such Bank under this Section 1.10, shall be made on a
reasonable basis.
1.11 Capital Requirements. If any Bank shall have determined that
the adoption or effectiveness after the Effective Date of any applicable law,
rule or regulation regarding capital adequacy, or any change therein, or any
change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by such Bank or such Bank's parent with
any request or directive regarding capital adequacy (whether or not having the
force of law) of any such authority, central bank or comparable agency
(including in each case any such change proposed or published prior to the date
hereof), has or would have the effect of reducing the rate of return on such
Bank's or such Bank's parent's capital or assets as a consequence of such Bank's
obligations hereunder to a level below that which such Bank or such Bank's
parent could have achieved but for such adoption, effectiveness or change or as
a consequence of an increase in the amount of capital required to be maintained
by such Bank as a consequence of such Bank's obligations hereunder (including in
each case, without limitation, with respect to any Bank's Commitment or any
Loan), then from time to time, within 15 Business Days after demand by such Bank
(with a copy to the Agent), the Borrower shall pay to such Bank such additional
amount or amounts as will compensate such Bank or such Bank's parent, as the
case may be, for such reduction. Each Bank, upon determining in
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good faith that any additional amounts will be payable pursuant to this Section
1.11, will give prompt written notice thereof to the Borrower, which notice
shall set forth in reasonable detail the basis of the calculation of such
additional amounts, although any delay in giving any notice shall not release or
diminish any of the Borrower's obligations to pay additional amounts pursuant to
this Section 1.11.
1.12 Total Loan Commitments; Limitations on Outstanding Loan
Amounts. The original amount of the (i) Total Commitments is $40,000,000, (ii)
Total A Term Loan Commitments is $15,000,000, (iii) Total B Term Loan
Commitments is $10,000,000 and (iv) Total Revolving Loan Commitments is
$15,000,000, including up to $5,000,000 of Letters of Credit. Anything contained
in this Agreement to the contrary notwithstanding, (a) in no event shall the sum
of the aggregate principal amount of all outstanding Term Loans and Revolving
Loans of any Bank at any time exceed such Bank's portion of the Total
Commitments, (b) in no event shall the sum of the aggregate principal amount of
all Term Loans and Revolving Loans from all Banks at any time exceed the Total
Commitments and (c) in no event shall the Total Utilization of Revolving Loan
Commitments and Letters of Credit Usage exceed the Total Revolving Loan
Commitments.
1.13 Letters of Credit.
(A) Letters of Credit. Subject to the terms and conditions of this
Agreement and in reliance upon the representations and warranties of the
Borrower set forth herein and in the other Credit Documents, in addition to
requesting that the Banks make Revolving Loans pursuant to Section 1.03, the
Borrower may request, in accordance with the provisions of this Section 1.13,
that one or more Issuing Banks issue Letters of Credit for the account of the
Borrower; provided that (i) the Borrower shall not request that any Bank issue
any Letter of Credit and a Bank shall not be required to issue any Letter of
Credit, if after giving effect to such issuance the sum of (a) the Letters of
Credit Usage on the date of such issuance, after giving effect to the issuance
of all Letters of Credit subject to outstanding requests for issuance of a
Letter of Credit, plus (b) the aggregate principal amount of Revolving Loans
then outstanding, after giving effect to the making of all Revolving Loans then
requested by all outstanding but unfunded Notices of Borrowing, would exceed the
lesser of the Borrower's Borrowing Base as would be shown in the Borrowing Base
Certificate that was last required to be delivered pursuant to Section 6.01 or
the Total Revolving Loan Commitment then in effect, (ii) in no event shall any
Issuing Bank issue (w) any Letter of Credit having an expiration date later than
ten
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(10) Business Days prior to the Final Revolving Loan Maturity Date, after giving
effect to any possible renewal of such Letter of Credit pursuant to the proviso
to the following clause (ii)(x), (x) subject to the foregoing clause (ii)(w),
any Letter of Credit having an expiration date more than one year after its date
of issuance; provided that, subject to the foregoing clause (ii)(w), this clause
(x) shall not prevent any Issuing Bank from issuing a Letter of Credit
containing a provision to the effect that such Letter of Credit will
automatically be renewed annually for a period not to exceed one year, so long
as such renewable Letter of Credit provides that it shall not at any time be
renewed for an additional year if (I) the Borrower notifies the Issuing Bank in
writing one Business Day prior to the applicable renewal date that the Borrower
elects to allow the Letter of Credit to expire without being renewed, or (II)
the Issuing Bank or the Required Banks notify the Borrower in writing, prior to
the date set forth in such Letter of Credit as the date by which the beneficiary
thereof is to be notified whether such Letter of Credit is to be renewed, that
such Letter of Credit shall not be so renewed, in which case such Letter of
Credit shall not be so renewed, (y) any Letter of Credit, the initial stated
amount of which is less than $5,000, or (z) any Letter of Credit (I) which is
governed by laws other than the laws of the State of New York, without regard to
the principles of conflicts of laws, or (II) as to which the beneficiary is not
required, by acceptance of the Letter of Credit, to be subject to the exclusive
jurisdiction of any competent state or federal court in the State of New York
with regard to such Letter of Credit and (iii) the Borrower shall not request
that any Issuing Bank issue and no Issuing Bank shall issue any Letter of Credit
if, after giving effect to such issuance and the issuance of all other requested
Letters of Credit, the then outstanding Letters of Credit Usage in respect of
all Letters of Credit would exceed $5,000,000. The issuance of any Letter of
Credit in accordance with the provisions of this Section 1.13 shall be given
effect in the calculation of the aggregate principal amount of Revolving Loans
outstanding and the Letters of Credit Usage and shall require the satisfaction
of each condition set forth in Sections 4.02 and 4.03.
Immediately upon the issuance of each Letter of Credit, each Bank
other than the Issuing Bank or Banks shall be deemed to, and hereby agrees to,
be irrevocably obligated to reimburse the Issuing Bank (such reimbursement
obligation of each Bank in each Letter of Credit being hereinafter referred to
as its "Letter of Credit Participation") under such Letter of Credit and each
drawing thereunder in an amount equal to such Bank's pro rata share (determined
on the basis of such Bank's Revolving Loan Commitment) of the maximum amount
which is or at any time may become available to be drawn thereunder.
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Each Letter of Credit may provide that the Issuing Bank may (but
shall not be required to) pay the beneficiary thereof upon the occurrence of an
Event of Default and the acceleration of the maturity of the Revolving Loans or,
if payment is not then due to the beneficiary, provide for the deposit of funds
in an account to secure payment to the beneficiary and that any funds so
deposited shall be paid to the beneficiary of the Letter of Credit if conditions
to such payment are satisfied or returned to the Issuing Bank for distribution
to the Banks (or, if all Obligations shall have been indefeasibly paid in full,
to the Borrower) if no payment to the beneficiary has been made and the final
date available for drawings under the Letter of Credit has passed. Each payment
or deposit of funds by an Issuing Bank as provided in this paragraph shall be
treated for all purposes of this Agreement as a drawing duly honored by such
Issuing Bank under the related Letter of Credit.
(B) Request for Issuance. Whenever the Borrower desires the issuance
of a Letter of Credit, it shall deliver to the Agent a request for issuance of a
Letter of Credit no later than 1:00 P.M. (New York time) at least three Business
Days, or such shorter period as may be agreed to by any Issuing Bank in any
particular instance, in advance of the proposed date of issuance. The request
for issuance with respect to any Letter of Credit shall specify (i) the proposed
date of issuance (which shall be a business day under the laws of the
jurisdiction of the Issuing Bank) of such Letter of Credit, (ii) the face amount
of such Letter of Credit, (iii) the expiration date of such Letter of Credit and
(iv) the name and address of the beneficiary of such Letter of Credit. As soon
as practicable after delivery of such request for issuance of a Letter of
Credit, the Issuing Bank for such Letter of Credit shall be determined as
provided in Section 1.13(C). Prior to the date of issuance, the Borrower shall
specify a precise description of the documents and the verbatim text of any
certificate to be presented by the beneficiary of such Letter of Credit which,
if presented by such beneficiary prior to the expiration date of the Letter of
Credit, would require the Issuing Bank to make payment under the Letter of
Credit; provided that the Issuing Bank, in its sole judgment, may require
changes in any such documents and certificates; and provided, further, that no
Letter of Credit shall require payment against a conforming draft to be made
thereunder earlier than 1:00 P.M. in the time zone of the Issuing Bank on the
Business Day (which shall be a business day under the laws of the jurisdiction
of the Issuing Bank) next succeeding the Business Day (which shall be a business
day under the laws of the jurisdiction of the Issuing Bank) that such draft is
presented. In determining whether to pay under any Letter of Credit, the Issuing
Bank shall be responsible only to determine that the documents and
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certificates required to be delivered under that Letter of Credit have been
delivered and that they comply on their face with the requirements of that
Letter of Credit. Promptly after receipt of a request for issuance of a Letter
of Credit and the determination of the Issuing Bank thereof, the Agent shall
notify each Bank of the proposed issuance, the identity of the Issuing Bank and
the amount of each other Bank's respective participation therein, determined in
accordance with Section 1.13(A).
(C) Determination of Issuing Bank.
(1) Upon receipt by the Agent of a request for issuance pursuant to
Section 1.13(B) with respect to a Letter of Credit, in the event the Agent
elects to issue such Letter of Credit, the Agent shall so notify the Borrower,
and the Agent shall be the Issuing Bank with respect thereto. In the event that
the Agent, in its sole discretion, elects not to issue such Letter of Credit,
the Agent shall promptly so notify the Borrower, and the Borrower may request
any other Bank to issue such Letter of Credit. Each such Bank so requested to
issue such Letter of Credit shall promptly notify the Borrower and the Agent
whether or not, in its sole discretion, it has elected to issue such Letter of
Credit, and any such Bank that so elects to issue such Letter of Credit shall be
the Issuing Bank with respect thereto. In the event that all other Banks shall
have declined to issue such Letter of Credit, notwithstanding the prior election
of the Agent not to issue such Letter of Credit, the Agent shall be obligated to
issue the Letter of Credit requested by the Borrower and shall be the Issuing
Bank with respect to such Letter of Credit. In no event shall any Bank be an
Issuing Bank if such Bank would incur increased costs pursuant to Section
1.13(H) as a result of being the Issuing Bank, unless consented to by the
Borrower. No Issuing Bank shall issue any Letter of Credit denominated in a
currency other than Dollars.
(2) Each Issuing Bank that elects to issue a Letter of Credit shall
promptly give written notice to the Agent and each other Bank of the information
required under Sections 1.13(B)(i)- (iv) relating to the Letter of Credit.
(D) Payment of Amounts Drawn Under Letters of Credit. In the event
of any request for drawing under any Letter of Credit by the beneficiary
thereof, the Issuing Bank shall notify the Borrower and the Agent on or before
the date on which such Issuing Bank intends to honor such drawing, and the
Borrower shall reimburse such Issuing Bank on the day on which such drawing is
honored in an amount in same day funds equal to the amount of such drawing;
provided that, anything contained in this Agreement to the contrary
notwithstanding, (i) unless the Borrower shall have
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notified the Agent and such Issuing Bank prior to 10:00 A.M. (New York time) on
the Business Day of the date of such drawing that the Borrower intends to
reimburse such Issuing Bank for the amount of such drawing with funds other than
the proceeds of Revolving Loans, the Borrower shall be deemed to have timely
given a Notice of Borrowing to the Agent requesting the Banks to make Revolving
Loans that are Base Rate Loans on the date on which such drawing is honored in
an amount equal to the amount of such drawing, and (ii) subject to satisfaction
or waiver of the conditions specified in Section 4.02, the Banks shall, on the
date of such drawing, make Revolving Loans that are Base Rate Loans in the
amount of such drawing, the proceeds of which shall be applied directly by the
Agent to reimburse such Issuing Bank for the amount of such drawing; and
provided further that if, for any reason, proceeds of Revolving Loans are not
received by such Issuing Bank on such date in an amount equal to the amount of
such drawing, the Borrower shall reimburse such Issuing Bank, on the Business
Day (which shall be a business day under the laws of the jurisdiction of such
Issuing Bank) immediately following the date of such drawing, in an amount in
same day funds equal to the excess of the amount of such drawing over the amount
of such Revolving Loans, if any, that are so received, plus accrued interest on
such amount at the rate set forth in Section 1.13(F)(1)(i).
(E) Payment by Banks. In the event that the Borrower shall fail to
reimburse an Issuing Bank as provided in Section 1.13(D) in an amount equal to
the amount of any drawing honored by such Issuing Bank under a Letter of Credit
issued by it, such Issuing Bank shall promptly notify each Bank of the
unreimbursed amount of such drawing and of such Bank's respective participation
therein. Each Bank shall make available to such Issuing Bank an amount equal to
its respective participation in same day funds, at the office of such Issuing
Bank specified in such notice, not later than 1:00 P.M. (New York time) on the
Business Day (which shall be a business day under the laws of the jurisdiction
of such Issuing Bank) after the date notified by such Issuing Bank. In the event
that any Bank fails to make available to such Issuing Bank the amount of such
Bank's participation in such Letter of Credit as provided in this Section
1.13(E), such Issuing Bank shall be entitled to recover such amount on demand
from such Bank together with interest at the customary rate set by the Agent for
the correction of errors among banks for three Business Days and thereafter at
the Base Rate. Each Issuing Bank shall distribute to each other Bank which has
paid all amounts payable by it under this Section 1.13(E) with respect to any
Letter of Credit issued by such Issuing Bank such other Bank's pro rata share of
all payments received by such Issuing Bank from the Borrower in reimbursement of
drawings honored by such Issuing Bank under such Letter of Credit
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when such payments are received. Nothing in this Section 1.13(E) shall be deemed
to relieve any Bank from its obligation to pay all amounts payable by it under
this Section 1.13(E) with respect to any Letter of Credit issued by an Issuing
Bank or to prejudice any rights that the Borrower or any other Bank may have
against a Bank as a result of any default by such Bank hereunder and no Bank
shall be responsible for the failure of any other Bank to pay its pro rata share
payable under this Section 1.13(E).
(F) Compensation.
(1) The Borrower agrees to pay the following amount with respect to
all Letters of Credit:
(i) with respect to drawings made under any Letter of Credit,
interest, payable on demand, on the amount paid by such Issuing Bank in
respect of each such drawing from and including the date of the drawing
through the date such amount is reimbursed by the Borrower (including any
such reimbursement out of the proceeds of Revolving Loans pursuant to
Section 1.13(D)) at a rate which is equal to the interest rate then
applicable to Base Rate Loans for the period from the date of such drawing
to and including the first Business Day after the date of such drawing and
thereafter at a rate equal to 2% per annum in excess of the rate of
interest otherwise payable under this Agreement for Base Rate Loans during
such period; provided that if the Banks make a Revolving Loan on any day
the proceeds of which are to be applied to payment of the amount paid by
such Issuing Bank, the Borrower shall not be obligated to pay interest on
such amount for such day pursuant to this clause (i); and
(ii) with respect to the amendment or transfer of each Letter of
Credit and each drawing made thereunder, documentary and processing
charges in accordance with such Issuing Bank's standard schedule for such
charges in effect at the time of such amendment, transfer or drawing, as
the case may be.
(2) The Borrower agrees to pay to the Agent for distribution to each
Bank in respect of all Letters of Credit outstanding such Bank's pro rata share
of a commission equal to 2% per annum of the maximum amount available from time
to time to be drawn under such outstanding Letters of Credit, payable in arrears
on and through the last day of each fiscal quarter of the Borrower and
calculated on the basis of a 365-day year and the actual number of days elapsed.
Upon the happening and during the continuance of an Event of Default described
in Section 8.01, the commission referred to in the preceding sentence shall be
4% per annum.
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(3) The Borrower agrees to pay to each Issuing Bank in respect of
each Letter of Credit issued by each such Issuing Bank on the date of issuance
an amount equal to the greater of (A) 1/4% of the maximum amount available at
any time to be drawn under such Letter of Credit or (B) $1,500.
Amounts payable under clauses (1)(i) and (2) of this Section 1.13(F)
shall be paid to the Agent on behalf of the Banks. The Agent shall promptly
distribute to each Bank its pro rata share of such amount. Amounts payable under
clauses (1)(ii) and (3) of this Section 1.13(F) shall be paid directly to the
Issuing Bank.
(G) Obligations Absolute. The obligation of the Borrower to
reimburse each Issuing Bank for drawings made under the Letters of Credit issued
by it and the obligations of the Banks under Section 1.13(E) shall be
unconditional and irrevocable and shall be paid strictly in accordance with the
terms of this Agreement under all circumstances including, without limitation,
the following circumstances:
(1) any lack of validity or enforceability of any Letter
of Credit;
(2) the existence of any claim, setoff, defense or other right that
the Borrower or any Affiliate of the Borrower or any other Person may have
at any time against a beneficiary or any transferee of any Letter of
Credit (or any persons or entities for whom any such beneficiary or
transferee may be acting), such Issuing Bank, any Bank or any other
Person, whether in connection with this Agreement, the transactions
contemplated herein or any unrelated transaction;
(3) any draft, demand, certificate or any other document presented
under any Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect, if not apparent from the documents presented;
(4) payment by such Issuing Bank under any Letter of Credit against
presentation of a demand, draft or certificate or other document that does
not comply with the terms of such Letter of Credit unless such Issuing
Bank shall have acted in bad faith or with willful misconduct or gross
negligence in issuing such payment;
(5) any other circumstance or happening whatsoever that
is similar to any of the foregoing; or
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(6) the fact that a Default or Event of Default shall have occurred
and be continuing.
(H) Additional Payments. If by reason of (a) any change after the
Effective Date in applicable law, regulation, rule, decree or regulatory
requirement or any change in the interpretation or application by any judicial
or regulatory authority of any law, regulation, rule, decree or regulatory
requirement or (b) compliance by any Issuing Bank or any Bank with any
direction, request or requirement (whether or not having the force of law) of
any governmental or monetary authority including, without limitation, Regulation
D:
(i) such Issuing Bank or any Bank shall be subject to any tax,
levy, charge or withholding of any nature or to any variation thereof or
to any penalty with respect to the maintenance or fulfillment of its
obligations under this Section 1.13, whether directly or by such being
imposed on or suffered by such Issuing Bank or any Bank; provided,
however, that no payment shall be required to be made by the Borrower
pursuant to this clause (i) with respect to changes in the rate of any tax
on or measured by the net income of a Bank (including any franchise or
similar tax so measured) pursuant to the income tax laws of the United
States or of the jurisdiction in which it is incorporated or organized or
the jurisdiction where such Bank's lending office is located;
(ii) any reserve, deposit or similar requirement is or shall be
applicable, imposed or modified in respect of any Letter of Credit issued
by such Issuing Bank or participations therein purchased by any Bank; or
(iii) there shall be imposed on such Issuing Bank or any Bank any
other condition regarding this Section 1.13, any Letter of Credit or any
participation therein;
and the result of the foregoing is to directly or indirectly increase the cost
to such Issuing Bank or any Bank of issuing, making or maintaining any Letter of
Credit or of purchasing or maintaining any participation therein, or to reduce
the amount receivable in respect thereof by such Issuing Bank or any Bank, then
and in any such case such Issuing Bank or such Bank shall, after the additional
cost is incurred or the amount received is reduced, notify the Borrower and the
Borrower shall pay within 10 Business Days after demand such amounts as such
Issuing Bank or such Bank may specify to be necessary to compensate such Issuing
Bank or such Bank for such additional cost or reduced receipt, together with
interest on such amount from the date demanded until
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payment in full thereof at a rate per annum equal at all times to the rate
applicable to Base Rate Loans then in effect; provided that if any Bank fails to
give such notice within 90 days after it obtains actual knowledge of such an
event, such Bank shall, with respect to compensation payable pursuant to this
Section 1.13(H) in respect of any costs or other amounts resulting from or
relating to such event, only be entitled to payment under this Section 1.13(H)
for such costs or other amounts from and after the date 90 days prior to the
date that such Bank does give such notice; and provided, further, that each Bank
agrees that, as promptly as practicable after it becomes aware of the existence
of the foregoing conditions, it will, to the extent not inconsistent with such
Bank's internal policies or any legal or regulatory restrictions, use reasonable
efforts to issue, make or maintain the affected Letter of Credit or purchase or
maintain any participation therein through another lending office of such Bank
if as a result thereof the additional moneys which would otherwise be required
to be paid to compensate for such additional cost or reduced receipt with
respect to such Letter of Credit pursuant to this Section 1.13(H) would be
reduced and if, as determined by such Bank, in its reasonable discretion, the
issuance, making or maintaining of such Letter of Credit or the purchasing or
maintaining of any participation therein through such other lending office would
not otherwise materially adversely affect such Letter of Credit or such Bank.
Each Bank will furnish to the Borrower a certificate setting forth in reasonable
detail the basis and amount of each request by such Bank for compensation under
this Section 1.13(H). Determinations by any Bank for purposes of this Section
1.13(H), including of the effect of any regulatory change pursuant to Section
1.13(H) on its costs of making or maintaining Letters of Credit (or purchasing
or maintaining participations therein), or on amounts receivable by it in
respect of Letters of Credit, and of the amounts required to compensate such
Bank under this Section 1.13(H), shall be made on a reasonable basis. A
certificate in reasonable detail as to the amount of such increased cost or
reduced receipt, submitted to the Borrower and the Agent by that Issuing Bank or
any Bank, as the case may be, shall, except for demonstrable error, be final,
conclusive and binding for all purposes.
If any Bank shall be entitled to payments under this Section 1.13,
such Bank, within a reasonable time after becoming entitled to such payments,
shall (unless otherwise required by a governmental authority or as a result of
any law, rule, regulation, order or similar directive applicable to such Bank)
designate a different lending office from that initially selected by such Bank
to which payments are to be made under this Agreement or under any Credit
Document, if such designation would avoid the need for (or
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materially reduce the amount of) such payments and would not, in the reasonable
opinion of the Bank, be otherwise disadvantageous to such Bank.
(I) Indemnification; Nature of Issuing Bank's Duties. In addition to
amounts payable as elsewhere provided in this Section 1.13, without duplication,
the Borrower hereby agrees to protect, indemnify, pay and save each Issuing Bank
harmless from and against any and all claims, demands, liabilities, damages,
losses, costs, charges and expenses (including reasonable attorneys' fees and
allocated costs of internal counsel) which such Issuing Bank may incur or be
subject to as a consequence, direct or indirect, of (i) the issuance of the
Letters of Credit or (ii) the failure of such Issuing Bank to honor a drawing
under any Letter of Credit, in each case as a result of any act or omission,
whether rightful or wrongful, of any present or future de jure or de facto
government or Governmental Authority (all such acts or omissions herein called
"Government Acts").
As between the Borrower and each Issuing Bank, the Borrower assumes
all risks of the acts and omissions of, or misuse of the Letters of Credit
issued by such Issuing Bank by, the respective beneficiaries of such Letters of
Credit. In furtherance and not in limitation of the foregoing, such Issuing Bank
shall not be responsible: (i) for the form, validity, sufficiency, accuracy,
genuineness or legal effects of any document submitted by any party in
connection with the application for and issuance of any such Letter of Credit,
even if it should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged; (ii) for the validity or
sufficiency of any instrument transferring or assigning or purporting to
transfer or assign any such Letter of Credit or the rights or benefits
thereunder or proceeds thereof, in whole or in part, that may prove to be
invalid or ineffective for any reason; (iii) for failure of the beneficiary of
any such Letter of Credit to comply fully with conditions required in order to
draw upon such Letter of Credit; (iv) for errors, omissions, interruptions or
delays in transmission or delivery of any messages, by mail, cable, telegraph,
telex or otherwise, whether or not they are in cipher; (v) for errors in
interpretation of technical terms; (vi) for any loss or delay in the
transmission or otherwise of any document required in order to make a drawing
under any such Letter of Credit or of the proceeds thereof; (vii) for the
misapplication by the beneficiary of any such Letter of Credit of the proceeds
of any drawing under such Letter of Credit; and (viii) for any consequences
arising from causes beyond the control of such Issuing Bank, including, without
limitation, any Government Acts. None of the above shall affect,
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impair, or prevent the vesting of any of such Issuing Bank's rights
or powers hereunder.
In furtherance and extension and not in limitation of the specific
provisions hereinabove set forth, any action taken or omitted by any Issuing
Bank in connection with the Letters of Credit issued by it or the related
certificates, if taken or omitted in good faith, shall not put such Issuing Bank
under any resulting liability to the Borrower.
Notwithstanding anything to the contrary contained in this Section
1.13(I), the Borrower shall have no obligation to indemnify any Issuing Bank or
any Bank in respect of any liability incurred by such Issuing Bank or such Bank
arising solely out of the gross negligence, bad faith or willful misconduct of
such Issuing Bank or such Bank or out of the wrongful dishonor by such Issuing
Bank or such Bank of a proper demand for payment under the Letters of Credit
issued by it.
SECTION 2. Commitments.
2.01 Voluntary Reduction of Commitments. Upon at least one Business
Day's prior written notice (or telephonic notice promptly confirmed in writing)
to the Agent at the Agent's Office (which notice the Agent shall promptly
transmit to each of the Banks), the Borrower shall have the right, without
premium or penalty, to terminate the unutilized portion of the Total Revolving
Loan Commitments, in part or in whole; provided that (x) any such termination
shall apply to proportionately and permanently reduce the Revolving Loan
Commitment of each of the Banks and (y) any partial reduction pursuant to this
Section 2.01 shall be in the amount of at least $500,000 and integral multiples
of $100,000 in excess of that amount; provided, further, that the Total
Revolving Loan Commitments shall not be reduced to an amount less than the
aggregate Revolving Loans and Letters of Credit Usage then outstanding.
2.02 Mandatory Adjustments of Commitments, etc.
(a) The Total Revolving Loan Commitments shall terminate on the
Revolving Loan Commitment Termination Date.
(b) The Total A Term Loan Commitments shall terminate as to the
amount of any portion of the Total A Term Loan Commitments not utilized by the
Borrower on the Closing Date.
(c) The Total B Term Loan Commitments shall terminate as to the
amount of any portion of the Total B Term Loan Commitments not utilized by the
Borrower on the Closing Date.
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(d) The Total Term Loan Commitments shall automatically be reduced,
on a pro rata basis, between the Total A Term Loan Commitments and the Total B
Term Loan Commitments, by the amount of any reduction of the funding necessary
for the Refinancing.
(e) The Total Term Loan Commitments shall be reduced on the date on
which any payments of principal on the Term Loans are made (other than pursuant
to Section 3.02(A)(a)) in an aggregate amount equal to such payments.
(f) Each reduction to the Total A Term Loan Commitments or the Total
B Term Loan Commitments or termination of the Total Revolving Loan Commitments
pursuant to this Section 2.02 shall apply proportionately to the A Term Loan
Commitment, the B Term Loan Commitment or the Revolving Loan Commitment, as the
case may be, of each Bank.
(g) The Total Revolving Loan Commitments shall be permanently
reduced in the amount and at the time of any payment on the Loans required to be
applied to the Revolving Loans or the Revolving Loan Commitment pursuant to
Section 3.02(B)(a).
2.03 Commitment Commission. The Borrower agrees to pay the Agent a
commitment commission ("Commitment Commission") for the account of each Bank for
the period from and including the Closing Date to but not including the date the
Total Revolving Loan Commitments have been terminated, computed at a rate equal
to 1/2% per annum on the daily average Unutilized Commitment of such Bank.
Accrued Commitment Commission shall be due and payable in arrears on the last
Business Day of each March, June, September and December commencing December
1996 and on the Revolving Loan Commitment Termination Date, based on the actual
number of days elapsed over a year of 360 days.
SECTION 3. Payments.
3.01 Voluntary Prepayments. The Borrower shall have the right to
prepay Term Loans and Revolving Loans in whole or in part from time to time,
without premium or penalty, on the following terms and conditions: (i) the
Borrower shall give the Agent at the Agent's Office written notice (or
telephonic notice promptly confirmed in writing) of its intent to prepay the
Loans, the amount of such prepayment and, in the case of Reserve Adjusted
Eurodollar Loans, the specific Borrowing or Borrowings pursuant to which made,
which notice shall be given by the Borrower at least one Business Day prior to
the date of such prepayment and which notice shall promptly be transmitted by
the Agent to each of the Banks; (ii) each partial prepayment of any Borrowing
shall be in an
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aggregate principal amount of at least $500,000 and integral multiples of
$100,000 in excess of that amount; provided that no partial prepayment of
Reserve Adjusted Eurodollar Loans made pursuant to a single Borrowing under the
Loan Facility (or Portion thereof) shall reduce the outstanding Loans made
pursuant to such Borrowing to an amount less than the Minimum Borrowing Amount;
and (iii) Reserve Adjusted Eurodollar Loans may only be prepaid pursuant to this
Section 3.01 on the last day of an Interest Period applicable thereto. Voluntary
prepayments of Term Loans shall be applied to the prepayment of the outstanding
principal amount of Term Loans pro rata between the A Term Loans and the B Term
Loans. Voluntary prepayments of Loans under the A Term Loan Facility shall be
applied to the prepayment of the outstanding principal amount of A Term Loans
pro rata to all remaining Scheduled A Term Loans Principal Payments such that
each Scheduled A Term Loans Principal Payment then remaining shall be reduced by
an amount equal to the product of (A) such payment and (B) a fraction of which
the numerator is equal to the amount of such Scheduled A Term Loans Principal
Payment then remaining and the denominator is equal to the amount of all
Scheduled A Term Loans Principal Payments remaining. Voluntary prepayments of
Loans under the B Term Loan Facility shall be applied to the prepayment of the
outstanding principal amount of B Term Loans pro rata to all remaining Scheduled
B Term Loans Principal Payments such that each Scheduled B Term Loans Principal
Payment then remaining shall be reduced by an amount equal to the product of (A)
such payment and (B) a fraction of which the numerator is equal to the amount of
such Scheduled B Term Loans Principal Payment then remaining and the denominator
is equal to the amount of all Scheduled B Term Loans Principal Payments
remaining.
3.02 Mandatory Prepayments.
(A) Requirements:
(a) The Borrower shall prepay the outstanding principal amount of
the A Term Loans, the B Term Loans or the Revolving Loans, as the case may
be, on any date on which the aggregate outstanding principal amount of
such Loans (after giving effect to any other repayments or prepayments on
such day together with, in the case of Revolving Loans, the outstanding
principal amount of Letters of Credit Usage) exceeds the Total A Term Loan
Commitments, the Total B Term Loan Commitments or the Total Revolving Loan
Commitments, as the case may be, in the amount of such excess.
(b) If the aggregate principal amount of outstanding
Revolving Loans and Letters of Credit Usage exceeds the
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Borrowing Base as set forth in the Borrower's most recent Borrowing Base
Certificate required to be delivered pursuant to Section 6.01 of this
Agreement (such amount is hereinafter referred to as the "Excess"), then
the Borrower shall prepay its Revolving Loans in a principal amount equal
to such Excess no later than two Business Days after the Borrower has
delivered, or was required to deliver, such Borrowing Base Certificate to
the Agent and the Banks.
(c) The Borrower shall cause to be paid each Scheduled A Term Loans
Principal Payment on the A Term Loans until the A Term Loans are paid in
full in the amounts and at the times specified in the definition of
Scheduled A Term Loans Principal Payments to the extent that prepayments
have not previously been applied to such Scheduled A Term Loans Principal
Payments (and such Scheduled A Term Loans Principal Payments have not
otherwise been reduced) pursuant to the terms hereof.
(d) The Borrower shall cause to be paid each Scheduled B Term Loans
Principal Payment on the B Term Loans until all B Term Loans are paid in
full, in the amounts and at the time specified in the definition of
Scheduled B Term Loans Principal Payments to the extent that prepayments
have not previously been applied to such Scheduled B Term Loans Principal
Payments (and such Scheduled B Term Loans Principal Payments have not
otherwise been reduced) pursuant to the terms hereof.
(e) As promptly as practicable, but in any event within five
Business Days of the date of receipt by Holdings, the Borrower and/or any
of the Borrower's Subsidiaries, as the case may be, of Net Cash Proceeds
or Net Financing Proceeds, an amount equal to such Net Cash Proceeds or
Net Financing Proceeds shall be applied as provided in Section 3.02(B)(a);
provided that with respect to any Net Cash Proceeds of the sale of equity
securities of Holdings, the Borrower or any of its Subsidiaries, clause
(g) of this Section 3.02(A) will govern and that with respect to any Net
Cash Proceeds from any Destruction or Taking, clause (i) of this Section
3.02(A) will govern.
(f) As promptly as practicable, but in any event within 90 days
after the last day of each fiscal year of the Borrower, commencing with
fiscal year 1997, an amount equal to 50% of Excess Cash Flow for such
fiscal year shall be applied as provided in Section 3.02(B)(a).
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(g) As promptly as practicable, but in any event within five
Business Days of the date of the receipt thereof by Holdings, the Borrower
and/or any of its Subsidiaries, an amount equal to 100% of the proceeds
received by the Borrower or Holdings (including capital contributions,
other than those referred to in clauses (i), (ii) and (iii) of this
paragraph (g), received by the Borrower or any of its Subsidiaries) or
such Subsidiary (net of underwriting discounts and commissions and other
costs and expenses directly associated therewith) of the sale after the
Closing Date of equity securities (other than proceeds from the issuance
of capital stock (i) of Holdings, the Borrower or any of its Subsidiaries
pursuant to any pension, stock option, profit sharing or other employee
benefit plan or agreement of Holdings, the Borrower or any of its
Subsidiaries in the ordinary course of business, (ii) by a Subsidiary to
another Subsidiary or to the Borrower or (iii) pursuant to the Holdings
IPO, except (x) to the extent necessary in connection with the Refinancing
as contemplated by this Agreement and (y) with respect to the
Overallotment Option, the net proceeds of which shall be applied without
penalty or premium (other than Reserve Adjusted Eurodollar Rate breakage
costs, if any) to repay Revolving Loans in an amount equal to such
proceeds, if any) shall be applied as provided in Section 3.02(B)(a).
(h) As promptly as practicable, but in any event within five
Business Days of the date of the receipt thereof by the Borrower or any of
its Subsidiaries, an amount equal to 100% of any surplus net assets of any
Pension Plan returned to the Borrower or any of its Subsidiaries shall be
applied as provided in Section 3.02(B)(a).
(i) At the Agent's discretion, on the date of receipt thereof by
Holdings, the Borrower and/or any of its Subsidiaries, an amount equal to
100% of any proceeds received due to loss, damage, destruction or
condemnation of or to Assets (collectively, "Loss Proceeds"), less any
portion of such proceeds not in excess of $500,000, in the aggregate, per
fiscal year to be used for rebuilding, repairing or replacing productive
assets of a kind then used or usable in the business of the Borrower and
its Subsidiaries (in each case to the extent permitted by the Mortgages
and the Security Documents) within 180 days of receipt of such Loss
Proceeds (or such longer periods as may be consented to by the Agent,
which consent shall not be unreasonably withheld) shall be delivered by
Holdings, the Borrower and/or its Subsidiaries to the Agent to be held by
the Agent in a cash collateral account bearing interest payable to the
Borrower at a rate per annum
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(meaning 360 days) equal to the Federal Funds Rate. Upon the Borrower's
request, Agent shall release such proceeds to the Borrower for
reinvestment, rebuilding, repair or replacement as described above. To the
extent the Borrower fails to use any or all of such released proceeds for
such rebuilding, repair or replacement of assets within 180 days (or such
longer periods as may be consented to by the Agent, which consent shall
not be unreasonably withheld) of such release, the Borrower shall, at the
Agent's discretion, return the unused portion of such released funds to
the Agent and authorize and direct the Agent to apply such proceeds as
provided in Section 3.02(B)(a).
(j) As promptly as practicable, but in any event within five
Business Days of the date of receipt by Holdings, the Borrower and/or its
Subsidiaries of any tax refund, an amount equal to 100% of such refund
paid to Holdings, the Borrower and/or any of its Subsidiaries shall be
applied as provided in Section 3.02(B)(a); provided that such refund or
refunds are not promptly applied by Holdings, the Borrower and/or any of
its Subsidiaries to the payment of future tax liabilities.
(B) Application:
(a) Prepayments to be applied pursuant to this Section 3.02(B)(a)
shall be applied without penalty or premium (other than Reserve Adjusted
Eurodollar Rate breakage costs, if any) as follows: (i) first, to the Term
Portion, pro rata between the Scheduled A Term Loans Principal Payments
and the Scheduled B Term Loans Principal Payments, in pro rata order of
maturity; and (ii) second, to repay Revolving Loans; provided that
prepayments required by Section 3.02(A)(b) hereof shall be applied first
to repay Revolving Loans.
(b) With respect to each prepayment of Loans required by Section
3.02(A), the Borrower shall give the Agent two Business Days notice and
may designate the Types of Loans and the specific Borrowing or Borrowings
which are to be prepaid; provided that (i)(x) Reserve Adjusted Eurodollar
Loans may be designated for prepayment pursuant to this Section 3.02 only
on the last day of an Interest Period applicable thereto unless all
Reserve Adjusted Eurodollar Loans with Interest Periods ending on such
date of required prepayment and all Base Rate Loans have been or are
concurrently being paid in full and (y) if any prepayment of Reserve
Adjusted Eurodollar Loans made pursuant to a single Borrowing shall reduce
the outstanding Loans made pursuant to such Borrowing to an amount less
than the Minimum Borrowing Amount, such Borrowing shall
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immediately be converted into Base Rate Loans; and (ii) each prepayment of
any Loans made pursuant to a single Borrowing shall be applied pro rata
among such Loans. In the absence of a designation by the Borrower, the
Agent shall, subject to the above, make such designation in its sole
discretion. All prepayments shall include payment of accrued interest on
the principal amount so prepaid, shall be applied to the payment of
interest before application to principal and shall include amounts
payable, if any, under Section 1.10(f).
3.03 Method and Place of Payment. (a) Except as otherwise
specifically provided herein, all payments under this Agreement shall be made to
the Agent, for the ratable account of the Banks entitled thereto, not later than
1:00 P.M. (New York time) on the date when due and shall be made in immediately
available funds in lawful money of the United States of America to the account
specified therefor by the Agent or if no account has been so specified at the
Agent's Office, it being understood that written notice by the Borrower to the
Agent to make a payment from the funds in the Borrower's account at the Agent's
Office shall constitute the making of such payment to the extent of such funds
held in such account. The Agent will thereafter cause to be distributed on the
same day (if payment is actually received by the Agent in New York prior to 1:00
P.M. (New York time) on such day) funds relating to the payment of principal or
interest or fees ratably to the Banks entitled to receive any such payment in
accordance with the terms of this Agreement. If and to the extent that any such
distribution shall not be so made by the Agent in full on the same day (if
payment is actually received by the Agent prior to 1:00 P.M. (New York time) on
such day), the Agent shall pay to each Bank its ratable amount thereof and each
such Bank shall be entitled to receive from the Agent, upon demand, interest on
such amount at the Federal Funds Rate for each day from the date such amount is
paid to the Agent until the date the Agent pays such amount to such Bank.
(b) Any payments under this Agreement which are made by the Borrower
later than 1:00 P.M. (New York time) shall be deemed to have been made on the
next succeeding Business Day. Whenever any payment to be made hereunder shall be
stated to be due on a day which is not a Business Day, the due date thereof
shall be extended to the next succeeding Business Day and, with respect to
payments of principal, interest shall be payable during such extension at the
applicable rate in effect immediately prior to such extension, except that with
respect to Reserve Adjusted Eurodollar Loans, if such next succeeding applicable
Business Day is not in the same month as the date on which such payment would
otherwise be due
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hereunder or under any Note, the due date with respect thereto shall be the next
preceding applicable Business Day.
3.04 Net Payments. (a) Except as provided in Section 3.04(d) hereof,
all payments by the Borrower under this Agreement or under any Credit Document
shall be made without set-off or counterclaim and in such amounts as may be
necessary in order that all such payments (after deduction or withholding for or
on account of any present or future taxes, levies, imposts, duties or other
charges of whatsoever nature imposed by any government or any political
subdivision or taxing authority thereof, other than any tax on or measured by
the net income of a Bank (including without limitation franchise taxes and
branch profits taxes) pursuant to the laws of the United States or any political
subdivision thereof or of the jurisdiction in which it is incorporated or the
jurisdiction where such Bank's lending office is located or in which it has any
other contacts or connection that would subject it to taxation therein
(collectively, "Taxes")) shall not be less than the amounts otherwise specified
to be paid under this Agreement and/or any Credit Document. A certificate as to
the calculation of any additional amounts payable to a Bank under this Section
3.04 submitted to the Borrower by such Bank shall, absent demonstrable error, be
final, conclusive and binding for all purposes upon all parties hereto. With
respect to each deduction or withholding for or on account of any Taxes, the
Borrower shall within 30 days after it is required by law to remit such
deduction or withholding to any relevant taxing authority furnish to each Bank
such certificates, receipts and other documents as may be required (in the
reasonable judgment of such Bank) to establish any tax credit to which such Bank
may be entitled.
(b) Without prejudice to the provisions of clause (a) of this
Section 3.04, and except as provided in Section 3.04(d) hereof, if any Bank, or
the Agent on its behalf, is required by law to make any payment on account of
Taxes on or in relation to any sum received or receivable under this Agreement
and/or the other Credit Documents by such Bank, or the Agent on its behalf, or
any liability for Tax in respect of any such payment is imposed, levied or
assessed against any Bank, or the Agent on its behalf, the Borrower will
promptly indemnify such person against such Tax payment or liability, together
with any interest, penalties and reasonable expenses (including counsel fees and
expenses) payable or incurred in connection therewith, including any Taxes of
any Bank arising by virtue of payments under this clause (b), computed in a
manner consistent with clause (a) of this Section 3.04. A certificate by such
Bank, or the Agent on its behalf, as to the calculation and amount of such
payments shall, absent demonstrable
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error, be final, conclusive and binding upon all parties hereto for
all purposes.
(c) (i) Each Bank that is organized under the laws of any
jurisdiction other than the United States or any State thereof (including the
District of Columbia) (a "Foreign Bank") agrees to furnish to the Borrower and
the Agent, prior to the date it receives any payment under this Agreement or
other Credit Documents, two signed copies of either U.S. Internal Revenue
Service Form 4224 or U.S. Internal Revenue Service Form 1001 or any successor
form thereto (wherein such Foreign Bank claims entitlement to a complete
exemption from U.S. federal withholding tax on interest paid by the Borrower
hereunder). Each Foreign Bank that is not a bank described in Section
881(c)(3)(A) of the Code and cannot deliver U.S. Internal Revenue Service Form
1001 entitling it to a complete exemption from withholding tax or U.S. Internal
Revenue Service Form 4224 pursuant to this Section 3.04(c)(i) agrees to furnish
to the Borrower and the Agent (x) a certificate substantially in the form of
Exhibit Q hereto and (y) two copies of U.S. Internal Revenue Service Form W-8,
or successor form (wherein such Foreign Bank makes the certifications necessary
to entitle it to a complete exemption from United States withholding tax on
interest paid by the Borrower hereunder).
(ii) In addition, each Foreign Bank that delivers forms pursuant to
Section 3.04(c)(i) hereof agrees to provide subsequently to the Borrower and the
Agent additional signed copies of such forms, or any successor forms thereto
(wherein such Bank claims entitlement to a complete exemption from or reduced
rate of U.S. federal withholding tax on interest paid by the Borrower
hereunder), as may be reasonably requested in writing by the Borrower or the
Agent. A Foreign Bank shall be required to furnish a form under this Section
3.04(c)(ii) only if it is entitled to claim an exemption from or a reduced rate
of withholding tax under applicable law. A Bank that is not entitled to claim an
exemption from or a reduced rate of withholding under applicable law at the time
that a request to provide forms is received from the Borrower or the Agent,
shall so inform the Borrower and the Agent in writing.
(d) The Borrower shall not be required to pay any increased amount
on account of Taxes pursuant to Section 3.04(a) or (b) to any Bank or Agent (i)
to the extent that such Taxes would not have been payable if the Bank had
furnished a form (properly and accurately completed in all material respects)
which it was otherwise required to furnish in accordance with Section 3.04(c)
hereof, (ii) if the Bank was not able to furnish a form (properly and accurately
completed in all material respects) which it was
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required to furnish in accordance with Section 3.04(c)(i) hereof, or (iii) if
the Bank failed to comply with applicable certification, information,
documentation or other reporting requirements concerning the nationality,
residence, identity or connections with the United States of such Bank if such
compliance is required by statute or regulation of the United States as a
precondition to relief or exemption from such Taxes.
(e) With respect to any Taxes imposed on a Bank which are paid or
reimbursed by the Borrower in accordance with the provisions of this Section
3.04, each Bank receiving the benefit of such payments of Taxes hereby agrees to
pay to the Borrower any amounts refunded to such Bank (including any interest
thereon) which such Bank reasonably determines to be a refund in respect of such
Taxes.
(f) If any Bank shall be entitled to payments under this Section
3.04, such Bank, within a reasonable time after becoming entitled to such
payments, shall (unless otherwise required by a governmental authority or as a
result of any law, rule, regulation, order or similar directive applicable to
such Bank) designate a different lending office from that initially selected by
such Bank to which payments are to be made under this Agreement or under any
Credit Document, if such designation would avoid the need for (or materially
reduce the amount of) such payments and would not, in the reasonable opinion of
such Bank, be otherwise disadvantageous to such Bank.
SECTION 4. Conditions Precedent.
4.01 Conditions Precedent to Initial Loans. The obligations of the
Banks to make the Initial Loans to the Borrower hereunder are subject, at the
time of the making of each such Initial Loan (except as otherwise hereinafter
indicated), to the satisfaction of the following conditions:
(A) Credit Agreement. The Borrower shall have duly
executed and delivered this Agreement.
(B) Officer's Certificates. On the Closing Date, the Agent shall
have received (i) a certificate dated such date signed by an appropriate
officer of the Borrower stating that all of the applicable conditions set
forth in Sections 4.01(D), (E), (F), (I), (K), (L), (N), (P), (Q), (R),
(S), (T) and (U) (in each case disregarding any reference therein that
such condition be deemed satisfactory by the Agent and/or the Required
Banks) have been satisfied in all material respects (without giving effect
to any materiality or similar
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exceptions contained therein) or waived as of such date and (ii) a
certificate with respect to environmental matters, substantially in the
form set forth on Exhibit N hereto.
(C) Opinions of Counsel. On the Closing Date, the Agent shall have
received an opinion or opinions addressed to each of the Banks and dated
the Closing Date, each in form and substance satisfactory to the Agent,
from (i) Milbank, Tweed, Hadley & McCloy, counsel to the Borrower and
Holdings, which opinion shall address the matters contained in Exhibit C-1
hereto, (ii) Hunter, Maclean, Exley & Dunn, P.C., special Georgia counsel
to the Borrower and Holdings, which opinion shall address the matters
contained in Exhibit C-2 hereto and (iii) local counsel to the Borrower in
each jurisdiction in which Mortgaged Real Property is located, which
opinions shall address the matters contained in Exhibit C-3 hereto.
(D) Corporate Proceedings. All corporate and legal proceedings and
all instruments and agreements in connection with the transactions
contemplated by the Credit Documents shall be satisfactory in form and
substance to the Agent, and the Agent shall have received all information
and copies of all certificates, documents and papers, including records of
corporate proceedings and governmental approvals, if any, which the Agent
reasonably may have requested from Holdings, the Borrower and any
Affiliate of any thereof in connection therewith, such documents and
papers where appropriate to be certified by proper corporate or
governmental authorities. Without limiting the foregoing, the Agent shall
have received (i) evidence satisfactory to it that the Board of Directors
of each of Holdings and the Borrower shall have approved and recommended
the Refinancing, (ii) resolutions of the Board of Directors of Holdings,
the Borrower or any Affiliate thereof approving and authorizing such
documents and actions as are contemplated hereby in form and substance
satisfactory to the Agent including without limitation the execution and
delivery of all Credit Documents, certified by its corporate secretary or
an assistant secretary as being in full force and effect without
modification or amendment, and (iii) signature and incumbency certificates
of officers of Holdings, the Borrower or any Affiliate thereof executing
instruments, documents or agreements required to be executed in connection
with the Refinancing.
(E) Holdings IPO. On the Closing Date, the Holdings IPO shall be
consummated concurrently with the making of the Initial Loans hereunder.
As a result of the Holdings IPO, Holdings shall have received not less
than $37,500,000, and
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the net proceeds of the Holdings IPO shall have been
contributed to the Borrower.
(F) Repayment of Existing Subordinated Debt. On the Closing Date,
the Borrower shall have purchased and cancelled each of the Senior
Subordinated Notes, the Subordinated Notes and the Junior Subordinated
Notes concurrently with the making of the Initial Loans hereunder.
(G) Organizational Documentation, etc. On or prior to the Closing
Date, the Agent shall have received copies of a true and complete
certified copy of the following documents of each of Holdings and the
Borrower, the provisions of which shall be reasonably satisfactory to the
Agent:
(1) Its respective Certificate of Incorporation, which shall
be certified and be accompanied by a good standing certificate from
the Secretary of State of the State of Delaware or its respective
jurisdiction of incorporation and good standing certificates from
the jurisdictions in which it is qualified to do business as a
foreign corporation, each to be dated a recent date prior to the
Closing Date;
(2) Its respective By-laws, certified as of the
Closing Date by its corporate secretary.
(H) Solvency. On the Closing Date, the Banks shall have received the
Officers' Solvency Certificate, substantially in the form of Exhibit L
annexed hereto, in form and substance satisfactory to the Agent,
supporting the conclusions that, after giving effect to the Refinancing
and the contemplated borrowings in connection herewith, the Borrower and
its Subsidiaries will not be insolvent, will not be rendered insolvent by
the indebtedness incurred in connection herewith, will not be left with
unreasonably small capital with which to engage in their respective
businesses and will not have incurred debts, including Contingent
Obligations, beyond their respective abilities to pay such debts as they
mature.
(I) Options and Warrants. There shall be no outstanding capital
stock (or right, option, warrant or other arrangement to acquire such
capital stock) of the Borrower, other than that owned by Holdings.
(J) Notes. There shall have been delivered to the Agent
for the account of each of the Banks the Term Notes and the
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Revolving Notes executed by the Borrower in the amount and maturity and as
otherwise provided herein.
(K) Certain Fees. All reasonable costs, fees and expenses
(including, without limitation, reasonable legal fees and expenses)
payable to Indosuez by the Borrower pursuant to the letter agreement
between Holdings and Indosuez dated August 12, 1996 shall have been paid
in full and the Borrower shall have paid or have caused to be paid the
commitment and other fees and expenses (including, without limitation,
reasonable legal fees and expenses) contemplated hereby and/or in
connection with the other Credit Documents.
(L) Conditions Relating to Mortgaged Real Property and Real
Property. On or prior to the Closing Date, the Borrower shall have caused
to be delivered to the Agent, on behalf of the Banks, the following
documents and instruments:
(i) a Mortgage encumbering each Mortgaged Real Property in
favor of the Agent, as Collateral Agent for the benefit of the
Banks, duly executed and acknowledged by the Credit Party that is
the owner of or holder of an interest in such Mortgaged Real
Property, and otherwise in form for recording in the recording
office of each political subdivision where each such Mortgaged Real
Property is situated, together with such certificates, affidavits,
questionnaires or returns as shall be required in connection with
the recording or filing thereof to create a lien under applicable
law, and such UCC-1 financing statements and other similar
statements as are contemplated by the counsel opinions described in
Section 4.01(C)(ii) in respect of such Mortgage, all of which shall
be in form and substance reasonably satisfactory to the Agent, and
any other instruments necessary to grant a mortgage lien under the
laws of any applicable jurisdiction, which Mortgage and financing
statements and other instruments shall be effective to create a
first priority Lien on such Mortgaged Real Property subject to no
Liens other than Prior Liens;
(ii) with respect to each Mortgaged Real Property, such
consents, approvals, amendments, supplements, estoppels, tenant
subordination agreements or other instruments as necessary or
required to consummate the transactions contemplated hereby or as
shall reasonably be deemed necessary by the Agent in order for the
owner or holder of the fee or leasehold interest constituting such
Mortgaged Real Property to grant the Lien
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contemplated by the Mortgage with respect to such
Mortgaged Real Property;
(iii) with respect to each Mortgage, a policy (or commitment to
issue a policy) of title insurance insuring (or committing to
insure) the Lien of such Mortgage as a valid first mortgage Lien on
the real property described therein in an amount not less than 115%
of the fair market value thereof as determined by appraisal reports,
which policies (or commitment) shall (a) be issued by the Title
Company, (b) include such reinsurance arrangements (with provisions
for direct access) as shall be reasonably acceptable to the Agent,
(c) contain a "tie-in" or "cluster" endorsement (if applicable and
if available under applicable law) (i.e., policies which insure
against losses regardless of location or allocated value of the
insured property up to a stated maximum coverage amount) and have
been supplemented by such endorsements (or where such endorsements
are not available, opinions of special counsel reasonably acceptable
to the Agent to the extent that such opinions can be obtained at a
cost which is reasonable with respect to the value of the Real
Property subject to such Mortgage) as shall be reasonably requested
by the Agent (including, without limitation, endorsements on matters
relating to usury, first loss, last dollar, contiguity (as
applicable), revolving credit, doing business, zoning, variable rate
and so-called comprehensive coverage over covenants and
restrictions) and (d) contain only such exceptions to title as shall
be Prior Liens or are otherwise agreed to by the Agent on or prior
to the Closing Date with respect to such Mortgaged Real Property;
(iv) with respect to each Mortgaged Real Property,
a Survey;
(v) with respect to each Mortgaged Real Property, policies or
certificates of insurance as required by the Mortgage relating
thereto, which policies or certificates shall comply with the
insurance requirements contained in such Mortgage;
(vi) with respect to each Mortgaged Real Property, UCC,
judgment and tax lien searches confirming that the personal property
comprising a part of such Mortgaged Real Property is subject to no
Liens other than Prior Liens;
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(vii) with respect to each Mortgaged Real Property, such
affidavits, certificates, information (including financial data) and
instruments of indemnification (including, without limitation, a
so-called "gap" indemnification) as shall be required to induce the
Title Company to issue the policy or policies (or commitment) and
endorsements contemplated in subparagraph (iii) above;
(viii) evidence reasonably acceptable to the Agent of payment by
the Borrower of all title insurance premiums, search and examination
charges, survey costs and related charges, mortgage recording taxes,
fees, charges, costs and expenses required for the recording of the
Mortgages and issuance of the title insurance policies referred to
in subparagraph (iii) above;
(ix) with respect to each Real Property or Mortgaged Real
Property, copies of all Leases in which a Credit Party holds the
landlord's, tenant's or other interest and any other agreements
relating to possessory interests in such Real Property or Mortgaged
Real Property. To the extent any of the foregoing affect any
Mortgaged Real Property, such Leases shall be reasonably acceptable
to the Agent; and
(x) with respect to each Mortgaged Real Property, an
Officers' Certificate or other evidence reasonably satisfactory to
the Agent that as of the date thereof, to the best of such officer's
knowledge, there (a) have been issued and are in effect valid and
proper certificates of occupancy or other local equivalents for the
use then being made of such Mortgaged Real Property to the extent
currently required by law in the jurisdiction in which such
Mortgaged Real Property is located which certificates if not
obtained or maintained would have a material adverse effect upon the
value of the Mortgaged Real Property and that there is not
outstanding any citation, violation or similar notice indicating
that such Mortgaged Real Property contains conditions which are not
in compliance in all material respects with local codes or
ordinances relating to building or fire safety or structural
soundness, (b) has not occurred any Taking or Destruction of any
Mortgaged Real Property that has not been repaired or restored
except as set forth therein and (c) is no litigation regarding
boundary lines, encroachment or possession of any Mortgaged Real
Property and no state of facts known to any Credit Party which
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could give rise to any such claim, except as set forth
therein.
(M) Financial Statements, etc. Prior to the Closing Date, the Agent
shall have received audited financial statements including a balance sheet
and statements of income and shareholders' equity and cash flows of
Holdings and its consolidated Subsidiaries for the fiscal year ended March
31, 1996, which audited financial statements shall reflect no material
changes from the unaudited financial statements previously delivered to
the Agent. The Borrower shall have delivered to the Agent pro forma
financial statements for the Borrower and its consolidated Subsidiaries
for the fiscal year ended June 30, 1996, after giving effect to the
Refinancing, and interim financial statements for the Borrower and its
consolidated Subsidiaries through August 31, 1996. The Borrower shall have
delivered to the Agent financial projections with respect to the Borrower
for the fiscal years ending March 31, 1997 through March 31, 2002,
inclusive, accompanied by a statement by the Borrower that such
projections are based on estimates and assumptions believed by the
Borrower in good faith to be reasonable in light of the conditions which
existed at the time of their preparation as to the future financial
performance of the Borrower, reasonably satisfactory to the Agent;
provided, however, that in addition to the financial projections referred
to above, the Borrower shall also have delivered to the Agent financial
projections on a monthly basis for each of the monthly periods from the
Closing Date through March 31, 1997. Since the time of the preparation of
such financial projections, no fact or facts have come to the attention of
the Borrower to cause the Borrower to believe that any of the estimates
and assumptions on which such projections are based are not reasonable.
(N) Insurance. Set forth on Annex VI is a summary of all insurance
policies maintained by the Borrower and its Subsidiaries, and the
insurance coverage provided for the Borrower and its Subsidiaries by such
insurance policies shall be reasonably satisfactory to the Agent.
(O) Performance Bonds. On the Closing Date, the Agent shall be
reasonably satisfied that the Borrower will be able to service and
maintain any performance bonds that may be required in the ordinary course
of business on reasonable terms and conditions.
(P) Indebtedness, etc. On or prior to the Closing Date
and except as set forth on Annex X, the Borrower and its
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Subsidiaries shall have received all necessary consents or waivers or
amended, supplemented or otherwise modified, repaid or defeased their
outstanding Indebtedness in a manner and on terms reasonably satisfactory
to the Agent such that there exists no default or potential default with
respect to such Indebtedness or under any note, evidence of indebtedness,
mortgage, deed of trust, security document or other agreement relating to
such Indebtedness and such indentures, notes, evidences of indebtedness,
mortgages, deeds of trust or other agreements relating to such
Indebtedness shall not, other than as set forth on Annex XI, contain any
restriction on the ability of the Borrower or any of its Subsidiaries to
enter into the Mortgages, Pledge Agreements or the granting of any Lien in
favor of the Banks in connection therewith, or contain any financial
covenants, agreements or tests applicable to the Borrower or any of its
Subsidiaries. Annex VII sets forth a true list of all Liens other than
Permitted Encumbrances on the property of the Borrower and its
Subsidiaries as of the Closing Date.
(Q) Management Agreement and Employment Agreements. Each of the
Management Agreement and the Employment Agreements shall remain in full
force and effect and shall be reasonably satisfactory to the Agent.
(R) Security Documents and Guarantees. The Security Documents and
Guarantees shall have been duly executed and delivered by the respective
parties thereto and there shall have been delivered to the Agent (i)
certificates representing all Pledged Securities, together with executed
and undated stock powers and/or assignments in blank, (ii) evidence of the
filing and due execution of appropriate financing statements under the
provisions of the UCC, applicable domestic or local laws, rules or
regulations in each of the offices where such filing is necessary or
appropriate to grant to the Agent a perfected first priority Lien in such
Collateral superior to and prior to the rights of all third persons and
subject to no other Liens other than Prior Liens, (iii) certified copies
of Requests for Information (Form UCC-11 or the equivalent), or equivalent
reports or lien search reports listing all effective financing statements
which name Holdings, the Borrower or any domestic Subsidiary of the
Borrower as debtor and which are filed in those jurisdictions in which any
of the Collateral is located and the jurisdictions in which Holdings', the
Borrower's and each such Subsidiary's principal place of business is
located, none of which, except as set forth in the applicable Security
Documents, shall encumber the Collateral covered or intended or purported
to be covered by
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the Security Documents, and (iv) evidence that arrangements have been made
for the prompt completion of all recordings and filings of each Security
Document related to Mortgaged Real Property and delivery to the Agent of
such other security and other documents as may be necessary or, in the
reasonable opinion of Agent, desirable to perfect the Liens created, or
purported or intended to be created, by the Security Documents.
(S) Consents, Etc. All material governmental and third party
approvals and consents (including, without limitation, all material
approvals and consents required in connection with any environmental
statutes, rules or regulations), if any, in connection with the
transactions contemplated by the Credit Documents and otherwise referred
to herein or therein to be completed on or before the Closing Date shall
have been obtained and remain in effect, and all applicable waiting
periods shall have expired without any action being taken by any competent
authority which restrains, prevents or imposes, in the judgment of the
Agent or the Required Banks, materially adverse conditions upon the
consummation of the Refinancing. There shall not exist any adverse
judgment, order, injunction or other restraint issued or filed with
respect to the making of the Loans hereunder or the consummation of the
Refinancing.
(T) Borrowing Base Certificate. Prior to the initial Revolving Loan,
the Agent and the Banks shall have received and the Agent and the Required
Banks shall be satisfied (both as to form and substance) with a pro forma
Borrowing Base Certificate which shall be prepared as of a date prior to
the Closing Date and which shall indicate that the Borrowing Base on the
Closing Date will exceed the initial Borrowings under the Revolving
Portion by not less than $5,000,000.
(U) Leases. All Capital Leases and Operating Leases of the Borrower
outstanding immediately prior to the Refinancing shall remain outstanding
after giving effect to the Refinancing, on terms satisfactory to the
Agent.
The acceptance of the proceeds of each Borrowing of Initial Loans
shall constitute a representation and warranty by each Credit Party to each of
the Banks that all of the applicable conditions specified above (in each case
disregarding any reference therein that such condition be deemed satisfactory by
the Agent and/or the Required Banks) have been satisfied or waived as of that
time. All of the certificates, legal opinions and other documents and papers
referred to in this Section 4.01, unless otherwise specified, shall be delivered
to the Agent at the Agent's Office
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(or such other location as may be specified by the Agent) for the account of
each of the Banks and in sufficient counterparts for each of the Banks and shall
be satisfactory in form and substance to the Agent.
4.02 Conditions Precedent to All Loans. The obligation of the Banks
to make all Loans (which term shall not include a conversion or continuation of
a Loan) is subject, at the time of each such Loan, to the satisfaction of the
following conditions:
(A) Effectiveness. This Agreement shall have become effective as
provided in Section 11.10.
(B) No Default; Representations and Warranties. At the time of the
making of each Loan and also after giving effect thereto (i) there shall
exist no Default or Event of Default and (ii) all representations and
warranties made by any Credit Party contained herein or in the other
Credit Documents in effect at such time shall be true and correct in all
material respects with the same effect as though such representations and
warranties had been made on and as of the date of the making of such Loan,
unless such representation and warranty expressly indicates that it is
being made as of any other specific date in which case on and as of such
other date.
(C) Documentation and Opinions of Counsel. The Agent shall have
received such documentation and opinion or opinions, addressed to each of
the Banks, from counsel to each Credit Party as may be reasonably
required, with reasonable notice under the circumstances, by, and shall be
reasonably satisfactory to the Agent, from (i) such counsel to each Credit
Party as reasonably requested by the Agent and (ii) appropriate local
counsel, which opinions shall cover such matters as reasonably requested
by, and be in form and substance reasonably satisfactory to, the Agent.
(D) Margin Rules. On the date of each Borrowing of Loans, neither
the making of any Loan nor the use of the proceeds thereof will violate
the provisions of Regulation G, T, U or X of the Board of Governors of the
Federal Reserve System.
(E) Borrowing Base Certificate. The Agent and the Required Banks
shall have received and shall be reasonably satisfied (both as to form and
substance) with the Borrowing Base Certificate last delivered to the
Banks.
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The acceptance of the proceeds of each Borrowing of Loans shall
constitute a representation and warranty by each Credit Party to each of the
Banks that all of the applicable conditions specified in Section 4.02 (in each
case disregarding any reference therein that such condition be deemed
satisfactory by the Agent and/or the Required Banks) have been satisfied or
waived.
All of the certificates, legal opinions and other documents and
papers referred to in this Section 4.02, unless otherwise specified, shall be
delivered to the Agent at the Agent's Office (or such other location as may be
specified by the Agent) for the account of each of the Banks and in sufficient
counterparts for each of the Banks and shall be satisfactory in form and
substance to the Agent.
4.03 Conditions Precedent to All Letters of Credit. The right of the
Borrower to obtain the issuance of any Letter of Credit that the relevant
Issuing Bank determines to issue in its sole discretion hereunder is subject to
prior or concurrent satisfaction of all of the following conditions:
(A) Required Documentation. On or prior to the date of issuance of a
Letter of Credit, the Agent shall have received, in accordance with the
provisions of Section 1.13(B), a request for issuance with respect to such
Letter of Credit (the furnishing by the Borrower of each such request for
issuance shall be deemed to constitute a representation and warranty of
the Borrower to the effect that the conditions set forth in Section 4.02
(in each case disregarding any reference therein that such condition be
deemed satisfactory by the Agent and/or the Required Banks) are satisfied
as of the date of delivery and will be satisfied on the relevant date of
issuance), all other information specified in Section 1.13(B), and such
other documents as the Issuing Bank may reasonably require in connection
with the issuance of such Letter of Credit.
(B) Conditions. On the date of issuance of each such Letter of
Credit, all conditions precedent described in Section 4.02 shall be
satisfied to the same extent as though the issuance of such Letter of
Credit were the making of a Revolving Loan.
SECTION 5. Representations, Warranties and Agreements. In order to
induce the Banks to enter into this Agreement and to make the Loans provided for
herein, each of Holdings and the Borrower makes the following representations
and warranties to, and agreements with, the Banks, all of which shall survive
the
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execution and delivery of this Agreement and the making of the Loans (with the
execution and delivery of this Agreement and the making of each Loan thereafter
being deemed to constitute a representation and warranty that the matters
specified in this Section 5 are true and correct in all material respects both
before and after giving effect to the Refinancing and the related transactions
and as of the date of each such Loan unless such representation and warranty
expressly indicates that it is being made as of any specific date):
5.01 Corporate Status. Each Credit Party (i) is a duly organized and
validly existing corporation in good standing under the laws of the jurisdiction
of its organization; (ii) has the corporate or other organizational power and
authority and, other than as set forth on Annex X, has obtained all requisite
governmental licenses, authorizations, consents and approvals to own and operate
its property and assets and to transact the business in which it is engaged and
presently proposes to engage including, without limitation, those in compliance
with or required by the Environmental Laws except as described in Annex XII
hereto and except for those governmental licenses, authorizations, consents or
approvals the failure of which to be so obtained would not have a Materially
Adverse Effect and (iii) is duly qualified and is authorized to do business and
is in good standing in all jurisdictions where it is required to be so qualified
and where the failure to be so qualified would have a Materially Adverse Effect.
5.02 Corporate Power and Authority; Business. (a) Each Credit Party
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 Credit Party
has duly executed and delivered each Credit Document to which it is a party and
each such Credit Document constitutes the legal, valid and binding obligation of
such Person enforceable against such Person in accordance with its terms except
as may be limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws relating to or affecting creditors' rights generally and except as
such enforceability may be limited by the application of general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law).
(b) Holdings was incorporated on May 10, 1995 and the
Borrower was incorporated as Aminco, Inc. in Delaware on March 20,
1990. Prior to the Closing Date, Holdings will not have engaged in
any business or incurred any liabilities except for activities,
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expenses and liabilities incident to its organization and to the
carrying out of the transactions contemplated by the Credit
Documents and the Holdings IPO.
5.03 No Violation. Neither the execution, delivery or performance by
any Credit Party of the Credit Documents to which it is a party nor compliance
with the terms and provisions thereof, nor the consummation of the transactions
contemplated therein (i) will contravene any applicable provision of any law,
statute, rule, regulation, order, writ, injunction or decree of any court or
governmental instrumentality, (ii) will conflict or be inconsistent with or
result in any breach of any of the terms, covenants, conditions or provisions
of, or constitute a default under, or (other than pursuant to the Security
Documents) result in the creation or imposition of (or the obligation to create
or impose) any Lien upon any of the property or assets of any Credit Party or
its Subsidiaries pursuant to the terms of any indenture, mortgage, deed of
trust, material agreement or other material instrument to which any Credit Party
or its Subsidiaries is a party or by which it or any of its property or assets
is bound or to which it may be subject or (iii) will violate any provision of
the charter or by-laws of any Credit Party or its Subsidiaries, except, in each
such case, where such contravention, conflict, inconsistency, breach, default,
creation, imposition, obligation or violation does not have a Materially Adverse
Effect. The consummation of the Refinancing and the terms of the financing in
connection therewith will not conflict or be inconsistent with or result in any
breach of any of the terms, covenants, conditions or provisions of, or
constitute a default under, or result in the creation or imposition of (or the
obligation to create or impose) any Lien (except pursuant to the Security
Documents) upon any of the property or assets of Holdings or the Borrower or any
of their respective Subsidiaries pursuant to the terms of, any indenture,
mortgage, deed of trust, material instrument or material agreement relating to
Indebtedness for borrowed money or the equivalent thereof or other material
agreement to which Holdings or the Borrower or any of their respective
Subsidiaries is a party or by which it or any of its property or assets is bound
or to which it may be subject, except, in each such case, where such conflict,
inconsistency, breach, default, creation, imposition or obligation does not have
a Materially Adverse Effect.
5.04 Litigation. Except as set forth on Annex IX, there are no
actions, judgments, suits or proceedings pending or, to Holdings' or the
Borrower's knowledge, threatened in any court of competent jurisdiction with
respect to any Credit Party or its Subsidiaries that are, individually or in the
aggregate, likely to have a Materially Adverse Effect.
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5.05 Use of Proceeds. (a) All the proceeds of all Term Loans to be
made hereunder shall be utilized to provide a portion of the financing required
to consummate the Refinancing and to pay related fees and expenses.
(b) Up to $3,000,000 of the proceeds of Revolving Loans may be used
by the Borrower on the Closing Date to provide a portion of the financing
required to consummate the Refinancing and to pay related fees and expenses and
the remaining proceeds of Revolving Loans may be utilized to finance the ongoing
working capital requirements of the Borrower and its Subsidiaries and for
general corporate purposes.
(c) Neither the making of any Loan hereunder, nor the use of the
proceeds thereof, will violate or be inconsistent with the provisions of
Regulation G, T, U or X of the Board of Governors of the Federal Reserve System.
5.06 Governmental Approvals, etc. No order, consent, approval,
license, authorization, or validation of, or filing, recording or registration
with, or exemption by, any third party or any foreign or domestic Governmental
Authority (other than those orders, consents, approvals, licenses,
authorizations or validations which, if not obtained or made, would not have a
Materially Adverse Effect or which have previously been obtained or made and
except for filings to perfect security interests granted pursuant to the
Security Documents) is required to authorize or is required in connection with
(i) the execution, delivery and performance of any Credit Document or the
transactions contemplated therein or (ii) the legality, validity, binding effect
or enforceability of any Credit Document. At the time of the making of the
Initial Loans, there does not exist any judgment, order, injunction or other
restraint issued or filed with respect to the consummation of the Refinancing or
the making of Loans or the performance by the Credit Parties of their
obligations under the Credit Documents.
5.07 Investment Company Act. None of Holdings, the Borrower or their
respective Subsidiaries is, or will be after giving effect to the transactions
contemplated hereby, an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
5.08 Public Utility Holding Company Act. None of
Holdings, the Borrower or their respective Subsidiaries is, or will
be after giving effect to the transactions contemplated hereby, a
"holding company," or a "subsidiary company" of a "holding
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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.
5.09 True and Complete Disclosure. All factual information (taken as
a whole) heretofore or contemporaneously furnished by or on behalf of Holdings,
the Borrower or any of their Subsidiaries in writing to any Bank (including,
without limitation, all information contained in the Credit Documents) for
purposes of or in connection with this Agreement or any transaction contemplated
herein is (or was, on the date of making the Initial Loans), and all other such
factual information (taken as a whole) hereafter furnished by or on behalf of
any such Person in writing to any Bank will be, true and accurate in all
material respects on the date as of which such information is dated or certified
and not incomplete by omitting to state any material fact necessary to make such
information not misleading at such time in light of the circumstances under
which such information was provided. The projections and pro forma financial
information contained in such materials are based on good faith estimates and
assumptions believed by such Persons to be reasonable at the time made. There is
no fact known to any Credit Party which has a Materially Adverse Effect which
has not been disclosed herein or in such other documents, certificates and
written statements furnished to the Banks for use in connection with the
transactions contemplated hereby.
5.10 Holdings IPO; Repayment of Subordinated Debt. At the time of
making the Initial Loans, the Holdings IPO shall concurrently be consummated,
and the Senior Subordinated Notes, the Subordinated Notes and the Junior
Subordinated Notes shall have concurrently been purchased and cancelled.
5.11 Financial Condition; Financial Statements; Projections. (a) No
Credit Party is entering into the arrangements contemplated hereby and by the
other Credit Documents, or intends to make any transfer or incur any obligations
hereunder or thereunder with actual intent to hinder, delay or defraud either
present or future creditors. On and as of the Closing Date, on a pro forma basis
after giving effect to the Refinancing and to all Indebtedness incurred and
Liens and Guarantees created, or to be created, by each Credit Party in
connection with the Refinancing, (w) the Borrower does not expect that final
judgments against any Credit Party in actions for money damages with respect to
pending or threatened litigation will be rendered at a time when, or in an
amount such that, such Credit Party will be unable to satisfy any such judgments
promptly in accordance with their terms (taking into account the maximum
reasonable amount of such judgments in any such
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actions and the earliest reasonable time at which such judgments might be
rendered and the cash available to each Credit Party, after taking into account
all other anticipated uses of the cash of such Credit Party (including the
payments on or in respect of debts (including their Contingent Obligations));
(x) no Credit Party will have incurred or intends to, or believes that it will,
incur debts beyond its ability to pay such debts as such debts mature (taking
into account the timing and amounts of cash to be received by such Credit Party
from any source, and amounts to be payable on or in respect of debts of such
Credit Party and the amounts referred to in the preceding clause (w)); (y) each
Credit Party, after taking into account all other anticipated uses of the cash
of such Credit Party, anticipates being able to pay all amounts on or in respect
of debts of such Credit Party when such amounts are required to be paid; and (z)
each Credit Party will have sufficient capital with which to conduct its present
and proposed business and the property of such Credit Party does not constitute
unreasonably small capital with which to conduct its present or proposed
business. For purposes of this Section 5.11, "debt" means any liability on a
claim, and "claim" means a (i) right to payment whether or not such a right is
reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured or unsecured; or (ii)
right to an equitable remedy for breach of performance if such breach gives rise
to a payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured
or unsecured. On the date of each Borrowing (and after giving effect to all
Borrowings as of such date), the representations set forth in this Section
5.11(a) shall be true and correct with respect to each Credit Party on such
date.
(b) The Borrower has heretofore delivered to the Banks the
consolidated audited financial statements including a balance sheet as at March
31, 1996 and statements of income and shareholders' equity and cash flows of the
Borrower and its consolidated Subsidiaries for the fiscal year ended March 31,
1996. All the financial statements referred to in the preceding sentence were
prepared in accordance with GAAP consistently applied. Such financial statements
present fairly, in all material respects, the consolidated financial position of
the Borrower and its consolidated Subsidiaries for each of the periods covered
thereby. There has also been delivered the pro forma (after giving effect to the
Refinancing) consolidated balance sheet of the Borrower and its consolidated
Subsidiaries as at June 30, 1996, which presents a good faith estimate of the
consolidated pro forma financial condition of the Borrower and its consolidated
Subsidiaries at the date thereof, and interim financial statements for the
Borrower and its consolidated Subsidiaries through August 31, 1996. Except as
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contemplated hereby, since March 31, 1996 (on a pro forma basis after giving
effect to the Refinancing) no event or events have occurred that are likely to
have a Materially Adverse Effect.
(c) There have heretofore been delivered to the Banks pro forma
consolidated income projections for the Borrower and its Subsidiaries, pro forma
consolidated balance sheet projections for the Borrower and its Subsidiaries and
pro forma consolidated cash flow projections for the Borrower and its
Subsidiaries, all for the fiscal years ending June 30, 1996 through March 31,
2002, inclusive, as well as such financial projections on a monthly basis for
each of the monthly periods from the Closing Date through March 31, 1997 (the
"Projected Financial Statements"), which give effect to the Refinancing and all
Indebtedness and Liens incurred or created in connection with the Refinancing.
The Projected Financial Statements are based on estimates and assumptions which
are believed by the Borrower in good faith to be reasonable in light of the
conditions which existed at the time of their preparation as to the future
financial performance of the Borrower.
(d) As of the Closing Date, except as adequately reflected or
reserved against in the financial statements and the notes thereto described in
Section 5.11(b) or as set forth in Annexes IX, XII and XVI, there were no
liabilities or obligations with respect to Holdings, the Borrower or any of
their respective Subsidiaries of any nature whatsoever (whether absolute,
accrued, contingent or otherwise and whether or not due) which, either
individually or in the aggregate, would be material to Holdings, the Borrower or
any of their respective Subsidiaries, except as incurred by any Credit Party in
connection with the Refinancing. As of the Closing Date, the Borrower knows of
no basis for the assertion against Holdings, the Borrower or any of their
respective Subsidiaries of any liability or obligation of any nature whatsoever
that is not adequately reflected in the financial statements described in
Section 5.11(b) or (c) or otherwise disclosed herein, except as incurred by any
Credit Party in connection with the Refinancing, which, either individually or
in the aggregate, could reasonably be expected to be material to Holdings, the
Borrower or any of their respective Subsidiaries.
5.12 Security Interests. At all times after the execution of the
Security Documents, the Security Documents create, in favor of the Collateral
Agent for the benefit of the Banks, as security for the obligations purported to
be secured thereby, a valid and enforceable perfected first priority security
interest in and Lien upon all of the Collateral, superior to and prior to the
rights of all third persons and subject to no Liens, except Prior Liens
applicable to such Collateral. The mortgagor under each
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Mortgage has good and marketable title to the Mortgaged Real Property free and
clear of all Liens other than Prior Liens and Liens expressly permitted by the
applicable Mortgage. The respective pledgor or assignor, as the case may be, has
(or on and after the time it executes the respective Security Document, will
have) good and marketable title to all items of Collateral (other than the
Mortgaged Real Property) covered by such Security Document free and clear of all
Liens except Prior Liens and Liens expressly permitted by the applicable
Security Document. No filings or recordings are required in order to perfect the
security interests created under any Security Document except for filings or
recordings required in connection with any such Security Document which shall
have been made prior to or contemporaneously with the execution and delivery
thereof.
5.13 Tax Returns and Payments. Except as set forth on Annex XIII
hereto, each Credit Party has filed all material tax returns required to be
filed by it and has paid all mater-ial taxes and assessments payable by it which
have become due, other than those not yet delinquent and except for those
contested in good faith and for which adequate reserves have been established.
Except as set forth on Annex XIII hereto, each Credit Party has paid, or has
provided adequate reserves (in accordance with GAAP) for the payment of, all
material federal, state, local and foreign income taxes (including, without
limitation, franchise taxes based upon income) applicable for all prior fiscal
years and for the current fiscal year to the date hereof. The Borrower knows of
no proposed tax assessment against the Borrower or any of its Subsidiaries that
could reasonably be expected to have a Materially Adverse Effect which is not
being actively contested in good faith by such Person to the extent affected
thereby in good faith and by appropriate proceedings; provided that such
reserves or other appropriate provisions, if any, as shall be required in
conformity with GAAP shall have been made or provided therefor.
5.14 ERISA. (A) Each Credit Party and its ERISA Affiliates are in
compliance with all applicable provisions of ERISA and the regulations and
published interpretations thereunder with respect to all employee benefit plans,
Pension Plans and Multiemployer Plans except for any failures to comply which,
individually or in the aggregate, would not have a Materially Adverse Effect.
(B) No Termination Event has occurred or is reasonably expected to
occur with respect to any Pension Plan which resulted or would result in a
liability to any Credit Party or any ERISA Affiliate.
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(C) The sum of the amount of unfunded benefit liabilities
(determined in accordance with Statement of Financial Accounting Standards No.
87) under all Title IV Plans (excluding each Title IV Plan with an amount of
unfunded benefit liabilities of zero or less) is not more than $2,500,000. As of
the Closing Date, there are no unfunded benefit liabilities (within the meaning
of Section 4001(a)(18) of ERISA) under any Title IV Plans.
(D) As of the Closing Date, no Credit Party nor any ERISA Affiliate
has any obligation to contribute to or any liability or potential liability
(including, but not limited to, actual or potential withdrawal liability) with
respect to any employee benefit plan of the type described in Sections 4063 and
4064 of ERISA or in Section 413(c) of the Code. Each Credit Party and their
ERISA Affiliates have complied in all material respects with the requirements of
ERISA Section 515 with respect to each Multiemployer Plan. The aggregate
potential withdrawal payments, as determined in accordance with Title IV of
ERISA, of each Credit Party and their ERISA Affiliates with respect to all
Multiemployer Plans does not exceed $2,500,000. No Credit Party nor any ERISA
Affiliate has incurred or reasonably expects to incur any withdrawal liability
under Section 4201 et seq. of ERISA to any Multiemployer Plan or any employee
benefit plan of the type described in Sections 4063 and 4064 of ERISA or in
Section 413(c) of the Code.
(E) No Credit Party nor any ERISA Affiliate has incurred any
accumulated funding deficiency (whether or not waived) with respect to any
Pension Plan.
(F) No Credit Party nor any ERISA Affiliate has or reasonably
expects to become subject to a Lien in favor of any Pension Plan under Section
302(f) or 307 of ERISA or Section 401(a)(29) or 412(n) of the Code.
(G) Assuming that no portion of the Loans to be advanced hereunder
is attributable, directly or indirectly, to the assets of any employee benefit
plan, the execution, performance and delivery of the Credit Documents by any
party thereto will not involve any prohibited transaction within the meaning of
Section 406 of ERISA or Section 4975 of the Code for which an exemption
therefrom is not available.
As used in this Section 5.14, the term "accumulated funding
deficiency" has the meaning specified in Section 302 of ERISA and Section 412 of
the Code, and the term "employee benefit plan" has the meaning specified in
Section 3(3) of ERISA.
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5.15 Subsidiaries. Annex IV hereto lists each direct and indirect
Subsidiary of Holdings existing on the Closing Date.
5.16 Patents, etc. Each Credit Party owns or possesses adequate
licenses or other rights to use all patents, patent applications, trademarks,
trademark applications, servicemarks, servicemark applications, trade names,
copyrights, trade secrets and know how (collectively, the "Intellectual
Property"), that are necessary for the operation of their respective businesses
as presently conducted and as proposed to be conducted. No claim is pending or,
to the best of the Borrower's knowledge, threatened to the effect that the
Borrower or any of its Subsidiaries infringes upon the asserted rights of any
other person under any Intellectual Property, and to the best of the Borrower's
knowledge there is no basis for any such claim (whether or not pending or
threatened), in each case where such claim could reasonably be expected to have
a Materially Adverse Effect. No claim is pending or, to the best of the
Borrower's knowledge, threatened to the effect that any such Intellectual
Property owned or licensed by the Borrower or any of its Subsidiaries or which
the Borrower or any of its Subsidiaries otherwise has the right to use is
invalid or unenforceable by the Borrower or such Subsidiary, and, to the best of
the Borrower's knowledge, there is no basis for any such claim (whether or not
pending or threatened), in each case where such claim could reasonably be
expected to have a Materially Adverse Effect.
5.17 Compliance with Laws, etc. Except as set forth in Annex XVI
hereto, each Credit Party is in material compliance with all material laws and
regulations, including without limitation those relating to equal employment
opportunity and employee safety but excluding Environmental Laws (as to which
Section 5.22 is applicable), in all jurisdictions in which it is presently doing
business, and each Credit Party will comply and cause each of its Subsidiaries
to comply with all such laws and regulations which may be imposed in the future
in jurisdictions in which it or such Subsidiary may then be doing business in
each such case other than those the non-compliance with which would not have a
Materially Adverse Effect.
5.18 Properties. The Borrower and each of its Subsidiaries have good
and marketable title to and beneficial ownership of all their respective
properties owned by them, including after the Closing Date all property
reflected in the most recent balance sheet referred to in Section 5.11(b) and
except as sold or otherwise disposed of since the date of such balance sheet in
the ordinary course of business, free and clear of all Liens, other than Prior
Liens and Permitted Encumbrances. The Borrower and each Subsidiary thereof hold
all material licenses,
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certificates of occupancy or operation and similar certificates and clearances
of municipal and other authorities necessary to own and operate the Mortgaged
Real Property in the manner and for the purposes currently operated by such
party which if not obtained or maintained would have a material adverse effect
upon the value of the Mortgaged Real Property. There are no actual defaults or
defaults alleged in writing or, to the best knowledge of the Borrower,
threatened defaults, in each case of a material nature with respect to any
leases of real property under which the Borrower or any of its Subsidiaries is
lessor or lessee.
5.19 Securities. On the Closing Date, the common stock of the
Borrower and of each Subsidiary whose stock is being pledged as of the Closing
Date will be duly authorized, issued and delivered and will be fully paid,
nonassessable and free of preemptive rights. There are not, as of the Closing
Date and thereafter, any existing options, warrants, calls, subscriptions,
convertible or exchangeable securities, rights, agreements, commitments or
arrangements for any person to acquire any capital stock of the Borrower or any
other securities convertible into, exchangeable for or evidencing the right to
subscribe for any such capital stock.
5.20 Collective Bargaining Agreements. Set forth on Annex V hereto
is a list and description (including dates of termination) of all collective
bargaining or similar agreements between or applicable to the Borrower and its
Subsidiaries as of the date hereof and any union, labor organization or other
bargaining agent in respect of the employees of the Borrower and its
Subsidiaries on the date indicated in Annex V hereto.
5.21 Indebtedness Outstanding. Set forth on Annex III hereto is a
complete list and description of all Indebtedness of Holdings, the Borrower and
their Subsidiaries (other than the Loans) that will be outstanding immediately
after the Closing Date and set forth on Annex III hereto is a complete list and
description of all Indebtedness of Holdings, the Borrower and their Subsidiaries
that will be repaid, defeased, transferred or otherwise terminated on or prior
to the Closing Date.
5.22 Environmental Matters.
(A) Except as set forth in Annex XII hereto, each of the Borrower
and its Subsidiaries and the properties and assets used in its businesses
(including the Real Properties) is in compliance in all material respects with
all applicable Environmental Laws, which compliance includes, without
limitation, the possession of all material licenses, permits, registrations and
other governmental
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authorizations (collectively, "Environmental Authorizations") required under
applicable Environmental Laws, and compliance in all material respects with the
terms and conditions thereof, and there are no circumstances of a nature which
may materially prevent or interfere with such compliance in the future. Except
as set forth in Annex XII hereto, neither the Borrower nor any of its
Subsidiaries has been notified by any Governmental Authority or, has any basis
to believe, that any such Environmental Authorizations will be modified,
suspended or revoked or cannot be renewed or otherwise maintained in the
ordinary course of business. Except as set forth in Annex XII hereto, in the
last five years, neither the Borrower nor any of its Subsidiaries has received
any communication, whether from a Governmental Authority, citizen group,
employee or otherwise, that alleges that the Borrower or any of its Subsidiaries
or any of the properties or assets used in their respective businesses
(including the Real Properties) is not in compliance with Environmental Laws.
(B) Except as set forth in Annex XII hereto, there is no
Environmental Notice that (i) is pending or, to the best knowledge of the
Borrower or any of its Subsidiaries, threatened against the Borrower or any of
its Subsidiaries or (ii) is pending or, to the best knowledge of the Borrower or
any of its Subsidiaries, threatened against any Person whose liability for such
Environmental Notice may have been retained or assumed by or could reasonably be
imputed or attributed by law or contract to the Borrower or any of its
Subsidiaries.
(C) Except as set forth in Annex XII hereto, to the best knowledge
of the Borrower and its Subsidiaries, there are no past or present actions,
activities, circumstances, conditions, events or incidents arising out of, based
upon, resulting from or relating to the operation, ownership or use of any
properties or assets (including the Real Properties) currently or formerly
owned, operated, leased or used by the Borrower or any of its Subsidiaries (or
any predecessor in interest of any of them), including, without limitation, the
emission, discharge, disposal or other release of any Hazardous Materials in or
into the Environment, that (i) could reasonably be expected to result in the
incurrence of costs in excess of $50,000, individually, under Environmental Laws
or (ii) could reasonably be expected to form the basis of any Environmental
Notice against or with respect to the Borrower or any of its Subsidiaries, or
against any person or entity whose liability for any Environmental Notice may
have been retained or assumed by or could be imputed or attributed by law or
contract to the Borrower or any of its Subsidiaries.
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(D) Except as set forth in Annex XII hereto, without in any way
limiting the generality of the foregoing, (i) there are, and to the best
knowledge of the Borrower and its Subsidiaries, have been, no underground
storage tanks, or related piping, located on, at or under property (including
the Real Properties) owned, operated, leased or used by the Borrower or any of
its Subsidiaries (or any predecessor in interest of any of them), (ii) there
are, and, to the best knowledge of the Borrower and its Subsidiaries, have been
no polychlorinated biphenyls used or stored by the Borrower or any of its
Subsidiaries, located on, at or under property (including the Real Properties)
owned, operated, leased or used by the Borrower or any of its Subsidiaries,
(iii) there are and have been no properties (including the Real Properties)
currently or formerly owned, operated, managed, leased or used by the Borrower
or any of its Subsidiaries (or any predecessor in interest of any of them) at
which Hazardous Materials generated, used, owned, managed, stored or controlled
by the Borrower or any of its Subsidiaries (or any predecessor in interest of
any of them) may have been disposed of or otherwise released into the
Environment except such disposals or other releases which were both (a) in
compliance with Environmental Laws and Environmental Authorizations and (b)
could not result in costs in excess of $50,000, individually, under
Environmental Laws and (iv) there is no friable asbestos contained in or forming
part of any building, building component, structure or office space owned,
operated, leased or used by the Borrower or any of its Subsidiaries.
(E) No Lien has been recorded under Environmental Laws with respect
to any properties, assets or facilities (including the Real Properties) owned,
operated, managed, leased or used by the Borrower or any of its Subsidiaries.
(F) Prior to the Closing Date, the Borrower and each of its
Subsidiaries shall have made all notifications, registrations and filings in
accordance with all applicable State and Local Real Property Disclosure
Requirements, including, without limitation, the use of forms provided by state
or local agencies, where such forms exist, whether to the Agent or to, or with,
the state or local agency, provided, that where such notification, registration
or filing was made to, or with, a state or local agency, a copy of such
notification, registration or filing shall be provided to the Agent prior to the
Closing Date.
5.23 Environmental Investigations. All material
environmental investigations, studies, audits, assessments or
reviews conducted of which the Borrower is in possession in
relation to the current or prior business of the Borrower or any
Subsidiary or any Real Property or facility now or previously
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owned, operated, leased, used or controlled by the Borrower or any of its
Subsidiaries, including, without limitation those relating to compliance with or
liability under any Environmental Law, have been delivered to the Agent through
its attorneys, Cahill Gordon & Reindel.
5.24 Fine Products Company. As of the date of this Agreement and as
of the Closing Date, Fine Products Company, a Georgia corporation ("Fine
Products"), has capital of $113,000 and has no other assets or, to the best of
the Borrower's knowledge, liabilities of any kind (other than its rights and
obligations under the Purchase Agreement dated as of February 1, 1994 between
Fine Products, Aminco Delaware and Gilliam Candy Co., Inc., and certain tax
attributes). There are no actions, claims, judgments, suits or proceedings
pending or, to the Borrower's knowledge, threatened in any court of competent
jurisdiction with respect to Fine Products and the Borrower is not aware of any
facts or circumstances which would provide the basis for the assertion against
Fine Products of any such actions, claims, suits or proceedings.
SECTION 6. Affirmative Covenants. The Borrower covenants and agrees
that on the Closing Date and thereafter for so long as this Agreement is in
effect and until the Commitments have terminated and the Loans together with
interest, fees and all other Obligations incurred hereunder are paid in full
(except as otherwise agreed or consented to or waived, in writing, by the
Required Banks):
6.01 Information Covenants. The Borrower will furnish
or cause to be furnished to the Agent, who will distribute copies
to each Bank:
(a) As soon as available and in any event within 90 days after the
close of each fiscal year of the Borrower, the consolidated balance sheet
of the Borrower and its Subsidiaries as at the end of such fiscal year and
the related consolidated statements of income, of shareholders' equity and
of cash flows for such fiscal year, setting forth comparative consolidated
figures for the preceding fiscal year and a report on such consolidated
balance sheets and financial statements by independent certified public
accountants of recognized national standing, which report shall not be
qualified as to the scope of audit or as to the status of the Borrower and
its Subsidiaries as a going concern and shall state that such consolidated
financial statements present fairly, in all material respects, the
consolidated financial position of the Borrower and its Subsidiaries as at
the dates
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indicated and the results of their operations and their cash flows for the
periods indicated in conformity with GAAP applied on a basis consistent
with prior years (except for such changes with which the independent
certified public accountants concur) and the examination by such
accountants was conducted in accordance with generally accepted auditing
standards.
(b) As soon as available and in any event within 45 days after the
close of each of the first three quarterly accounting periods in each
fiscal year of the Borrower, the consolidated balance sheet of the
Borrower and its Subsidiaries as at the end of such quarterly accounting
period and the related consolidated statements of income, of shareholders'
equity and of cash flows for such quarterly accounting period and for the
elapsed portion of the fiscal year ended with the last day of such
quarterly accounting period, setting forth in comparative form the same
information for the corresponding periods of the prior fiscal year.
(c) As soon as practicable and in any event within 30 days after the
end of the month of October 1996 and each month thereafter, (i) the
consolidated balance sheet of the Borrower and its Subsidiaries as at the
end of such period and (ii) the related consolidated statements of income
and cash flows of the Borrower each in the form customarily prepared by
management, in each case for such fiscal month and for the period from the
beginning of the then current fiscal year to the end of such fiscal month,
setting forth in comparative form the same information for the
corresponding periods of the prior fiscal year (including a comparison of
such monthly financial results against the budgets required to be
submitted pursuant to subsection (e) hereof, together with a brief
narrative discussion and analysis prepared by management describing the
Borrower's results of operations for such fiscal month.
(d) Together with each delivery of financial statements of the
Borrower and its Subsidiaries pursuant to subsection (a) above, a written
statement by the independent public accountants giving the report thereon
(i) stating that their audit examination has included a review of the
terms of Sections 7.04, 7.05, 7.07 (as to the Borrower only) and 7.09
through 7.11 (inclusive) of this Agreement as they relate to accounting
matters but without having conducted any special auditing procedures in
connection therewith, (ii) stating whether, in connection with their audit
examination, any condition or event which constitutes a Default or Event
of
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Default has come to their attention, and if such a condition or event has
come to their attention, specifying the nature and period of existence
thereof; provided that such accountants shall not be liable by reason of
any failure to obtain knowledge of any such Default or Event of Default
that would not be disclosed in the course of their audit examination, and
(iii) stating that based on their audit examination nothing has come to
their attention which causes them to believe that as of the end of such
fiscal year of the Borrower there existed a Default or an Event of Default
related to the breach of any covenant set forth in Sections 7.04, 7.05,
7.07 (as to the Borrower only) and 7.09 through 7.11 (inclusive), as they
relate to accounting matters, and if such a condition or event has come to
their attention, specifying the nature and period of existence thereof and
what action the Borrower has taken, is taking and proposes to take with
respect thereto.
(e) Prior to the commencement of each fiscal year, annual budgets of
the Borrower and its Subsidiaries in reasonable detail for each month of
such fiscal year, as customarily prepared by management for its internal
use, setting forth, with appropriate discussion, the principal assumptions
upon which such budgets are based. Together with each delivery of
financial statements pursuant to Section 6.01(c), a comparison of the
current year to date financial results against the budgets required to be
submitted pursuant to this subsection (e) shall be presented.
(f) At the time of the delivery of the financial statements provided
for in Sections 6.01(a), (b) and (c), a certificate of the chief executive
officer, chief financial officer, controller, chief accounting officer or
other Authorized Officer of the Borrower to the effect that such financial
statements are true and complete in all material respects and that no
Default or Event of Default exists, or, if any Default or Event of Default
does exist, specifying the nature and extent thereof, which certificate
shall, with respect to the financial statements provided for in Section
6.01(c), at the time of delivery of such statements for the months ended
September 30, December 31, March 31 and June 30, beginning with the month
ended December 31, 1996, be accompanied by a Compliance Certificate in a
form reasonably acceptable to the Agent setting forth the calculations
required to establish whether the Borrower and its Subsidiaries were in
compliance with the covenants in this Agreement (including without
limitation the covenants set
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forth in Sections 7.09 through 7.11 (inclusive)) as at the end of such
fiscal period or year, as the case may be.
(g) Promptly upon receipt thereof, a copy of each annual "management
letter" submitted to the Borrower by its independent accountants in
connection with any annual audit made by them of the books of the Borrower
or any of its Subsidiaries.
(h) Promptly upon their becoming available, copies of all
consolidated financial statements, reports, notices and proxy statements
sent or made available generally by the Borrower or any Subsidiary of the
Borrower to its security holders (other than to the Borrower or another
Subsidiary), of all regular and periodic reports and all registration
statements and prospectuses, if any, filed by the Borrower or any of its
Subsidiaries with any securities exchange or with the SEC and of all press
releases and other statements made available generally by the Borrower or
any Subsidiary of the Borrower to the public concerning material
developments in the business of the Borrower and its Subsidiaries.
(i) Promptly upon any Senior Officer obtaining knowledge (w) of any
condition or event which constitutes a Default or Event of Default, or
becoming aware that any Bank has given any written notice or taken any
other action with respect to a claimed Default or Event of Default under
this Agreement, (x) that any Person has given any written notice to the
Borrower or any Subsidiary of the Borrower or taken any other action with
respect to a claimed default or event or condition of the type referred to
in Section 8.04, or (y) of a material adverse change in the business,
operations, properties, assets, nature of assets, condition (financial or
otherwise) or prospects of the Borrower and its Subsidiaries taken as a
whole, an Officers' Certificate specifying the nature and period of
existence of any such condition or event, or specifying the notice given
or action taken by such holder or Person and the nature of such claimed
Default, Event of Default, event or condition, or material adverse change,
and what action the Borrower has taken, is taking and proposes to take
with respect thereto.
(j) (i) Promptly upon any Senior Officer obtaining knowledge of the
institution of, or written threat of, any action, suit, proceeding,
governmental investigation or arbitration against or affecting Holdings,
the Borrower or any of its Subsidiaries or any property of Holdings, the
Borrower or any of its Subsidiaries not previously disclosed to the
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Banks, which action, suit, proceeding, governmental investigation or
arbitration seeks (or in the case of multiple actions, suits, proceedings,
governmental investigations or arbitrations arising out of the same
general allegations or circumstances which seek) recovery from Holdings,
the Borrower or any of its Subsidiaries aggregating $500,000 or more
(exclusive of claims covered by insurance policies of Holdings, the
Borrower or any of its Subsidiaries unless the insurers of such claims
have disclaimed coverage or reserved the right to disclaim coverage on
such claims), the Borrower shall give notice thereof to the Banks and
provide such other information as may be reasonably available to enable
the Banks and their counsel to evaluate such matters; (ii) as soon as
practicable and in any event within 45 days after the end of each fiscal
quarter, the Borrower shall provide a report to the Banks covering any
institution of, or written threat of, any action, suit, proceeding,
governmental investigation or arbitration (not previously reported)
against or affecting Holdings, the Borrower or any of its Subsidiaries or
any property of Holdings, the Borrower or any of its Subsidiaries not
previously disclosed to the Banks, which action, suit, proceeding,
governmental investigation or arbitration seeks (or in the case of
multiple actions, suits, proceedings, governmental investigations or
arbitrations arising out of the same general allegations or circumstances
which seek) recovery from Holdings, the Borrower or any of its
Subsidiaries aggregating $250,000 or more (exclusive of claims covered by
insurance policies of Holdings, the Borrower or any of its Subsidiaries
unless the insurers of such claims have disclaimed coverage or reserved
the right to disclaim coverage on such claims), and shall provide such
other information at such time as may be reasonably available to enable
the Banks and their counsel to evaluate such matters; (iii) in addition to
the requirements set forth in clauses (i) and (ii) of this Section
6.01(j), the Borrower upon request shall promptly give notice of the
status of any action, suit, proceeding, governmental investigation or
arbitration covered by a report delivered to the Banks pursuant to clause
(i) or (ii) above to the Banks and provide such other information as may
be reasonably available to it to enable the Banks and their counsel to
evaluate such matters and (iv) promptly upon any Senior Officer obtaining
knowledge of any material dispute in respect of or the institution of, or
written threat of, any action, suit, proceeding, governmental
investigation or arbitration in respect of any material contract of the
Borrower or any of its Subsidiaries, the Borrower shall give notice
thereof to the Banks and shall provide such other
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information as may be reasonably available to enable the Banks and their
counsel to evaluate such matters.
(k) Within 90 days of the last day of each fiscal year of the
Borrower, a summary report, substantially in the form of Annex VI hereto,
outlining all material insurance coverage maintained as of the date of
such report by the Borrower and its Subsidiaries and outlining all
material insurance coverage planned to be maintained by the Borrower and
its Subsidiaries in the subsequent fiscal year.
(l) To the extent reasonably requested by the Agent, as soon as
practicable and in any event within ten Business Days of the later of such
request and the making of any such amendment or waiver, copies of
amendments or waivers with respect to Indebtedness of the Borrower or any
of its Subsidiaries.
(m) The Borrower shall provide to the Agent prior to the Closing
Date a consolidated plan, substantially in the form of Exhibit P hereto,
for the remainder of the fiscal year ending March 31, 1997, and the
Borrower shall provide to the Agent on or prior to December 31, 1996 and
each December 31 thereafter a consolidated plan, substantially in the form
of Exhibit P hereto, for each month in the current fiscal year and a
consolidated plan, substantially in the form of Exhibit P hereto, for the
next succeeding five fiscal years, in each case prepared in accordance
with the Borrower's normal accounting procedures (and which will represent
management's reasonable estimate of the Borrower's projected performance
during such periods) applied on a consistent basis, including, without
limitation, (i) forecasted consolidated balance sheets, consolidated
statements of operations, of stockholders' equity and of cash flows of the
Borrower and its Subsidiaries on a consolidated basis for such periods,
(ii) the amount of forecasted capital expenditures for such fiscal
periods, and (iii) forecasted compliance with Sections 7.09-7.11; provided
that if any such forecast indicates that the Borrower may not be in
compliance with any provision of this Agreement at some future date, such
forecast shall not constitute a Default or an Event of Default or
anticipatory or other breach thereof.
(n) Within fifteen (15) days after the last Business Day of each
month, the Borrower shall deliver to Agent for distribution to each Bank a
borrowing base certificate in the form of Exhibit M hereto (the "Borrowing
Base Certificate") detailing the Borrower's Eligible Accounts Receivable
and
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Eligible Inventory as of the last day of such month, certified as complete
and correct on behalf of the Borrower by a Senior Officer or any other
Authorized Officer. In addition, each Borrowing Base Certificate shall
have attached to it such additional schedules and/or other information as
the Agent may reasonably request. If the Borrower fails to deliver any
such Borrowing Base Certificate within twenty-five (25) days after the end
of any such month, then the Borrower's Borrowing Base shall be deemed to
be $0 until such time as the Borrower shall deliver such required
Borrowing Base Certificate.
(o) (i) On or prior to the Closing Date and within 90 days after the
commencement of each fiscal year, a complete and accurate list of the
officers and directors of the Borrower and (ii) within 30 days of any
change in personnel affecting the accuracy of such list, a notice
specifying such change in personnel.
(p) With reasonable promptness, such other information and data with
respect to the Borrower or any of its Subsidiaries or any other similar
entity in which the Borrower or any Subsidiary has an investment, as from
time to time may be reasonably requested by any Bank and may be reasonably
available to the Borrower.
(q) The Borrower shall deliver to the Agent, within 15 days after
filing with the SEC, copies of Holdings' annual report and of the
information, documents and other reports (or copies of such portions of
any of the foregoing as the SEC may by rules and regulations prescribe)
which is filed by Holdings with the SEC pursuant to Section 13 or 15(d) of
the Exchange Act within the time periods prescribed under such rules and
regulations. In addition, the Borrower shall cause Holdings' annual
reports to shareholders and any quarterly or other financial reports
furnished by Holdings to shareholders generally to be filed with the
Agent.
6.02 Books, Records and Inspections. The Borrower will, and will
cause each of its Subsidiaries to, keep true books of records and accounts in
which full and correct entries will be made of all their business transactions,
and will reflect in its financial statements adequate accruals and
appropriations to reserves, all in accordance with GAAP. The Borrower will, and
will cause each of its Subsidiaries to, permit, upon reasonable prior notice to
the chief financial officer, controller, chief accounting officer or any other
Authorized Officer of the Borrower, officers and designated representatives of
the Agent or any Bank to visit and inspect any of the properties or assets of
the Borrower and any
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of its Subsidiaries in whomsoever's possession, and to examine the books of
account of the Borrower and any of its Subsidiaries and discuss the affairs,
finances and accounts of the Borrower and of any of its Subsidiaries with, and
be advised as to the same by, its and their officers and independent accountants
(in the presence of such officers), all at such reasonable times during regular
business hours and intervals and to such reasonable extent as the Agent or any
Bank may reasonably request.
6.03 Maintenance of Property; Insurance. (a) The Borrower will, and
will cause each of its Subsidiaries to, exercise commercially reasonable efforts
to maintain or cause to be maintained in good repair, working order and
condition (subject to normal wear and tear) all properties used in its
businesses and from time to time will make or cause to be made all repairs,
renewals and replacements thereof which the Borrower deems appropriate in its
commercially reasonable judgment and will maintain and renew as necessary all
licenses, permits and other clearances necessary in its commercially reasonable
judgment to use and occupy such properties of the Borrower and each Subsidiary,
as the case may be.
(b) The Borrower will, and will cause each of its Subsidiaries to,
maintain or cause to be maintained, with financially sound and reputable
insurers, insurance with respect to its properties and business against loss or
damage of the kinds customarily insured against by corporations of established
reputation engaged in the same or similar businesses and similarly situated, of
such types and in such amounts as are customarily carried under similar
circumstances by such other corporations to the extent that such types and such
amounts of insurance are available at commercially reasonable rates. The
Borrower will, and will cause each of its Subsidiaries to, furnish to each Bank,
upon reasonable request, information as to the insurance carried, and will not
cancel any such insurance without the consent of the Required Banks.
(c) Without limiting subsection 6.03(b) above, the Borrower will,
and will cause each of its Subsidiaries to, maintain in full force the insurance
coverages specified in the Mortgages and the other Security Documents.
6.04 Payment of Taxes. The Borrower will pay and discharge, and will
cause each of its Subsidiaries to pay and discharge, all material taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits, or upon any properties belonging to it, prior to the date on
which material penalties attach thereto, and all lawful claims which, if unpaid,
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might become a Lien or charge upon any properties of the Borrower or any of its
Subsidiaries or cause a failure or forfeiture of title thereto; provided that
neither the Borrower nor any Subsidiary shall be required to pay any such tax,
assessment, charge, levy or claim that is being contested in good faith and by
proper proceedings timely instituted and diligently conducted if it has
maintained adequate reserves with respect thereto in accordance with GAAP.
6.05 Corporate Franchises. The Borrower will do, and will cause each
Subsidiary to do, or cause to be done, all things necessary to preserve and keep
in full force and effect its existence, rights and authority, except where such
failure to keep in full force and effect such rights and authority would not
have a Materially Adverse Effect.
6.06 Compliance with Statutes, etc. The Borrower will, and will
cause each Subsidiary to, comply with all applicable statutes, regulations and
orders of, and all applicable restrictions imposed by, all Governmental
Authorities, in respect of the conduct of its business and the ownership of its
property, other than non-compliance which would not have a Materially Adverse
Effect; provided that with respect to non-compliance with Environmental Laws
which is disclosed in Annex XII hereto, the Borrower will, and will cause each
Subsidiary to, comply with such Environmental Laws as soon as practicable.
6.07 ERISA. The Borrower will furnish to the Agent, who
will distribute to each of the Banks:
(a) promptly upon the Borrower's knowing or having reason to know of
the occurrence of any (i) Termination Event, or (ii) "prohibited
transaction," within the meaning of Section 406 of ERISA or Section 4975
of the Code, in connection with any Pension Plan or any trust created
thereunder, which in the case of all such events described in clause (i)
or (ii) results or could reasonably be expected to result in a liability
of a Credit Party or its ERISA Affiliates in the aggregate in excess of
$200,000, a written notice specifying the nature thereof, what action the
Credit Party or its ERISA Affiliates have taken, are taking or propose to
take with respect thereto, and, when known, any action taken or threatened
by the Internal Revenue Service, Department of Labor, PBGC or
Multiemployer Plan with respect thereto.
(b) with reasonable promptness, copies of (i) all
notices received by a Credit Party or any of its ERISA
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Affiliates of PBGC's intent to terminate any Title IV Plan or to have a
trustee appointed to administer any Title IV Plan, the notice of which
event is required pursuant to the preceding paragraph (a); (ii) upon the
request of the Agent each Schedule B (Actuarial Information) to the annual
report (Form 5500 Series) filed by a Credit Party or any of its ERISA
Affiliates with the Internal Revenue Service with respect to each Pension
Plan for which Schedule B is required; (iii) upon the request of the
Agent, the most recent actuarial valuation report for each Title IV Plan;
and (iv) all notices received by the Credit Parties or any of their ERISA
Affiliates from a Multiemployer Plan concerning the imposition or amount
of withdrawal liability pursuant to Section 4202 of ERISA, the notice of
which event is required pursuant to the preceding paragraph (a).
6.08 Performance of Obligations. The Borrower will, and will cause
each of its Subsidiaries to, perform in all material respects all of its
obligations under the terms of each mortgage, indenture, security agreement,
other debt instrument and material contract by which it is bound or to which it
is a party, except where such nonperformance would not have a Materially Adverse
Effect.
6.09 End of Fiscal Years; Fiscal Quarters. As of December 31, 1996,
the Borrower will, for financial reporting purposes, and will cause each of its
Subsidiaries to, have its (i) fiscal years end on December 31, and (ii) fiscal
quarters end on or about March 31, June 30, September 30 and December 31.
6.10 Use of Proceeds. All proceeds of the Term Loans and Revolving
Loans shall be used as provided in Section 5.05.
6.11 Equal Security for Loans and Notes; No Further Negative
Pledges. (a) If the Borrower or any of its Subsidiaries shall create or assume
any Lien upon any of its property or assets, whether now owned or hereafter
acquired and whether or not such property or assets constitutes Collateral,
other than Permitted Encumbrances (unless prior written consent to the creation
or assumption thereof shall have been obtained from the Agent and the Required
Banks), it shall make or cause to be made effective provisions whereby the
Obligations will be secured by such Lien equally and ratably with any and all
other Indebtedness thereby secured as long as any such Indebtedness shall be
secured; provided that this covenant shall not be construed as consent by the
Agent and the Required Banks to any violation by the Borrower of the provisions
of Section 7.03.
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(b) Except with respect to prohibitions against other encumbrances
on specific property encumbered to secure payment of particular Indebtedness
permitted hereunder (which Indebtedness relates solely to the acquisition or
improvement of such specific property) neither the Borrower nor any of its
Subsidiaries shall enter into any agreement prohibiting the creation or
assumption of any Lien upon its properties or assets, whether now owned or
hereafter acquired.
6.12 Lender Meeting. The Borrower will participate in a meeting of
the Banks once during each fiscal year (commencing with the fiscal year ending
December 31, 1996) to be held at a location and a time selected by the Borrower
and reasonably acceptable to the Agent unless the Required Banks determine in
their sole discretion that such meeting is unnecessary and so inform the
Borrower.
6.13 Pledge of Additional Collateral. Concurrently with the
execution and delivery by any Subsidiary of a Subsidiary Guarantee, the Borrower
will cause such Subsidiary to take all necessary action to grant the Collateral
Agent a perfected first Lien in all of the real and personal property of such
Subsidiary (to the extent permitted by applicable law) to secure the payment and
performance of the Obligations and such Subsidiary's obligations and liabilities
under its Subsidiary Guarantee; and promptly, and in any event within 30 days
after the acquisition of assets of a type that, but for the fact that such
assets shall have been acquired after the Closing Date, would have constituted
Collateral, the Borrower will, and will cause each of its Subsidiaries to, take
all necessary action to grant the Collateral Agent a perfected first Lien in
such newly acquired assets (such personal property and assets of a Subsidiary
executing a Subsidiary Guarantee and such newly acquired assets are referred to
herein collectively as the "Additional Collateral"). Such action to be taken by
the Borrower and the Subsidiaries shall include, without limitation, the
execution and delivery of security agreements, and/or supplements thereto, and
other instruments and documents, all in form and substance reasonably
satisfactory to the Collateral Agent, the filing of appropriate financing
statements under the provisions of the UCC, applicable domestic or local laws,
rules or regulations in each of the offices where such filing is necessary or
appropriate, and the delivery of such opinions of counsel with respect to the
foregoing as the Collateral Agent shall reasonably require; provided this
Section 6.13 shall not apply to any assets subject to Liens permitted under
Section 7.03(i). Furthermore, promptly, and in any event within 30 days, after
the acquisition of an interest in Real Property within the United States not
held as of the Closing Date (the "Additional Real Property"), the Borrower
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will, and will cause such of its Subsidiaries acquiring such an interest to,
take such actions and execute such documents as the Agent shall reasonably
require to confirm the Lien of a Mortgage (including, without limitation,
satisfaction of the conditions set forth in Sections 4.01(C)(ii) and (L)), or
execute a new Mortgage, with respect to such Additional Real Property. All costs
and expenses arising from any action taken by the Agent or any Bank in
connection with the pledge of Additional Collateral or Additional Real Property
pursuant to this Section 6.13, including, without limitation, reasonable costs
of counsel for the Agent, shall be payable by the Borrower to the Agent or the
Bank incurring such cost or expense within 10 Business Days after demand
therefor. All agreements, instruments and documents executed or delivered
pursuant to or in furtherance of this Section 6.13, and all amendments,
modifications and supplements thereto from time to time entered into, are and
shall be within the definition of "Security Documents."
6.14 Security Interests. The Borrower will, and will cause each of
its Subsidiaries to, perform any and all acts and execute any and all documents
(including, without limitation, the execution, amendment or supplementation of
any financing statement and continuation statement) for filing in any
appropriate jurisdiction under the provisions of the UCC, local law or any
statute, rule or regulation of any applicable domestic jurisdiction which are
necessary in order to maintain or confirm in favor of the Collateral Agent for
the benefit of the Banks a valid and perfected Lien on the Collateral and any
Additional Collateral, subject to no Liens except for Prior Liens and Liens
permitted by the applicable Security Documents. The Borrower shall, as promptly
as practicable after the filing of any financing statements, deliver to the
Agent acknowledgment copies of, or copies of lien search reports confirming the
filing of, financing statements duly filed under the UCC of all jurisdictions as
may be necessary or, in the reasonable judgment of the Agent, desirable to
perfect the Lien created, or purported or intended to be created, by each
Security Document.
6.15 Environmental Events. (i) The Borrower will, and will cause
each of its Subsidiaries to, comply with any and all Environmental Laws, other
than non-compliance which could not reasonably be expected to result in
liability under any Environmental Laws in excess of $250,000 individually or in
the aggregate with any other liability under any Environmental Laws; provided
that with respect to non-compliance with Environmental Laws which is disclosed
in Annex XII hereto, the Borrower will, and will cause each of its Subsidiaries
to, comply with such Environmental Laws as soon as practicable.
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(ii) The Borrower will promptly give notice to the Agent upon
determining the existence of (a) any violation of any Environmental Laws, (b)
any Environmental Notice or (c) any release or threatened release of Hazardous
Materials at, on, upon, under or from any of the Real Properties or any facility
or equipment thereat in excess of a reportable quantity or allowable standard or
level under any Environmental Laws, or in a manner and/or amount which could
reasonably be expected to result in liability under any Environmental Laws, in
each case in excess of $250,000 individually or in the aggregate with any other
liability under any Environmental Laws (other than any such events disclosed in
Annex XII).
(iii) In the event of the presence of Hazardous Materials on any of
the Real Properties which is in violation of, or which could reasonably be
expected to result in liability under, any Environmental Laws, in each case in
excess of $250,000 individually or in the aggregate with any other liability
under any Environmental Laws, the Borrower or any of its Subsidiaries, upon
discovery thereof, shall take appropriate steps to initiate and expeditiously
complete all response, corrective and other action required under any
Environmental Laws to mitigate and eliminate any such violation or liability.
(iv) Accompanying each quarterly Compliance Certificate required
under Section 6.01(f) hereof, the Company shall include a statement of the
status of each matter identified in Annex XII and each matter for which notice
has been given under Section 6.15(ii) hereof indicating the action that has been
taken, additional action required, and, to the extent practicable, an estimate
of the completion date and future cost for each matter until each matter has
been completely addressed.
6.16 New Subsidiaries. In addition to its obligations with respect
to Section 6.13, if, after the date hereof, the Borrower or any Subsidiary shall
create or acquire any Subsidiary, the Borrower shall, concurrently with the
creation or acquisition of such Subsidiary, (i) cause such Subsidiary to execute
and deliver to the Agent a Subsidiary Guarantee, substantially in the form of
Exhibit R annexed hereto, guaranteeing the Borrower's Obligations hereunder and
(ii) take all necessary actions and execute such agreements, instruments and
documents, including, without limitation, stock powers executed in blank, and
deliver such opinions of counsel with respect thereto, as the Agent may
reasonably require to cause all of the capital stock of such Subsidiary owned or
controlled by the Borrower to be pledged to the Collateral Agent to secure the
Borrower's Obligations hereunder
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such that the Collateral Agent has a valid and perfected first-priority security
interest in such pledged capital stock.
6.17 Repayment of Existing Subordinated Debt. Holdings and the
Borrower hereby covenant and agree that concurrently with the closing of the
Holdings IPO and the Refinancing, Holdings and the Borrower shall purchase, or
cause to be purchased, each of the Senior Subordinated Notes, the Subordinated
Notes and the Junior Subordinated Notes. Upon such purchase, each of such notes
shall be cancelled.
SECTION 7. Negative Covenants. The Borrower hereby covenants and
agrees that as of the Closing Date and thereafter for so long as this Agreement
is in effect and until the Commitments have terminated and the Loans together
with interest, fees and all other Obligations incurred hereunder are paid in
full (except as otherwise agreed or consented to or waived, in writing, by the
Required Banks):
7.01 Changes in Business. Other than asset dispositions permitted
under Section 7.13, the Borrower will not, and will not permit any of its
Subsidiaries to, materially alter its businesses from that conducted by the
Borrower or such Subsidiary at the Closing Date and the business generally
described in the prospectus relating to the Holdings IPO, and lines of business
reasonably related thereto.
7.02 Amendments or Waivers of Certain Documents. The
Borrower will not, and will not permit any of its Subsidiaries to,
amend or otherwise change the terms of any Existing Debt.
7.03 Liens. The Borrower will not, and will not permit any
Subsidiary to, directly or indirectly, create, incur, assume or permit or suffer
to exist any Lien upon or with respect to any item constituting Collateral,
whether now owned or hereafter acquired, except for the Lien of the Security
Document relating thereto, Prior Liens applicable thereto and other Liens
expressly permitted by such Security Document. The Borrower will not, and will
not permit any of its Subsidiaries to, create, incur, assume or suffer to exist
any Lien upon or with respect to any property or assets of the Borrower or any
Subsidiary which does not constitute Collateral whether now owned or hereafter
acquired, or sell any such property or assets subject to an understanding or
agreement, contingent or otherwise, to repurchase such property or assets or
assign any right to receive income, or file or permit the filing of any
financing statement under the UCC or any other similar notice of Lien under any
similar recording or notice statute, except the
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following, which are herein collectively referred to as "Permitted
Encumbrances":
(a) Liens for taxes, assessments or governmental charges or claims
not yet delinquent or Liens for taxes, assessments or governmental charges
or claims being contested in good faith and by appropriate proceedings for
which adequate reserves, as may be required by GAAP, have been
established;
(b) Liens in respect of property or assets of the Borrower or any of
its Subsidiaries imposed by law (i) which were incurred in the ordinary
course of business, such as carriers', warehousemen's and mechanics' Liens
and other similar Liens arising in the ordinary course of business, and
(x) which do not in the aggregate materially detract from the value of
such property or assets or materially impair the use thereof in the
operation of the business of the Borrower or any of its Subsidiaries or
(y) which are being contested in good faith by appropriate proceedings,
which proceedings have the effect of preventing the forfeiture or sale of
the property or asset subject to such Lien or (ii) which do not relate to
material liabilities of the Borrower and its Subsidiaries and do not in
the aggregate materially detract from the value of the property and assets
of the Borrower and its Subsidiaries taken as a whole;
(c) Liens in connection with any attachment or judgment (including
judgment or appeal bonds) for amounts of less than $500,000 individually
or less than $1,000,000 in the aggregate (exclusive of any amount
adequately covered by insurance as to which the insurance company has
acknowledged coverage) unless the judgment it secures shall, within 60
days after the entry thereof, not have been discharged or execution
thereof not been stayed pending appeal, or shall not have been discharged
within 30 days after the expiration of any such stay;
(d) Liens (other than any Lien imposed by ERISA) incurred or
deposits made in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other types of social
security, or to secure the performance of tenders, statutory obligations,
surety and appeal bonds, bids, leases, government contracts, performance
and return-of-money bonds and other similar obligations incurred in the
ordinary course of business (exclusive of obligations in respect of the
payment for borrowed money or the equivalent);
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(e) subject to the provisions of Section 7.17 and, with respect to
any Mortgaged Real Property, to the provisions of any applicable Mortgage,
(i) Leases with respect to the assets or properties of the Borrower
entered into in the ordinary course of the Borrower's business and
subordinate in all respects to the Liens granted and evidenced by the
Security Documents, (ii) foreign Leases and (iii) Existing Leases and any
extensions, renewals or replacements thereof;
(f) easements, rights of way, restrictions, minor defects or
irregularities in title not interfering in any material respect with the
business of the Borrower or any of its respective Subsidiaries, in each
case incurred in the ordinary course of business and which do not
materially impair for its intended purposes the Real Property to which it
relates;
(g) zoning and building by-laws and ordinances, municipal bylaws and
regulations, and restrictive covenants, which do not materially interfere
with the use of the subject property by the Borrower or any of its
Subsidiaries as such property is used as of the Closing Date;
(h) Liens securing Indebtedness of a Subsidiary owing to
the Borrower or a Wholly Owned Subsidiary of the Borrower;
(i) Liens upon real or tangible or intangible personal property
acquired or constructed by the Borrower or its Subsidiaries after the date
hereof or on such property or equity securities of a Person at the time
such Person becomes a Subsidiary of the Borrower or any of its
Subsidiaries; provided that (i) any such Lien is created solely for the
purpose of securing Indebtedness representing, or incurred to finance, the
cost of the item of property subject thereto or such Liens existed on the
date such property or securities were acquired and were not incurred as a
result of or in anticipation of such acquisition, (ii) the principal
amount of the Indebtedness secured by such Lien does not exceed 100% of
the fair value (as determined in good faith by the board of directors of
the Borrower) of the respective property at the time it was so acquired or
constructed, (iii) the Indebtedness secured by the Lien is not created
more than 180 days after the later of the acquisition, completion of
construction, repair, improvement, addition or commencement of full
operation of the property subject to the Lien, (iv) such Lien does not
extend to or cover any other property other than such item of property and
(v) the incurrence of such Indebtedness secured by such Lien is permitted
by Section 7.04;
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(j) Liens on any property existing as of the date hereof securing
Existing Debt and any refinancing, extension, renewal or rearrangement
thereof provided that such Lien does not extend to or cover any other
property other than items of property encumbered as of the date hereof;
and
(k) Liens pursuant to Section 6.13 of this Agreement.
7.04 Indebtedness. The Borrower will not, and will not permit any of
its Subsidiaries to, contract, create, incur, assume or suffer to exist any
Indebtedness, except:
(a) Indebtedness incurred pursuant to the Credit
Documents;
(b) Existing Debt and any refinancing, extension, renewal,
rearrangement or replacement thereof; provided that any such refinancing,
extension, renewal, rearrangement or replacement of Existing Debt shall be
on terms which, both taken as a whole and specifically as such terms
relate to the identity of the obligors, repayments of principal,
covenants, events of default and security in property of the debtor, are
in each event no less favorable to the Borrower than the correlative terms
of the Existing Debt;
(c) Interest Rate Agreements, if any;
(d) $1,000,000 of Indebtedness outstanding at any time to finance
the cost of the acquisition or construction of real or personal tangible
or intangible property (including Capital Leases), and any refinancing,
extension, renewal, rearrangement or replacement thereof; provided that
such Indebtedness (or the refinancing thereof) shall not exceed 100% of
the fair value of such property; and provided, further, that such
Indebtedness (or the refinancing thereof) is not secured by any Lien other
than a Lien referred to in clause (i) of Section 7.03;
(e) other unsecured Indebtedness not exceeding
$1,000,000 in the aggregate at any time outstanding;
(f) Indebtedness owed to Morningside under the
Management Agreement;
(g) Indebtedness of the Borrower to any of its Wholly Owned
Subsidiaries or of any Subsidiary to the Borrower or another Wholly Owned
Subsidiary of the Borrower (but only so
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long as such Indebtedness is held by the Borrower or its
Wholly Owned Subsidiary);
(h) Indebtedness in respect of performance bonds, return-of-money
bonds, surety and appeal bonds and other similar obligations incurred by
the Borrower or any of its Subsidiaries in the ordinary course of
business, provided such Indebtedness does not exceed $100,000 at any time
outstanding; and
(i) Indebtedness of any Subsidiary incurred pursuant to the issuance
of a Guarantee by such Subsidiary as required by Section 6.16 of this
Agreement.
7.05 Advances, Investments and Loans. The Borrower will not, and
will not permit any of its Subsidiaries to, lend money or credit or make
advances to any Person, or purchase or acquire any stock, obligations or
securities of, or any other interest in, or make any capital contribution to any
Person, except:
(a) investments in Cash and Cash Equivalents;
(b) receivables owing to them and advances to customers and
suppliers, in each case if created, acquired or made in the ordinary
course of business and payable or dischargeable in accordance with
customary trade terms;
(c) investments (including debt obligations) received in connection
with the bankruptcy or reorganization of suppliers and customers and in
settlement of delinquent obligations of, and other disputes with,
customers and suppliers arising in the ordinary course of business;
(d) investments in and advances to Credit Parties;
(e) investments in any Wholly Owned Subsidiary of the Borrower or
another Subsidiary, or any Person which, as a result of such investment,
becomes a Wholly Owned Subsidiary of the Borrower or another Subsidiary;
provided that such Wholly Owned Subsidiary is engaged in a business
related to that of the Borrower and its Subsidiaries in compliance with
Section 7.01;
(f) transactions between the Borrower and any of its Wholly Owned
Subsidiaries and between Wholly Owned Subsidiaries permitted under
Sections 7.04(g) and 7.08(i);
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(g) loans or advances made by the Borrower to its officers,
directors and employees in the ordinary course of business not to exceed
$500,000 in the aggregate outstanding at any time;
(h) investments made as a result of the receipt of non-cash proceeds
from any Asset Sale made pursuant to and in compliance with Section 7.13;
(i) investments in Interest Rate Agreements permitted
under Section 7.04(c); and
(j) other investments, loans or advances not to exceed
$500,000 in the aggregate outstanding at any time.
7.06 Prepayments of Indebtedness; Amendments. (i) The Borrower will
not, and will not permit any of its Subsidiaries to make (or give any notice in
respect of) any voluntary or optional payment or prepayment or redemption or
acquisition for value of Indebtedness (including, without limitation, by way of
depositing with any trustee with respect thereto money or securities before such
Indebtedness is due for the purpose of paying such Indebtedness when due) or
exchange of any such Indebtedness or preferred stock, as the case may be, in
each case until all Obligations under this Agreement have been satisfied in
full; provided that the Borrower and any of its Subsidiaries may make such a
payment, prepayment, redemption, acquisition or exchange using the proceeds of
Indebtedness permitted to be incurred by Section 7.04 to refinance or replace
such Indebtedness.
(ii) The Borrower will not, and will not permit any of its
Subsidiaries to: amend, modify or change any of the Management Agreement,
Employment Agreements, the Certificate of Incorporation (including, without
limitation, by the filing of any certificate of designation) or By-laws of the
Borrower (or of Holdings to the extent such amendment, modification or change is
adverse to the Banks as Banks), or any agreement entered into by the Borrower
(or by Holdings to the extent such amendment, modification or change is adverse
to the Banks as Banks) with respect to its capital stock, or enter into any new
agreement with respect to the capital stock of the Borrower (or of Holdings to
the extent such new agreement is adverse to the Banks as Banks), in each case
without the prior consent of the Agent.
7.07 Dividends, etc. The Borrower will not, and will not permit any
of its Subsidiaries to, declare or pay any dividends (other than dividends or
distributions payable in shares of capital stock of the Borrower or any of its
Subsidiaries, other than
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redeemable stock) or return any capital to, its stockholders or authorize or
make any other distribution, payment or delivery of property or cash to its
stockholders as such, or redeem, retire, purchase or otherwise acquire, directly
or indirectly, for any consideration, any shares of any class of its capital
stock now or hereafter outstanding (or any warrants for or options or stock
appreciation rights in respect of any of such shares), or make any loans or
advances to Affiliates, or set aside any funds for any of the foregoing
purposes, or permit any of its Subsidiaries to purchase or otherwise acquire for
consideration any shares of any class of the capital stock of the Borrower or
any other Subsidiary, as the case may be, now or hereafter outstanding (or any
options or warrants or stock appreciation rights issued by such Person with
respect to its capital stock) (all of the foregoing, "Dividends"), except that
(i) any direct or indirect Subsidiary of the Borrower may pay Dividends to its
parent corporation if such parent corporation is the Borrower or a Wholly Owned
Subsidiary of the Borrower, (ii) the Borrower or any Subsidiary of the Borrower
may pay to Holdings any amounts required (x) for the payment of any taxes
payable (A) by Holdings or (B) by Holdings, the Borrower and/or its Subsidiaries
on a consolidated, combined or unitary basis or (y) with respect to the
Refinancing and related transactions, (iii) the Borrower or any of its
Subsidiaries may purchase capital stock held by employees of the Borrower or any
of its Subsidiaries pursuant to any employee stock option or other benefit plan
thereof upon the termination, retirement or death of any such employee in
accordance with the provisions of any such plan in an amount not greater than
$250,000 in any calendar year; provided that the Borrower may purchase capital
stock pursuant to the Employment Agreement with Dr. Leroy Keith without regard
to such limitation; and (iv) the Borrower or any of its Subsidiaries may make
payments to Affiliates pursuant to and in compliance with Section 7.08 hereof.
7.08 Transactions with Affiliates. The Borrower will not, and will
not permit any Subsidiary to, enter into any transaction or series of
transactions, whether or not in the ordinary course of business, with any holder
of 5% or more of any class of equity securities of the Borrower or with any
Affiliate of the Borrower other than on terms and conditions substantially as
favorable to the Borrower or such Subsidiary as would be obtainable by the
Borrower or such Subsidiary at the time in a comparable arm's-length transaction
with a Person other than a holder of 5% or more of any class of equity
securities of the Borrower or an Affiliate; provided that the foregoing
restrictions shall not apply to (i) transactions between the Borrower and any of
its Wholly Owned Subsidiaries and between Wholly Owned Subsidiaries, (ii)
transactions between Holdings and the Borrower to the extent
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otherwise expressly permitted under this Agreement, (iii) payments to
Morningside pursuant to the Management Agreement for management services not to
exceed $350,000 in any fiscal year, plus reimbursement of reasonable
out-of-pocket expenses, (iv) the payment of reasonable fees to Indosuez and its
Affiliates for financial services, such fees not to exceed the usual and
customary fees for similar services, (v) loans and other advances made by the
Borrower to its officers, directors and employees permitted under Section
7.05(g), (vi) the payment of customary outside directors' fees, customary
indemnification arrangements and customary director and officer liability
insurance and (vii) the issuance of capital stock of the Borrower or any of its
Subsidiaries, pursuant to any pension, stock option, profit sharing or other
employee benefit plan or agreement of the Borrower or any of its Subsidiaries in
the ordinary course of business.
7.09 Total Interest Coverage Ratio. The Borrower will not permit the
ratio of (i) Consolidated EBITDA of the Borrower to (ii) Consolidated Interest
Expense (which, for purposes of this Section 7.09 only, shall include only Cash
interest expense) of the Borrower for any Test Period (beginning January 1,
1997) ending during any period listed below to be less than the ratio set forth
opposite such period below:
Period Ratio
January 1, 1997 through and
including September 30, 1997....................... 3.50 to 1.00
October 1, 1997 and thereafter..................... 4.00 to 1.00
7.10 Fixed Charge Coverage Ratio. The Borrower will not permit the
ratio of (i) Consolidated EBITDAC of the Borrower minus cash taxes paid by the
Borrower to (ii) the sum of (A) Consolidated Interest Expense (which, for
purposes of this Section 7.10 only, shall include only Cash interest expense) of
the Borrower and (B) the amount of scheduled mandatory payments on account of
principal of Indebtedness made by the Borrower for any Test Period ending on or
after the following dates (based on results beginning January 1, 1997) to be
less than the ratio set forth opposite such dates below:
June 30, 1997...................................... 1.00 to 1.00
September 30, 1997................................. 1.05 to 1.00
December 31, 1997.................................. 1.10 to 1.00
December 31, 1998 and thereafter................... 1.25 to 1.00
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7.11 Leverage Ratio. The Borrower will not permit the ratio of (i)
Indebtedness of the Borrower and its Subsidiaries to (ii) Consolidated EBITDA of
the Borrower (for the 12 month period ending at the end of the most recent
fiscal quarter of the Borrower) to be more than the ratio set forth below as of
the last day of each of the fiscal years set forth below and as of the last day
of each of the three fiscal quarters immediately following such fiscal years:
Fiscal Year Ratio
1996............................................... 2.50 to 1.00
1997 and thereafter................................ 2.00 to 1.00
7.12 Issuance of Subsidiary Stock. The Borrower will not and will
not permit any of its Subsidiaries directly or indirectly to issue, sell,
assign, pledge or otherwise encumber or dispose of any shares of such
Subsidiaries' capital stock or other equity securities (or warrants, rights or
options to acquire capital stock or convertible securities or other equity
securities) of such Subsidiary, except to the Borrower or any other Wholly Owned
Subsidiary of the Borrower (in each case other than directors' or nominees'
qualifying shares or shares of capital stock required to be owned by foreign
nationals under applicable law); provided, however, that nothing contained in
this Section 7.12 shall prohibit the issuance of capital stock of Carson
Holdings Limited in accordance with the terms of the Carson Holdings Limited
Share Incentive Trust, as in effect on the date hereof.
7.13 Disposition of Assets. (A) The Borrower will not, and will not
permit any of its Subsidiaries to, dispose of all or any part of its interest in
any asset, except that the Borrower and its Subsidiaries may sell or otherwise
dispose of assets so long as either (i) such sales are approved by the Required
Banks (subject to the provisions of Section 11.12 hereof); (ii) such sales are
for at least the fair market value of such assets and the aggregate amount of
such asset sales is less than $500,000 in any 12-month period and, in any such
case, the Borrower or such Subsidiary complies with the mandatory prepayment and
Commitment reduction provisions herein and, in the case of Collateral, so long
as the conditions to the release of Collateral described herein and in the
applicable Security Documents are met; (iii) such sales are of inventory and in
the ordinary course of business; (iv) such sales or other dispositions are (A)
of equipment that has become worn out, obsolete or damaged or otherwise
unsuitable or no longer needed for use in connection with the business of the
Borrower or any of its Subsidiaries or should be replaced, as the case may be,
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in each case as determined in good faith by the board of directors of the
Borrower or its Subsidiary, as the case may be, (B) for at least the fair market
value of such equipment, (C) not in excess of $100,000 individually or $250,000
per year in the aggregate for sales of such equipment and (D) the proceeds of
the sales of such equipment are used within 90 days of such sales to (1)
purchase equipment used in substantially similar lines of business or (2) repay
Indebtedness under this Credit Agreement pursuant to Section 3.01; (v) such
sales or other dispositions do not exceed $50,000 individually and are for at
least the fair market value of such assets or as to such other dispositions, the
likely amount of net sales proceeds that would be realized upon a sale of such
assets is such that a sale of such assets is not, in the reasonable judgment of
the Borrower, economically practicable but such other disposition is otherwise
of commercial value to the Borrower; provided that in no case shall sales
pursuant to this clause (v) exceed an aggregate of $100,000 in any fiscal year,
and in the case of Collateral, so long as the conditions to the release of
Collateral described herein and in the applicable Security Documents are met;
(vi) such sales consist of the licensing or sublicensing of the Borrower's or
any of its Subsidiaries' Intellectual Property in the ordinary course of
business; or (vii) such sales are of equity securities under any stock option or
other benefit plan available to the employees or directors of the Borrower or
any of its Subsidiaries.
The consideration received by the Borrower and its Subsidiaries from
each sale of assets permitted by subsections (i) and (ii) above, other than with
respect to such sales involving consideration of not more than $100,000 in the
aggregate in any fiscal year, shall be payable by the purchaser in whole within
15 days of such sale and at least 70% of the consideration from each sale shall
consist of Cash or Cash Equivalents. Any non-cash proceeds received from the
sale of assets constituting Collateral shall be pledged pursuant to and in
accordance with the applicable Security Documents and shall constitute
Collateral.
(B) Upon compliance with the conditions in subsection A of this
Section 7.13, the Release Conditions and the Partial Release Conditions (each as
hereinafter defined), the Borrower shall be entitled to receive from Collateral
Agent an instrument in form and substance reasonably satisfactory to the
Borrower (each, a "Release"), releasing the Lien of the Mortgage with respect to
all or any portion of a Mortgaged Real Property (each, a "Released Real
Property"). The Borrower shall exercise its rights under this Section by
delivering to Collateral Agent a notice (each, a "Release Notice"), which shall
refer to this Section, describe with particularity the proposed Released Real
Property and be
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accompanied by (i) four counterparts of the Release fully executed and
acknowledged by all necessary parties other than Collateral Agent, (ii) executed
counterparts of UCC termination statements necessary to terminate the Lien of
the applicable Mortgage and (iii) an Officer's Certificate certifying that no
Default or Event of Default shall have occurred and the parties executing any
and all documents in connection with the Release (other than Collateral Agent)
were duly authorized to do so (collectively, the "Release Conditions"). In the
event the proposed Released Property consists of less than all of the Mortgaged
Real Property subject to a single Mortgage, the Partial Release Conditions must
be satisfied in order for the Borrower to receive the Release.
(C) Collateral Agent's obligation to deliver a Release in respect of
less than all of the Mortgaged Real Property subject to a single Mortgage shall
be contingent upon the satisfaction of the conditions in subsection A of this
Section 7.13 and the Release Conditions as well as the following conditions
(collectively, the "Partial Release Conditions"):
(i) following the sale, transfer or other disposition of and
release of the Lien of the applicable Mortgage with respect to the
proposed Released Real Property, the remaining Mortgaged Real Property
shall have utility services and access to public roads, rail spurs and
other transportation structures sufficient and necessary in the reasonable
opinion of the Borrower for the continued use of such Mortgaged Real
Property in the manner utilized prior to the Release;
(ii) following the sale, transfer or other disposition of the
proposed Released Real Property, the remaining Mortgaged Real Property
shall comply in all material respects with applicable laws, rules,
regulations and ordinances relating to environmental protection, zoning,
land use, configuration and building and workplace safety (except for such
non-compliance which has been previously consented to by the Collateral
Agent);
(iii) following the sale, transfer or other disposition of the
proposed Released Real Property, the value of the remaining Mortgaged Real
Property shall not be less than the value of such remaining Mortgaged Real
Property prior to the Release due to such sale, transfer or other
disposition;
(iv) the Title Company shall be prepared to issue an endorsement to
the Banks' title insurance policy relating to the Mortgaged Real Property
confirming that after the proposed release, the Lien of the applicable
Mortgage continues
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unimpaired as a first priority Lien upon the remaining Mortgaged Real
Property subject only to Prior Liens, those Liens permitted by the
Mortgage or previously consented to by the Collateral Agent;
(v) the Borrower shall cause to have been delivered to Collateral
Agent a Survey reasonably acceptable to the Agent of the Mortgaged Real
Property remaining after the proposed Released Real Property has been
released; and
(vi) the Borrower shall cause to have been delivered to Collateral
Agent an Officer's Certificate certifying that the conditions set forth in
subsections (i) through (v) have been satisfied.
(D) Collateral Agent shall execute, acknowledge (if applicable) and
deliver to the Borrower counterparts of the documents described in subsection
B(i) and (ii) within 10 Business Days after receipt by Collateral Agent of a
Release Notice provided that the Release Conditions and the Partial Release
Conditions (if applicable) have been satisfied. The Borrower shall (i) execute,
deliver, obtain and record such instruments as Collateral Agent may require,
including, without limitation, amendments to the Security Documents or this
Agreement and, (ii) deliver to Collateral Agent such evidence of the
satisfaction of the Release Conditions and the Partial Release Conditions as
Collateral Agent may require and (iii) cause the Title Company to issue the
endorsement referred to in subsection C(iv). The Borrower shall reimburse
Collateral Agent, Agent and the Banks upon demand for all reasonable costs or
expenses incurred in connection with any actions taken pursuant to this Section
7.13.
7.14 Contingent Obligations. The Borrower will not, and
will not permit any of its Subsidiaries to, directly or indirectly,
create or become or be liable with respect to any Contingent
Obligation except:
(i) guarantees resulting from endorsement of instruments
for deposit or collection in the ordinary course of business;
(ii) Interest Rate Agreements, if any;
(iii) obligations arising as a direct consequence of the
Refinancing;
(iv) obligations with respect to the Indebtedness
permitted to be incurred under Section 7.04; and
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(v) other Contingent Obligations not to exceed $250,000
outstanding at any one time.
7.15 ERISA. The Credit Parties will not, and will not
permit any of their ERISA Affiliates to:
(i) engage in any transaction in connection with which the Borrower
or any of its ERISA Affiliates could be subject to either a tax imposed by
Section 4975(a) of the Code or the corresponding civil penalty assessed
pursuant to Section 502(i) of ERISA, which penalties and taxes for all
such transactions could reasonably be expected to be in an aggregate
amount in excess of $500,000;
(ii) permit to exist any accumulated funding deficiency, for which a
waiver has not been obtained from the Internal Revenue Service, with
respect to any Pension Plan;
(iii) permit to exist any failure to make contributions or any
unfunded benefits liability which creates, or with the passage of time
would create, a statutory lien or requirement to provide security under
ERISA or the Code in favor of the PBGC or any Pension Plan, Multiemployer
Plan or other entity;
(iv) permit the sum of the amount of unfunded benefit liabilities
(determined in accordance with Statement of Financial Accounting Standards
No. 87) under all Title IV Plans (excluding each Title IV Plan with an
amount of unfunded benefit liabilities of zero or less) to exceed
$2,500,000 for a period in excess of twelve months; or
(v) fail to make any payment to any Multiemployer Plan that it or
any of its ERISA Affiliates may be required to make under such
Multiemployer Plan, any agreement relating to such Multiemployer Plan, or
any law pertaining thereto.
As used in this Section 7.15, the term "accumulated funding
deficiency" has the meaning specified in Section 302 of ERISA and Section 412 of
the Code, and the term "amount of unfunded benefit liabilities" has the meaning
specified in Section 4001(a)(18) of ERISA.
7.16 Merger and Consolidations. No Credit Party will merge or
consolidate with or into any other entity; provided that any Subsidiary of the
Borrower may be merged or consolidated with or into (i) the Borrower, if the
Borrower is the continuing or surviving corporation or (ii) any other such
Subsidiary, if the
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continuing or surviving corporation is a Wholly Owned Subsidiary of
the Borrower.
7.17 Sale and Lease-Backs. The Borrower will not, and will not
permit any of its Subsidiaries to, directly or indirectly, become or thereafter
remain liable as lessee or as guarantor or other surety with respect to the
lessee's obligations under any lease, whether an Operating Lease or a Capital
Lease, of any property (whether real or personal or mixed) whether now owned or
hereafter acquired, (i) which the Borrower or any of its Subsidiaries has sold
or transferred or is to sell or transfer to any other Person (other than in
connection with the Refinancing) or (ii) which the Borrower or any such
Subsidiary intends to use for substantially the same purpose as any other
property which has been or is to be sold or transferred by the Borrower or any
such Subsidiary to any Person in connection with such lease, if in the case of
clause (i) or (ii) above, such sale and such lease are part of the same
transaction or a series of related transactions or such sale and such lease
occur with one year of each other or are with the same other Person.
7.18 Sale or Discount of Receivables. The Borrower will not, nor
will it permit any of its Subsidiaries to, sell, with or without recourse, or
discount (other than in connection with trade discounts or arrangements
necessitated by the creditworthiness of the other party, in each case in the
ordinary course of business consistent with past practice) or otherwise sell for
less than the face value thereof, notes receivable or accounts receivable owed
to it by its third party customers or suppliers.
7.19 Fine Products Company. The Borrower will not, and will not
permit any Subsidiary to, transfer any cash or other property to Fine Products,
other than transfers of cash in amounts needed to enable Fine Products to pay
amounts not to exceed $25,000 in the aggregate then required to be paid by Fine
Products to Persons that are not Affiliates of the Borrower. The Borrower will
not permit Fine Products to engage in any business activity.
SECTION 8. Events of Default. Upon the occurrence and
during the continuance of any of the following specified events
(each an "Event of Default"):
8.01 Payments. The Borrower shall (i) default in the payment when
due of any principal of the Loans, (ii) de fault, and such default shall
continue for two or more Business Days, in the payment when due of any interest
on the Loans or under any other Credit Document or (iii) fail to pay any other
amounts owing hereunder for five Business Days after receiving notice thereof;
or
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8.02 Representations, etc. Any representation, warranty or statement
made or deemed made by operation of Section 4.01, 4.02 or 4.03 by any Credit
Party herein or in any other Credit Document or in any written statement or
certificate delivered or required to be delivered pursuant hereto or thereto
shall prove to be untrue in any material respect on the date as of which made or
deemed made by operation of Section 4.01, 4.02 or 4.03; or
8.03 Covenants. Any Credit Party shall (a) default in the due
performance or observance by it of any term, covenant or agreement contained in
Section 6.11, 6.13, 6.14, 6.16 or Section 7 hereof or Section 1.1 of any
Mortgage or (b) default in the due performance or observance by it of any other
term, covenant or agreement contained in this Agreement or any Security Document
and such default shall continue unremedied for a period of at least thirty days
(or, in the case of Section 6.15(iii), five Business Days) after the date of
such default; or
8.04 Default Under Other Agreements. (a) Any Credit Party shall (i)
default in any payment with respect to any Indebtedness (other than Obligations)
having a principal amount of $500,000 or more individually or $1,000,000 or more
in the aggregate, for all Credit Parties and their Subsidiaries, beyond the
period of grace, if any, provided in the instrument or agreement under which
such Indebtedness was created or (ii) default in the observance or performance
of any agreement or condition relating to any such Indebtedness or contained in
any instrument or agreement evidencing, securing or relating thereto, or any
other event shall occur or condition exist, the effect of which default or other
event or condition is to cause, or to permit the holder or holders of such
Indebtedness (or a trustee or agent on behalf of such holder or holders) to
cause any such Indebtedness to become due prior to its stated maturity; or (b)
any such Indebtedness of any Credit Party or any of its respective Subsidiaries
shall be declared to be due and payable, or required to be prepaid other than by
a regularly scheduled required prepayment, prior to the stated maturity thereof;
or
8.05 Bankruptcy, etc. Any Credit Party shall commence a voluntary
case concerning itself under Title 11 of the United States Code entitled
"Bankruptcy," as now or hereafter in effect, or any successor thereto (the
"Bankruptcy Code"); or an involuntary case is commenced against any Credit Party
or any of its Subsidiaries and the petition is not controverted within 20 days,
or is not dismissed for a period of 60 consecutive days, after commencement of
the case; or a custodian (as defined in the Bankruptcy Code) is appointed for,
or takes charge of, all or substantially all of the property of any Credit Party
or any of its
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Subsidiaries; or any Credit Party or any of its Subsidiaries commences any other
proceeding under any reorganization, arrangement, adjustment of debt, relief of
debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to any Credit Party or
any of its Subsidiaries; or there is commenced against any Credit Party or any
of its Subsidiaries any such proceeding which remains undismissed for a period
of 60 consecutive days; or any Credit Party or any of its Subsidiaries is
adjudicated insolvent or bankrupt; or any order of relief or other order
approving any such case or proceeding is entered and continues unstayed for a
period of 60 consecutive days; or any Credit Party or any of its Subsidiaries
suffers any appointment of any custodian or the like for it or any substantial
part of its property to continue undischarged or unstayed for a period of 60
consecutive days; or any Credit Party or any of its Subsidiaries makes a general
assignment for the benefit of creditors; or any corporate action is taken by any
Credit Party or any of its Subsidiaries for the purpose of effecting any of the
foregoing; or
8.06 ERISA.
(i) Any "reportable event" as described in Section 4043 of ERISA or
the regulations thereunder (excluding those events for which the requirement for
notice has been waived by regulation by the PBGC), or any other event or
condition, which the Required Banks determine constitutes reasonable grounds
under Section 4042 of ERISA for the termination of any Title IV Plan by the PBGC
or for the appointment by the appropriate United States District Court of a
trustee to administer or liquidate any Title IV Plan shall have occurred; or
(ii) A trustee shall be appointed by a United States
District Court to administer any Title IV Plan; or
(iii) The PBGC shall institute proceedings to terminate any Title IV
Plan or to appoint a trustee to administer any Title IV Plan; or
(iv) A Credit Party or any of its ERISA Affiliates shall become
liable to the PBGC or any other party under Section 4062, 4063, 4064 or 4069 of
ERISA with respect to any Title IV Plan; or
(v) A Credit Party or any of its ERISA Affiliates shall
become liable to any Multiemployer Plan under Section 4201 et seq.
of ERISA;
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if the sum of each of such Credit Party's and its ERISA Affiliates' various
liabilities (such liabilities to include, without limitation, any liability to
the PBGC or to any other party under Section 4062, 4063, 4064 or 4069 of ERISA
with respect to any Title IV Plan, or to any Multiemployer Plan under Section
4201 et seq. of ERISA) which the Required Banks determine could reasonably be
expected to be incurred as a result of such events listed in subclauses (i)
through (v) above exceeds $1,000,000; or
8.07 Security Documents. Any Security Document shall cease to be in
full force and effect, or shall cease to give the Collateral Agent the Liens,
rights, powers and privileges purported to be created thereby, in favor of the
Collateral Agent, superior to and prior to the rights of all third Persons and
subject to no Liens other than Prior Liens and Liens expressly permitted by the
applicable Security Document or any judgment creditor having a Lien against any
item of Collateral shall commence legal action to foreclose such Lien or
otherwise exercise its remedies against any item of Collateral; or
8.08 Guarantees. Any Guarantee or any provisions thereof shall cease
to be in full force or effect in all material respects, or the Guarantor
thereunder or Person acting by or on behalf of such Guarantor shall deny or
disaffirm such Guarantor's obligations under such Guarantee or the Guarantor
shall default in the due performance or observance of any term, covenant or
agreement on its part to be performed or observed pursuant to such Guarantee; or
8.09 Judgments. One or more judgments or decrees shall be entered
against any Credit Party or any of its Subsidiaries involving a liability of
$500,000 or more in the case of any one such judgment or decree or $1,000,000 or
more in the aggregate for all such judgments and decrees for all Credit Parties
and their Subsidiaries (in either case in excess of the amount covered by
insurance as to which the insurance company has acknowledged coverage) and any
such judgments or decrees shall not have been vacated, discharged, stayed or
bonded pending appeal for a period of 60 consecutive days from the entry
thereof; or
8.10 Ownership.
(i) Holdings shall own less than 100% (on a fully diluted basis) of
the issued and outstanding capital stock of the Borrower, other than securities
issued in the ordinary course of business under any stock option or other
benefit plan available to the employees or directors of the Borrower or any of
its
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Subsidiaries (each of clauses (i), (ii) and (iii) of this Section 8.10 a "Change
of Control Event"); or
(ii) (x) DNL Partners, Limited Partnership, together with the
DNLAffiliates, in the aggregate, cease to own or control at least more than 50%
of the Total Voting Power of Holdings, or (y) in the event that DNL Partners,
Limited Partnership distributes to its partners (pursuant to the terms of its
partnership agreement) all of the capital stock of Holdings owned by DNL
Partners, Limited Partnership, if, following such distribution, DNL Partners,
Limited Partnership, together with the DNL Affiliates, in the aggregate, cease
to own or control at least 33-1/3% of the Total Voting Power of Holdings;
provided that, for purposes of the calculations made pursuant to this paragraph
(ii) (I) in the event any shares of Class B Common Stock of Holdings are
converted into either shares of Class A Common Stock or Class C Common Stock of
Holdings (in any combination), then all such shares of Class A Common Stock
and/or Class C Common Stock issued upon such conversion shall be excluded and
(II) in the event shares of capital stock of Holdings are issued by Holdings as
consideration in whole or in part for the acquisition, directly or indirectly,
of another entity and the Aggregate Market Value of such shares of stock so
issued is more than $25,000,000, then all shares of capital stock of Holdings
issued in connection with such acquisition shall be excluded. For purposes of
the foregoing proviso the term "Aggregate Market Value" means (a) the average
closing price per share of the relevant class of Holdings capital stock during
the ten consecutive trading day period preceding the tenth trading day
immediately preceding the closing date of the acquisition transaction with
respect to which such shares are to be issued, times (b) the number of shares of
such class of capital stock issued by Holdings in such acquisition transaction.
The closing price for any day shall be the last reported sale price regular way
or, in case no such reported sale takes place on such day, the average of the
closing bid and asked prices regular way for such day, in each case (1) on The
New York Stock Exchange as reported on the NYSE composite tape as reported in
The Wall Street Journal or another newspaper of general circulation in the
Borough of Manhattan, City of New York, New York customarily published on each
business day or (2) if the relevant shares of capital stock are not listed on
The New York Stock Exchange, on the principal national securities exchange on
which the relevant shares of capital stock of Holdings are listed or to which
such shares are admitted to trading or (3) if the relevant shares of capital
stock are not listed or admitted to trading on a national securities exchange,
in the over-the-counter market as reported by NASDAQ or any comparable system or
(4) if the relevant shares of capital stock are not listed on NASDAQ or a
comparable system, or if for any other reason the current market price per
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share cannot be determined pursuant to the foregoing provisions of this
paragraph, the current market price per share shall be the fair market value
thereof as determined in good faith by the Board of Directors of the Company.
Then, and in any such event, and at any time thereafter, if any
Event of Default shall then be continuing, the Agent shall, upon the written
request of the Required Banks, by written notice to the Borrower, take any or
all of the following actions, without prejudice to the rights of the Agent or
any Bank to enforce its claims against the Borrower, except as otherwise
specifically provided for in this Agreement (provided that if an Event of
Default specified in Section 8.05 shall occur, with respect to any Credit Party,
the result which would occur upon the giving of written notice by the Agent as
specified in clauses (i) and (ii) below shall occur automatically without the
giving of any such notice): (i) declare the Total Commitments terminated,
whereupon the Commitment of each Bank shall forthwith terminate immediately and
any accrued and unpaid Commitment Commission shall forthwith become due and
payable without any other notice of any kind; (ii) declare the principal of and
accrued interest in respect of all Loans and all Obligations owing hereunder and
thereunder to be, whereupon the same shall become, forthwith due and payable
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by each Credit Party; and/or (iii) enforce, as Collateral
Agent (or direct the Collateral Agent to enforce), any or all of the remedies
created pursuant to the Security Documents. If an Event of Default is cured or
waived in accordance with the terms of the Agreement, it ceases (or is waived,
pursuant to the terms, and to the extent, of such waiver).
SECTION 9. Definitions. As used herein, the following terms shall
have the meanings herein specified unless the context otherwise requires.
Defined terms in this Agreement shall include in the singular number the plural
and in the plural the singular:
"A Term Loan" has the meaning provided in Section
1.01(a).
"A Term Loan Commitment" means, with respect to each Bank, the
amount set forth opposite such Bank's name on Annex I hereto directly below the
column entitled "Commitments -- A Term," as the same may be reduced from time to
time pursuant to Sections 2.01, 2.02, 3.02 and/or 8.
"A Term Loan Facility" means the Loan Facility evidenced
by the Total A Term Loan Commitments.
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"A Term Note" has the meaning provided in Section
1.05(a).
"Account" means all of the "accounts" of the Borrower and its
Subsidiaries (as that term is defined in Section 9-106 of the Uniform Commercial
Code as in effect in the State of New York) whether or not such Account has been
earned by performance, whether now existing or existing in the future,
including, without limitation, all (i) accounts receivable, including, without
limitation, all accounts created by or arising from all of the Borrower's and
its Subsidiaries' sales of goods or rendition of services or licensing or
subleasing of any of the Borrower's and its Subsidiaries' Intellectual Property;
(ii) unpaid seller's rights (including rescission, replevin, reclamation and
stopping in transit) relating to the foregoing or arising therefrom; (iii)
rights to any goods represented by any of the foregoing, including returned or
repossessed goods; (iv) reserves and credit balances held by the Borrower and
its Subsidiaries with respect to any such accounts receivable or any account
debtor; (v) guarantees or collateral for any of the foregoing; and (vi)
insurance policies or rights relating to any of the foregoing.
"Acquisition Corp." means DNL Savannah Acquisition Corp.,
a Delaware corporation and a Wholly Owned Subsidiary of Holdings
(now known as Carson Products Company).
"Additional Collateral" has the meaning provided in
Section 6.13.
"Additional Real Property" has the meaning provided in
Section 6.13.
"Affiliate" means with respect to any Person, any other Person
directly or indirectly controlling (including but not limited to all directors
and executive officers of such Person), controlled by, or under direct or
indirect common control with such Person; provided that neither Indosuez nor any
Affiliate of Indosuez shall be deemed to be an Affiliate of any Credit Party. A
Person shall be deemed to control a corporation for the purposes of this
definition if such Person possesses, directly or indirectly, the power (i) to
vote 10% or more of the securities having ordinary voting power for the election
of directors of such corporation or (ii) to direct or cause the direction of the
management and policies of such corporation, whether through the ownership of
voting securities, by contract or otherwise.
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"Agent" means Indosuez, or any successor thereto appointed in
accordance herewith, in its capacity as agent and collateral agent for the
Banks.
"Agent's Office" means the office of the Agent located at 1211
Avenue of the Americas, 7th Floor, New York, New York 10036, or such other
office in New York as the Agent may hereafter designate in writing as such to
the other parties hereto.
"Agreement" means this Credit Agreement, as the same may after its
execution be amended, supplemented or otherwise modified from time to time in
accordance with the terms hereof.
"Asset Sale" means the sale, transfer or other disposition, to the
extent consummated after the Closing Date, (x) by Holdings of the Securities of
the Borrower held by it to any Person or (y) by the Borrower or any Subsidiary
of the Borrower to any Person other than the Borrower or any Wholly Owned
Subsidiary of the Borrower of any asset of the Borrower or such Subsidiary
(other than, in each such case, (i) transactions included in the definition of
Net Financing Proceeds, (ii) the issuance of equity securities under any stock
option or other benefit plan available to the employees or directors of the
Borrower or any of its Subsidiaries, (iii) sales, transfers or other
dispositions of inventory in the ordinary course of business and/or of equipment
that has become worn out, obsolete or damaged or otherwise unsuitable or no
longer needed for use in connection with the business of the Borrower or any of
its Subsidiaries or should be replaced, as the case may be, in each case as
determined in good faith by the board of directors of the Borrower or its
Subsidiary, as the case may be, effected in compliance with Section 7.13A(iv) or
(v), and (iv) sales or other dispositions pursuant to Section 7.13A(v), (vi) or
(vii).
"Authorized Officer" means any senior officer of the Borrower or
Holdings, as the case may be, designated as such in writing to the Agent by the
Borrower or Holdings, as the case may be, to the extent reasonably acceptable to
the Agent.
"B Term Loan" has the meaning provided in Section
1.01(a).
"B Term Loan Commitment" means, with respect to each Bank, the
amount set forth opposite such Bank's name on Annex I hereto directly below the
column entitled "Commitments -- B Term" as the same may be reduced from time to
time pursuant to Sections 2.01, 2.02, 3.02 and/or 8.
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"B Term Loan Facility" means the Loan Facility evidenced
by the Total B Term Loan Commitments.
"B Term Note" has the meaning provided in Section
1.05(a).
"Bank" has the meaning provided in the first paragraph of
this Agreement and in Section 11.04.
"Bankruptcy Code" has the meaning provided in
Section 8.05.
"Base Rate" means the higher of (x) 1/2% per annum in excess of the
Federal Funds Rate and (y) the rate which the Agent announces from time to time
as its prime lending rate, as in effect from time to time. The rate the Agent
announces as its prime lending rate is a reference rate and does not necessarily
represent the lowest or best rate actually charged to any customer. The Agent
may make commercial loans or other loans at rates of interest at, above or below
the rate it announces as its prime lending rate.
"Base Rate Loan" means each Loan bearing interest based on the Base
Rate as provided in Section 1.08(a).
"Borrower" means Carson Products Company, a Delaware
corporation.
"Borrower General Security Agreement" means the Borrower General
Security Agreement substantially in the form of Exhibit H hereto, except for
such changes therein as shall have been approved by the Agent and the Required
Banks, as the same may after its execution be amended, supplemented or otherwise
modified from time to time in accordance with the terms thereof and hereof.
"Borrower Intellectual Property Security Agreement" means the
Borrower Intellectual Property Security Agreement substantially in the form of
Exhibit G hereto, except for such changes therein as shall have been approved by
the Agent and the Required Banks, as the same may after its execution be
amended, supplemented or otherwise modified from time to time in accordance with
the terms thereof and hereof.
"Borrower Pledge Agreement" means the Borrower Securities Pledge
Agreement substantially in the form of Exhibit F-1 hereto, except for such
changes therein as shall have been approved by the Agent and the Required Banks,
as the same may after its execution be amended, supplemented or otherwise
modified from time to time in accordance with the terms thereof and hereof.
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"Borrowing" means the incurrence pursuant to a Notice of Borrowing
and the Loan Facility of one Type of Loan by a Borrower from all of the Banks on
a pro rata basis on a given date (or resulting from conversions on a given
date), having in the case of Reserve Adjusted Eurodollar Loans the same Interest
Periods.
"Borrowing Base" means an amount equal to the sum of (i) 80% of the
Eligible Accounts Receivable and (ii) 50% of the Eligible Inventory.
"Borrowing Base Certificate" has the meaning assigned to
that term in Section 6.01.
"Business Day" means (i) for all purposes other than as covered by
clause (ii) below, any day excluding Saturday, Sunday and any day which shall be
in The City of New York or Savannah, Georgia a legal holiday or a day on which
banking institutions are authorized by law or other governmental actions to
close and (ii) with respect to all notices and determinations in connection
with, and payments of principal and interest on, Reserve Adjusted Eurodollar
Loans, any day which is a Business Day described in clause (i) and which is also
a day for trading by and between banks in Dollar deposits in the interbank
eurodollar market.
"Capital Lease" of any Person means any lease of any property
(whether real, personal or mixed) by that Person as lessee which, in conformity
with GAAP, is, or is required to be, accounted for as a capital lease on the
balance sheet of that Person, together with any renewals of such leases (or
entry into new leases) on substantially similar terms.
"Capitalized Lease Obligations" of any Person means all obligations
under Capital Leases of such Person or any of its Subsidiaries in each case
taken at the amount thereof accounted for as liabilities in accordance with
GAAP.
"Carson Holdings Limited" means a South African
subsidiary of the Borrower.
"Carson Holdings Limited Share Incentive Trust" means the trust
pursuant to which certain additional shares of common stock of Carson Holdings
Limited may be issued from time to time.
"Cash" means money, currency or a credit balance in a
Deposit Account.
"Cash Equivalents" means (i) securities issued or
directly and fully guaranteed or insured by the United States of
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America or any agency or instrumentality thereof (provided that the full faith
and credit of the United States of America is pledged in support thereof) having
maturities of not more than one year from the date of acquisition, (ii)
marketable direct obligations issued by any State of the United States of
America or any local government or other political subdivision thereof rated (at
the time of acquisition of such security) at least AA by Standard & Poor's
Ratings Group ("S&P") or the equivalent thereof by Moody's Investors Service,
Inc. ("Moody's") having maturities of not more than one year from the date of
acquisition, (iii) U.S. dollar denominated time deposits, certificates of
deposit and bankers' acceptances of (x) any Bank, (y) any domestic commercial
bank of recognized standing having capital and surplus in excess of $250,000,000
or (z) any bank whose short-term commercial paper rating (at the time of
acquisition of such security) by S&P is at least A-1 or the equivalent thereof
or by Moody's is at least P-1 or the equivalent thereof (any such bank, an
"Approved Bank"), in each case with maturities of not more than six months from
the date of acquisition, (iv) commercial paper and variable or fixed rate notes
issued by any Bank or Approved Bank or by the parent company of any Bank or
Approved Bank and commercial paper and variable rate notes issued by, or
guaranteed by, any industrial or financial company with a short-term commercial
paper rating (at the time of acquisition of such security) of at least A-1 or
the equivalent thereof by S&P or at least P-1 or the equivalent thereof by
Moody's, or guaranteed by any industrial company with a long-term unsecured debt
rating (at the time of acquisition of such security) of at least AA or the
equivalent thereof by S&P or the equivalent thereof by Moody's and in each case
maturing within one year after the date of acquisition, (v) repurchase
agreements with any Bank or any primary dealer in U.S. government securities
maturing within one year from the date of acquisition that are fully
collateralized by investment instruments that would otherwise be Cash
Equivalents; provided that the terms of such repurchase agreements comply with
the guidelines set forth in the Federal Financial Institutions Examination
Council Supervisory Policy -- Repurchase Agreements of Depository Institutions
With Securities Dealers and Others, as adopted by the Comptroller of the
Currency on October 31, 1985, and (vi) investments in money market mutual funds,
all of the assets of which are invested in securities and instruments of the
types set forth in clauses (i) through (iv) above.
"Certificate of Incorporation" means the respective
certificates of incorporation of Holdings or the Borrower.
"Change of Control" has the meaning assigned to that term
in Section 8.10.
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"Closing Date" means the date on or before October 18, 1996 on which
the Initial Loans are made and the consummation of the Holdings IPO occurs.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Collateral" means all of the Pledged Collateral, Pledged Securities
and Mortgaged Real Property and all Additional Collateral and Additional Real
Property to the extent not otherwise included in any of the foregoing.
"Collateral Agent" means Indosuez in its capacity as
collateral agent for the Banks.
"Collective Bargaining Agreement" means the Collective
Bargaining Agreement set forth in Annex V.
"Commercial Letter of Credit" means any letter of credit or similar
instrument issued for the account of the Borrower for the purpose of providing
the primary payment mechanism in connection with the purchase of any materials,
goods or services by the Borrower or any of its Subsidiaries in the ordinary
course of business of the Borrower or such Subsidiaries.
"Commitment" means, with respect to each Bank, such
Bank's A Term Loan Commitment, B Term Loan Commitment and Revolving Loan
Commitment.
"Commitment Commission" has the meaning provided in
Section 2.03.
"Compliance Certificate" means a certificate issued pursuant to
Section 6.01(f) signed by a chief financial officer, controller, chief
accounting officer or other Authorized Officer of the Borrower.
"Consolidated Amortization Expense" for any Person means, for any
period, the consolidated amortization expense of such Person for such period
(including amortization of any step-up in value of Inventory or other assets as
may be required by purchase accounting), determined on a consolidated basis for
such Person and its Subsidiaries in conformity with GAAP.
"Consolidated Capital Expenditures" of any Person means, for any
period, the aggregate gross increase during that period, in the property, plant
or equipment reflected in the consolidated balance sheet of such Person and its
consolidated Subsidiaries, in
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conformity with GAAP, but excluding expenditures made in connection with the
replacement, substitution or restoration of assets (i) to the extent financed
from insurance proceeds paid on account of the loss of or damage to the assets
being replaced or restored, (ii) with awards of compensation arising from the
taking by eminent domain or condemnation of the assets being replaced or (iii)
with regard to equipment that is purchased simultaneously with the trade-in of
existing equipment, fixed assets or improvements, the credit granted by the
seller of such equipment for the trade-in of such equipment, fixed assets or
improvements; provided that Consolidated Capital Expenditures shall in any event
include the purchase price paid in connection with the acquisition of any other
Person (including through the purchase of all of the capital stock or other
ownership interests of such Person or through merger or consolidation) to the
extent allocable to property, plant and equipment.
"Consolidated Compensation Expense" for any Person means, for any
period, the consolidated compensation expense incurred by such Person during
such period (x) in connection with long-term incentive compensation arrangements
entered into by such Person or any of its consolidated Subsidiaries with
officers and employees of such Person or any consolidated Subsidiary of such
Person prior to the consummation of the Holdings IPO and (y) in connection with
issuances of shares of the capital stock of such Person or any of its
consolidated Subsidiaries to directors, officers and/or employees of such Person
or any of its consolidated Subsidiaries prior to the consummation of the
Holdings IPO, in each such case determined on a consolidated basis for such
Person and its consolidated Subsidiaries in conformity with GAAP.
"Consolidated Current Assets" means, with respect to any Person as
at any date of determination, the total assets of such Person and its
consolidated Subsidiaries which may properly be classified as current assets on
a consolidated balance sheet of such Person and its Subsidiaries (provided that
with respect to the Borrower, there shall be added to such amount the amount of
LIFO reserve as reflected in the then most recent consolidated financial
statements of the Borrower delivered by the Borrower pursuant to Section
6.01(a), (b) and (c)), all as determined on a consolidated basis for such Person
and its consolidated Subsidiaries in accordance with GAAP.
"Consolidated Current Liabilities" means, with respect to any Person
as at any date of determination, the total liabilities of such Person and its
consolidated Subsidiaries which may properly be classified as current
liabilities (other than the current portion of any Loans and of any Existing
Indebtedness) on a
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consolidated balance sheet of such Person and its consolidated Subsidiaries in
accordance with GAAP.
"Consolidated Depreciation Expense" for any Person means, for any
period, the consolidated depreciation expense of such Person for such period,
determined on a consolidated basis for such Person and its consolidated
Subsidiaries in conformity with GAAP.
"Consolidated EBITDA" for any Person means, for any period, the
difference between (A) the sum of the amounts for such period of (i)
Consolidated Net Income, (ii) Consolidated Interest Expense, (iii) Consolidated
Tax Expense, (iv) Consolidated Depreciation Expense, (v) Consolidated
Compensation Expense and (vi) Consolidated Amortization Expense less (B) the sum
of the amounts for such period of (i) interest income, (ii) net gains on sales
of assets to the extent included in Consolidated Net Income, whether or not
extraordinary (excluding sales in the ordinary course of business) and other
extraordinary gains, as adjusted for the impact of the application of the
last-in, first-out (LIFO) method of valuing inventory (to the extent such
adjustments are non-Cash), which adjustment is made by (x) adding to the sum in
clause (A) above the amount of LIFO provision for such period, if any, which had
the effect of decreasing the Consolidated Net Income of the Borrower and its
Subsidiaries for such period or (y) adding to the sum in clause (B) above the
amount of LIFO recovery for such period, if any, which had the effect of
increasing the Consolidated Net Income of the Borrower and its Subsidiaries for
such period, and (iii) for the Borrower only, non-cash compensation expense
related to and in connection with the chief executive officer's Employment
Agreement, all as determined on a consolidated basis for such Person and its
consolidated Subsidiaries in accordance with GAAP.
"Consolidated EBITDAC" for any Person means, for any period,
Consolidated EBITDA for such period minus Consolidated Capital Expenditures for
such period.
"Consolidated Interest Expense" for any Person means, for any
period, the sum of (x) total interest expense (including that attributable to
Capital Leases in accordance with GAAP) and (y) total cash dividends paid on any
preferred stock, in each case of such Person and its Subsidiaries on a
consolidated basis with respect to all outstanding Indebtedness and preferred
stock of such Person and its Subsidiaries, including, without limitation, all
commissions, discounts and other fees and charges owed with respect to letters
of credit and bankers' acceptance financing, but excluding, however, any
amortization of deferred financing costs, all as determined on a consolidated
basis for such Person and its
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consolidated Subsidiaries in accordance with GAAP. For purposes of clause (y)
above, dividend requirements shall be increased to an amount representing the
pretax earnings that would be required to cover such dividend requirements;
accordingly, the increased amount shall be equal to such dividend requirements
multiplied by a fraction, the numerator of which is such dividend requirement
and the denominator of which is 1 minus the applicable actual combined Federal,
state, local and foreign income tax rate of such Person and its subsidiaries
(expressed as a decimal), on a consolidated basis, for the fiscal year
immediately preceding the date of the transaction giving rise to the need to
calculate Consolidated Interest Expense.
"Consolidated Net Income" for any Person means, for any period, the
net income (or loss) of such Person and its Subsidiaries on a consolidated basis
for such period taken as a single accounting period determined on a consolidated
basis for such Person and its consolidated Subsidiaries in conformity with GAAP;
provided that there shall be excluded (i) the income (or loss) of any other
Person (other than consolidated Subsidiaries of such Person) in which any third
Person (other than such Person or any of its consolidated Subsidiaries) has a
joint interest, except to the extent of the amount of dividends or other
distributions actually paid to such Person or any of its Subsidiaries by such
other Person during such period, (ii) the income (or loss) of any other Person
accrued prior to the date it becomes a consolidated Subsidiary of such Person or
is merged into or consolidated with such Person or any of its consolidated
Subsidiaries or such other Person's assets are acquired by such Person or any of
its consolidated Subsidiaries, and (iii) the income of any consolidated
Subsidiary of such Person to the extent that the declaration or payment of
dividends or similar distributions by that consolidated Subsidiary of that
income is not at the time permitted by operation of the terms of its charter or
any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that consolidated Subsidiary.
"Consolidated Tax Expense" for any Person means, for any period, the
consolidated tax expense of such Person for such period, determined on a
consolidated basis for such Person and its consolidated Subsidiaries in
conformity with GAAP.
"Contingent Obligations" means, as to any Person, without
duplication, any obligation of such Person guaranteeing or intended to guarantee
any Indebtedness, leases, dividends or other obligations ("primary obligations")
of any other Person (the "primary obligor") in any manner, whether directly or
indirectly, including, without limitation, any obligation of such Person,
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whether or not contingent, (a) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (b) to advance or
supply funds (i) for the purchase or payment of any such primary obligation or
(ii) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor, (c) 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 (d) otherwise to assure or hold
harmless the owner of such primary obligation against loss in respect thereof;
provided, however, that the term Contingent Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary course of
business and amounts that are permitted by Section 7.14. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the maximum
amount that such Person may be obligated to expend pursuant to the terms of such
Contingent Obligation or, if such Contingent Obligation is not so limited, 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
reasonably anticipated liability in respect thereof (assuming such Person is
required to perform thereunder) as determined by such Person in good faith.
"Credit Documents" means (i) this Agreement, (ii) each Note, (iii)
each Guarantee and (iv) each Security Document.
"Credit Party" means at all times Holdings and the Borrower and each
Subsidiary of the Borrower that pledges any stock, grants any Lien or issues any
Guarantee pursuant to any Credit Document.
"Default" means any event, act or condition which with notice or
lapse of time, or both, would constitute an Event of Default.
"Destruction" has the meaning assigned to that term in
each Mortgage.
"Dividends" has the meaning provided in Section 7.07.
"DNL Affiliates" means Vincent A. Wasik, S. Garrett
Stonehouse, Lawrence E. Bathgate, II and Morningside, in each case
together with Affiliates thereof, any member of the immediate
family of any of the foregoing, or any trust or foundation for the
benefit of any of the foregoing.
"Dollars" means United States Dollars.
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"Effective Date" has the meaning provided in
Section 11.10.
"Eligible Accounts Receivable" means, as at any applicable date of
determination, the aggregate face amount of the Borrower's and its Subsidiaries'
Accounts included in clause (i) of the definition of Account hereunder
(excluding any Accounts set forth in clauses (ii) through (vi) of such
definition), without duplication, in each case less (without duplication) the
aggregate amount of all reserves, limits and deductions with respect to such
Accounts set forth below and less the aggregate amount of all returns,
discounts, claims, rebates, offsets, credits, charges (including warehouseman's
charges) and allowances of any nature with respect to such Accounts (whether
issued, owing, granted or outstanding). Unless otherwise approved in writing by
the Agent in its sole discretion, no individual Account shall be deemed to be an
Eligible Account Receivable if:
(a) the Borrower or its Subsidiary does not have legal
and valid title to the Account; or
(b) the Account is not the valid, binding and legally enforceable
obligation of the account debtor subject, as to enforceability, only to
(i) applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws at the time in effect affecting the enforceability of
creditors' rights generally and (ii) judicial discretion in connection
with the remedy of specific performance and other equitable remedies; or
(c) the Account arises out of a sale made by the
Borrower to an Affiliate of the Borrower; or
(d) the Account or any portion thereof is unpaid more than 90 days
after the original invoice date, with respect to Accounts the invoice for
which provides that payment is due in 60 days or less from the date of
such invoice; or
(e) the Account is unpaid more than 30 days after the original
payment due date, with respect to Accounts the invoice for which provides
that payment is due more than 60 days from the date of such invoice;
provided, however, that the aggregate amount of all invoices providing for
payment more than 60 days from the date of the invoice that may constitute
Eligible Accounts Receivable shall not exceed 7 1/2% in face value of all
Accounts of the Borrower and its Subsidiaries then outstanding at any one
time; or
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(f) such Account, when aggregated with all other Accounts of the
same account debtor (or any Affiliate thereof), exceeds twenty percent in
face value of all Accounts of the Borrower and its Subsidiaries then
outstanding, to the extent of such excess; or
(g) (i) the account debtor for such Account is also a creditor of
the Borrower, to the extent of the amount owed by the Borrower to the
account debtor, (ii) the Account is subject to any claim on the part of
the account debtor disputing liability under such Account in whole or in
part, to the extent of the amount of such dispute or (iii) the Account
otherwise is or is reasonably likely to become subject to any right of
setoff or any counterclaim, claim or defense by the account debtor, to the
extent of the amount of such setoff or counterclaim, claim or defense; or
(h) the account debtor for such Account has commenced a voluntary
case under the federal bankruptcy laws, as now constituted or hereafter
amended, or made an assignment for the benefit of creditors or if a decree
or order for relief has been entered by a court having jurisdiction in the
premises in respect of the account debtor in an involuntary case under the
federal bankruptcy laws, as now constituted or hereafter amended, or if
any other petition or other application for relief under the federal
bankruptcy laws has been filed by or against the account debtor, or if the
account debtor has failed, suspended business, ceased to be solvent, or
consented to or suffered a receiver, trustee, liquidator or custodian to
be appointed for it or for all or a significant portion of its assets or
affairs; or
(i) the Agent does not have a valid and perfected first priority
security interest in such Account (subject only to a tax lien being
contested in good faith and by appropriate proceedings and permitted by
Section 7.03(a)); or
(j) the sale to the account debtor for such Account is on a
consignment, sale on approval, guaranteed sale or sale-and-return basis or
pursuant to any written agreement requiring repurchase or return (other
than return arrangements in the ordinary course of business consistent
with the past business practices of the Borrower); or
(k) such Account is from an account debtor (or any Affiliate
thereof) and fifty percent (50%) or more, in face amount, of other
Accounts from either such account debtor or
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any Affiliate thereof are due or unpaid for more than 90 days
after the original invoice date; or
(l) fifty percent (50%) or more, in face amount, of other Accounts
from the same account debtor for such Account are not deemed Eligible
Accounts Receivable hereunder; or
(m) the account debtor for such Account is a foreign
Governmental Authority; or
(n) such Account is an Account a security interest in which would be
subject to the Federal Assignment of Claims Act of 1940, as amended (31
U.S.C. ss. 3727 et seq.), unless (i) such Account, together with all other
Eligible Accounts a security interest in which would be subject to such
Act, does not exceed 7 1/2% in face value of all Eligible Accounts of the
Borrower and its Subsidiaries then outstanding, or (ii) the Borrower has
assigned the Account to the Agent in compliance with the provisions of
such Act; or
(o) the account debtor for such Account is outside the United States
or Canada or incorporated in or conducting substantially all of its
business in any jurisdiction located outside the United States, unless the
sale is (i) on letter of credit or sight draft, guaranty or acceptance
terms, consistent with past business practices of the Borrower, not to
exceed 5% in face value of all Eligible Accounts of the Borrower and its
Subsidiaries then outstanding or (ii) such Account is otherwise approved
by and reasonably acceptable to the Agent; or
(p) the Agent determines in good faith in accordance with its
internal credit policies that such Account may not be paid by reason of
the account debtor's financial inability to pay; provided, however, that
any Account referred to in this clause (p) shall not become ineligible
until the Agent shall have given the Borrower five Business Days' advance
notice of such determination; or
(q) the goods giving rise to such Account have not been shipped or
the services giving rise to such Account have not been performed by the
Borrower or the Account otherwise does not represent a final sale; or
(r) such Account does not comply in all material respects with all
applicable legal requirements, including, where applicable, the Federal
Consumer Credit Protection Act, the Federal Truth in Lending Act and
Regulation Z of the Board
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of Governors of the Federal Reserve System, in each case as
amended.
In addition to the foregoing, Eligible Accounts Receivable includes
such Accounts as the Borrower requests and that the Agent approves in advance,
in writing and in its sole discretion (or if the aggregate face amount to be
approved exceeds $750,000 at any one time, the approval of the Required Banks
has been obtained in writing).
"Eligible Assignee" means (i) a commercial bank organized under the
laws of the United States, or any State thereof, and having total assets in
excess of $500,000,000; (ii) a savings and loan association or savings bank
organized under the laws of the United States, or any State thereof, and having
total assets in excess of $250,000,000; (iii) a finance company, insurance
company or other financial institution organized under the laws of the United
States, or any State thereof, that is engaged in purchasing or otherwise
investing in commercial loans in the ordinary course of business, having total
assets in excess of $100,000,000; or (iv) an entity managed by a Bank or
Affiliate of a Bank; provided that the Commitment held by such entity is less
than $20,000,000; and, in each such case, which is otherwise reasonably
acceptable to the Borrower.
"Eligible Inventory" means (A) the gross amount of Inventory of the
Borrower and its Subsidiaries, valued at the lower of cost (on a FIFO basis) or
market, which (i) is owned solely by the Borrower or its Subsidiary and with
respect to which the Borrower or its Subsidiary has good, valid and marketable
title; (ii) is stored on property that is either (a) owned or leased by the
Borrower or its Subsidiary or (b) owned or leased by a warehouseman that has
contracted with the Borrower or its Subsidiary to store Inventory on such
warehouseman's property (provided that, with respect to Inventory contracted to
be stored on property leased by the Borrower or its Subsidiary, the Borrower or
its Subsidiary shall deliver to the Agent immediately following the execution of
such storage contract a Landlord Lien Assurance and, with respect to the
Inventory stored on property owned or leased by a warehouseman, the Borrower or
its Subsidiary shall deliver to the Agent acknowledgment agreements executed by
such warehouseman); (iii) is subject to a valid, enforceable and first priority
Lien in favor of the Agent (subject to a tax lien being contested in good faith
and by appropriate proceedings and permitted by Section 7.03(a), and except with
respect to Eligible Inventory stored at sites described in clause (ii)(b) above,
for Liens for normal and customary warehouseman charges); (iv) is located in the
United States; and (v) is not, in the reasonable
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judgment of the Agent, obsolete or slow moving in relation to customary industry
practice, and which otherwise conforms to the requirements for eligibility
contained in clauses (i) - (iv) hereof; (B) less the amount of any goods
returned or rejected by the Borrower's or its Subsidiaries' customers and goods
in transit to third parties (other than to the Borrower's or its Subsidiaries'
agents or warehousemen that comply with clause (A)(ii)(b) above); and (C) less
the amount of any reserves for special order goods and market value declines in
accordance with GAAP. In addition to the foregoing, Eligible Inventory shall
include such items of the Borrower's and its Subsidiaries' Inventory as the
Borrower shall request and that the Agent approves in advance, in writing and in
its sole discretion (or if the aggregate amount to be approved exceeds $500,000
at any one time, the approval of the Required Banks has been obtained).
"Employment Agreements" means the employment agreements between the
Borrower and (i) Joyce Roche, dated as of June 7, 1995, as amended, (ii) Dennis
E. Smith, dated as of June 7, 1995, as amended, and (iii) Dr. Leroy Keith dated
as of August 23, 1995, as amended.
"Environment" shall mean any surface water, ground water, drinking
water supply, land surface or subsurface strata or ambient air and includes,
without limitation, any indoor location.
"Environmental Authorizations" has the meaning provided
in Section 5.22.
"Environmental Laws" shall mean all federal, state, local and
foreign laws, codes, regulations, ordinances, requirements, directives, orders,
common law, and administrative or judicial interpretations thereof that may be
enforced by any Governmental Authority or court, relating to pollution, the
protection of human health, the protection of the Environment, or the emission,
discharge, disposal or other release or threatened release of Hazardous
Materials in or into the Environment.
"Environmental Notice" shall mean any written notice or claim by any
Governmental Authority or other third party alleging liability (including,
without limitation, potential liability for investigatory costs, cleanup costs,
governmental costs, compliance costs or harm, injuries or damages to any person,
property or natural resources, or any fines or penalties) arising out of, based
upon, resulting from or relating to any Environmental Law.
"ERISA" means the Employee Retirement Income Security Act
of 1974, as amended from time to time. Section references to ERISA
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are to ERISA, as in effect at the date of this Agreement and any subsequent
provisions of ERISA, amendatory thereof, supplemental thereto or substituted
therefor.
"ERISA Affiliate" means any entity, whether or not incorporated,
which is under common control or would be considered a single employer with a
Credit Party within the meaning of Section 414(b), (c) or (m) of the Code and
regulations promulgated under those sections or within the meaning of section
4001(b) of ERISA and regulations promulgated under that section.
"Eurodollar Rate" means with respect to each Interest Period for a
Reserve Adjusted Eurodollar Loan, (i) the arithmetic average (rounded to the
nearest 1/100 of 1%) of the offered quotation to leading banks in the interbank
Eurodollar market by each of the Reference Banks for dollar deposits in such
Reference Bank of amounts in same day funds comparable to the outstanding
principal amount of the Reserve Adjusted Eurodollar Loan for which an interest
rate is then being determined with maturities comparable to the Interest Period
to be applicable to such Eurodollar Loan, determined as of 10:00 A.M. (New York
time) on the date which is two Business Days prior to the commencement of such
Interest Period divided (and rounded upward to the next whole multiple of 1/16
of 1%) by (ii) a percentage equal to 100% minus the then stated maximum rate of
all reserve requirements (including, without limitation, any marginal,
emergency, supplemental, special or other reserves) applicable to any member
bank of the Federal Reserve System in respect of Eurocurrency liabilities as
defined in Regulation D (or any successor category of liabilities under
Regulation D); provided that if any Reference Bank fails to provide the Agent
with its aforesaid rate, then the Eurodollar Rate shall be determined based on
the rate or rates provided to the Agent by a bank designated by the Required
Banks and reasonably approved by the Borrower.
"Event of Default" has the meaning provided in Section 8.
"Excess Cash Flow" means, without duplication, for any Person for
any period for which such amount is being determined, (i) Consolidated Net
Income, minus (ii) any amount which is both (x) included in Consolidated Net
Income and (y) required to be applied to the prepayment of the Loans pursuant to
Section 3.02(A), plus (minus) (iii) the amount of depreciation, depletion,
amortization of intangibles, deferred taxes and other non-cash expenses
(revenues) which, pursuant to GAAP, were deducted (added) in determining such
Consolidated Net Income of such Person minus (plus) (iv) additions (reductions)
to working capital for such period (i.e., the increase or decrease in
Consolidated Current
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Assets (excluding Cash or Cash Equivalents which are either Net Cash Proceeds or
Net Financing Proceeds required to be applied to the prepayment of the Loans
pursuant to Section 3.02(A)(e) of such Person from the beginning to the end of
such period) of such Person minus the increase or decrease in Consolidated
Current Liabilities) minus (v) the amount of Consolidated Capital Expenditures
that are paid other than from the proceeds of borrowings in such period minus
(vi) Scheduled A Term Loans Principal Payments, Scheduled B Term Loans Principal
Payments and voluntary prepayments of Loans not subject to reborrowing made
during such period. For purposes of the foregoing and without duplication,
Consolidated Net Income will exclude (x) all net losses on the sale of capital
assets or out of the ordinary course of business and (y) all write-downs of
capital assets.
"Exchange Act" means the Securities Exchange Act of 1934,
as amended.
"Existing Debt" means the Indebtedness of the Borrower
and its Subsidiaries set forth on Annex III.
"Existing Leases" means the Leases of the Borrower and
its Subsidiaries set forth on Annex XV.
"Federal Funds Rate" means on any one day the weighted average of
the rate on overnight Federal funds transactions with members of the Federal
Reserve System only arranged by Federal funds brokers as published as of such
day by the Federal Reserve Bank of New York, or if not so published, the rate
then used by leading banks in extending overnight loans to other leading banks.
"Final A Term Loan Maturity Date" means the last Business
Day of September, 2002.
"Final B Term Loan Maturity Date" means the last Business
Day of September, 2003.
"Final Revolving Loan Maturity Date" means the last
Business Day of September, 2002.
"Financing Proceeds" means the cash (other than Net Cash Proceeds or
proceeds of any sale, transfer or other disposition of assets excluded from the
definition of "Asset Sale" by the exceptions contained therein) received by the
Borrower and/or any of its Subsidiaries, directly or indirectly, from any
financing transaction of whatever kind or nature, including without limitation
from any incurrence of Indebtedness, any mortgage or pledge of an asset or
interest therein (including a transaction
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which is the substantial equivalent of a mortgage or pledge), from the sale of
tax benefits, from a lease to a third party and a pledge of the lease payments
due thereunder to secure Indebtedness, from a joint venture arrangement, from an
exchange of assets and a sale of the assets received in such exchange, or any
other similar arrangement or technique whereby the Borrower or any of its
Subsidiaries obtains Cash in respect of an asset, net of direct costs associated
therewith. Financing Proceeds shall not include any amounts with respect to (i)
the incurrence or refinancing of the Total Revolving Loan Commitment, (ii) the
incurrence or refinancing of Indebtedness permitted by Sections 7.04(a), (b),
(c) and (d) effected in accordance with the applicable provisions of such
Sections, or (iii) transactions between any of the Borrower, Holdings and any
Wholly Owned Subsidiaries of the Borrower.
"Fine Products" has the meaning set forth in Section 5.24
hereof.
"FIRREA" means the Financial Institutions Reform, Recovery &
Enforcement Act of 1989, as amended from time to time, and any successor
statute.
"Foreign Bank" has the meaning provided in Section
3.04(c).
"GAAP" means generally accepted accounting principles in the United
States of America as in effect on the Effective Date, it being understood and
agreed that determinations in accordance with GAAP for purposes of Sections 5,
6, 7 and 8 and all defined terms as used in this Agreement, are subject (to the
extent provided therein) to Section 11.07(a).
"General Security Agreements" means and includes the Borrower
General Security Agreement and any other general security agreements delivered
pursuant to Section 6.13 or 6.14.
"Government Acts" has the meaning provided in Section
1.13(I).
"Governmental Authority" means any federal, state, local, foreign or
other governmental or administrative (including self-regulatory) body,
instrumentality, department or agency or any court, tribunal, administrative
hearing body, arbitration panel, commission, or other similar dispute-resolving
panel or body including, without limitation, those governing the regulation and
protection of the Environment, whether now or hereafter in existence, or any
officer or official thereof.
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"Guarantee" means and includes, once executed and delivered, each of
the Holdings Guarantee and each Subsidiary Guarantee.
"Guarantor" for purposes of this Agreement means, individually, each
of Holdings and each Subsidiary which executes a Subsidiary Guarantee.
"Hazardous Materials" means all pollutants, contaminants, or
chemical, industrial, hazardous or toxic materials, substances, constituents or
wastes, including, without limitation, asbestos or asbestos-containing
materials, polychlorinated biphenyls and petroleum, oil, or petroleum or oil
products, derivatives or constituents, including, without limitation, crude oil
or any fraction thereof.
"Holdings" means Carson, Inc., a Delaware corporation (formerly
known as DNL Savannah Holding Corp.).
"Holdings Guarantee" means the Holdings Guarantee substantially in
the form of Exhibit E hereto, except for such changes as shall have been
approved by the Agent and the Required Banks, as the same may after its
execution be amended, supplemented or otherwise modified from time to time in
accordance with the terms thereof and hereof.
"Holdings IPO" has the meaning set forth in the recitals
hereto.
"Holdings Pledge Agreement" means the Holdings Securities Pledge
Agreement substantially in the form of Exhibit F-2 hereto, except for such
changes therein as shall have been approved by the Agent and the Required Banks,
as the same may after its execution be amended, supplemented or otherwise
modified from time to time in accordance with the terms thereof and hereof.
"Indebtedness" of any Person means, without duplication, (i) all
indebtedness of such Person for borrowed money, (ii) the deferred purchase price
of assets or services which in accordance with GAAP would be shown on the
liability side of the balance sheet of such Person, other than current
liabilities in respect of the foregoing, liabilities for accumulated
postretirement benefit obligations and liabilities for deferred compensation,
(iii) the face amount of all letters of credit issued for the account of such
Person and, without duplication, all drafts drawn and unpaid thereunder, (iv)
all Indebtedness of a second Person secured by any Lien on any property owned by
such first Person, whether or not such Indebtedness has been assumed by such
first Person, (v) all
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Capitalized Lease Obligations of such Person, (vi) all obligations of such
Person to pay a specified purchase price for goods or services whether or not
delivered or accepted, i.e., take-or-pay and similar obligations, (vii) all
obligations of such Person under Interest Rate Agreements and (viii) all
Contingent Obligations of such Person; provided that Indebtedness shall not
include trade payables, accrued expenses, accrued dividends and accrued income
taxes, in each case arising in the ordinary course of business.
"Indosuez" means Banque Indosuez, New York Branch.
"Initial Bank" means a Bank that was an original
signatory to this Agreement.
"Initial Loans" means the initial Loans made under this Agreement on
the Closing Date.
"Intellectual Property" has the meaning provided in
Section 5.16.
"Intellectual Property Security Agreements" means and includes the
Borrower Intellectual Property Security Agreement and any other intellectual
property security agreements delivered pursuant to Section 6.13 or 6.14.
"Interest Margin" means, for the Portion and Type of
Loan, the following:
Base Rate Reserve Adjusted
Loans Eurodollar Loans
A Term Loan 0.50% 2.00%
B Term Loan 1.00% 2.50%
Revolving Loans 0.50% 2.00%
"Interest Period" means, with respect to any Reserve Adjusted
Eurodollar Loan, the interest period applicable thereto, as determined pursuant
to Section 1.09.
"Interest Rate Agreement" means any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement, interest rate
futures contract, interest rate option contract or other similar agreement or
arrangement to which the Borrower is a party, designed to protect the Borrower
or any of its Subsidiaries against fluctuations in interest rates.
"Interest Rate Determination Date" means each date for
calculating the Eurodollar Rate for purposes of determining the
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interest rate in respect of an Interest Period. The Interest Rate Determination
Date shall be the second Business Day prior to the first day of the related
Interest Period for a Reserve Adjusted Eurodollar Loan.
"Inventory" means all of the inventory of the Borrower and its
Subsidiaries (on a consolidated basis) including without limitation: (i) all raw
materials, work in process, parts, components, assemblies, supplies and
materials used or consumed in the business of the Borrower and its Subsidiaries;
(ii) all goods, wares and merchandise, finished or unfinished, held for sale or
lease or leased or furnished or to be furnished under contracts of service; and
(iii) all goods returned or repossessed by the Borrower or any of its
Subsidiaries.
"Issuing Bank" means the Bank that agrees or is otherwise obligated
to issue a Letter of Credit, determined as provided in Section 1.13(C).
"Junior Subordinated Notes" means, collectively, the $11,753,000
aggregate original principal amount of Junior Subordinated Promissory Notes
issued by Acquisition Corp. on August 23, 1995 as such notes may have been
extended pursuant to the terms of the Junior Subordinated Note Agreement.
"Junior Subordinated Note Agreement" means the Junior
Subordinated Note Agreement by and between Acquisition Corp. and
Abram Minis, Jr., Henry A. Minis, Marguerite M. Trethewey and the
Minis Family Trustees, dated August 23, 1995, as amended.
"Landlord Lien Assurance" means, with respect to any Real Property
leased by the Borrower or any of its Subsidiaries for use as a retail facility
or for the storage of Inventory, either (i) an agreement executed by the
landlord of such Real Property substantially in the form of Exhibit O hereto or
(ii) a legal opinion or other evidence, in each case reasonably satisfactory to
the Agent, that the laws of the jurisdiction or jurisdictions applicable to the
lease and the retail or storage facility do not give rise to any Lien in favor
of the landlord with respect to Inventory located at such facility.
"Lease" means any lease, sublease, franchise agreement, license,
occupancy or concession agreement.
"Letter of Credit" or "Letters of Credit" means (i) Standby Letter
or Letters of Credit and (ii) Commercial Letter or Letters of Credit, in each
case, issued or to be issued by Issuing Banks for the account of the Borrower
pursuant to Section 1.13.
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"Letter of Credit Participation" has the meaning assigned
to that term in Section 1.13(A).
"Letters of Credit Usage" means, as at any date of determination,
the sum of (i) the maximum aggregate amount that is or at any time thereafter
may become available under all Letters of Credit then issued and outstanding
plus (ii) the aggregate amount of all drawings under Letters of Credit honored
by all Issuing Banks and not theretofore reimbursed by the Borrower; provided,
however, the Letters of Credit Usage of an Issuing Bank shall be deemed to be
only such portion of the Letters of Credit Usage of such Issuing Bank which
other Banks have not bought by participation pursuant to Section 1.13(A).
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien, claim, hypothecation, assignment for security or charge of any kind
(including any agreement to give any of the foregoing, any conditional sale or
other title retention agreement or any lease in the nature thereof).
"Loan" means each and every Term Loan or Revolving Loan.
"Loan Facility" means the credit facility evidenced by
the Total Term Loan Commitments and the Total Revolving Loan
Commitments.
"Loss Proceeds" has the meaning set forth in Section
3.02(A)(i) hereof.
"Management Agreement" means the management assistance agreement
between Morningside and the Borrower dated as of August 23, 1995, as amended.
"Materially Adverse Effect" means, (i) with respect to Holdings and
the Borrower and its Subsidiaries, any materially adverse effect (both before
and after giving effect to the Refinancing and the financing thereof and the
other transactions contemplated hereby) with respect to the operations,
business, properties, assets, liabilities (contingent or otherwise) or financial
condition or prospects of Holdings and the Borrower and its Subsidiaries, taken
as a whole, or (ii) any fact or circumstance (whether or not the result thereof
would be covered by insurance) as to which singly or in the aggregate there is a
reasonable likelihood of (w) a materially adverse change described in clause (i)
with respect to Holdings and the Borrower and its Subsidiaries, taken as a
whole, (x) the inability of any Credit Party to perform in any material respect
its Obligations hereunder or the inability of the Banks to enforce in any
material respect
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their rights purported to be granted hereunder or the Obligations (including
realizing on the Collateral), or (y) a materially adverse effect on the ability
to effect (including hindering or unduly delaying) the Refinancing and the other
transactions contemplated hereby on the terms contemplated hereby and thereby.
"Minimum Borrowing Amount" means $100,000.
"Morningside" means Morningside Capital Group, LLC, a Connecticut
limited liability company.
"Mortgage" means a term loan and revolving credit mortgage (or deed
of trust or deed to secure debt, as the case may be), assignment of rents,
security agreement and fixture filing creating and evidencing a Lien on a
Mortgaged Real Property, which shall be substantially in the form of Exhibit D
hereto, containing such schedules and including such additional provisions and
other deviations from such Exhibit as shall be necessary to conform such
document to applicable or local law or as shall be customary under applicable or
local law and which shall be dated the date of delivery thereof and made by the
owner (fee or leasehold, as the case may be) of the Mortgaged Real Property
described therein for the benefit of the Collateral Agent, as mortgagee (or
beneficiary, as the case may be), assignee and secured party, as the same may
after its execution be amended, supplemented or otherwise modified from time to
time in accordance with the terms thereof and hereof.
"Mortgaged Real Property" means each Real Property designated on
Annex VIII which shall be subject to a Mortgage.
"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA with respect to which any Credit Party or any of
their respective ERISA Affiliates is or has been required to contribute or
otherwise may have liability.
"Net Award" has the meaning assigned to that term in each
Mortgage.
"Net Cash Proceeds" means:
(a) with respect to any Asset Sale, the aggregate cash payments
received by Holdings, the Borrower and/or any of the Borrower's
Subsidiaries, as the case may be, from such Asset Sale, net of direct
expenses of sale, net of taxes (including income taxes and transfer taxes)
and net of repayment of Indebtedness or Capitalized Leases in each case
secured by a Lien on the asset subject to such Asset Sale; provided that,
with respect to taxes, expenses shall only include taxes to
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the extent that taxes are payable in cash in the current year or in the
next succeeding year with respect to the current year as a result of such
Asset Sale; and
(b) with respect to any Taking or Destruction, the Net Award or Net
Proceeds, as applicable, resulting therefrom, to be applied as Net Cash
Proceeds under this Agreement pursuant to the provisions of Sections
1.13.3 and 1.13.4 of the Mortgages;
provided, further, that Net Cash Proceeds shall not include any amounts or items
included in the definition of Financing Proceeds or Net Financing Proceeds
(including in any proviso appearing therein).
"Net Financing Proceeds" means Financing Proceeds, net of direct
expenses of the transaction and net of taxes (including income taxes) currently
paid or payable in cash as a result thereof in the current year or in the next
succeeding year with respect to the current year as a result of the transaction
generating Net Financing Proceeds.
"Net Proceeds" has the meaning assigned to that term in
each Mortgage.
"Note" means any Revolving Note or Term Note.
"Notice of Borrowing" has the meaning provided in
Section 1.03.
"Notice of Conversion/Continuation" has the meaning
provided in Section 1.06.
"Obligations" means all amounts, direct or indirect, contingent or
absolute, of every type or description, and at any time existing, owing to the
Agent or any Bank pursuant to the terms of this Agreement or any other Credit
Document or secured by any of the Security Documents.
"Officers' Certificate" means, as applied to any corporation, a
certificate executed on behalf of such corporation by its Chairman of the Board
(if an officer) or its President or one of its Vice Presidents and by its Chief
Financial Officer or its Treasurer or any Assistant Treasurer; provided that
every Officers' Certificate with respect to compliance with a condition
precedent to the making of any Loan hereunder shall include (i) a statement that
the officers making or giving such Officers' Certificate have read such
condition and any definitions or other
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provisions contained in this Agreement relating thereto, (ii) a statement that,
in the opinion of the signers, they have made or have caused to be made such
examination or investigation as is necessary to enable them to express an
informed opinion as to whether or not such condition has been complied with, and
(iii) a statement as to whether, in the opinion of the signers, such condition
has been complied with.
"Officers' Solvency Certificate" means the Officers' Solvency
Certificate in the form set forth as Exhibit L hereto.
"Operating Lease" of any Person, shall mean any lease (including,
without limitation, leases which may be terminated by the lessee at any time) of
any property (whether real, personal or mixed) by such Person as Lessee which is
not a Capital Lease.
"Overallotment Option" means, in connection with the Holdings IPO,
the option granted by the Company to the underwriters and managers to purchase
additional shares of the common stock of Holdings, pursuant to the U.S. and
international purchase agreements, respectively.
"Partial Release Conditions" has the meaning provided in
Section 7.13(C).
"PBGC" means the Pension Benefit Guaranty Corporation established
pursuant to Section 4002 of ERISA, or any successor thereto.
"Pension Plan" means any pension plan as defined in Section 3(2) of
ERISA (other than a Multiemployer Plan) which is or has been maintained by or to
which contributions are or have been made by any Credit Party or their
respective ERISA Affiliates or as to which any Credit Party or their respective
ERISA Affiliates may have liability.
"Permitted Encumbrances" has the meaning provided in
Section 7.03.
"Person" means any individual, partnership, joint venture, firm,
corporation, association, trust or other enterprise or any Governmental
Authority.
"Pledge Agreements" means and includes the Holdings Pledge
Agreement, the Borrower Pledge Agreement, and any securities pledge agreements
(including, without limitation, any supplements or amendments to any of the
foregoing) delivered pursuant to Section 6.13, 6.14 or 6.16.
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"Pledged Collateral" means all the Pledged Collateral as defined in
each of the General Security Agreements and in the Intellectual Property
Security Agreements.
"Pledged Securities" means all the securities and other collateral
in which a security interest is purported to be granted to the Agent for the
benefit of the Banks by each of the Pledge Agreements, including, without
limitation, all Pledged Collateral as defined therein.
"Portion" means the Term Portion or the Revolving
Portion.
"Prior Liens" means Liens which, pursuant to the provisions of any
Security Document, are or may be superior to the Lien of such Security Document.
"Projected Financial Statements" has the meaning set
forth in Section 5.11(c).
"Real Property" means all right, title and interest of the Borrower
or any of its Subsidiaries (including, without limitation, any leasehold estate)
in and to a parcel of real property owned, leased or operated by the Borrower or
any of its Subsidiaries together with, in each case, all of the Borrower's or
such Subsidiaries' right, title and interest in and to all improvements and
appurtenant fixtures, equipment, personal property, easements and other property
and rights incidental to the ownership, lease or operation thereof.
"Release" has the meaning set forth in Section 7.13(B).
"Release Conditions" has the meaning set forth in Section
7.13(B).
"Release Notice" has the meaning set forth in Section
7.13(B).
"Released Real Property" has the meaning set forth in
Section 7.13(B).
"Reference Banks" means Indosuez, Chase Bank and
Citibank, N.A.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor to all
or a portion thereof establishing reserve requirements.
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"Regulation G" means Regulation G of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor to all
or a portion thereof establishing margin requirements.
"Regulation T" means Regulation T of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor to all
or a portion thereof establishing margin requirements.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor to all
or a portion thereof establishing margin requirements.
"Regulation X" means Regulation X of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor to all
or a portion thereof establishing margin requirements.
"Required Banks" means at any time (i) Banks holding at least 51% of
the Total Commitments held by Banks (or, if the Total Commitments shall have
been terminated, Banks holding at least 51% of the outstanding Loans) or (ii)
two Banks if there are only two Banks holding 100% of the Total Commitments and
at least one of such Banks holds an aggregate Commitment of at least $5,000,000;
provided that for the purposes of Section 4, the requirement that any document,
agreement, certificate or other writing is to be satisfactory to the Required
Banks shall be satisfied if (x) such document, agreement, certificate or other
writing was delivered in its final form to the Banks prior to the Effective Date
(or if amended or modified thereafter, the Agent has reasonably determined such
amendment or modification not to be material), (y) such document, agreement,
certificate or other writing is satisfactory to the Agent and (z) Banks holding
more than 33-1/3% of the Total Commitments held by Banks have not objected in
writing to such document, agreement, certificate or other writing to the Agent
prior to the Closing Date.
"Reserve Adjusted Eurodollar Loan" means each Loan bearing interest
based on the Eurodollar Rate as provided in Section 1.08(b).
"Restoration" has the meaning assigned to that term in
each Mortgage.
"Revolving Loan Commitment" means, with respect to each Bank, the
amount set opposite such Bank's name on Annex I hereto
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directly below the column entitled "Commitments -- Revolver," as the same may be
reduced from time to time pursuant to Sections 2.01, 3.02 and/or 8.
"Revolving Loan Commitment Termination Date" means the
Business Day immediately preceding the Final Revolving Loan
Maturity Date.
"Revolving Loans" has the meaning provided in Sec-
tion 1.01(b).
"Revolving Note" has the meaning provided in
Section 1.05(a).
"Revolving Portion" means, at any time, the portion of the Loan
Facility evidenced by the Total Revolving Loan Commitments.
"Scheduled A Term Loans Principal Payments" means, with respect to
the principal payments on the A Term Loans on the last Business Day of each
month set forth below, the U.S. dollar amount set forth opposite thereto:
Scheduled A Term Loan
Date Principal Payment
December 1996 $625,000
March 1997 625,000
June 1997 625,000
September 1997 625,000
December 1997 625,000
March 1998 625,000
June 1998 625,000
September 1998 625,000
December 1998 625,000
March 1999 625,000
June 1999 625,000
September 1999 625,000
December 1999 625,000
March 2000 625,000
June 2000 625,000
September 2000 625,000
December 2000 625,000
March 2001 625,000
June 2001 625,000
September 2001 625,000
December 2001 625,000
March 2002 625,000
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June 2002 625,000
September 2002 625,000
"Scheduled B Term Loans Principal Payments" means, with respect to
the principal payments on the B Term Loans on the last Business Day of each
month set forth below, the U.S. dollar amount set forth opposite thereto:
Scheduled B Term Loan
Date Principal Payment
December 1996 $ 25,000
March 1997 25,000
June 1997 25,000
September 1997 25,000
December 1997 25,000
March 1998 25,000
June 1998 25,000
September 1998 25,000
December 1998 25,000
March 1999 25,000
June 1999 25,000
September 1999 25,000
December 1999 25,000
March 2000 25,000
June 2000 25,000
September 2000 25,000
December 2000 25,000
March 2001 25,000
June 2001 25,000
September 2001 25,000
December 2001 25,000
March 2002 25,000
June 2002 25,000
September 2002 25,000
December 2002 2,350,000
March 2003 2,350,000
June 2003 2,350,000
September 2003 2,350,000
"SEC" means the Securities and Exchange Commission or any
successor thereto.
"SEC Regulation D" means Regulation D as promulgated under the
Securities Act, as the same may be in effect from time to time.
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"Securities" means any stock, shares, voting trust certificates,
bonds, debentures, options, warrants, notes, or other evidences of indebtedness,
secured or unsecured, convertible, subordinated or otherwise, or in general any
instruments commonly known as "securities" or any certificates of interest,
shares or participations in temporary or interim certificates for the purchase
or acquisition of, or any right to subscribe to, purchase or acquire, any of the
foregoing.
"Securities Act" means the Securities Act of 1933, as
amended.
"Security Documents" means each of the Mortgage, the Pledge
Agreements, the Borrower General Security Agreement, the Intellectual Property
Security Agreement and any other documents utilized to pledge as Collateral for
the Obligations any property or assets of whatever kind or nature.
"Senior Officer" means any of the chief executive officer, chief
financial officer, controller, chief accounting officer, chief operating
officer, treasurer or any executive vice president of the Borrower.
"Senior Subordinated Notes" means, collectively, the
$18,000,000 aggregate original principal amount of Senior
Subordinated Notes issued by Acquisition Corp. on August 23, 1995.
"Senior Subordinated Note Purchase Agreement" means the
Note Purchase Agreement, dated as of August 23, 1995, as amended,
between Acquisition Corp. and the Purchasers listed therein.
"Standby Letter of Credit" means any standby letter of credit or
similar instrument issued for the purpose of supporting (i) workers'
compensation liabilities of the Borrower or any of its Subsidiaries, (ii) the
obligations of third-party insurers of the Borrower or any of its Subsidiaries
arising by virtue of the laws of any jurisdiction requiring third-party insurers
to obtain such letters of credit, or (iii) performance, payment, deposit or
surety obligations of the Borrower or any of its Subsidiaries if required by law
or governmental rule or regulation or in accordance with custom and practice in
the industry.
"State and Local Real Property Disclosure Requirements" means any
state or local laws requiring notification of the buyer of real property, or
notification, registration, or filing to or with any state or local agency,
prior to, concurrent with or following the sale of any real property or transfer
of control of an establishment, of the actual or threatened presence or release
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into the environment, or the use, disposal, or handling of Hazardous Materials
on, at, under, or near the real property to be sold or the establishment for
which control is to be transferred.
"Subordinated Note Purchase Agreement" means the
Subordinated Note Purchase Agreement, dated as of August 23, 1995,
between Acquisition Corp. and the Purchasers listed therein.
"Subordinated Notes" means, collectively, the $3,000,000
aggregate original principal amount of Subordinated Notes issued by
Acquisition Corp. on August 23, 1995.
"Subsidiary" of any Person means and includes (i) any corporation
more than 50% of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person directly or
indirectly through Subsidiaries and (ii) any partnership, association, joint
venture or other entity in which such Person directly or indirectly through
Subsidiaries has more than a 50% equity interest at the time.
"Subsidiary Guarantee" means each guarantee substantially in the
form of Exhibit R hereto, executed and delivered by a Subsidiary in accordance
with the terms hereof, except for such changes as shall have been approved by
the Agent, as the same may after its execution be amended, supplemented or
otherwise modified from time to time in accordance with the terms hereof and
thereof; provided, however, that (subject to change if applicable law is
modified from that in effect on the Closing Date), Carson Holdings Limited and
its subsidiaries shall not be required to execute a Subsidiary Guarantee.
"Survey" means a survey of any Mortgaged Real Property (and all
improvements thereon): (i) prepared by a surveyor or engineer licensed to
perform surveys in the state where such Mortgaged Real Property is located, (ii)
dated (or redated) not earlier than six months prior to the date of delivery
thereof unless there shall have occurred within six months prior to such date of
delivery any exterior construction on the site of such Mortgaged Real Property,
in which event such survey shall be dated (or redated) after the completion of
such construction or if such construction shall not have been completed as of
such date of delivery, not earlier than 20 days prior to such date of delivery,
(iii) certified by the surveyor (in a manner reasonably acceptable to the Agent)
to the Agent and the Title Company and (iv) complying
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in all respects with the minimum detail requirements of the American Land Title
Association as such requirements are in effect on the date of preparation of
such survey.
"Taking" has the meaning assigned to that term in each
Mortgage.
"Taxes" has the meaning set forth in Section 3.04.
"Term Loans" has the meaning set forth in Section
1.01(a).
"Term Notes" has the meaning set forth in Section
1.05(a).
"Term Portion" means, at any time, the portion of the Loan Facility
evidenced by the Total Term Loan Commitments.
"Termination Event" means (i) a "reportable event" described in
Section 4043 of ERISA or in the regulations thereunder (excluding events for
which the requirement for notice of such reportable event has been waived by the
PBGC) with respect to a Title IV Plan, or (ii) the withdrawal of any Credit
Party or any of their respective ERISA Affiliates from a Title IV Plan during a
plan year in which it was a "substantial employer" as defined in Section
4001(a)(2) of ERISA, or (iii) the filing of a notice of intent to terminate a
Title IV Plan or the treatment of a Title IV Plan amendment as a termination
under Section 4041 of ERISA, or (iv) the institution of proceedings by the PBGC
to terminate a Title IV Plan or to appoint a trustee to administer a Title IV
Plan, or (v) any other event or condition which might constitute reasonable
grounds under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Title IV Plan, or (vi) the complete or partial
withdrawal (within the meaning of Sections 4203 and 4205, respectively, of
ERISA) of any Credit Party or any of their respective ERISA Affiliates from a
Multiemployer Plan, or (vii) the insolvency or reorganization (within the
meaning of Sections 4245 and 4241, respectively, of ERISA) or termination of any
Multiemployer Plan, or (viii) the failure to make any payment or contribution to
any Pension Plan or Multiemployer Plan or the making of any amendment to any
Pension Plan which could result in the imposition of a lien or the posting of a
bond or other security.
"Test Period" means the shorter of (i) the four consecutive complete
fiscal quarters of the Borrower then last ended or (ii) the period of all
complete fiscal quarters of the Borrower since the Closing Date.
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"Title Company" means Ticor Title Insurance or such other title
insurance or abstract company as shall be selected by the Borrower and
reasonably acceptable to the Required Banks.
"Title IV Plan" means any Pension Plan described in Section 4021(a)
of ERISA, and not excluded under Section 4021(b) of ERISA.
"Total A Term Loan Commitments" means the sum of the A Term Loan
Commitments of each of the Banks.
"Total B Term Loan Commitments" means the sum of the B Term Loan
Commitments of each of the Banks.
"Total Commitments" means the sum of the Total Term Loan
Commitments and the Total Revolving Loan Commitments.
"Total Revolving Loan Commitments" means the sum of the Revolving
Loan Commitments of each of the Banks.
"Total Term Loan Commitments" means the sum of the A Term Loan
Commitments and the B Term Loan Commitments of each of the Banks.
"Total Utilization of Revolving Loan Commitments" means, at any date
of determination, the sum of the aggregate principal amount of all Revolving
Loans then outstanding.
"Total Voting Power" means the total combined voting power in the
election of directors of all shares of capital stock then outstanding.
"Type" of Loan means either a Base Rate Loan or a Reserve
Adjusted Eurodollar Loan.
"UCC" means the Uniform Commercial Code as in effect in the State of
New York or any other applicable jurisdiction in the United States.
"Unutilized Commitment" for any Bank at any time means, on and after
the Closing Date, the unutilized Revolving Loan Commitment of such Bank, after
taking into effect the Letters of Credit Usage.
"Wholly Owned Subsidiary" of any Person means any Subsidiary of such
Person to the extent all of the capital stock or other ownership interests in
such Subsidiary, other than directors' or nominees' qualifying shares or shares
of capital stock required
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to be owned by foreign nationals under applicable law, is owned directly or
indirectly by such Person.
"Written" or "in writing" means any form of written communication or
a communication by means of telex, telecopier device, telegraph or cable.
SECTION 10. The Agent.
10.01 Appointment. Each Bank hereby irrevocably designates and
appoints Indosuez as Agent (such term to include the Agent acting as Collateral
Agent or in any other representative capacity under any other Credit Document)
of such Bank to act as specified herein and in the other Credit Documents and
each such Bank hereby irrevocably authorizes the Agent to take such action on
its behalf under the provisions of this Agreement and the other Credit Documents
and to exercise such powers and perform such duties as are expressly delegated
to the Agent by the terms of this Agreement and the other Credit Documents,
together with such other powers as are reasonably incidental thereto. The Agent
agrees to act as such upon the express conditions contained in this Section 10.
Notwithstanding any provision to the contrary elsewhere in this Agreement, the
Agent shall not have any duties or responsibilities, except those expressly set
forth herein or in the other Credit Documents, or any fiduciary relationship
with any Bank, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or otherwise exist
against the Agent. The provisions of this Section 10 are solely for the benefit
of the Agent and the Banks, and no Credit Party shall have any rights as a third
party beneficiary of any of the provisions hereof. In performing its functions
and duties under this Agreement, the Agent shall act solely as agent of the
Banks and does not assume and shall not be deemed to have assumed any obligation
or relationship of agency or trust with or for any Credit Party.
10.02 Delegation of Duties. The Agent may execute any of its duties
under this Agreement or any other Credit Document by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact selected by it with
reasonable care except to the extent otherwise required by Section 10.03.
10.03 Exculpatory Provisions. Neither the Agent nor any
of its officers, directors, employees, agents, attorneys-in-fact or
affiliates shall be (i) liable for any action lawfully taken or
omitted to be taken by it or such Person under or in connection
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with this Agreement (except for its or such Person's own gross negligence or
willful misconduct) or (ii) responsible in any manner to any of the Banks for
any recitals, statements, representations or warranties by the Borrower, any
Subsidiary of the Borrower or any of their respective officers contained in this
Agreement, any other Document or in any certificate, report, statement or other
document referred to or provided for in, or received by the Agent under or in
connection with, this Agreement or any other Document or for any failure of the
Borrower or any Subsidiary of the Borrower or any of their respective officers
to perform its obligations hereunder or thereunder. The Agent shall not be under
any obligation to any Bank to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement, or to inspect the properties, books or records of the Borrower or any
Subsidiary of the Borrower. The Agent shall not be responsible to any Bank for
the effectiveness, genuineness, validity, enforceability, collectibility or
sufficiency of this Agreement or any Credit Document or for any representations,
warranties, recitals or statements made herein or therein or made in any written
or oral statement or in any financial or other statements, instruments, reports,
certificates or any other documents in connection herewith or therewith
furnished or made by the Agent to the Banks or by or on behalf of the Borrower
to the Agent or any Bank or be required to ascertain or inquire as to the
performance or observance of any of the terms, conditions, provisions, covenants
or agreements contained herein or therein or as to the use of the proceeds of
the Loans or of the existence or possible existence of any Default or Event of
Default.
10.04 Reliance by the Agent. The Agent shall be entitled to rely,
and shall be fully protected in relying, upon any note, writing, resolution,
notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy,
telex or teletype message, statement, order or other document or conversation
believed by it to be genuine and to have been signed, sent or made by the proper
Person or Persons and upon advice and statements of legal counsel (including,
without limitation, counsel to the Credit Parties), independent accountants and
other experts selected by the Agent. The Agent shall be fully justified in
failing or refusing to take any action under this Agreement or any other Credit
Document unless it shall first receive such advice or concurrence of the
Required Banks as it deems appropriate or it shall first be indemnified to its
satisfaction by the Banks against any and all liability and expense which may be
incurred by it by reason of taking or continuing to take any such action. The
Agent shall in all cases be fully protected in acting, or in refraining from
acting, under this Agreement and the other Credit Documents in accordance with a
request of the Required Banks (or to the extent specifically
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provided in Section 11.12, all the Banks), and such request and any action taken
or failure to act pursuant thereto shall be binding upon all the Banks.
10.05 Notice of Default. The Agent shall not be deemed to have
knowledge of the occurrence of any Default or Event of Default, other than a
default in the payment of principal or interest on the Loans hereunder unless it
has received notice from a Bank or the Borrower or any other Credit Party
referring to this Agreement, describing such Default or Event of Default and
stating that such notice is a "notice of default". In the event that the Agent
receives such a notice, the Agent shall give prompt notice thereof to the Banks.
The Agent shall take such action with respect to such Default or Event of
Default as shall be reasonably directed by the Required Banks; provided that,
unless and until the Agent shall have received such directions, the Agent may
(but shall not be obligated to) take such action, or refrain from taking such
action, with respect to such Default or Event of Default as it shall deem
advisable in the best interests of the Banks.
10.06 Non-Reliance on Agent and Other Banks. Each Bank expressly
acknowledges that neither the Agent nor any of its officers, directors,
employees, agents, attorneys-in-fact or affiliates have made any representations
or warranties to it and that no act by the Agent hereinafter taken, including
any review of the affairs of the Borrower or any Subsidiary of the Borrower,
shall be deemed to constitute any representation or warranty by the Agent to any
Bank. Each Bank represents to the Agent that it has, independently and without
reliance upon the Agent or any other Bank, and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, assets, operations, property, financial and
other conditions, prospects and creditworthiness of the Borrower and its
Subsidiaries and made its own decision to make its Loans hereunder and enter
into this Agreement and the other agreements contemplated hereby. Each Bank also
represents that it will, independently and without reliance upon the Agent or
any other Bank, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit analysis, appraisals
and decisions in taking or not taking action under this Agreement, and to make
such investigation as it deems necessary to inform itself as to the business,
assets, operations, property, financial and other conditions, prospects and
creditworthiness of the Borrower and its Subsidiaries. Except for notices,
reports and other documents expressly required to be furnished to the Banks by
the Agent hereunder, the Agent shall not have any duty or responsibility to
provide any Bank with any credit or other information concerning the business,
operations, assets, property,
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financial and other conditions, prospects or creditworthiness of the Borrower or
any of its Subsidiaries which may come into the possession of the Agent or any
of its officers, directors, employees, agents, attorneys-in-fact or affiliates.
10.07 Indemnification. The Banks agree to indemnify the Agent in its
capacity as such or in any other representative capacity under any other Credit
Document ratably according to their aggregate Commitments, from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, reasonable expenses or disbursements of any kind
whatsoever which may at any time (including, without limitation, at any time
following the payment of the Obligations) be imposed on, incurred by or asserted
against the Agent in its capacity as such in any way relating to or arising out
of this Agreement or any other Credit Document, or any documents contemplated by
or referred to herein or the transactions contemplated hereby or any action
taken or omitted to be taken by the Agent under or in connection with any of the
foregoing, but only to the extent that any of the foregoing is not paid by the
Borrower or any of its Subsidiaries or any Guarantor; provided that no Bank
shall be liable to the Agent for the payment of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting solely from the Agent's gross negligence or
willful misconduct. If any indemnity furnished to the Agent for any purpose
shall, in the opinion of the Agent, be insufficient or become impaired, the
Agent may call for additional indemnity and cease, or not commence, to do the
acts indemnified against until such additional indemnity is furnished. The
agreements in this Section 10.07 shall survive the payment of all Obligations.
10.08 The Agent in Its Individual Capacity. The Agent and its
Affiliates may make loans to, accept deposits from and generally engage in any
kind of business with the Borrower, its Subsidiaries and other Affiliates of the
Borrower as though the Agent were not the Agent hereunder. With respect to the
Loans made by it and all Obligations owing to it, the Agent shall have the same
rights and powers under this Agreement as any Bank and may exercise the same as
though it were not the Agent, and the terms "Bank" and "Banks" shall include the
Agent in its individual capacity.
10.09 Successor Agent. Upon the acceptance of any appointment as
Agent hereunder by a successor Agent, the term "Agent" shall include such
successor agent effective upon its appointment, and the resigning Agent's
rights, powers and duties as Agent shall be terminated, without any other or
further act or deed on the part of such former Agent or any of the parties to
this
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Agreement. After the retiring Agent's resignation hereunder as Agent, the
provisions of this Section 10 shall inure to its benefit as to any actions taken
or omitted to be taken by it while it was Agent under this Agreement.
10.10 Resignation by Agent. (A) The Agent may resign from the
performance of all its functions and duties hereunder at any time by giving 30
Business Days' prior written notice to the Borrower and the Banks. Such
resignation shall take effect upon the acceptance by a successor Agent of
appointment pursuant to subsections B and C below or as otherwise provided
below.
(B) Upon any such notice of resignation of the Agent, the Required
Banks shall appoint a successor Agent acceptable to the Borrower and which shall
be an incorporated bank or trust company or other qualified financial
institution with operations in the United States and total assets of at least $1
billion.
(C) If a successor Agent shall not have been so appointed within
said 30 Business Day period, the resigning Agent with the consent of the
Borrower shall then appoint a successor Agent (which shall be an incorporated
bank or trust company or other qualified financial institution with operations
in the United States and total assets of at least $1 billion) who shall serve as
Agent until such time, if any, as the Required Banks appoint a successor Agent
as provided above.
(D) If no successor Agent has been appointed pursuant to subsection
B or C by the 30th Business Day after the date such notice of resignation was
given by the resigning Agent, such Agent's resignation shall become effective
and the Required Banks shall thereafter perform all the duties of Agent
hereunder until such time, if any, as the Required Banks appoint a successor
Agent as provided above.
SECTION 11. Miscellaneous.
11.01 Payment of Expenses, etc. The Borrower agrees to: (i) whether
or not the transactions herein contemplated are consummated, pay all reasonable
out-of-pocket costs and expenses of the Agent in connection with the
negotiation, preparation, execution and delivery of the Credit Documents and the
documents and instruments referred to therein (subject to the terms of the
letter agreement dated August 12, 1996) and any amendment, waiver or consent
relating thereto (including, without limitation, the reasonable fees and
disbursements of Cahill Gordon & Reindel and local counsel issuing opinions
pursuant to Section 4.01(C)) with prior notice to the Borrower of the engagement
of any counsel and
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of each of the Banks in connection with the enforcement of the Credit Documents
and the documents and instruments referred to therein (including, without
limitation, the reasonable fees and disbursements of counsel for each of the
Banks) with prior notice to the Borrower of the engagement of any counsel; (ii)
pay and hold each of the Banks harmless from and against any and all present and
future stamp and other similar taxes with respect to the foregoing matters and
save each of the Banks harmless from and against any and all liabilities with
respect to or resulting from any delay or omission (other than to the extent
attributable to such Bank) to pay such taxes; and (iii) indemnify Agent,
Collateral Agent and each Bank, its officers, directors, employees,
representatives and agents from and hold each of them harmless against any and
all losses, liabilities, claims, damages or expenses (including, without
limitation, any and all losses, liabilities, claims, damages or expenses arising
under Environmental Laws except with regard to any losses, costs, damages or
expenses under Environmental Laws arising from or relating to acts or omissions
occurring after the Agent or any Bank takes possession of, uses, operates,
manages, controls or sells the Mortgaged Property provided, however, that such
exception shall apply only to the extent such losses, costs, damages or expenses
arise solely from the gross negligence, bad faith or willful misconduct of the
Agent or any Bank or of the agents of the Agent or any Bank) incurred by any of
them as a result of, or arising out of, or in any way related to, or by reason
of, any investigation, litigation or other proceeding (whether or not any Bank
is a party thereto) related to the entering into and/or performance of any
Credit Document or the use of the proceeds of any Loans hereunder or the
Refinancing or the consummation of any other transactions contemplated in any
Credit Document, including, without limitation, the reasonable fees and
disbursements of counsel incurred in connection with any such investigation,
litigation or other proceeding (but excluding any such losses, liabilities,
claims, damages or expenses to the extent incurred by reason of the gross
negligence, bad faith or willful misconduct of the Person to be indemnified).
11.02 Right of Setoff. In addition to any rights now or hereafter
granted under applicable law or otherwise, and not by way of limitation of any
such rights, upon the occurrence and during the continuance of an Event of
Default, each Bank is hereby authorized at any time or from time to time,
without presentment, demand, protest or other notice of any kind to any Credit
Party or to any other Person, any such notice being hereby expressly waived, to
set off and to appropriate and apply any and all deposits (general or special)
and any other Indebtedness at any time held or owing by such Bank (including,
without limitation, by branches and agencies of such Bank wherever located) to
or for the credit or the
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account of any Credit Party against and on account of the Obligations and
liabilities of such Credit Party to such Bank under this Agreement or under any
of the other Credit Documents, including, without limitation, all interests in
Obligations of such Credit Party purchased by such Bank pursuant to Section
11.06(b), and all other claims of any nature or description arising out of or
connected with this Agreement or any other Credit Document, irrespective of
whether or not such Bank shall have made any demand hereunder.
11.03 Notices. Except as otherwise expressly provided herein, all
notices and other communications provided for hereunder shall be in writing
(including telegraphic, telex, telecopier or cable communication) and mailed,
telegraphed, telexed, telecopied, cabled or delivered, if to the Borrower,
Carson Products Company, 64 Ross Road, Savannah, GA 31405, Attention: Chief
Financial Officer, with a copy to Morningside Capital Group, LLC, 1 Morningside
Drive, North, Suite 200, Westport, CT 06880, Attention: President, or if to
another Credit Party, to its address specified in the other relevant Credit
Documents, as the case may be; if to the Agent or any Bank, at its address
specified for the Agent or such Bank on Annex II hereto; or, at such other
address as shall be designated by any party in a written notice to the other
parties hereto. All such notices and communications shall, when mailed,
telegraphed, telexed, telecopied, or cabled or sent by overnight courier, be
effective two days after being deposited in the mails, when delivered to the
telegraph company, cable company or overnight courier, as the case may be, or
when sent by telex or telecopier, except that notices and communications to the
Agent shall not be effective until received by the Agent.
11.04 Benefit of Agreement. (a) This Agreement shall be binding upon
and inure to the benefit of and be enforceable by the parties hereto, all future
holders of the Notes, and their respective successors and assigns; provided that
no Credit Party may assign or transfer any of its interests hereunder without
the prior written consent of the Banks; and provided, further, that the rights
of each Bank to transfer, assign or grant participations in its rights and/or
obligations hereunder shall be limited as set forth below in this Section 11.04;
provided that nothing in this Section 11.04 shall prevent or prohibit any Bank
from (i) pledging its Loans hereunder to a Federal Reserve Bank in support of
borrowings made by such Bank from such Federal Reserve Bank and (ii) granting
participations in or assignments of such Bank's Loans, Notes and/or Commitments
hereunder to its parent company and/or to any Affiliate of such Bank that is at
least 50% owned by such Bank or its parent company; provided, however, that any
such assignment or participation shall not result in the Borrower paying
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additional amounts as of the time of such assignment pursuant to Section
1.10(e), 1.11, 1.13 or 3.04.
(b) Each Bank shall have the right to transfer, assign or grant
participations in all or any part of its remaining Loans, Notes and/or
Commitments hereunder on the basis set forth below in this clause (b). Subject
to Section 11.04(c) hereof, each Bank may furnish any information concerning the
Borrower in the possession of such Bank from time to time to assignees and
participants (including prospective assignees and participants).
(A) Assignments. Each Bank, with the written consent of the Agent
and the Borrower, which consent shall not be unreasonably withheld, which
shall be evidenced on the notice in the form of Exhibit I-1 hereto, may
assign pursuant to an Assignment Agreement substantially in the form of
Exhibit I-2 hereto all or a portion of its Loans, Notes and/or Commitments
hereunder pursuant to this clause (b)(A) to one or more Eligible
Assignees; provided that any such assignment pursuant to this clause
(b)(A) shall not result in the Borrower paying additional amounts as of
the time of such assignment pursuant to Section 1.10(e), 1.11, 1.13 or
3.04. Any assignment pursuant to this clause (b)(A) will become effective
five Business Days after the Agent's receipt of (i) a written notice in
the form of Exhibit I-1 hereto from the assigning Bank and the Eligible
Assignee and (ii) a processing and recordation fee of $2,500 from the
assigning Bank in connection with the Agent's recording of such sale,
assignment, transfer or negotiation; provided that such fee shall only be
payable if the assignment is between a Bank and an Eligible Assignee that
is not a Bank prior to the assignment. The Borrower shall issue new Notes
to the Eligible Assignee in conformity with Section 1.05 and the assignor
shall return the old Notes to the Borrower. Upon the effectiveness of any
assignment in accordance with this clause (b)(A), the Eligible Assignee
will become a "Bank" for all purposes of this Agreement and the other
Credit Documents and, to the extent of such assignment, the assigning Bank
shall be relieved of its obligations hereunder with respect to the
Commitments being assigned. The Agent shall maintain at its address
specified in Annex II hereto a copy of each Assignment Agreement delivered
to and accepted by it and a register in which it shall record the names
and addresses of the Banks and the Commitment of, and principal amount of
the Loans owning to, each Bank from time to time (the "Register"). The
entries in the Register shall be conclusive and binding for all purposes,
absent demonstrable error, and the Borrower, the Agent and the Banks may
treat each Person whose name is
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recorded in the Register as a Bank hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the Borrower,
the Agent or any Bank at any reasonable time and from time to time upon
reasonable prior notice.
(B) Participations. Each Bank may transfer, grant or assign
participations in all or any part of such Bank's Loans, Notes and/or
Commitments hereunder pursuant to this clause (b)(B) to any Person;
provided that (i) such Bank shall remain a "Bank" for all purposes of this
Agreement and the transferee of such participation shall not constitute a
Bank hereunder and (ii) no participant under any such participation shall
have rights to approve any amendment to or waiver of this Agreement or any
other Credit Document except to the extent such amendment or waiver would
(x) change the scheduled final maturity date of any of the Loans, Notes or
Commitments in which such participant is participating or (y) reduce the
principal amount, interest rate or fees applicable to any of the Loans,
Notes or Commitments in which such participant is participating or
postpone the payment of any interest or fees or (z) release all or
substantially all of the Collateral; and provided, further that any
participation pursuant to this Section 11.04(b)(B) shall not result in the
Borrower paying additional amounts as of the time of such participation
pursuant to Section 1.10(e), 1.11, 1.13 or 3.04. In the case of any such
participation, the participant shall not have any rights under this
Agreement or any of the other Credit Documents (the participant's rights
against the granting Bank in respect of such participation to be those set
forth in the agreement with such Bank creating such participation) and all
amounts payable by the Borrower hereunder shall be determined as if such
Bank had not sold such participation; provided that such participant shall
be considered to be a "Bank" for purposes of Sections 11.02 and 11.06(b).
(c) The Agent and the Banks agree to keep confidential (and to cause
their respective officers, directors, employees, agents and representatives to
keep confidential) all information, materials and documents furnished to the
Agent or any Bank (the "Information"). Notwithstanding the foregoing, the Agent
and each Bank shall be permitted to disclose Information (i) to such of its
officers, directors, employees, agents and representatives as need to know such
Information in connection with its participation in any of the transactions
contemplated hereby or the administration of this Agreement; (ii) to the extent
required by applicable laws and regulations or by any subpoena or similar legal
process, or
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requested by any governmental agency or authority; (iii) to the extent such
Information (A) becomes publicly available other than as a result of a breach of
this Agreement or any other confidentiality agreement with respect thereto, (B)
becomes available to the Agent or such Bank on a non-confidential basis from a
source other than Holdings, the Borrower, or any of their respective
subsidiaries, officers, directors, employees, agents or representatives or (C)
was available to the Agent or such Bank on a non-confidential basis prior to its
disclosure to the Agent or such Bank by the Borrower, Holdings or any of their
respective subsidiaries; (iv) to the extent the Borrower, Holdings or any of
their respective subsidiaries shall have consented to such disclosure in
writing; (v) in connection with the sale of any Collateral pursuant to the
provisions of any of the Security Documents; or (vi) pursuant to Section
11.04(b) hereof; provided that prior to any such disclosure under Section
11.04(b), each prospective Eligible Assignee or participant shall enter into a
written agreement with the assigning or selling Bank to preserve the
confidentiality of any Information to the extent set forth in this Section
11.04(c).
11.05 No Waiver; Remedies Cumulative. No failure or delay on the
part of the Agent or any Bank in exercising any right, power or privilege
hereunder or under any other Credit Document and no course of dealing between
any Credit Party and the Agent or any Bank shall operate as a waiver thereof;
nor shall any single or partial exercise of any right, power, or privilege
hereunder or under any other Credit Document preclude any other or further
exercise thereof or the exercise of any other right, power or privilege
hereunder or thereunder. The rights and remedies herein expressly provided are
cumulative and not exclusive of any rights or remedies which the Agent or any
Bank would otherwise have. No notice to or demand on any Credit Party in any
case shall entitle any Credit Party to any other or further notice or demand in
similar or other circumstances or constitute a waiver of the rights of the Agent
or the Banks to any other or further action in any circumstances without notice
or demand.
11.06 Payments Pro Rata. (a) The Agent agrees that promptly after
its receipt of each payment from or on behalf of any Credit Party in respect of
any Obligations of such Credit Party, it shall distribute such payment to the
Banks pro rata based upon their respective shares, if any, of the Obligations
with respect to which such payment was received.
(b) Each of the Banks agrees that, if it should receive any amount
hereunder (whether by voluntary payment, by realization upon security, by the
exercise of the right of setoff or banker's
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lien, by counterclaim or cross action, by the enforcement of any right under the
Credit Documents, or otherwise) which is applicable to the payment of the
principal of, or interest on, the Loans, of a sum which with respect to the
related sum or sums received by other Banks is in a greater proportion than the
total of such Obligations then owed and due to such Bank bears to the total of
such Obligations then owed and due to all of the Banks immediately prior to such
receipt, then such Bank receiving such excess payment shall purchase for cash
without recourse or warranty from the other Banks an interest in the Obligations
of the respective Credit Party to such Banks in such amount as shall result in a
proportional participation by all of the Banks in such amount; provided that if
all or any portion of such excess amount is thereafter recovered from such Bank,
such purchase shall be rescinded and the purchase price restored to the extent
of such recovery, but without interest.
11.07 Calculations; Computations. (a) The financial statements to be
furnished to the Banks pursuant hereto shall be made and prepared in accordance
with GAAP consistently applied throughout the periods involved (except as set
forth in the notes thereto or as otherwise disclosed in writing by the Borrower
to the Banks); provided that, except as otherwise specifically provided herein,
all computations determining compliance with Sections 5, 6, 7 and 8 and all
definitions used in this Agreement for any purpose shall utilize accounting
principles and policies in effect at the time of the preparation of, and in
conformity with those used to prepare, the historical financial statements
delivered to the Banks pursuant to Section 4.01(M).
(b) All computations of interest and fees hereunder shall be made on
the actual number of days elapsed over a year of 365 days; provided, however,
that all computations of interest on Reserve Adjusted Eurodollar Loans and
Commitment Commission shall be made on the actual number of days elapsed over a
year of 360 days.
11.08 Governing Law; Submission to Jurisdiction; Venue. (a)This
Agreement and the rights and obligations of the parties hereunder shall be
construed and enforced in accordance with and be governed by the laws of the
State of New York applicable to contracts made and to be performed wholly
therein. Any legal action or proceeding with respect to this Agreement or any
other Credit Document may be brought in the courts of the State of New York or
of the United States for the Southern District of New York, and, by execution
and delivery of this Agreement, each Credit Party hereby irrevocably accepts for
itself and in respect of its property, generally and unconditionally, the
non-exclusive
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jurisdiction of the aforesaid courts. Each Credit Party further irrevocably
consents to the service of process out of any of the aforementioned courts in
any such action or proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to the respective Credit Party at its address
for notices pursuant to Section 11.03, such service to become effective 15 days
after such mailing. Each Credit Party hereby irrevocably appoints the Borrower
and such other persons as may hereafter be selected by the Borrower irrevocably
agreeing in writing to serve as its agent for service of process in respect of
any such action or proceeding. Nothing herein shall affect the right of the
Agent or any Bank to serve process in any other manner permitted by law or to
commence legal proceedings or otherwise proceed against any Credit Party in any
other jurisdiction.
(b) Each Credit Party hereby irrevocably waives any objection which
it may now or hereafter have to the laying of venue of any of the aforesaid
actions or proceedings arising out of or in connection with this Agreement or
any other Credit Document brought in the courts referred to in clause (a) above
and hereby further irrevocably waives and agrees not to plead or claim in any
such court that any such action or proceeding brought in any such court has been
brought in an inconvenient forum.
11.09 Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A set of counterparts
executed by all the parties hereto shall be lodged with the Borrower and the
Agent.
11.10 Effectiveness. This Agreement shall become effective on the
date (the "Effective Date") on which the Borrower and each of the Banks shall
have signed a copy hereof (whether the same or different copies) and shall have
delivered the same to the Agent at the Agent's Office or, in the case of the
Banks, shall have given to the Agent telephonic (confirmed in writing), written,
telex or telecopy notice (actually received) at such office that the same has
been signed and mailed to it. The Agent will give the Borrower and each Bank
prompt written notice of the occurrence of the Effective Date.
11.11 Headings Descriptive. The headings of the several
sections and subsections of this Agreement are inserted for
convenience only and shall not in any way affect the meaning or
construction of any provision of this Agreement.
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11.12 Amendment or Waiver. Neither this Agreement nor any other
Credit Document nor any terms hereof or thereof may be changed, waived,
discharged or terminated unless such change, waiver, discharge or termination is
in writing signed by the Borrower and the Required Banks; provided that no such
change, waiver, discharge or termination shall, without the consent of each
affected Bank and the Agent, (i) extend the scheduled final maturity date of any
Loan, or any portion thereof, or reduce the rate or extend the time of payment
of interest thereon or fees or reduce the principal amount thereof, or increase
the Commitments of any Bank over the amount thereof then in effect (it being
understood that a waiver of any Default or Event of Default or of a mandatory
reduction in the Total Commitment shall not constitute a change in the terms of
any Commitment of any Bank), (ii) release all or a substantial portion of the
Collateral or Guarantees (except as expressly permitted by the Credit
Documents), (iii) amend, modify or waive any provision of this Section, or
Section 1.10, 1.11, 3.04, Section 8, 10.07, 11.01, 11.02, 11.04, 11.06, 11.07(b)
or 11.12, (iv) reduce any percentage specified in, or otherwise modify, the
definition of Required Banks or (v) consent to the assignment or transfer by any
Credit Party of any of its rights and obligations under this Agreement. No
provision of Section 10 may be amended without the consent of the Agent.
11.13 Survival. All indemnities set forth herein including, without
limitation, in Section 1.11, 3.04, 10.07 or 11.01 shall survive the execution
and delivery of this Agreement and the making of the Loans, the repayment of the
Obligations and the termination of the Total Commitments.
11.14 Domicile of Loans. Each Bank may transfer and carry its Loans
at, to or for the account of any branch office, subsidiary or affiliate of such
Bank; provided, however, that any such transfer shall not result in the Borrower
paying additional amounts as of the time of such transfer pursuant to Section
1.10(e), 1.11, 1.13 or 3.04.
11.15 Waiver of Jury Trial. Each of the parties to this Agreement
hereby irrevocably waives all right to a trial by jury in any action, proceeding
or counterclaim arising out of or relating to this Agreement, the Credit
Documents or the transactions contemplated hereby or thereby.
11.16 Independence of Covenants. All covenants hereunder shall be
given independent effect so that if a particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by an
exception to, or be otherwise
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within the limitation of, another covenant shall not avoid the occurrence of a
Default or an Event of Default if such action is taken or condition exists.
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<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Agreement to be duly executed and delivered as of the date
first above written.
CARSON PRODUCTS COMPANY
By:
Name:
Title:
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<PAGE>
Credit Agreement among Carson Products Company, Banque Indosuez
and the Banks listed herein.
BANQUE INDOSUEZ, NEW YORK BRANCH
as Agent and Collateral
Agent
By:
Name:
Title:
By:
Name:
Title:
THE PROVIDENT BANK
By:
Name:
Title:
CREDITANSTALT-BANKVEREIN
By:
Name:
Title:
By:
Name:
Title:
FIRST UNION NATIONAL BANK OF GEORGIA
By:
Name:
Title:
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<PAGE>
ANNEX I
List of Banks Commitments
Revolver A Term B Term
Banque Indosuez, New York Branch $4,375,000 $4,375,000 $3,750,000
Creditanstalt - Bankverein $3,750,000 $3,750,000 $5,000,000
The Provident Bank $1,875,000 $1,875,000 $1,250,000
First Union National Bank $5,000,000 $5,000,000 -----
Assignment Banks Commitments
Revolver A Term B Term
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<PAGE>
ANNEX II
Agent and Bank Addresses
Banque Indosuez, New York Branch
1211 Avenue of the Americas
7th Floor
New York, New York 10036
The Provident Bank
One East Fourth Street
Cincinnatti, Ohio 45202
Creditanstalt Corporate Finance, Inc.
2 Greenwich Plaza
Greenwich, Connecticut 06830
First Union National Bank of Georgia
999 Peachtree Road, NE
6th Floor
Atlanta, Georgia 30309
Assignment Banks
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ANNEX III
Existing Debt
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ANNEX IV
Subsidiaries
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ANNEX V
Collective Bargaining Agreements
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<PAGE>
ANNEX VI
INSURANCE
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ANNEX VII
Liens
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<PAGE>
ANNEX VIII
Mortgaged Real Property
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<PAGE>
ANNEX IX
Litigation
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<PAGE>
ANNEX X
Consents
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<PAGE>
ANNEX XI
Restrictions
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<PAGE>
ANNEX XII
Environmental Matters
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<PAGE>
ANNEX XIII
Taxes
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<PAGE>
ANNEX XIV
Schedule of Intellectual Property
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<PAGE>
Exhibit A to the
Credit Agreement
REVOLVING NOTE
CARSON PRODUCTS COMPANY
U.S. $ New York, New York
, 1996
FOR VALUE RECEIVED, CARSON PRODUCTS COMPANY, a Delaware corporation
(the "Borrower"), hereby promises to pay to the order of (the "Bank"), in lawful
money of the United States of America in immediately available funds, at the
office of Banque Indosuez, New York Branch, located at 1211 Avenue of the
Americas, 7th Floor, New York, New York 10036 or as otherwise designated
pursuant to the Credit Agreement (which is hereinafter defined), on the Final
Revolving Loan Maturity Date (as defined in the Credit Agreement), the principal
sum of
AND /100 U.S. DOLLARS
($ ) or, if less, the unpaid principal amount of the Revolving Loans (as defined
in the Credit Agreement) made by the Bank pursuant to the Credit Agreement.
The Borrower also promises to pay interest on the unpaid principal
amount hereof in like money at said office from the date hereof until paid at
the rates and at the times provided in the Credit Agreement.
This Note is one of the Revolving Notes referred to in the Credit
Agreement, dated as of October 18, 1996, among the Borrower, the Bank and the
other lending institutions party thereto and Banque Indosuez, New York Branch,
as Agent (as amended, amended and restated, supplemented or otherwise modified
in accordance with the terms thereof in effect, the "Credit Agreement") and is
entitled to the benefits thereof and shall be subject to the provisions thereof.
This Note is also entitled to the benefits of the Security Documents (as defined
in the Credit Agreement). As provided in the Credit Agreement, this Note is
subject to mandatory and voluntary prepayment, in whole or in part.
In case an Event of Default (as defined in the Credit Agreement)
shall occur and be continuing, the principal of and accrued interest on this
Note may be declared to be due and payable in the manner and with the effect
provided in the Credit Agreement.
The Borrower hereby waives presentment, demand, protest or notice of
any kind in connection with this Note.
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All borrowings evidenced by this Note and all payments and
prepayments of the principal hereof and interest hereon and the respective dates
thereof shall be endorsed by the holder hereof on the schedule attached hereto
and made a part hereof, or on a continuation thereof which shall be attached
hereto and made a part hereof, or otherwise recorded by such holder in its
internal records; provided, however, that the failure of the holder hereof to
make such an endorsement or recordation or any error in such an endorsement or
recordation shall not affect the obligations of the Borrower to make payments
when due of any amounts owing under the Credit Agreement or under this Note.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICTS OF LAW.
CARSON PRODUCTS COMPANY
By
Name:
Title:
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<PAGE>
TRANSACTIONS
ON
REVOLVING NOTE
Principal Amount of Outstanding
Type of Amount of Duration Principal or Principal
Loan Made Loan Made Interest of Interest Interest Paid
Date This Date This Date Rate Period This Date
Balance Notation
This Date Made By
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<PAGE>
Exhibit B-1 to the
Credit Agreement
A TERM NOTE
CARSON PRODUCTS COMPANY
New York, New York
U.S. $ , 1996
FOR VALUE RECEIVED, CARSON PRODUCTS COMPANY, a Delaware corporation
(the "Borrower"), hereby promises to pay to the order of (the "Bank"), in lawful
money of the United States of America in immediately available funds, at the
office of Banque Indosuez, New York Branch, located at 1211 Avenue of the
Americas, 7th Floor, New York, New York 10036 or as otherwise designated
pursuant to the Credit Agreement (which is hereinafter defined), on the Final A
Term Loan Maturity Date (as defined in the Credit Agreement), the principal sum
of
AND /100 U.S. DOLLARS
($ ) or, if less, the unpaid principal amount of the A Term Loans (as defined in
the Credit Agreement) made by the Bank pursuant to the Credit Agreement.
The Borrower also promises to pay interest on the unpaid principal
amount hereof in like money at said office from the date hereof until paid at
the rates and at the times provided in the Credit Agreement.
This Note is one of the A Term Notes referred to in the Credit
Agreement, dated as of October 18, 1996, among the Borrower, the Bank and the
other lending institutions party thereto and Banque Indosuez, New York Branch,
as Agent (as amended, amended and restated, supplemented or otherwise modified
in accordance with the terms thereof in effect, the "Credit Agreement") and is
entitled to the benefits thereof and shall be subject to the provisions thereof.
This Note is also entitled to the benefits of the Security Documents (as defined
in the Credit Agreement). As provided in the Credit Agreement, this Note is
subject to mandatory and voluntary prepayment, in whole or in part.
In case an Event of Default (as defined in the Credit Agreement)
shall occur and be continuing, the principal of and accrued interest on this
Note may be declared to be due and payable in the manner and with the effect
provided in the Credit Agreement.
The Borrower hereby waives presentment, demand, protest or notice of
any kind in connection with this Note.
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<PAGE>
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All borrowings evidenced by this Note and all payments and
prepayments of the principal hereof and interest hereon and the respective dates
thereof shall be endorsed by the holder hereof on the schedule attached hereto
and made a part hereof, or on a continuation thereof which shall be attached
hereto and made a part hereof, or otherwise recorded by such holder in its
internal records; provided, however, that the failure of the holder hereof to
make such an endorsement or recordation or any error in such an endorsement or
recordation shall not affect the obligations of the Borrower to make payments
when due of any amounts owing under the Credit Agreement or under this Note.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
THE PRINCIPLES OF CONFLICTS OF LAW.
CARSON PRODUCTS COMPANY
By
Name:
Title:
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<PAGE>
TRANSACTIONS
ON
A TERM NOTE
Principal Amount of Outstanding
Type of Amount of Duration Principal or Principal
Loan Made Loan Made Interest of Interest Interest Paid
Date This Date This Date Rate Period This Date
Balance Notation
This Date Made By
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<PAGE>
Exhibit B-2 to the
Credit Agreement
B TERM NOTE
CARSON PRODUCTS COMPANY
New York, New York
U.S. $ , 1996
FOR VALUE RECEIVED, CARSON PRODUCTS COMPANY, a Delaware corporation
(the "Borrower"), hereby promises to pay to the order of (the "Bank"), in lawful
money of the United States of America in immediately available funds, at the
office of Banque Indosuez, New York Branch, located at 1211 Avenue of the
Americas, 7th Floor, New York, New York 10036 or as otherwise designated
pursuant to the Credit Agreement (which is hereinafter defined), on the Final B
Term Loan Maturity Date (as defined in the Credit Agreement), the principal sum
of
AND /100 U.S. DOLLARS
($ ) or, if less, the unpaid principal amount of the B Term Loans (as defined in
the Credit Agreement) made by the Bank pursuant to the Credit Agreement.
The Borrower also promises to pay interest on the unpaid principal
amount hereof in like money at said office from the date hereof until paid at
the rates and at the times provided in the Credit Agreement.
This Note is one of the B Term Notes referred to in the Credit
Agreement, dated as of October 18, 1996, among the Borrower, the Bank and the
other lending institutions party thereto and Banque Indosuez, New York Branch,
as Agent (as amended, amended and restated, supplemented or otherwise modified
in accordance with the terms thereof in effect, the "Credit Agreement") and is
entitled to the benefits thereof and shall be subject to the provisions thereof.
This Note is also entitled to the benefits of the Security Documents (as defined
in the Credit Agreement). As provided in the Credit Agreement, this Note is
subject to mandatory and voluntary prepayment, in whole or in part.
In case an Event of Default (as defined in the Credit Agreement)
shall occur and be continuing, the principal of and accrued interest on this
Note may be declared to be due and payable in the manner and with the effect
provided in the Credit Agreement.
The Borrower hereby waives presentment, demand, protest or notice of
any kind in connection with this Note.
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<PAGE>
-2-
All borrowings evidenced by this Note and all payments and
prepayments of the principal hereof and interest hereon and the respective dates
thereof shall be endorsed by the holder hereof on the schedule attached hereto
and made a part hereof, or on a continuation thereof which shall be attached
hereto and made a part hereof, or otherwise recorded by such holder in its
internal records; provided, however, that the failure of the holder hereof to
make such an endorsement or recordation or any error in such an endorsement or
recordation shall not affect the obligations of the Borrower to make payments
when due of any amounts owing under the Credit Agreement or under this Note.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
THE PRINCIPLES OF CONFLICTS OF LAW.
CARSON PRODUCTS COMPANY
By
Name:
Title:
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<PAGE>
TRANSACTIONS
ON
B TERM NOTE
Principal Amount of
Type of Amount of Duration Principal or
Loan Made Loan Made Interest of Interest Interest Paid n
Date This Date This Date Rate Period This Date
Outstanding
Principal
Balance Notatio
This Date Made By
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<PAGE>
Exhibit D to the
Credit Agreement
This instrument prepared by and, after recording, please
return to:
Jonathan I. Mark, Esq.
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
TERM LOAN AND REVOLVING CREDIT DEED TO SECURE DEBT,
ASSIGNMENT OF LEASES AND SECURITY AGREEMENT
BY
CARSON PRODUCTS COMPANY
(formerly known as Aminco, Inc.),
Grantor,
TO
BANQUE INDOSUEZ, NEW YORK BRANCH,
as Collateral Agent,
Beneficiary
Relating to Premises in:
Savannah, Chatham County, Georgia
$40,000,000
Dated as of: October 18, 1996
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<PAGE>
TABLE OF CONTENTS
Section Heading Page
INTRODUCTION............................................................ 1
RECITALS................................................................ 1
GRANTING CLAUSES........................................................ 2
COVENANTS............................................................... 5
ARTICLE I WARRANTIES, REPRESENTATIONS AND
COVENANTS OF GRANTOR
1.1 Payment........................................................ 5
1.2 Authority and Validity......................................... 5
1.3 Good Title..................................................... 6
1.4 Recording Documentation To Assure
Security Interest; Fees and Expenses......................... 7
1.5 Payment of Taxes, Insurance Premiums,
Assessments; Compliance with Law and
Insurance Requirements....................................... 8
1.6 Certain Tax Law Changes........................................ 11
1.7 Required Insurance Policies.................................... 12
1.8 Failure To Make Certain Payments............................... 15
1.9 Inspection..................................................... 16
1.10 Grantor To Maintain Improvements............................... 16
1.11 Grantor's Obligations with Respect to Leases................... 17
1.12 Transfer Restrictions and Liens................................ 20
1.13 Destruction; Condemnation...................................... 20
1.14 Alterations.................................................... 25
1.15 Hazardous Material............................................. 25
1.16 Asbestos....................................................... 27
1.17 Books and Records; Other Information........................... 27
1.18 No Claims Against Beneficiary.................................. 28
1.19 Utility Services............................................... 28
ARTICLE II ASSIGNMENT OF LEASES; SECURITY
AGREEMENT; ASSIGNMENT AGREEMENT
2.1 Assignment of Leases, Rents, Issues
and Profits.................................................. 29
2.2 Security Interest in Fixtures.................................. 31
ARTICLE III EVENTS OF DEFAULT AND REMEDIES
3.1 Events of Default.............................................. 32
3.2 Remedies in Case of an Event of Default........................ 32
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Section Heading Page
3.3 Sale of Mortgaged Property if Event of
Default Occurs; Proceeds of Sale............................. 34
3.4 Additional Remedies in Case of an Event of Default............. 37
3.5 Legal Proceedings After an Event of Default.................... 38
3.6 Remedies Not Exclusive......................................... 39
ARTICLE IV CERTAIN DEFINITIONS......................................... 40
ARTICLE V MISCELLANEOUS
5.1 Severability of Provisions..................................... 41
5.2 Notices........................................................ 41
5.3 Covenants To Run with the Land................................. 41
5.4 Headings....................................................... 41
5.5 Limitation on Interest Payable................................. 41
5.6 Governing Law; Submission to Jurisdiction;
Venue........................................................ 42
5.7 No Merger...................................................... 43
5.8 Modification in Writing........................................ 43
5.9 No Credit for Payment of Taxes or Impositions.................. 43
5.10 Stamp and Other Taxes.......................................... 43
5.11 Estoppel Certificates.......................................... 43
5.12 Additional Security............................................ 44
5.13 Release........................................................ 44
5.14 Certain Expenses of Beneficiary................................ 44
5.15 Expenses of Collection......................................... 45
5.16 Business Days.................................................. 45
5.17 Relationship................................................... 45
5.18 Reconveyance Upon Payment of Secured Obligations............... 46
5.19 Concerning Beneficiary......................................... 46
5.20 Future Advances................................................ 47
5.21 Waiver of Stay................................................. 47
5.22 Continuing Security Interest; Assignment....................... 48
5.23 Obligations Absolute........................................... 48
5.24 Beneficiary's Right to Sever Indebtedness...................... 49
SIGNATURES
SCHEDULE A LEGAL DESCRIPTION
SCHEDULE B PRIOR LIENS
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TERM LOAN AND REVOLVING CREDIT DEED TO SECURE DEBT,
ASSIGNMENT OF LEASES AND SECURITY AGREEMENT
TERM LOAN AND REVOLVING CREDIT DEED TO SECURE DEBT, ASSIGNMENT OF
LEASES AND SECURITY AGREEMENT ("Deed to Secure Debt"), dated as of October 18,
1996, made by CARSON PRODUCTS COMPANY (formerly known as Aminco, Inc., as
successor by merger to DNL Savannah Acquisition Corp.), a Delaware corporation,
having an office at 64 Ross Road, Savannah, Georgia 31405, as grantor, assignor
and debtor (in such capacities and together with any successors in such
capacities, "Grantor"), to BANQUE INDOSUEZ, NEW YORK BRANCH, having an office at
1211 Avenue of the Americas, 7th Floor, New York, New York 10036, as
beneficiary, assignee and secured party (in such capacities and together with
any successors in such capacities, "Beneficiary") as collateral agent for the
lending institutions (the "Banks") from time to time party to the Credit
Agreement (as hereinafter defined).
R E C I T A L S :
A. Pursuant to a certain credit agreement, dated as of the date
hereof (as amended, amended and restated, supplemented, or otherwise modified
from time to time, the "Credit Agreement"; capitalized terms used herein and not
defined shall have the meanings assigned to them in the Credit Agreement), among
Grantor, the Banks and Banque Indosuez, New York Branch, as Agent for the Banks,
the Banks have agreed (i) to make to or for the account of Grantor certain A
Term Loans up to an aggregate principal amount of $15,000,000 that mature on the
last Business Day of September, 2002, certain B Term Loans up to an aggregate
principal amount of $10,000,000 that mature on the last Business Day of
September, 2003 and certain Revolving Loans up to an aggregate principal amount
of $15,000,000 that mature on the last Business Day of September, 2002 and (ii)
to issue certain Letters of Credit for the account of Grantor.
B. It is contemplated that Grantor may enter into one or more
agreements with one or more of the Banks ("Interest Rate Agreements") fixing the
interest rates with respect to Loans under the Credit Agreement (all obligations
of Grantor now existing or hereafter arising under such Interest Rate
Agreements, collectively, the "Interest Rate Obligations").
C. Grantor is the owner of the Mortgaged Property (as
hereinafter defined).
D. It is a condition to the obligations of the Banks to
make the Loans under the Credit Agreement and a condition to any
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Bank issuing Letters of Credit under the Credit Agreement or entering into the
Interest Rate Agreements that Grantor execute and deliver the applicable Credit
Documents, including this Deed to Secure Debt.
E. This Deed to Secure Debt is given by Grantor in favor of
Beneficiary for its benefit and the benefit of the Banks and the Agent
(collectively, the "Secured Parties") to secure the payment and performance in
full when due, whether at stated maturity, by acceleration or otherwise
(including, without limitation, the payment of interest and other amounts which
would accrue and become due but for the filing of a petition in bankruptcy or
the operation of the automatic stay under Section 362(a) of the Bankruptcy Code,
11 U.S.C. ss. 362(a)), of (i) all Obligations of Grantor now existing or
hereafter arising under the Credit Agreement and all Interest Rate Obligations
of Grantor now existing or hereafter arising under any Interest Rate Agreement
(including, without limitation, Grantor's obligation provided for therein to pay
principal, interest and all other charges, fees, expenses, commissions,
reimbursements, premiums, indemnities and other payments related to or in
respect of the Obligations contained in the Credit Agreement and the obligations
contained in any Interest Rate Agreement), and (ii) without duplication of the
amounts described in clause (i), all Obligations of Grantor now existing or
hereafter arising under this Deed to Secure Debt or any other Security Document,
including, without limitation, with respect to all charges, fees, expenses,
commissions, reimbursements, premiums, indemnities and other payments that
Grantor is obligated to pay under this Deed to Secure Debt or any other Security
Document (the obligations described in clauses (i) and (ii), collectively, the
"Secured Obligations").
G R A N T I N G C L A U S E S :
For and in consideration of the sum of Ten Dollars ($10.00) and
other valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Grantor does hereby pledge, give, grant, sell, convey and transfer
to Beneficiary, its successors and assigns, with powers of sale, for the use and
benefit of Beneficiary, all Grantor's right, title and interest in and to the
following property, whether now owned or held or hereafter acquired
(collectively, the "Mortgaged Property"):
A. Any and all present estates or interest of Grantor
in the land described in Schedule A, together with all Grantor's
reversionary rights in and to any and all easements, rights-of-way,
sidewalks, strips and gores of land, drives, roads, curbs, streets,
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ways, alleys, passages, passageways, sewer rights, waters, water courses, water
rights, and all power, air, light and other rights, estates, titles, interests,
privileges, liberties, servitudes, licenses, tenements, hereditaments and
appurtenances whatsoever, in any way belonging, relating or appertaining
thereto, or any part thereof, or which hereafter shall in any way belong, relate
or be appurtenant thereto (collectively, the "Land");
B. Any and all estates or interests of Grantor in the buildings,
structures and other improvements and any and all Alterations (as hereinafter
defined) now or hereafter located or erected on the Land, including, without
limitation, attachments, walks and ways (collectively, the "Improvements";
together with the Land, the "Premises");
C. Any and all permits, certificates, approvals and authorizations,
however characterized, issued or in any way furnished in connection with the
Premises to the extent assignable, whether necessary or not for the operation
and use of the Premises, including, without limitation, building permits,
certificates of occupancy, environmental certificates, industrial permits or
licenses and certificates of operation;
D. Any and all interest of Grantor in all machinery, apparatus,
equipment, fittings, fixtures, improvements and articles of personal property of
every kind and nature whatsoever now or hereafter attached or affixed to the
Premises or used in connection with the use and enjoyment of the Premises or the
maintenance or preservation thereof, including, without limitation, all utility
systems, fire sprinkler and alarm systems, HVAC equipment, boilers, electronic
data processing, telecommunications or computer equipment, refrigeration,
electronic monitoring, water or lighting systems, power, sanitation, waste
removal, elevators, maintenance or other systems or equipment, and all other
articles used or useful in connection with the use or operation of any part of
the Premises, all to the extent the same constitute "fixtures" as such term is
defined in the UCC as in effect in the State of Georgia (collectively, the
"Equipment");
E. All Grantor's right, title and interest as landlord, licensor or
grantor, in all leases and subleases of space, licenses, occupancy or concession
agreements now existing or hereafter entered into relating in any manner to the
Premises or the Equipment and any and all amendments, modifications, supplements
and renewals of any thereof (each such lease, license or agreement, together
with any such amendment, modification, supplement or renewal, a "Lease"),
whether now in effect or hereafter coming into effect, including, without
limitation, all
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rents, additional rents, cash, guaranties, letters of credit, bonds, sureties or
securities deposited thereunder to secure performance of the lessee's,
licensee's or obligee's obligations thereunder, revenues, earnings, profits and
income, advance rental payments, payments incident to assignment, sublease or
surrender of a Lease, claims for forfeited deposits and claims for damages, now
due or hereafter to become due, with respect to any Lease, any indemnification
against, or reimbursement for, sums paid and costs and expenses incurred by
Grantor under any Lease or otherwise, and any award in the event of the
bankruptcy of any tenant under or guarantor of a Lease (collectively, the
"Rents");
F. All general intangibles and contract rights relating
to the Premises and the Equipment and all reserves, deferred
payments, deposits, refunds and claims of every kind or character
relating thereto (collectively, the "Contract Rights");
G. All drawings, plans, specifications, file materials, operating
and maintenance records, catalogues, tenant lists, correspondence, advertising
materials, operating manuals, warranties, guaranties, appraisals, studies and
data relating to the Premises or the Equipment or the construction of any
Alteration or the maintenance of any Permit (as hereinafter defined); and
H. All proceeds of the conversion, voluntary or involuntary, of any
of the foregoing into cash or liquidated claims, including, without limitation,
proceeds of insurance and condemnation or other awards or payments and refunds
of real estate taxes and assessments, including interest thereon (collectively,
"Proceeds");
TO HAVE AND TO HOLD the Mortgaged Property together with the rights,
privileges and appurtenances thereto belonging unto Beneficiary, for the benefit
of Beneficiary and Beneficiary's successors and assigns forever, for the purpose
of securing payment and performance by Grantor of the Secured Obligations, and
Grantor hereby binds itself and its successors and assigns to warrant and
forever defend the Mortgaged Property unto Beneficiary, its substitutes,
successors and assigns, as the case may be, against the claim or claims of all
persons claiming or to claim the same or any part thereof. This Deed to Secure
Debt is a deed passing legal title pursuant to the laws of the State of Georgia
governing loan or security deeds and security agreements and is not a mortgage
as such term is defined under such laws.
C O V E N A N T S :
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Grantor warrants, represents and covenants to and for the benefit of
Beneficiary as follows:
ARTICLE I.
WARRANTIES, REPRESENTATIONS AND
COVENANTS OF GRANTOR
SECTION 1.1 Payment. Grantor shall pay as and when the same shall
become due, whether at its stated maturity, by acceleration or otherwise, each
and every amount payable by Grantor under the Credit Documents and the Interest
Rate Agreements.
SECTION 1.2 Authority and Validity. Grantor represents, warrants and
covenants that (i) Grantor is duly authorized to execute and deliver this Deed
to Secure Debt, and all corporate and governmental consents, authorizations and
approvals necessary or required therefor have been duly and effectively taken or
obtained, (ii) this Deed to Secure Debt is a legal, valid, binding and
enforceable obligation of Grantor, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or affecting
creditors' rights generally and except as such enforceability may be limited by
the application of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law) and (iii)
Grantor has full corporate power and lawful authority to execute and deliver
this Deed to Secure Debt and to convey and grant a security interest in the
Mortgaged Property as contemplated herein.
SECTION 1.3 Good Title.
1.3.1 Grantor represents, warrants and covenants that (i) Grantor
has good and marketable fee simple title to the Premises and the landlord's
interest and estate under or in respect of the Leases and good title to the
interest it purports to own in and to each of the Permits, the Equipment and the
Contract Rights, in each case subject to no deed of trust, mortgage, deed to
secure debt, pledge, security interest, encumbrance, lien, lease, license,
easement, assignment, collateral assignment or charge of any kind, including,
without limitation, any conditional sale or other title retention agreement or
lease in the nature thereof, any filing or agreement to file a financing
statement as debtor under the Uniform Commercial Code or any similar statute or
any subordination arrangement in favor of any party other than Grantor
(collectively, "Liens"; each, a "Lien"), except for those Liens identified on
Schedule B hereto (collectively, the "Prior Liens"), (ii) Grantor will keep in
effect all rights and appurtenances to or that
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constitute a part of the Mortgaged Property the failure to maintain which would
have a material adverse effect upon the interests of Beneficiary under this Deed
to Secure Debt or upon the value of the Mortgaged Property (a "Material Adverse
Effect"), (iii) Grantor will protect, preserve and defend its interest in the
Mortgaged Property and title thereto, provided that the failure to preserve such
interest would have a Material Adverse Effect, (iv) Grantor will comply with
each of the terms, conditions and provisions of any obligation of Grantor which
is secured by the Mortgaged Property, the noncompliance with which might
reasonably be expected to result in the imposition of a Lien on the Mortgaged
Property, which Lien is not permitted pursuant to the terms hereof, (v) Grantor
will appear and defend the Lien and security interests created and evidenced
hereby and the validity and priority of this Deed to Secure Debt (subject to
Prior Liens) in any action or proceeding affecting or purporting to affect the
Mortgaged Property or any of the rights of Beneficiary hereunder, (vi) this Deed
to Secure Debt creates and constitutes a valid and enforceable first Lien on the
Mortgaged Property, which first Lien is and will be subject only to (a) Prior
Liens (but not to extensions, amendments, supplements or replacements of Prior
Liens unless consented to by Beneficiary) and (b) Liens hereafter created and
which, pursuant to the provisions of Section 1.12, are superior to the Lien and
security interests created and evidenced hereby, and Grantor does now and will
forever warrant and defend to Beneficiary and all its successors and assigns
such title and the validity and priority of the Lien and security interests
created and evidenced hereby against the claims of all persons and parties
whomsoever and (vii) there has been issued and there remain in effect each and
every certificate of occupancy or use or other Permit currently required for the
existing use and occupancy by Grantor which if not obtained or maintained would
have a Material Adverse Effect.
1.3.2 Grantor, immediately upon obtaining actual knowledge of the
pendency of any proceedings for the eviction of Grantor from the Mortgaged
Property or any part thereof by paramount title or otherwise questioning
Grantor's title to the Mortgaged Property as warranted in this Deed to Secure
Debt, or of any condition that might reasonably be expected to give rise to any
such proceedings, shall notify Beneficiary thereof. Beneficiary may participate
in such proceedings, and Grantor will deliver or cause to be delivered to
Beneficiary all instruments reasonably requested by Beneficiary to permit such
participation. In any such proceedings Beneficiary may be represented by counsel
reasonably satisfactory to Beneficiary at the reasonable expense of Grantor. If,
upon the resolution of such proceedings, Grantor shall suffer a loss of the
Mortgaged Property or any part thereof or interest therein and title insurance
proceeds shall be payable in connection
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therewith, such proceeds are hereby assigned to and shall be paid to Beneficiary
to be applied to the payment of the Secured Obligations in accordance with the
provisions of Section 3.02(B)(a) of the Credit Agreement.
SECTION 1.4 Recording Documentation To Assure Security
Interest; Fees and Expenses.
1.4.1 Grantor shall, forthwith after the execution and delivery of
this Deed to Secure Debt and thereafter, from time to time, cause this Deed to
Secure Debt and any financing statement, continuation statement or similar
instrument relating to any thereof or to any property intended to be subject to
the Lien of this Deed to Secure Debt to be filed, registered and recorded in
such manner and in such places as may be required by any present or future law
in order to publish notice of and fully to protect the validity and priority
thereof or the Lien hereof purported to be created upon the Mortgaged Property
and the interest and rights of Beneficiary therein. Grantor shall pay or cause
to be paid all taxes and fees incident to such filing, registration and
recording, and all reasonable expenses incident to the preparation, execution
and acknowledgment thereof, and of any instrument of further assurance, and all
Federal or state stamp taxes or other taxes, duties and charges arising out of
or in connection with the execution and delivery of such instruments.
1.4.2 Grantor shall, at the sole cost and expense of Grantor, do,
execute, acknowledge and deliver all and every such further acts, deeds,
conveyances, mortgages, assignments, notices of assignment, transfers, financing
statements, continuation statements and assurances as Beneficiary shall from
time to time reasonably request, which may be necessary in the reasonable
judgment of Beneficiary from time to time to assure, perfect, convey, assign,
mortgage, transfer and confirm unto Beneficiary, the property and rights hereby
conveyed or assigned or which Grantor may be or may hereafter become bound to
convey or assign to Beneficiary or for carrying out the intention or
facilitating the performance of the terms of this Deed to Secure Debt or the
filing, registering or recording of this Deed to Secure Debt. In the event
Grantor shall fail after demand to execute any instrument reasonably requested
to be executed by Grantor under this subsection 1.4.2, Beneficiary may execute
the same as the attorney-in-fact for Grantor, such power of attorney being
coupled with an interest and irrevocable.
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SECTION 1.5 Payment of Taxes, Insurance Premiums, Assessments;
Compliance with Law and Insurance Requirements.
1.5.1 Unless and to the extent contested by Grantor in accordance
with the provisions of subsection 1.5.5 hereof, Grantor shall pay and discharge,
or cause to be paid and discharged, from time to time prior to the date on which
material penalties attach thereto, all real estate and other material taxes,
special assessments, levies, permits, inspection and license fees, all premiums
for insurance, all water and sewer rents and charges and all other public
charges imposed upon or assessed against or in respect of the Mortgaged Property
or any part thereof or upon the Rents. Grantor shall, upon Beneficiary's
reasonable request, deliver to Beneficiary, receipts evidencing the payment of
all such taxes, assessments, levies, fees, rents and other public charges
imposed upon or assessed against the Mortgaged Property or any part thereof or
the Rents.
1.5.2 From and after the occurrence and during the continuance of an
Event of Default (as hereinafter defined), at the option and upon the request of
Beneficiary, Grantor shall deposit with Beneficiary, on the first day of each
month, an amount estimated by Beneficiary to be equal to one-twelfth of the
annual taxes, assessments and other items required to be discharged by Grantor
under subsection 1.5.1. Such amounts shall be held by Beneficiary without
interest to Grantor and applied to the payment of the obligations in respect of
which such amounts were deposited, in such priority as Beneficiary shall
determine, on or before the respective dates on which such obligations or any
part thereof would become delinquent. Nothing contained in this Section 1.5
shall (i) affect any right or remedy of Beneficiary under any provision of this
Deed to Secure Debt or of any statute or rule of law following an Event of
Default to pay any such amount as provided above from its own funds and to add
the amount so paid, together with interest at a rate per annum (the "Default
Rate") equal to the highest rate then payable under the Credit Agreement during
such time that any amount remains outstanding, to the Secured Obligations or
(ii) relieve Grantor of its obligations to make or provide for the payment of
the annual taxes, assessments and other charges required to be discharged by
Grantor under subsection 1.5.1. Grantor hereby grants to Beneficiary a security
interest in all sums held pursuant to this subsection 1.5.2 to secure payment
and performance of the Secured Obligations. During the continuance of any Event
of Default, Beneficiary may, at its option, apply all or any part of the sums
held pursuant to this subsection 1.5.2 to payment and performance of the Secured
Obligations. Grantor shall redeposit with Beneficiary an amount equal to all
amounts so applied as a condition to the cure, if any,
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of such Event of Default in addition to fulfillment of any other
required conditions.
1.5.3 Unless and to the extent contested by Grantor in accordance
with the provisions of subsection 1.5.5, Grantor shall timely pay, or cause to
be paid, all lawful claims and demands of mechanics, materialmen, laborers,
government agencies administering worker's compensation insurance, old age
pensions and social security benefits and all other claims, judgments, demands
or amounts of any nature which, if unpaid, might reasonably be expected to
result in, or permit the creation of, a Lien on the Mortgaged Property or any
part thereof, or on the Rents (other than Liens permitted pursuant to the terms
hereof) or which might reasonably be expected to result in forfeiture of all or
any part of the Mortgaged Property.
1.5.4 Grantor shall maintain, or cause to be maintained, in full
force and effect all permits, certificates, authorizations, consents, approvals,
licenses, franchises or other instruments now or hereafter required by any
Governmental Authority to operate or use and occupy the Premises and the
Equipment in the manner and for the purposes operated by Grantor, or which
Grantor otherwise deems necessary or appropriate in its commercially reasonable
judgment (collectively, "Permits"; each, a "Permit"), except where the failure
to maintain such Permit would not reasonably be expected to have a Material
Adverse Effect. Unless and to the extent contested by Grantor in accordance with
the provisions of subsection 1.5.5 hereof, Grantor shall comply with all
material requirements set forth in the Permits and all requirements of any law,
ordinance, rule, regulation or similar statute or case law (collectively,
"Requirements of Law") of any Governmental Authority applicable to all or any
part of the Mortgaged Property or the condition, use or occupancy of all or any
part thereof or any recorded deed of restriction, declaration, covenant running
with the land or otherwise, now or hereafter in force, except where the failure
to comply with such Requirements of Law would not reasonably be expected to have
a Material Adverse Effect. Grantor shall not initiate, join in, or consent to
any change in the zoning or any other permitted use classification of the
Premises without the prior written consent of Beneficiary, which consent will
not be unreasonably withheld or delayed.
1.5.5 Grantor may at its own expense contest the amount or
applicability of any of the obligations described in subsections 1.5.1, 1.5.3 or
1.5.4 by appropriate legal proceedings, prosecution of which operates to prevent
the collection or enforcement thereof and the sale or forfeiture of the
Mortgaged Property or any part thereof to satisfy such obligations; provided,
however, that in
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connection with such contest, Grantor shall have made provision for the payment
or performance of such contested obligation on Grantor's books if and to the
extent required by GAAP. Notwithstanding the foregoing provisions of this
subsection 1.5.5, (i) no contest of any such obligations may be pursued by
Grantor if such contest would expose Beneficiary or any Bank to any possible
criminal liability or, unless Grantor shall have furnished a bond or other
security therefor reasonably satisfactory to Beneficiary or such Bank, as the
case may be, any additional civil liability for failure to comply with such
obligations and (ii) if at any time payment or performance of any obligation
contested by Grantor pursuant to this subsection 1.5.5 shall become necessary to
prevent the delivery of a tax or similar deed conveying the Mortgaged Property
or any portion thereof because of nonpayment or nonperformance, Grantor shall
pay or perform the same, in sufficient time to prevent the delivery of such tax
or similar deed or such termination or forfeiture.
1.5.6 Grantor shall not take any action that could be the basis for
termination, revocation or denial of any insurance coverage required to be
maintained under this Deed to Secure Debt or that could be the basis for a
defense to any claim under any insurance policy maintained in respect of the
Premises or the Equipment and Grantor shall otherwise comply in all respects
with the requirements of any insurer that issues a policy of insurance in
respect of the Premises or the Equipment; provided, however, that Grantor may,
at its own expense and after notice to Beneficiary, (i) contest the
applicability or enforceability of any such requirements by appropriate legal
proceedings, prosecution of which does not constitute a basis for cancellation
or revocation of any insurance coverage required under Section 1.7 hereof or
(ii) cause the insurance policy containing any such requirement to be replaced
by a new policy complying with the provisions of Section 1.7.
1.5.7 Grantor shall, promptly upon receipt of any written notice
regarding any failure by Grantor to pay or discharge any of the obligations
described in subsection 1.5.1, 1.5.3, 1.5.4 or 1.5.6, furnish a copy of such
notice to Beneficiary.
1.5.8 In the event that the proceeds of any tax claim are paid after
Beneficiary has exercised its right to foreclose the Lien of this Deed to Secure
Debt, such proceeds shall be paid to Beneficiary to satisfy any deficiency
remaining after such foreclosure. Beneficiary shall retain its interest in the
proceeds of any tax claim during any redemption period. The amount of any such
proceeds in excess of any deficiency claim of Beneficiary shall reasonably
promptly be released to Grantor.
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SECTION 1.6 Certain Tax Law Changes. In the event of the passage
after the date of this Deed to Secure Debt of any law deducting from the value
of real property, for the purpose of taxation, amounts in respect of any Lien
thereon or changing in any way the laws for the taxation of mortgages or debts
secured by mortgages for state or local purposes or the manner of the collection
of any such taxes (excluding therefrom taxes on income), and imposing a tax,
either directly or indirectly, on this Deed to Secure Debt, any Interest Rate
Agreement or any other Credit Document that is payable by Beneficiary, Grantor
shall promptly pay to Beneficiary such amount or amounts as may be necessary
from time to time to pay such tax.
SECTION 1.7 Required Insurance Policies.
1.7.1 Grantor shall maintain in respect of the Premises and the
Equipment the following insurance coverages:
(i) Physical hazard insurance on an "all risk" basis covering,
without limitation, hazards commonly covered by fire and extended
coverage, lightning, windstorm, civil commotion, hail, riot, strike, water
damage, sprinkler leakage, collapse and malicious mischief, in an amount
equal to the full replacement cost of the Improvements and all Equipment,
with such deductibles as Beneficiary may from time to time reasonably
require, and, if Beneficiary shall not have imposed any such requirements,
with such deductibles as would be maintained by a prudent operator of
property similar in use and configuration to the Premises and located in
the locality where the Premises are located. "Full replacement cost" means
the Cost of Construction (as hereinafter defined) to replace the
Improvements and the Equipment, exclusive of depreciation, excavation,
foundation and footings, as determined from time to time (but not less
frequently than once every twelve (12) months) by a Person selected by
Grantor and reasonably acceptable to Beneficiary, such determination to be
based upon the appraisals delivered to Beneficiary pursuant to Section
4.01(L)(iii) of the Credit Agreement, with appropriate updates for
capitalized additions, deletions, industry trends and other factors;
(ii) Comprehensive general liability insurance against claims for
bodily injury, death or property damage occurring on, in or about the
Premises and any adjoining streets, sidewalks and passageways, and
covering any and all claims, including, without limitation, all legal
liability to the extent insurable imposed upon Beneficiary and all court
costs and attorneys' fees, arising out of or connected with the
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possession, use, leasing, operation or condition of the Premises with
policy limits and deductibles in such amounts as Beneficiary may from time
to time reasonably require, and, if Beneficiary shall not have imposed any
such requirements, in such amounts as from time to time would be
maintained by a prudent operator of property similar in use and
configuration to the Premises and located in the locality where the
Premises are located;
(iii) Worker's compensation insurance as required by the laws of the
state where the Premises are located to protect Grantor against claims for
injuries sustained in the course of employment at the Premises;
(iv) Explosion insurance in respect of any boilers and similar
apparatus located on the Premises or comprising any Equipment, with policy
limits and deductibles in such amounts as Beneficiary may from time to
time reasonably require, and, if Beneficiary shall not have imposed any
such requirements, in such amounts as would be maintained by a prudent
operator of property similar in use and configuration to the Premises and
the Equipment and located in the locality where the Premises and Equipment
are located;
(v) Business interruption insurance and/or "loss of rents"
insurance covering one year of loss, the term "loss of rents" to mean the
total estimated gross rental income from tenant occupation of the
Improvements as furnished and equipped under Leases;
(vi) If the Premises are located in an area identified by the
Federal Emergency Management Agency as an area having special flood
hazards pursuant to the National Flood Insurance Act of 1968 or the Flood
Disaster Protection Act of 1973, each as amended, or any successor laws,
flood insurance with policy limits and deductibles in such amounts as
Beneficiary may from time to time reasonably require, and, if Beneficiary
shall not have imposed any such requirements, in such amounts as would be
maintained by a prudent operator of property similar in use and
configuration to the Premises and located in the locality where the
Premises are located; and
(vii) Such other insurance, against such risks and with policy limits
and deductibles in such amounts as Beneficiary may from time to time
reasonably require, and, if no such requirements shall have been imposed,
in such amounts as would be maintained by a prudent operator of property
similar in use
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and configuration to the Premises and located in the locality
where the Premises are located.
1.7.2 All insurance policies required by this Section 1.7 shall be
in form reasonably satisfactory to Beneficiary. All insurance policies in
respect of the coverages required by subsections 1.7.1(i), 1.7.1(iv), 1.7.1(v),
1.7.1(vi) and, if applicable, 1.7.1(vii), shall be in amounts at least
sufficient to prevent coinsurance liability, and all losses thereunder shall be
payable to Beneficiary, as loss payee, pursuant to a standard non-contributory
New York mortgagee endorsement. All insurance policies in respect of the
coverages required by subsections 1.7.1(ii) and, if applicable, 1.7.1(vii) shall
name Beneficiary as an additional insured. Each policy of insurance required
under this Section 1.7 shall provide that it may not be modified, reduced,
cancelled or otherwise terminated without at least thirty (30) days' prior
written notice to Beneficiary and shall permit Beneficiary to pay any premium
therefor within thirty (30) days after receipt of any notice stating that such
premium has not been paid when due. All insurance policies required hereunder
shall provide that all losses thereunder shall be payable notwithstanding any
act or negligence of Grantor or its agents or employees which otherwise might
have resulted in a forfeiture of all or a part of such insurance payments. The
policy or policies of such insurance or certificates of insurance evidencing the
required coverages, and all renewals or extensions thereof, shall be delivered
to Beneficiary on the Closing Date. Settlement of any claim under any of the
insurance policies referred to in this Section 1.7, if such claim involves (in
the reasonable judgment of Beneficiary) loss in excess of $500,000 or more,
shall require the prior written approval of Beneficiary, which approval shall
not be unreasonably withheld or delayed, and Grantor shall use reasonable
efforts to cause each such policy to contain a provision to such effect.
1.7.3 At least ten (10) days prior to the expiration of any
insurance policy required by this Section 1.7, a policy or policies renewing or
extending such expiring policy or renewal or extension certificates or other
reasonable evidence of renewal or extension and reasonable evidence that the
applicable policies are in full force and effect shall be delivered to
Beneficiary.
1.7.4 Grantor shall not purchase separate insurance policies
concurrent in form or contributing in the event of loss with those policies
required to be maintained under this Section 1.7, unless (to the extent such
coverage may be obtained under applicable law) Beneficiary is included thereon
as a named insured and, if applicable, with loss payable to Beneficiary under an
endorsement containing the provisions described in subsection
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1.7.2. Grantor shall immediately notify Beneficiary whenever any such separate
insurance policy is obtained and shall promptly deliver to Beneficiary the
policy or certificate evidencing such insurance.
1.7.5 Grantor shall, immediately upon receipt of any written notice
of any failure by Grantor to pay any insurance premium in respect of any
insurance policy required to be maintained under this Section 1.7, furnish a
copy of such notice to Beneficiary.
1.7.6 In the event that the proceeds of any insurance claim are paid
after Beneficiary has exercised its right to foreclose the Lien of this Deed to
Secure Debt, such proceeds shall be paid to Beneficiary to satisfy any
deficiency remaining after such foreclosure. Beneficiary shall retain its
interest in the policies of insurance required to be maintained pursuant to this
Deed to Secure Debt during any redemption period. The amount of any such
proceeds in excess of any deficiency claim of Beneficiary shall reasonably
promptly be released to Grantor.
SECTION 1.8 Failure To Make Certain Payments. If Grantor shall fail
to perform any of the covenants contained in this Deed to Secure Debt,
including, without limitation, Grantor's covenants to (i) pay the premiums in
respect of all required insurance coverages, (ii) pay taxes and assessments,
(iii) make repairs, (iv) discharge liens and encumbrances or (v) pay or perform
any obligations of Grantor under the Leases, Beneficiary may, following five (5)
Business Days' prior written notice by Beneficiary to Grantor of its intent to
do so during which time Grantor shall not have remedied such failure, but shall
not be obligated to, make advances to perform such covenant on Grantor's behalf,
and all sums so advanced shall be included in the Secured Obligations and, to
the extent permitted by applicable law, shall be secured hereby. Grantor shall
repay on demand all sums so advanced by Beneficiary on behalf of Grantor, with
interest at the Default Rate from the date of payment by Beneficiary to the date
of reimbursement. Neither the provisions of this Section 1.8 nor any action
taken by Beneficiary pursuant to the provisions of this Section 1.8 shall
prevent any such failure to observe any covenant contained in this Deed to
Secure Debt from constituting an Event of Default. Beneficiary shall not be
bound to inquire into the validity of any tax, lien or imposition which Grantor
fails to pay as and when required hereby and which Grantor does not contest in
accordance with the terms hereof.
SECTION 1.9 Inspection. Grantor shall, upon reasonable
prior notice by Beneficiary to the chief financial officer,
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controller or any other Authorized Officer of Grantor, permit Beneficiary, by
its agents, accountants and attorneys, to visit and inspect the Premises at such
reasonable times during regular business hours and intervals and to such
reasonable extent as may be reasonably requested by Beneficiary.
SECTION 1.10 Grantor To Maintain Improvements. Grantor shall not
commit or suffer any waste on the Premises or with respect to any Equipment.
Grantor represents and warrants that (i) the Premises are served by all
utilities required or necessary for the current use thereof and (ii) Grantor has
access to the Premises from public roads sufficient to allow Grantor and its
tenants and invitees to conduct its and their businesses at the Premises in
accordance with sound commercial practices. Grantor shall, at all times,
exercise commercially reasonable efforts to maintain the Premises and Equipment
in good repair, working order and insurable condition (subject to normal wear
and tear) and shall make all repairs, structural or nonstructural, which Grantor
deems appropriate in its commercially reasonable judgment, when necessary.
Grantor shall (a) not alter the occupancy or use of all or any part of the
Premises on which Grantor is conducting its business without the prior written
consent of Beneficiary, which consent shall not be unreasonably withheld or
delayed, and (b) do all other reasonable acts which from the character or use of
the Premises and Equipment may, in the commercially reasonable opinion of
Grantor, be necessary or appropriate to maintain and preserve their value.
Grantor shall not remove, demolish or alter the structural character of any
Improvement now or hereafter erected upon all or any part of the Premises, or
permit any such removal, demolition or alteration, without the prior written
consent of Beneficiary, which consent shall not be unreasonably withheld or
delayed, except that items constituting Equipment may be removed if such removal
is temporary and for the purpose of making repairs or such items are immediately
replaced with similar items of Equipment having a value and utility for their
intended purposes that is not less than the value and such utility of the
Equipment so removed or if in the commercially reasonable opinion of Grantor
such Equipment is not necessary for the use or operation of the Premises, and
except as permitted pursuant to Section 7.13 of the Credit Agreement.
SECTION 1.11 Grantor's Obligations with Respect to Leases.
1.11.1 Subject to the provisions of subsection 1.11.2 herein,
Grantor will manage and operate the Mortgaged Property in a reasonably prudent
manner and will not without the prior written consent of Beneficiary, which
consent shall not be unreasonably
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withheld or delayed, enter into any Lease of all or any part of the Premises,
other than a Lease to an Affiliate of Grantor (which will not require the
consent of Beneficiary), which (i) interferes with the operation of Grantor's
business on the Premises, (ii) might reasonably be expected to have a Material
Adverse Effect on the value of the Premises or (iii) is for space in excess of
10,000 square feet (each, a "Material Lease").
1.11.2 Grantor shall not:
(i) receive or collect, or permit the receipt or collection of, any
rental or other payments under any Material Lease more than one month in
advance of the respective period in respect of which they are to accrue,
except that (a) in connection with the execution and delivery of any Lease
or of any amendment to any Lease, rental payments thereunder may be
collected and received in advance in an amount not in excess of one
month's rent and/or a reasonable security deposit may be required
thereunder and (b) Grantor may receive and collect escalation and other
charges in accordance with the terms of each Lease;
(ii) assign, transfer or hypothecate (other than to Beneficiary
hereunder) any rental or other payment under any Lease whether then due or
to accrue in the future, the interest of Grantor as lessor under any Lease
or the rents, issues, revenues, profits or other income of the Mortgaged
Property;
(iii) enter into any Lease after the date hereof that does not
contain terms to the effect as follows:
(a) such Lease and the rights of the tenant thereunder
(including, without limitation, any options to purchase or rights of
first offer or refusal) shall be subject and subordinate to the
rights of Beneficiary under and the Lien of this Deed to Secure
Debt;
(b) such Lease has been assigned as collateral security by
Grantor as landlord thereunder to Beneficiary under this Deed to
Secure Debt;
(c) in the case of any foreclosure hereunder, the rights and
remedies of the tenant in respect of any obligations of any
successor landlord thereunder shall be limited to the equity
interest of such successor landlord in the Premises and any
successor landlord shall not (1) be liable for any act, omission or
default of any
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prior landlord under the Lease, (2) be required to make or complete
any tenant improvements or capital improvements or repair, restore,
rebuild or replace the demised premises or any part thereof in the
event of damage, casualty or condemnation or (3) be required to pay
any amounts to tenant arising under the Lease prior to such
successor landlord taking possession;
(d) the tenant's obligation to pay rent and any additional
rent shall not be subject to any abatement, deduction, counterclaim
or setoff as against any mortgagee or purchaser upon the foreclosure
of any of the Premises or the giving or granting of a deed in lieu
thereof by reason of a landlord default occurring prior to such
foreclosure and such mortgagee or purchaser will not be bound by any
advance payments of rent in excess of one month or any security
deposits unless such security was actually received (or in the case
of a letter of credit, was properly transferred in negotiable form);
(e) the tenant agrees to attorn, at the option of Beneficiary
or any purchaser of the Premises, upon a foreclosure of the Premises
or the giving or granting of a deed in lieu thereof; and
(f) the tenant agrees to give notice to Beneficiary of any
default by landlord under the Lease and Beneficiary shall have a
reasonable time to cure, should Beneficiary so elect, any default of
landlord prior to tenant exercising any rights of tenant to
terminate or cancel such Lease.
(iv) enter into any amendment or modification of any Material Lease
which would change the unexpired term thereof or decrease the amount of
the rents or other amounts payable thereunder or materially impair the
value or utility of the Mortgaged Property or impair the security provided
by this Deed to Secure Debt;
(v) enter into any further lease or sublease of the property
subject to any Material Lease without the prior written consent of
Beneficiary, which consent shall not be unreasonably withheld or delayed,
unless such Material Lease is not amended in any material respect and the
primary obligor under such Material Lease is not released in any material
respect from its material responsibilities and liabilities under such
Material Lease as a result of such lease or sublease;
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(vi) terminate (whether by exercising any contractual right of
Grantor to recapture leased space or otherwise) or permit the termination
of any Material Lease or accept surrender of all or any portion of the
space demised under any Material Lease prior to the end of the term
thereof or accept assignment of any Material Lease to Grantor unless:
(a) the tenant under such Lease has not paid the equivalent of
two (2) months' rent and Grantor has made reasonable efforts to
collect such rent; or
(b) Grantor shall deliver to Beneficiary an Officer's
Certificate to the effect that Grantor has entered into a new Lease
(or Leases) for the space covered by the terminated or assigned
Lease with a term (or terms) which expire(s) no earlier than the
date on which the terminated or assigned Lease was to expire
(excluding renewal options), and with a tenant (or tenants) having a
creditworthiness (as reasonably determined by Grantor) sufficient to
pay the rent and other charges due under the new Lease (or Leases),
and the tenant(s) shall have commenced paying rent, including all
operating expenses and other amounts payable under the new Lease (or
Leases) without any abatement or concession; or
(vii) waive, excuse, condone or in any manner discharge or release
any tenants of or from the material obligations of such tenants under
their respective Leases or guarantors of tenants from material obligations
under any guarantees of the Leases except in the ordinary and prudent
course of business with due regard for the security afforded Beneficiary
thereby.
1.11.3 Grantor shall timely perform and observe all the material
terms, covenants and conditions required to be performed and observed by Grantor
under each Lease and shall at all times do all things reasonably necessary to
require performance by the lessee, franchisee, licensee or grantee under each
Lease of all obligations, covenants and agreements by such party to be performed
thereunder. Grantor shall promptly notify Beneficiary of the receipt of any
notice from any lessee under any Lease claiming that Grantor is in default in
the performance or observance of any of the terms, covenants or conditions
thereof to be performed or observed by Grantor and will cause a copy of each
such notice to be promptly delivered to Beneficiary.
SECTION 1.12 Transfer Restrictions and Liens. Except as
provided in Section 1.11 and as permitted pursuant to Section 7.13
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of the Credit Agreement, Grantor may not, without the prior written consent of
Beneficiary, further mortgage, encumber, hypothecate, sell, convey or assign all
or any part of the Mortgaged Property or suffer any of the foregoing to occur by
operation of law or otherwise. Notwithstanding the provisions of the foregoing
sentence, so long as no Event of Default shall have occurred and be continuing,
Grantor shall have the right to suffer, in respect of the Mortgaged Property,
(i) the Liens in respect of amounts payable or obligations to be performed by
Grantor pursuant to subsections 1.5.1, 1.5.3 and 1.5.4, provided, however, that
such amounts are not yet delinquent or are being contested in accordance with
the provisions of subsection 1.5.5 and (ii) Liens of the type described in
paragraphs (c), (e), (f), (g) and (i) of the definition of Permitted
Encumbrances. Each of the Liens and other transfers permitted by this Section
1.12 shall in all respects be subject and subordinate in priority to the Lien
and security interests created and evidenced hereby except to the extent the law
or regulation creating or authorizing such Lien provides that such Lien must be
superior to the Lien and security interest created and evidenced hereby.
SECTION 1.13 Destruction; Condemnation.
1.13.1 Destruction; Insurance Proceeds. If there shall occur any
damage to, or loss or destruction of, the Improvements, Equipment, or any part
of any thereof (each, a "Destruction"), Grantor shall promptly send to
Beneficiary a notice setting forth the nature and extent of such Destruction.
The proceeds of any insurance payable in respect of such Destruction are hereby
assigned and shall be paid to Beneficiary, provided that Grantor shall be
entitled to retain the proceeds of any insurance payable in respect of a
Destruction to the extent that the aggregate amount of any such insurance
proceeds received by Grantor in such fiscal year when added to the aggregate of
any award or payment in respect of any Taking (as hereinafter defined) received
by Grantor in such fiscal year does not exceed $500,000. All such proceeds,
together with any interest earned thereon, less the amount of any expenses
incurred in litigating, arbitrating, compromising or settling any claim arising
out of such Destruction (the "Net Proceeds"), shall be applied in accordance
with the provisions of subsections 1.13.3, 1.13.4 and 1.13.5.
1.13.2 Condemnation; Assignment of Award. If there shall occur any
taking of the Mortgaged Property or any part thereof, in or by condemnation or
other eminent domain proceedings pursuant to any law, general or special, or by
reason of the temporary requisition of the use or occupancy of the Mortgaged
Property or any part thereof, by any Governmental Authority, civil
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or military (each, a "Taking"), Grantor shall promptly notify Beneficiary upon
receiving notice of such Taking or commencement of proceedings therefor.
Beneficiary may participate in any proceedings or negotiations which might
result in any Taking, and Grantor shall deliver or cause to be delivered to
Beneficiary all instruments requested by it to permit such participation.
Beneficiary may be represented by counsel reasonably satisfactory to it at the
reasonable expense of Grantor in connection with any such participation. Grantor
shall pay all reasonable fees, costs and expenses incurred by Beneficiary in
connection with any Taking and in seeking and obtaining any award or payment on
account thereof. Any proceeds, award or payment in respect of any Taking are
hereby assigned and shall be paid to Beneficiary, provided that Grantor shall be
entitled to the award or payment payable in respect of a Taking to the extent
that the aggregate amount of any such award received by Grantor in such fiscal
year when added to the aggregate of any insurance proceeds in respect of any
Destruction received by Grantor in such fiscal year does not exceed $500,000.
Grantor shall take all steps necessary to notify the condemning authority of
such assignment. Such proceeds, award or payment, together with any interest
earned thereon, less the amount of any expenses incurred in litigating,
arbitrating, compromising or settling any claim arising out of such Taking (the
"Net Award"), shall be applied in accordance with the provisions of subsections
1.13.3, 1.13.4 and 1.13.5.
1.13.3 Restoration. So long as no Event of Default shall have
occurred and be continuing, in the event there shall be a Net Award or Net
Proceeds in an amount less than or equal to $1,000,000, Grantor shall have the
right, at Grantor's option, to apply such Net Award or Net Proceeds as Net Cash
Proceeds in accordance with the provisions of Section 3.02(B)(a) of the Credit
Agreement or to perform a restoration (each, a "Restoration") of the Premises
and Equipment. In the event Grantor elects to perform any Restoration
contemplated by this subsection 1.13.3, Beneficiary shall release such Net Award
or Net Proceeds to Grantor as soon as practicable. Grantor shall promptly
following the date of its receipt of any proceeds in respect of a Destruction or
Taking, as the case may be, commence and diligently continue to perform the
Restoration in accordance with Section 3.02(A)(i) of the Credit Agreement
(subject to extensions for delays caused by reason of force majeure) of that
portion or portions of the Improvements and Equipment subject to such
Destruction or affected by such Taking so that, upon the completion of the
Restoration, the Premises and Equipment will be in substantially the same
condition and shall be as near as practicable to the value and utility as the
Premises and Equipment was immediately prior to such Destruction or Taking.
Grantor shall so complete such Restoration with its own funds to
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the extent that the amount of any Net Award or Net Proceeds is insufficient for
such purpose.
1.13.4 Major Restoration. In the event there shall be a Net Award or
Net Proceeds other than as described in subsection 1.13.3, Grantor shall have
the option to apply such Net Award or Net Proceeds, as the case may be, as Net
Cash Proceeds in accordance with the provisions of Section 3.02(B)(a) of the
Credit Agreement or to require a Restoration of the Mortgaged Property. In the
event a Restoration is to be performed under this subsection 1.13.4, Beneficiary
shall not release any part of the Net Award or the Net Proceeds except in
accordance with the provisions of subsection 1.13.5, and Grantor shall, prior to
commencing any work to effect a Restoration of the Premises and Equipment,
promptly (but in no event later than ninety (90) days following any Destruction
or Taking) furnish to Beneficiary:
(i) complete plans and specifications (the "Plans and
Specifications") for the Restoration;
(ii) a certificate (an "Architect's Certificate") of an independent,
reputable architect or engineer reasonably acceptable to Beneficiary and
licensed in the state where the Premises is located (a) listing all
permits and approvals required by law in connection with the Restoration,
(b) stating that all permits and approvals required by law to commence
work in connection with the Restoration have been obtained, (c) stating
that the Plans and Specifications have been reviewed and approved by the
signatory thereto, (d) stating such signatory's estimate (an "Estimate")
of the costs of completing the Restoration and (e) stating that upon
completion of such Restoration in accordance with the Plans and
Specifications, the value and utility of the Premises and the Equipment
will be approximately equal to or greater than the value and utility
thereof immediately prior to the Destruction or Taking relating to such
Restoration; and
(iii) if the Estimate exceeds the Net Proceeds or Net Award, as the
case may be, a surety bond for, guarantee of, or irrevocable letter of
credit (a "Letter of Credit") or other irrevocable and unconditional
commitment to provide funds (each, a "Commitment") for the payment of the
excess cost of such Restoration, payable to or in favor of Beneficiary, as
Collateral Agent, which bond, guaranty, Letter of Credit or Commitment (A)
shall be signed by a surety or sureties or guarantor(s), as the case may
be, reasonably acceptable to Beneficiary and, in the case of a Letter of
Credit or Commitment, shall be provided by a bank or other financial
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institution having capital and surplus in excess of $250 million as shown
in its most recent available statement of financial condition and (B)
shall be in an amount not less than the excess of the amount of the
Estimate over the amount of the Net Award or Net Proceeds, as the case may
be, then held by Beneficiary for application toward the cost of such
Restoration.
Beneficiary shall have the right to review and approve the Plans and
Specifications as to structural matters only, such review and approval not to be
unreasonably withheld or delayed. Promptly upon any approval of the Plans and
Specifications by Beneficiary, Grantor shall commence and diligently continue to
perform the Restoration in accordance with such approved Plans and
Specifications. Grantor shall so complete such Restoration with its own funds to
the extent that the amount of any Net Award or Net Proceeds is insufficient for
such purpose.
1.13.5 Restoration Advances Following Destruction or Taking of
Mortgaged Property. In the event Grantor shall elect to perform a Restoration of
the Premises and Equipment as provided in subsection 1.13.4, Beneficiary shall
apply any Net Proceeds or the Net Award held by Beneficiary on account of the
applicable Destruction or Taking to the payment of the cost of performing such
Restoration and shall pay portions of the same, from time to time, to Grantor
or, at Beneficiary's option, exercised from time to time, directly to the
contractors, subcontractors, materialmen, laborers, engineers, architects, and
other persons rendering services or material for such Restoration, subject to
the following conditions:
(i) Each request for payment shall be made on at least ten (10)
days' prior notice to Beneficiary and shall be accompanied by an
Architect's Certificate stating (a) that all the Restoration work then
completed has been done in compliance with the Plans and Specifications,
as approved by Beneficiary, and in accordance with all provisions of law,
(b) the sums requested are required to reimburse Grantor for payments by
Grantor to, or are due to, the contractors, subcontractors, materialmen,
laborers, engineers, architects, or other persons rendering services or
materials for the Restoration, and that, when added to the sums, if any,
previously paid out by Beneficiary, such sums do not exceed the cost of
the Restoration to the date of such Architect's Certificate, (c) whether
or not the Estimate continues to be accurate, and if not, what the entire
cost of such Restoration is then estimated to be and (d) that the amount
of the Net Proceeds or Net Award, as the case may be, remaining after
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giving effect to such payment will be sufficient on completion of the
Restoration to pay for the same in full (including, in detail, an estimate
by trade of the remaining costs of completion);
(ii) Each request for payment shall be accompanied by an opinion of
counsel to Grantor (which counsel shall be independent and reasonably
acceptable to Beneficiary) or a title insurance policy, binder or
endorsement in form and substance reasonably satisfactory to Beneficiary
confirming that (a) all Liens (other than Prior Liens and Liens otherwise
permitted hereunder) covering that part of the Restoration previously paid
for, if any, have been waived and (b) there has not been filed with
respect to all or any part of the Premises any Lien (other than Prior
Liens and Liens otherwise permitted hereunder) which is not discharged of
record and which could have priority over the Lien of this Deed to Secure
Debt in respect of any part of the Secured Obligations; and
(iii) The final request for any payment after the Restoration has
been completed shall be accompanied by an Architect's Certificate listing
all certificates, permits, licenses, waivers, other documents, or any
combination of the foregoing required by law in connection with or as a
result of such Restoration and stating that all of the same have been
obtained, or if not obtained, the failure to obtain such certificate,
permit, license or waiver will not have a Material Adverse Effect.
In the event that there shall be any surplus after application of
the Net Award or the Net Proceeds to Restoration of the Improvements and the
Equipment, such surplus shall be applied as Net Cash Proceeds in accordance with
Section 3.02(B)(a) of the Credit Agreement or, at the option of Beneficiary,
shall be held by Beneficiary as additional collateral to secure the performance
by Grantor of the Secured Obligations.
SECTION 1.14 Alterations. Grantor shall not, without the prior
written consent of Beneficiary, which consent shall not be unreasonably withheld
or delayed, make any addition, modification or change which is structural in
nature (each, an "Alteration") to the Premises that costs more to effect than
$250,000. Whether or not Beneficiary has consented to the making of any
Alteration, Grantor shall (i) complete each Alteration promptly, in a good and
workmanlike manner and in compliance with all applicable material local laws,
ordinances and requirements (subject to extensions for delays caused by reason
of force
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majeure) and (ii) pay when due all claims for labor performed and materials
furnished in connection with such Alteration, unless contested in accordance
with the provisions of subsection 1.5.5.
SECTION 1.15 Hazardous Material.
1.15.1 Each of the provisions of Section 5.27 of the Credit
Agreement is restated herein in its entirety (including all defined terms
referenced therein) mutatis mutandis. Grantor shall comply with the provisions
of such section as if such grantor were the "Borrower and its Subsidiaries" as
referenced therein.
1.15.2 Each of the provisions of Sections 6.15 of the Credit
Agreement is restated herein in its entirety (including all defined terms
referenced therein) mutatis mutandis. Grantor shall comply with the provisions
of such section as if such Grantor were the "Borrower and its Subsidiaries" as
referenced therein. In the event Grantor fails to comply with the referenced
covenants, Beneficiary may, in addition to any other remedies set forth herein,
as agent for and at Grantor's sole cost and expense, cause any necessary
remediation, removal or response action required by Environmental Laws relating
to Hazardous Materials to be taken and Grantor shall provide to Beneficiary and
its agents and employees reasonable access to the Mortgaged Property for such
purpose. Any reasonable costs or expenses incurred by Beneficiary for such
purpose shall be payable by Grantor immediately upon demand therefor and shall
bear interest at the Default Rate. Beneficiary shall have the right at any time
that the Secured Obligations are outstanding, at the sole cost and expense of
Grantor, to conduct an environmental audit of the Mortgaged Property where
Beneficiary believes that cause exists, including in the event any change in any
applicable Environmental Law would either require the conduct of an
environmental audit or make such an audit prudent, by such persons or firms
appointed by Beneficiary, and Grantor shall cooperate in all reasonable respects
in the conduct of such environmental audit, including, without limitation, by
providing reasonable access to the Mortgaged Property and to all relevant
records relating thereto. To the extent that any such environmental audit
identifies conditions which violate, or could be expected to give rise to
material liability or obligations under Environmental Laws, Grantor agrees to
expeditiously correct any such violation or respond to conditions giving rise to
such liability or obligations in a manner which complies with Environmental
Laws. Grantor shall indemnify and hold Beneficiary and each Bank harmless from
and against all loss, cost, damage (including, without limitation, consequential
damages) and expense (including, without limitation, attorneys' and consultants'
fees and disbursements and the allocated costs of staff counsel) that
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Beneficiary or such Bank may sustain by reason of the assertion against
Beneficiary or such Bank by any party of any claim relating to such Hazardous
Materials on, under or from the Mortgaged Property or actions taken with respect
thereto as authorized hereunder. The foregoing indemnification shall survive
repayment of all Secured Obligations and any release or assignment of this Deed
to Secure Debt except with regard to any loss, cost, damage or expense arising
from or relating to acts or omissions occurring after Beneficiary or any Bank
takes possession of, uses, operates, manages, controls or sells the Mortgaged
Property provided, however, that such exception shall apply only to the extent
such loss, cost, damage or expense arises solely from the gross negligence, bad
faith or willful misconduct of Beneficiary or any Bank or of the agents of
Beneficiary or any Bank.
SECTION 1.16 Asbestos. Grantor shall not install nor permit to be
installed in or removed from the Mortgaged Property, asbestos or any
asbestos-containing material (collectively, "ACM") except in compliance with all
applicable Environmental Laws, and with respect to any ACM currently present in
the Mortgaged Property, Grantor shall promptly either (i) remove or encapsulate
any ACM which such Environmental Laws require to be removed or (ii) otherwise
comply with such Environmental Laws with respect to such ACM, all at Grantor's
sole cost and expense. If Grantor shall fail to so remove or encapsulate any ACM
or otherwise comply with such Environmental Laws, Beneficiary may, in addition
to any other remedies set forth herein, take whatever steps it deems necessary
or appropriate to remove or encapsulate any ACM from the Mortgaged Property or
otherwise comply with applicable Environmental Laws, and Grantor shall provide
to Beneficiary and its agents and employees reasonable access to the Mortgaged
Property for such purpose. Any reasonable costs or expenses incurred by
Beneficiary for such purpose shall be payable by Grantor immediately upon demand
therefor and shall bear interest at the Default Rate. Grantor shall indemnify
and hold Beneficiary and each Bank harmless from and against all loss, cost,
damage (including, without limitation, consequential damages) and expense
(including, without limitation, attorneys' and consultants' fees and
disbursements and the allocated costs of staff counsel) that Beneficiary or such
Bank may sustain as a result of the presence of any ACM and any removal thereof
or compliance with Environmental Laws. The foregoing indemnification shall
survive repayment of all Secured Obligations and any release or assignment of
this Deed to Secure Debt except with regard to any loss, cost, damage or expense
arising from or relating to acts or omissions occurring after Beneficiary or any
Bank takes possession of, uses, operates, manages, controls or sells the
Mortgaged Property provided, however, that such exception shall apply only to
the extent such loss, cost, damage or
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expense arises solely from the gross negligence, bad faith or willful misconduct
of Beneficiary or any Bank or of the agents of Beneficiary or any Bank.
SECTION 1.17 Books and Records; Other Information.
1.17.1 Grantor shall keep proper books of record and account in
which full, true and correct entries shall be made of all dealings or
transactions of or in relation to the Mortgaged Property and the business and
affairs of Grantor relating to the Mortgaged Property. Upon reasonable notice by
Beneficiary to the chief financial officer, controller or any other Authorized
Officer of Grantor, Beneficiary and its authorized representatives shall have
the right at reasonable times during regular business hours and intervals and to
such reasonable extent as may be reasonably requested by Beneficiary to examine
the books and records of Grantor relating to the operation of the Mortgaged
Property.
1.17.2 Grantor shall, at any and all times, within a reasonable time
after written request by Beneficiary, furnish or cause to be furnished to
Beneficiary, in such manner and in such detail as may be reasonably requested by
Beneficiary, additional information with respect to the Mortgaged Property.
SECTION 1.18 No Claims Against Beneficiary. Nothing contained in
this Deed to Secure Debt shall constitute any consent or request by Beneficiary,
express or implied, for the performance of any labor or services or the
furnishing of any materials or other property in respect of the Premises or any
part thereof, nor as giving Grantor any right, power or authority to contract
for or permit the performance of any labor or services or the furnishing of any
materials or other property in such fashion as would permit the making of any
claim against Beneficiary in respect thereof or any claim that any Lien based on
the performance of such labor or services or the furnishing of any such
materials or other property is prior to the Lien of this Deed to Secure Debt.
SECTION 1.19 Utility Services. Grantor shall pay, or cause to be
paid, when due all charges for all public or private utility services, all
public or private rail and highway services, all public or private communication
services, all sprinkler systems, and all protective services and any other
services of whatever kind or nature at any time rendered to or in connection
with the Premises or any part thereof, shall comply with all contracts relating
to any such services, and shall do all other things required for the maintenance
and continuance of all such services to the extent required to fulfill the
obligations set forth in Section 1.10.
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ARTICLE II.
ASSIGNMENT OF LEASES; SECURITY AGREEMENT;
ASSIGNMENT AGREEMENT
SECTION 2.1 Assignment of Leases, Rents, Issues and
Profits.
2.1.1 Grantor absolutely, presently and irrevocably assigns,
transfers and sets over to Beneficiary, and grants to Beneficiary subject to the
terms and conditions hereof, all Grantor's estate, right, title, interest, claim
and demand as landlord to collect rent and other sums due under all existing
Leases and any other Leases, including, without limitation, all extensions of
the terms of the Leases (such assigned rights, "Grantor's Interest"), as
follows:
(i) the immediate and continuing right to receive and
collect Rents payable by all tenants or other parties pursuant
to the Leases;
(ii) all claims, rights, powers, privileges and remedies of Grantor,
whether provided for in any Lease or arising by statute or at law or in
equity or otherwise, consequent on any failure on the part of any tenant
to perform or comply with any term of any Lease;
(iii) all rights to take all actions upon the happening of a default
under any Lease as shall be permitted by such Lease or by law, including,
without limitation, the commencement, conduct and consummation of
proceedings at law or in equity; and
(iv) the full power and authority, in the name of Grantor or
otherwise, to enforce, collect, receive and receipt for any and all of the
foregoing and to do any and all other acts and things whatsoever which
Grantor or any landlord is or may be entitled to do under the Leases.
2.1.2 Any Rents receivable by Beneficiary hereunder, after payment
of all proper costs and charges, shall be applied to all amounts due and owing
under and as provided in this Deed to Secure Debt and the Credit Agreement.
Beneficiary shall be accountable to Grantor only for Rents actually received by
Beneficiary pursuant to this assignment. The collection of such Rents and the
application thereof shall not cure or waive any Event
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or Default or waive, modify or affect notice of Event of Default or invalidate
any act done pursuant to such notice.
2.1.3 So long as no Event of Default shall have occurred and be
continuing, Grantor shall have a license to collect and apply the Rents and to
enforce the obligations of tenants under the Leases. Immediately upon the
occurrence and during the continuance of any Event of Default, the license
granted in the immediately preceding sentence shall cease and terminate, with or
without any notice, action or proceeding or the intervention of a receiver
appointed by a court. Upon such Event of Default and during the continuance
thereof, Beneficiary may, to the fullest extent permitted by the Leases, (i)
exercise any of Grantor's rights under the Leases, (ii) enforce the Leases,
(iii) demand, collect, sue for, attach, levy, recover, receive, compromise and
adjust, and make, execute and deliver receipts and releases for all Rents or
other payments that may then be or may thereafter become due, owing or payable
with respect to the Leases and (iv) generally, do, execute and perform any other
act, deed, matter or thing whatsoever that ought to be done, executed and
performed in and about or with respect to the Leases, as fully as allowed or
authorized by Grantor's Interest.
2.1.4 Upon the occurrence and during the continuance of an Event of
Default, Grantor shall, at the direction of Beneficiary, further authorize and
direct the tenant under each Lease to pay directly to, or as directed by,
Beneficiary all Rents accruing or due under its Lease without proof to the
tenant of the occurrence and continuance of such Event of Default. Grantor
hereby authorizes the tenant under each Lease to rely upon and comply with any
notice or demand from Beneficiary for payment of Rents to Beneficiary and
Grantor shall have no claim against any tenant for Rents paid by such tenant to
Beneficiary pursuant to such notice or demand.
2.1.5 Grantor at its sole cost and expense shall use commercially
reasonable efforts to enforce the material terms of the Leases in accordance
with their terms. Neither this Deed to Secure Debt nor any action or inaction on
the part of Beneficiary shall release any tenant under any Lease, any guarantor
of any Lease or Grantor from any of their respective obligations under the
Leases or constitute an assumption of any such obligation on the part of
Beneficiary. No action or failure to act on the part of Grantor shall adversely
affect or limit the rights of Beneficiary under this Deed to Secure Debt or,
through this Deed to Secure Debt, under the Leases.
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2.1.6 All rights, powers and privileges of Beneficiary herein set
forth are coupled with an interest and are irrevocable, subject to the terms and
conditions hereof, and Grantor shall not take any action under the Leases or
otherwise which is inconsistent with this Deed to Secure Debt or any of the
terms hereof and any such action inconsistent herewith or therewith shall be
void. Grantor shall, from time to time, upon reasonable request of Beneficiary,
execute all instruments and further assurances and all supplemental instruments
and take all such action as Beneficiary from time to time may reasonably request
in order to perfect, preserve and protect the interests intended to be assigned
to Beneficiary hereby.
2.1.7 Grantor shall not, unilaterally or by agreement, subordinate,
amend, modify, extend, discharge, terminate, surrender, waive or otherwise
change any material term of any of the Material Leases in any manner which would
violate this Deed to Secure Debt. If the Leases shall be amended as permitted
hereby, they shall continue to be subject to the provisions hereof without the
necessity of any further act by any of the parties hereto.
2.1.8 Nothing contained herein shall operate or be construed to (i)
obligate Beneficiary to perform any of the terms, covenants or conditions
contained in the Leases or otherwise to impose any obligation upon Beneficiary
with respect to the Leases (including, without limitation, any obligation
arising out of any covenant of quiet enjoyment contained in the Leases in the
event that any tenant under a Lease shall have been joined as a party defendant
in any action by which the estate of such tenant shall be terminated) or (ii)
place upon Beneficiary any responsibility for the operation, control, care,
management or repair of the Premises.
SECTION 2.2 Security Interest in Fixtures.
2.2.1 This Deed to Secure Debt shall constitute a security agreement
and shall create and evidence a security interest in all the Equipment and in
all the other items of Mortgaged Property to the extent the same constitute
"fixtures" under the UCC as in effect in Georgia in which a security interest
may be granted pursuant to the UCC as in effect in the State of Georgia
(collectively, "Fixtures").
2.2.2 Upon the occurrence of any Event of Default, in addition to
the remedies set forth in Article III, Beneficiary shall have the power to sell
the Fixtures in accordance with the Uniform Commercial Code as enacted in the
state in which the Premises are located or under other applicable law. It shall
not be necessary that any Fixtures offered be physically present at any
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such sale or constructively in the possession of Beneficiary or the
person conducting the sale.
2.2.3 Upon the occurrence and during the continuance of any Event of
Default, Beneficiary may sell the Fixtures or any part thereof at public or
private sale with notice to Grantor as hereinafter provided. The proceeds of any
such sale, after deducting all expenses of Beneficiary in taking, storing,
repairing and selling the Fixtures (including, without limitation, attorneys'
fees and legal expenses) shall be applied in the manner set forth in subsection
3.3.3. At any sale, public or private, of the Fixtures or any part thereof,
Beneficiary may purchase any or all of the Fixtures offered at such sale.
2.2.4 Beneficiary shall give Grantor reasonable notice of any sale
of any of the Fixtures pursuant to the provisions of this Section 2.2.
Notwithstanding the provisions of Section 5.2, any such notice shall
conclusively be deemed to be reasonable and effective if such notice is mailed
at least five (5) days prior to any sale, by first class or certified mail,
postage prepaid, to Grantor at its address determined in accordance with the
provisions of Section 5.2.
ARTICLE III.
EVENTS OF DEFAULT AND REMEDIES
SECTION 3.1 Events of Default. It shall be an Event of Default
hereunder if there shall have occurred and be continuing an Event of Default
under the Credit Agreement.
SECTION 3.2 Remedies in Case of an Event of Default. If any Event of
Default shall have occurred and be continuing, Beneficiary may at Beneficiary's
option, in addition to any other action permitted under this Deed to Secure Debt
or the Credit Agreement or by law, statute or in equity, take one or more of the
following actions:
3.2.1 by written notice to Grantor, declare in accordance with and
pursuant to the terms of the Credit Agreement the entire unpaid amount of the
Secured Obligations to be due and payable immediately;
3.2.2 personally, or by its agents or attorneys, (i) enter into and
upon and take possession of all or any part of the Premises together with the
books, records and accounts of Grantor relating thereto and, exclude Grantor,
its agents and
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servants wholly therefrom, (ii) use, operate, manage and control the Premises
and the Equipment and conduct the business thereof, (iii) maintain and restore
the Premises and the Equipment, (iv) make all necessary or proper repairs,
renewals and replacements and such useful Alterations thereto and thereon as
Beneficiary may deem advisable, (v) manage, lease and operate the Premises and
carry on the business thereof and exercise all rights and powers of Grantor with
respect thereto either in the name of Grantor or otherwise or (vi) collect and
receive all earnings, revenues, rents, issues, profits and income of the
Mortgaged Property and every part thereof. Beneficiary shall be under no
liability for or by reason of any such taking of possession, entry, removal or
holding, operation or management except that any amounts so received by
Beneficiary shall be applied as follows:
FIRST: to pay costs and expenses (including, without limitation,
attorneys' fees and expenses) of so entering upon, taking possession of,
holding, operating and managing the Mortgaged Property or any part
thereof, and any taxes, assessments or other charges which Beneficiary may
consider necessary or desirable to pay, and any other amounts due to
Beneficiary;
SECOND: to the payment in full in cash of Secured Obligations
consisting of interest and all amounts other than principal under the
Credit Agreement at any time and from time to time owing by Grantor under
or in connection with the Credit Agreement, ratably according to the
unpaid amounts thereof, in the manner and priority set forth in the Credit
Agreement, together with interest on each such amount in the manner and to
the extent set forth in the Credit Agreement from and after the date such
amount is due, owing or unpaid until paid in full;
THIRD: to the pro rata payment in full in cash of Secured
Obligations consisting of (i) principal at any time and from time to time
owing by Grantor under or in connection with the Credit Agreement, ratably
according to the unpaid amounts thereof, in the manner and priority set
forth in the Credit Agreement and (ii) the amount of Grantor's obligations
then due and payable under any Interest Rate Agreement, including any
early termination payments then due (exclusive of expenses or similar
liabilities to any Bank under the applicable Interest Rate Agreement(s)),
together with interest on each such amount in the manner and to the extent
set forth in the Credit Agreement from and after the date such amount is
due, owing or unpaid until paid in full; and
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FOURTH: the balance, if any, to the Person lawfully entitled thereto
(including Grantor or its successors or assigns), if all conditions to the
release of this Deed to Secure Debt shall have been fulfilled, but if any
such condition shall not have been fulfilled, to be held by Beneficiary
and thereafter applied to any future payments required to be made in
accordance with clauses FIRST, SECOND and THIRD above.
3.2.3 with or without entry, personally or by its agents or
attorneys, (i) sell the Mortgaged Property and all estate, right, title and
interest, claim and demand therein at one or more sales in one or more parcels,
in accordance with the provisions of Section 3.3 or (ii) institute and prosecute
proceedings for the complete or partial foreclosure of the Lien and security
interests created and evidenced hereby; or
3.2.4 take such steps to protect and enforce its rights whether by
action, suit or proceeding at law or in equity for the specific performance of
any covenant, condition or agreement in the Credit Agreement and the other
Credit Documents, or in aid of the execution of any power granted in this Deed
to Secure Debt, or for any foreclosure hereunder, or for the enforcement of any
other appropriate legal or equitable remedy or otherwise as Beneficiary shall
elect.
SECTION 3.3 Sale of Mortgaged Property if Event of Default Occurs;
Proceeds of Sale.
3.3.1 Upon acceleration of the Loans and all Obligations owing under
the Credit Agreement as provided in subsection 3.2.1 hereof, Beneficiary may
institute an action to foreclose this Deed to Secure Debt or take such other
action as may be permitted and available to Beneficiary at law or in equity for
the enforcement of the Credit Agreement and realization on the Mortgaged
Property and proceeds thereon through power of sale or to final judgment and
execution thereof for the Secured Obligations, and in furtherance thereof
Beneficiary may sell the Mortgaged Property at one or more sales, as an entirety
or in parcels, at such time and place, upon such terms and after such notice
thereof as may be required or permitted by law or statute or in equity.
Beneficiary may execute and deliver to the purchaser at such sale a conveyance
of the Mortgaged Property in fee simple and an assignment or conveyance of all
Grantor's Interest in the Leases and the Mortgaged Property, each of which
conveyances and assignments shall contain recitals as to the Event of Default
upon which the execution of the power of sale herein granted depends, and
Grantor hereby constitutes and appoints Beneficiary the true and lawful attorney
in fact of
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Grantor to make any such recitals, sale, assignment and conveyance, and all of
the acts of Beneficiary as such attorney in fact are hereby ratified and
confirmed. Grantor agrees that such recitals shall be binding and conclusive
upon Grantor and that any assignment or conveyance to be made by Beneficiary
shall divest Grantor of all right, title, interest, equity and right of
redemption, including any statutory redemption, in and to the Mortgaged
Property. The power and agency hereby granted are coupled with an interest and
are irrevocable by death or dissolution, or otherwise, and are in addition to
any and all other remedies which Beneficiary may have hereunder, at law or in
equity. So long as the Secured Obligations, or any part thereof, remain unpaid,
Grantor agrees that possession of the Mortgaged Property by Grantor, or any
person claiming under Grantor, shall be as tenant, and, in case of a sale under
power or upon foreclosure as provided in this Deed to Secure Debt, Grantor and
any person in possession under Grantor, as to whose interest such sale was not
made subject, shall, at the option of the purchaser at such sale, then become
and be tenants holding over, and shall forthwith deliver possession to such
purchaser, or be summarily dispossessed in accordance with the laws applicable
to tenants holding over. In case of any sale under this Deed to Secure Debt by
virtue of the exercise of the powers herein granted, or pursuant to any order in
any judicial proceeding or otherwise, the Mortgaged Property may be sold as an
entirety or in separate parcels in such manner or order as Beneficiary in its
discretion may elect. One or more exercises of powers herein granted shall not
extinguish or exhaust such powers, until the entire Mortgaged Property is sold
or all amounts secured hereby are paid in full.
3.3.2 In the event of any sale made under or by virtue of this
Article III, the entire principal of, and interest in respect of the Secured
Obligations, if not previously due and payable, shall, at the option of
Beneficiary, immediately become due and payable, anything in this Deed to Secure
Debt to the contrary notwithstanding.
3.3.3 The proceeds of any sale made under or by virtue of this
Article III, together with any other sums which then may be held by Beneficiary
under this Deed to Secure Debt, whether under the provisions of this Article III
or otherwise, shall be applied as follows:
FIRST: to pay the costs and expenses incurred by
Beneficiary in enforcing its remedies under this Deed to
Secure Debt;
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SECOND: to pay the costs and expenses of the sale and of
any receiver of the Mortgaged Property or any part thereof
appointed pursuant to subsection 3.5.2;
THIRD: to the payment in full in cash of Secured Obligations
consisting of interest and all amounts other than principal under the
Credit Agreement at any time and from time to time owing by Grantor under
or in connection with the Credit Agreement, ratably according to the
unpaid amounts thereof, in the manner and priority set forth in the Credit
Agreement, together with interest on each such amount in the manner and to
the extent set forth in the Credit Agreement from and after the date such
amount is due, owing or unpaid until paid in full;
FOURTH: to the pro rata payment in full in cash of Secured
Obligations consisting of (i) principal at any time and from time to time
owing by Grantor under or in connection with the Credit Agreement, ratably
according to the unpaid amounts thereof, in the manner and priority set
forth in the Credit Agreement and (ii) the amount of Grantor's obligations
then due and payable under any Interest Rate Agreement, including any
early termination payments then due (exclusive of expenses or similar
liabilities to any Bank under the applicable Interest Rate Agreement(s)),
together with interest on each such amount in the manner and to the extent
set forth in the Credit Agreement from and after the date such amount is
due, owing or unpaid until paid in full; and
FIFTH: the balance, if any, to the Person lawfully
entitled thereto (including Grantor or its successors or
assigns).
3.3.4 Beneficiary (on behalf of any Bank or on its own behalf) or
any Bank or any of their respective Affiliates may bid for and acquire the
Mortgaged Property or any part thereof at any sale made under or by virtue of
this Article III and, in lieu of paying cash therefor, may make settlement for
the purchase price by crediting against the purchase price the unpaid amounts
(whether or not then due) owing to Beneficiary, or such Bank in respect of the
Secured Obligations, after deducting from the sales price the expense of the
sale and the reasonable costs of the action or proceedings and any other sums
that Beneficiary or such Bank is authorized to deduct under this Deed to Secure
Debt.
3.3.5 Beneficiary may adjourn from time to time any sale by it to be
made under or by virtue of this Deed to Secure Debt by announcement at the time
and place appointed for such sale or for
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such adjourned sale or sales, and, Beneficiary, without further notice or
publication, may make such sale at the time and place to which the same shall be
so adjourned.
3.3.6 If the Premises is comprised of more than one parcel of land,
Beneficiary may take any of the actions authorized by this Section 3.3 in
respect of any or a number of individual parcels.
SECTION 3.4 Additional Remedies in Case of an Event of Default.
3.4.1 Beneficiary shall be entitled to recover judgment as aforesaid
either before, after or during the pendency of any proceedings for the
enforcement of the provisions of this Deed to Secure Debt, and the right of
Beneficiary to recover such judgment shall not be affected by any entry or sale
hereunder, or by the exercise of any other right, power or remedy for the
enforcement of the provisions of this Deed to Secure Debt, or the foreclosure
of, or absolute conveyance pursuant to, this Deed to Secure Debt. In case of
proceedings against Grantor in insolvency or bankruptcy or any proceedings for
its reorganization or involving the liquidation of its assets, Beneficiary shall
be entitled to prove the whole amount of principal and interest and other
payments, charges and costs due in respect of the Secured Obligations to the
full amount thereof without deducting therefrom any proceeds obtained from the
sale of the whole or any part of the Mortgaged Property; provided, however, that
in no case shall Beneficiary receive a greater amount than the aggregate of such
principal, interest and such other payments, charges and costs (with interest at
the Default Rate) from the proceeds of the sale of the Mortgaged Property and
the distribution from the estate of Grantor.
3.4.2 Any recovery of any judgment by Beneficiary and any levy of
any execution under any judgment upon the Mortgaged Property shall not affect in
any manner or to any extent the Lien and security interests created and
evidenced hereby upon the Mortgaged Property or any part thereof, or any
conveyances, powers, rights and remedies of Beneficiary hereunder, but such
conveyances, powers, rights and remedies shall continue unimpaired as before.
3.4.3 Any moneys collected by Beneficiary under this Section 3.4
shall be applied in accordance with the provisions of subsection 3.3.3.
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SECTION 3.5 Legal Proceedings After an Event of Default.
3.5.1 After the occurrence of any Event of Default and immediately
upon the commencement of any action, suit or legal proceedings to obtain
judgment for the Secured Obligations or any part thereof, or of any proceedings
to foreclose the Lien and security interest created and evidenced hereby or
otherwise enforce the provisions of this Deed to Secure Debt or of any other
proceedings in aid of the enforcement of this Deed to Secure Debt, Grantor shall
enter its voluntary appearance in such action, suit or proceeding.
3.5.2 Upon the occurrence and during the continuance of an Event of
Default, Beneficiary shall be entitled forthwith as a matter of right,
concurrently or independently of any other right or remedy hereunder either
before or after declaring the Secured Obligations or any part thereof to be due
and payable, to the appointment of a receiver without giving notice to any party
and without regard to the adequacy or inadequacy of any security for the Secured
Obligations or the solvency or insolvency of any person or entity then legally
or equitably liable for the Secured Obligations or any portion thereof. Grantor
hereby consents to the appointment of such receiver. Notwithstanding the
appointment of any receiver, Beneficiary shall be entitled as pledgee to the
possession and control of any cash, deposits or instruments at the time held by
or payable or deliverable under the terms of the Credit Agreement to
Beneficiary.
3.5.3 Grantor shall not (i) at any time insist upon, or plead, or in
any manner whatsoever claim or take any benefit or advantage of any stay or
extension or moratorium law, any exemption from execution or sale of the
Mortgaged Property or any part thereof, wherever enacted, now or at any time
hereafter in force, which may affect the covenants and terms of performance of
this Deed to Secure Debt, (ii) claim, take or insist on any benefit or advantage
of any law now or hereafter in force providing for the valuation or appraisal of
the Mortgaged Property, or any part thereof, prior to any sale or sales of the
Mortgaged Property which may be made pursuant to this Deed to Secure Debt, or
pursuant to any decree, judgment or order of any court of competent jurisdiction
or (iii) after any such sale or sales, claim or exercise any right under any
statute heretofore or hereafter enacted to redeem the property so sold or any
part thereof. To the extent permitted by applicable law, Grantor hereby
expressly (i) waives all benefit or advantage of any such law or laws,
including, without limitation, any statute of limitations applicable to this
Deed to Secure Debt, (ii) waives any and all rights to trial by jury in any
action or proceeding relating to the enforcement of
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this Deed to Secure Debt, (iii) waives any objection which it may now or
hereafter have to the laying of venue of any action, suit or proceeding brought
in connection with this Deed to Secure Debt and further waives and agrees not to
plead that any such action, suit or proceeding brought in any such court has
been brought in an inconvenient forum and (iv) covenants not to hinder, delay or
impede the execution of any power granted or delegated to Beneficiary by this
Deed to Secure Debt but to suffer and permit the execution of every such power
as though no such law or laws had been made or enacted. Beneficiary shall not be
liable for any incorrect or improper payment made pursuant to this Article III
in the absence of gross negligence or willful misconduct.
SECTION 3.6 Remedies Not Exclusive. No remedy conferred upon or
reserved to Beneficiary by this Deed to Secure Debt is intended to be exclusive
of any other remedy or remedies, and each and every such remedy shall be
cumulative and shall be in addition to every other remedy given under this Deed
to Secure Debt or now or hereafter existing at law or in equity. Any delay or
omission of Beneficiary to exercise any right or power accruing on any Event of
Default shall not impair any such right or power and shall not be construed to
be a waiver of or acquiescence in any such Event of Default. Every power and
remedy given by this Deed to Secure Debt may be exercised from time to time
concurrently or independently, when and as often as may be deemed expedient by
Beneficiary in such order and manner as Beneficiary, in its sole discretion, may
elect. If Beneficiary accepts any moneys required to be paid by Grantor under
this Deed to Secure Debt after the same become due, such acceptance shall not
constitute a waiver of the right either to require prompt payment, when due, of
all other sums secured by this Deed to Secure Debt or to declare an Event of
Default with regard to subsequent defaults. If Beneficiary accepts any moneys
required to be paid by Grantor under this Deed to Secure Debt in an amount less
than the sum then due, such acceptance shall be deemed an acceptance on account
only and on the condition that it shall not constitute a waiver of the
obligation of Grantor to pay the entire sum then due, and Grantor's failure to
pay the entire sum then due shall be and continue to be a default hereunder
notwithstanding acceptance of such amount on account.
ARTICLE IV.
CERTAIN DEFINITIONS
The following terms shall have the following respective meanings:
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"Cost of Construction" means the sum, so far as it relates to the
reconstructing, renewing, restoring or replacing of the Improvements, of (i)
obligations incurred or assumed by Grantor or undertaken by tenants pursuant to
the terms of the Leases for labor, materials and other expenses and to
contractors, builders and materialmen; (ii) the cost of contract bonds and of
insurance of all kinds that may reasonably be deemed by Grantor to be desirable
or necessary during the course of construction; (iii) the expenses incurred or
assumed by Grantor for test borings, surveys, estimates, any Plans and
Specifications and preliminary investigations therefor, and for supervising
construction, as well as for the performance of all other duties required by or
reasonably necessary for proper construction; (iv) ad valorem property taxes
levied upon the Premises during performance of any Restoration; and (v) any
costs or other charges in connection with obtaining title insurance and counsel
opinions that may be required or necessary in connection with a Restoration.
"Governmental Authority" shall mean any federal, state, local or
foreign court, agency, authority, board, bureau, commission, department, office
or instrumentality of any nature whatsoever or any governmental or
quasi-governmental unit, whether now or hereafter in existence, or any officer
or official thereof, having jurisdiction over Grantor or the Mortgaged Property.
ARTICLE V.
MISCELLANEOUS
SECTION 5.1 Severability of Provisions. Any provision of this Deed
to Secure Debt which 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 or
affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 5.2 Notices. Unless otherwise provided herein or in the
Credit Agreement, any notice or other communication herein required or permitted
to be given shall be given in the manner set forth in the Credit Agreement, if
to Grantor or Beneficiary, addressed to it at the address set forth in the
Credit Agreement, or as to either party at such other address as shall be
designated by such party in a written notice to the other parties complying as
to delivery with the terms of this Section 5.2; provided, however, that notices
to Beneficiary shall not be effective until received by Beneficiary.
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SECTION 5.3 Covenants To Run with the Land. All of the grants,
covenants, terms, provisions and conditions in this Deed to Secure Debt shall
run with the Land and shall apply to, and bind the successors and assigns of,
Grantor. If there shall be more than one grantor, the covenants and warranties
hereof shall be joint and several.
SECTION 5.4 Headings. The Section headings used in this Deed to
Secure Debt are for convenience of reference only and shall not affect the
construction of this Deed to Secure Debt.
SECTION 5.5 Limitation on Interest Payable. It is the intention of
the parties to conform strictly to the usury laws, whether state or federal,
that are applicable to the transaction of which this Deed to Secure Debt is a
part. All agreements between Grantor and Beneficiary whether now existing or
hereafter arising and whether oral or written, are hereby expressly limited so
that in no contingency or event whatsoever shall the amount paid or agreed to be
paid by Grantor for the use, forbearance or detention of the money to be loaned
under the Credit Agreement or any related document, or for the payment or
performance of any covenant or obligation contained herein or in the Credit
Agreement or any related document, exceed the maximum amount permissible under
applicable federal or state usury laws. If under any circumstances whatsoever
fulfillment of any such provision, at the time performance of such provision
shall be due, shall involve exceeding the limit of validity prescribed by law,
then the obligation to be fulfilled shall be reduced to the limit of such
validity. If under any circumstances Grantor shall have paid an amount deemed
interest by applicable law, which would exceed the highest lawful rate, such
amount that would be excessive interest under applicable usury laws shall be
applied to the reduction of the principal amount owing in respect of the Secured
Obligations and not to the payment of interest, or if such excessive interest
exceeds the unpaid balance of principal and any other amounts due hereunder, the
excess shall be refunded to Grantor. All sums paid or agreed to be paid for the
use, forbearance or detention of the principal under any extension of credit by
Beneficiary shall, to the extent permitted by applicable law, and to the extent
necessary to preclude exceeding the limit of validity prescribed by law, be
amortized, prorated, allocated and spread from the date of this Deed to Secure
Debt until payment in full of the Secured Obligations so that the actual rate of
interest on account of such principal amounts is uniform throughout the term
hereof.
SECTION 5.6 Governing Law; Submission to Jurisdiction;
Venue. (a) This Deed to Secure Debt and the rights and
obligations of the parties hereunder shall be construed and
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enforced in accordance with and be governed by the laws of the State in which
the Premises are located. Grantor hereby irrevocably appoints CT Corporation
System, having an address at 1633 Broadway, New York, New York 10019 and such
other persons as may hereafter be selected by Grantor irrevocably agreeing in
writing to serve as its agent for service of process in respect of any such
action or proceeding. Nothing herein shall affect the right of Beneficiary to
serve process in any other manner permitted by law or to commence legal
proceedings or otherwise proceed against Grantor in any other jurisdiction.
(b) Grantor hereby irrevocably waives any objection which it may now
or hereafter have to the laying of venue of any of the aforesaid actions or
proceedings arising out of or in connection with this Deed to Secure Debt and
hereby further irrevocably waives and agrees not to plead or claim in any court
that any such action or proceeding brought in any court has been brought in an
inconvenient forum.
SECTION 5.7 No Merger. The rights and estate created by this Deed to
Secure Debt shall not, under any circumstances, be held to have merged into any
other estate or interest now owned or hereafter acquired by Beneficiary unless
Beneficiary shall have consented to such merger in writing.
SECTION 5.8 Modification in Writing. No amendment, modification,
supplement, termination or waiver of or to any provision of this Deed to Secure
Debt, nor consent to any departure by Grantor therefrom shall be effective
unless the same shall be done in accordance with the terms of the Credit
Agreement and unless in writing and signed by Beneficiary. Any amendment,
modification or supplement of or to any provision of this Deed to Secure Debt,
any waiver of any provision of this Deed to Secure Debt, and any consent to any
departure by Grantor from the terms of any provision of this Deed to Secure Debt
shall be effective only in the specific instance and for the specific purpose
for which made or given. Except where notice is specifically required by this
Deed to Secure Debt or any other Credit Document, no notice to or demand on
Grantor in any case shall entitle Grantor to any other or further notice or
demand in similar or other circumstances.
SECTION 5.9 No Credit for Payment of Taxes or Impositions. Grantor
shall not be entitled to any credit against the principal, premium, if any, or
interest payable under the Credit Agreement, and Grantor shall not be entitled
to any credit against any other sums which may become payable under the terms
thereof or hereof, by reason of the payment of any tax or other impositions on
the Mortgaged Property or any part thereof.
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SECTION 5.10 Stamp and Other Taxes. Subject to the provisions of
subsection 1.5.5 relating to permitted contests, Grantor shall pay any mortgage
recording taxes, with interest and fines and penalties, that may hereafter be
levied, imposed or assessed under or upon or by reason of this Deed to Secure
Debt or the Secured Obligations or any instrument or transaction affecting or
relating to either thereof and in default thereof Beneficiary may advance the
same and the amount so advanced shall be payable by Grantor to Beneficiary
within ten (10) days after demand therefor, together with interest thereon at
the Default Rate.
SECTION 5.11 Estoppel Certificates. Grantor and Beneficiary shall,
from time to time, upon thirty (30) days' prior written request of the other
party, execute, acknowledge and deliver to the other party a certificate signed
by an authorized officer or officers stating that this Deed to Secure Debt, the
Credit Agreement and the other Credit Documents are unmodified and in full force
and effect (or, if there have been modifications, that this Deed to Secure Debt,
the Credit Agreement or such Credit Document, as applicable, is in full force
and effect as modified and setting forth such modifications) and stating the
date to which principal and interest have been paid on the Loans.
SECTION 5.12 Additional Security. Without notice to or consent of
Grantor and without impairment of the Lien and rights created by this Deed to
Secure Beneficiary may accept (but Grantor shall not be obligated to furnish)
from Grantor or from any other Person or Persons, additional security for the
Secured Obligations. Neither the giving of this Deed to Secure Debt nor the
acceptance of any such additional security shall prevent Beneficiary from
resorting, first, to such additional security, and, second, to the security
created by this Deed to Secure Debt without affecting Beneficiary's Lien and
rights under this Deed to Secure Debt.
SECTION 5.13 Release. The Mortgaged Property shall be released from
the Lien of this Deed to Secure Debt in accordance with the provisions of the
Credit Agreement or at such time as all Secured Obligations have been paid in
full and the Commitments of the Banks to make any Loan or issue any Letter of
Credit under the Credit Agreement shall have expired or been sooner terminated.
Beneficiary, on the written request and at the expense of Grantor, will execute
and deliver such proper instruments of release and satisfaction or assignment as
may reasonably be requested to evidence such release or assignment, and any such
instrument, when duly executed by Beneficiary and duly recorded by Grantor in
the places where this Deed to Secure Debt is recorded, shall conclusively
evidence the release or assignment of this Deed to Secure Debt.
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SECTION 5.14 Certain Expenses of Beneficiary. If any action, suit or
other proceeding affecting the Mortgaged Property or any part thereof be
commenced, in which action, suit or proceeding Beneficiary is made a party or
participates or in which the right to use the Mortgaged Property or any part
thereof is threatened, or in which it becomes necessary in the judgment of
Beneficiary to defend or uphold the Lien of this Deed to Secure Debt (including,
without limitation, any action, suit or proceeding to establish or uphold the
compliance of the Improvements with any Requirements of Law), then all amounts
reasonably paid or incurred by Beneficiary for the expense of any such action,
suit or other proceeding or to protect its rights therein (whether or not it is
made or becomes a party thereto) or otherwise to enforce or defend the rights
and Lien created by this Deed to Secure Debt, shall be paid by Grantor upon
demand together with interest at the Default Rate from the date of the payment
or incurring thereof to the date of repayment, and any such amount and the
interest thereon shall be a Lien on the Mortgaged Property, prior to any right,
or right to, interest in, or claim upon the Mortgaged Property attaching or
accruing subsequent to or otherwise subordinate to the Lien of this Deed to
Secure Debt, and the same shall be deemed to be secured hereby. All other
amounts reasonably paid, advanced or incurred by Beneficiary in order to secure
and protect the Lien of this Deed to Secure Debt or other security provided
hereunder shall be a like Lien on the Mortgaged Property and be deemed to be
secured hereby.
SECTION 5.15 Expenses of Collection. Grantor will upon demand pay to
Beneficiary the amount of any and all reasonable expenses, including the
reasonable fees and expenses of its counsel and the reasonable fees and expenses
of any experts and agents, which Beneficiary may incur in connection with (i)
the collection of the Secured Obligations, (ii) the enforcement and
administration of this Deed to Secure Debt, (iii) the custody or preservation
of, or the sale of, collection from, or other realization upon, any of the
Mortgaged Property, (iv) the exercise or enforcement of any of the rights of
Beneficiary or any Secured Party hereunder or (v) the failure by Grantor to
perform or observe any of the provisions hereof. All amounts payable by Grantor
under this Section 5.16 shall be due upon demand and shall be part of the
Secured Obligations. Grantor's obligations under this Section shall survive the
termination of this Deed to Secure Debt and the discharge of Grantor's other
obligations hereunder.
SECTION 5.16 Business Days. In the event any time period or any date
provided in this Deed to Secure Debt ends or falls on a day other than a
Business Day, then such time period shall be deemed to end and such date shall
be deemed to fall on the next succeeding Business Day, and performance herein
may be made on
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such Business Day, with the same force and effect as if made on such other day.
SECTION 5.17 Relationship. The relationship of Beneficiary to
Grantor hereunder is strictly and solely that of lender and borrower and grantor
and beneficiary and nothing contained in the Credit Agreement, this Deed to
Secure Debt or any other document or instrument now existing and delivered in
connection therewith or otherwise in connection with the Secured Obligations is
intended to create, or shall in any event or under any circumstance be construed
as creating a partnership, joint venture, tenancy-in-common, joint tenancy or
other relationship of any nature whatsoever between Beneficiary and Grantor
other than as lender and borrower and grantor and beneficiary.
SECTION 5.18 Reconveyance Upon Payment of Secured Obligations. In
the event that Grantor shall cause to be paid and performed in full all of the
Secured Obligations, Beneficiary shall release the Mortgaged Property from the
Lien of this Deed to Secure Debt and to reconvey (without warranty by or
recourse against Beneficiary or any Bank) the Mortgaged Property to Grantor.
SECTION 5.19 Concerning Beneficiary.
5.19.1 Beneficiary shall be entitled to rely upon any written
notice, statement, certificate, order or other document or any telephone message
believed by it to be genuine and correct and to have been signed, sent or made
by the proper person, and, with respect to all matters pertaining to this Deed
to Secure Debt and its duties hereunder, upon advice of counsel selected by it.
5.19.2 With respect to any of its rights and obligations as a Bank,
Beneficiary shall have and may exercise the same rights and powers hereunder.
The term "Banks," "Bank" or any similar terms shall, unless the context clearly
otherwise indicates, include Beneficiary in its individual capacity as a Bank.
Beneficiary may accept deposits from, lend money to, and generally engage in any
kind of banking, trust or other business with Grantor or any entity related to
or affiliated with Grantor to the same extent as if Beneficiary were not acting
as collateral agent.
5.19.3 If any item of Mortgaged Property also constitutes collateral
granted to Beneficiary under any other deed of trust, mortgage, deed to secure
debt, security agreement, pledge or instrument of any type, in the event of any
conflict between the provisions of this Deed to Secure Debt and the provisions
of such other deed of trust, mortgage, security agreement, pledge or instrument
of any type in respect of such collateral, Beneficiary,
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in its sole discretion, shall select which provision or provisions
shall control.
5.19.4 Beneficiary has been appointed as collateral agent pursuant
to the Credit Agreement. The actions of Beneficiary hereunder are subject to the
provisions of the Credit Agreement. Beneficiary shall have the right hereunder
to make demands, to give notices, to exercise or refrain from exercising any
rights, and to take or refrain from taking action (including, without
limitation, the release or substitution of Mortgaged Property), in accordance
with this Deed to Secure Debt and the Credit Agreement. Beneficiary may resign
and a successor Beneficiary may be appointed in the manner provided in the
Credit Agreement. Upon the acceptance of any appointment as Beneficiary by a
successor Beneficiary, that successor Beneficiary shall thereupon succeed to and
become vested with all the rights, powers, privileges and duties of the retiring
Beneficiary under this Deed to Secure Debt, and the retiring Beneficiary shall
thereupon be discharged from its duties and obligations under this Deed to
Secure Debt. After any retiring Beneficiary's resignation, the provisions of
this Deed to Secure Debt shall inure to its benefit as to any actions taken or
omitted to be taken by it under this Deed to Secure Debt while it was
Beneficiary.
SECTION 5.20 Future Advances. This Deed to Secure Debt may secure
future advances. The maximum aggregate amount of all advances of principal under
the Credit Agreement that may be outstanding hereunder at any time is
$40,000,000.
SECTION 5.21 Waiver of Stay.
5.21.1 Grantor agrees that in the event that Grantor or any property
or assets of Grantor shall hereafter become the subject of a voluntary or
involuntary proceeding under the Bankruptcy Code or Grantor shall otherwise be a
party to any federal or state bankruptcy, insolvency, moratorium or similar
proceeding to which the provisions relating to the automatic stay under Section
362 of the Bankruptcy Code or any similar provision in any such law is
applicable, then, in any such case, whether or not Beneficiary has commenced
foreclosure proceedings under this Deed to Secure Debt, Beneficiary shall be
entitled to relief from any such automatic stay as it relates to the exercise of
any of the rights and remedies (including, without limitation, any foreclosure
proceedings) available to Beneficiary as provided in this Deed to Secure Debt or
in any other Security Document.
5.21.2 Beneficiary shall have the right to petition or
move any court having jurisdiction over any proceeding described in
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subsection 5.21.1 for the purposes provided therein, and Grantor agrees (i) not
to oppose any such petition or motion and (ii) at Grantor's sole cost and
expense, to assist and cooperate with Beneficiary, as may be requested by
Beneficiary from time to time, in obtaining any relief requested by Beneficiary,
including, without limitation, by filing any such petitions, supplemental
petitions, requests for relief, documents, instruments or other items from time
to time requested by Beneficiary or any such court.
SECTION 5.22 Continuing Security Interest; Assignment. This Deed to
Secure Debt shall create a continuing security interest in the Mortgaged
Property and shall (i) be binding upon Grantor, its successors and assigns and
(ii) inure, together with the rights and remedies of Beneficiary hereunder, to
the benefit of Beneficiary and the other Secured Parties and each of their
respective successors, transferees and assigns; no other Persons (including,
without limitation, any other creditor of Grantor) shall have any interest
herein or any right or benefit with respect hereto. Without limiting the
generality of the foregoing clause (ii), any Bank may assign or otherwise
transfer any indebtedness held by it secured by this Deed to Secure Debt to any
other Person, and such other Person shall thereupon become vested with all the
benefits in respect thereof granted to such Bank, herein or otherwise, subject
however, to the provisions of the Credit Agreement and any applicable Interest
Rate Agreement.
SECTION 5.23 Obligations Absolute. All obligations of Grantor
hereunder shall be absolute and unconditional irrespective of:
(i) any bankruptcy, insolvency, reorganization,
arrangement, readjustment, composition, liquidation or the
like of Grantor or any other Credit Party;
(ii) any lack of validity or enforceability of the Credit Agreement,
any Interest Rate Agreement, any Letter of Credit, any other Credit
Document, or any other agreement or instrument relating thereto;
(iii) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Secured Obligations, or any other
amendment or waiver of or any consent to any departure from the Credit
Agreement, any Interest Rate Agreement, any Letter of Credit, any other
Credit Document, or any other agreement or instrument relating thereto;
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(iv) any exchange, release or non-perfection of any other
collateral, or any release or amendment or waiver of or consent to any
departure from any guarantee, for all or any of the Secured Obligations;
(v) any exercise or non-exercise, or any waiver of any right,
remedy, power or privilege under or in respect of this Deed to Secure
Debt, any Interest Rate Agreement or any other Credit Document except as
specifically set forth in a waiver granted pursuant to the provisions of
Section 5.8 hereof; or
(vi) any other circumstance or happening whatsoever that
is similar to any of the foregoing.
SECTION 5.24 Beneficiary's Right to Sever Indebtedness.
5.24.1 Grantor acknowledges that (a) the Mortgaged Property does not
constitute the sole source of security for the payment and performance of the
Secured Obligations and that the Secured Obligations are also secured by
property of Grantor in other jurisdictions (all such property, collectively, the
"Collateral"), (b) the number of such jurisdictions and the nature of the
transaction of which this instrument is a part are such that it would have been
impracticable for the parties to allocate to each item of Collateral a specific
loan amount and to execute in respect of such item a separate credit agreement
or interest rate agreement and (c) Grantor intends that Beneficiary have the
same rights with respect to the Mortgaged Property, in foreclosure or otherwise,
that Beneficiary would have had if each item of Collateral had been secured,
mortgaged or pledged pursuant to a separate credit agreement or interest rate
agreement, mortgage or security document. In furtherance of such intent, Grantor
agrees that Beneficiary may at any time by notice (an "Allocation Notice") to
Grantor allocate a portion (the "Allocated Indebtedness") of the Secured
Obligations to the Mortgaged Property and sever from the remaining Secured
Obligations the Allocated Indebtedness. From and after the giving of an
Allocation Notice with respect to the Mortgaged Property, the Secured
Obligations hereunder shall be limited to the extent set forth in the Allocation
Notice and (as so limited) shall, for all purposes, be construed as a separate
loan obligation of Grantor unrelated to the other transactions contemplated by
the Credit Agreement, any Interest Rate Agreement, any other Credit Document or
any document related to any thereof. To the extent that the proceeds on any
foreclosure of the Mortgaged Property shall exceed the Allocated Indebtedness,
such proceeds shall belong to Grantor and shall not be available hereunder to
satisfy any Secured Obligations of Grantor other than the Allocated
Indebtedness. In any action or proceeding to foreclose the Lien of
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this Deed to Secure Debt or in connection with any power of sale foreclosure or
other remedy exercised under this Deed to Secure Debt commenced after the giving
by Beneficiary of an Allocation Notice, the Allocation Notice shall be
conclusive proof of the limits of the Secured Obligations hereby secured, and
Grantor may introduce, by way of defense or counterclaim, evidence thereof in
any such action or proceeding. Notwithstanding any provision of this Section
5.24, the proceeds received by Beneficiary pursuant to this Deed to Secure Debt
shall be applied by Beneficiary in accordance with the provisions of subsection
3.3.3 hereof.
5.24.2 Grantor hereby waives to the greatest extent permitted under
law the right to a discharge of any of the Secured Obligations under any statute
or rule of law now or hereafter in effect which provides that foreclosure of the
Lien of this Deed to Secure Debt or other remedy exercised under this Deed to
Secure Debt constitutes the exclusive means for satisfaction of the Secured
Obligations or which makes unavailable a deficiency judgment or any subsequent
remedy because Beneficiary elected to proceed with a power of sale foreclosure
or such other remedy or because of any failure by Beneficiary to comply with
laws that prescribe conditions to the entitlement to a deficiency judgment. In
the event that, notwithstanding the foregoing waiver, any court shall for any
reason hold that Beneficiary is not entitled to a deficiency judgment, Grantor
shall not (a) introduce in any other jurisdiction such judgment as a defense to
enforcement against Grantor of any remedy in the Credit Agreement, any Interest
Rate Agreement or any other Credit Document or (b) seek to have such judgment
recognized or entered in any other jurisdiction, and any such judgment shall in
all events be limited in application only to the state or jurisdiction where
rendered.
5.24.3 In the event any instrument in addition to the Allocation
Notice is necessary to effectuate the provisions of this Section 5.24,
including, without limitation, any amendment to this Deed to Secure Debt, any
substitute promissory note or affidavit or certificate of any kind, Beneficiary
may execute, deliver or record such instrument as the attorney-in-fact of
Grantor. Such power of attorney is coupled with an interest and is irrevocable.
5.24.4 Notwithstanding anything set forth herein to the contrary,
the provisions of this Section 5.24 shall be effective only to the maximum
extent permitted by law.
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<PAGE>
IN WITNESS WHEREOF, Grantor has caused this Deed to Secure Debt to
be duly executed and delivered under seal the day and year first above written.
CARSON PRODUCTS COMPANY
(formerly known as Aminco, Inc.),
Grantor
By:___________________________
Name:
Title:
Attest:_______________________
Name:
Title:
Signed, sealed and delivered in the presence of:
Witness
- ------------------------------
Name:
- -----------------------------
Notary Public
[Notary Seal]
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<PAGE>
Schedule A
[Legal Description]
[To come from Title Policy]
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<PAGE>
Schedule B
[Prior Liens]
[To come from Title Policy]
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<PAGE>
Exhibit E to the
Credit Agreement
HOLDINGS GUARANTEE
This GUARANTEE (the "Guarantee") dated as of October [ ], 1996 by
Carson, Inc., a Delaware corporation (the "Guarantor"), in favor of and for the
benefit of the Banks under the Credit Agreement (each as hereinafter defined).
R E C I T A L S :
A. Pursuant to a certain Credit Agreement dated as of October 18,
1996 (as amended, amended and restated, supplemented or otherwise modified in
accordance with its terms, the "Credit Agreement"; capitalized terms not defined
herein have the meanings ascribed to them in the Credit Agreement) among Carson
Products Company (the "Borrower") the lending institutions identified therein
(collectively, the "Banks") and Banque Indosuez, New York Branch as Agent (the
"Agent"), the Banks have agreed to make certain Loans to the Borrower and to
issue Letters of Credit for the accounts of the Borrower.
B. It is a condition precedent to the Banks obligations to make the
Loans and to issue the Letters of Credit under to the Credit Agreement that the
Guarantor shall have executed and delivered this Guarantee and that this
Guarantee shall be in full force and effect.
C. This Guarantee is given by the Guarantor in favor of the Banks to
guarantee all of the Obligations of the Borrower, to the extent of the Pledged
Securities as defined in the Holdings Pledge Agreement, in accordance with the
terms of the Credit Agreement.
D. All of the Guarantor's obligations hereunder shall
be secured pursuant to the Holdings Pledge Agreement to which the
Guarantor is a party.
NOW, THEREFORE, in consideration of the foregoing premises and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the Guarantor hereby agrees as follows:
SECTION 1. Guarantee. (i) To induce the Banks to
execute and deliver the Credit Agreement and to make the Loans and
issue the Letters of Credit upon the terms and conditions set forth
in the Credit Agreement, and in consideration thereof, the
Guarantor hereby unconditionally and irrevocably (a) guarantees to
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the Banks and their respective successors, transferees and assigns, the prompt
and complete payment and performance when due (whether at the stated maturity,
by acceleration or otherwise) and at all times thereafter of the Obligations of
the Borrower (including amounts which would become due but for the operation of
the automatic stay under Section 362(a) of the Bankruptcy Code, or similar
provisions under the bankruptcy laws of foreign jurisdictions); and (b) agrees
to pay any and all reasonable expenses (including reasonable attorneys' fees and
disbursements) which may be paid or incurred by the Banks, the Agent or the
Collateral Agent in enforcing any rights with respect to, or collecting, any or
all of the Obligations and/or enforcing any rights with respect to, or
collecting against, the Guarantor under this Guarantee; provided, that this
Guarantee is limited as set forth in Section 6 hereof (as so limited,
collectively, the "Guaranteed Obligations").
(ii) The Guarantor agrees that this Guarantee constitutes a guarantee
of payment when due and not of collection and waives any right to require that
any resort be held by the Collateral Agent, the Agent or any Bank to any of the
security held for payment of any of the Guaranteed Obligations or to any balance
of any deposit account or credit on the books of the Agent, the Collateral Agent
or any Bank in favor of the Borrower or any other Person.
(iii) No payment or payments made by any other Person or received or
collected by the Banks (or the Collateral Agent or Agent on behalf of the Banks)
from any other Person by virtue of any action or proceeding or any set-off or
appropriation or application at any time in reduction of or in payment of the
Guaranteed Obligations shall be deemed to modify, reduce, release or otherwise
affect the liability or obligations of the Guarantor hereunder which shall,
notwithstanding any such payment or payments other than payments made to the
Banks (or the Collateral Agent or the Agent on behalf of the Banks) by the
Guarantor or payments received or collected by the Banks (or the Collateral
Agent or Agent on behalf of the Banks) from the Guarantor, remain liable for the
Guaranteed Obligations until the Guaranteed Obligations are indefeasibly paid in
full in Cash or Cash Equivalents, subject to the provisions of Section 1(iv)
hereof.
(iv) The Guarantor understands, agrees and confirms that this is a
guarantee of payment when due and not of collection and that each Bank may, from
time to time, enforce this Guarantee up to the full amount of the Guaranteed
Obligations owed to such Bank without proceeding against any other Credit Party,
against any security for the Guaranteed Obligations, against any other
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<PAGE>
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guarantor or under any other guarantee covering the Guaranteed
Obligations.
SECTION 2. Waiver by Guarantor. Until the payment and satisfaction
in full of all Guaranteed Obligations and the expiration or termination of the
Commitments and all Letters of Credit Usage of the Banks under the Credit
Agreement, the Guarantor hereby waives absolutely and irrevocably any claim
which it may have against the Borrower or any of its Affiliates by reason of any
payment to the Agent, Collateral Agent, or any Bank, or to any other Person
pursuant to or in respect of this Guarantee, including any claims by way of
subrogation, contribution, reimbursement, indemnity or otherwise.
SECTION 3. Consent by Guarantor. The Guarantor hereby consents and
agrees that, without the necessity of any reservation of rights against the
Guarantor and without notice to or further assent by the Guarantor, any demand
for payment of any of the Guaranteed Obligations made by the Agent, the
Collateral Agent or any Bank may be rescinded by the Banks (or the Agent or
Collateral Agent on behalf of the Banks) and any of the Guaranteed Obligations
continued, and the Guaranteed Obligations, or the liability of any other party
upon or for any part thereof, or any collateral security or guarantee therefor
or right of offset with respect thereto, may, from time to time, in whole or in
part, be renewed, extended, amended, modified, accelerated, compromised, waived,
surrendered or released by the Banks (or the Agent or Collateral Agent on behalf
of the Banks); and the Credit Agreement or any of the Credit Document, or other
guarantee or documents in connection therewith, or any of them, may be amended,
modified, supplemented or terminated, in whole or in part, as the Banks (or the
Agent or Collateral Agent on behalf of the Banks) may deem advisable from time
to time; and any Guarantee (subject to Section 11.04 of the Credit Agreement) or
right of offset or any Collateral may be sold, exchanged, waived, surrendered or
released, all without the necessity of any reservation of rights against the
Guarantor and without notice to or further assent by the Guarantor, which will
remain bound hereunder, notwithstanding any such renewal, extension,
modification, acceleration, compromise, amendment, supplement, termination,
sale, exchange, waiver, surrender or release. Neither the Banks nor the Agent or
the Collateral Agent shall have any obligation to protect, secure, perfect or
insure any Collateral or property at any time held as security for the
guaranteed Obligations or this Guarantee (other than the exercise of reasonable
care in the custody and preservation of the Pledged Collateral referred to in
the Holdings Pledge Agreement). When making any demand hereunder against the
Guarantor, the Agent, the Collateral Agent or the Banks may, but shall be under
no obligation to, make a similar demand on any other Credit Party or any such
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other guarantor, and any failure by the the Agent, the Collateral Agent or the
Banks to make any such demand or to collect any payments from any such other
Credit Party or any such other guarantor or any release of such other Credit
Party or any such other guarantor or of the Guarantor's obligations or
liabilities hereunder shall not impair or affect the rights and remedies,
express or implied, or as a matter of law, of the Banks against the Guarantor
hereunder. For the purposes hereof "demand" shall include the commencement and
continuance of any legal proceedings.
SECTION 4. Waivers; Successors and Assigns. The Guarantor waives any
and all notice of the creation, renewal, extension or accrual of any of the
Guaranteed Obligations and notice of or proof of reliance by the Banks upon this
Guarantee or acceptance of this Guarantee, and the Guaranteed Obligations shall
conclusively be deemed to have been created, contracted or incurred in reliance
upon this Guarantee, and all dealings between the Guarantor and any other Credit
Party, on the one hand, and the Banks, on the other hand, shall likewise be
conclusively presumed to have been had or consummated in reliance upon this
Guarantee. The Guarantor waives diligence, presentment, protest, demand for
payment and notice of default or nonpayment to or upon any Credit Party or the
Guarantor with respect to the Guaranteed Obligations. This Guarantee shall be
construed as a continuing, absolute and unconditional guarantee of payment
without regard to the validity, regularity or enforceability of the Credit
Agreement, the other Credit Documents, any of the Guaranteed Obligations or any
guarantee therefor or right of offset with respect thereto at any time or from
time to time held by the Banks and without regard to any defense (other than the
defense of payment), set-off or counterclaim which may at any time be available
to or be asserted by any Credit Party against the Banks, or by any other
circumstance whatsoever (with or without notice to or knowledge of the
Guarantor) which constitutes, or might be construed to constitute, an equitable
or legal discharge of the Guaranteed Obligations, or of the Guarantor under this
Guarantee, in bankruptcy or in any other instance, and the obligations and
liabilities of the Guarantor hereunder shall not be conditioned or contingent
upon the pursuit by the Banks or any other Person at any time of any right or
remedy against any Credit Party or against any other Person which may be or
become liable or obligated in respect of all or any part of the Guaranteed
Obligations or against any collateral security or guarantee therefor or right of
offset with respect thereto. This Guarantee shall remain in full force and
effect and be binding in accordance with and to the extent of its terms upon the
Guarantor and the successors and assigns thereof, and shall inure to the benefit
of the Banks, and their respective successors, transferees and assigns
(including each holder from time to time of Guaranteed Obligations) until all of
the Guaranteed Obligations and
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the obligations of the Guarantor under this Guarantee shall have been satisfied
by indefeasible payment in full in cash or cash equivalents, notwithstanding
that from time to time during the term of the Credit Agreement any Credit Party
may be released from all of its Guaranteed Obligations thereunder.
SECTION 5. Guarantee Secured. Payment under this Guarantee is
secured by a pledge of Securities pursuant to the Holdings Pledge Agreement in
accordance with the Credit Agreement. Reference is hereby made to the Credit
Agreement and the Holdings Pledge Agreement for a description of the Securities
pledged and the right of the respective parties to such property, to secure all
the obligations of the Guarantor hereunder.
SECTION 6. Limited Liability. Notwithstanding any contrary provision
of this Agreement, the Holdings Pledge Agreement or the Credit Agreement, it is
hereby expressly agreed that no partner, officer, employee, servant, controlling
Person, executive, director, agent, authorized representative or affiliate
(herein referred to as "operatives") of any of the Guarantor, DNL Group, L.L.C.
or DNL Partners, Limited Partnership (collectively, the "Guarantor and Equity
Entities") shall be personally liable for payments due under this Agreement for
the performance of any obligation hereunder. Except for the representations and
warranties made by the Guarantor in Section 10 of this Agreement, the sole
recourse of the Banks, or the Agent or Collateral Agent on behalf of the Banks,
for satisfaction of the obligations of the Guarantor under this Agreement, the
Holdings Pledge Agreement or the Credit Agreement shall be against the Pledged
Securities (as such term is defined in the Holdings Pledge Agreement) and no
against any other assets or property of any of the Guarantor and Equity Entities
or any of the operatives of any of the Guarantor and Equity Entities other than
the remedies provided hereunder and under the Holdings Pledge Agreement. In the
event that a default occurs in connection with such obligations, no action shall
be brought against any of he Guarantor and Equity Entities or any of the
operatives of any of the Guarantor and Equity Entities by virtue solely of its
direct or indirect ownership interest in the Borrower, except in accordance with
the Holdings Pledge Agreement. In the event of foreclosure or other sale or
disposition of Mortgaged Real Property or Pledged Collateral, no judgment for
any deficiency upon the obligations of the obligors thereunder shall be
obtainable by the Banks, or the Agent or Collateral Agent on behalf of the
Banks, against any of the Guarantor and Equity Entities or any of the operatives
of any of the Guarantor and Equity Entities by virtue solely of its direct or
indirect ownership interest in the Borrower or its Subsidiaries. Nothing
contained in this Section shall prevent the Banks, or the Agent or Collateral
Agent on behalf of the Banks, from exercising any rights or remedies
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against the Borrower or its Subsidiaries, the Mortgaged Real Property or the
Pledged Collateral pursuant to the Credit Agreement, the Security Documents or
this Agreement.
SECTION 7. Effectiveness; Reinstatement. This Guarantee shall
continue to be effective, or be reinstated, as the case may be, if at any time
payment, or any part thereof, of any of the Guaranteed Obligations is rescinded
or must otherwise be restored or returned by the Banks upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of any Credit Party, or
upon or as a result of the appointment of a receiver, intervenor or conservator
of, or trustee or similar officer for, any Credit Party or any substantial part
of its property, or otherwise, all as though such payments had not been made.
SECTION 8. Payment of Guaranteed Obligations. The Guarantor hereby
guarantees that the Guaranteed Obligations will be paid for the ratable benefit
of the Banks without set-off or counterclaim in lawful currency of the United
States of America at the office of the Collateral Agent located at 1211 Avenue
of the Americas, New York, New York 10036. The Guarantor shall make any payments
required hereunder upon receipt of written notice thereof from the Agent or
Collateral Agent or any Bank; provided, however, that the failure of the Agent
or Collateral Agent or any Bank to give such notice shall not affect the
Guarantor's obligations hereunder.
SECTION 9. Default. If (a) the Borrower has failed to pay or perform
when due its Obligations guaranteed hereby or (b) there is an event with respect
to the Guarantor that would require or permit the acceleration pursuant to
Section 8.05 of the Credit Agreement of any outstanding Loan, then in the case
of clause (a) all of the obligations with respect to the Borrower guaranteed
hereby and in the case of clause (b) all of the Guaranteed Obligations shall be
immediately due and payable by the Guarantor, regardless of whether in the case
of clause (a) the payment of the Obligations guaranteed hereby has been
accelerated or in the case of clause (b) the Borrower is in default with respect
to the Obligations guaranteed hereby.
SECTION 10. Representations and Warranties. To induce the Banks to
enter into the Credit Agreement and to make Loans thereunder and to issue the
Letters of Credit, the Guarantor represents and warrants to each Bank that the
following statements are true, correct and complete on and as of the Closing
Date:
A. Organization and Powers. The Guarantor is a duly
organized and validly existing corporation in good standing under
the laws of the jurisdiction of its organization and has the
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corporate power and authority to own its property and assets and to transact the
business in which it is engaged and currently proposes to engage. The Guarantor
has duly qualified and is authorized to do business and is in good standing in
all jurisdictions in which the conduct of its business or the ownership of its
properties requires such qualification, except where the failure to be so
qualified would not have a Materially Adverse Effect. The Guarantor has all
requisite governmental licenses, authorizations, consents and approvals to own
and carry on its business as now conducted and as presently contemplated to be
conducted by the Guarantor, other than such licenses, authorizations, consents
and approvals the failure to obtain which has not had and will not have a
Materially Adverse Effect. The Guarantor has all corporate authority to enter
into each of the Security Documents to which it is a party and to carry out the
transactions contemplated therby and to execute and deliver this Guarantee.
B. No Violations. Neither the execution, delivery or performance by
the Guarantor of any of the Credit Documents to which it is a party, nor
compliance with any of the terms and provisions thereof, nor the consummation of
any of the transactions contemplated therein, nor the grant and perfection of
the security interests pursuant to the Security Documents (a) will contravene
any applicable provision of any law, statute, rule, regulation, order, writ,
injunction or decree of any Governmental Authority, (b) will conflict or be
inconsistent with or result in any breach of, any of the terms, covenants,
conditions or provisions of, or constitute (with notice or lapse of time or
both) a default under any material contractual obligation of the Guarantor or
any of its Subsidiaries, or (other than as contemplated by the Security
Documents) result in the creation or imposition of (or the obligation to create
or impose), any Lien upon any of the property or assets of the Guarantor or any
of its Subsidiaries pursuant to any material contractual obligation of the
Guarantor or (c) will violate any provision of the organizational documents of
the Guarantor or any of its Subsidiaries, except in each such case where such
contravention, conflict, inconsistancy, breach, default, creation, impostion,
obligation or violation would not have a Materially Adverse Effect.
C. Approvals. The execution, delivery and performance
by the Guarantor of the Credit Documents to which it is a party do
not and will not require any registration with, consent or waiver
or approval of, or notice to, or other action to, with or by, any
Governmental Authority or other Person (other than those
registrations, consents, waivers, approvals, notices or other
actions which if not obtained or made, would not have a Materially
Adverse Effect) except filings required for the perfection of
security intersts granted pursuant to the Security documents. All
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consents and approvals from or notices to or filings with any Governmental
Authority or other Person required to be obtained by Guarantor have been
obtained and are in full force and effect (other than those consents, waivers,
approvals, notices or filings which, if not obtained or made, would not have a
Materially Adverse Effect).
D. Binding Obligation. This Guarantee constitutes the legal, valid
and binding obligation of the Guarantor, enforceable against the Guarantor in
accordance with its terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights generally
and except as such enforceability may be limited by the application general
principles of equity, (regardless of whether such enforceability is considered
in a proceeding in equity or at law).
E. Investment Company. The Guarantor is not an "investment company"
or a company "controlled" by an "investment company" (as each of such quoted
terms is defined or used in the Investment Company Act of 1940, as amended) or
subject to regulation under the Public Utility Holding Company Act of 1935, the
Federal Power Act or any foreign, federal or local statute or regulation
limiting its ability to incur Indebtedness for money borrowed or guarantee such
Indebtedness as contemplated hereby or by any other Credit Document.
SECTION 11. Ratable Sharing. The Banks by acceptance of this
Guarantee agree among themselves that with respect to all amounts received by
them which are applicable to the payment of obligations of the Guarantor under
this Guarantee, if the Banks, or the Agent or Collateral Agent on behalf of the
Banks, exercise their rights hereunder, including, without limitation,
acceleration of the obligations of the Guarantor hereunder, equitable adjustment
will be made so that, in effect, all such amounts will be shared among the Banks
pro rata based on the relative outstanding Guaranteed Obligations.
SECTION 12. Merger. If the Guarantor shall merge into or consolidate
with another corporation, or liquidate, wind up or dissolve itself in a
transaction not prohibited by the Credit Agreement, or if all of the stock of
the Guarantor shall be sold or otherwise disposed of in a manner not prohibited
by the Credit Agreement, the Guarantor hereby covenants and agrees, that upon
any such merger, consolidation, liquidation, or dissolution, the guarantee given
in this Guarantee and the due and punctual performance and observance of all of
the covenants and conditions of the Credit Agreement to be performed by the
Guarantor, shall be expressly assumed (in the event that the Guarantor is not
the surviving corporation in the merger) by supplemental agreements
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<PAGE>
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satisfactory in form to the Agent or Collateral Agent on behalf of the Banks, by
the corporation or corporations formed by such consolidation, or into which the
Guarantor shall have been merged, or by the corporation or corporations which
shall have acquired such property. In addition, the Guarantor shall deliver to
the Agent or Collateral Agent on behalf of the Banks, an Officers' Certificate
and an opinion of counsel, each stating that such merger, consolidation or
transfer and such supplemental agreements comply with this Guarantee and that
all conditions precedent herein provided relating to such transaction have been
complied with. In case of any such consolidation, merger, sale or conveyance and
upon the assumption by the successor corporation or corporations, by
supplemental agreements executed and delivered to the Agent or Collateral Agent
on behalf of the Banks, and reasonably satisfactory in form to the Agent or
Collateral Agent on behalf of the Banks, of the guarantee given in this
Guarantee and the due and punctual performance of all of the covenants and
conditions of the Credit Agreement to be performed by the Guarantor, such
successor corporation or corporations shall succeed to and be substituted for
the Guarantor, with the same effect as if it or they had been named herein as a
guarantor.
SECTION 13. No Waiver. No failure to exercise and no delay in
exercising, on the part of the Banks, or the Agent or Collateral Agent on behalf
of the Banks, any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege preclude any other or further exercise thereof, or the exercise of any
other power of right. The rights and remedies herein provided are cumulative and
are not exclusive of any rights and remedies provided by law.
SECTION 14. Notices. All notices, demands, instructions or other
communications required or permitted to be given to or made upon any party
hereto shall be given in accordance with the provisions of the Credit Agreement
and at the address set forth therein or as provided on the signature page
hereof.
SECTION 15. Amendments, Waivers, etc. No provision of this Guarantee
shall be waived, amended, terminated or supplemented except by a written
instrument executed by the Guarantor and the Agent or Collateral Agent, on
behalf of the Banks.
SECTION 16. Notice of Exercise. Upon exercise of its rights
hereunder, each Bank, or the Agent or Collateral Agent on behalf of the Banks,
as the case may be, shall provide written notice on the date of such exercise to
the Banks, or the Agent or Collateral Agent on behalf of the Banks, as the case
may be, of such exercise.
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SECTION 17. GOVERNING LAW. THIS GUARANTEE SHALL BE
GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS.
SECTION 18. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL
JUDICIAL PROCEEDINGS BROUGHT AGAINST THE GUARANTOR WITH RESPECT TO THIS
GUARANTEE MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETANT JURISDICTION
IN THE STATE OF NEW YORK AND BY EXECUTION AND DELIVERY OF THIS GUARANTEE THE
GUARANTOR ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY
AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS. THE
PARTIES HERETO HEREBY IRREVOCABLY WAIVE TO THE EXTENT PERMITTED BY APPLICABLE
LAW ANY RIGHT TO TRIAL BY JURY, AND THE GUARANTOR HEREBY IRREVOCABLY WAIVES ANY
OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH
ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS. THE GUARANTOR DESIGNATES
AND APPOINTS CT CORPORATION, SYSTEM, HAVING AN ADDRESS AT 1633 BROADWAY, NEW
YORK, NEW YORK 10019, AND SUCH OTHER PERSONS AS MAY HEREAFTER BE SELECTED BY THE
GUARANTOR IRREVOCABLY AGREEING IN WRITING TO SERVE, AS ITS AGENT TO RECEIVE ON
ITS BEHALF, SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDINGS IN ANY SUCH COURT,
SUCH SERVICE BEING HEREBY ACKNOWLEDGED BY THE GUARANTOR TO BE EFFECTIVE AND
BINDING SERVICE IN EVERY RESPECT. A COPY OF SUCH PROCESS SO SERVED SHALL BE
MAILED BY REGISTERED MAIL TO THE GUARANTOR AS PROVIDED IN SECTION 14 HEREOF. IF
ANY AGENT APPOINTED BY THE GUARANTOR REFUSES TO ACCEPT SERVICE, THE GUARANTOR
HEREBY AGREES THAT SERVICE UPON IT BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE.
NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF ANY BANK TO BRING PROCEEDINGS
AGAINST THE GUARANTOR IN THE COURTS OF ANY OTHER JURISDICTION.
SECTION 19. Counterparts. This Guarantee and any amendments,
waivers, consents or supplements may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Guarantee to be
duly executed and delivered by its duly authorized officer on the day and year
first above written.
CARSON, INC.
By: _______________________________
Name:
Title:
Notice Address:
CARSON, INC.
64 Ross Road
Savannah, GA 31405
Attn: President
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<PAGE>
Exhibit F-1 to the
Credit Agreement
BORROWER SECURITIES PLEDGE AGREEMENT
BORROWER SECURITIES PLEDGE AGREEMENT (the "Agreement"), dated as of
October 18, 1996, made by CARSON PRODUCTS COMPANY (formerly known as Aminco,
Inc., as successor by merger to DNL Savannah Acquisition Corp.), a Delaware
corporation having an office at 64 Ross Road, Savannah, Georgia 31405
("Pledgor"), in favor of BANQUE INDOSUEZ, NEW YORK BRANCH, having an office at
1211 Avenue of the Americas, 7th Floor, New York, New York 10036, as pledgee,
assignee and secured party, in its capacity as collateral agent (in such
capacities and together with any successors in such capacities, "Collateral
Agent") for the lending institutions (the "Banks") from time to time party to
the Credit Agreement (as hereinafter defined).
R E C I T A L S :
A. Pursuant to a certain credit agreement, dated as of the date
hereof (as amended, amended and restated, supplemented or otherwise modified
from time to time, the "Credit Agreement"; capitalized terms used herein and not
defined shall have the meanings assigned to them in the Credit Agreement), among
Pledgor, the Banks and Banque Indosuez, New York Branch, as Agent and Collateral
Agent for the Banks, the Banks have agreed (i) to make to or for the account of
Pledgor certain A Term Loans up to an aggregate principal amount of $15,000,000,
certain B Term Loans up to an aggregate principal amount of $10,000,000 and
certain Revolving Loans up to an aggregate principal amount of $15,000,000 and
(ii) to issue certain Letters of Credit for the account of Pledgor.
B. It is contemplated that Pledgor may enter into one or more
agreements with one or more of the Banks ("Interest Rate Agreements") fixing the
interest rates with respect to Loans under the Credit Agreement (all obligations
of Pledgor now existing or hereafter arising under such Interest Rate
Agreements, collectively, the "Interest Rate Obligations").
C. Pledgor is the legal and beneficial owner of the
Pledged Collateral (as hereinafter defined).
D. It is a condition to the obligations of the Banks to
make the Loans under the Credit Agreement and a condition to any
Bank issuing Letters of Credit under the Credit Agreement or
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entering into the Interest Rate Agreements that Pledgor execute and deliver the
applicable Credit Documents, including this Agreement.
E. This Agreement is given by Pledgor in favor of Collateral Agent
for its benefit and the benefit of the Banks and the Agent (collectively, the
"Secured Parties") to secure the payment and performance of all of the Secured
Obligations (as defined in Section 2).
A G R E E M E N T :
NOW, THEREFORE, in consideration of the foregoing premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Pledgor and Collateral Agent hereby agree as follows:
Section 1. Pledge. As collateral security for the payment and
performance when due of all the Secured Obligations, Pledgor hereby pledges,
assigns, transfers and grants to Collateral Agent for its benefit and the
benefit of the Secured Parties, a continuing first priority security interest in
and to all of the right, title and interest of Pledgor in, to and under the
following property, whether now existing or hereafter acquired (collectively,
the "Pledged Collateral"):
(a) issued and outstanding shares of capital stock of each Person
described in Schedule I hereto (the "Pledged Shares") (which are and shall
remain at all times until this Agreement terminates, certificated shares),
including the certificates representing the Pledged Shares and any
interest of Pledgor in the entries on the books of any financial
intermediary pertaining to the Pledged Shares;
(b) all additional shares of capital stock of any issuer of the
Pledged Shares from time to time acquired by Pledgor in any manner (which
are and shall remain at all times until this Agreement terminates,
certificated shares) (which shares shall be deemed to be part of the
Pledged Shares), including the certificates representing such additional
shares and any interest of Pledgor in the entries on the books of any
financial intermediary pertaining to such additional shares;
(c) all intercompany notes described on Schedule II hereto (the
"Intercompany Notes") now owned or held by Pledgor and from time to time
acquired by Pledgor in any way, and all certificates or instruments
evidencing such Intercompany Notes and all proceeds thereof, all
accessions thereto and substitutions therefor;
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(d) all dividends, cash, options, warrants, rights, instruments,
distributions, returns of capital, income, profits and other property,
interests or proceeds from time to time received, receivable or otherwise
distributed to Pledgor in respect of or in exchange for any or all of the
Pledged Shares or Intercompany Notes (collectively, "Distributions"); and
(e) all "proceeds" (as such term is defined in the UCC or under
other relevant law) of any of the foregoing.
Section 2. Secured Obligations. This Agreement secures, and the
Pledged Collateral is collateral security for, the payment and performance in
full when due, whether at stated maturity, by acceleration or otherwise
(including, without limitation, the payment of interest and other amounts which
would accrue and become due but for the filing of a petition in bankruptcy or
the operation of the automatic stay under Section 362(a) of the Bankruptcy Code,
11 U.S.C. ss. 362(a)) of (i) all Obligations of Pledgor now existing or
hereafter arising under the Credit Agreement and all Interest Rate Obligations
of Pledgor now existing or hereafter arising under any Interest Rate Agreement
(including, without limitation, Pledgor's obligation provided for therein to pay
principal, interest and all other charges, fees, expenses, commissions,
reimbursements, premiums, indemnities and other payments related to or in
respect of the Obligations contained in the Credit Agreement and the obligations
contained in any Interest Rate Agreement), and (ii) without duplication of the
amounts described in clause (i), all obligations of Pledgor now existing or
hereafter arising under this Agreement or any other Security Document,
including, without limitation, with respect to all charges, fees, expenses,
commissions, reimbursements, premiums, indemnities and other payments that
Pledgor is obligated to pay under this Agreement or any other Security Document
(the obligations described in clauses (i) and (ii), collectively, the "Secured
Obligations").
Section 3. No Release. Nothing set forth in this Agreement shall
relieve Pledgor from the performance of any term, covenant, condition or
agreement on Pledgor's part to be performed or observed under or in respect of
any of the Pledged Collateral or from any liability to any Person under or in
respect of any of the Pledged Collateral or shall impose any obligation on
Collateral Agent or any Secured Party to perform or observe any such term,
covenant, condition or agreement on Pledgor's part to be so performed or
observed or shall impose any liability on Collateral Agent or any Secured Party
for any act or omission on the part of Pledgor relating thereto or for any
breach of any representation or warranty on the part of Pledgor contained in
this Agreement, any Interest Rate Agreement or any other Credit Document or
under or in
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respect of the Pledged Collateral or made in connection herewith or therewith.
The obligations of Pledgor contained in this Section 3 shall survive the
termination of this Agreement and the discharge of Pledgor's other obligations
under this Agreement, any Interest Rate Agreement and the other Credit
Documents.
Section 4. Delivery of Pledged Collateral.
(a) All certificates, agreements or instruments representing or
evidencing the Pledged Collateral, to the extent not previously delivered to
Collateral Agent, shall immediately upon receipt thereof by Pledgor be delivered
to and held by or on behalf of Collateral Agent pursuant hereto. All Pledged
Collateral shall be in suitable form for transfer by delivery or shall be
accompanied by duly executed instruments of transfer or assignment in blank, all
in form and substance reasonably satisfactory to Collateral Agent. Collateral
Agent shall have the right, at any time upon the occurrence of an Event of
Default and without notice to Pledgor, to endorse, assign or otherwise transfer
to or to register in the name of Collateral Agent or any of its nominees any or
all of the Pledged Collateral. In addition, Collateral Agent shall have the
right at any time to exchange certificates representing or evidencing Pledged
Collateral for certificates of smaller or larger denominations.
(b) If the issuer of Pledged Shares is incorporated in a
jurisdiction which does not permit the use of certificates to evidence equity
ownership, then Pledgor shall, to the extent permitted by applicable law, record
such pledge on the stock register of the issuer, execute any customary stock
pledge forms or other documents necessary or appropriate to complete the pledge
and give Collateral Agent the right to transfer such Pledged Shares under the
terms hereof and provide to Collateral Agent an opinion of counsel, in form and
substance reasonably satisfactory to Collateral Agent, confirming such pledge.
Section 5. Supplements, Further Assurances.
(a) Pledgor agrees that at any time and from time to time, at the
sole cost and expense of Pledgor, Pledgor shall promptly execute and deliver all
further instruments and documents, including, without limitation, supplemental
or additional UCC-1 financing statements, and take all further action that may
be necessary or that Collateral Agent may reasonably request, in order to
perfect and protect the pledge, security interest and Lien granted or purported
to be granted hereby or to enable Collateral Agent to exercise and enforce its
rights and remedies hereunder with respect to any Pledged Collateral.
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(b) Pledgor shall, upon obtaining any Pledged Shares or Intercompany
Notes of any Person, promptly (and in any event within five Business Days)
deliver to Collateral Agent a pledge amendment, duly executed by Pledgor, in
substantially the form of Exhibit 1 hereto (each, a "Pledge Amendment"), in
respect of the additional Pledged Shares or Intercompany Notes which are to be
pledged pursuant to this Agreement, and confirming the attachment of the Lien
hereby created on and in respect of such additional shares. Pledgor hereby
authorizes Collateral Agent to attach each Pledge Amendment to this Agreement
and agrees that all Pledged Shares or Intercompany Notes listed on any Pledge
Amendment delivered to Collateral Agent shall for all purposes hereunder be
considered Pledged Collateral.
Section 6. Representations, Warranties and Covenants.
Pledgor represents, warrants and covenants as follows:
(a) No Liens. Pledgor is as of the date hereof, and at the time of
any delivery of any Pledged Collateral to Collateral Agent pursuant to
Section 4 of this Agreement, Pledgor will be, the sole legal and
beneficial owner of the Pledged Collateral. All Pledged Collateral is on
the date hereof, and will be, so owned by Pledgor free and clear of any
Lien except for the Lien created by this Agreement and Liens of the type
described in paragraph (a) of the definition of Permitted Encumbrances.
(b) Authorization, Enforceability. Pledgor has the requisite
corporate power, authority and legal right to pledge and grant a security
interest in all the Pledged Collateral pursuant to this Agreement, and
this Agreement constitutes the legal, valid and binding obligation of
Pledgor, enforceable against Pledgor in accordance with its terms, except
as may be limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws relating to or affecting creditors' rights generally and
except as such enforceability may be limited by the application of general
principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(c) No Consents, etc. No consent of any party (including, without
limitation, stockholders or creditors of Pledgor) and no consent,
authorization, approval, license or other action by, and no notice to or
filing with, any Governmental Authority or regulatory body or other Person
is required for (x) the pledge by Pledgor of the Pledged Collateral
pursuant to this Agreement or for the execution, delivery or performance
of this Agreement by Pledgor, (y) the
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exercise by Collateral Agent of the voting or other rights provided for in
this Agreement, or (z) the exercise by Collateral Agent of the remedies in
respect of the Pledged Collateral pursuant to this Agreement (other than
those consents, authorizations, approvals, actions, notices or filings
which, if not obtained or made, would not have a material adverse effect
upon the interests of Collateral Agent under this Agreement).
(d) Due Authorization and Issuance. All of the Pledged Shares have
been, and to the extent hereafter issued will be upon such pledge, duly
authorized and validly issued and fully paid and nonassessable.
(e) Chief Executive Office. Pledgor's chief executive office is
located at 64 Ross Road, Savannah, Georgia 31405. Pledgor shall not move
its chief executive office except to such new location as Pledgor may
establish in accordance with the last sentence of this Section 6(e).
Pledgor shall not establish a new location for its chief executive office
nor shall it change its name until (i) it shall have given Collateral
Agent not less than 45 days' prior written notice of its intention so to
do, clearly describing such new location or name and providing such other
information in connection therewith as Collateral Agent or any Secured
Party may request, and (ii) with respect to such new location or name,
Pledgor shall have taken all action satisfactory to Collateral Agent and
the Secured Parties to maintain the perfection and priority of the
security interest of Collateral Agent for the benefit of the Secured
Parties in the Pledged Collateral intended to be granted hereby.
(f) Delivery of Pledged Collateral; Filings. Pledgor has delivered
to Collateral Agent all certificates representing the Pledged Shares and
Intercompany Notes and has delivered to Collateral Agent appropriate UCC-1
financing statements to be filed with the Secretary of State of the States
of New York and Georgia, the State in which the chief executive office of
Pledgor is located, evidencing the Lien created by this Agreement, and
such delivery, filing and pledge of the Pledged Collateral pursuant to
this Agreement will create a valid and perfected first priority security
interest in the Pledged Collateral securing the payment of the Secured
Obligations pursuant to the UCC in effect in each applicable jurisdiction,
including, without limitation, the States of New York and Georgia.
(g) Pledged Collateral. All information set forth
herein, including the Schedules annexed hereto, and all
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information contained in any documents, schedules and lists heretofore
delivered to any Secured Party in connection with this Agreement, in each
case, relating to the Pledged Collateral is accurate and complete in all
material respects.
(h) No Violations, etc. The pledge of the Pledged Collateral
pursuant to this Agreement does not violate Regulation G, T, U or X of the
Federal Reserve Board.
(i) Ownership of Pledged Collateral. Except as
otherwise permitted by the Credit Agreement, Pledgor at all
times will be the sole beneficial owner of the Pledged
Collateral.
(j) No Options, Warrants, etc. There are no options, warrants,
calls, rights, commitments or agreements of any character to which Pledgor
is a party or by which it is bound obligating Pledgor to deliver or sell
or cause to be issued, delivered or sold, additional Pledged Shares or
obligating Pledgor to grant, extend or enter into any such option,
warrant, call, right, commitment or agreement. There are no voting trusts
or other agreements or understandings to which Pledgor is a party with
respect to the voting of the capital stock of any issuer of the Pledged
Shares.
Section 7. Voting Rights; Distributions; etc.
(a) So long as no Event of Default shall have occurred
and be continuing:
(i) Pledgor shall be entitled to exercise any and all voting and
other consensual rights pertaining to the Pledged Shares or any part
thereof for any purpose not inconsistent with the terms or purpose of this
Agreement or any other Credit Document; provided, however, that Pledgor
shall not in any event exercise such rights in any manner which may have a
material adverse effect on the value of the Pledged Collateral or the
security intended to be provided by this Agreement.
(ii) Subject to the terms of the Credit Agreement, Pledgor shall be
entitled to receive and retain, and to utilize free and clear of the Lien
of this Agreement, any and all Distributions, but only if and to the
extent made in accordance with the provisions of the Credit Agreement;
provided, however, that any and all such Distributions consisting of
rights or interests in the form of securities shall be, and shall be
forthwith delivered to Collateral Agent to hold as Pledged Collateral and
shall, if received by Pledgor, be received in trust for the benefit of
Collateral
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Agent, be segregated from the other property or funds of Pledgor, and be
forthwith delivered to Collateral Agent as Pledged Collateral in the same
form as so received (with any necessary endorsement).
(iii) Collateral Agent shall be deemed without further action or
formality to have granted to Pledgor all necessary consents relating to
voting rights and shall, if necessary, upon written request of Pledgor and
at Pledgor's sole cost and expense, from time to time execute and deliver
(or cause to be executed and delivered) to Pledgor all such instruments as
Pledgor may reasonably request in order to permit Pledgor to exercise the
voting and other rights which it is entitled to exercise pursuant to
Section 7(a)(i) hereof and to receive the Distributions which it is
authorized to receive and retain pursuant to Section 7(a)(ii) hereof.
(b) Upon the occurrence and during the continuance of an
Event of Default:
(i) All rights of Pledgor to exercise the voting and other
consensual rights it would otherwise be entitled to exercise pursuant to
Section 7(a)(i) hereof without any action or the giving of any notice
shall cease, and all such rights shall thereupon become vested in
Collateral Agent, which shall thereupon have the sole right to exercise
such voting and other consensual rights.
(ii) All rights of Pledgor to receive Distributions which it would
otherwise be authorized to receive and retain pursuant to Section 7(a)(ii)
hereof shall cease and all such rights shall thereupon become vested in
Collateral Agent, which shall thereupon have the sole right to receive and
hold as Pledged Collateral such Distributions; provided, that if such
Event of Default is cured, any such Distributions theretofore paid to
Collateral Agent shall, upon the request of Pledgor (except to the extent
theretofore applied to the Secured Obligations), be returned by Collateral
Agent to Pledgor.
(c) Pledgor shall, at its sole cost and expense, from time to time
execute and deliver to Collateral Agent appropriate instruments as Collateral
Agent may reasonably request in order to permit Collateral Agent to exercise the
voting and other rights which it may be entitled to exercise pursuant to Section
7(b)(i) hereof and to receive all Distributions which it may be entitled to
receive under Section 7(b)(ii) hereof.
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(d) All Distributions which are received by Pledgor contrary to the
provisions of Section 7(b)(ii) hereof shall be received in trust for the benefit
of Collateral Agent, shall be segregated from other funds of Pledgor and shall
immediately be paid over to Collateral Agent as Pledged Collateral in the same
form as so received (with any necessary endorsement).
Section 8. Transfers and Other Liens; Additional Shares;
Principal Office.
(a) Pledgor shall not (i) sell, convey, assign or otherwise dispose
of, or grant any option, right or warrant with respect to, any of the Pledged
Collateral except as permitted by the Credit Agreement, (ii) create or permit to
exist any Lien upon or with respect to any Pledged Collateral other than the
Lien and security interest granted to Collateral Agent pursuant to this
Agreement and Liens of the type described in paragraph (a) of the definition of
Permitted Encumbrances, or (iii) permit any issuer of the Pledged Shares to
merge, consolidate or change its legal form, except as permitted by the Credit
Agreement unless all of the outstanding capital stock of the surviving or
resulting corporation is, upon such merger or consolidation, pledged hereunder
and no cash, securities or other property is distributed in respect of the
outstanding shares of any other constituent corporation. The preceding sentence
shall not apply to any sale or other disposition of all of the stock of the
issuer of Pledged Shares which is in compliance with the Credit Agreement and
the proceeds of which sale or other disposition are used to make a mandatory
prepayment of the Loans pursuant to Section 3.02(A) of the Credit Agreement.
Upon such sale or other disposition, such Pledged Shares shall be released from
the Lien of this Agreement in accordance with Section 17 of this Agreement.
(b) Pledgor shall (i) cause each issuer of the Pledged Shares not to
issue any stock or other securities in addition to or in substitution for the
Pledged Shares issued by such issuer, except to Pledgor, unless required by
applicable law, and (ii) pledge hereunder, immediately upon its acquisition
(directly or indirectly) thereof, any and all additional shares of capital stock
or other equity securities of the issuer of the Pledged Shares which are
required to be pledged hereunder.
Section 9. Reasonable Care. Collateral Agent shall be deemed to have
exercised reasonable care in the custody and preservation of the Pledged
Collateral in its possession if such Pledged Collateral is accorded treatment
substantially equivalent to that which Collateral Agent, in its individual
capacity, accords its own property consisting of similar instruments or
interests, it being understood that neither Collateral Agent nor any of the
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Secured Parties shall have responsibility for (i) ascertaining or taking action
with respect to calls, conversions, exchanges, maturities, tenders or other
matters relating to any Pledged Collateral, whether or not Collateral Agent or
any other Secured Party has or is deemed to have knowledge of such matters, or
(ii) taking any necessary steps to preserve rights against any Person with
respect to any Pledged Collateral.
Section 10. Remedies Upon Default; Decisions Relating to
Exercise of Remedies.
(a) If an Event of Default shall have occurred and be continuing,
and the Secured Obligations have been declared due and payable in accordance
with the Credit Agreement, Collateral Agent shall have the right, in addition to
other rights and remedies provided for herein or otherwise available to it to be
exercised from time to time, (i) to retain and apply the Distributions to the
Secured Obligations as provided in Section 11 hereof, and (ii) to exercise all
the rights and remedies of a secured party on default under the UCC in effect in
the State of New York at that time, and Collateral Agent may also in its sole
discretion, without notice except as specified below, sell the Pledged
Collateral or any part thereof (including, without limitation, any partial
interest in the Pledged Shares) in one or more parcels at public or private
sale, at any exchange, broker's board or at any of Collateral Agent's offices or
elsewhere, for cash, on credit or for future delivery, and at such price or
prices and upon such other terms as Collateral Agent may deem commercially
reasonable, irrespective of the impact of any such sales on the market price of
the Pledged Collateral. Collateral Agent or any other Secured Party or any of
their respective Affiliates may be the purchaser of any or all of the Pledged
Collateral at any such sale and shall be entitled, for the purpose of bidding
and making settlement or payment of the purchase price for all or any portion of
the Pledged Collateral sold at such sale, to use and apply any of the Secured
Obligations owed to such Person as a credit on account of the purchase price of
any Pledged Collateral payable by such Person at such sale. Each purchaser at
any such sale shall acquire the property sold absolutely free from any claim or
right on the part of Pledgor, and Pledgor hereby waives, to the fullest extent
permitted by law, all rights of redemption, stay and/or appraisal which it now
has or may at any time in the future have under any rule of law or statute now
existing or hereafter enacted. Pledgor acknowledges and agrees that, to the
extent notice of sale shall be required by law, ten days notice to Pledgor of
the time and place of any public sale or the time after which any private sale
or other intended disposition is to take place shall constitute reasonable
notification of such matters. No notification need be given to Pledgor if it has
signed, after the occurrence of an Event of Default, a statement
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<PAGE>
-11-
renouncing or modifying any right to notification of sale or other intended
disposition. Collateral Agent shall not be obligated to make any sale of Pledged
Collateral regardless of notice of sale having been given. Collateral Agent may
adjourn any public or private sale from time to time by announcement at the time
and place fixed therefor, and such sale may, without further notice, be made at
the time and place to which it was so adjourned. Pledgor hereby waives, to the
fullest extent permitted by law, any claims against Collateral Agent arising by
reason of the fact that the price at which any Pledged Collateral may have been
sold at such a private sale was less than the price which might have been
obtained at a public sale, even if Collateral Agent accepts the first offer
received and does not offer such Pledged Collateral to more than one offeree.
Collateral Agent shall not be liable for any incorrect or improper payment made
pursuant to this Section 10 in the absence of gross negligence or willful
misconduct.
(b) Pledgor recognizes that, by reason of certain prohibitions
contained in the Securities Act of 1933, as amended (the "Securities Act"), and
applicable state securities laws, Collateral Agent may be compelled, with
respect to any sale of all or any part of the Pledged Collateral, to limit
purchasers to Persons who will agree, among other things, to acquire the Pledged
Collateral for their own account, for investment and not with a view to the
distribution or resale thereof. Pledgor acknowledges that any such private sales
may be at prices and on terms less favorable to Collateral Agent than those
obtainable through a public sale without such restrictions (including, without
limitation, a public offering made pursuant to a registration statement under
the Securities Act), and, notwithstanding such circumstances, agrees that any
such private sale shall be deemed to have been made in a commercially reasonable
manner and that Collateral Agent shall have no obligation to engage in public
sales and no obligation to delay the sale of any Pledged Collateral for the
period of time necessary to permit the issuer thereof to register it for a form
of public sale requiring registration under the Securities Act or under
applicable state securities laws, even if such issuer would agree to do so.
(c) If Collateral Agent determines to exercise its right to sell any
or all of the Pledged Collateral, upon written request, Pledgor shall from time
to time furnish to Collateral Agent all such information as Collateral Agent may
request in order to determine the number of securities included in the Pledged
Collateral which may be sold by Collateral Agent as exempt transactions under
the Securities Act and the rules of the Securities and Exchange Commission
thereunder, as the same are from time to time in effect.
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<PAGE>
-12-
(d) Pledgor recognizes that, by reason of certain prohibitions
contained in laws, rules, regulations or orders of any foreign Governmental
Authority, Collateral Agent may be compelled, with respect to any sale of all or
any part of the Pledged Collateral, to limit purchasers to those who meet the
requirements of such foreign Governmental Authority. Pledgor acknowledges that
any such sales may be at prices and on terms less favorable to Collateral Agent
than those obtainable through a public sale without such restrictions, and,
notwithstanding such circumstances, agrees that any such restricted sale shall
be deemed to have been made in a commercially reasonable manner and that, except
as may be required by applicable law, Collateral Agent shall have no obligation
to engage in public sales.
(e) In addition to any of the other rights and remedies hereunder,
Collateral Agent shall have the right to institute a proceeding seeking specific
performance in connection with any of the agreements or obligations hereunder.
Section 11. Application of Proceeds. All Distributions held from
time to time by Collateral Agent and all proceeds received by Collateral Agent
in respect of any sale of, collection from, or other realization upon all or any
part of the Pledged Collateral pursuant to the exercise by Collateral Agent of
its remedies as a secured creditor as provided in Section 10 hereof shall be
applied, together with any other sums then held by Collateral Agent pursuant to
this Agreement, promptly by Collateral Agent as follows:
First, to the payment of all costs and expenses, fees, commissions
and taxes of such sale, collection or other realization, including,
without limitation, reasonable out-of-pocket costs and expenses of
Collateral Agent and its agents and counsel, and all expenses, liabilities
and advances made or incurred by Collateral Agent in connection therewith;
Second, to the payment of all other costs and expenses of such sale,
collection or other realization, including reasonable out-of-pocket costs
and expenses of the Banks and their agents and counsel and all costs,
liabilities and advances made or incurred by the Banks in connection
therewith;
Third, to the payment in full in cash of Secured Obligations
consisting of interest and all amounts other than principal under the
Credit Agreement at any time and from time to time owing by Pledgor under
or in connection with the Credit Agreement, ratably according to the
unpaid amounts thereof, in the manner and priority set forth in the Credit
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<PAGE>
-13-
Agreement, together with interest on each such amount in the manner and to
the extent set forth in the Credit Agreement from and after the date such
amount is due, owing or unpaid until paid in full;
Fourth, to the pro rata payment in full in cash of Secured
Obligations consisting of (i) principal at any time and from time to time
owing by Pledgor under or in connection with the Credit Agreement, ratably
according to the unpaid amounts thereof, in the manner and priority set
forth in the Credit Agreement and (ii) the amount of Pledgor's obligations
then due and payable under any Interest Rate Agreement, including any
early termination payments then due (exclusive of expenses or similar
liabilities to any Bank under the applicable Interest Rate Agreement(s)),
together with interest on each such amount in the manner and to the extent
set forth in the Credit Agreement from and after the date such amount is
due, owing or unpaid until paid in full; and
Fifth, the balance, if any, to the Person lawfully entitled thereto
(including Pledgor or its successors or assigns).
Section 12. Expenses. Pledgor will upon demand pay to Collateral
Agent the amount of any and all reasonable expenses, including the reasonable
fees and expenses of its counsel and the reasonable fees and expenses of any
experts and agents, which Collateral Agent may incur in connection with (i) the
collection of the Secured Obligations, (ii) the enforcement and administration
of this Agreement, (iii) the custody or preservation of, or the sale of,
collection from, or other realization upon, any of the Pledged Collateral, (iv)
the exercise or enforcement of any of the rights of Collateral Agent or any
Secured Party hereunder or (v) the failure by Pledgor to perform or observe any
of the provisions hereof. All amounts payable by Pledgor under this Section 12
shall be due within ten Business Days after demand and shall be part of the
Secured Obligations. Pledgor's obligations under this Section 12 shall survive
the termination of this Agreement and the discharge of Pledgor's other
obligations hereunder.
Section 13. No Waiver; Cumulative Remedies. (a) No failure on the
part of Collateral Agent to exercise, no course of dealing with respect to, and
no delay on the part of Collateral Agent in exercising, any right, power or
remedy hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right, power or remedy hereunder preclude any other
or further exercise thereof or the exercise of any other right, power or remedy.
The remedies herein provided are cumulative and are not exclusive of any
remedies provided by law.
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<PAGE>
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(b) In the event Collateral Agent shall have instituted any
proceeding to enforce any right, power or remedy under this Agreement by
foreclosure, sale, entry or otherwise, and such proceeding shall have been
discontinued or abandoned for any reason or shall have been determined adversely
to Collateral Agent, then and in every such case, Pledgor, Collateral Agent and
each Secured Party shall be restored to their respective former positions and
rights hereunder with respect to the Pledged Collateral, and all rights,
remedies and powers of Collateral Agent and the Secured Parties shall continue
as if no such proceeding had been instituted.
Section 14. Collateral Agent. Collateral Agent has been appointed as
collateral agent pursuant to the Credit Agreement. The actions of Collateral
Agent hereunder are subject to the provisions of the Credit Agreement.
Collateral Agent shall have the right hereunder to make demands, to give
notices, to exercise or refrain from exercising any rights, and to take or
refrain from taking action (including, without limitation, the release or
substitution of Pledged Collateral), in accordance with this Agreement and the
Credit Agreement. Collateral Agent may resign and a successor Collateral Agent
may be appointed in the manner provided in the Credit Agreement. Upon the
acceptance of any appointment as Collateral Agent by a successor Collateral
Agent, that successor Collateral Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring
Collateral Agent under this Agreement, and the retiring Collateral Agent shall
thereupon be discharged from its duties and obligations under this Agreement.
After any retiring Collateral Agent's resignation, the provisions of this
Agreement shall inure to its benefit as to any actions taken or omitted to be
taken by it under this Agreement while it was Collateral Agent.
Section 15. Collateral Agent May Perform; Collateral Agent Appointed
Attorney-in-Fact. If Pledgor shall fail to do any act or thing that it has
covenanted to do hereunder or any warranty on the part of Pledgor contained
herein shall be breached, Collateral Agent or any Secured Party may (but shall
not be obligated to) do the same or cause it to be done or remedy any such
breach, and may, following five Business Days' prior written notice to Pledgor
of its intention to do so, expend funds for such purpose. Any and all amounts so
expended by Collateral Agent or such Secured Party shall be paid by Pledgor
within ten Business Days after demand therefor, with interest at the highest
rate then in effect under the Credit Agreement during the period from and
including the date on which such funds were so expended to the date of
repayment. Pledgor's obligations under this Section 15 shall survive the
termination of this Agreement and the discharge of Pledgor's other obligations
under this Agreement, the Credit
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<PAGE>
-15-
Agreement, any Interest Rate Agreement and the other Credit Documents. Pledgor
hereby appoints Collateral Agent its attorney-in-fact, with full authority in
the place and stead of Pledgor and in the name of Pledgor, or otherwise, from
time to time in Collateral Agent's reasonable discretion to take any action and
to execute any instrument consistent with the terms of this Agreement and the
other Credit Documents which Collateral Agent may deem reasonably necessary or
advisable to accomplish the purposes of this Agreement. The foregoing grant of
authority is a power of attorney coupled with an interest and such appointment
shall be irrevocable for the term of this Agreement. Pledgor hereby ratifies all
that such attorney shall lawfully do or cause to be done by virtue hereof.
Section 16. Modification in Writing. No amendment, modification,
supplement, termination or waiver of or to any provision of this Agreement, nor
consent to any departure by Pledgor therefrom, shall be effective unless the
same shall be done in accordance with the terms of the Credit Agreement and
unless in writing and signed by Collateral Agent. Any amendment, modification or
supplement of or to any provision of this Agreement, any waiver of any provision
of this Agreement and any consent to any departure by Pledgor from the terms of
any provision of this Agreement shall be effective only in the specific instance
and for the specific purpose for which made or given. Except where notice is
specifically required by this Agreement or any other Credit Document, no notice
to or demand on Pledgor in any case shall entitle Pledgor to any other or
further notice or demand in similar or other circumstances.
Section 17. Termination; Release. When all the Secured Obligations
have been paid in full and the Commitments of the Banks to make any Loan or to
issue any Letter of Credit under the Credit Agreement shall have expired or been
sooner terminated, this Agreement shall terminate. Upon termination of this
Agreement or any release of Pledged Collateral in accordance with the provisions
of the Credit Agreement, Collateral Agent shall, upon the request and at the
sole cost and expense of Pledgor, forthwith assign, transfer and deliver to
Pledgor, against receipt and without recourse to or warranty by Collateral
Agent, such of the Pledged Collateral to be released (in the case of a release)
as may be in the possession of Collateral Agent and as shall not have been sold
or otherwise applied pursuant to the terms hereof, and, with respect to any
other Pledged Collateral, proper instruments (including UCC termination
statements on Form UCC-3) acknowledging the termination of this Agreement or the
release of such Pledged Collateral, as the case may be.
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<PAGE>
-16-
Section 18. Notices. Unless otherwise provided herein or in the
Credit Agreement, any notice or other communication herein required or permitted
to be given shall be given in the manner set forth in the Credit Agreement, as
to either party addressed to it at the address set forth in the Credit Agreement
or at such other address as shall be designated by such party in a written
notice to the other party complying as to delivery with the terms of this
Section 18; provided that notices to Collateral Agent shall not be effective
until received by Collateral Agent.
Section 19. Continuing Security Interest; Assignment. This Agreement
shall create a continuing security interest in the Pledged Collateral and shall
(i) be binding upon Pledgor, its successors and assigns and (ii) inure, together
with the rights and remedies of Collateral Agent hereunder, to the benefit of
Collateral Agent and the other Secured Parties and each of their respective
successors, transferees and assigns; no other Persons (including, without
limitation, any other creditor of Pledgor) shall have any interest herein or any
right or benefit with respect hereto. Without limiting the generality of the
foregoing clause (ii), any Bank may assign or otherwise transfer any
indebtedness held by it secured by this Agreement to any other Person, and such
other Person shall thereupon become vested with all the benefits in respect
thereof granted to such Bank, herein or otherwise, subject however, to the
provisions of the Credit Agreement and any applicable Interest Rate Agreement.
Section 20. GOVERNING LAW; TERMS. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE
TO CONTRACTS MADE AND TO BE PERFORMED WHOLLY THEREIN, EXCEPT TO THE EXTENT THAT
THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES
HEREUNDER, IN RESPECT OF ANY PARTICULAR PROPERTY ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK.
Section 21. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. (a) Any
legal action or proceeding with respect to this Agreement may be brought in the
courts of the State of New York or of the United States for the Southern
District of New York, and, by execution and delivery of this Agreement, Pledgor
hereby irrevocably accepts for itself and in respect of its property, generally
and unconditionally, the non-exclusive jurisdiction of the aforesaid courts.
Pledgor further irrevocably consents to the service of process out of any of the
aforementioned courts in any such action or proceeding by the mailing of copies
thereof by registered or certified mail, postage prepaid, to Pledgor at its
address for notices pursuant to the Credit Agreement, such service to become
effective 30 days after such mailing. Pledgor hereby
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<PAGE>
-17-
irrevocably appoints CT Corporation System having an address at 1633 Broadway,
New York, New York 10019 and such other persons as may hereafter be selected by
Borrower irrevocably agreeing in writing to serve as its agent for service of
process in respect of any such action or proceeding. Nothing herein shall affect
the right of Collateral Agent to serve process in any other manner permitted by
law or to commence legal proceedings or otherwise proceed against Pledgor in any
other jurisdiction.
(b) Pledgor hereby irrevocably waives any objection which it may now
or hereafter have to the laying of venue of any of the aforesaid actions or
proceedings arising out of or in connection with this Agreement brought in the
courts referred to in clause (a) above and hereby further irrevocably waives and
agrees not to plead or claim in any such court that any such action or
proceeding brought in any such court has been brought in an inconvenient forum.
Section 22. Severability of Provisions. Any provision of this
Agreement which 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 or
affecting the validity or enforceability of such provision in any other
jurisdiction.
Section 23. Execution in Counterparts. This Agreement and any
amendments, waivers, consents or supplements hereto may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed to be an original,
but all such counterparts together shall constitute one and the same agreement.
Section 24. Headings. The Section headings used in this
Agreement are for convenience of reference only and shall not
affect the construction of this Agreement.
Section 25. Obligations Absolute. All obligations of
Pledgor hereunder shall be absolute and unconditional irrespective
of:
(i) any bankruptcy, insolvency, reorganization,
arrangement, readjustment, composition, liquidation or the
like of Pledgor or any other Credit Party;
(ii) any lack of validity or enforceability of the Credit Agreement,
any Interest Rate Agreement, any Letter of Credit, any other Credit
Document, or any other agreement or instrument relating thereto;
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-18-
(iii) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Secured Obligations, or any other
amendment or waiver of or any consent to any departure from the Credit
Agreement, any Interest Rate Agreement, any Letter of Credit, any other
Credit Document, or any other agreement or instrument relating thereto;
(iv) any exchange, release or non-perfection of any other
collateral, or any release or amendment or waiver of or consent to any
departure from any guarantee, for all or any of the Secured Obligations;
(v) any exercise or non-exercise, or any waiver of any right,
remedy, power or privilege under or in respect of this Agreement any
Interest Rate Agreement, or any other Credit Document except as
specifically set forth in a waiver granted pursuant to the provisions of
Section 17 hereof; or
(vi) any other circumstance or happening whatsoever that
is similar to any of the foregoing.
Section 26. Collateral Agent's Right to Sever Indebtedness. (a)
Pledgor acknowledges that (i) the Pledged Collateral does not constitute the
sole source of security for the payment and performance of the Secured
Obligations and that the Secured Obligations are also secured by other types of
property of Pledgor and its Affiliates in other jurisdictions (all such
property, collectively, the "Collateral"), (ii) the number of such jurisdictions
and the nature of the transaction of which this instrument is a part are such
that it would have been impracticable for the parties to allocate to each item
of Collateral a specific loan amount and to execute in respect of such item a
separate credit agreement, and (iii) Pledgor intends that Collateral Agent have
the same rights with respect to the Pledged Collateral, in any judicial
proceeding relating to the exercise of any right or remedy hereunder or
otherwise, that Collateral Agent would have had if each item of Collateral had
been pledged or encumbered pursuant to a separate credit agreement and security
instrument. In furtherance of such intent, Pledgor agrees to the greatest extent
permitted by law that Collateral Agent may at any time by notice (an "Allocation
Notice") to Pledgor allocate a portion of the Secured Obligations (the
"Allocated Indebtedness") to the Pledged Collateral and sever from the remaining
Secured Obligations the Allocated Indebtedness. From and after the giving of an
Allocation Notice with respect to the Pledged Collateral, the Secured
Obligations hereunder shall be limited to the extent set forth in the Allocation
Notice and (as so limited) shall, for all purposes, be construed as a separate
credit obligation of Pledgor unrelated
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<PAGE>
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to the other transactions contemplated by the Credit Agreement, any Interest
Rate Agreement, any other Credit Document or any document related to any
thereof. To the extent that the proceeds of any judicial proceeding relating to
the exercise of any right or remedy hereunder of the Pledged Collateral shall
exceed the Allocated Indebtedness, such proceeds shall belong to Pledgor and
shall not be available hereunder to satisfy any Secured Obligations of Pledgor
other than the Allocated Indebtedness. In any action or proceeding to exercise
any right or remedy under this Agreement which is commenced after the giving by
Collateral Agent of an Allocation Notice, the Allocation Notice shall be
conclusive proof of the limits of the Secured Obligations hereby secured, and
Pledgor may introduce, by way of defense or counterclaim, evidence thereof in
any such action or proceeding. Notwithstanding any provision of this Section 26,
the proceeds received by Collateral Agent pursuant to this Agreement shall be
applied by Collateral Agent in accordance with the provisions of Section 11
hereof.
(b) Pledgor hereby waives to the greatest extent permitted under law
the right to a discharge of any of the Secured Obligations under any statute or
rule of law now or hereafter in effect which provides that the exercise of any
particular right or remedy as provided for herein (by judicial proceedings or
otherwise) constitutes the exclusive means for satisfaction of the Secured
Obligations or which makes unavailable any further judgment or any other right
or remedy provided for herein because Collateral Agent elected to proceed with
the exercise of such initial right or remedy or because of any failure by
Collateral Agent to comply with laws that prescribe conditions to the
entitlement to such subsequent judgment or the availability of such subsequent
right or remedy. In the event that, notwithstanding the foregoing waiver, any
court shall for any reason hold that such subsequent judgment or action is not
available to Collateral Agent, Pledgor shall not (i) introduce in any other
jurisdiction any judgment so holding as a defense to enforcement against Pledgor
of any remedy in the Credit Agreement, any Interest Rate Agreement or any other
Credit Document or (ii) seek to have such judgment recognized or entered in any
other jurisdiction, and any such judgment shall in all events be limited in
application only to the state or jurisdiction where rendered and only with
respect to the collateral referred to in such judgment.
(c) In the event any instrument in addition to the Allocation Notice
is necessary to effectuate the provisions of this Section 26, including, without
limitation, any amendment to this Agreement, any substitute promissory note or
affidavit or certificate of any kind, Collateral Agent may execute and deliver
such instrument as the attorney-in-fact of Pledgor. Such power of attorney is
coupled with an interest and is irrevocable.
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(d) Notwithstanding anything set forth herein to the contrary, the
provisions of this Section 26 shall be effective only to the maximum extent
permitted by law.
Section 27. Future Advances. This Agreement shall
secure the payment of any amounts advanced from time to time
pursuant to the Credit Agreement.
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<PAGE>
IN WITNESS WHEREOF, Pledgor and Collateral Agent have caused this
Agreement to be duly executed and delivered by their duly authorized officers as
of the date first above written.
CARSON PRODUCTS COMPANY,
as Pledgor
By:
Name:
Title:
BANQUE INDOSUEZ, NEW YORK BRANCH,
as Collateral Agent
By:
Name:
Title:
By:
Name:
Title:
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<PAGE>
SCHEDULE I
Pledged Shares
PERCENTAGE OF
ALL CAPITAL OR
CERTIFI- NUMBER OTHER EQUITY
CLASS PAR CATE OF INTERESTS OF
ISSUER OF STOCK VALUE NO(S). SHARES ISSUER
Fine Products Company Capital None 4 2,000,000 100%
Carson Holdings Common R.01 1,611 29,450,000 73.125%
Limited (one
cent)
Carson Botswana Common P1 3 99 99%
(Proprietary) Limited
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<PAGE>
SCHEDULE II
Intercompany Notes
PRINCIPAL DATE OF INTEREST MATURITY
ISSUER AMOUNT ISSUANCE RATE DATE
NONE
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<PAGE>
EXHIBIT 1
PLEDGE AMENDMENT
This Pledge Amendment, dated ______________, is delivered pursuant
to Section 5 of the Agreement referred to below. The undersigned hereby agrees
that this Pledge Amendment may be attached to the Borrower Securities Pledge
Agreement, dated as of October __, 1996, between the undersigned and Banque
Indosuez, New York Branch, as Collateral Agent (the "Agreement"; capitalized
terms used herein and not defined shall have the meanings assigned to them in
the Agreement) and that the Pledged Shares and/or Intercompany Notes listed on
this Pledge Amendment shall be deemed to be and shall become part of the Pledged
Collateral and shall secure all Secured Obligations.
CARSON PRODUCTS COMPANY,
as Pledgor
By:
Name:
Title:
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<PAGE>
Pledged Shares
PERCENTAGE OF
ALL CAPITAL OR
OTHER EQUITY
CLASS OF PAR CERTIFICATE NUMBER INTERESTS OF
ISSUER STOCK VALUE NO(S). OF SHARES ISSUER
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<PAGE>
Intercompany Notes
PRINCIPAL DATE OF INTEREST MATURITY
ISSUER AMOUNT ISSUANCE RATE DATE
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<PAGE>
Exhibit F-2 to the
Credit Agreement
HOLDINGS SECURITIES PLEDGE AGREEMENT
HOLDINGS SECURITIES PLEDGE AGREEMENT (the "Agreement"), dated as of
October 18, 1996, made by CARSON, INC. (formerly DNL Savannah Holding Corp.), a
Delaware corporation having an office at 64 Ross Road, Savannah, Georgia 31405
("Pledgor"), in favor of BANQUE INDOSUEZ, NEW YORK BRANCH, having an office at
1211 Avenue of the Americas, 7th Floor, New York, New York 10036, as pledgee,
assignee and secured party, in its capacity as collateral agent (in such
capacities and together with any successors in such capacities, "Collateral
Agent") for the lending institutions (the "Banks") from time to time party to
the Credit Agreement (as hereinafter defined).
R E C I T A L S :
A. Pursuant to a certain credit agreement, dated as of the date
hereof (as amended, amended and restated, supplemented or otherwise modified
from time to time, the "Credit Agreement"; capitalized terms used herein and not
defined shall have the meanings assigned to them in the Credit Agreement), among
Carson Products Company (the "Borrower"), the Banks and Banque Indosuez, New
York Branch, as Agent and Collateral Agent for the Banks, the Banks have agreed
(i) to make to or for the account of the Borrower certain A Term Loans up to an
aggregate principal amount of $15,000,000, certain B Term Loans up to an
aggregate principal amount of $10,000,000 and certain Revolving Loans up to an
aggregate principal amount of $15,000,000 and (ii) to issue certain Letters of
Credit for the account of the Borrower.
B. It is contemplated that the Borrower may enter into one or more
agreements with one or more of the Banks ("Interest Rate Agreements") fixing the
interest rates with respect to Loans under the Credit Agreement (all obligations
of the Borrower now existing or hereafter arising under such Interest Rate
Agreements, collectively, the "Interest Rate Obligations").
C. Pledgor is the legal and beneficial owner of the
Pledged Collateral (as hereinafter defined).
D. Pledgor has executed and delivered to Collateral Agent a certain
guarantee instrument (the "Guarantee") pursuant to which, among other things,
Pledgor has guaranteed the obligations of the Borrower under the Credit
Agreement and under any Interest Rate Agreements, and Pledgor desires that such
Guarantee be secured hereunder.
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<PAGE>
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E. It is a condition to the obligations of the Banks to make the
Loans under the Credit Agreement and a condition to any Bank issuing Letters of
Credit under the Credit Agreement or entering into the Interest Rate Agreements
that Pledgor execute and deliver the applicable Credit Documents, including this
Agreement.
F. This Agreement is given by Pledgor in favor of Collateral Agent
for its benefit and the benefit of the Banks and the Agent (collectively, the
"Secured Parties") to secure the payment and performance of all of the Secured
Obligations (as defined in Section 2).
A G R E E M E N T :
NOW, THEREFORE, in consideration of the foregoing premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Pledgor and Collateral Agent hereby agree as follows:
Section 1. Pledge. As collateral security for the payment and
performance when due of all the Secured Obligations, Pledgor hereby pledges,
assigns, transfers and grants to Collateral Agent for its benefit and the
benefit of the Secured Parties, a continuing first priority security interest in
and to all of the right, title and interest of Pledgor in, to and under the
following property, whether now existing or hereafter acquired (collectively,
the "Pledged Collateral"):
(a) issued and outstanding shares of capital stock of each Person
described in Schedule I hereto (the "Pledged Shares") (which are and shall
remain at all times until this Agreement terminates, certificated shares),
including the certificates representing the Pledged Shares and any
interest of Pledgor in the entries on the books of any financial
intermediary pertaining to the Pledged Shares;
(b) all additional shares of capital stock of any issuer of the
Pledged Shares from time to time acquired by Pledgor in any manner (which
are and shall remain at all times until this Agreement terminates,
certificated shares) (which shares shall be deemed to be part of the
Pledged Shares), including the certificates representing such additional
shares and any interest of Pledgor in the entries on the books of any
financial intermediary pertaining to such additional shares;
(c) all dividends, cash, options, warrants, rights, instruments,
distributions, returns of capital, income, profits and other property,
interests or proceeds from time to
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time received, receivable or otherwise distributed to Pledgor
in respect of or in exchange for any or all of the Pledged
Shares (collectively, "Distributions"); and
(d) all "proceeds" (as such term is defined in the UCC or under
other relevant law) of any of the foregoing.
Section 2. Secured Obligations. This Agreement secures, and the
Pledged Collateral is collateral security for, the payment and performance in
full when due, whether at stated maturity, by acceleration or otherwise
(including, without limitation, the payment of interest and other amounts which
would accrue and become due but for the filing of a petition in bankruptcy or
the operation of the automatic stay under Section 362(a) of the Bankruptcy Code,
11 U.S.C. ss. 362(a)) of (i) all Obligations of Pledgor under the Guarantee
(including, without limitation, Pledgor's obligation provided for therein to pay
principal, interest and all other charges, fees, expenses, commissions,
reimbursements, premiums, indemnities and other payments related to or in
respect of the Obligations contained in the Guarantee, (ii) all Obligations of
the Borrower now existing or hereafter arising under the Credit Agreement and
all Interest Rate Obligations of the Borrower now existing or hereafter arising
under any Interest Rate Agreement (including, without limitation, Pledgor's
obligation provided for therein to pay principal, interest and all other
charges, fees, expenses, commissions, reimbursements, premiums, indemnities and
other payments related to or in respect of the Obligations contained in the
Credit Agreement and the obligations contained in any Interest Rate Agreement),
and (iii) without duplication of the amounts described in clauses (i) and (ii),
all obligations of Pledgor now existing or hereafter arising under this
Agreement or any other Security Document, including, without limitation, with
respect to all charges, fees, expenses, commissions, reimbursements, premiums,
indemnities and other payments that Pledgor is obligated to pay under this
Agreement or any other Security Document (the obligations described in clauses
(i), (ii) and (iii), collectively, the "Secured Obligations").
Section 3. No Release. Nothing set forth in this Agreement shall
relieve Pledgor from the performance of any term, covenant, condition or
agreement on Pledgor's part to be performed or observed under or in respect of
any of the Pledged Collateral or from any liability to any Person under or in
respect of any of the Pledged Collateral or shall impose any obligation on
Collateral Agent or any Secured Party to perform or observe any such term,
covenant, condition or agreement on Pledgor's part to be so performed or
observed or shall impose any liability on Collateral Agent or any Secured Party
for any act or omission on the part of
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Pledgor relating thereto or for any breach of any representation or warranty on
the part of Pledgor contained in this Agreement, any Interest Rate Agreement or
any other Credit Document or under or in respect of the Pledged Collateral or
made in connection herewith or therewith. The obligations of Pledgor contained
in this Section 3 shall survive the termination of this Agreement and the
discharge of Pledgor's other obligations under this Agreement, any Interest Rate
Agreement and the other Credit Documents.
Section 4. Delivery of Pledged Collateral.
(a) All certificates, agreements or instruments representing or
evidencing the Pledged Collateral, to the extent not previously delivered to
Collateral Agent, shall immediately upon receipt thereof by Pledgor be delivered
to and held by or on behalf of Collateral Agent pursuant hereto. All Pledged
Collateral shall be in suitable form for transfer by delivery or shall be
accompanied by duly executed instruments of transfer or assignment in blank, all
in form and substance reasonably satisfactory to Collateral Agent. Collateral
Agent shall have the right, at any time upon the occurrence of an Event of
Default and without notice to Pledgor, to endorse, assign or otherwise transfer
to or to register in the name of Collateral Agent or any of its nominees any or
all of the Pledged Collateral. In addition, Collateral Agent shall have the
right at any time to exchange certificates representing or evidencing Pledged
Collateral for certificates of smaller or larger denominations.
(b) If the issuer of Pledged Shares is incorporated in a
jurisdiction which does not permit the use of certificates to evidence equity
ownership, then Pledgor shall, to the extent permitted by applicable law, record
such pledge on the stock register of the issuer, execute any customary stock
pledge forms or other documents necessary or appropriate to complete the pledge
and give Collateral Agent the right to transfer such Pledged Shares under the
terms hereof and provide to Collateral Agent an opinion of counsel, in form and
substance reasonably satisfactory to Collateral Agent, confirming such pledge.
Section 5. Supplements, Further Assurances.
(a) Pledgor agrees that at any time and from time to time, at the
sole cost and expense of Pledgor, Pledgor shall promptly execute and deliver all
further instruments and documents, including, without limitation, supplemental
or additional UCC-1 financing statements, and take all further action that may
be necessary or that Collateral Agent may reasonably request, in order to
perfect and protect the pledge, security interest and Lien
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granted or purported to be granted hereby or to enable Collateral Agent to
exercise and enforce its rights and remedies hereunder with respect to any
Pledged Collateral.
(b) Pledgor shall, upon obtaining any Pledged Shares of any Person,
promptly (and in any event within five Business Days) deliver to Collateral
Agent a pledge amendment, duly executed by Pledgor, in substantially the form of
Exhibit 1 hereto (each, a "Pledge Amendment"), in respect of the additional
Pledged Shares which are to be pledged pursuant to this Agreement, and
confirming the attachment of the Lien hereby created on and in respect of such
additional shares. Pledgor hereby authorizes Collateral Agent to attach each
Pledge Amendment to this Agreement and agrees that all Pledged Shares listed on
any Pledge Amendment delivered to Collateral Agent shall for all purposes
hereunder be considered Pledged Collateral.
Section 6. Representations, Warranties and Covenants.
Pledgor represents, warrants and covenants as follows:
(a) No Liens. Pledgor is as of the date hereof, and at the time of
any delivery of any Pledged Collateral to Collateral Agent pursuant to
Section 4 of this Agreement, Pledgor will be, the sole legal and
beneficial owner of the Pledged Collateral. All Pledged Collateral is on
the date hereof, and will be, so owned by Pledgor free and clear of any
Lien except for the Lien created by this Agreement and Liens of the type
described in paragraph (a) of the definition of Permitted Encumbrances.
(b) Authorization, Enforceability. Pledgor has the requisite
corporate power, authority and legal right to pledge and grant a security
interest in all the Pledged Collateral pursuant to this Agreement, and
this Agreement constitutes the legal, valid and binding obligation of
Pledgor, enforceable against Pledgor in accordance with its terms, except
as may be limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws relating to or affecting creditors' rights generally and
except as such enforceability may be limited by the application of general
principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(c) No Consents, etc. No consent of any party (including, without
limitation, stockholders or creditors of Pledgor) and no consent,
authorization, approval, license or other action by, and no notice to or
filing with, any Governmental Authority or regulatory body or other Person
is
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required for (x) the pledge by Pledgor of the Pledged Collateral pursuant
to this Agreement or for the execution, delivery or performance of this
Agreement by Pledgor, (y) the exercise by Collateral Agent of the voting
or other rights provided for in this Agreement, or (z) the exercise by
Collateral Agent of the remedies in respect of the Pledged Collateral
pursuant to this Agreement (other than those consents, authorizations,
approvals, actions, notices or filings which, if not obtained or made,
would not have a material adverse effect upon the interests of Collateral
Agent under this Agreement).
(d) Due Authorization and Issuance. All of the Pledged Shares have
been, and to the extent hereafter issued will be upon such pledge, duly
authorized and validly issued and fully paid and nonassessable.
(e) Chief Executive Office. Pledgor's chief executive office is
located at 64 Ross Road, Savannah, Georgia 31405. Pledgor shall not move
its chief executive office except to such new location as Pledgor may
establish in accordance with the last sentence of this Section 6(e).
Pledgor shall not establish a new location for its chief executive office
nor shall it change its name until (i) it shall have given Collateral
Agent not less than 45 days' prior written notice of its intention so to
do, clearly describing such new location or name and providing such other
information in connection therewith as Collateral Agent or any Secured
Party may request, and (ii) with respect to such new location or name,
Pledgor shall have taken all action satisfactory to Collateral Agent and
the Secured Parties to maintain the perfection and priority of the
security interest of Collateral Agent for the benefit of the Secured
Parties in the Pledged Collateral intended to be granted hereby.
(f) Delivery of Pledged Collateral; Filings. Pledgor has delivered
to Collateral Agent all certificates representing the Pledged Shares and
has delivered to Collateral Agent appropriate UCC-1 financing statements
to be filed with the Secretary of State of the States of New York and
Georgia, the State in which the chief executive office of Pledgor is
located, evidencing the Lien created by this Agreement, and such delivery,
filing and pledge of the Pledged Collateral pursuant to this Agreement
will create a valid and perfected first priority security interest in the
Pledged Collateral securing the payment of the Secured Obligations
pursuant to the UCC in effect in each applicable jurisdiction, including,
without limitation, the States of New York and Georgia.
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(g) Pledged Collateral. All information set forth herein, including
the Schedules annexed hereto, and all information contained in any
documents, schedules and lists heretofore delivered to any Secured Party
in connection with this Agreement, in each case, relating to the Pledged
Collateral is accurate and complete in all material respects.
(h) No Violations, etc. The pledge of the Pledged Collateral
pursuant to this Agreement does not violate Regulation G, T, U or X of the
Federal Reserve Board.
(i) Ownership of Pledged Collateral. Except as
otherwise permitted by the Credit Agreement, Pledgor at all
times will be the sole beneficial owner of the Pledged
Collateral.
(j) No Options, Warrants, etc. There are no options, warrants,
calls, rights, commitments or agreements of any character to which Pledgor
is a party or by which it is bound obligating Pledgor to deliver or sell
or cause to be issued, delivered or sold, additional Pledged Shares or
obligating Pledgor to grant, extend or enter into any such option,
warrant, call, right, commitment or agreement. There are no voting trusts
or other agreements or understandings to which Pledgor is a party with
respect to the voting of the capital stock of any issuer of the Pledged
Shares.
Section 7. Voting Rights; Distributions; etc.
(a) So long as no Event of Default shall have occurred
and be continuing:
(i) Pledgor shall be entitled to exercise any and all voting and
other consensual rights pertaining to the Pledged Shares or any part
thereof for any purpose not inconsistent with the terms or purpose of this
Agreement or any other Credit Document; provided, however, that Pledgor
shall not in any event exercise such rights in any manner which may have a
material adverse effect on the value of the Pledged Collateral or the
security intended to be provided by this Agreement.
(ii) Subject to the terms of the Credit Agreement, Pledgor shall be
entitled to receive and retain, and to utilize free and clear of the Lien
of this Agreement, any and all Distributions, but only if and to the
extent made in accordance with the provisions of the Credit Agreement;
provided, however, that any and all such Distributions consisting of
rights or interests in the form of securities
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shall be, and shall be forthwith delivered to Collateral Agent to hold as
Pledged Collateral and shall, if received by Pledgor, be received in trust
for the benefit of Collateral Agent, be segregated from the other property
or funds of Pledgor, and be forthwith delivered to Collateral Agent as
Pledged Collateral in the same form as so received (with any necessary
endorsement).
(iii) Collateral Agent shall be deemed without further action or
formality to have granted to Pledgor all necessary consents relating to
voting rights and shall, if necessary, upon written request of Pledgor and
at Pledgor's sole cost and expense, from time to time execute and deliver
(or cause to be executed and delivered) to Pledgor all such instruments as
Pledgor may reasonably request in order to permit Pledgor to exercise the
voting and other rights which it is entitled to exercise pursuant to
Section 7(a)(i) hereof and to receive the Distributions which it is
authorized to receive and retain pursuant to Section 7(a)(ii) hereof.
(b) Upon the occurrence and during the continuance of an
Event of Default:
(i) All rights of Pledgor to exercise the voting and other
consensual rights it would otherwise be entitled to exercise pursuant to
Section 7(a)(i) hereof without any action or the giving of any notice
shall cease, and all such rights shall thereupon become vested in
Collateral Agent, which shall thereupon have the sole right to exercise
such voting and other consensual rights.
(ii) All rights of Pledgor to receive Distributions which it would
otherwise be authorized to receive and retain pursuant to Section 7(a)(ii)
hereof shall cease and all such rights shall thereupon become vested in
Collateral Agent, which shall thereupon have the sole right to receive and
hold as Pledged Collateral such Distributions; provided, that if such
Event of Default is cured, any such Distributions theretofore paid to
Collateral Agent shall, upon the request of Pledgor (except to the extent
theretofore applied to the Secured Obligations), be returned by Collateral
Agent to Pledgor.
(c) Pledgor shall, at its sole cost and expense, from time to time
execute and deliver to Collateral Agent appropriate instruments as Collateral
Agent may reasonably request in order to permit Collateral Agent to exercise the
voting and other rights which it may be entitled to exercise pursuant to Section
7(b)(i)
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hereof and to receive all Distributions which it may be entitled to receive
under Section 7(b)(ii) hereof.
(d) All Distributions which are received by Pledgor contrary to the
provisions of Section 7(b)(ii) hereof shall be received in trust for the benefit
of Collateral Agent, shall be segregated from other funds of Pledgor and shall
immediately be paid over to Collateral Agent as Pledged Collateral in the same
form as so received (with any necessary endorsement).
Section 8. Transfers and Other Liens; Additional Shares;
Principal Office.
(a) Pledgor shall not (i) sell, convey, assign or otherwise dispose
of, or grant any option, right or warrant with respect to, any of the Pledged
Collateral except as permitted by the Credit Agreement, (ii) create or permit to
exist any Lien upon or with respect to any Pledged Collateral other than the
Lien and security interest granted to Collateral Agent pursuant to this
Agreement and Liens of the type described in paragraph (a) of the definition of
Permitted Encumbrances, or (iii) permit any issuer of the Pledged Shares to
merge, consolidate or change its legal form, except as permitted by the Credit
Agreement unless all of the outstanding capital stock of the surviving or
resulting corporation is, upon such merger or consolidation, pledged hereunder
and no cash, securities or other property is distributed in respect of the
outstanding shares of any other constituent corporation. The preceding sentence
shall not apply to any sale or other disposition of all of the stock of the
issuer of Pledged Shares which is in compliance with the Credit Agreement and
the proceeds of which sale or other disposition are used to make a mandatory
prepayment of the Loans pursuant to Section 3.02(A) of the Credit Agreement.
Upon such sale or other disposition, such Pledged Shares shall be released from
the Lien of this Agreement in accordance with Section 17 of this Agreement.
(b) Pledgor shall (i) cause each issuer of the Pledged Shares not to
issue any stock or other securities in addition to or in substitution for the
Pledged Shares issued by such issuer, except to Pledgor, unless required by
applicable law, and (ii) pledge hereunder, immediately upon its acquisition
(directly or indirectly) thereof, any and all additional shares of capital stock
or other equity securities of the issuer of the Pledged Shares which are
required to be pledged hereunder.
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Section 9. Reasonable Care. Collateral Agent shall be deemed to have
exercised reasonable care in the custody and preservation of the Pledged
Collateral in its possession if such Pledged Collateral is accorded treatment
substantially equivalent to that which Collateral Agent, in its individual
capacity, accords its own property consisting of similar instruments or
interests, it being understood that neither Collateral Agent nor any of the
Secured Parties shall have responsibility for (i) ascertaining or taking action
with respect to calls, conversions, exchanges, maturities, tenders or other
matters relating to any Pledged Collateral, whether or not Collateral Agent or
any other Secured Party has or is deemed to have knowledge of such matters, or
(ii) taking any necessary steps to preserve rights against any Person with
respect to any Pledged Collateral.
Section 10. Remedies Upon Default; Decisions Relating to
Exercise of Remedies.
(a) If an Event of Default shall have occurred and be continuing,
and the Secured Obligations have been declared due and payable in accordance
with the Credit Agreement, Collateral Agent shall have the right, in addition to
other rights and remedies provided for herein or otherwise available to it to be
exercised from time to time, (i) to retain and apply the Distributions to the
Secured Obligations as provided in Section 11 hereof, and (ii) to exercise all
the rights and remedies of a secured party on default under the UCC in effect in
the State of New York at that time, and Collateral Agent may also in its sole
discretion, without notice except as specified below, sell the Pledged
Collateral or any part thereof (including, without limitation, any partial
interest in the Pledged Shares) in one or more parcels at public or private
sale, at any exchange, broker's board or at any of Collateral Agent's offices or
elsewhere, for cash, on credit or for future delivery, and at such price or
prices and upon such other terms as Collateral Agent may deem commercially
reasonable, irrespective of the impact of any such sales on the market price of
the Pledged Collateral. Collateral Agent or any other Secured Party or any of
their respective Affiliates may be the purchaser of any or all of the Pledged
Collateral at any such sale and shall be entitled, for the purpose of bidding
and making settlement or payment of the purchase price for all or any portion of
the Pledged Collateral sold at such sale, to use and apply any of the Secured
Obligations owed to such Person as a credit on account of the purchase price of
any Pledged Collateral payable by such Person at such sale. Each purchaser at
any such sale shall acquire the property sold absolutely free from any claim or
right on the part of Pledgor, and Pledgor hereby waives, to the fullest extent
permitted by law, all rights of redemption, stay and/or appraisal which it now
has or may at any
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time in the future have under any rule of law or statute now existing or
hereafter enacted. Pledgor acknowledges and agrees that, to the extent notice of
sale shall be required by law, ten days notice to Pledgor of the time and place
of any public sale or the time after which any private sale or other intended
disposition is to take place shall constitute reasonable notification of such
matters. No notification need be given to Pledgor if it has signed, after the
occurrence of an Event of Default, a statement renouncing or modifying any right
to notification of sale or other intended disposition. Collateral Agent shall
not be obligated to make any sale of Pledged Collateral regardless of notice of
sale having been given. Collateral Agent may adjourn any public or private sale
from time to time by announcement at the time and place fixed therefor, and such
sale may, without further notice, be made at the time and place to which it was
so adjourned. Pledgor hereby waives, to the fullest extent permitted by law, any
claims against Collateral Agent arising by reason of the fact that the price at
which any Pledged Collateral may have been sold at such a private sale was less
than the price which might have been obtained at a public sale, even if
Collateral Agent accepts the first offer received and does not offer such
Pledged Collateral to more than one offeree. Collateral Agent shall not be
liable for any incorrect or improper payment made pursuant to this Section 10 in
the absence of gross negligence or willful misconduct.
(b) Pledgor recognizes that, by reason of certain prohibitions
contained in the Securities Act of 1933, as amended (the "Securities Act"), and
applicable state securities laws, Collateral Agent may be compelled, with
respect to any sale of all or any part of the Pledged Collateral, to limit
purchasers to Persons who will agree, among other things, to acquire the Pledged
Collateral for their own account, for investment and not with a view to the
distribution or resale thereof. Pledgor acknowledges that any such private sales
may be at prices and on terms less favorable to Collateral Agent than those
obtainable through a public sale without such restrictions (including, without
limitation, a public offering made pursuant to a registration statement under
the Securities Act), and, notwithstanding such circumstances, agrees that any
such private sale shall be deemed to have been made in a commercially reasonable
manner and that Collateral Agent shall have no obligation to engage in public
sales and no obligation to delay the sale of any Pledged Collateral for the
period of time necessary to permit the issuer thereof to register it for a form
of public sale requiring registration under the Securities Act or under
applicable state securities laws, even if such issuer would agree to do so.
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(c) If Collateral Agent determines to exercise its right to sell any
or all of the Pledged Collateral, upon written request, Pledgor shall from time
to time furnish to Collateral Agent all such information as Collateral Agent may
request in order to determine the number of securities included in the Pledged
Collateral which may be sold by Collateral Agent as exempt transactions under
the Securities Act and the rules of the Securities and Exchange Commission
thereunder, as the same are from time to time in effect.
(d) Pledgor recognizes that, by reason of certain prohibitions
contained in laws, rules, regulations or orders of any foreign Governmental
Authority, Collateral Agent may be compelled, with respect to any sale of all or
any part of the Pledged Collateral, to limit purchasers to those who meet the
requirements of such foreign Governmental Authority. Pledgor acknowledges that
any such sales may be at prices and on terms less favorable to Collateral Agent
than those obtainable through a public sale without such restrictions, and,
notwithstanding such circumstances, agrees that any such restricted sale shall
be deemed to have been made in a commercially reasonable manner and that, except
as may be required by applicable law, Collateral Agent shall have no obligation
to engage in public sales.
(e) In addition to any of the other rights and remedies hereunder,
Collateral Agent shall have the right to institute a proceeding seeking specific
performance in connection with any of the agreements or obligations hereunder.
Section 11. Application of Proceeds. All Distributions held from
time to time by Collateral Agent and all proceeds received by Collateral Agent
in respect of any sale of, collection from, or other realization upon all or any
part of the Pledged Collateral pursuant to the exercise by Collateral Agent of
its remedies as a secured creditor as provided in Section 10 hereof shall be
applied, together with any other sums then held by Collateral Agent pursuant to
this Agreement, promptly by Collateral Agent as follows:
First, to the payment of all costs and expenses, fees, commissions
and taxes of such sale, collection or other realization, including,
without limitation, reasonable out-of-pocket costs and expenses of
Collateral Agent and its agents and counsel, and all expenses, liabilities
and advances made or incurred by Collateral Agent in connection therewith;
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Second, to the payment of all other costs and expenses of such sale,
collection or other realization, including reasonable out-of-pocket costs
and expenses of the Banks and their agents and counsel and all costs,
liabilities and advances made or incurred by the Banks in connection
therewith;
Third, to the payment in full in cash of Secured Obligations
consisting of interest and all amounts other than principal under the
Credit Agreement at any time and from time to time owing by Pledgor or the
Borrower under or in connection with the Credit Agreement, ratably
according to the unpaid amounts thereof, in the manner and priority set
forth in the Credit Agreement, together with interest on each such amount
in the manner and to the extent set forth in the Credit Agreement from and
after the date such amount is due, owing or unpaid until paid in full;
Fourth, to the pro rata payment in full in cash of Secured
Obligations consisting of (i) principal at any time and from time to time
owing by Pledgor or the Borrower under or in connection with the Credit
Agreement, ratably according to the unpaid amounts thereof, in the manner
and priority set forth in the Credit Agreement and (ii) the amount of the
Borrower's obligations then due and payable under any Interest Rate
Agreement, including any early termination payments then due (exclusive of
expenses or similar liabilities to any Bank under the applicable Interest
Rate Agreement(s)), together with interest on each such amount in the
manner and to the extent set forth in the Credit Agreement from and after
the date such amount is due, owing or unpaid until paid in full; and
Fifth, the balance, if any, to the Person lawfully entitled thereto
(including Pledgor or its successors or assigns).
Section 12. Expenses. Pledgor will upon demand pay to Collateral
Agent the amount of any and all reasonable expenses, including the reasonable
fees and expenses of its counsel and the reasonable fees and expenses of any
experts and agents, which Collateral Agent may incur in connection with (i) the
collection of the Secured Obligations, (ii) the enforcement and administration
of this Agreement, (iii) the custody or preservation of, or the sale of,
collection from, or other realization upon, any of the Pledged Collateral, (iv)
the exercise or enforcement of any of the rights of Collateral Agent or any
Secured Party hereunder or (v) the failure by Pledgor to perform or observe any
of the provisions
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hereof. All amounts payable by Pledgor under this Section 12 shall be due within
ten Business Days after demand and shall be part of the Secured Obligations.
Pledgor's obligations under this Section 12 shall survive the termination of
this Agreement and the discharge of Pledgor's other obligations hereunder.
Section 13. No Waiver; Cumulative Remedies. (a) No failure on the
part of Collateral Agent to exercise, no course of dealing with respect to, and
no delay on the part of Collateral Agent in exercising, any right, power or
remedy hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right, power or remedy hereunder preclude any other
or further exercise thereof or the exercise of any other right, power or remedy.
The remedies herein provided are cumulative and are not exclusive of any
remedies provided by law.
(b) In the event Collateral Agent shall have instituted any
proceeding to enforce any right, power or remedy under this Agreement by
foreclosure, sale, entry or otherwise, and such proceeding shall have been
discontinued or abandoned for any reason or shall have been determined adversely
to Collateral Agent, then and in every such case, Pledgor, Collateral Agent and
each Secured Party shall be restored to their respective former positions and
rights hereunder with respect to the Pledged Collateral, and all rights,
remedies and powers of Collateral Agent and the Secured Parties shall continue
as if no such proceeding had been instituted.
Section 14. Collateral Agent. Collateral Agent has been appointed as
collateral agent pursuant to the Credit Agreement. The actions of Collateral
Agent hereunder are subject to the provisions of the Credit Agreement.
Collateral Agent shall have the right hereunder to make demands, to give
notices, to exercise or refrain from exercising any rights, and to take or
refrain from taking action (including, without limitation, the release or
substitution of Pledged Collateral), in accordance with this Agreement and the
Credit Agreement. Collateral Agent may resign and a successor Collateral Agent
may be appointed in the manner provided in the Credit Agreement. Upon the
acceptance of any appointment as Collateral Agent by a successor Collateral
Agent, that successor Collateral Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring
Collateral Agent under this Agreement, and the retiring Collateral Agent shall
thereupon be discharged from its duties and obligations under this Agreement.
After any retiring Collateral Agent's resignation, the provisions of this
Agreement shall inure to its benefit as to any actions taken or omitted to be
taken by it under this Agreement while it was Collateral Agent.
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Section 15. Collateral Agent May Perform; Collateral Agent Appointed
Attorney-in-Fact. If Pledgor shall fail to do any act or thing that it has
covenanted to do hereunder or any warranty on the part of Pledgor contained
herein shall be breached, Collateral Agent or any Secured Party may (but shall
not be obligated to) do the same or cause it to be done or remedy any such
breach, and may, following five Business Days' prior written notice to Pledgor
of its intention to do so, expend funds for such purpose. Any and all amounts so
expended by Collateral Agent or such Secured Party shall be paid by Pledgor
within ten Business Days after demand therefor, with interest at the highest
rate then in effect under the Credit Agreement during the period from and
including the date on which such funds were so expended to the date of
repayment. Pledgor's obligations under this Section 15 shall survive the
termination of this Agreement and the discharge of Pledgor's other obligations
under this Agreement, the Credit Agreement, any Interest Rate Agreement and the
other Credit Documents. Pledgor hereby appoints Collateral Agent its
attorney-in-fact, with full authority in the place and stead of Pledgor and in
the name of Pledgor, or otherwise, from time to time in Collateral Agent's
reasonable discretion to take any action and to execute any instrument
consistent with the terms of this Agreement and the other Credit Documents which
Collateral Agent may deem reasonably necessary or advisable to accomplish the
purposes of this Agreement. The foregoing grant of authority is a power of
attorney coupled with an interest and such appointment shall be irrevocable for
the term of this Agreement. Pledgor hereby ratifies all that such attorney shall
lawfully do or cause to be done by virtue hereof.
Section 16. Modification in Writing. No amendment, modification,
supplement, termination or waiver of or to any provision of this Agreement, nor
consent to any departure by Pledgor therefrom, shall be effective unless the
same shall be done in accordance with the terms of the Credit Agreement and
unless in writing and signed by Collateral Agent. Any amendment, modification or
supplement of or to any provision of this Agreement, any waiver of any provision
of this Agreement and any consent to any departure by Pledgor from the terms of
any provision of this Agreement shall be effective only in the specific instance
and for the specific purpose for which made or given. Except where notice is
specifically required by this Agreement or any other Credit Document, no notice
to or demand on Pledgor in any case shall entitle Pledgor to any other or
further notice or demand in similar or other circumstances.
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Section 17. Termination; Release. When all the Secured Obligations
have been paid in full and the Commitments of the Banks to make any Loan or to
issue any Letter of Credit under the Credit Agreement shall have expired or been
sooner terminated, this Agreement shall terminate. Upon termination of this
Agreement or any release of Pledged Collateral in accordance with the provisions
of the Credit Agreement, Collateral Agent shall, upon the request and at the
sole cost and expense of Pledgor, forthwith assign, transfer and deliver to
Pledgor, against receipt and without recourse to or warranty by Collateral
Agent, such of the Pledged Collateral to be released (in the case of a release)
as may be in the possession of Collateral Agent and as shall not have been sold
or otherwise applied pursuant to the terms hereof, and, with respect to any
other Pledged Collateral, proper instruments (including UCC termination
statements on Form UCC-3) acknowledging the termination of this Agreement or the
release of such Pledged Collateral, as the case may be.
Section 18. Notices. Unless otherwise provided herein or in the
Credit Agreement, any notice or other communication herein required or permitted
to be given shall be given in the manner set forth in the Credit Agreement, as
to either party addressed to it at the address set forth in the Credit Agreement
or at such other address as shall be designated by such party in a written
notice to the other party complying as to delivery with the terms of this
Section 18; provided that notices to Collateral Agent shall not be effective
until received by Collateral Agent.
Section 19. Continuing Security Interest; Assignment. This Agreement
shall create a continuing security interest in the Pledged Collateral and shall
(i) be binding upon Pledgor, its successors and assigns and (ii) inure, together
with the rights and remedies of Collateral Agent hereunder, to the benefit of
Collateral Agent and the other Secured Parties and each of their respective
successors, transferees and assigns; no other Persons (including, without
limitation, any other creditor of Pledgor) shall have any interest herein or any
right or benefit with respect hereto. Without limiting the generality of the
foregoing clause (ii), any Bank may assign or otherwise transfer any
indebtedness held by it secured by this Agreement to any other Person, and such
other Person shall thereupon become vested with all the benefits in respect
thereof granted to such Bank, herein or otherwise, subject however, to the
provisions of the Credit Agreement and any applicable Interest Rate Agreement.
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Section 20. GOVERNING LAW; TERMS. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE
TO CONTRACTS MADE AND TO BE PERFORMED WHOLLY THEREIN, EXCEPT TO THE EXTENT THAT
THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES
HEREUNDER, IN RESPECT OF ANY PARTICULAR PROPERTY ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK.
Section 21. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. (a) Any
legal action or proceeding with respect to this Agreement may be brought in the
courts of the State of New York or of the United States for the Southern
District of New York, and, by execution and delivery of this Agreement, Pledgor
hereby irrevocably accepts for itself and in respect of its property, generally
and unconditionally, the non-exclusive jurisdiction of the aforesaid courts.
Pledgor further irrevocably consents to the service of process out of any of the
aforementioned courts in any such action or proceeding by the mailing of copies
thereof by registered or certified mail, postage prepaid, to Pledgor at its
address for notices pursuant to the Credit Agreement, such service to become
effective 30 days after such mailing. Pledgor hereby irrevocably appoints CT
Corporation System having an address at 1633 Broadway, New York, New York 10019
and such other persons as may hereafter be selected by Borrower irrevocably
agreeing in writing to serve as its agent for service of process in respect of
any such action or proceeding. Nothing herein shall affect the right of
Collateral Agent to serve process in any other manner permitted by law or to
commence legal proceedings or otherwise proceed against Pledgor in any other
jurisdiction.
(b) Pledgor hereby irrevocably waives any objection which it may now
or hereafter have to the laying of venue of any of the aforesaid actions or
proceedings arising out of or in connection with this Agreement brought in the
courts referred to in clause (a) above and hereby further irrevocably waives and
agrees not to plead or claim in any such court that any such action or
proceeding brought in any such court has been brought in an inconvenient forum.
Section 22. Severability of Provisions. Any provision of this
Agreement which 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 or
affecting the validity or enforceability of such provision in any other
jurisdiction.
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<PAGE>
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Section 23. Execution in Counterparts. This Agreement and any
amendments, waivers, consents or supplements hereto may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed to be an original,
but all such counterparts together shall constitute one and the same agreement.
Section 24. Headings. The Section headings used in this Agreement
are for convenience of reference only and shall not affect the construction of
this Agreement.
Section 25. Obligations Absolute. All obligations of
Pledgor hereunder shall be absolute and unconditional irrespective
of:
(i) any bankruptcy, insolvency, reorganization,
arrangement, readjustment, composition, liquidation or the
like of Pledgor or any other Credit Party;
(ii) any lack of validity or enforceability of the Credit Agreement,
any Interest Rate Agreement, any Letter of Credit, any other Credit
Document, or any other agreement or instrument relating thereto;
(iii) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Secured Obligations, or any other
amendment or waiver of or any consent to any departure from the Credit
Agreement, any Interest Rate Agreement, any Letter of Credit, any other
Credit Document, or any other agreement or instrument relating thereto;
(iv) any exchange, release or non-perfection of any other
collateral, or any release or amendment or waiver of or consent to any
departure from any guarantee, for all or any of the Secured Obligations;
(v) any exercise or non-exercise, or any waiver of any right,
remedy, power or privilege under or in respect of this Agreement any
Interest Rate Agreement, or any other Credit Document except as
specifically set forth in a waiver granted pursuant to the provisions of
Section 17 hereof; or
(vi) any other circumstance or happening whatsoever that
is similar to any of the foregoing.
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<PAGE>
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Section 26. Collateral Agent's Right to Sever Indebtedness. (a)
Pledgor acknowledges that (i) the Pledged Collateral does not constitute the
sole source of security for the payment and performance of the Secured
Obligations and that the Secured Obligations are also secured by other types of
property of Pledgor and its Affiliates in other jurisdictions (all such
property, collectively, the "Collateral"), (ii) the number of such jurisdictions
and the nature of the transaction of which this instrument is a part are such
that it would have been impracticable for the parties to allocate to each item
of Collateral a specific loan amount and to execute in respect of such item a
separate credit agreement, and (iii) Pledgor intends that Collateral Agent have
the same rights with respect to the Pledged Collateral, in any judicial
proceeding relating to the exercise of any right or remedy hereunder or
otherwise, that Collateral Agent would have had if each item of Collateral had
been pledged or encumbered pursuant to a separate credit agreement and security
instrument. In furtherance of such intent, Pledgor agrees to the greatest extent
permitted by law that Collateral Agent may at any time by notice (an "Allocation
Notice") to Pledgor allocate a portion of the Secured Obligations (the
"Allocated Indebtedness") to the Pledged Collateral and sever from the remaining
Secured Obligations the Allocated Indebtedness. From and after the giving of an
Allocation Notice with respect to the Pledged Collateral, the Secured
Obligations hereunder shall be limited to the extent set forth in the Allocation
Notice and (as so limited) shall, for all purposes, be construed as a separate
credit obligation of Pledgor unrelated to the other transactions contemplated by
the Credit Agreement, any Interest Rate Agreement, any other Credit Document or
any document related to any thereof. To the extent that the proceeds of any
judicial proceeding relating to the exercise of any right or remedy hereunder of
the Pledged Collateral shall exceed the Allocated Indebtedness, such proceeds
shall belong to Pledgor and shall not be available hereunder to satisfy any
Secured Obligations of Pledgor other than the Allocated Indebtedness. In any
action or proceeding to exercise any right or remedy under this Agreement which
is commenced after the giving by Collateral Agent of an Allocation Notice, the
Allocation Notice shall be conclusive proof of the limits of the Secured
Obligations hereby secured, and Pledgor may introduce, by way of defense or
counterclaim, evidence thereof in any such action or proceeding. Notwithstanding
any provision of this Section 26, the proceeds received by Collateral Agent
pursuant to this Agreement shall be applied by Collateral Agent in accordance
with the provisions of Section 11 hereof.
(b) Pledgor hereby waives to the greatest extent permitted under law
the right to a discharge of any of the Secured Obligations under any statute or
rule of law now or hereafter in
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<PAGE>
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effect which provides that the exercise of any particular right or remedy as
provided for herein (by judicial proceedings or otherwise) constitutes the
exclusive means for satisfaction of the Secured Obligations or which makes
unavailable any further judgment or any other right or remedy provided for
herein because Collateral Agent elected to proceed with the exercise of such
initial right or remedy or because of any failure by Collateral Agent to comply
with laws that prescribe conditions to the entitlement to such subsequent
judgment or the availability of such subsequent right or remedy. In the event
that, notwithstanding the foregoing waiver, any court shall for any reason hold
that such subsequent judgment or action is not available to Collateral Agent,
Pledgor shall not (i) introduce in any other jurisdiction any judgment so
holding as a defense to enforcement against Pledgor of any remedy in the Credit
Agreement, any Interest Rate Agreement or any other Credit Document or (ii) seek
to have such judgment recognized or entered in any other jurisdiction, and any
such judgment shall in all events be limited in application only to the state or
jurisdiction where rendered and only with respect to the collateral referred to
in such judgment.
(c) In the event any instrument in addition to the Allocation Notice
is necessary to effectuate the provisions of this Section 26, including, without
limitation, any amendment to this Agreement, any substitute promissory note or
affidavit or certificate of any kind, Collateral Agent may execute and deliver
such instrument as the attorney-in-fact of Pledgor. Such power of attorney is
coupled with an interest and is irrevocable.
(d) Notwithstanding anything set forth herein to the contrary, the
provisions of this Section 26 shall be effective only to the maximum extent
permitted by law.
Section 27. Future Advances. This Agreement shall secure the payment
of any amounts advanced from time to time pursuant to the Credit Agreement.
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IN WITNESS WHEREOF, Pledgor and Collateral Agent have caused this
Agreement to be duly executed and delivered by their duly authorized officers as
of the date first above written.
CARSON, INC.,
as Pledgor
By:
Name:
Title:
BANQUE INDOSUEZ, NEW YORK BRANCH,
as Collateral Agent
By:
Name:
Title:
By:
Name:
Title:
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<PAGE>
SCHEDULE I
Pledged Shares
PERCENTAGE OF
ALL CAPITAL OR
OTHER EQUITY
INTERESTS OF
CLASS PAR CERTIFICATE NUMBER ISSUER
ISSUER OF STOCK VALUE NO(S). OF SHARES
Carson Products Common $.01 1 1 100%
Company
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<PAGE>
EXHIBIT 1
PLEDGE AMENDMENT
This Pledge Amendment, dated ______________, is delivered pursuant
to Section 5 of the Agreement referred to below. The undersigned hereby agrees
that this Pledge Amendment may be attached to the Holdings Securities Pledge
Agreement, dated as of October __, 1996, between the undersigned and Banque
Indosuez, New York Branch, as Collateral Agent (the "Agreement"; capitalized
terms used herein and not defined shall have the meanings assigned to them in
the Agreement) and that the Pledged Shares and/or Intercompany Notes listed on
this Pledge Amendment shall be deemed to be and shall become part of the Pledged
Collateral and shall secure all Secured Obligations.
CARSON, INC.,
as Pledgor
By:
Name:
Title:
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<PAGE>
Pledged Shares
PERCENTAGE OF
ALL CAPITAL OR
OTHER EQUITY
CLASS PAR CERTIFICATE NUMBER INTERESTS OF
ISSUER OF STOCK VALUE NO(S). OF SHARES ISSUER
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<PAGE>
Exhibit G to the
Credit Agreement
BORROWER INTELLECTUAL PROPERTY SECURITY AGREEMENT
BORROWER INTELLECTUAL PROPERTY SECURITY AGREEMENT (the "Agreement"),
dated as of October 18, 1996, made by CARSON PRODUCTS COMPANY (formerly known as
Aminco, Inc., as successor by merger to DNL Savannah Acquisition Corp.), a
Delaware corporation having an office at 64 Ross Road, Savannah, Georgia 31405
("Pledgor"), in favor of BANQUE INDOSUEZ, NEW YORK BRANCH, having an office at
1211 Avenue of the Americas, 7th Floor, New York, New York 10036, as pledgee,
assignee and secured party, in its capacity as collateral agent (in such
capacities and together with any successors in such capacities, "Collateral
Agent") for the lending institutions (the "Banks") from time to time party to
the Credit Agreement (as hereinafter defined).
R E C I T A L S :
A. Pursuant to a certain credit agreement, dated as of the date
hereof (as amended, amended and restated, supplemented or otherwise modified
from time to time, the "Credit Agreement"; capitalized terms used herein and not
defined shall have the meanings assigned to them in the Credit Agreement) by and
among Pledgor, the Banks and Banque Indosuez, New York Branch, as Agent and
Collateral Agent for the Banks, the Banks have agreed (i) to make to or for the
account of Pledgor certain A Term Loans up to an aggregate principal amount of
$15,000,000, certain B Term Loans up to an aggregate principal amount of
$10,000,000 and certain Revolving Loans up to an aggregate principal amount of
$15,000,000 and (ii) to issue certain Letters of Credit for the account of
Pledgor.
B. It is contemplated that Pledgor may enter into one or more
agreements with one or more of the Banks ("Interest Rate Agreements") fixing the
interest rates with respect to Loans under the Credit Agreement (all obligations
of Pledgor now existing or hereafter arising under such Interest Rate
Agreements, collectively, the "Interest Rate Obligations").
C. Pledgor is the owner of the Pledged Collateral (as
hereinafter defined).
D. It is a condition to the obligations of the Banks to make the
Loans under the Credit Agreement and a condition to any Bank issuing Letters of
Credit under the Credit Agreement or entering into the Interest Rate Agreements
that Pledgor execute and deliver the applicable Credit Documents, including this
Agreement.
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E. This Agreement is given by Pledgor in favor of Collateral Agent
for its benefit and the benefit of the Banks and the Agent (collectively, the
"Secured Parties") to secure the payment and performance of all of the Secured
Obligations (as defined in Section 2).
A G R E E M E N T :
NOW, THEREFORE, in consideration of the foregoing premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Pledgor and Collateral Agent hereby agree as follows:
Section 1. Pledge. As collateral security for the payment and
performance when due of all the Secured Obligations, Pledgor hereby pledges,
assigns, transfers and grants to Collateral Agent for its benefit and the
benefit of the Secured Parties, a continuing first priority security interest in
and to all of the right, title and interest of Pledgor in, to and under the
following property, whether now existing or hereafter acquired (collectively,
the "Pledged Collateral"):
(a) Patents issued or assigned to and all patent applications made
by Pledgor, including, without limitation, the patents and patent
applications listed on Schedule A hereto, along with any and all (i)
inventions and improvements described and claimed therein, (ii) reissues,
divisions, continuations, extensions and continuations-in-part thereof,
(iii) income, royalties, damages, claims and payments now and hereafter
due and/or payable under and with respect thereto, including, without
limitation, damages and payments for past or future infringements thereof,
and (iv) rights to sue for past, present and future infringements thereof
(collectively, the "Patents");
(b) Trademarks (including service marks), federal and state
trademark registrations and applications made by Pledgor, common law
trademarks and trade names owned by or assigned to Pledgor and all
registrations and applications for the foregoing, including, without
limitation, the registrations and applications listed on Schedule B
hereto, along with any and all (i) renewals thereof, (ii) income,
royalties, damages and payments now and hereafter due and/or payable with
respect thereto, including, without limitation, damages, claims and
payments for past or future infringements thereof, and (iii) rights to sue
for past, present and future infringements thereof (collectively, the
"Trademarks");
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(c) Copyrights owned by or assigned to Pledgor, including, without
limitation, the registrations and applications listed on Schedule C
hereto, along with any and all (i) renewals and extensions thereof, (ii)
income, royalties, damages, claims and payments now and hereafter due
and/or payable with respect thereto, including, without limitation,
damages and payments for past, present or future infringements thereof,
and (iii) rights to sue for past, present and future infringements thereof
(collectively, the "Copyrights");
(d) License agreements and covenants not to sue with any other party
with respect to any Patent, Trademark, or Copyright listed on Schedule D
hereto, along with any and all (i) renewals, extensions, supplements and
continuations thereof, (ii) income, royalties, damages, claims and
payments now and hereafter due and/or payable to Pledgor with respect
thereto, including, without limitation, damages and payments for past,
present or future breaches thereof, (iii) rights to sue for past, present
and future breaches thereof, and (iv) any other rights to use, exploit or
practice any or all of the Patents, Trademarks or Copyrights
(collectively, the "Licenses");
(e) the entire goodwill of Pledgor's business and other general
intangibles, including, without limitation, know-how, trade secrets,
customer lists, proprietary information, inventions, methods, procedures
and formulae connected with the use of and symbolized by the Trademarks of
Pledgor; and
(f) all "proceeds" (as such term is defined in the UCC or under
other relevant law) of any of the foregoing.
Section 2. Secured Obligations. This Agreement secures, and the
Pledged Collateral is collateral security for, the payment and performance in
full when due, whether at stated maturity, by acceleration or otherwise
(including, without limitation, the payment of interest and other amounts which
would accrue and become due but for the filing of a petition in bankruptcy or
the operation of the automatic stay under Section 362(a) of the Bankruptcy Code,
11 U.S.C. ss. 362(a)), of (i) all Obligations of Pledgor now existing or
hereafter arising under the Credit Agreement and all Interest Rate Obligations
of Pledgor now existing or hereafter arising under any Interest Rate Agreement
(including, without limitation, Pledgor's obligation provided for therein to pay
principal, interest and all other charges, fees, expenses, commissions,
reimbursements, premiums, indemnities and other payments related to or in
respect of the Obligations contained in the Credit Agreement
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<PAGE>
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and the obligations contained in any Interest Rate Agreement and (ii) without
duplication of the amounts described in clause (i), all Obligations of Pledgor
now existing or hereafter arising under this Agreement or any other Security
Document, including, without limitation, all charges, fees, expenses,
commissions, reimbursements, premiums, indemnities and other payments that
Pledgor is obligated to pay under this Agreement or in any other Security
Document (the obligations described in clauses (i) and (ii), collectively, the
"Secured Obligations").
Section 3. No Release. Nothing set forth in this Agreement shall
relieve Pledgor from the performance of any term, covenant, condition or
agreement on Pledgor's part to be performed or observed under or in respect of
any of the Pledged Collateral or from any liability to any Person under or in
respect of any of the Pledged Collateral or shall impose any obligation on
Collateral Agent or any Secured Party to perform or observe any such term,
covenant, condition or agreement on Pledgor's part to be so performed or
observed or shall impose any liability on Collateral Agent or any Secured Party
for any act or omission on the part of Pledgor relating thereto or for any
breach of any representation or warranty on the part of Pledgor contained in
this Agreement, any Interest Rate Agreement or any other Credit Document, or
under or in respect of the Pledged Collateral or made in connection herewith or
therewith. The obligations of Pledgor contained in this Section 3 shall survive
the termination of this Agreement and the discharge of Pledgor's other
obligations under this Agreement, any Interest Rate Agreement and the other
Credit Documents.
Section 4. Use and Pledge of Pledged Collateral. Unless an Event of
Default shall have occurred and be continuing, Collateral Agent shall from time
to time execute and deliver, upon written request of Pledgor and at Pledgor's
sole cost and expense, any and all instruments, certificates or other documents,
in the form so requested, necessary or appropriate in the reasonable judgment of
Pledgor to enable Pledgor to continue to exploit, license, use, enjoy and
protect the Pledged Collateral throughout the world. Pledgor and Collateral
Agent acknowledge that this Agreement is intended to grant to Collateral Agent
for the benefit of the Secured Parties a security interest in and Lien upon the
Pledged Collateral and shall not constitute or create a present assignment of
the Pledged Collateral.
Section 5. Supplements; Further Assurances.
(a) Pledgor agrees that at any time and from time to time, it will
execute and, at its sole cost and expense, file and refile, or permit Collateral
Agent to file and refile, such
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<PAGE>
-5-
financing statements, continuation statements and other documents (including,
without limitation, this Agreement), in such offices (including, without
limitation, the United States Patent and Trademark Office and the United States
Copyright Office) as Collateral Agent may reasonably deem necessary or
appropriate, wherever required or permitted by law in order to perfect and
preserve the rights and interests granted to Collateral Agent hereunder.
(b) Pledgor hereby authorizes Collateral Agent, without relieving
Pledgor of any obligations hereunder, to file financing statements, continuation
statements, amendments thereto and other documents, relative to all or any part
thereof, without the signature of Pledgor where permitted by law, and Pledgor
agrees to do such further acts and things, and to execute and deliver to
Collateral Agent such additional assignments, agreements, powers and
instruments, as Collateral Agent may reasonably deem necessary or appropriate,
wherever required or permitted by law in order to perfect and preserve the
rights and interests granted to Collateral Agent hereunder or to carry into
effect the purposes of this Agreement or better to assure and confirm unto
Collateral Agent its respective rights, powers and remedies hereunder. All of
the foregoing shall be at the sole cost and expense of Pledgor.
Section 6. Representations, Warranties and Covenants.
Pledgor hereby represents, warrants and covenants as follows:
(a) Necessary Filings. Upon the filing of financing statements and
the acceptance thereof in the appropriate offices under the UCC and the filing
of this Agreement and the acceptance thereof in the United States Patent and
Trademark Office and the United States Copyright Office, the security interest
granted to Collateral Agent for the benefit of the Secured Parties pursuant to
this Agreement in and to the Pledged Collateral constitutes and hereafter will
constitute a valid and duly perfected first priority security interest in the
Pledged Collateral superior and prior to the rights of all other Persons therein
and subject to no other Liens.
(b) No Liens. Pledgor is as of the date hereof, and as to Pledged
Collateral acquired by it from time to time after the date hereof, Pledgor will
be, the sole and exclusive owner or, as applicable, licensee of the Pledged
Collateral free from any Lien or other right, title or interest of any Person
other than the Lien and security interest created by this Agreement and Liens of
the type described in paragraph (a) of the definition of Permitted Encumbrances.
Pledgor shall take all reasonable steps to defend the Pledged Collateral against
all claims and demands of all
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Persons at any time claiming any interest therein adverse to Collateral Agent or
any Secured Party.
(c) Other Financing Statements. There is no financing statement (or
similar statement or instrument of registration under the law of any
jurisdiction) covering or purporting to cover any interest of any kind in the
Pledged Collateral and, so long as the Secured Obligations remain unpaid or the
Commitments of the Banks to make any Loan or to issue any Letter of Credit shall
not have expired or been sooner terminated, Pledgor shall not execute or
authorize to be filed in any public office any financing statement (or similar
statement or instrument of registration under the law of any jurisdiction) or
statements relating to the Pledged Collateral, except, in each case, financing
statements filed or to be filed in respect of and covering the security
interests granted by Pledgor pursuant to this Agreement.
(d) Authorization; Enforceability. Pledgor has the requisite
corporate power, authority and legal right to pledge and grant a security
interest in all the Pledged Collateral pursuant to this Agreement, and this
Agreement constitutes the legal, valid and binding obligation of Pledgor,
enforceable against Pledgor in accordance with its terms, except as may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or affecting creditors' rights generally and except as such
enforceability may be limited by the application of general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
(e) No Consents, etc. No consent of any party (including, without
limitation, stockholders or creditors of Pledgor) and no consent, authorization,
approval, license, or other action by, and no notice to or filing with, any
Governmental Authority or regulatory body or other Person is required for (x)
the execution, delivery or performance of this Agreement by Pledgor, (y) the
assignment of, and the grant of a Lien (including the priority thereof) on and
security interest in, the Pledged Collateral by Pledgor in the manner and for
the purpose contemplated by this Agreement or (z) the exercise by Collateral
Agent of the remedies in respect of the Pledged Collateral pursuant to this
Agreement (other than those consents, authorizations, approvals, licenses,
actions, notices or filings which, if not obtained or made, would not have a
material adverse effect upon the interests of Collateral Agent under this
Agreement).
(f) No Claims. Pledgor owns or has rights to use all
the Pledged Collateral and all rights with respect to any of the
foregoing used in, necessary for or material to Pledgor's business
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as currently conducted and as contemplated to be conducted pursuant to the
Credit Documents. To the best of Pledgor's knowledge, the use by Pledgor of such
Pledged Collateral and all such rights with respect to the foregoing does not
infringe on the rights of any Person. To the best of Pledgor's knowledge, no
claim has been made and remains outstanding that Pledgor's use of the Pledged
Collateral does or may violate the rights of any third person.
(g) Pledged Collateral. Schedules A, B, C and D hereto,
respectively, are true, accurate and complete lists as of the date hereof of all
issued, registered or applied for Patents, Trademarks, Copyrights and Licenses
owned by Pledgor.
Section 7. Covenants Concerning Pledged Collateral.
(a) Protection of Collateral Agent's Security. On a continuing
basis, Pledgor shall, at its sole cost and expense, make, execute, acknowledge
and deliver, and file and record in the proper filing and recording offices, all
such instruments or documents, including, without limitation, appropriate
financing and continuation statements and collateral agreements, and take all
such action as may reasonably be deemed necessary by Collateral Agent to carry
out the intent and purposes of this Agreement, to assure and confirm to
Collateral Agent the grant or perfection of a first priority security interest
in the Pledged Collateral for the benefit of the Secured Parties, and to enable
Collateral Agent to exercise and enforce its rights and remedies hereunder with
respect to any Pledged Collateral. Without limiting the generality of the
foregoing, Pledgor (i) will not enter into any agreement that would impair or
conflict with Pledgor's obligations hereunder; (ii) will, from time to time,
upon Collateral Agent's reasonable request, cause its books and records to be
marked with such legends or segregated in such manner as Collateral Agent may
reasonably specify and take or cause to be taken such other action and adopt
such procedures as Collateral Agent may reasonably specify to give notice to or
to perfect the security interest in the Pledged Collateral intended to be
conveyed hereby; (iii) will, promptly following its becoming aware thereof,
notify Collateral Agent of (A) any adverse determination in any proceeding in
the United States Patent and Trademark Office or the United States Copyright
Office with respect to any Patent, Trademark or Copyright, or (B) the
institution of any proceeding or any adverse determination in any Federal, state
or local court or administrative body regarding Pledgor's claim of ownership in
or right to use any of the Pledged Collateral, its right to register the Pledged
Collateral, or its right to keep and maintain such registration in full force
and effect; (iv) will maintain and protect the Pledged Collateral necessary for
the operation of Pledgor's business;
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(v) will not permit to lapse or become abandoned any Pledged Collateral
necessary for the operation of Pledgor's business, and will not settle or
compromise any pending or future litigation or administrative proceeding with
respect to the Pledged Collateral necessary for the operation of Pledgor's
business, in each case, without the consent of Collateral Agent (such consent
not to be unreasonably withheld or delayed); (vi) upon Pledgor obtaining
knowledge thereof, will promptly notify Collateral Agent in writing of any event
which may reasonably be expected to adversely affect the value or utility of the
Pledged Collateral or any portion thereof necessary for the operation of
Pledgor's business, the ability of Pledgor or Collateral Agent to dispose of the
Pledged Collateral or any portion thereof or the rights and remedies of
Collateral Agent in relation thereto, including, without limitation, a levy or
threat of levy or any legal process against the Pledged Collateral or any
portion thereof; (vii) will not license the Pledged Collateral other than
licenses entered into by Pledgor in, or incidental to, the ordinary course of
business, or amend or permit the amendment of any of the licenses in a manner
that materially adversely affects the right to receive payments thereunder, in
any manner that would materially impair the value of the Pledged Collateral or
the Lien on the Pledged Collateral intended to be granted to Collateral Agent
for the benefit of Secured Parties without the consent of Collateral Agent;
(viii) until Collateral Agent exercises its rights to make collection, will
diligently keep adequate records respecting the Pledged Collateral; (ix) will
furnish to Collateral Agent from time to time statements and amended schedules
further identifying and describing the Pledged Collateral and such other
materials evidencing or reports pertaining to the Pledged Collateral as
Collateral Agent may from time to time reasonably request, all in reasonable
detail; (x) will pay when due any and all material taxes, levies, maintenance
fees, charges, assessments, license fees and similar taxes or impositions
payable in respect of each item of Pledged Collateral; and (xi) will comply with
all material laws, rules and regulations applicable to the Pledged Collateral
the failure to comply with which would have a material adverse effect on the
value or use of the Pledged Collateral or a material adverse effect on the Lien
on the Pledged Collateral granted to the Collateral Agent hereunder.
(b) After-Acquired Property. If Pledgor shall, at any time before
the Secured Obligations have been paid or the Commitments of the Banks to make
any Loan or to issue any Letter of Credit have expired or been sooner terminated
(i) obtain any rights to any additional Pledged Collateral or (ii) become
entitled to the benefit of any additional Pledged Collateral or any renewal or
extension thereof, including any reissue, division, continuation,
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or continuation-in-part of any Patent, or any improvement on any Patent, the
provisions of this Agreement shall automatically apply thereto and any such item
enumerated in clause (i) or (ii) with respect to Pledgor shall automatically
constitute Pledged Collateral if such would have constituted Pledged Collateral
at the time of execution of this Agreement, and be subject to the Lien created
by this Agreement without further action by any party other than actions
required to perfect such Lien. Pledgor shall promptly provide to Collateral
Agent written notice of any of the foregoing. Pledgor agrees, promptly following
a request by Collateral Agent, to confirm the attachment of the Lien created by
this Agreement to any rights described in clauses (i) and (ii) above if such
would have constituted Pledged Collateral at the time of execution of this
Agreement by execution of an instrument in form reasonably acceptable to
Collateral Agent.
(c) Modifications. Pledgor agrees to modify this Agreement by
amending Schedules A, B, C and D hereto to include any future Pledged Collateral
of Pledgor, including, without limitation, any of the items listed in Section
7(b).
(d) Applications. Pledgor shall file and prosecute diligently all
applications for the Patents, the Trademarks or the Copyrights now or hereafter
pending that would be necessary to the business of Pledgor to which any such
applications pertain, and shall do all acts necessary to preserve and maintain
all rights in the Pledged Collateral necessary for the operation of Pledgor's
business. Any and all costs and expenses incurred in connection with any such
actions shall be borne by Pledgor. Pledgor shall not abandon any right to file a
Patent, Trademark or Copyright application, or any pending Patent, Trademark or
Copyright application or any Patent, Trademark or Copyright necessary for the
operation of Pledgor's business without the consent of Collateral Agent (such
consent not to be unreasonably withheld or delayed).
Section 8. Transfers and Other Liens. Pledgor shall not (i) sell,
convey, assign or otherwise dispose of, or grant any option with respect to, any
of the Pledged Collateral other than licenses entered into by Pledgor in, or
incidental to, the ordinary course of business or with any Affiliate of Pledgor
or (ii) create or permit to exist any Lien upon or with respect to any of the
Pledged Collateral, other than the Lien granted to Collateral Agent pursuant to
this Agreement and Liens of the type described in paragraph (a) of the
definition of Permitted Encumbrances.
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Section 9. Reasonable Care. Collateral Agent shall be deemed to have
exercised reasonable care in the custody and preservation of the Pledged
Collateral in its possession if such Pledged Collateral is accorded treatment
substantially equivalent to that which Collateral Agent, in its individual
capacity, accords its own property, it being understood that neither Collateral
Agent nor any of the Secured Parties shall have responsibility for taking any
necessary steps to preserve rights against any Person with respect to any
Pledged Collateral.
Section 10. Remedies Upon Default.
(a) Remedies; Disposition of Collateral. If any Event of Default
shall have occurred and be continuing, and the Secured Obligations have been
declared due and payable in accordance with the Credit Agreement, then and in
every such case, Collateral Agent may, (i) to the full extent permitted by law,
and without advertisement, hearing or process of law of any kind, (A) exercise
any and all rights as beneficial and legal owner of the Pledged Collateral,
including, without limitation, perfecting assignment of any and all consensual
rights and powers with respect to the Pledged Collateral and (B) sell or assign
or grant a license to use, or cause to be sold or assigned or a license granted
to use any or all of the Pledged Collateral (in the case of Trademarks, along
with the goodwill associated therewith) or any part thereof, in each case, free
of all rights and claims of Pledgor therein and thereto. In that connection,
Collateral Agent shall have the right to cause any or all of the Pledged
Collateral to be transferred of record into the name of Collateral Agent or its
nominee and the right to impose (1) such limitations and restrictions on the
sale or assignment of the Pledged Collateral as Collateral Agent may deem to be
necessary or appropriate to comply with any law, rule or regulation (federal,
state or local) having applicability to the sale or assignment, and (2) any
necessary or appropriate requirements for any required governmental approvals or
consents;
(ii) Exercise in respect of the Pledged Collateral, in addition to
other rights and remedies provided for herein or otherwise available to it, all
the rights and remedies of a secured party on default under the UCC to the
extent permitted by applicable law and whether or not the UCC is applicable
thereto. Pledgor acknowledges and agrees that, to the extent notice of sale
shall be required by law, ten days' notice to Pledgor of the time and place of
any public sale or of the time after which any private sale or other intended
disposition is to take place shall constitute commercially reasonable
notification of such matters. No notification need be given to Pledgor if it has
signed, after the occurrence of an Event of Default, a statement renouncing or
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<PAGE>
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modifying any right to notification of sale or other intended
disposition;
(iii) Collateral Agent or any other Secured Party or any of their
respective Affiliates may be the purchaser of any or all of the Pledged
Collateral at any public or private sale and shall be entitled, for the purpose
of bidding and making settlement or payment of the purchase price for all or any
portion of the Pledged Collateral sold at such sale, to use and apply any of the
Secured Obligations owed to such Person as a credit on account of the purchase
price of such item of Collateral payable by such Person at such sale. Each
purchaser at any such sale shall acquire the property sold absolutely free from
any claim or right on the part of Pledgor, and Pledgor hereby waives, to the
fullest extent permitted by law, all rights of redemption, stay and/or appraisal
which it now has or may at any time in the future have under any rule of law or
statute now existing or hereafter enacted. Collateral Agent shall not be
obligated to make any sale of Pledged Collateral regardless of notice of sale
having been given. Collateral Agent may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefor, and such sale
may, without further notice, be made at the time and place to which it was so
adjourned. Pledgor hereby waives, to the fullest extent permitted by applicable
law, any claims against Collateral Agent arising by reason of the fact that the
price at which any Pledged Collateral may have been sold at such a private sale
was less than the price which might have been obtained at a public sale, even if
Collateral Agent accepts the first offer received and does not offer such
Pledged Collateral to more than one offeree.
(b) (i) Waiver of Notice and Claims. Pledgor hereby waives, to the
fullest extent permitted by applicable law, any and all notices, advertisements,
hearings or process of law in connection with the exercise by Collateral Agent
of any of its rights and remedies hereunder. Collateral Agent shall not be
liable to any Person for any incorrect or improper payment made pursuant to this
Section 10 in the absence of gross negligence or willful misconduct.
(ii) Pledgor hereby waives, to the fullest extent permitted by
applicable law, notice or judicial hearing in connection with Collateral Agent's
taking possession or Collateral Agent's disposition of any of the Pledged
Collateral, including, without limitation, any and all prior notice and hearing
for any prejudgment remedy or remedies and any such right which Pledgor would
otherwise have under law, and Pledgor hereby further waives to the extent
permitted by applicable law: (A) all damages
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occasioned by such taking of possession; (B) all other requirements as to the
time, place and terms of sale or other requirements with respect to the
enforcement of Collateral Agent's rights hereunder; and (C) all rights of
redemption, appraisal, valuation, stay, extension or moratorium now or hereafter
in force under any applicable law. Any sale of, or the grant of options to
purchase, or any other realization upon, any Pledged Collateral shall operate to
divest all right, title, interest, claim and demand, either at law or in equity,
of Pledgor therein and thereto, and shall be a perpetual bar both at law and in
equity against Pledgor and against any and all Persons claiming or attempting to
claim the Pledged Collateral so sold, optioned or realized upon, or any part
thereof, from, through or under Pledgor.
Section 11. Application of Proceeds. The proceeds received by
Collateral Agent in respect of any sale of, collection from or other realization
upon all or any part of the Pledged Collateral pursuant to the exercise by
Collateral Agent of its remedies as a secured creditor as provided in Section 10
hereof shall be applied, together with any other sums then held by Collateral
Agent pursuant to this Agreement, promptly by Collateral Agent as follows:
First, to the payment of all costs and expenses, fees, commissions
and taxes of such sale, collection or other realization, including, without
limitation, reasonable out-of-pocket costs and expenses of Collateral Agent and
its agents and counsel, and all expenses, liabilities and advances made or
incurred by Collateral Agent in connection therewith;
Second, to the payment of all other costs and expenses of such sale,
collection or other realization, including, without limitation, reasonable
out-of-pocket costs and expenses of the Banks and their agents and counsel and
all costs, liabilities and advances made or incurred by the Banks in connection
therewith;
Third, to the payment in full in cash of Secured Obligations
consisting of interest and all amounts other than principal under the Credit
Agreement at any time and from time to time owing by Pledgor under or in
connection with the Credit Agreement, ratably according to the unpaid amounts
thereof, in the manner and priority set forth in the Credit Agreement, together
with interest on each such amount in the manner and to the extent set forth in
the Credit Agreement from and after the date such amount is due, owing or unpaid
until paid in full;
Fourth, to the pro rata payment in full in cash of
Secured Obligations consisting of (i) principal at any time and
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from time to time owing by Pledgor under or in connection with the Credit
Agreement, ratably according to the unpaid amounts thereof, in the manner and
priority set forth in the Credit Agreement and (ii) the amount of Pledgor's
obligations then due and payable under any Interest Rate Agreement, including
any early termination payments then due (exclusive of expenses or similar
liabilities to any Bank under the applicable Interest Rate Agreement(s)),
together with interest on each such amount in the manner and to the extent set
forth in the Credit Agreement from and after the date such amount is due, owing
or unpaid until paid in full; and
Fifth, the balance, if any, to the Person lawfully entitled thereto
(including Pledgor or its successors or assigns).
Section 12. Expenses. Pledgor will upon demand pay to Collateral
Agent the amount of any and all reasonable expenses, including the reasonable
fees and expenses of its counsel and the reasonable fees and expenses of any
experts and agents, which Collateral Agent may incur in connection with (i) the
collection of the Secured Obligations, (ii) the enforcement and administration
of this Agreement, (iii) the custody or preservation of, or the sale of,
collection from, or other realization upon, any of the Pledged Collateral, (iv)
the exercise or enforcement of any of the rights of Collateral Agent or any
Secured Party hereunder or (v) the failure by Pledgor to perform or observe any
of the provisions hereof. All amounts payable by Pledgor under this Section 12
shall be due within ten Business Days after demand and shall be part of the
Secured Obligations. Pledgor's obligations under this Section 12 shall survive
the termination of this Agreement and the discharge of Pledgor's other
obligations hereunder.
Section 13. No Waiver; Cumulative Remedies.
(a) No failure on the part of Collateral Agent to exercise, no
course of dealing with respect to, and no delay on the part of Collateral Agent
in exercising, any right, power or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any such right, power or
remedy hereunder preclude any other or further exercise thereof or the exercise
of any other right, power or remedy. The remedies herein provided are cumulative
and are not exclusive of any remedies provided by law.
(b) In the event Collateral Agent shall have instituted any
proceeding to enforce any right, power or remedy under this instrument by
foreclosure, sale or otherwise, and such proceeding shall have been discontinued
or abandoned for any reason or shall have been determined adversely to
Collateral Agent, then and in every such case, Pledgor, Collateral Agent and
each Secured Party
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shall be restored to their respective former positions and rights hereunder with
respect to the Pledged Collateral, and all rights, remedies and powers of
Collateral Agent and the Secured Parties shall continue as if no such proceeding
had been instituted.
Section 14. Collateral Agent. Collateral Agent has been appointed as
collateral agent pursuant to the Credit Agreement. The actions of Collateral
Agent hereunder are subject to the provisions of the Credit Agreement.
Collateral Agent shall have the right hereunder to make demands, to give
notices, to exercise or refrain from exercising any rights, and to take or
refrain from taking action (including, without limitation, the release or
substitution of Pledged Collateral), in accordance with this Agreement and the
Credit Agreement. Collateral Agent may resign and a successor Collateral Agent
may be appointed in the manner provided in the Credit Agreement. Upon the
acceptance of any appointment as Collateral Agent by a successor Collateral
Agent, that successor Collateral Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring
Collateral Agent under this Agreement, and the retiring Collateral Agent shall
thereupon be discharged from its duties and obligations under this Agreement.
After any retiring Collateral Agent's resignation, the provisions of this
Agreement shall inure to its benefit as to any actions taken or omitted to be
taken by it under this Agreement while it was Collateral Agent.
Section 15. Collateral Agent May Perform; Collateral Agent Appointed
Attorney-in-Fact. If Pledgor shall fail to do any act or thing that it has
covenanted to do hereunder or any warranty on the part of Pledgor contained
herein shall be breached, Collateral Agent or any Secured Party may (but shall
not be obligated to) do the same or cause it to be done or remedy any such
breach, and may, following five Business Days' written notice to Pledgor of its
intention to do so, expend funds for such purpose. Any and all amounts so
expended by Collateral Agent or such Secured Party shall be paid by Pledgor
within ten Business Days after demand therefor, with interest at the highest
rate then in effect under the Credit Agreement during the period from and
including the date on which such funds were so expended to the date of
repayment. Pledgor's obligations under this Section 15 shall survive the
termination of this Agreement and the discharge of Pledgor's other obligations
under this Agreement, the Credit Agreement, any Interest Rate Agreement and the
other Credit Documents. Pledgor hereby appoints Collateral Agent its
attorney-in-fact with an interest, with full authority in the place and stead of
Pledgor and in the name of Pledgor, or otherwise, from time to time in
Collateral Agent's reasonable discretion to take any action and to execute any
instrument consistent with the terms of this Agreement
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and the other Credit Documents which Collateral Agent may deem reasonably
necessary or advisable to accomplish the purposes of this Agreement. The
foregoing grant of authority is a power of attorney coupled with an interest and
such appointment shall be irrevocable for the term of this Agreement. Pledgor
hereby ratifies all that such attorney shall lawfully do or cause to be done by
virtue hereof.
Section 16. Litigation.
(a) Unless there shall occur an Event of Default, Pledgor shall have
the right to commence and prosecute in its own name, as real party in interest,
for its own benefit and at its sole cost and expense, such applications for
protection of the Pledged Collateral, suits, proceedings or other actions for
infringement, counterfeiting, unfair competition, dilution or other damage as
are in its reasonable business judgment necessary to protect the Pledged
Collateral. Pledgor shall promptly notify Collateral Agent in writing as to the
commencement and prosecution of any such actions, or threat thereof relating to
the Pledged Collateral and shall provide to Collateral Agent such information
with respect thereto as may be reasonably requested by Collateral Agent. Pledgor
shall indemnify and hold harmless each Secured Party for any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
expenses or disbursements (including reasonable attorneys' fees and expenses) of
any kind whatsoever which may be imposed on, incurred by or asserted against
such Secured Party in connection with or in any way arising out of such suits,
proceedings or other actions.
(b) Upon the occurrence and during the continuance of an Event of
Default, Collateral Agent shall have the right but shall in no way be obligated
to file applications for protection of the Pledged Collateral and/or bring suit
in the name of Pledgor, Collateral Agent or the Secured Parties to enforce the
Pledged Collateral and any license thereunder; in the event of such suit,
Pledgor shall, at the request of Collateral Agent, do any and all lawful acts
and execute any and all documents requested by Collateral Agent in aid of such
enforcement and Pledgor shall promptly, upon demand, reimburse and indemnify
Collateral Agent, as the case may be, for all costs and expenses (including
reasonable fees and expenses of counsel) incurred by Collateral Agent in the
exercise of its rights under this Section 16. In the event that Collateral Agent
shall elect not to bring suit to enforce the Pledged Collateral, Pledgor agrees,
at the request of Collateral Agent, to use all reasonable measures, whether by
action, suit, proceeding or otherwise, to prevent the infringement,
counterfeiting or other diminution in value of any of the Pledged
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Collateral by others and for that purpose agrees to diligently maintain any
action, suit or proceeding against any person so infringing necessary to prevent
such infringement unless Pledgor has determined that the Pledged Collateral that
is the subject of any pending or contemplated infringement or enforcement action
or proceeding does not contain or represent any value or utility (other than of
an immaterial nature), consistent with prudent business practice.
Section 17. Modification in Writing. No amendment, modification,
supplement, termination or waiver of or to any provision of this Agreement, nor
consent to any departure by Pledgor therefrom, shall be effective unless the
same shall be done in accordance with the terms of the Credit Agreement and
unless in writing and signed by Collateral Agent. Any amendment, modification or
supplement of or to any provision of this Agreement, any waiver of any provision
of this Agreement and any consent to any departure by Pledgor from the terms of
any provision of this Agreement shall be effective only in the specific instance
and for the specific purpose for which made or given. Except where notice is
specifically required by this Agreement or any other Credit Document, no notice
to or demand on Pledgor in any case shall entitle Pledgor to any other or
further notice or demand in similar or other circumstances.
Section 18. Termination; Release. When all the Secured Obligations
have been paid in full and the Commitments of the Banks to make any Loan or to
issue any Letter of Credit under the Credit Agreement shall have expired or been
sooner terminated, this Agreement shall terminate. Upon termination of this
Agreement or any release of Pledged Collateral in accordance with the provisions
of the Credit Agreement, Collateral Agent shall, upon the request and at the
sole cost and expense of Pledgor, forthwith assign, transfer and deliver to
Pledgor, against receipt and without recourse to or warranty by Collateral
Agent, such of the Pledged Collateral to be released (in the case of a release)
as shall not have been sold or otherwise applied pursuant to the terms hereof,
and with respect to any other Pledged Collateral, proper instruments (including
UCC termination statements on Form UCC-3 and documents suitable for recordation
in the United States Patent and Trademark Office, the United States Copyright
Office or similar domestic or foreign authority) acknowledging the termination
of this Agreement or the release of such Pledged Collateral, as the case may be.
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Section 19. Notices. Unless otherwise provided herein or in the
Credit Agreement, any notice or other communication herein required or permitted
to be given shall be given in the manner set forth in the Credit Agreement, as
to either party, addressed to it at the address set forth in the Credit
Agreement or at such other address as shall be designated by such party in a
written notice to the other party complying as to delivery with the terms of
this Section 19; provided that notices to Collateral Agent shall not be
effective until received by Collateral Agent.
Section 20. Continuing Security Interest; Assignment. This Agreement
shall create a continuing security interest in the Pledged Collateral and shall
(i) be binding upon Pledgor, its successors and assigns and (ii) inure, together
with the rights and remedies of Collateral Agent hereunder, to the benefit of
Collateral Agent and the other Secured Parties and each of their respective
successors, transferees and assigns; no other Persons (including, without
limitation, any other creditor of Pledgor) shall have any interest herein or any
right or benefit with respect hereto. Without limiting the generality of the
foregoing clause (ii), any Bank may assign or otherwise transfer any
indebtedness held by it secured by this Agreement to any other Person, and such
other Person shall thereupon become vested with all the benefits in respect
thereof granted to such Bank, herein or otherwise, subject however, to the
provisions of the Credit Agreement and any applicable Interest Rate Agreement.
Section 21. GOVERNING LAW; TERMS. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, APPLICABLE
TO CONTRACTS MADE AND TO BE PERFORMED WHOLLY THEREIN, EXCEPT TO THE EXTENT THAT
THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES
HEREUNDER, IN RESPECT OF ANY PARTICULAR PROPERTY ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK.
Section 22. CONSENT TO JURISDICTION AND SERVICE OF
PROCESS.
(a) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT
MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES
FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, PLEDGOR HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE
AFORESAID COURTS. PLEDGOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS
OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE
MAILING OF COPIES THEREOF BY
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REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO PLEDGOR AT ITS ADDRESS FOR
NOTICES PURSUANT TO THE CREDIT AGREEMENT, SUCH SERVICE TO BECOME EFFECTIVE 30
DAYS AFTER SUCH MAILING. PLEDGOR HEREBY IRREVOCABLY APPOINTS CT CORPORATION
SYSTEM HAVING AN ADDRESS AT 1633 BROADWAY, NEW YORK, NEW YORK 10019 AND SUCH
OTHER PERSONS AS MAY HEREAFTER BE SELECTED BY BORROWER IRREVOCABLY AGREEING IN
WRITING TO SERVE AS ITS AGENT FOR SERVICE OF PROCESS IN RESPECT OF ANY SUCH
ACTION OR PROCEEDING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF COLLATERAL AGENT
TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL
PROCEEDINGS OR OTHERWISE PROCEED AGAINST PLEDGOR IN ANY OTHER JURISDICTION.
(b) PLEDGOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR
PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT BROUGHT IN THE
COURTS REFERRED TO IN CLAUSE (A) ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES AND
AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
Section 23. Severability of Provisions. Any provision of this
Agreement which 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 or
affecting the validity or enforceability of such provision in any other
jurisdiction.
Section 24. Execution in Counterparts. This Agreement and any
amendments, waivers, consents or supplements hereto may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed to be an original,
but all such counterparts together shall constitute one and the same agreement.
Section 25. Headings. The Section headings used in this Agreement
are for convenience of reference only and shall not affect the construction of
this Agreement.
Section 26. Obligations Absolute. All obligations of
Pledgor hereunder shall be absolute and unconditional irrespective
of:
(i) any bankruptcy, insolvency, reorganization,
arrangement, readjustment, composition, liquidation or the
like of either Pledgor or any other Credit Party;
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(ii) any lack of validity or enforceability of the Credit Agreement,
any Interest Rate Agreement, any Letter of Credit or any other Credit
Document, or any other agreement or instrument relating thereto;
(iii) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations, or any other
amendment or waiver of or any consent to any departure from the Credit
Agreement, any Interest Rate Agreement, any Letter of Credit or any other
Credit Document, or any other agreement or instrument relating thereto;
(iv) any exchange, release or non-perfection of any other collateral,
or any release or amendment or waiver of or consent to any departure from
any guarantee, for all or any of the Secured Obligations;
(v) any exercise or non-exercise, or any waiver of any right,
remedy, power or privilege under or in respect of this Agreement any
Interest Rate Agreement, or any other Credit Document except as
specifically set forth in a waiver granted pursuant to the provisions of
Section 18 hereof; or
(vi) any other circumstance or happening whatsoever that
is similar to any of the foregoing.
Section 27. Collateral Agent's Right to Sever
Indebtedness.
(a) Pledgor acknowledges that (i) the Pledged Collateral does not
constitute the sole source of security for the payment and performance of the
Secured Obligations and that the Secured Obligations are also secured by other
types of property of Pledgor and its Affiliates in other jurisdictions (all such
property, collectively, the "Collateral"), (ii) the number of such jurisdictions
and the nature of the transaction of which this instrument is a part are such
that it would have been impracticable for the parties to allocate to each item
of Collateral a specific loan amount and to execute in respect of such item a
separate credit agreement, and (iii) Pledgor intends that Collateral Agent have
the same rights with respect to the Pledged Collateral, in any judicial
proceeding relating to the exercise of any right or remedy hereunder or
otherwise, that Collateral Agent would have had if each item of Collateral had
been pledged or encumbered pursuant to a separate credit agreement and security
instrument. In furtherance of such intent, Pledgor agrees to the greatest extent
permitted by law that Collateral Agent may at any time by notice
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(an "Allocation Notice") to Pledgor allocate a portion of the Secured
Obligations (the "Allocated Indebtedness") to all or a specified portion of the
Pledged Collateral and sever from the remaining Secured Obligations the
Allocated Indebtedness. From and after the giving of an Allocation Notice with
respect to any of the Pledged Collateral, the Secured Obligations hereunder
shall be limited to the extent set forth in the Allocation Notice and (as so
limited) shall, for all purposes, be construed as a separate credit obligation
of Pledgor unrelated to the other transactions contemplated by the Credit
Agreement, any Interest Rate Agreement, any other Credit Document or any
document related to any thereof. To the extent that the proceeds of any judicial
proceeding relating to the exercise of any right or remedy hereunder of the
Pledged Collateral shall exceed the Allocated Indebtedness, such proceeds shall
belong to Pledgor and shall not be available hereunder to satisfy any Secured
Obligations of Pledgor other than the Allocated Indebtedness. In any action or
proceeding to exercise any right or remedy under this Agreement which is
commenced after the giving by Collateral Agent of an Allocation Notice, the
Allocation Notice shall be conclusive proof of the limits of the Secured
Obligations hereby secured, and Pledgor may introduce, by way of defense or
counterclaim, evidence thereof in any such action or proceeding. Notwithstanding
any provision of this Section 27, the proceeds received by Collateral Agent
pursuant to this Agreement shall be applied by Collateral Agent in accordance
with the provisions of Section 11 hereof.
(b) Pledgor hereby waives to the greatest extent permitted under law
the right to a discharge of any of the Secured Obligations under any statute or
rule of law now or hereafter in effect which provides that the exercise of any
particular right or remedy as provided for herein (by judicial proceedings or
otherwise) constitutes the exclusive means for satisfaction of the Secured
Obligations or which makes unavailable any further judgment or any other right
or remedy provided for herein because Collateral Agent elected to proceed with
the exercise of such initial right or remedy or because of any failure by
Collateral Agent to comply with laws that prescribe conditions to the
entitlement to such subsequent judgment or the availability of such subsequent
right or remedy. In the event that, notwithstanding the foregoing waiver, any
court shall for any reason hold that such subsequent judgment or action is not
available to Collateral Agent, Pledgor shall not (i) introduce in any other
jurisdiction any judgment so holding as a defense to enforcement against Pledgor
of any remedy in the Credit Agreement, any Interest Rate Agreement or any other
Credit Document or (ii) seek to have such judgment recognized or entered in any
other jurisdiction, and any such judgment shall in all events be limited in
application only to the state or jurisdiction
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where rendered and only with respect to the collateral referred to
in such judgment.
(c) In the event any instrument in addition to the Allocation Notice
is necessary to effectuate the provisions of this Section 27, including, without
limitation, any amendment to this Agreement, any substitute promissory note or
affidavit or certificate of any kind, Collateral Agent may execute and deliver
such instrument as the attorney-in-fact of Pledgor. Such power of attorney is
coupled with an interest and is irrevocable.
(d) Notwithstanding anything set forth herein to the contrary, the
provisions of this Section 27 shall be effective only to the maximum extent
permitted by law.
Section 28. Future Advances. This Agreement shall secure the payment
of any amounts advanced from time to time pursuant to the Credit Agreement.
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IN WITNESS WHEREOF, Pledgor and Collateral Agent have caused this
Agreement to be duly executed and delivered by their duly authorized officers as
of the date first above written.
CARSON PRODUCTS COMPANY,
as Pledgor
By:
Name:
Title:
BANQUE INDOSUEZ, NEW YORK BRANCH,
as Collateral Agent
By:
Name:
Title:
By:
Name:
Title:
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<PAGE>
Schedule A
1. U.S. Patent Registrations:
2. Pending Applications for U.S. Patents:
3. Pending Applications for U.S. Patents in which Pledgor has a
partial legal interest:
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<PAGE>
Schedule B
1. U.S. Trademark Registrations:
Trademark U.S. Registration No. Registration Date
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<PAGE>
Schedule C
U.S. Copyright Registrations:
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<PAGE>
Schedule D
Proprietary Rights for which Pledgor has a license from a third party:
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<PAGE>
Exhibit H to the
Credit Agreement
BORROWER GENERAL SECURITY AGREEMENT
BORROWER GENERAL SECURITY AGREEMENT (the "Agreement"), dated as of
October 18, 1996, made by CARSON PRODUCTS COMPANY (formerly known as Aminco,
Inc., as successor by merger to DNL Savannah Acquisition Corp.), a Delaware
corporation having an office at 64 Ross Road, Savannah, Georgia 31405
("Pledgor"), in favor of BANQUE INDOSUEZ, NEW YORK BRANCH, having an office at
1211 Avenue of the Americas, 7th Floor, New York, New York 10036, as pledgee,
assignee and secured party, in its capacity as collateral agent (in such
capacities and together with any successors in such capacities, "Collateral
Agent") for the lending institutions (the "Banks") from time to time party to
the Credit Agreement (as hereinafter defined).
R E C I T A L S :
A. Pursuant to a certain credit agreement, dated as of
the date hereof (as amended, amended and restated, supplemented or
otherwise modified from time to time, the "Credit Agreement";
capitalized terms used herein and not defined shall have the
meanings assigned to them in the Credit Agreement), among Pledgor,
the Banks and Banque Indosuez, New York Branch, as Agent and
Collateral Agent for the Banks, the Banks have agreed (i) to make
to or for the account of Pledgor certain A Term Loans up to an
aggregate principal amount of $15,000,000, certain B Term Loans up
to an aggregate principal amount of $10,000,000 and certain
Revolving Loans up to an aggregate principal amount of $15,000,000
and (ii) to issue certain Letters of Credit for the account of
Pledgor.
B. It is contemplated that Pledgor may enter into one or more
agreements with one or more of the Banks ("Interest Rate Agreements") fixing the
interest rates with respect to Loans under the Credit Agreement (all obligations
of Pledgor now existing or hereafter arising under such Interest Rate
Agreements, collectively, the "Interest Rate Obligations").
C. Pledgor is the legal and beneficial owner of the
Pledged Collateral (as hereinafter defined).
D. It is a condition to the obligations of the Banks to
make the Loans under the Credit Agreement and a condition to any
Bank issuing Letters of Credit under the Credit Agreement or
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entering into the Interest Rate Agreements that Pledgor execute and deliver the
applicable Credit Documents, including this Agreement.
E. This Agreement is given by Pledgor in favor of Collateral Agent
for its benefit and the benefit of the Banks and the Agent (collectively, the
"Secured Parties") to secure the payment and performance of all of the Secured
Obligations (as defined in Section 2).
A G R E E M E N T :
NOW, THEREFORE, in consideration of the foregoing premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Pledgor and Collateral Agent hereby agree as follows:
Section 1. Pledge. As collateral security for the payment and
performance when due of all the Secured Obligations, Pledgor hereby pledges,
assigns, transfers and grants to Collateral Agent for its benefit and the
benefit of the Secured Parties, a continuing first priority security interest
(except as set forth on Schedule A hereto) in and to all of the right, title and
interest of Pledgor in, to and under the following property whether now existing
or hereafter acquired (collectively, the "Pledged Collateral"):
(a) each and every Receivable (as hereinafter
defined);
(b) all Inventory (as hereinafter defined);
(c) all books, records, ledgers, print-outs, file materials and
other papers containing information relating to Receivables and any
account debtors in respect thereof, together with all Contracts (as
hereinafter defined) (except where such pledge, assignment, transfer or
grant would violate the provisions of any such Contracts);
(d) all Equipment (as hereinafter defined);
(e) all Intangibles (as hereinafter defined);
(f) all Insurance Policies (as hereinafter
defined);
(g) all Pension Plan Reversions (as hereinafter defined);
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(h) any and all property of every name and nature (excluding any
property constituting Pledged Collateral under the Borrower Intellectual
Property Security Agreement) which from time to time after the date
hereof, by delivery or by writing of any kind for the purposes hereof,
shall have been conveyed, mortgaged, pledged, assigned or transferred by
Pledgor or by anyone on Pledgor's behalf or with its consent to Collateral
Agent for the benefit of the Secured Parties, which is hereby authorized
to receive at any and all times any such property, as and for additional
security for the payment of the Secured Obligations and to hold and apply
such property subject to and in accordance with this Agreement; including,
without limitation, all monies due and to become due to Pledgor in
connection with any of the foregoing and all rights, remedies, powers,
privileges and claims of Pledgor under or in connection therewith;
(i) all Documents (as hereinafter defined);
(j) all Instruments (as hereinafter defined); and
(k) all Proceeds (as hereinafter defined) of any
and all of the foregoing.
Section 2. Secured Obligations. This Agreement secures, and the
Pledged Collateral is collateral security for, the payment and performance in
full when due, whether at stated maturity, by acceleration or otherwise
(including, without limitation, the payment of interest and other amounts which
would accrue and become due but for the filing of a petition in bankruptcy or
the operation of the automatic stay under Section 362(a) of the Bankruptcy Code,
11 U.S.C. ss. 362(a)), of (i) all Obligations of Pledgor now existing or
hereafter arising under the Credit Agreement and all Interest Rate Obligations
of Pledgor now existing or hereafter arising under any Interest Rate Agreement
(including, without limitation, the obligations of Pledgor provided for therein
to pay principal, interest and all other charges, fees, expenses, commissions,
reimbursements, premiums, indemnities and other payments related to or in
respect of the Obligations contained in the Credit Agreement and the obligations
contained in any Interest Rate Agreement) and (ii) without duplication of the
amounts described in clause (i), all obligations of Pledgor now existing or
hereafter arising under this Agreement or any other Security Document,
including, without limitation, all charges, fees, expenses, commissions,
reimbursements, premiums, indemnities and other payments that Pledgor is
obligated to pay under this Agreement or any other
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<PAGE>
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Security Document (the obligations described clauses (i) and (ii), collectively,
the "Secured Obligations").
Section 3. No Release. Nothing set forth in this Agreement shall
relieve Pledgor from the performance of any term, covenant, condition or
agreement on Pledgor's part to be performed or observed under or in respect of
any of the Pledged Collateral or from any liability to any Person under or in
respect of any of the Pledged Collateral or shall impose any obligation on
Collateral Agent or any Secured Party to perform or observe any such term,
covenant, condition or agreement on Pledgor's part to be so performed or
observed or shall impose any liability on Collateral Agent or any Secured Party
for any act or omission on the part of Pledgor relating thereto or for any
breach of any representation or warranty on the part of Pledgor contained in
this Agreement, any Interest Rate Agreement or any other Credit Document, or
under or in respect of the Pledged Collateral or made in connection herewith or
therewith. The obligations of Pledgor contained in this Section 3 shall survive
the termination of this Agreement and the discharge of Pledgor's other
obligations under this Agreement, any Interest Rate Agreement and the other
Credit Documents.
Section 4. Supplements by Collateral Agent. Pledgor hereby
authorizes Collateral Agent, without relieving Pledgor of any obligations
hereunder, to file financing statements, continuation statements, amendments
thereto and other documents relative to all or any part thereof, without the
signature of Pledgor where permitted by law, and Pledgor agrees to do such
further acts and things, and to execute and deliver to Collateral Agent such
additional assignments, agreements, powers and instruments, as Collateral Agent
may reasonably deem necessary or appropriate, wherever required or permitted by
law in order to perfect and preserve the rights and interests granted to
Collateral Agent hereunder or to carry into effect the purposes of this
Agreement or better to assure and confirm unto Collateral Agent its respective
rights, powers and remedies hereunder. All of the foregoing shall be at the sole
cost and expense of Pledgor.
Section 5. Representations, Warranties and Covenants.
Pledgor represents, warrants and covenants as follows:
(a) Necessary Filings. Upon the filing of financing statements and
acceptance thereof in the appropriate offices under the UCC, the security
interest granted to Collateral Agent for the benefit of the Secured
Parties pursuant to this Agreement in and to the Pledged Collateral will
constitute a perfected security interest therein, superior and prior to
the rights of all other Persons therein and subject to no Liens
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other than the Liens identified on Schedule A hereto relating to the items
of Pledged Collateral identified on such schedule (collectively, "Prior
Liens").
(b) No Liens. Pledgor is as of the date hereof, and, as to Pledged
Collateral acquired by it from time to time after the date hereof, Pledgor
will be, the owner of all Pledged Collateral free from any Lien or other
right, title or interest of any Person other than (i) Prior Liens, (ii)
the Lien and security interest created by this Agreement, and (iii) Liens
of the type described in paragraphs (a), (b), (c), (d), (e), (h), (i) and
(j) of the definition of Permitted Encumbrances (collectively, "Permitted
Liens"), and Pledgor shall take all reasonable steps to defend the Pledged
Collateral against all claims and demands of all Persons at any time
claiming any interest therein adverse to Collateral Agent or any Secured
Party.
(c) Other Financing Statements. There is no financing statement (or
similar statement or instrument of registration under the law of any
jurisdiction) covering or purporting to cover any interest of any kind in
the Pledged Collateral other than financing statements relating to (i)
Prior Liens, (ii) this Agreement and (iii) Permitted Liens, and so long as
any of the Secured Obligations remain unpaid or the Commitments of the
Banks to make any Loan or to issue any Letter of Credit shall not have
expired or been sooner terminated, Pledgor shall not execute, authorize or
permit to be filed in any public office any financing statement (or
similar statement or instrument of registration under the law of any
jurisdiction) or statements relating to the Pledged Collateral, except, in
each case, financing statements filed or to be filed in respect of and
covering the security interests granted by Pledgor pursuant to this
Agreement and financing statements relating to Prior Liens and Permitted
Liens.
(d) Chief Executive Office; Records. The chief executive office of
Pledgor is located at 64 Ross Road, Savannah, Georgia 31405. Pledgor shall
not move its chief executive office except to such new location as Pledgor
may establish in accordance with the last sentence of this Section 5(d).
All tangible evidence of all Receivables, Pension Plan Reversions,
Contracts, Intangibles and Insurance Policies of Pledgor and the only
original books of account and records of Pledgor relating thereto are, and
will continue to be, kept at such chief executive office, or at such new
location for such chief executive office as Pledgor may establish in
accordance
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with the last sentence of this Section 5(d). All Receivables, Pension Plan
Reversions, Contracts, Intangibles and Insurance Policies of Pledgor are,
and will continue to be, controlled and monitored (including, without
limitation, for general accounting purposes) from such chief executive
office location shown above, or such new location as Pledgor may establish
in accordance with the last sentence of this Section 5(d). Pledgor shall
not establish a new location for its chief executive office nor shall it
change its name until (i) it shall have given Collateral Agent not less
than 30 days' prior written notice of its intention so to do, clearly
describing such new location or name and providing such other information
in connection therewith as Collateral Agent or any Secured Party may
request, and (ii) with respect to such new location or name, Pledgor shall
have taken all action reasonably satisfactory to Collateral Agent to
maintain the perfection and priority of the security interest of
Collateral Agent for the benefit of the Secured Parties in the Pledged
Collateral intended to be granted hereby, including, without limitation,
obtaining waivers of landlord's or warehouseman's liens with respect to
such new location, if applicable.
(e) Location of Inventory. All Inventory held on the date hereof by
Pledgor is located at one of the locations shown on Schedule B hereto,
except for Inventory in transit in the ordinary course of business to or
from one or more of such locations. All Inventory now held or subsequently
acquired shall be kept at one of the locations shown on Schedule B hereto,
except for Inventory in transit in the ordinary course of business to or
from one or more of such locations, or at such new location as Pledgor may
establish if (i) it shall have given to Collateral Agent at least 30 days'
prior written notice of its intention so to do, clearly describing such
new location and providing such other information in connection therewith
as Collateral Agent or any Secured Party may request, and (ii) with
respect to such new location, Pledgor shall have taken all action
reasonably satisfactory to Collateral Agent to maintain the perfection and
priority of the security interest in the Pledged Collateral intended to be
granted hereby, including, without limitation, obtaining waivers of
landlord's or warehouseman's liens with respect to such new location, if
applicable.
(f) Location of Equipment. All Equipment held on the date hereof by
Pledgor is located at one of the locations shown on Schedule C hereto. All
Equipment now held or subsequently acquired by Pledgor shall be kept at
one of the locations shown on Schedule C hereto, or such new location as
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Pledgor may establish if (i) it shall have given to Collateral Agent at
least 30 days' prior written notice of its intention so to do, clearly
describing such new location and providing such other information in
connection therewith as Collateral Agent or any Secured Party may request,
and (ii) with respect to such new location, Pledgor shall have taken all
action reasonably satisfactory to Collateral Agent to maintain the
perfection and priority of the security interest of Collateral Agent for
the benefit of the Secured Parties in the Pledged Collateral intended to
be granted hereby, including, without limitation, obtaining waivers of
landlord's or warehouseman's liens with respect to such new location, if
applicable.
(g) Authorization, Enforceability. Pledgor has the requisite
corporate power, authority and legal right to pledge and grant a security
interest in all the Pledged Collateral pursuant to this Agreement, and
this Agreement constitutes the legal, valid and binding obligation of
Pledgor, enforceable against Pledgor in accordance with its terms, except
as may be limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws relating to or affecting creditors' rights generally and
except as such enforceability may be limited by the application of general
principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(h) No Consents, etc. No consent of any party (including, without
limitation, stockholders or creditors of Pledgor or any account debtor
under a Receivable) and no consent, authorization, approval, license or
other action by, and no notice to or filing with, any Governmental
Authority or regulatory body or other Person is required for (x) the
pledge by Pledgor of the Pledged Collateral pursuant to this Agreement or
for the execution, delivery or performance of this Agreement by Pledgor,
or (y) the exercise by Collateral Agent of the rights provided for in this
Agreement, or (z) the exercise by Collateral Agent of the remedies in
respect of the Pledged Collateral pursuant to this Agreement (other than
those consents, authorizations, approvals, licenses, actions, notices or
filings which, if not obtained or made, would not have a material adverse
effect upon the interests of Collateral Agent under this Agreement).
(i) Pledged Collateral. All information set forth
herein, including the Schedules annexed hereto, and all
information contained in any documents, schedules and lists
heretofore delivered to any Secured Party in connection with
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this Agreement, in each case, relating to the Pledged Collateral is
accurate and complete in all material respects.
Section 6. Special Provisions Concerning Receivables.
(a) Special Representations and Warranties. As of the time when each
of its Receivables arises, Pledgor shall be deemed to have represented and
warranted that such Receivable and all records, papers and documents relating
thereto (i) are genuine and correct and in all material respects what they
purport to be, (ii) represent the legal, valid and binding obligation of the
account debtor, evidencing indebtedness unpaid and owed by such account debtor,
arising out of the performance of labor or services or the sale or lease and
delivery of the merchandise listed therein or out of an advance or a loan, (iii)
will, in the case of a Receivable, except for the original or duplicate original
invoice sent to a purchaser evidencing such purchaser's account, be the only
original writings evidencing and embodying such obligation of the account debtor
named therein, (iv) constitute and evidence true and valid obligations,
enforceable in accordance with their respective terms, not subject to the
fulfillment of any contract or condition whatsoever or to any defenses, set-offs
or counterclaims except with respect to refunds, returns and allowances in the
ordinary course of business, or stamp or other taxes, and (v) are in compliance
and conform in all material respects with all applicable Federal, state and
local laws and applicable laws of any relevant foreign jurisdiction.
(b) Maintenance of Records. Pledgor shall keep and maintain at its
own cost and expense complete records of each Receivable, in a manner consistent
with prudent business practice, including, without limitation, records of all
payments received, all credits granted thereon, all merchandise returned and all
other documentation relating thereto, and Pledgor shall make the same available
to Collateral Agent or any Secured Party for inspection upon reasonable prior
notice to any Authorized Officer of Pledgor, at such reasonable times during
regular business hours and intervals and to such reasonable extent as Collateral
Agent or any Secured Party may reasonably request. Pledgor shall, at Pledgor's
sole cost and expense, upon Collateral Agent's demand made at any time after the
occurrence of an Event of Default, deliver all tangible evidence of Receivables,
including, without limitation, all documents evidencing Receivables and any
books and records relating thereto to Collateral Agent or to its representatives
(copies of which evidence and books and records may be retained by Pledgor).
Upon the occurrence and during the continuance of an Event of Default,
Collateral Agent may transfer a full and complete copy of Pledgor's books,
records, credit information, reports,
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memoranda and all other writings relating to the Receivables to and for the use
by any Person that has acquired or is contemplating acquisition of an interest
in the Receivables or Collateral Agent's security interest therein without the
consent of Pledgor.
(c) Legend. Pledgor shall legend, at the request of Collateral Agent
made at any time after the occurrence of an Event of Default and in form and
manner reasonably satisfactory to Collateral Agent, the Receivables and other
books, records and documents of Pledgor evidencing or pertaining to the
Receivables with an appropriate reference to the fact that the Receivables have
been assigned to Collateral Agent for the benefit of the Secured Parties and
that Collateral Agent has a security interest therein.
(d) Modification of Terms, etc. Pledgor shall not rescind or cancel
any indebtedness evidenced by any Receivable or modify any material term thereof
or make any material adjustment with respect thereto except in the ordinary
course of business consistent with prudent business practice, or extend or renew
any such indebtedness except in the ordinary course of business consistent with
prudent business practice or compromise or settle any dispute, claim, suit or
legal proceeding relating thereto except in the ordinary course of business
consistent with prudent business practice or sell any Receivable or interest
therein without the prior written consent of Collateral Agent (such consent not
to be unreasonably withheld or delayed). Pledgor shall timely fulfill all
obligations on its part to be fulfilled under or in connection with the
Receivables (except for such obligations the failure to fulfill which would not
have in the aggregate, a material adverse effect upon the interests of
Collateral Agent under this Agreement).
(e) Collection. Pledgor shall use reasonable efforts to cause to be
collected from the account debtor of each of the Receivables, as and when due
(including, without limitation, Receivables that are delinquent, such
Receivables to be collected in accordance with generally accepted commercial
collection procedures), any and all amounts owing under or on account of such
Receivable, and apply forthwith upon receipt thereof all such amounts as are so
collected to the outstanding balance of such Receivable, except that Pledgor
may, with respect to a Receivable, allow in the ordinary course of business (i)
a refund or credit due as a result of returned or damaged or defective
merchandise and (ii) such extensions of time to pay amounts due in respect of
Receivables and such other modifications of payment terms or settlements in
respect of Receivables as shall be commercially reasonable in the circumstances,
all in accordance with Pledgor's ordinary course of business consistent with its
collection
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practices as in effect from time to time. The reasonable costs and expenses
(including, without limitation, attorneys' fees) of collection, in any case,
whether incurred by Pledgor, Collateral Agent or any Secured Party, shall be
paid by Pledgor.
(f) Instruments. Pledgor shall deliver to Collateral Agent, within
five days after receipt thereof by Pledgor, any Instrument evidencing
Receivables which is in the principal amount of $500,000 or more. Any Instrument
delivered to Collateral Agent pursuant to this Section 6(f) shall be
appropriately endorsed (if applicable) to the order of Collateral Agent, as
agent for the Secured Parties, and shall be held by Collateral Agent as further
security hereunder; provided, that, so long as no Default or Event of Default
shall have occurred and be continuing, Pledgor may retain for collection in the
ordinary course any Instruments received by Pledgor in the ordinary course of
business and Collateral Agent shall, promptly upon request of Pledgor, make
appropriate arrangements for making any Instrument pledged by Pledgor available
to Pledgor for purposes of presentation, collection or renewal (any such
arrangement to be effected, to the extent deemed appropriate by Collateral
Agent, against trust receipt or like document).
(g) Cash Collateral. Upon the occurrence and during the continuance
of an Event of Default, if Collateral Agent so directs, Pledgor shall cause all
payments on account of the Receivables to be held by Collateral Agent as cash
collateral, upon acceleration or otherwise. Without notice to or assent by
Pledgor, Collateral Agent may apply any or all amounts then or thereafter held
as cash collateral in the manner provided in Section 11. The reasonable costs
and expenses (including, without limitation, reasonable attorneys' fees) of
collection, whether incurred by Collateral Agent or any Secured Party, shall be
paid by Pledgor.
Section 7. Provisions Concerning All Pledged Collateral.
(a) Protection of Collateral Agent's Security. Pledgor shall not
take any action that impairs the rights of Collateral Agent or any Secured Party
in the Pledged Collateral. Pledgor shall at all times keep the Inventory and
Equipment insured, at Pledgor's own expense, to Collateral Agent's reasonable
satisfaction against fire, theft and all other risks of the kind customarily
insured against, in such amounts and with such deductibles as would customarily
be maintained under similar circumstances by operators of businesses similar to
the business of Pledgor to the extent available at commercially reasonable
rates. Each policy or certificate with respect to such insurance shall be
endorsed to Collateral Agent's reasonable satisfaction for the
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benefit of Collateral Agent (including, without limitation, by naming Collateral
Agent as an additional named insured and sole loss payee as Collateral Agent may
request) and such policy or certificate shall be delivered to Collateral Agent.
Each such policy shall state that it cannot be cancelled without 30 days' prior
written notice to Collateral Agent. At least 30 days prior to the expiration of
any such policy of insurance, Pledgor shall deliver to Collateral Agent an
extension or renewal policy or an insurance certificate evidencing renewal or
extension of such policy. If Pledgor shall fail to insure such Pledged
Collateral to Collateral Agent's reasonable satisfaction, Collateral Agent shall
have the right (but shall be under no obligation), following five (5) Business
Days' prior written notice to Pledgor of its intention to do so, to advance
funds to procure or renew or extend such insurance and Pledgor agrees to
reimburse Collateral Agent for all reasonable costs and expenses thereof, with
interest on all such funds from the date advanced until paid in full at the
highest rate then in effect under the Credit Agreement.
(b) Insurance Proceeds. So long as no Event of Default shall have
occurred and be continuing, Pledgor shall have the option as provided in Section
3.02(A)(h) of the Credit Agreement (i) to apply any proceeds of property
insurance (less any portion of such proceeds not in excess of $500,000) received
by it as Net Cash Proceeds in accordance with Section 3.02(B)(a) of the Credit
Agreement or (ii) to apply the proceeds of such insurance to the repair or
replacement of the item or items of Pledged Collateral in respect of which such
proceeds were received. In the event that Pledgor elects to apply such proceeds
to the repair or replacement of any item of Pledged Collateral pursuant to
clause (ii) of the preceding sentence, Pledgor shall upon its receipt of such
proceeds from Collateral Agent as promptly as practicable commence and
diligently continue to perform such repair or as promptly as practicable effect
such replacement. Upon the occurrence and during the continuance of an Event of
Default, Collateral Agent shall have the option to apply any proceeds of
insurance received by Pledgor in respect of the Pledged Collateral toward the
payment of the Secured Obligations in accordance with Section 11 hereof or to
continue to hold such proceeds as additional collateral to secure the
performance by Pledgor of the Secured Obligations.
(c) Maintenance of Equipment. Pledgor shall exercise commercially
reasonable efforts to cause the Equipment to be maintained and preserved in good
repair, working order and condition, ordinary wear and tear excepted, and to the
extent consistent with current business practice in accordance with any
manufacturer's manual, and shall, in the case of any loss or damage which
(individually or in the aggregate) exceeds $100,000 to any of
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the Equipment (of which prompt notice shall be given to Collateral Agent) as
quickly as commercially practicable after the occurrence thereof, make or cause
to be made all repairs, replacements and other improvements in connection
therewith which are necessary or desirable in the conduct of Pledgor's business
in Pledgor's commercially reasonable judgment.
(d) Payment of Taxes; Claims. Pledgor shall pay, prior to the date
on which material penalties attach thereto, all property and other material
taxes, assessments and governmental charges or levies imposed upon, and all
lawful claims (including claims for labor, materials and supplies) against, the
Pledged Collateral which, if unpaid might become a Lien upon the Pledged
Collateral. Notwithstanding the foregoing, Pledgor may at its own expense
contest the amount or applicability of any of the obligations described in the
preceding sentence as permitted under the Credit Agreement.
(e) Further Actions. Pledgor shall, at its sole cost and expense,
make, execute, endorse, acknowledge, file or refile and/or deliver to Collateral
Agent from time to time such lists, descriptions and designations of the Pledged
Collateral, copies of warehouse receipts, receipts in the nature of warehouse
receipts, bills of lading, documents of title, vouchers, invoices, schedules,
confirmatory assignments, supplements, additional security agreements,
conveyances, financing statements, transfer endorsements, powers of attorney,
certificates, reports and other assurances or instruments and take such further
steps relating to the Pledged Collateral and other property or rights covered by
the security interest hereby granted, which Collateral Agent reasonably deems
appropriate or advisable to exercise and enforce its rights and remedies
hereunder with respect to any Pledged Collateral and to perfect, preserve or
protect the security interest in the Pledged Collateral created and granted by
this Agreement.
(f) Financing Statements. Pledgor shall sign and deliver to
Collateral Agent such financing and continuation statements, in form reasonably
acceptable to Collateral Agent, as may from time to time be required to continue
and maintain a valid, enforceable, first priority security interest in the
Pledged Collateral as provided herein and the other rights, as against third
parties, provided hereby, all in accordance with the UCC or any other relevant
law. Pledgor shall pay any applicable filing fees and other expenses related to
the filing of such financing and continuation statements. Pledgor authorizes
Collateral Agent to file any such financing or continuation statements without
the signature of Pledgor where permitted by law.
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(g) Warehouse Receipts Non-Negotiable. If any warehouse receipt or
receipt in the nature of a warehouse receipt is issued with respect to any of
the Inventory, Pledgor shall not permit such warehouse receipt or receipt in the
nature thereof to be "negotiable" (as such term is used in Section 7-104 of the
UCC or under other relevant law).
Section 8. Transfers and Other Liens. Pledgor shall not (a) sell,
convey, assign or otherwise dispose of, or grant any option with respect to, any
of the Pledged Collateral except as permitted by the Credit Agreement or (b)
create or permit to exist any Lien upon or with respect to any of the Pledged
Collateral other than (i) Prior Liens, (ii) the Lien and security interest
granted to Collateral Agent pursuant to this Agreement, and (iii) Permitted
Liens.
Upon any sale or other disposition of any assets of Pledgor which is
in compliance with the Credit Agreement and the proceeds of which sale or other
disposition are used to make a mandatory prepayment of the Loans pursuant to
Section 3.02(A) of the Credit Agreement, such assets constituting Pledged
Collateral shall be released from the Lien of this Agreement in accordance with
Section 17 of this Agreement.
Section 9. Reasonable Care. Collateral Agent shall be deemed to have
exercised reasonable care in the custody and preservation of the Pledged
Collateral in its possession if such Pledged Collateral is accorded treatment
substantially equivalent to that which Collateral Agent, in its individual
capacity, accords its own property, it being understood that Collateral Agent
shall not have responsibility for taking any necessary steps to preserve rights
against any Person with respect to any Pledged Collateral.
Section 10. Remedies Upon Default; Obtaining the Pledged Collateral
Upon Event of Default. (a)If an Event of Default shall have occurred and be
continuing, and the Secured Obligations have been declared due and payable in
accordance with the Credit Agreement, then and in every such case, Collateral
Agent may:
(i) Personally, or by agents or attorneys, immediately take
possession of the Pledged Collateral or any part thereof, from Pledgor or
any other Person who then has possession of any part thereof with or
without notice or process of law, and for that purpose may enter upon
Pledgor's premises where any of the Pledged Collateral is located and
remove such Pledged Collateral and use in connection with such removal any
and all services, supplies, aids and other facilities of Pledgor.
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(ii) Instruct the obligor or obligors on any agreement, instrument
or other obligation (including, without limitation, the Receivables and
Contracts) constituting the Pledged Collateral to make any payment
required by the terms of such instrument or agreement directly to
Collateral Agent; provided, however, that in the event that any such
payments are made directly to Pledgor, prior to receipt by any such
obligor of such instruction, Pledgor shall segregate all amounts received
pursuant thereto in a separate account and pay the same as promptly as
practicable to Collateral Agent.
(iii) Sell, assign or otherwise liquidate, or direct Pledgor to sell,
assign or otherwise liquidate, any or all investments made in whole or in
part with the Pledged Collateral or any part thereof, and take possession
of the proceeds of any such sale, assignment or liquidation.
(iv) Take possession of the Pledged Collateral or any part thereof,
by directing Pledgor in writing to deliver the same to Collateral Agent at
any place or places so designated by Collateral Agent, in which event
Pledgor shall at its own expense: (A) forthwith cause the same to be moved
to the place or places designated by Collateral Agent and there delivered
to Collateral Agent; (B) store and keep any Pledged Collateral so
delivered to Collateral Agent at such place or places pending further
action by Collateral Agent; and (C) while the Pledged Collateral shall be
so stored and kept, provide such security and maintenance services as
shall be reasonably necessary to protect the same and to preserve and
maintain them in good condition. Pledgor's obligation to deliver the
Pledged Collateral is of the essence of this Agreement. Upon application
to a court of equity having jurisdiction, Collateral Agent shall be
entitled to a decree requiring specific performance by Pledgor of such
obligation.
(b) Remedies; Disposition of the Pledged Collateral.
(i) Upon the occurrence and during the continuance of an Event of
Default, Collateral Agent may from time to time exercise in respect of the
Pledged Collateral, in addition to other rights and remedies provided for
herein or otherwise available to it, all the rights and remedies of a
secured party on default under the UCC, and Collateral Agent may also in
its sole discretion, without notice except as specified below, sell the
Pledged Collateral or any part thereof in one or more parcels at public or
private sale, at any exchange, broker's board or at any of Collateral
Agent's offices or elsewhere, for cash, on credit or for future delivery,
and at
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such price or prices and upon such other terms as Collateral Agent may
deem commercially reasonable. Collateral Agent or any other Secured Party
or any of their respective Affiliates may be the purchaser of any or all
of the Pledged Collateral at any such sale and shall be entitled, for the
purpose of bidding and making settlement or payment of the purchase price
for all or any portion of the Pledged Collateral sold at such sale, to use
and apply any of the Secured Obligations owed to such Person as a credit
on account of the purchase price of any Pledged Collateral payable by such
Person at such sale. Each purchaser at any such sale shall acquire the
property sold absolutely free from any claim or right on the part of
Pledgor. Collateral Agent shall not be obligated to make any sale of
Pledged Collateral regardless of notice of sale having been given.
Collateral Agent may adjourn any public or private sale from time to time
by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned. Pledgor hereby waives, to the fullest extent permitted by law,
any claims against Collateral Agent arising by reason of the fact that the
price at which any Pledged Collateral may have been sold at such a private
sale was less than the price which might have been obtained at a public
sale, even if Collateral Agent accepts the first offer received and does
not offer such Pledged Collateral to more than one offeree.
(ii) Pledgor acknowledges and agrees that, to the extent notice of
sale shall be required by law, ten days' notice to Pledgor of the time and
place of any public sale or of the time after which any private sale or
other intended disposition is to take place shall be commercially
reasonable notification of such matters. No notification need be given to
Pledgor if it has signed, after the occurrence of an Event of Default, a
statement renouncing or modifying any right to notification of sale or
other intended disposition.
(c) Waiver of Notice and Claims. Pledgor hereby waives, to the
fullest extent permitted by applicable law, notice or judicial hearing in
connection with Collateral Agent's taking possession or Collateral Agent's
disposition of any of the Pledged Collateral, including, without limitation, any
and all prior notice and hearing for any prejudgment remedy or remedies and any
such right which Pledgor would otherwise have under law, and Pledgor hereby
further waives, to the fullest extent permitted by applicable law: (i) all
damages occasioned by such taking of possession; (ii) all other requirements as
to the time, place and terms of sale or other requirements with respect to the
enforcement
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of Collateral Agent's rights hereunder; and (iii) all rights of redemption,
appraisal, valuation, stay, extension or moratorium now or hereafter in force
under any applicable law. Collateral Agent shall not be liable for any incorrect
or improper payment made pursuant to this Section 10 in the absence of gross
negligence or willful misconduct. Any sale of, or the grant of options to
purchase, or any other realization upon, any Pledged Collateral shall operate to
divest all right, title, interest, claim and demand, either at law or in equity,
of Pledgor therein and thereto, and shall be a perpetual bar both at law and in
equity against Pledgor and against any and all Persons claiming or attempting to
claim the Pledged Collateral so sold, optioned or realized upon, or any part
thereof, from, through or under Pledgor.
(d) Certain Sales of Pledged Collateral. Pledgor recognizes that, by
reason of certain prohibitions contained in law, rules, regulations or orders of
any foreign Governmental Authority, Collateral Agent may be compelled, with
respect to any sale of all or any part of the Pledged Collateral, to limit
purchasers to those who meet the requirements of such foreign Governmental
Authority. Pledgor acknowledges that any such sales may be at prices and on
terms less favorable to Collateral Agent than those obtainable through a public
sale without such restrictions, and, notwithstanding such circumstances, agrees
that any such restricted sale shall be deemed to have been made in a
commercially reasonable manner.
Section 11. Application of Proceeds. The proceeds received by
Collateral Agent in respect of any sale of, collection from or other realization
upon all or any part of the Pledged Collateral pursuant to the exercise by
Collateral Agent of its remedies as a secured creditor as provided in Section 10
hereof shall be applied, together with any other sums then held by Collateral
Agent pursuant to this Agreement, promptly by Collateral Agent as follows:
First, to the payment of all costs and expenses, fees, commissions
and taxes of such sale, collection or other realization, including,
without limitation, reasonable out of pocket costs and expenses of
Collateral Agent and its agents and counsel, and all expenses, liabilities
and advances made or incurred by Collateral Agent in connection therewith;
Second, to the payment of all other costs and expenses of such sale,
collection or other realization, including, without limitation,
compensation to the Banks and their agents and counsel and all costs,
liabilities and advances made or incurred by the Banks in connection
therewith;
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Third, to the payment in full in cash of Secured Obligations
consisting of interest and all amounts other than principal under the
Credit Agreement at any time and from time to time owing by Pledgor under
or in connection with the Credit Agreement, ratably according to the
unpaid amounts thereof, in the manner and priority set forth in the Credit
Agreement, together with interest on each such amount in the manner and to
the extent set forth in the Credit Agreement from and after the date such
amount is due, owing or unpaid until paid in full;
Fourth, to the pro rata payment in full in cash of Secured
Obligations consisting of (i) principal at any time and from time to time
owing by Pledgor under or in connection with the Credit Agreement, ratably
according to the unpaid amounts thereof, in the manner and priority set
forth in the Credit Agreement and (ii) the amount of Pledgor's obligations
then due and payable under any Interest Rate Agreement, including any
early termination payments then due (exclusive of expenses or similar
liabilities to any Bank under the applicable Interest Rate Agreement(s)),
together with interest on each such amount in the manner and to the extent
set forth in the Credit Agreement from and after the date such amount is
due, owing or unpaid until paid in full; and
Fifth, the balance, if any, to the Person lawfully entitled thereto
(including Pledgor or its successors or assigns).
Section 12. Expenses. Pledgor will upon demand pay to Collateral
Agent the amount of any and all reasonable expenses, including the reasonable
fees and expenses of its counsel and the reasonable fees and expenses of any
experts and agents which Collateral Agent may incur in connection with (i) the
collection of the Secured Obligations, (ii) the enforcement and administration
of this Agreement, (iii) the custody or preservation of, or the sale of,
collection from, or other realization upon, any of the Pledged Collateral, (iv)
the exercise or enforcement of any of the rights of Collateral Agent or any
Secured Party hereunder or (v) the failure by Pledgor to perform or observe any
of the provisions hereof. All amounts payable by Pledgor under this Section 12
shall be due within ten Business Days after demand and shall be part of the
Secured Obligations. Pledgor's obligations under this Section 12 shall survive
the termination of this Agreement and the discharge of Pledgor's other
obligations hereunder.
Section 13. No Waiver; Cumulative Remedies. (a) No
failure on the part of Collateral Agent to exercise, no course of
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dealing with respect to, and no delay on the part of Collateral Agent in
exercising, any right, power or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any such right, power or
remedy hereunder preclude any other or further exercise thereof or the exercise
of any other right, power or remedy. The remedies herein provided are cumulative
and are not exclusive of any remedies provided by law.
(b) In the event Collateral Agent shall have instituted any
proceeding to enforce any right, power or remedy under this Agreement by
foreclosure, sale, entry or otherwise, and such proceeding shall have been
discontinued or abandoned for any reason or shall have been determined adversely
to Collateral Agent, then and in every such case, Pledgor, Collateral Agent and
each Secured Party shall be restored to their respective former positions and
rights hereunder with respect to the Pledged Collateral, and all rights,
remedies and powers of Collateral Agent and the Secured Parties shall continue
as if no such proceeding had been instituted.
Section 14. Collateral Agent. Collateral Agent has been appointed as
collateral agent pursuant to the Credit Agreement. The actions of Collateral
Agent hereunder are subject to the provisions of the Credit Agreement.
Collateral Agent shall have the right hereunder to make demands, to give
notices, to exercise or refrain from exercising any rights, and to take or
refrain from taking action (including, without limitation, the release or
substitution of Pledged Collateral), in accordance with this Agreement and the
Credit Agreement. Collateral Agent may resign and a successor Collateral Agent
may be appointed in the manner provided in the Credit Agreement. Upon the
acceptance of any appointment as Collateral Agent by a successor Collateral
Agent, that successor Collateral Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring
Collateral Agent under this Agreement, and the retiring Collateral Agent shall
thereupon be discharged from its duties and obligations under this Agreement.
After any retiring Collateral Agent's resignation, the provisions of this
Agreement shall inure to its benefit as to any actions taken or omitted to be
taken by it under this Agreement while it was Collateral Agent.
Section 15. Collateral Agent May Perform; Collateral Agent Appointed
Attorney-in-Fact. If Pledgor shall fail to do any act or thing that it has
covenanted to do hereunder or if any warranty on the part of Pledgor contained
herein shall be breached, Collateral Agent or any Secured Party may (but shall
not be obligated to) do the same or cause it to be done or remedy any such
breach, and may, following five Business Days' prior written notice
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to Pledgor of its intention to do so, expend funds for such purpose. Any and all
amounts so expended by Collateral Agent or such Secured Party shall be paid by
Pledgor within ten Business Days after demand therefor, with interest at the
highest rate then in effect under the Credit Agreement during the period from
and including the date on which such funds were so expended to the date of
repayment. Pledgor's obligations under this Section 15 shall survive the
termination of this Agreement and the discharge of Pledgor's other obligations
under this Agreement, the Credit Agreement, any Interest Rate Agreement and the
other Credit Documents. Pledgor hereby appoints Collateral Agent its
attorney-in-fact, with full authority in the place and stead of Pledgor and in
the name of Pledgor, or otherwise, from time to time in Collateral Agent's
reasonable discretion to take any action and to execute any instrument
consistent with the terms of this Agreement and the other Credit Documents which
Collateral Agent may deem reasonably necessary or advisable to accomplish the
purposes of this Agreement. The foregoing grant of authority is a power of
attorney coupled with an interest and such appointment shall be irrevocable for
the term of this Agreement. Pledgor hereby ratifies all that such attorney shall
lawfully do or cause to be done by virtue hereof.
Section 16. Modification in Writing. No amendment, modification,
supplement, termination or waiver of or to any provision of this Agreement, nor
consent to any departure by Pledgor therefrom, shall be effective unless the
same shall be made in accordance with the terms of the Credit Agreement and
unless in writing and signed by Collateral Agent. Any amendment, modification or
supplement of or to any provision of this Agreement, any waiver of any provision
of this Agreement and any consent to any departure by Pledgor from the terms of
any provision of this Agreement shall be effective only in the specific instance
and for the specific purpose for which made or given. Except where notice is
specifically required by this Agreement or any other Credit Document, no notice
to or demand on Pledgor in any case shall entitle Pledgor to any other or
further notice or demand in similar or other circumstances.
Section 17. Termination; Release. When all the Secured Obligations
have been paid in full and the Commitments of the Banks to make any Loan or to
issue any Letter of Credit under the Credit Agreement shall have expired or been
sooner terminated, this Agreement shall terminate. Upon termination of this
Agreement or any release of Pledged Collateral in accordance with the provisions
of the Credit Agreement, Collateral Agent shall, upon the request and at the
sole cost and expense of Pledgor, forthwith assign, transfer and deliver to
Pledgor, against receipt and without
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recourse to or warranty by Collateral Agent, such of the Pledged Collateral to
be released (in the case of a release) as may be in possession of Collateral
Agent and as shall not have been sold or otherwise applied pursuant to the terms
hereof, and, with respect to any other Pledged Collateral, proper instruments
(including UCC termination statements on Form UCC-3) acknowledging the
termination of this Agreement or the release of such Pledged Collateral, as the
case may be.
Section 18. Definitions. The following terms shall have
the following meanings. All such definitions shall be equally
applicable to the singular and plural forms of the terms defined.
"Contracts" shall mean all right, title and interest of Pledgor in,
to and under, or derived from, any and all sale, service, performance and
equipment lease contracts, agreements and grants (whether written or oral), and
any other contract (whether written or oral) between Pledgor and third parties.
"Documents" shall have the meaning assigned to that term
under the UCC.
"Equipment" shall mean "equipment", as such term is
defined in the UCC.
"Instrument" shall have the meaning assigned that term
under the UCC.
"Intangibles" shall mean "general intangibles", as such
term is defined in the UCC.
"Insurance Policies" shall mean all insurance policies held by
Pledgor or naming Pledgor as insured, additional insured or loss payee
(including, without limitation, casualty insurance, liability insurance,
property insurance and business interruption insurance) and all such insurance
policies entered into after the date hereof other than insurance policies (or
certificates of insurance evidencing such insurance policies) relating to health
and welfare insurance and life insurance policies in which Pledgor is not named
as beneficiary (i.e., insurance policies that are not "Key Man" insurance
policies).
"Inventory" shall mean, all "inventory", as such term is
defined in the UCC.
"Pension Plan Reversions" shall mean Pledgor's right to receive the
surplus funds, if any, which are payable to Pledgor following the termination of
any employee pension plan and the
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satisfaction of all liabilities of participants and beneficiaries under such
plan in accordance with applicable law.
"Proceeds" shall mean all "proceeds", as such term is defined in the
UCC or under other relevant law.
"Receivables" shall mean all of Pledgor's rights to payment for
goods sold or leased or services performed by Pledgor or any other party,
whether now in existence or arising from time to time hereafter, including any
"account", as such term is defined in the UCC, and all rights evidenced by an
account, contract, security agreement, chattel paper, or other evidence of
indebtedness or security together with (i) all security pledged, assigned,
hypothecated or granted to or held by Pledgor to secure the foregoing, (ii)
general intangibles arising out of Pledgor's rights in any goods, the sale of
which gave rise thereto, (iii) all guarantees, endorsements and indemnifications
on, or of, any of the foregoing, (iv) all powers of attorney for the execution
of any evidence of indebtedness or security or other writing in connection
therewith, and (v) all evidences of the filing of financing statements and other
statements and the registration of other instruments in connection therewith and
amendments thereto, notices to other creditors or secured parties, and
certificates from filing or other registration officers.
Section 19. Notices. Unless otherwise provided herein or in the
Credit Agreement, any notice or other communication herein required or permitted
to be given shall be given in the manner set forth in the Credit Agreement, as
to either party, addressed to it at the address set forth in the Credit
Agreement or at such other address as shall be designated by such party in a
written notice to the other party complying as to delivery with the terms of
this Section 19; provided that notices to Collateral Agent shall not be
effective until received by Collateral Agent.
Section 20. Continuing Security Interest; Assignment. This Agreement
shall create a continuing security interest in the Pledged Collateral and shall
(i) be binding upon Pledgor, its successors and assigns and (ii) inure, together
with the rights and remedies of Collateral Agent hereunder, to the benefit of
Collateral Agent and the other Secured Parties and each of their respective
successors, transferees and assigns; no other Persons (including, without
limitation, any other creditor of Pledgor) shall have any interest herein or any
right or benefit with respect hereto. Without limiting the generality of the
foregoing clause (ii), any Bank may assign or otherwise transfer any
indebtedness held by it secured by this Agreement to any other Person, and such
other Person shall thereupon become vested with
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<PAGE>
-22-
all the benefits in respect thereof granted to such Bank, herein or otherwise,
subject however, to the provisions of the Credit Agreement and any applicable
Interest Rate Agreement.
Section 21. GOVERNING LAW; TERMS. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE
TO CONTRACTS MADE AND TO BE PERFORMED WHOLLY THEREIN, EXCEPT TO THE EXTENT THAT
THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES
HEREUNDER, IN RESPECT OF ANY PARTICULAR PROPERTY ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK.
Section 22.CONSENT TO JURISDICTION AND SERVICE OF PROCESS. (a) Any
legal action or proceeding with respect to this Agreement may be brought in the
courts of the State of New York or of the United States for the Southern
District of New York, and, by execution and delivery of this Agreement, Pledgor
hereby irrevocably accepts for itself and in respect of its property, generally
and unconditionally, the non-exclusive jurisdiction of the aforesaid courts.
Pledgor further irrevocably consents to the service of process out of any of the
aforementioned courts in any such action or proceeding by the mailing of copies
thereof by registered or certified mail, postage prepaid, to Pledgor at its
address for notices pursuant to the Credit Agreement, such service to become
effective 30 days after such mailing. Pledgor hereby irrevocably appoints CT
Corporation System having an address at 1633 Broadway, New York, New York 10019
and such other persons as may hereafter be selected by Borrower irrevocably
agreeing in writing to serve as its agent for service of process in respect of
any such action or proceeding. Nothing herein shall affect the right of
Collateral Agent to serve process in any other manner permitted by law or to
commence legal proceedings or otherwise proceed against Pledgor in any other
jurisdiction.
(b) Pledgor hereby irrevocably waives any objection which it may now
or hereafter have to the laying of venue of any of the aforesaid actions or
proceedings arising out of or in connection with this Agreement brought in the
courts referred to in clause (a) above and hereby further irrevocably waives and
agrees not to plead or claim in any such court that any such action or
proceeding brought in any such court has been brought in an inconvenient forum.
Section 23. Severability of Provisions. Any provision
of this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the
extent of such prohibition or unenforceability without invalidating
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<PAGE>
-23-
the remaining provisions hereof or affecting the validity or enforceability of
such provision in any other jurisdiction.
Section 24. Execution in Counterparts. This Agreement and any
amendments, waivers, consents or supplements hereto may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed to be an original,
but all such counterparts together shall constitute one and the same agreement.
Section 25. Headings. The Section headings used in this
Agreement are for convenience of reference only and shall not
affect the construction of this Agreement.
Section 26. Obligations Absolute. All obligations of
Pledgor hereunder shall be absolute and unconditional irrespective
of:
(i) any bankruptcy, insolvency, reorganization,
arrangement, readjustment, composition, liquidation or the
like of either of Pledgor or any other Credit Party;
(ii) any lack of validity or enforceability of the Credit Agreement,
any Interest Rate Agreement, any Letter of Credit or any other Credit
Document, or any other agreement or instrument relating thereto;
(iii) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Secured Obligations, or any other
amendment or waiver of or any consent to any departure from the Credit
Agreement, any Interest Rate Agreement, any Letter of Credit or any other
Credit Document, or any other agreement or instrument relating thereto;
(iv) any exchange, release or non-perfection of any other
collateral, or any release or amendment or waiver of or consent to any
departure from any guarantee, for all or any of the Secured Obligations;
(v) any exercise or non-exercise, or any waiver of any right,
remedy, power or privilege under or in respect of this Agreement, any
Interest Rate Agreement or any other Credit Document except as
specifically set forth in a waiver granted pursuant to the provisions of
Section 16 hereof; or
(vi) any other circumstance or happening whatsoever that
is similar to any of the foregoing.
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<PAGE>
-24-
Section 27. Collateral Agent's Right to Sever Indebtedness. (a)
Pledgor acknowledges that (i) the Pledged Collateral does not constitute the
sole source of security for the payment and performance of the Secured
Obligations and that the Secured Obligations are also secured by other types of
property of Pledgor and its Affiliates in other jurisdictions (all such
property, collectively, the "Collateral"), (ii) the number of such jurisdictions
and the nature of the transaction of which this instrument is a part are such
that it would have been impracticable for the parties to allocate to each item
of Collateral a specific loan amount and to execute in respect of such item a
separate credit agreement, and (iii) Pledgor intends that Collateral Agent have
the same rights with respect to the Pledged Collateral, in any judicial
proceeding relating to the exercise of any right or remedy hereunder or
otherwise, that Collateral Agent would have had if each item of Collateral had
been pledged or encumbered pursuant to a separate credit agreement and security
instrument. In furtherance of such intent, Pledgor agrees to the greatest extent
permitted by law that Collateral Agent may at any time by notice (an "Allocation
Notice") to Pledgor allocate a portion of the Secured Obligations (the
"Allocated Indebtedness") to all or a specified portion of the Pledged
Collateral and sever from the remaining Secured Obligations the Allocated
Indebtedness. From and after the giving of an Allocation Notice with respect to
any of the Pledged Collateral, the Secured Obligations hereunder shall be
limited to the extent set forth in the Allocation Notice and (as so limited)
shall, for all purposes, be construed as a separate credit obligation of Pledgor
unrelated to the other transactions contemplated by the Credit Agreement, any
Interest Rate Agreement, any other Credit Document or any document related to
any thereof. To the extent that the proceeds of any judicial proceeding relating
to the exercise of any right or remedy hereunder of the Pledged Collateral shall
exceed the Allocated Indebtedness, such proceeds shall belong to Pledgor and
shall not be available hereunder to satisfy any Secured Obligations of Pledgor
other than the Allocated Indebtedness. In any action or proceeding to exercise
any right or remedy under this Agreement which is commenced after the giving by
Collateral Agent of an Allocation Notice, the Allocation Notice shall be
conclusive proof of the limits of the Secured Obligations hereby secured, and
Pledgor may introduce, by way of defense or counterclaim, evidence thereof in
any such action or proceeding. Notwithstanding any provision of this Section 27,
the proceeds received by Collateral Agent pursuant to this Agreement shall be
applied by Collateral Agent in accordance with the provisions of Section 11
hereof.
(b) Pledgor hereby waives to the greatest extent
permitted under law the right to a discharge of any of the Secured
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<PAGE>
-25-
Obligations under any statute or rule of law now or hereafter in effect which
provides that the exercise of any particular right or remedy as provided for
herein (by judicial proceedings or otherwise) constitutes the exclusive means
for satisfaction of the Secured Obligations or which makes unavailable any
further judgment or any other right or remedy provided for herein because
Collateral Agent elected to proceed with the exercise of such initial right or
remedy or because of any failure by Collateral Agent to comply with laws that
prescribe conditions to the entitlement to such subsequent judgment or the
availability of such subsequent right or remedy. In the event that,
notwithstanding the foregoing waiver, any court shall for any reason hold that
such subsequent judgment or action is not available to Collateral Agent, Pledgor
shall not (i) introduce in any other jurisdiction any judgment so holding as a
defense to enforcement against Pledgor of any remedy in the Credit Agreement,
any Interest Rate Agreement or any other Credit Document or (ii) seek to have
such judgment recognized or entered in any other jurisdiction, and any such
judgment shall in all events be limited in application only to the state or
jurisdiction where rendered and only with respect to the collateral referred to
in such judgment.
(c) In the event any instrument in addition to the Allocation Notice
is necessary to effectuate the provisions of this Section 27, including, without
limitation, any amendment to this Agreement, any substitute promissory note or
affidavit or certificate of any kind, Collateral Agent may execute and deliver
such instrument as the attorney-in-fact of Pledgor. Such power of attorney is
coupled with an interest and is irrevocable.
(d) Notwithstanding anything set forth herein to the contrary, the
provisions of this Section 27 shall be effective only to the maximum extent
permitted by law.
Section 28. Future Advances. This Agreement shall
secure the payment of any amounts advanced from time to time
pursuant to the Credit Agreement.
Section 29. Borrower Intellectual Property Security Agreement. To
the extent that the terms and provisions of this Agreement conflict with the
terms and provisions of the Borrower Intellectual Property Security Agreement
with respect to any Pledged Collateral (as such term is defined in the Borrower
Intellectual Property Security Agreement), the terms and provisions of the
Borrower Intellectual Property Security Agreement shall govern.
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<PAGE>
IN WITNESS WHEREOF, Pledgor and Collateral Agent have caused this
Agreement to be duly executed and delivered by their duly authorized officers as
of the date first above written.
CARSON PRODUCTS COMPANY,
as Pledgor
By:
Name:
Title:
BANQUE INDOSUEZ, NEW YORK BRANCH,
as Collateral Agent
By:
Name:
Title:
By:
Name:
Title:
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<PAGE>
Schedule A
PRIOR LIENS
Secured Party Location Date Number Comment
NONE
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<PAGE>
Schedule B
LOCATION OF INVENTORY
64 Ross Road
Savannah, Georgia 31405
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<PAGE>
Schedule C
LOCATION OF EQUIPMENT
64 Ross Road
Savannah, Georgia 31405
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<PAGE>
Exhibit J to the
Credit Agreement
FORM OF NOTICE OF BORROWING
Pursuant to that certain Credit Agreement dated as of October 18,
1996 (as amended, amended and restated, supplemented or otherwise modified from
time to time in accordance with the terms thereof in effect) (the "Credit
Agreement") among Carson Products Company, the Banks named therein, and Banque
Indosuez, New York Branch, as Agent ("Agent"), this represents the Borrower's
request to borrow on , 19 from the Banks on a pro rata basis $ as [Base
Rate/Reserve Adjusted Eurodollar [A Term/B Term/Revolving Loans]]. [The Interest
Period for such Reserve Adjusted Eurodollar Loan is requested to be a period.]
The proceeds of such Loans are to be deposited in the Borrower's account with
Banque Indosuez, New York Branch, as Agent.
The undersigned officer on behalf of the Borrower, to the best of
his knowledge, after due inquiry, and the Borrower certify that (i) the
representations and warranties contained in the Credit Agreement and the other
Credit Documents are true, correct and complete in all material respects on and
as of the date hereof to the same extent as though made on and as of the date
hereof, except to the extent that the same expressly are made only as of a
different date; and (ii) no Default or Event of Default has occurred and is
continuing under the Credit Agreement or will result from the proposed
borrowing. Capitalized terms used herein without definition shall have the
meanings set forth in the Credit Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
-2-
IN WITNESS WHEREOF, the undersigned has executed this Notice of
Borrowing as of the date below written.
CARSON PRODUCTS COMPANY
By:
Name:
Title:
DATED: __________________
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<PAGE>
Exhibit K to the
Credit Agreement
NOTICE OF CONVERSION/CONTINUATION
Pursuant to that certain Credit Agreement dated as of
October 18, 1996 (as
amended, amended and restated, supplemented or otherwise modified from time to
time in accordance with the terms thereof in effect) (the "Credit Agreement")
among Carson Products Company (the "Borrower"), the Banks named therein, and
Banque Indosuez, New York Branch, as Agent, this represents [the Borrower's
request [A: to convert $ in principal amount of presently outstanding [Base
Rate/Reserve Adjusted Eurodollar [A Term/B Term/Revolving]] Loans to [Base
Rate/Reserve Adjusted Eurodollar] Loans on , 19 .] [B: to continue as Reserve
Adjusted Eurodollar [A Term/B Term/Revolving] Loans $ in principal amount of
presently outstanding Reserve Adjusted Eurodollar Loans.] [The Interest Period
for such Reserve Adjusted Eurodollar Loans commencing on such Interest Payment
Date is requested to be a period.]
The undersigned officer, to the best of his knowledge, after due
inquiry, and the Borrower certify that no Default or Event of Default has
occurred and is continuing under the Credit Agreement. Capitalized terms used
herein without definition shall have the meanings set forth in the Credit
Agreement.
DATED: __________________
CARSON PRODUCTS COMPANY
By:
Name:
Title:
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<PAGE>
Exhibit L to the
Credit Agreement
FORM OF OFFICER'S SOLVENCY CERTIFICATE
, 19
Banque Indosuez, New York Branch
1211 Avenue of the Americas, 7th Floor
New York, New York 10036
and
The Banks Party to the Credit
Agreement Referenced Below
Ladies and Gentlemen:
Pursuant to Section 4.01(H) of the Credit Agreement dated as of
October 18, 1996 (the "Credit Agreement") among Carson Products Company, a
Delaware corporation (the "Borrower"), the banks listed therein, and Banque
Indosuez, New York Branch, as Agent (the "Agent"), I, , hereby certify on behalf
of the Borrower as follows (unless otherwise defined herein, capitalized terms
used herein have the meanings assigned to them in the Credit Agreement):
1. I have reviewed and participated in the preparation of the
financial projections prepared by management of the Borrower and delivered to
the Agent (the "Projected Financial Statements"). All assumptions with respect
to the Projected Financial Statements are set forth therein and the Projected
Financial Statements provide, in my judgment, a reasonable, good faith
estimation of future performance of the Borrower. The assumptions on which the
Projected Financial Statements are based are reasonable and are based on the
best information available, although any assumption and any forecast by
necessity involve uncertainty and approximation.
2. For purposes of delivering this certificate, I
have:
(a) consulted with other officers of the Borrower responsible for
financial and accounting functions concerning contingent liabilities other than
those related to litigation; and
(b) made such other investigation and inquiries as I
have deemed appropriate.
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<PAGE>
-2-
3. Based upon the foregoing (including the Projected Financial
Statements), I have concluded that, as of the date hereof, after giving effect
to the Refinancing and the incurrence of the Loans by the Borrower in an amount
equal to the sum of the Total Term Loan Commitments and Total Revolving Loan
Commitments and the grant of the security interests in the Collateral (the
"Transaction"):
(a) each of the Fair Value and Present Fair Saleable Value of the
assets of the Borrower exceeds its stated liabilities and identified contingent
liabilities;
(b) each of the Fair Value and Present Fair Saleable Value of the
assets of the Borrower exceeds the probable liability on its debts (including
identified contingent liabilities) as such debts become absolute and mature;
(c) the Borrower will be able to pay its debts as they
mature; and
(d) the Borrower will not have unreasonably small capital for the
business in which it is engaged and is proposed to be engaged following the
consummation of the Refinancing.
4. For purposes of this letter, the terms below have been agreed
upon by you to have the following definitions:
(a) "Fair Value"
The amount at which an entity's aggregate assets would change hands
between a willing buyer and a willing seller, each having reasonable knowledge
of the relevant facts, with neither being under any compulsion to act, with
equity to both.
(b) "Present Fair Saleable Value"
The amount that may be realized if an entity's aggregate assets are
sold with reasonable promptness in an arm's- length transaction under present
conditions for the sale of comparable business enterprises.
(c) "will be able to pay its debts as they mature"
That, as of the date hereof, both immediately before and after
giving effect to the Refinancing, the Fair Value and Present Fair Saleable Value
of such entity's aggregate assets would exceed its stated liabilities and
identified contingent liabilities, the Fair Value and Present Fair Saleable
Value of
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<PAGE>
-3-
its current assets would exceed its current stated liabilities and current
identified contingent liabilities, and such entity would have a positive cash
flow for the period from the date hereof to , 20 , including (after giving
effect to) the payment of installments due under loans made pursuant to the
indebtedness incurred in the Refinancing as such installments are scheduled at
the close of the Refinancing, and including funds available under the entities'
revolving credit facilities.
5. To the best of my knowledge, no Credit Party is entering into the
arrangements contemplated by the Credit Agreement or the other Credit Documents
or intends to make any transfer or incur any obligations thereunder, with actual
intent to hinder, delay or defraud either present or future creditors.
6. To the best of my knowledge, no Credit Party intends to incur, or
believes, that such Credit Party will incur, debts beyond such Credit Party's
ability to pay as they become due.
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<PAGE>
-4-
This Certificate is being delivered by the undersigned only in his
capacity as an officer of the Borrower and not individually. The undersigned
shall have no liability in connection herewith so long as this Certificate is
true and correct to the best of his knowledge, after due inquiry, as of the date
hereof.
CARSON PRODUCTS COMPANY
By:
Name:
Title:
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<PAGE>
Exhibit M to the
Credit Agreement
FORM OF CARSON PRODUCTS COMPANY
BORROWING BASE CERTIFICATE
Computation of Availability as of [date]
ACCOUNTS RECEIVABLE
Gross accounts receivable per aging
(as of last month-end)
Credits, returns, discounts, claims, credits, charges, rebates, offsets and
allowances not yet booked Other adjustments
Sub-total
Ineligibles and Deductions:
Borrower does not have legal and valid title Unenforceable obligations of
account debtor Intercompany Invoices 61 day or less invoices past due over 91
days $ value of all invoices providing for payment more than
60 days from invoice, other than those which are not past due over 30 days
and which, in the aggregate, do not exceed 7 1/2% of all Eligible Accounts
of Borrower and its Subsidiaries then outstanding
Accounts from same account debtor exceeding 20% in face value of all Accounts of
Borrower and its Subsidiaries then outstanding
Accounts payable to account debtors Accounts from account debtors in bankruptcy
No first priority lien Contingent sales Accounts from account debtors for whom
more than 50% of accounts are ineligible
Foreign Government invoices
U.S. Government invoices, other than those which
(i) together with all other U.S. Government invoices,
do not exceed 7 1/2% of all other Eligible Accounts of
the Borrower or its Subsidiaries then outstanding or
(ii) are assigned to the Agent
Foreign invoices, unless on letter of credit, guaranty or acceptance terms and
not exceeding $500,000 at any time outstanding
Insecure Accounts
Accounts for undelivered goods
Non-complying Accounts
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<PAGE>
-2-
Other reserves and deductions
Total Ineligibles/Deductions
Eligible Accounts Receivable
Accounts Receivable Advance Rate 80%
Available Accounts Receivable
INVENTORY
Finished Goods (as of last month-end)
Work-in-Process (as of last month-end)
Raw Materials (as of last month-end)
Total Inventory before Ineligibles
and Deductions
Ineligibles and Deductions:
Returns and Rejections
Obsolete and slow moving goods
Reserve for special order goods and market
value declines
Other reserves and deductions
Total Ineligibles/Deductions
Eligible Inventory
Inventory Advance Rate 50%
Available Inventory
Borrowing Base
(Available Inventory
plus Available Accounts Receivable)
Total Availability
Less: Outstanding Revolving Loans
NET AVAILABILITY
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<PAGE>
Exhibit N to the
Credit Agreement
FORM OF OFFICERS' CERTIFICATE
REGARDING ENVIRONMENTAL REVIEW
This Certificate is delivered pursuant to Section 4.01(B) of the
Credit Agreement dated as of October 18, 1996 (the "Credit Agreement") among
Carson Products Company, a Delaware corporation (the "Borrower"), the lenders
listed therein and Banque Indosuez, New York Branch, as Agent (the "Agent").
Unless otherwise defined herein, capitalized terms used herein have the meanings
assigned to them in the Credit Agreement.
We, the undersigned, hereby certify that
is the of the Borrower, and
is the of the Borrower, and that to the
best of our knowledge:
1. After giving effect to the Refinancing, the Borrower
is in compliance with all Environmental Laws to the extent
contemplated by Sections 5.22 and 5.23 of the Credit Agreement; and
2. All information including any and all memoranda and reports
furnished to the Agent through its attorneys Cahill Gordon & Reindel, by or on
behalf of the Borrower is true and accurate in all material respects nor did the
Borrower withhold any material information from the Agent.
We have read all relevant environmental materials including the
information referenced above and have read the Credit Agreement and made all
other investigations and examinations that we deem necessary to make the
foregoing certifications.
This Certificate is being delivered by the undersigned only in their
capacities as officers of the Borrower and the undersigned shall have no
personal liability in connection herewith, it being understood that none of the
undersigned has any greater knowledge with respect to the statements made herein
in his personal capacity than in his capacity as an officer.
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<PAGE>
-2-
IN WITNESS WHEREOF, each of the undersigned has caused this
Certificate to be duly executed and delivered on this 18th day of October, 1996.
Name:
Title: of
Carson Products Company
Name:
Title: of
Carson Products Company
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<PAGE>
Exhibit O to the
Credit Agreement
[FORM OF LANDLORD LIEN ASSURANCE AGREEMENT]
[TENANT'S LETTERHEAD]
[Landlord]
Re: Lease, dated ______________ [and amended
by a certain amendment thereto dated __________]
([collectively,] the "Lease"), by and between
_______________ and ____________ ("Tenant"), relating
to premises located in (the "Premises")*
Ladies and Gentlemen:
Tenant is entering into a certain credit agreement (the "Credit
Agreement") with certain banks (the "Banks"), pursuant to which the Banks have
agreed to make certain loans to Tenant. As security for repayment of the loans,
the Banks have requested that Tenant grant to Banque Indosuez, New York Branch,
in its capacities as agent and collateral agent for the Banks ("Collateral
Agent"), a first priority lien on Tenant's personal property, inventory, trade
fixtures and equipment located at the Premises (collectively, the "Collateral").
Your signature below will acknowledge (i) the first priority
security interest of Collateral Agent in the Collateral and the Collateral
Agent's right to possess the Collateral, file Uniform Commercial Code financing
statements against the Collateral and remove the Collateral from the Premises
upon the occurrence of an event of default under the Credit Agreement or related
documents and (ii) that you waive any claim on or interest in the Collateral
(including, without limitation, any right to include the Collateral in any
secured financing obtained by you). In addition, your signature will acknowledge
that (i) you are current record owner of the Premises and the current owner of
the lessor's interest under the Lease, (ii) the Lease has not been amended,
supplemented or modified in any respect, (iii) the Lease is in full force and
effect, (iv) you have no notice or knowledge of any default or any facts or
circumstances which, with notice or lapse of time or both,
- --------
* Delete bracketed language if the Lease has not been amended.
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<PAGE>
-2-
would constitute a default under the Lease and (v) Tenant has paid all rental
obligations owed under the Lease to date.
You hereby further agree that (i) you will simultaneously deliver to
Collateral Agent at Banque Indosuez, New York Branch, 1211 Avenue of the
Americas, New York, New York 10036, Attn: R. Haynes Chidsey (or such other
address as Collateral Agent may designate to you in writing) in the manner
provided for in the Lease for the giving of notices, a copy of any and all
notices given by you to Tenant, (ii) upon the occurrence of any default under
the Lease, Collateral Agent shall have the right, but not the obligation, to
cure such default within the applicable cure period in respect of such default
that is given Tenant in the Lease for remedying any such default or causing the
same to be remedied and (iii) in the event of performance by Collateral Agent
within the period provided for in the foregoing clause (ii), you shall accept
such performance by Collateral Agent as though the same had been done or
performed by Tenant within the period allowed Tenant by the terms of the Lease.
It would be most appreciated if you would execute the acknowledgment
below and return this letter to us as soon as possible so as to facilitate the
closing of the proposed transaction. Please call me with any questions you may
have.
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<PAGE>
-3-
We appreciate your cooperation in this matter.
Sincerely,
LANDLORD ACKNOWLEDGMENT
As of this ___ day of
, the undersigned
hereby acknowledges and agrees
to the contents of this letter
and to the matters set forth herein.
By:____________________________
Name:
Title:
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<PAGE>
Exhibit Q to the
Credit Agreement
FORM OF NON-U.S. LENDER CERTIFICATE
Reference is hereby made to the Credit Agreement (the "Credit
Agreement"), dated as of October 18, 1996, among Carson Products Company, a
Delaware corporation ("Borrower"), Banque Indosuez, New York Branch, as Agent,
and the lenders listed therein. Pursuant to the provisions of Section 3.04(c) of
the Credit Agreement, the undersigned hereby certifies (i) that it is not a bank
described in Section 881(c)(3)(A) of the Internal Revenue Code of 1986, as
amended (the "Code"); (ii) that it is not a 10-percent shareholder, as described
in Section 881(c)(3)(B) of the Code, of the Borrower; (iii) that it is not a
controlled foreign corporation described in Section 881(c)(3)(C) of the Code;
and (iv) that it is entitled to receive payments of interest without deduction
or withholding of any United States federal income tax pursuant to Section
881(c)(1) of the Code.
[NAME OF FOREIGN BANK]
By:
Name:
Title:
Date:
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<PAGE>
Exhibit R to the
Credit Agreement
FORM OF SUBSIDIARY GUARANTEE
GUARANTEE, dated as of , 199_ ("Guarantee"), by [NAME OF
SUBSIDIARY], a [ ] corporation ("Guarantor"), in favor and for the benefit of
the Banks under the Credit Agreement (each as hereinafter defined).
R E C I T A L S:
A. Pursuant to a certain credit agreement dated as of October 18,
1996 (as amended, amended and restated, supplemented or otherwise modified from
time to time in accordance with the terms thereof in effect, the "Credit
Agreement"; capitalized terms not defined herein have the meanings ascribed to
them in the Credit Agreement) by and among Carson Products Company (the
"Borrower"), the lending institutions identified therein (collectively, the
"Banks") and Banque Indosuez, New York Branch, as agent (the "Agent"), the Banks
have agreed to make certain Loans to the Borrower and to issue Letters of Credit
for the accounts of the Borrower.
B. It is a requirement under Section 6.16 of the Credit Agreement
that the Guarantor shall execute and deliver this Guarantee and that this
Guarantee shall be in full force and effect.
C. This Guarantee is given by the Guarantor in favor of
the Banks to guarantee all of the Obligations of the Borrower in
accordance with the terms of the Credit Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Guarantor hereby agrees as follows:
1. Guarantee. (a) To induce the Banks to make the Loans and to issue
the Letters of Credit upon the terms and conditions set forth in the Credit
Agreement, and in consideration thereof, the Guarantor hereby unconditionally
and irrevocably (i) guarantees to the Banks and their respective successors,
transferees and assigns, the prompt and complete payment and performance when
due (whether at the stated maturity, by acceleration or otherwise) and at all
times thereafter of the Obligations of the Borrower (including amounts which
would become due but for the operation of the automatic stay under Section
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<PAGE>
-2-
362(a) of the Bankruptcy Code, or similar provisions under the bankruptcy laws
of foreign jurisdictions); and (ii) agrees to pay any and all reasonable
expenses (including reasonable attorneys' fees and disbursements) which may be
paid or incurred by the Banks, the Agent or Collateral Agent in enforcing any
rights with respect to, or collecting, any or all of the Obligations and/or
enforcing any rights with respect to, or collecting against, the Guarantor under
this Guarantee provided, that this Guarantee is limited as set forth in Section
5 hereof (as so limited, collectively, the "Guaranteed Obligations").
(b) The Guarantor agrees that this Guarantee constitutes a guarantee
of payment when due and not of collection and waives any right to require that
any resort be had by the Collateral Agent, the Agent or any Bank to any of the
security held for payment of any of the Guaranteed Obligations or to any balance
of any deposit account or credit on the books of the Agent, the Collateral Agent
or any Bank in favor of the Borrower or any other Person.
(c) No payment or payments made by the Borrower or any other Person
or received or collected by the Banks (or the Collateral Agent or Agent on
behalf of the Banks) from any other Person by virtue of any action or proceeding
or any set-off or appropriation or application at any time or from time to time
in reduction of or in payment of the Guaranteed Obligations shall be deemed to
modify, reduce, release or otherwise affect the liability of the Guarantor
hereunder which shall, notwithstanding any such payment or payments other than
payments made to the Banks (or the Collateral Agent or Agent on behalf of the
Banks) by the Guarantor or payments received or collected by the Banks (or the
Collateral Agent or Agent on behalf of the Banks) from the Guarantor, remain
liable for the Guaranteed Obligations until the Guaranteed Obligations are
indefeasibly paid in full in Cash or Cash Equivalents, subject to the provisions
of Section 1(d) hereof.
(d) The Guarantor understands, agrees and confirms that this is a
guarantee of payment when due and not of collection and that each Bank may, from
time to time, enforce this Guarantee up to the full amount of the Guaranteed
Obligations owed to such Bank without proceeding against any other Credit Party,
against any security for the Guaranteed Obligations, against any other guarantor
or under any other guarantee covering the Guaranteed Obligations.
2. Waiver by Guarantor. Until the payment and
satisfaction in full of all Guaranteed Obligations and the
expiration or termination of the Commitments and all Letters of
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-3-
Credit Usage of the Banks under the Credit Agreement, the Guarantor hereby
waives absolutely and irrevocably any claim which it may have against the
Borrower or any of their respective Affiliates by reason of any payment to the
Agent, Collateral Agent or any Bank, or to any other Person pursuant to or in
respect of this Guarantee, including any claims by way of subrogation,
contribution, reimbursement, indemnity or otherwise.
3. Consent by Guarantor. The Guarantor hereby consents and agrees
that, without the necessity of any reservation of rights against the Guarantor
and without notice to or further assent by the Guarantor, any demand for payment
of any of the Guaranteed Obligations made by the Agent, the Collateral Agent or
any Bank may be rescinded by the Banks (or the Agent or Collateral Agent on
behalf of the Banks) and any of the Guaranteed Obligations continued, and the
Guaranteed Obligations, or the liability of any other party upon or for any part
thereof, or any collateral security or guarantee therefor or right of offset
with respect thereto, may, from time to time, in whole or in part, be renewed,
extended, amended, modified, accelerated, compromised, waived, surrendered or
released by the Banks (or the Agent or the Collateral Agent on behalf of the
Banks); and the Credit Agreement or any other Credit Document, or other
guarantee or documents in connection therewith, or any of them, may be amended,
modified, supplemented or terminated, in whole or in part, as the Banks (or the
Agent or Collateral Agent on behalf of the Banks) may deem advisable from time
to time; and any Guarantee (subject to Section 11.04 of the Credit Agreement) or
right of offset or any Collateral may be sold, exchanged, waived, surrendered or
released, all without the necessity of any reservation of rights against the
Guarantor and without notice to or further assent by the Guarantor, which will
remain bound hereunder, notwithstanding any such renewal, extension,
modification, acceleration, compromise, amendment, supplement, termination,
sale, exchange, waiver, surrender or release. Neither the Banks nor the Agent or
the Collateral Agent shall have any obligation to protect, secure, perfect or
insure any Collateral or property at any time held as security for the
Guaranteed Obligations (other than the exercise of reasonable care in the
custody and preservation of collateral as provided in any of the Credit
Documents). When making any demand hereunder against the Guarantor, the Agent,
the Collateral Agent or the Banks may, but shall be under no obligation to, make
a similar demand on any other Credit Party or any such other guarantor, and any
failure by the Agent, the Collateral Agent or the Banks to make any such demand
or to collect any payments from such other Credit Party or any such other
guarantor or any release of such other Credit Party or any such other guarantor
or of the Guarantor's obligations or liabilities hereunder shall not impair
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<PAGE>
-4-
or affect the rights and remedies, express or implied, or as a matter of law, of
the Banks against the Guarantor hereunder. For the purposes hereof "demand"
shall include the commencement and continuance of any legal proceedings.
4. Waivers; Successors and Assigns. The Guarantor waives any and all
notice of the creation, renewal, extension or accrual of any of the Guaranteed
Obligations and notice of or proof of reliance by the Banks upon this Guarantee
or acceptance of this Guarantee, and the Guaranteed Obligations shall
conclusively be deemed to have been created, contracted or incurred in reliance
upon this Guarantee, and all dealings between the Guarantor and any other Credit
Party, on the one hand, and the Banks, on the other hand, shall likewise be
conclusively presumed to have been had or consummated in reliance upon this
Guarantee. The Guarantor waives diligence, presentment, protest, demand for
payment and notice of default or non-payment to or upon any Credit Party or the
Guarantor with respect to the Guaranteed Obligations. This Guarantee shall be
construed as a continuing, absolute and unconditional guarantee of payment
without regard to the validity, regularity or enforceability of the Credit
Agreement, the other Credit Documents, any of the Guaranteed Obligations or any
guarantee therefor or right of offset with respect thereto at any time or from
time to time held by the Banks and without regard to any defense (other than the
defense of payment), set-off or counterclaim which may at any time be available
to or be asserted by any Credit Party against the Banks, or by any other
circumstance whatsoever (with or without notice to or knowledge of the
Guarantor) which constitutes, or might be construed to constitute, an equitable
or legal discharge of the Guaranteed Obligations, or of the Guarantor under this
Guarantee, in bankruptcy or in any other instance, and the obligations and
liabilities of the Guarantor hereunder shall not be conditioned or contingent
upon the pursuit by the Banks or any other Person at any time of any right or
remedy against any Credit Party or against any other Person which may be or
become liable in respect of all or any part of the Guaranteed Obligations or
against any collateral security or guarantee therefor or right of offset with
respect thereto. This Guarantee shall remain in full force and effect and be
binding in accordance with and to the extent of its terms upon the Guarantor and
the successors and assigns thereof, and shall inure to the benefit of the Banks,
and their respective successors, transferees and assigns (including each holder
from time to time of Guaranteed Obligations), until all of the Guaranteed
Obligations and the obligations of the Guarantor under this Guarantee shall have
been satisfied by indefeasible payment in full in cash or cash equivalents,
notwithstanding that from time to time during the term of the Credit Agreement
any
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<PAGE>
-5-
Credit Party may be released from all of its Guaranteed Obligations thereunder.
5. Limited Liability. Notwithstanding any contrary provision of this
Agreement or the Credit Agreement, it is hereby expressly agreed that no
partner, officer, employee, servant, controlling Person, executive, director,
agent, authorized representative of affiliate (herein referred to as
"operatives") of any of the Guarantor, DNL Group, L.L.C. or DNL Partners,
Limited Partnership (collectively, the "Guarantor and Equity Entities") shall be
personally liable for payments due under this Agreement for the performance of
any obligation hereunder. Nothing contained in this Section shall prevent the
Banks, or the Agent or the Collateral Agent on behalf of the Banks, from
exercising any rights or remedies against the Borrower or its Subsidiaries, the
Mortgaged Real Property or the Pledged Collateral pursuant to the Credit
Agreement, the Security Documents or this Agreement.
6. Effectiveness; Reinstatement. This Guarantee shall continue to be
effective, or be reinstated, as the case may be, if at any time payment, or any
part thereof, of any of the Guaranteed Obligations is rescinded or must
otherwise be restored or returned by the Banks upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of any Credit Party, or upon or as a
result of the appointment of a receiver, intervenor or conservator of, or
trustee or similar officer for, any Credit Party or any substantial part of its
property, or otherwise, all as though such payments had not been made.
7. Payments of Guaranteed Obligations. The Guarantor hereby
guarantees that the Guaranteed Obligations will be paid for the ratable benefit
of the Banks without set-off or counterclaim in lawful currency of the United
States of America at the office of Agent located at 1211 Avenue of the Americas,
7th Floor, New York, New York 10036. The Guarantor shall make any payments
required hereunder upon receipt of written notice thereof from the Agent or
Collateral Agent or any Bank; provided, however, that the failure of the Agent
or Collateral Agent or any Bank to give such notice shall not affect the
Guarantor's obligations hereunder.
8. Representations and Warranties. To induce the Banks to enter into
the Credit Agreement and to make the Loans thereunder and to issue the Letters
of Credit, the Guarantor represents and warrants to each Bank that the following
statements are true, correct and complete on and as of the date hereof:
A. Organization and Powers. The Guarantor is a duly
organized, validly existing corporation in good standing under the
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-6-
laws of the jurisdiction of its organization and has the corporate power and
authority to own its property and assets and to transact the business in which
it is engaged and currently proposes to engage. The Guarantor has duly qualified
and is authorized to do business and is in good standing in all jurisdictions in
which the conduct of its business or the ownership of its properties requires
such qualification, except where the failure to be so qualified would not have a
Materially Adverse Effect. The Guarantor has all requisite governmental
licenses, authorizations, consents and approvals to own and carry on its
business as now conducted and as presently contemplated to be conducted by the
Guarantor, other than such licenses, authorizations, consents and approvals the
failure to obtain which has not had and will not have a Materially Adverse
Effect. The Guarantor has all corporate authority to enter into each of the
Credit Documents to which it is or is to be a party and to carry out the
transactions contemplated thereby and to execute and deliver this Guarantee.
B. No Violations. Neither the execution, delivery or performance by
the Guarantor of any of the Credit Documents to which it is a party, nor
compliance with any of the terms and provisions thereof, nor the consummation of
any of the transactions contemplated therein, nor the grant and perfection of
the security interests pursuant to the Security Documents will (a) contravene
any applicable provision of any law, statute, rule, regulation, order, writ,
injunction or decree of any Governmental Authority, (b) conflict or be
inconsistent with or result in a breach of, any of the terms, covenants,
conditions or provisions of, or constitute (with notice or lapse of time or
both) a default under any material contractual obligation of the Guarantor or
any of its Subsidiaries, or (other than as contemplated by the Security
Documents) result in the creation or imposition of (or the obligation to create
or impose), any Lien upon any of the property or assets of the Guarantor or any
of its Subsidiaries pursuant to any material contractual obligation of the
Guarantor or (c) violate any provision of the organizational documents of the
Guarantor or any of its Subsidiaries, except in each such case where such
contravention, conflict, breach, default, creation, imposition, obligation or
violation would not have a Materially Adverse Effect.
C. Approvals. The execution, delivery and performance
by the Guarantor of the Credit Documents to which it is a party do
not and will not require any registration with, consent or approval
of, or notice to, or other action to, with or by, any Governmental
Authority or other Person (other than those registrations,
consents, waivers, approvals, notices or other actions which, if
not obtained or made, would not have a Materially Adverse Effect).
All consents and approvals from or notices to or filings with any
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<PAGE>
-7-
Governmental Authority or other Person required to be obtained by the Guarantor
have been obtained and are in full force and effect (other than those consents,
waivers, approvals, notices or filings which, if not obtained or made, would not
have a Materially Adverse Effect).
D. Binding Obligation. This Guarantee constitutes the legal, valid
and binding obligation of the Guarantor, enforceable against the Guarantor in
accordance with its terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or affecting creditors'
rights generally and except as such enforceability may be limited by the
application of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
E. Investment Company. The Guarantor is not an "investment company"
or a company "controlled" by an "investment company" (as each of such quoted
terms is defined or used in the Investment Company Act of 1940, as amended (the
"1940 Act")) or subject to regulation under the Public Utility Holding Company
Act of 1935, the Federal Power Act or any foreign, federal or local statute or
regulation limiting its ability to incur Indebtedness for money borrowed or
guarantee such Indebtedness as contemplated hereby or by any other Credit
Document.
9. Ratable Sharing. The Banks by acceptance of this Guarantee agree
among themselves that with respect to all amounts received by them which are
applicable to the payment of obligations of the Guarantor under this Guarantee,
if the Banks, or the Agent or Collateral Agent on behalf of the Banks, exercise
their rights hereunder, including, without limitation, acceleration of the
obligations of the Guarantor hereunder, equitable adjustment will be made so
that, in effect, all such amounts will be shared among the Banks pro rata based
on the relative outstanding Guaranteed Obligations.
10. Merger. If the Guarantor shall merge into or consolidate with
another corporation, or liquidate, wind up or dissolve itself in a transaction
not prohibited by the Credit Agreement, or if all of the stock of the Guarantor
shall be sold or otherwise disposed of in a manner not prohibited by the Credit
Agreement, the Guarantor hereby covenants and agrees, that upon any such merger,
consolidation, liquidation, or dissolution, the guarantee given in this
Guarantee and the due and punctual performance and observance of all of the
covenants and conditions of the Credit Agreement to be performed by the
Guarantor, shall be expressly assumed (in the event that the Guarantor is not
the surviving corporation in the merger) by supplemental agreements
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<PAGE>
-8-
reasonably satisfactory in form to the Agent on behalf of the Banks by the
corporation or corporations formed by such consolidation, or into which the
Guarantor shall have been merged, or by the corporation or corporations which
shall have acquired such property. In addition, the Guarantor shall deliver to
the Agent an Officer's Certificate and an opinion of counsel, each stating that
such merger, consolidation or transfer and such supplemental agreements comply
with this Guarantee and that all conditions precedent herein provided relating
to such transaction have been complied with. In case of any such consolidation,
merger, sale or conveyance and upon the assumption by the successor corporation
or corporations, by supplemental agreements executed and delivered to the Agent,
and reasonably satisfactory in form to the Agent on behalf of the Banks, of the
guarantee given in this Guarantee and the due and punctual performance of all of
the covenants and conditions of the Credit Agreement to be performed by the
Guarantor, such successor corporation or corporations shall succeed to and be
substituted for the Guarantor, with the same effect as if it or they had been
named herein as a Guarantor.
11. No Waiver. No failure to exercise and no delay in exercising, on
the part of the Banks, or the Agent or Collateral Agent on behalf of the Banks,
any right, power or privilege hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or privilege preclude
any other or further exercise thereof, or the exercise of any other power or
right. The rights and remedies herein provided are cumulative and not exclusive
of any rights or remedies provided by law.
12. Notices. All notices, demands, instructions or other
communications required or permitted to be given to or made upon any party
hereto shall be given in accordance with the provisions of the Credit Agreement
and at the address set forth therein or as provided on the signature page
hereof.
13. Amendments, Waivers, etc. No provision of this
Guarantee shall be waived, amended, terminated or supplemented
except by a written instrument executed by the Guarantor and the
Agent or Collateral Agent, on behalf of the Banks.
14. Notice of Exercise. Upon exercise of its rights hereunder, each
Bank, or the Agent or Collateral Agent on behalf of the Banks, as the case may
be, shall provide written notice on the date of such exercise to the Banks, or
the Agent or Collateral Agent, as the case may be, of such exercise.
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<PAGE>
-9-
15. GOVERNING LAW. THIS GUARANTEE SHALL BE GOVERNED BY,
AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF
LAWS.
16. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL JUDICIAL
PROCEEDINGS BROUGHT AGAINST THE GUARANTOR WITH RESPECT TO THIS GUARANTEE
AGREEMENT MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION
IN THE STATE OF NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS GUARANTEE
AGREEMENT THE GUARANTOR ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS
PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE
AFORESAID COURTS. THE PARTIES HERETO HEREBY IRREVOCABLY WAIVE, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, ANY RIGHT TO TRIAL BY JURY, AND THE GUARANTOR
HEREBY IRREVOCABLY WAIVES ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE
GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS. THE
GUARANTOR DESIGNATES AND APPOINTS CT CORPORATION SYSTEM, WITH AN ADDRESS AT 1633
BROADWAY, NEW YORK, NEW YORK 10019, AND SUCH OTHER PERSONS AS MAY HEREAFTER BE
SELECTED BY THE GUARANTOR IRREVOCABLY AGREEING IN WRITING TO SERVE, AS ITS AGENT
TO RECEIVE ON ITS BEHALF, SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDINGS IN ANY
SUCH COURT, SUCH SERVICE BEING HEREBY ACKNOWLEDGED BY THE GUARANTOR TO BE
EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. A COPY OF SUCH PROCESS SO SERVED
SHALL BE MAILED BY REGISTERED MAIL TO THE GUARANTOR AS PROVIDED IN SECTION 12
HEREOF. IF ANY AGENT APPOINTED BY THE GUARANTOR REFUSES TO ACCEPT SERVICE, THE
GUARANTOR HEREBY AGREES THAT SERVICE UPON IT BY MAIL SHALL CONSTITUTE SUFFICIENT
NOTICE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF ANY BANK TO BRING
PROCEEDINGS AGAINST THE GUARANTOR IN THE COURTS OF ANY OTHER JURISDICTION.
17. Counterparts. This Guarantee and any amendments, waivers,
consents or supplements may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument.
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<PAGE>
-10-
IN WITNESS WHEREOF, the undersigned has caused this Guarantee to be
duly executed and delivered by its duly authorized officer on the day and year
first above written.
[SUBSIDIARY]
By:
Name:
Title:
Notice Address:
[SUBSIDIARY]
[ ]
[ ]
Attn: [ ]
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<PAGE>
Selected Consolidated Historical Financial Data
Carson, Inc.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Combined (1)
Company (3) (Unaudited) Full Fiscal Year
Predecessor
Nine Nine
Months Months Predecessor Company (2)
Ended Ended April 1, 1995 August 23, 1995 Year Ended March 31,
Amounts in 000s except per
share data December 31, December 31, to August 22, to March 31,
1996 1995 1995 1996 1995 1994 1993 1992
Statement of Operations Data :
Net sales $59,938 $50,527 $26,854 $41,465 $58,126 $50,108 $49,335 $49,947
Income (loss)
from continuing operations (4) (3,256) 4,272 3,934 1,206 5,688 3,083 4,939 5,605
(Loss) earnings per share from
continuing operations (4) $ (0.25) $ 0.10
Weighted average common shares
outstanding 12,715 11,871
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Company Company (2) Predecessor
December 31, March 31, March 31,
Balance Sheet Data: 1996 1996 1995 1994 1993 1992
Total assets $97,631 $88,082 $ 43,863 $39,209 $37,572 $37,848
Long-term debt (excluding current portion) 24,501 63,778 288 552
Stockholders' equity 54,317 9,877 34,358 29,699 30,473 29,141
Working capital $15,954 $13,957 $ 15,140 $11,653 $14,256 $14,184
</TABLE>
(1) The combined unaudited nine months ended December 31, 1995 includes results
of the Predecessor for the period from April 1, 1995 to August 22, 1995 combined
with the Company results of operations for the period from August 23, 1995 to
December 31, 1995. (2) The acquisition of Aminco, Inc. (the Predecessor) was
completed on August 23, 1995. The Company's financial statements include the
operating results from the acquisition date. (3) Effective December 31, 1996,
the Company changed its fiscal year-end from March 31 to December 31. (4) Before
extraordinary item and cumulative effect of accounting change.
EX-13, PAGE 1
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Overview
Carson, Inc. (formerly DNL Savannah Holding Corp. and also referred to
herein as the "Company" or "Carson") is a leading manufacturer and marketer in
the U.S. retail ethnic hair care market for African-Americans. The Company
currently sells over 70 different products in the United States and in over 60
other countries under five principal brand names. The majority of the Company's
net sales are derived from four categories of the ethnic health and beauty aids
market: hair relaxers and texturizers (which constituted approximately 50% of
the Company's net sales in 1996), hair color, shaving products and hair care
maintenance products.
Carson was established in May 1995 and until August 1995 its operations
were de minimus. On August 23, 1995, the Company acquired all of the outstanding
stock of Aminco, Inc. (also referred to as the "Predecessor"). Aminco's
operations were principally conducted by its wholly owned subsidiary, Carson
Products Company. Subsequent to the acquisition of Aminco, Carson Products
Company was merged into Aminco; the surviving entity was renamed Carson Products
Company. The accompanying financial statements include the operating results of
Carson Products Company ("Carson Products") from the acquisition date.
The Company's acquisition of the Predecessor for approximately $95
million in cash (including $6 million for fees and other costs directly
associated with the acquisition) was initially financed with long-term
borrowings aggregating approximately $68.0 million and has been accounted for as
a purchase (the "acquisition"). Accordingly, the purchase price has been
allocated to the Predecessor's identifiable assets and liabilities based on the
fair values at the acquisition date. Liabilities assumed aggregated
approximately $11.4 million. The excess of the purchase price over the fair
value of the Predecessor's identifiable net assets has been classified as
goodwill. In connection with the acquisition, the senior management of the
Predecessor was replaced. The Predecessor had a March 31 fiscal year-end.
Effective December 31, 1996, the Company changed its fiscal year-end from March
31 to December 31. The decision to change the fiscal year-end was made in order
to conform the Company's financial reporting year to the natural business year
of the industry.
On July 3, 1996, the Company's South African subsidiary, Carson
Holdings, Ltd. ("Carson South Africa") sold 25.0% of its shares in an initial
public offering on the Johannesburg Stock Exchange. This offering resulted in
net proceeds of approximately $4.2 million. At the same time, Carson South
Africa issued 1.875% of its shares to certain employees, officers and directors
involved in the Company's South African operations. As a result of the issuance
of these shares, the Company has reflected in its consolidated statement of
operations for periods subsequent to the share issuance a minority interest in
subsidiary earnings. The amount of the charge reflected in this line item equals
Carson South Africa's net income for the applicable period multiplied by the
percentage of the Carson South Africa shares which are not indirectly owned by
the Company. In conjunction with the South African initial public offering, the
Company's U.S. subsidiary, Carson Products entered into an amendment to its
license agreement with Carson Products Proprietary Limited ("Carson Products,
S.A."), a South African registered company wholly owned by Carson South Africa,
which provides that commencing on April 1, 1998, Carson Products S.A. will pay
to Carson Products a royalty in the amount of 3.0% of the net sales of all
licensed products. The amount of the royalty increases to 3.5% on April 1, 1999
and 4.0% on April 1, 2000 until the termination of the agreement. The initial
term of the agreement expires on April 1, 1999; however, the agreement continues
indefinitely thereafter until terminated by either party upon 12 months written
notice.
EX-13, PAGE 2
<PAGE>
With the exception of sales by Carson Products S.A. to South Africa,
Botswana, Lesotho, Namibia and Swaziland, which are denominated in South African
Rand, all of the Company's sales are recorded in U.S. Dollars. The Company does
not view the exposure to Rand exchange rate fluctuations as significant because
the South African subsidiary incurs all of its costs in Rand. Assets and
liabilities of the Company's South African operations are translated for
consolidation purposes from South African Rand into U.S. Dollars at the rate of
currency exchange at the end of the fiscal period. Revenues and expenses are
translated at average monthly prevailing exchange rates. Resulting translation
differences are recognized as a component of stockholders' equity.
On June 26, 1996, Carson made an investment of $3.0 million in
Morningside AM Acquisition Corp., the parent of AM Cosmetics, Inc. ("AM
Cosmetics") a leading low-cost manufacturer of cosmetics. The investment was
made through the purchase of $3.0 million of 12% cumulative, payment-in-kind
preferred stock. The Company's consolidated statements of operations for periods
subsequent to June 26, 1996 include the dividend income from this investment,
although dividends are anticipated to be paid through the issuance of additional
preferred stock. Therefore, it is anticipated that no cash will be generated
from this investment in the near future. In connection with the investment,
Carson entered into a management agreement and will enter into certain related
sales agreements and manufacturing agreements with AM Cosmetics.
The Company completed the offering (the "Offering") of 4,818,500 shares
of Class A common stock on the New York Stock Exchange on October 18, 1996 at a
price of $14 per share. Of these shares 3,113,000 were sold by the Company with
the balance sold by selling stockholders, none of which included any members of
management or the original buyout group.
Effect of the Acquisition on Results of Operations
The consummation of the Company's acquisition of the stock of the Predecessor
(the "acquisition") affected the Company's results of operations following the
acquisition in certain significant respects. The acquisition was reflected using
purchase accounting with the purchase price being allocated to the Company's
identifiable assets and liabilities based on fair values at the date of the
acquisition, which was August 23, 1995. The excess of the purchase price over
the fair value of the Company's identifiable net assets has been classified as
goodwill. Therefore, the Company's amortization expenses are significantly
higher than the corresponding amounts for the Predecessor. Additionally,
interest expense increased due to debt initially used to finance the
acquisition.
Results of Operations
The acquisition was completed on August 23, 1995. Because of the application of
purchase accounting and the resulting revaluation of the Predecessor's assets
and liabilities and the impact on certain expenses, the financial statements of
the Predecessor for the periods prior to August 23, 1995 are not strictly
comparable to those of subsequent periods. However, the following table combines
historical fiscal 1996 data for the Predecessor and the Company in order to
facilitate discussion of financial results.
EX-13, PAGE 3
<PAGE>
Statement of Operations Data
<TABLE>
<S> <C> <C> <C> <C>
Company Combined (a)
Nine-Month Nine-Month Combined (b) Predecessor
Period Ended Period Ended Year Ended Year Ended
December 31, 1996 December 31, 1995 March 31, 1996 March 31, 1995
(Unaudited)
Net sales $ 59,938 $ 50,527 $ 68,319 $ 58,126
Cost of sales 26,940 22,336 30,142 25,692
Gross profit 32,998 28,191 38,177 32,434
Selling expenses 15,692 13,596 17,048 17,888
General and
administrative expenses 5,836 4,751 7,337 5,246
Incentive compensation 7,123
Depreciation and
amortization 1,896 1,278 1,833 1,085
Operating income 2,451 8,566 11,959 8,215
Interest expense 4,545 2,696 4,543 136
Other income, net 565 1,172 1,319 783
(Loss) Income before taxes (1,529) 7,042 8,735 8,862
Provision for income taxes 1,727 2,770 3,595 3,174
(Loss) Income before
extraordinary item (3,256) 4,272 5,140 5,688
Extraordinary item, net of tax (3,527)
Net (loss) income (c) $(6,783)$ 4,272 $ 5,140 $ 5,688
EBITDA (d) $ 4,410 $ 9,838 $ 13,977 $ 9,450
Data As A Percentage Of Sales:
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 44.9 44.2 44.1 44.2
Gross profit 55.1 55.8 55.9 55.8
Selling expenses 26.2 26.9 25.0 30.8
General and
administrative expenses 9.7 9.4 10.7 9.0
Incentive compensation 11.9
Depreciation and amortization 3.2 2.5 2.7 1.9
Operating income 4.1% 17.0% 17.5% 14.1%
</TABLE>
(a) The combined unaudited statement of operations for the nine-month period
ended December 31, 1995 includes results of Predecessor operations for the
period from April 1, 1995 to August 22, 1995 combined with Company results of
operations for the period from August 23, 1995 to December 31, 1995. (b) The
statement of operations of the Predecessor for the period from April 1, 1995 to
August 22, 1995 is combined with the statement of operations of the Company for
the period August 23, 1995 to March 31, 1996. (c) Before effect of change in
accounting principle and dividends on preferred stock of the Predecessor. (d)
EBITDA is calculated by adding earnings before interest, income taxes,
depreciation and amortization expense. In addition, the effect of the $3.5
million extraordinary item is excluded.
EX-13, PAGE 4
<PAGE>
Company Nine-Month Period Ended December 31, 1996 Compared to Combined
Nine-Month Period Ended December 31, 1995
Net Sales. Net sales increased from $50.5 million for the combined nine-month
period ended December 31, 1995 to $59.9 million for the nine-month period ended
December 31, 1996, an increase of 18.6%. In the United States, relaxers and
texturizers, hair color and hair care maintenance products each generated net
sales increases. Carson South Africa continued to demonstrate strong results
with an increase in net sales of 69.2% from $5.2 million for the combined
nine-month period ended December 31, 1995 to $8.8 million for the nine-month
period ended December 31, 1996.
Gross Profit. Gross profit increased from $28.2 million for the combined
nine-month period ended December 31, 1995 to $33.0 million for the nine-month
period ended December 31, 1996, an increase of 17.0%. This increase was almost
entirely due to the increase in net sales. As a percent of net sales, gross
profit decreased from 55.8% for the combined nine-month period ended December
31, 1995 to 55.1% for the nine-month period ended December 31, 1996, primarily
due to an i nventory adjustment related to repackaging and reformulation of
several product lines.
Selling Expenses. Selling expenses increased from $13.6 million for the combined
nine-month period ended December 31, 1995 to $15.7 million for the nine-month
period ended December 31, 1996, an increase of 15.4%. The increase in selling
expense was almost entirely a result of the increase in net sales. As a
percentage of net sales, selling expenses decreased from 26.9% to 26.2% during
this period, primarily as a result of the timing of advertising and promotional
expenses.
General and Administrative Expenses. General and administrative expenses
increased from $4.8 million for the combined nine-month period ended December
31, 1995 to $5.8 million for the nine-month period ended December 31, 1996, an
increase of 20.8%. As a percentage of net sales, general and administrative
expenses increased from 9.4% to 9.7% during this period. This increase in
general and administrative expenses as a percentage of net sales was a function
of several factors relating to the acquisition and the new management structure.
First, the new management team included the addition of several new senior
executives and the promotion of certain key executives that increased personnel
costs which management believed was necessary to support the future growth of
the Company. Second, the Company entered into a management agreement with
Morningside which provides strategic consulting advice to the Company for a fee
of $0.4 million per annum. Third, travel expenses increased significantly due to
the new management's focus on international markets which required extensive
travel. Finally bank fees and professional fees increased due to the new credit
agreements relating to the debt incurred to finance the acquisition.
Incentive Compensation Expenses. The Company recognized $7.1 million of incent
ive compensation expenses during the nine-month period ended December 31, 1996
relating to costs under certain long-term incentive compensation agreements and
the purchase of shares prior to the initial public offering by several outside
directors and certain members of senior management and for the shares of Carson
South Africa awarded to certain members of its management. No similar costs were
previously recorded.
Depreciation and Amortization. Depreciation and
amortization expense increased from $1.3 million for the combined nine-month
period ended December 31, 1995 to $1.9 million for the nine-month period ended
December 31, 1996. As a percentage of net sales, depreciation and amortization
expense increased from 2.5% to 3.2% during this period. This increase was
primarily due to goodwill amortization which resulted from the application of
purchase accounting. The increase in amortization due to the acquisition was
partially offset by a change in the wa y the Company accounts for package design
costs. Prior to the acquisition, the Predecessor capitalized package design
costs and amortized it over a four year period. Since the acquisition, the
Company has expensed package design costs as incurred.
Operating Income and EBITDA. As a result of the above changes, operating income
decreased from $8.6 million for the combined nine-month period ended December
31, 1995 to $2.5 million for the nine-month period ended December 31, 1996.
EBITDA decreased from $9.8 million to $4.4 million during this period.
Interest Expense. Interest expense increased substantially from $2.7 million for
the combined nine-month period ended December 31, 1995 to $4.5 million for the
nine-month period ended December 31, 1996, as a result of the new debt incurred
to finance the acquisition.
EX-13, PAGE 5
<PAGE>
Other Income, net. Other income decreased as a result of the elimination of
royalty income associated with the Caribbean. The Company now handles Caribbean
sales through its in-house sales organization. Investment income decreased
because most of the Predecessor's investments were liquidated in conjunction
with the acquisition. Additionally, in June of 1996, the Company made an
investment and entered into a management contract with AM Cosmetics, a leading
low-cost producer of cosmetics. Under the terms of the investment and the
management agreement, the Company is entitled to a 12% paid in kind dividend on
its $3.0 million investment and an annual management fee of the greater of $.5
million or 1% of net sales.
Provision for Taxes. The provision for taxes decreased from $2.8 million to
$1.7 million during this period. The effective tax rate is not proportionate
to the statutory rates as a result of the majority of the incentive
compensation charge not being deductible for income tax purposes.
Combined Twelve-Months Ended March 31, 1996 Compared to Predecessor
Twelve-Months Ended March 31, 1995
Net Sales. Net sales increased from $58.1 million for fiscal 1995 to $68.3
million for fiscal 1996, an increase of 17.6%, as a result of positive market
acceptance of new product formulation and new packaging and the efforts of the
Company's in-house sales organization, which was established in April 1995. In
the United States, relaxers and texturizers, hair color, shaving products and
hair care maintenance products all generated net sales increases. Carson South
Africa continued to show strong growth with an increase in net sales of 80.4%
from $3.6 million recorded for fiscal 1995 to $6.6 million for fiscal 1996, a
function of both the rapid expansion of the African market and increasing market
share. International sales excluding sales by Carson South Africa also
increased, primarily due to European sales where the Company increased its sales
representation.
Gross Profit. Gross profit increased from $32.4 million for fiscal 1995 to $38.2
million for fiscal 1996, an increase of 17.7%. This increase was almost entirely
due to the increase in net sales. Gross margin increased slightly from 55.8% to
55.9% during this period.
Selling Expenses. Selling expenses decreased from $17.9 million for fiscal 1995
to $17.0 million for fiscal 1996, a decrease of 4.7% despite an increase in net
sales of 17.6%. As a percentage of net sales, selling expenses decreased from
30.8% to 25.0% during this period. This decrease was due to the Company's
decision to establish an in-house sales organization and terminate the majority
of its sales broker relationships. In fiscal 1995, brokers were paid a
commission which averaged slightly above 5%. The commission expense was almost
entirely eliminated in fiscal 1996. This savings was offset in part by an
increase in sales salaries and other payroll costs related to the new sales
employees. General and Administrative Expenses. General and administrative
expenses increased from $5.2 million for fiscal 1995 to $7.3 million for fiscal
1996, an increase of 39.9%. As a percentage of net sales, general and
administrative expenses increased from 9.0% to 10.7% during this period. This
increase in general and administrative expenses as a percentage of net sales was
a function of several factors relating to the acquisition and the new management
structure. First, the new management team included the addition of several new
senior executives and the promotion of certain key executives that increased
personnel costs which management believed were necessary to support the future
growth of the Company. Second, the Company entered into a management agreement
with Morningside which provides strategic consulting advice to the Company for a
fee of $0.4 million per annum. Third, travel expenses increased significantly
due to the new management's focus on international markets which required
extensive travel. Finally, bank fees and professional fees increased due to the
new credit agreements relating to the debt incurred to finance the acquisition.
Depreciation and Amortization. Depreciation and amortization expense increased
from $1.1 million for fiscal 1995 to $1.8 million for fiscal 1996. As a
percentage of net sales, depreciation and amortization expense increased from
1.9% to 2.7% during this period. This increase was due to goodwill amortization
which resulted from the application of purchase accounting. The increase in
amortization due to the acquisition was partially offset by a change in the way
the Company accounts for package design costs. Prior to the acquisition, the
Predecessor capitalized package design costs and amortized it over a four year
period. Since the acquisition, the Company has expensed package design costs as
incurred. The application of purchase accounting related to the acquisition did
not have a material impact on the Company's depreciation expense.
Operating Income and EBITDA. As a result of the above changes, operating income
increased from approximately $8.2 million for fiscal 1995 to $12.0 million for
fiscal 1996, an increase of 45.6%. As a percentage of net sales, operating
income increased from 14.1% to 17.5% during this period. EBITDA increased from
approximately $9.5 million to $14.0 million, an increase of 47.4% during this
period.
EX-13, PAGE 6
<PAGE>
Interest Expense. Interest expense increased substantially from $0.1 million for
fiscal 1995 to $4.5 million for fiscal 1996 as a result of the new debt incurred
to finance the acquisition.
Other Income; Investment Income. Other income remained approximately the same
for fiscal 1996 as compared to fiscal 1995. Investment income increased from
$0.6 million for fiscal 1995 to $1.1 million for fiscal 1996 as the Predecessor
realized gains on the liquidation of certain investment securities.
Provision for Taxes. The provision for income taxes increased from $3.2 million
for fiscal 1995 to $3.6 million for fiscal 1996, an increase of 13.3%. This
increase occurred despite pre-tax income decreasing from $8.9 million in fiscal
1995 to $8.7 million for fiscal 1996 as a result of goodwill amortization of
$0.7 million for fiscal 1996 that was not deductible for tax purposes.
Accordingly, the effective tax rate increased from 35.8% to 41.2% during this
period.
Liquidity and Capital Resources
The Company used the net proceeds of the Offering to repay indebtedness
incurred in the acquisition. In conjunction with the Offering, the Company
refinanced the remaining portion of its Bank Credit Facility with borrowings
under a New Senior Bank Facility pursuant to a credit agreement dated as of
October 18, 1996, which included (i) a $15.0 million term loan A, (ii) a $10.0
million term loan B and (iii) a $15.0 million revolving credit facility, which
provides more availability than the previous facility. The term loan A and
revolving credit facility bear interest at the applicable prime rate plus 0.5%
or LIBOR plus 2.0% and have a final maturity of six years . The term loan B
bears interest at the applicable prime rate plus 1.0% or LIB OR plus 2.5% and
has a final maturity of seven years. The New Senior Bank Faci lity contains less
restrictive covenants compared to the previous facility, since the Company is
substantially less leveraged following the Offering.
In the nine months ended December 31, 1996 net cash flow provided by
operations was $2.2 million as a result of an increase in accounts payable of
$3.5 million and a decrease in other current assets of $1.7 million. These items
were offset in part by increases in accounts receivable and inventories of $2.6
million and $2.1 million, respectively. Working capital increased from $14.0
million at March 31, 1996 to $16.0 million at December 31, 1996.
Net cash used in investing activities for the nine months ended December
31, 1996 totaled $6.8 million which included $3.8 million of capital
expenditures and a $3.0 million investment in AM Cosmetics. The three largest
capital projects involved purchasing and equipping the new South African
manufacturing facility, reorganizing the shaving powder production in Savannah
to better optimize capacity and adding production equipment in the Savannah
facility to address short term capacity constraints.
Net cash provided from financing activities for the nine months ended
December 31, 1996 totaled $7.2 million. This included $32.7 million of
borrowings from the New Senior Bank Facility, proceeds from the initial public
offerings of the Company and its South African subsidiary of $42.4 million, less
$69.2 million to repay acquisition indebtedness.
The net cash flow for the nine months ended December 31, 1996 was
$2.6 million, which when combined with beginning cash of $1.6 million results
in a net cash balance of $4.2 million as of December 31, 1996.
Inflation
The Company's manufacturing costs and operating expenses are affected by
price changes. The Company has historically mitigated inflationary effects by
passing price changes along to its customers and by continually developing more
cost-effective manufacturing and operational procedures. The Company's ability
to mitigate the effects of price changes will depend on market factors.
Outlook
The Company believes that cash flow from operating activities, existing
cash balances and available borrowings under its New Senior Bank Facility will
be sufficient to fund working capital requirements, capital expenditures and
debt service requirements in the foreseeable future.
The preceding statement and certain other statements contained herein
are forward-looking statements. It is important to note that the Company's
actual results could differ materially from those projected in such
forward-looking statements based on a number of factors, some of which are
beyond the Company's control.
Risk factors include, but are not limited to, the Company's ability to
successfully implement its growth strategy, the nature and extent of future
competition in the Company's principal marketing areas and increased costs of
compliance with any developments in the U.S., Brazil, the Caribbean, Europe and
other countries where the Company now does business or in the future may do
business.
EX-13, PAGE 7
<PAGE>
<TABLE>
Consolidated Statements of Operations Twelve Month Period
Carson, Inc. Nine Month Period
<S> <C> <C> <C> <C> <C>
Company
Company Unaudited Predecessor Company Predecessor
April 1, 1996 August 23, 1995 April 1, 1995 August 23, 1995 Year Ended
Amounts in 000s except per share data to December 31, to December 31, to August 22, to March 31, March 31,
1996 1995 1995 1996 1995
Net sales ................................................. $59,938 $23,673 $26,854 $41,465 $58,126
Cost of sales ............................................. 26,940 10,823 11,513 18,629 25,692
Gross profit .......................................... 32,998 12,850 15,341 22,836 32,434
Selling expenses .......................................... 15,692 6,129 7,467 9,581 17,888
General and administrative expenses ....................... 5,603 2,475 2,276 5,061 5,246
General and administrative - fees paid to Morningside ..... 233
Incentive compensation, directors and management .......... 7,123
Depreciation and amortization ............................. 1,896 776 502 1,331 1,085
Operating income ...................................... 2,451 3,470 5,096 6,863 8,215
Interest expense .......................................... 4,545 2,640 56 4,487 136
Other income, net ......................................... 121 35 1,137 182 783
Other income, AM Cosmetics management fee and dividend .... 444
(Loss) income before income tax ........................... (1,529) 865 6,177 2,558 8,862
Provision for income tax .................................. 1,727 527 2,243 1,352 3,174
(Loss) income before extraordinary item and change in
accounting principle ................................ (3,256) 338 3,934 1,206 5,688
Extraordinary item, net of tax benefit .................... (3,527)
Cumulative effect of change in accounting principle,
net of tax benefit ......... (250)
Net (loss) income ......................................... (6,783) 338 3,934 1,206 5,438
Dividends on preferred stock 554 1,109
(Loss) income available to all shareholders ............... $(6,783) $338 $3,380 $1,206 $4,329
Earnings per common share:
Before extraordinary item ........................... $0.25) $0.03 $0.10
Extraordinary item, net of tax benefit .............. (0.28)
Net (loss) earnings per share ....................... $(0.53) $0.03 $0.10
Weighted average common shares outstanding ................ 12,715 11,871 11,871
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
EX-13, PAGE 8
<PAGE>
Consolidated Balance Sheets
Carson, Inc.
<TABLE>
<S> <C> <C>
December 31, March 31,
Dollars in 000s except share and par value data 1996 1996
ASSETS
Current Assets
Cash and cash equivalents .................................................... $ 4,191 $ 1,553
Accounts receivable (less allowance for doubtful accounts of $614 and $531
at December 31, 1996 and March 31, 1996, respectively) ...................... 14,855 12,611
Accounts receivable due from AM Cosmetics .................................... 262
Inventories .................................................................. 10,749 8,663
Other current assets ......................................................... 1,346 3,094
Total current assets ......................................................... 31,403 25,921
Property, Plant and Equipment, at cost:
Land and improvements ........................................................ 545 545
Buildings and improvements ................................................... 6,689 5,427
Machinery and equipment ...................................................... 7,436 5,806
Furniture and fixtures ....................................................... 396 277
Construction-in-progress ..................................................... 1,004 282
16,070 12,337
Less:accumulated depreciation ................................................ 981 351
15,089 11,986
Investment in AM Cosmetics ......................................................... 3,187
Goodwill, net of accumulated amortization of $1,573 and $688 at
December 31, 1996 and March 31, 1996, respectively .............................. 45,801 46,633
Other Assets ....................................................................... 2,151 3,542
Total Assets ................................................................. $ 97,631 $ 88,082
EX-13, PAGE 9
<PAGE>
December 31, March 31,
Dollars in 000s except share and par value data 1996 1996
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable ............................................................. $ 7,065 $ 3,600
Accrued expenses ............................................................. 4,451 5,354
Accrued expenses, directors and employees .................................... 1,333
Current maturities of long-term debt ......................................... 2,600 3,010
Total current liabilities .................................................... 15,449 11,964
Long-term Debt ..................................................................... 24,501 63,778
Other Liabilities .................................................................. 1,700 1,732
Deferred Income Taxes .............................................................. 731
Minority Interest in Subsidiary .................................................... 1,664
Commitments and Contingencies (Notes 11 and 14)
Stockholders' Equity:
Preferred stock, $.01 par value, 10,000,000 shares authorized, none outstanding
Common stock:
Class A, voting, $.01 par value, 150,000,000 shares authorized, 4,996,568
shares issued and outstanding as of December 31, 1996 ......................... 50
Class B, nonvoting, $.01 par value, 2,000,000 shares authorized, 1,859,677
shares issued and outstanding ................................................ 19 19
Class C, voting, $.01 par value, 13,000,000 shares authorized, 8,127,937
and 9,510,323 shares issued and outstanding at December 31, 1996
and March 31, 1996, respectively ............................................. 81 95
Paid-in capital .............................................................. 62,418 8,557
Notes receivable from employee shareholders, net of discount ................. (1,365)
(Accumulated deficit) Retained earnings ...................................... (5,577) 1,206
Foreign currency translation adjustment ...................................... (1,309)
Total stockholders' equity ................................................... 54,317 9,877
Total Liabilities and Stockholders' Equity ................................... $ 97,631 $ 88,082
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
EX-13, PAGE 10
<PAGE>
<TABLE>
Consolidated Statement of Shareholders' Equity
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total
Common Stock Preferred Stock Paid-in Retained Valuation ESOP Debt Treasury Stockholders'
Amounts in 000s Shares Amount Shares Amount Capital Earnings Adjustment Guarantee Stock Equity
PREDECESSOR
Balance, March 31, 1994 ...... 406,699 $1,220 606,752 $6,068 $214 $28,858 $ $(288) $(6,373) $29,699
Net income ................... 5,438 5,438
Cash dividends,
preferred stock .......... (1,109) (1,109)
Reduction in ESOP debt
guarantee ................ 288 288
Issuance of treasury stock ... 94 232 326
Purchase of treasury stock ... (567) (567)
Unrealized gains on
investments
available for sale,
net of taxes ............. 283 283
Balance, March 31, 1995 ...... 406,699 1,220 606,752 6,068 308 33,187 283 (6,708) 34,358
Net income ................... 3,934 3,934
Cash dividends,
preferred stock .......... (554) (554)
Issuance of treasury stock ... 296 296
Balance, August 22, 1995 ..... 406,699 $1,220 606,752 $6,068 $308 $36,567 $283 $ -- $(6,412) $38,034
</TABLE>
EX-13, PAGE 11
<PAGE>
Carson, Inc.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Retained Notes Total
Class A Class B Class C Paid-in Earnings Translation Stockholders'
Amounts in 000s Shares Amount Shares Amount Shares Amount Capital (Accumulated Receivable
Deficit) Adjustment From Officers Equity
COMPANY, beginning
August 23, 1995
Sale of common stock ........ $ 569 $ 6 5,799 $58 $11,936 $ $ $ $12,000
Issuance of common stock
in connection with
acquisition ............. 1,291 13 2,006 20 2,717 2,750
Carryover of predecessor
basis ................... 1,705 17 (6,096) (6,079)
Net income .................. 1,206 1,206
Balance, March 31, 1996 ..... 1,860 19 9,510 95 8,557 1,206 9,877
Gain on sale of South African
stock, net .............. 2,808 2,808
Sale of common stock, net ... 3,113 31 38,162 38,193
Conversion of Class C shares
to Class A shares ....... 1,884 19 (1,884) (19)
Gain on forgiveness of
shareholder note ........ 5,530 5,530
Net loss .................... (6,783) (6,783)
Translation adjustment ...... (1,309) (1,309)
Employee shareholder loans,
less discount ........... (1,365) (1,365)
Incentive compensation
and other ............... 502 5 7,361 7,366
Balance, December 31, 1996 .. 4,997 $50 1,860 $19 8,128 $81 $62,418 $(5,577) $(1,309) $(1,365) $54,317
The accompanying notes are an integral part of these financial statements.
Consolidated Statements of Cash Flows
</TABLE>
EX-13, PAGE 12
<PAGE>
<TABLE>
Carson, Inc.
Twelve-Month Period
<S> <C> <C> <C> <C> <C>
Nine-Month Period
Company Company Unaudited Predecessor Company Predecessor
April 1, 1996 to August 23, 1995 to April 1, 1995 to August 23, 1995 to Year ended
Dollars in 000s December 31, 1996 December 31, 1995 August 22, 1995 March 31, 1996 March 31, 1995
Operating Activities:
Net (loss) income ............................ $(6,783) $ 338 $ 3,934 $1,206 $ 5,438
Adjustments to reconcile net (loss)
income to net
cash provided by operating
activities:
Depreciation and amortization .............. 1,896 776 502 1,331 1,085
Extraordinary item, net of tax benefit ..... 3,527
Incentive compensation ..................... 6,163
Provision for doubtful accounts ............ 112 110
Deferred income taxes ...................... (957) 805 25
Other, net ................................. (1,363) (2,238) (1,367) 701 394
Prepayment penalty on long-term debt ....... (1,328)
Changes in operating assets and
liabilities, net
of acquisitions:
Accounts receivable ........................ (2,356) (446) (588) (2,385) (1,275)
Accounts receivable, related party ......... (262)
Inventories ................................ (2,086) (1,579) 190 (1,586) 467
Other current assets ....................... 1,748 (89) (546) (970) 313
Accounts payable ........................... 3,465 366 (732) 1,360 755
Accrued liabilities ........................ (903) (985) 1,688 (1,677) 479
Accrued liabilities, related party ......... 1,333
Total adjustments .......................... 8,989 (4,085) (853) (2,421) 2,243
Net cash provided by (used in)
operating activities ...................... 2,206 (3,747) 3,081 (1,215) 7,681
Investing Activities:
Additions to property, plant and equipment ... (3,805) (624) (375) (1,470) (974)
Long-term investments ........................ (3,000)
Proceeds from sales and maturities of
investments ............................... 21,428 12,498
Package design costs ......................... (244) (356)
Acquisitions of business assets, net of
cash acquired ............................. (65,300) (65,300)
Purchases of investments ..................... (6,760) (15,704)
Other ........................................ 299
Net cash (used in) provided by
investing activities ...................... (6,805) $(65,924) $ 14,049 $(66,770) $ (4,237)
</TABLE>
EX-13, PAGE 13
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Twelve-Month Period
Nine-Month Period
Company Company Unaudited Predecessor Company Predecessor
April 1, 1996 to August 23, 1995 to April 1, 1995 to August 23, 1995 to Year ended
Dollars in 000s December 31, 1996 December 31, 1995 August 22, 1995 March 31, 1996 March 31, 1995
Financing Activities:
Proceeds from long-term borrowings ........... $32,704 $ 58,550 $ $ 58,550 $
Principal payments on long-term debt ......... (67,876) (500) (1,012)
Dividends paid, preferred stock .............. (554) (1,109)
Purchases of treasury stock .................. (296) (567)
Checks outstanding ........................... (1,043)
Proceeds from sale of common stock ........... 38,193 12,000 12,000
Proceeds from sale of subsidiary stock ....... 4,216
Net cash provided by (used in) financing
activities ................................ 7,237 70,050 (850) 69,538 (2,719)
Net Increase (Decrease) in Cash and Cash
Equivalents ............................... 2,638 379 16,280 1,553 725
Cash and Cash Equivalents at Beginning of Period 1,553 1,620 895
Cash and Cash Equivalents at End of Period ..... $4,191 $ 379 $ 17,900 $1,553 $ 1,620
Cash paid during the period for:
Interest ................................... $4,178 $ 3,034 $ 56 $3,991 $ 136
Income taxes ............................... $2,421 $ 1,276 $ 457 $2,497 $ 2,654
Non-cash financing activities:
Long-term debt issued in Acquisition .......$ $ 11,753 $ $11,753 $
Forgiveness of shareholder debt ............ $5,530 $ $ $ $
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
EX-13, PAGE 14
<PAGE>
Notes to Consolidated Financial Statements
Carson, Inc.
Note 1. Organization and Business
Carson, Inc. (formerly DNL Savannah Holding Corp. and also referred to herein as
the "Company") was established in May 1995 and until August 1995 its operations
were de minimus. On August 23, 1995, the Company acquired all of the outstanding
stock of Aminco, Inc. (also referred to as the "Predecessor"). Aminco's
operations were principally conducted by its wholly owned subsidiary, Carson
Products Company. Subsequent to the acquisition of Aminco, Carson Products
Company was merged into Aminco; the surviving entity was renamed Carson Products
Company. The accompanying financial statements of the Company include the
operating results of Carson Products Company ("Carson Products") from the
acquisition date.
The Company is the leading manufacturer and marketer in the U.S. retail
ethnic hair care market for African-Americans. The Company is also a leading
global manufacturer and marketer of ethnic hair care products for persons of
African descent. The Company's more than 60 products are marketed under five
principal brand names. Certain of the Company's international activities are
conducted by its South African subsidiary.
The Company's acquisition of the Predecessor for approximately $95 million
in cash (including $6 million for fees and other costs directly associated with
the acquisition) was initially financed with long-term borrowings aggregating
approximately $68.0 million and has been accounted for as a purchase (the
"Acquisition"). Accordingly, the purchase price has been allocated to the
Predecessor's identifiable assets and liabilities based on the fair values at
the acquisition date. The excess of the purchase price over the fair value of
the Predecessor's identifiable net assets has been classified as goodwill.
Certain previous shareholders of the Predecessor received 1,705,500 shares
of Class A Common Stock in the acquisition. Such share interest has been carried
over at such shareholders' proportionate equity in the book value of Aminco
(predecessor basis in accordance with Emerging Issues Task Force Issue No.
88-16, "Basis in Leveraged Buyout Transactions."
The purchase price of the Predecessor (net of carryover of negative
predecessor basis of approximately $6.1 million) has been allocated as follows
(in millions):
Current assets (including $17.9 of cash acquired) $37.9
Property, plant and equipment 10.8
Goodwill 47.2
Other assets 4.5
Liabilities assumed (11.4)
89.0
In July 1996, the Company's South African subsidiary sold 25% of its shares
in an initial public offering on the Johannesburg Stock Exchange. The subsidiary
received net proceeds of approximately $4.2 million from this sale (which
resulted in a gain to the Company of approximately $2.8 million which was
recorded in paid in capital). In conjunction with this public offering, the
Company entered into an amendment to its license agreement with its South
African subsidiary which provides that commencing on April 1, 1998, its South
African subsidiary will pay the Company a royalty in the amount of 3.0% of the
net sales price of all licensed products. The amount of the royalty increases to
3.5% on April 1, 1999 and 4.0% on April 1, 2000 until the termination of the
agreement. The initial term of the agreement expires on April 1, 1999; however,
the agreement continues indefinitely thereafter until terminated by either party
upon 12 months written notice.
The Company completed an initial public offering of 4,818,500 shares of its
common stock on October 18, 1996. The Company used the proceeds of such offering
to repay certain indebtedness (see Note 7). This repayment resulted in an
extraordinary loss recorded at that time of approximately $3.5 million (net of
tax) for prepayment penalties and the write-off of unamortized debt discount and
deferred financing costs.
In October 1996, the Company amended its Certificate of Incorporation to
change the authorized capital stock to Class A Common Stock, Class B Common
Stock, Class C Common Stock and Preferred Stock (each with a par value of $.01
per share). Each share of the Company's former Class A Common Stock was
converted into 11,370 shares of newly created Class C Common Stock, and each
share of former Class B Common Stock was converted into 11,370 shares of newly
created Class B Common Stock. These stock conversions have been given
retroactive recognition in the accompanying financial statements.
EX-13, PAGE 15
<PAGE>
Note 2. Significant Accounting Policies
Change in Fiscal Year
Effective December 31, 1996, the Company changed
its fiscal year-end from
March 31 to December 31 in order to conform the Company's financial reporting
year to the natural business year of its industry.
Principles of Consolidation
The accompanying financial statements include the accounts of the Company and
its wholly owned subsidiaries and the Predecessor. All significant intercompany
transactions and accounts have been eliminated.
Inventories
Inventories in the United States are valued at the lower of Last-In, First-Out
(LIFO) cost or market. Inventories of the South African subsidiary are valued at
the lower of First-In, First-Out (FIFO) cost or market.
Property, Plant and Equipment
Property, plant and equipment is recorded at assigned values or cost less an
allowance for depreciation. The Company capitalizes eligible expenditures with a
cost greater than $1,000. Depreciation is computed using the straight-line
method over the following estimated useful lives:
Buildings 42 years
Land improvements 20 years
Machinery and equipment 12 years
Furniture and fixtures 10 years
Office equipment 8 years
Vehicles 5 years
Information systems 5 years
Intangible Assets
Goodwill is amortized over 40 years using the straight-line method. Debt issue
costs are amortized on the interest method over the life of the related debt.
Patents are amortized using the straight-line method over 17 years. Trademarks
are amortized using the straight-line method over 40 years. The Company
periodically assesses the recoverability of intangible assets based on judgments
as to future undiscounted cash flows from operations.
Income Taxes
Deferred income taxes are recognized for the tax consequences of "temporary
differences" by applying currently enacted statutory rates to differences
between financial statement carrying amounts and the tax basis of existing
assets and liabilities. The effect on deferred taxes of a change in tax rates is
recognized in the results of operations in the period that includes the
enactment date.
Revenue Recognition
Revenue from sales of manufactured goods is recognized upon shipment to
customers.
Research and Development Costs
Research and development costs (principally for new products) are expensed as
incurred and aggregated $349,000 for the nine-month period ended December 31,
1996, $250,000 for the period August 23, 1995 to March 31, 1996, $160,000 for
the period from April 1, 1995 to August 22, 1995 and $323,000 for the year ended
March 31, 1995. These costs are included in general and administrative expenses
in the accompanying statements of operations.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Foreign Currency Translation
Assets and liabilities of the Company's South African operations are
translated from South African Rand into U.S. dollars at the rate of currency
exchange at the end of the fiscal period. Revenues and expenses are translated
at average monthly exchange rates prevailing during the period. Resulting
translation differences are recognized as a component of stockholders' equity.
Net (Loss) Earnings Per Share
Net (loss) earnings per share is computed by dividing net income by weighted
average common shares outstanding. In accordance with the rules of the
Securities and Exchange Commission, all shares of common stock issued prior to
the Company's initial public offering are included in weighted average shares
outstanding as if they were issued at the Company's formation.
EX-13, PAGE 16
<PAGE>
Supplementary Net (Loss) Earnings Per Share
Supplementary net (loss) earnings per share is computed as if the Company's
shares issued in its initial public offering of 3,113,000 were issued at the
beginning of the Company's formation and interest related to debt that was paid
off with proceeds is added back. Supplementary net (loss) earnings per share was
$(0.33), $0.13 and $0.26 for the periods April 1, 1996 to December 31, 1996,
August 23, 1995 to December 31, 1995 and August 23, 1995 to March 31, 1996,
respectively.
Cash and Cash Equivalents
Cash and investments with maturities of three months or less when purchased are
considered cash equivalents.
Fair Value of Financial Instruments
The carrying values of cash and cash equivalents, accounts receivable,
inventories, investment in AM Cosmetics preferred stock, accounts payable and
accrued liabilities approximate fair values due to the short-term maturities of
the instruments. The carrying value of long-term debt approximates fair value.
RECLASSIFICATION
Certain prior period balances have been reclassified to conform with current
year presentation.
Note 3. Inventories
Inventories at December 31, 1996 and March 31, 1996 are summarized as follows
(in 000s):
December 31, 1996 March 31, 1996
Raw materials $ 7,017 $4,562
Work-in-process 1,236 1,002
Finished goods 2,496 3,099
Total $ 10,749 $ 8,663
There were no material differences between inventories valued on a LIFO basis or
their valuation on a FIFO basis at December 31, 1996 and March 31, 1996.
Note 4. Other Current Assets
Other current assets at December 31, 1996 and March 31, 1996 consist of the
following (in 000s):
December 31, 1996 March 31, 1996
Deferred income taxes $ 128 $ 785
Income tax receivable 872
Prepaid interest 1,090
Prepaid other 346 1,219
Total $ 1,346 $ 3,094
Note 5. Property, Plant and Equipment
Depreciation expense for the nine months ended December 31, 1996 and December
31, 1995 was $672,000 and $586,000, respectively. For the periods from August
23, 1995 to March 31, 1996, April 1, 1995 to August 22, 1995 and April 1, 1994
to March 31, 1995, depreciation expense was $351,000, $322,000 and $679,000,
respectively.
Note 6. Other Assets
Other assets at December 31, 1996 and March 31, 1996 are summarized as follows
(in 000s):
December 31, 1996 March 31, 1996
Deferred financing costs $ 937 $3,275
Deferred tax asset 935
Prepaid interest 433
Patents 184 152
Trademarks and other 128
2,184 3,860
Less: accumulated amortization 33 318
Total $ 2,151 $3,542
EX-13, PAGE 17
<PAGE>
Note 7. Long-Term Debt
Long-term debt at December 31, 1996 and March 31, 1996 is summarized as follows
(in 000s):
December 31, 1996 March 31, 1996
Term Loans $ 24,350 $29,000
Revolving line of credit 2,052 7,500
Senior subordinated notes,
interest at 12.5% 16,693
Subordinated notes, interest at 15% 2,004
Junior subordinated notes,
interest at 10% 11,544
Other 699 47
27,101 66,788
Less: current portion 2,600 3,010
$ 24,501 $63,778
Note 7. Long-Term Debt (continued)
Annual maturities of outstanding indebtedness at December 31, 1996 are as
follows (in 000s):
December 31, 1996
1997 $2,600
1998 2,840
1999 2,891
2000 2,745
2001 2,623
Thereafter 13,402
27,101
Less: Current maturities 2,600
Long-term portion $24,501
The Company used the proceeds from its initial public offering to retire
the senior subordinated notes, subordinated notes and junior subordinated notes.
As a result, during the nine months ended December 31, 1996, the Company
incurred $3.5 million (net of the related tax benefit of $2.4 million) of
debt-related charges and write-offs reflected in the accompanying Statements of
Operations as an extraordinary item. In addition, a shareholder forgave a
portion of the junior subordinated notes totaling $5.5 million which is
reflected as a capital addition in the Statement of Shareholders' Equity.
In October 1996, the Company replaced its credit agreement with a new
facility (the "New Senior Bank Facility") that includes (i) a $15.0 million term
loan A, (ii) a $10.0 million term loan B and (iii) a $15.0 million revolving
credit facility, including up to $5.0 million of letters of credit. Aggregate
borrowings under the revolving credit facility and outstanding letters of credit
may not exceed the Borrowing Base, which equals the sum of (i) 80% of Eligible
Accounts Receivable and (ii) 50% of Eligible Inventory. The amount available for
borrowing under the revolver at December 31, 1996 was $12.9 million. Term loan
A, term loan B and the revolving credit facility mature in September 2002, 2003
and 2002, respectively. Term loan A amortizes in quarterly installments of
$625,000, term loan B amortizes in quarterly installments of $25,000 through
September 2002 and in quarterly installments of $2,350,000 beginning in December
2002.
The term loan A and revolving credit facility bear interest at the
applicable prime rate plus 0.5% or LIBOR plus 2.0% and have a final maturity of
six years. The term loan B bears interest at the applicable prime rate plus 1.0%
or LIBOR plus 2.5% and has a final maturity of seven years. The New Senior Bank
Facility contains less restrictive covenants compared to the previous facility,
since the Company is substantially less leveraged following the Offering.
The Credit Agreement provides for (i) a commitment fee of 0.5% per annum
on the unutilized portion of the revolving credit facility, (ii) a fee of 2.0%
per annum on the maximum amount available to be drawn under letters of credit,
and (iii) a letter of credit issuance fee.
The obligations of Carson Products under the New Senior Bank Facility are
secured by substantially all of Carson Products' (and its subsidiaries) assets,
as well as by a pledge of the capital stock of Carson Products. The New Senior
Bank Facility is guaranteed by the Company and each present and future
subsidiary of Carson Products (other than Carson South Africa and its
subsidiaries). The New Senior Bank Facility contains covenants with respect to,
among other things, (i) maintenance by Carson Products of certain total interest
coverage ratios, fixed charge coverage ratios and leverage ratios, and (ii)
restrictions on the incurrence of additional liens or indebtedness. The New
Senior Bank Facility contains restrictions on the payment of any cash dividends
except for dividends or distributions payable in shares of capital stock.
EX-13, PAGE 18
<PAGE>
Note 8. Accrued Liabilities
Accrued liabilities at December 31, 1996 and March 31, 1996 consisted of the
following (in 000s):
December 31, 1996 March 31, 1996
Compensation and benefits $ 1,587 $2,227
Advertising 1,070 1,340
Self-insurance 719 927
Interest 240 384
Income tax payable 493 --
Other 342 476
4,451 5,354
Note 9. Income Taxes
The following is a reconciliation of the statutory tax rate on (loss) income
from continuing operations to the Company's effective tax rate for the periods
noted:
<TABLE>
<S> <C> <C> <C> <C> <C>
Company Predecessor Company Predecessor
Unaudited
April 1, 1996 to Aug. 23, 1995 to April 1, 1995 to Aug. 23, 1995 to Year Ended
Dec. 31, 1996 Dec. 31, 1995 Aug. 22, 1995 March 31, 1996 March 31, 1995
Statutory rate (34.0)% 34.0% 34.0% 34.0% 34.0%
State income taxes
(net of federal
benefit) (2.6)% 2.6% 4.0% 4.0% 4.0%
Foreign taxes 33.8% 21.5% 21.5%
Foreign tax credit (33.8)% (21.5)% (21.5)%
Permanent differences:
Incentive
Compensation 93.9%
Goodwill 21.8% 24.3% 15.0%
Other taxes 33.8% (1.7)% (2.2)%
Effective rate 112.9% 60.9% 36.3% 53.0% 35.8%
</TABLE>
EX-13, PAGE 19
<PAGE>
Note 9. Income Taxes (continued)
Income tax expense (benefit) for the periods noted include the following (in
000s):
<TABLE>
<S> <C> <C> <C> <C> <C>
Twelve-Months
Nine-Months
Company Predecessor Company Predecessor
April 1, 1996 to Aug. 23, 1995 to April 1, 1995 to Aug. 23, 1995 to Year Ended
Dec. 31, 1996 Dec. 31, 1995 Aug. 22, 1995 March 31, 1996 March 31, 1995
Unaudited
Current:
Federal $1,685 $117 $ 1,744 $204 $ 2,760
State 405 19 333 33 294
Foreign 594 177 104 310 95
Total current
provision 2,684 313 2,181 547 3,149
Deferred:
Federal (749) 102 52 609 23
State (269) 65 10 114 2
Foreign 61 47 82
Total deferred
provision (957) 214 62 805 25
Total provision
for continuing
operations 1,727 527 2,243 1,352 3,174
Benefit for extra-
ordinary item (2,351)
Benefit for
accounting
change (147)
Total income tax
(benefit) expense $ (624) $ 527 $ 2,243 $ 1,352 $ 3,027
</TABLE>
The effects of temporary differences which gave rise to the deferred tax asset
and liability at December 31, 1996 and at March 31, 1996 are as follows (in
000s):
EX-13, PAGE 20
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
December 31, 1996 March 31, 1996
Current Long-term Current Long-term
Deferred domestic tax assets related to:
Deferred compensation $ $ 643 $ $ 638
Accrued expenses 813 522 188
Package design costs 533 412
Allowance for doubtful accounts 219 199
Foreign tax credit carryforward 702
NOLcarryforward 241
Inventories 14 50
Other 116 14
1,046 2,235 785 1,238
Deferred domestic tax liabilities related to:
Inventories (827) (801)
Property, plant and equipment (1,300) (1,168)
Other (91)
(918) (1,300) (1,969)
Deferred domestic tax asset (liability) $128 $ 935 $ 785 $ (731)
Deferred foreign tax liability $ $ (106) $ $(54)
</TABLE>
Deferred income taxes were not provided on undistributed earnings of certain
foreign subsidiaries ($5.7 million at December 31, 1996 and $1.0 million at
March 31, 1996) because such undistributed earnings are expected to be
reinvested indefinitely overseas. If these amounts were not considered
permanently invested, an additional deferred tax liability of approximately
$712,500 and $125,000 would have been provided as of December 31, 1996 and March
31, 1996, respectively. The foreign tax credit and NOL carryforward of $0.7
million and $0.5 million expire at December 31, 2001 and December 31, 2011,
respectively.
EX-13, PAGE 20
<PAGE>
Note 10. Employee Benefit Plans
The Company has a profit sharing plan which covers substantially all its U.S.
employees. Contributions to the plan are discretionary, as determined by the
Board of Directors. Contributions are made on an annual basis. The Company
contributed $401,000 to the plan for the period from April 1, 1996 to December
31, 1996 and $246,000 to the plan for the period from August 23, 1995 to March
31, 1996.
The Company is obligated for retirement benefits to a former employee
for the remainder of his (and his spouse's) life. The expected present value of
this obligation ($1.6 million at December 31, 1996 and $1.7 million at March 31,
1996) is classified in other liabilities in the accompanying balance sheets.
The Company provides postretirement health care benefits to a limited
number of key executives. The accumulated postretirement benefit obligation
("APBO") was $517,000 at December 31, 1996 and $499,000 at March 31, 1996. For
measurement purposes, the cost of providing medical benefits was assumed to
increase by 10% in the fiscal year ended December 31, 1996, decreasing to an
annual rate of 8% after December 31, 1999. The medical cost trend rate
assumption could have an effect on amounts reported. For example, an increase of
1% in the assumed rate of increase would have an effect of increasing the APBO
by $63,000 and the net periodic postretirement benefit cost by $23,000. The
weighted average discount rate used in determining the APBO was 8%. Net periodic
postretirement
benefit cost for the period from August 23, 1995 to March 31, 1996 was $9,000.
Net periodic postretirement benefit cost for the period from April 1, 1996 to
December 31, 1996 was $18,000.
The Company recognized $0.8 million of compensation expense during the
quarter ended June 30, 1996 relating to anticipated costs under certain
equity-based long-term incentive compensation arrangements (such awards and
compensation expense are based upon the fair market value of the Company at the
time of the initial public offering). Such arrangements were awarded originally
as stock appreciation rights ("SARs"). During 1996, the SARs were amended and
converted to immediately exercisable stock purchase rights, on a complete or
partial basis, as agreed to by the Company and the awardee.The SARs entitled the
holder to a specified value (determined as a percentage of the Company's equity
value) over a fixed base value subject to five year vesting requirements (or
earlier upon a public offering or sale of the Company). Upon amendment and
conversion, the SAR rights were cancelled (and replaced with accelerated,
immediately exercisable stock purchase rights). These rights have a fixed
purchase price equal in amount to the canceled SARs fixed base value.
During August 1996, pursuant to the terms of the accelerated, immediately
exercisable stock purchase rights, several outside directors purchased 115,373
shares of Common Stock at approximately $2.17 per share for an aggregate
purchase price of $250,000 and members of senior management purchased 385,818
shares of Common Stock at approximately $4.21 per share for an aggregate
purchase price of $1.6 million. The purchase of such shares by senior management
was financed with $1.4 million (net of discount) in noninterest bearing
long-term full recourse loans from the Company. The incentive compensation
expense represents the excess of the initial public offering price over the
actual purchase price of these shares plus certain cash payments. In connection
with the South African offering, the Company also issued shares of the
subsidiary to certain members of its management; the Company recorded
compensation expense of approximately $0.3 million for these share awards.
Note 11. Contingencies
The Company is a party to lawsuits incidental to its business. Management
believes that the ultimate resolution of these matters will not have a material
adverse impact on the business or financial condition and operations of the
Company.
EX-13, PAGE 21
<PAGE>
Note 12. U.S. and Foreign Operations
The Company's operations are located in the United States and South Africa.
Financial information by geographic area is as follows (in 000s):
<TABLE>
<S> <C> <C> <C> <C> <C>
Twelve Months
Nine Months
(UNAUDITED) Company
Net sales: April 1, 1996 to August 23, 1995 April 1, 1995 to August 23, 1995 Year Ended
United States: December 31, 1996 to December 31, 1995 August 22, 1995 March 31, 1995 March 31, 1995
Domestic ............................. $42,855 $17,386 $20,189 $30,676 $47,111
Export ............................... 8,274 3,304 4,407 6,494 7,382
South Africa ......................... 8,809 2,983 2,258 4,295 3,633
......................................... $59,938 $23,673 $26,854 $41,465 $58,126
Operating income:
United States ........................ $723 $3,096 $4,733 $5,890 $7,852
South Africa ......................... 1,728 374 363 973 363
......................................... $2,451 $3,470 $5,096 $6,863 $8,215
Identifiable assets (at end of period):
United States ........................ $95,385 $82,109 $ 84,988 $42,585
South Africa ......................... 11,529 2,953 4,404 2,113
Eliminations ......................... (9,283) (971) (1,310) (835)
......................................... $97,631 $84,091 $88,082 $43,863
Transfers of products from the United States to South Africa were not material
during the periods presented above. Export sales from the United States include
sales to customers in Europe, the Caribbean and Africa.
</TABLE>
Note 13. Financial Information of Carson, Inc. (Parent Company)
The assets of Carson, Inc. on an unconsolidated basis consist solely of its
investment in Carson Products Company. During the period from April 1, 1996 to
December 31, 1996, and for the period from August 23, 1995 to March 31, 1996,
the results of operations of Carson, Inc. consisted solely of its equity in the
earnings of Carson Products Company and its cash flows consisted solely of the
cash provided by financing activities of $42.4 million and $12.0 million,
respectively, from the sale of its common stock and cash used in investing
activities of $42.4 million and $12.0 million, respectively, for its investment
in Carson Products Company.
Note 14. Certain Relationships and Related Transactions
Morningside
Carson Products and Morningside Capital Group, L.L.C., ("Morningside") entered
into a Management Assistance Agreement dated August 23, 1995 (the "Management
Agreement"), pursuant to which Morningside and a shareholder of the Company
agreed to supply the services of a principal member of Morningside to the
Company to provide certain advice and assistance. Such services are provided for
a fee of $350,000 per year, payable on a monthly basis in advance plus
reimbursement for out-of-pocket expenses. The termination date of the Management
Agreement is August 23, 1998; however, the term of the agreement shall continue
after such termination date until terminated by not less than 30 days' advance
notice by either party.
In connection with the Acquisition, Morningside received fees of $500,000
from the Company for arranging and negotiating the financing for the Acquisition
and performing other consulting and financial advisory services and was
reimbursed by the Company for certain related expenses. Under the Management
Agreement, the Company paid Morningside approximately $25,000 in fiscal 1996 for
reimbursement of out-of-pocket expenses. Morningside received a fee of $100,000
for arranging and negotiating the terms of the New Senior Bank Facility and
performing other consulting and financial advisory services. In addition, the
Company reimbursed Morningside for approximately $35,000 of out-of-pocket
expenses incurred in connection with the initial public offering. From time to
time Morningside may provide additional financial advisory services to the
Company, for which Morningside will receive usual and customary compensation.
Fees Related to the Acquisition
A corporation in which the Company's chief financial officer serves as President
and is a principal stockholder, was paid $290,000 and received 159,180 shares of
the Company's Class C Common Stock from the Company in connection with financial
advisory services related to the Acquisition. A law firm in which a director and
shareholder of the Company serves as President and Chief Executive Officer was
paid approximately $690,000 for services rendered in arranging the equity
investment in the Company in connection with the Acquisition. A principal lender
and a shareholder of the Company received fees and reimbursement of
out-of-pocket expenses totalling $1,783,000 in connection with the Acquisition.
EX-13, PAGE 22
<PAGE>
Note 14. Certain Relationships and Related Transactions (continued) AM
Cosmetics Morningside AMAcquisition Corp., ("AM Acquisition"), entered into a
Subscription Agreement dated as of June 26, 1996 (the "Subscription Agreement")
with Carson Products, providing for the purchase by Carson Products of 300
shares of cumulative Payment in Kind Preferred Shares (the "PIK Preferred
Shares") issued by AMAcquisition, at a price of $10,000 per share. AM
Acquisition was formed by Morningside on behalf of an investor group to acquire
the assets of Arthur Matney Co., Inc. Certain key management personnel and
shareholders of the Company are also key management and shareholders of AM
Cosmetics. AMCosmetics sells three brands of "budget"cosmetics, one of which is
targeted at the African-American consumer. The PIK Preferred Shares are
non-voting and are entitled to cumulative dividends payable quarterly in
additional PIK Preferred Shares at a rate of 12%per annum. Additionally, the PIK
Preferred Shares are subject to redemption in whole at the option of Carson
Products on or after July 1, 2005, at the stated value per share (which is
$10,000 per share) plus an amount in cash equal to all accrued and unpaid
dividends on the PIK Preferred Shares.
Concurrent with its investment in AM Acquisition, Carson Products entered
into a Management Agreement (the "Carson-AM Management Agreement") with AM
Cosmetics, pursuant to which Carson Products agreed to manage the business
operations of, and provide certain other services to AM Cosmetics. In return for
the management and other services it will provide, Carson Products is entitled
to fees equal to 1%of AM Cosmetics' annual net sales subject to a minimum of
$500,000 per annum. The Carson-AMManagement Agreement expires on June 26, 2004
unless terminated earlier, or renewed for an additional three-year period at AM
Cosmetics' option by giving Carson Products written notice thereof at least 180
days prior to the expiration date. Either party may terminate the AM Management
Agreement by providing the other party with written notice, at least 360 days in
advance if terminated by Carson Products and 60 days in advance if terminated by
AM Cosmetics.
INDEPENDENT AUDITORS REPORT
Board of Directors and Stockholders of Carson, Inc.:
We have audited the accompanying consolidated balance sheets of Carson,
Inc. and its subsidiaries as of December 31, 1996 and March 31, 1996, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for the periods from April 1, 1996 to December 31, 1996 and from August
23, 1995 to March 31, 1996. We also audited the accompanying statement of
operations, stockholders' equity, and cash flows of Aminco, Inc. (the
Predecessor) for the period from April 1, 1995 to August 22, 1995. Our audits
also included the financial statement schedule listed in the index at Item 14
for such periods. These financial statements and financial statement schedule
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects the financial position of Carson, Inc. and its
subsidiaries as of December 31, 1996 and March 31, 1996, and the results of its
operations and its cash flows for the periods from April 1, 1996 to December 31,
1996 and from August 23, 1995 to March 31, 1996, and the results of operations
and cash flows of the Predecessor for the period from April 1, 1995 to August
22, 1995 in conformity with generally accepted accounting principles. Also, in
our opinion, such financial statement schedule, when considered in relation to
the basic consolidated financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Atlanta, Georgia
March 7, 1997
EX-13, PAGE 23
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Directors of Aminco, Inc. and Subsidiaries:
In our opinion, the accompanying consolidated statements of income,
shareholders' equity and of cash flows present fairly, in all material respects,
the financial position of Aminco, Inc. and its subsidiaries at March 31, 1995,
and the results of their operations and their cash flows for the year in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free from material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
Atlanta, Georgia
May 8, 1995
EX-13, Page 24
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
333-21141 of Carson, Inc. on Form S-8 of our report dated March 7, 1997,
appearing in this Annual Report on Form 10-K of Carson, Inc. for the transition
period from April 1, 1996 to December 31, 1996.
DELOITTE & TOUCHE LLP
Atlanta, Georgia
March 26, 1997
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 No. 333-21141 of Aminco, Inc. of our report dated May 8,
1995 appearing on page 24 of Exhibit 13, Annual Report to Shareholders which is
incorporated in this Annual Report on Form 10-K for the transition period from
April 1, 1995 to December 31, 1996.
PRICE WATERHOUSE LLP
Atlanta, Georgia
March 31, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated financial statements of the Company for the period ended December
31, 1996 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 4,191,000
<SECURITIES> 0
<RECEIVABLES> 15,731,000
<ALLOWANCES> 614,000
<INVENTORY> 10,749,000
<CURRENT-ASSETS> 31,403,000
<PP&E> 16,070,000
<DEPRECIATION> 981,000
<TOTAL-ASSETS> 97,631,000
<CURRENT-LIABILITIES> 15,449,000
<BONDS> 0
0
0
<COMMON> 150
<OTHER-SE> 54,167,000
<TOTAL-LIABILITY-AND-EQUITY> 97,631,000
<SALES> 59,938,000
<TOTAL-REVENUES> 59,938,000
<CGS> 26,940,000
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,545,000
<INCOME-PRETAX> (1,529,000)
<INCOME-TAX> 1,727,000
<INCOME-CONTINUING> (3,256,000)
<DISCONTINUED> 0
<EXTRAORDINARY> (3,527,000)
<CHANGES> 0
<NET-INCOME> (6,783,000)
<EPS-PRIMARY> (0.53)
<EPS-DILUTED> (0.53)
</TABLE>
